Document:

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                                                                    Exhibit 10.9

                            ASSET PURCHASE AGREEMENT

                                     BETWEEN

                               CAF EXTRUSION, INC.
                                    ("BUYER")

                      COLLINS & AIKMAN FLOORCOVERINGS, INC.
                                     ("C&A")

                                       AND

                             CANDLEWICK YARNS, INC.
                                   ("SELLER")

                                  BRETLIN, INC.
                                   ("BRETLIN")

                              THE DIXIE GROUP, INC.
                                   ("PARENT")

                                   DATED AS OF

                                   MAY 1, 2002

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                                TABLE OF CONTENTS
<Table>
<Caption>
                                                                                                               Page
<S>        <C>                                                                                                <C>

ARTICLE I  SALE AND PURCHASE OF ASSETS............................................................................1
   1.1      Transfer of Assets....................................................................................1
   1.2      Purchased Assets......................................................................................1
   1.3      Excluded Assets.......................................................................................3
   1.4      Liabilities...........................................................................................4

ARTICLE II  CONSIDERATION.........................................................................................5
   2.1      Purchase Price........................................................................................5
   2.2      Allocation............................................................................................6
   2.3      Prorations............................................................................................6

ARTICLE III  REPRESENTATIONS AND WARRANTIES OF SELLER, BRETLIN AND PARENT.........................................6
   3.1      Organization and Good Standing........................................................................6
   3.2      Authority.............................................................................................6
   3.3      Effect of Agreement...................................................................................7
   3.4      Financials; Books; No Undisclosed Liabilities.........................................................7
   3.5      Title to and Sufficiency of Assets....................................................................8
   3.6      Real Estate...........................................................................................8
   3.7      Tangible Property.....................................................................................9
   3.8      Contracts and Leases..................................................................................9
   3.9      Intellectual Property................................................................................10
   3.10     Labor Matters........................................................................................10
   3.11     Employees; Benefits..................................................................................10
   3.12     Absence of Changes...................................................................................11
   3.13     Related Party Transactions...........................................................................12

ARTICLE IV  REPRESENTATIONS AND WARRANTIES OF BUYER AND C&A......................................................12
   4.1      Organization and Good Standing.......................................................................12
   4.2      Authority............................................................................................12
   4.3      Effect of Agreement..................................................................................12

ARTICLE V  COVENANTS.............................................................................................12
   5.1      Termination of Seller's Employees; Settlement of Obligations of Seller...............................12
   5.2      Collection of Receivables............................................................................13
   5.3      Employee Benefit Matters.............................................................................13

ARTICLE VI  CLOSING..............................................................................................13
   6.1      Closing..............................................................................................13
   6.2      Deliveries by Seller.................................................................................14
   6.3      Deliveries by Buyer..................................................................................14
   6.4      Other Deliveries.....................................................................................15
   6.5      Further Assurances...................................................................................15
   6.6      Real Property Acquisition............................................................................15
   6.7      Closing Conditions...................................................................................15

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ARTICLE VII  INDEMNIFICATION.....................................................................................15
   7.1      Indemnification by Seller, Bretlin and Parent........................................................15
   7.2      Indemnification by Buyer.............................................................................16
   7.3      Notice of Claim......................................................................................17
   7.4      Defense..............................................................................................17
   7.5      Other Remedies.......................................................................................17
   7.6      Limitation...........................................................................................17

ARTICLE VIII  MISCELLANEOUS......................................................................................18
   8.1      Survival of Representations..........................................................................18
   8.2      Bulk Sales...........................................................................................18
   8.3      Risk of Loss.........................................................................................18
   8.4      Brokers..............................................................................................18
   8.5      Tax Filings..........................................................................................18
   8.6      Expenses.............................................................................................18
   8.7      Publicity............................................................................................18
   8.8      Notices..............................................................................................19
   8.9      Governing Law........................................................................................20
   8.10     Counterparts.........................................................................................20
   8.11     Assignment...........................................................................................21
   8.12     Third Party Beneficiaries............................................................................21
   8.13     Headings.............................................................................................21
   8.14     Amendments...........................................................................................21
   8.15     Specific Performance.................................................................................21
   8.16     Jurisdiction.........................................................................................21
   8.17     Severability.........................................................................................21
   8.18     Entire Agreement.....................................................................................21
   8.19     Certain Definitions..................................................................................22
   8.20     Schedules............................................................................................22
</Table>

<Table>
<Caption>
SCHEDULES
---------
<S>              <C>
Schedule 1.1      Permitted Liens
Schedule 1.2(a)   Real Property
Schedule 1.2(b)   Tangible Personal Property/List of  Warranties
Schedule 1.2(c)   Inventory
Schedule 1.2(d)   Assumed Contracts
Schedule 1.2(e)   Intellectual Property
Schedule 1.2(f)   Permits
Schedule 1.2(h)   Claims
Schedule 1.3(h)   Unrelated Assets
Schedule 1.3(l)   Excluded Claims and Deposits
Schedule 1.3(m)   Excluded Assets
Schedule 2.1(c)   Inventory Valuation Determination

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Schedule 2.2      Purchase Price Allocation
Schedule 3.1      Foreign Qualifications
Schedule 3.3      Required Consents
Schedule 3.4.1    Cost Data
Schedule 3.4.2    Liabilities of the Business
Schedule 3.4.3    Permits used in the Business
Schedule 3.5.1    Required Assets
Schedule 3.5.2    Third Party Rights
Schedule 3.7      Condition of Property
Schedule 3.8      Contracts
Schedule 3.11     Employees; Benefits
Schedule 3.12     Absence of Changes
Schedule 8.19     Knowledge of Sellers
</Table>

<Table>
<Caption>
EXHIBITS
--------
<S>              <C>
Exhibit A         Bill of Sale
Exhibit B         Non-Solicitation Agreement
Exhibit C         Opinion of Seller's Counsel
Exhibit D         Supply Agreement
Exhibit E         Opinion of Buyer's Counsel
Exhibit F         Transitional Services Agreement
</Table>

                                      iii

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                            ASSET PURCHASE AGREEMENT

         THIS ASSET PURCHASE AGREEMENT (together with all Schedules and Exhibits
hereto, this "AGREEMENT"), agreed and entered into on May 1st, 2002, to be
effective in all respects as of the Effective Time, as defined herein, is
entered into by and between Candlewick Yarns, Inc., a Tennessee corporation
("SELLER"), Bretlin, Inc., a Georgia corporation and the parent company of the
Seller, ("BRETLIN"), The Dixie Group, Inc., a Tennessee corporation and the
parent company of Bretlin, (the "PARENT"), CAF Extrusion, Inc., a Delaware
corporation, ("BUYER"), and Collins & Aikman Floorcoverings, Inc., a Delaware
corporation and the parent company of Buyer ("C&A").

                                R E C I T A L S :

         1. Seller is the owner and operator of a fiber extrusion plant,
including equipment, fixtures and facilities necessary or appropriate for the
extrusion of yarn filament for the carpet and rug industry, located at 246 Old
Dalton Road, Calhoun, Georgia (the "BUSINESS").

         2. Seller desires to sell, and Buyer desires to buy, substantially all
of the properties and assets of Seller owned and used in the operation of the
Business or located on the Real Property, on the terms and conditions set forth
in this Agreement.

         THEREFORE, for and in consideration of the above Recitals, the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto do
hereby agree as follows:

                                   ARTICLE I
                           SALE AND PURCHASE OF ASSETS

         1.1 TRANSFER OF ASSETS. Seller (and Bretlin and Parent to the extent of
their interests) agrees to sell, assign, transfer and deliver to Buyer, and
Buyer agrees to purchase and accept from Seller, (and Bretlin and Parent to the
extent of their interests), at the Closing (as defined below) good and
marketable title, free and clear of all liens and encumbrances whatsoever, other
than (i) liens for current Taxes not yet due and payable and (ii) with respect
to personal property only, liens evidenced by the filing, for notice purposes
only, of financing statements in respect of true leases disclosed on Schedule
1.1 (collectively, "PERMITTED LIENS"), to all of the assets and properties of
every kind and description owned and used by Seller (and Bretlin and Parent to
the extent of their interests) in connection with the operations of the Business
or located on the Real Property, but excluding assets covered by Assumed
Contracts and the Excluded Assets described in Section 1.3, on the terms and
conditions set forth in this Agreement. The assets being sold hereunder are
collectively referred to as the "PURCHASED ASSETS," and the assets described in
Section 1.3 are collectively referred to as the "EXCLUDED ASSETS."

         1.2 PURCHASED ASSETS. The Purchased Assets specifically include, but
are not limited to, the following:

             (a) REAL ESTATE. Seller's tenant improvements in the real property,
         buildings and improvements located at 246 Old Dalton Road, Calhoun,
         Georgia, the metes and

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         bounds of such real property being more particularly described on
         Schedule 1.2(a) (the "REAL PROPERTY").

             (b) TANGIBLE PERSONAL PROPERTY. All machinery, equipment,
         furniture, office equipment, supplies, materials, vehicles and other
         items of tangible personal property of every kind owned by Seller (and
         Bretlin and Parent to the extent of their interests) and used in
         connection with the Business or located on the Real Property,
         including, without limitation, those listed on Schedule 1.2(b) (the
         "TANGIBLE PERSONAL Property"), and any additions or replacements made
         between the date of this Agreement and the Closing Date, together with
         any assignable express or implied warranty by the manufacturers of
         sellers of any item thereof, to the extent such warranty is
         transferable as set forth on Schedule 1.2(b).

             (c) INVENTORIES. All inventories of the Business as of the
         Effective Time (defined below), including, without limitation, finished
         goods under open purchase orders assumed by Buyer pursuant to Section
         1.2(d) below (but not including any other finished goods), work in
         process, raw materials, packaging materials and spare parts (the
         "INVENTORY"), (including supplies relating to such Inventory, and any
         deposits, prepayments, rebates or refunds attributable to Inventory
         purchased by Buyer) the location and an approximation of the value of
         which is described on Schedule 1.2(c).

             (d) ASSUMED CONTRACTS. All of Seller's interest arising or accruing
         after the Effective Time under all contracts, leases of personal
         property, other leases and other agreements, including unfilled
         purchase orders (together with any deposits or prepayments pertaining
         to such unfilled purchase orders) as of the Closing Date as provided in
         Section 1.4, to which the Seller is a party and which pertain primarily
         to the Business and were entered into in the ordinary course of
         business consistent with past practices, but only to the extent such
         contracts are either (i) set forth on Schedule 1.2(d) hereto, or (ii)
         individually involve a financial obligation of less than Five Thousand
         Dollars ($5,000) over the term of such contract, and which were entered
         into in the ordinary course of business and do not contain or create
         any restriction or limitation on the ability of the Seller (or any
         purchaser of the Business) to utilize the Purchased Assets or to
         realize the benefit to be derived therefrom or to conduct the
         operations of the Business worldwide (collectively, the "ASSUMED
         CONTRACTS").

             (e) INTELLECTUAL PROPERTY. All of the intellectual property of
         Seller used primarily in connection with the operations of the
         Business, including, without limitation, the following: (a) all
         trademarks, service marks, trade names, logos (the "MARKS") and all
         registrations relating thereto; (b) all copyrighted works and
         registrations therefor; (c) all patents and applications therefor; and
         (d) all confidential or proprietary processes, formulas, trade secrets
         and technical and other similar information, all of which are described
         on Schedule 1.2(e) (the "INTELLECTUAL PROPERTY"), together with the
         goodwill related thereto and any royalty income therefrom accruing
         after the Effective Time.

             (f) PERMITS. All assignable Permits, including, without limitation,
         those listed on Schedule 1.2(f). For purposes of this Agreement, the
         term "PERMITS" means all

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         permits, authorizations, certificates, approvals and licenses relating
         to the operation of the Business.

             (g) INTANGIBLE PROPERTY. All records, technical data, asset
         ledgers, books of account, inventory records, budgets, customer and
         supplier records, payroll and personnel records, computer programs,
         correspondence and other files of Seller, regardless of the medium on
         which stored, created or maintained in connection with the Business
         that can be separated from the records of Seller's, Bretlin's or
         Parent's other business activities with reasonable efforts, and all
         rights to do business with the customers of the Business, subject to
         the Non-Solicitation Agreement, and subject to any applicable
         obligations of confidentiality imposed by applicable law.

             (h) CLAIMS. All of Seller's rights to any causes of action or
         claims arising in connection with the Purchased Assets or the Assumed
         Contracts, except for causes of action or claims arising prior to the
         Closing and listed on Schedule 1.2(h).

             (i) GOODWILL. Any and all of Seller's goodwill in and going concern
         value of the Business.

             (j) OTHER ASSETS. All other assets of any kind or description,
         tangible or intangible, which are owned by Seller and used primarily in
         or relating to the operations of the Business, whether or not carried
         or reflected on the books and records of Seller or Dixie.

         1.3 EXCLUDED ASSETS. The following assets shall be excluded from the
Purchased Assets and shall be retained by Seller:

             (a) ACCOUNTS RECEIVABLE. All accounts receivable due to Seller as
         of the Effective Time in connection with the Business (the
         "RECEIVABLES"), and the full benefit of any security therefor;

             (b) CASH. All cash on hand and on deposit in banks, cash
         equivalents and investments, and all customer deposits and prepayments
         in connection with the sale of goods by Seller, to the extent the
         applicable goods are not included in the Purchased Assets;

             (c) INSURANCE. All insurance policies relating to the Business;

             (d) ASSETS OF BENEFIT PLANS. Pension, profit sharing, savings, or
         other benefit plans and trusts and the reserves thereof;

             (e) FINISHED GOODS. All finished goods manufactured by the Seller
         prior to the Closing Date, except as provided in 1.2(c), above.

             (f) CERTAIN RECORDS. Minute books, stock books and any corporate
         documents relating to the organization, maintenance and existence of
         Seller as a corporation;

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             (g) EXCLUDED CONTRACTS. Any and all contracts entered into by
         Seller or by which Seller or any of the Purchased Assets is bound,
         other than the Assumed Contracts;

             (h) UNRELATED ASSETS. Any assets, properties, rights, contracts,
         operations and businesses of Seller, Parent or Bretlin that are used
         primarily in business operations of Seller, Bretlin or Parent other
         than the Business, including without limitation all centralized
         management information systems and accounting systems, and listed on
         Schedule 1.3(h);

             (i) TAX REFUNDS. Any rights of Seller or any of its Affiliates to
         any tax refund with respect to periods prior to the Closing Date;

             (j) INSURANCE BENEFITS. Any property, casualty, workers'
         compensation or other insurance policy or related insurance services
         contract relating to the Purchased Assets, the Business, Seller or any
         of its Affiliates and any rights of Seller or any of its Affiliates
         under such insurance policy or contract, other than rights under such
         insurance policies or contracts with respect to any Assumed Liability
         or any casualty occurring prior to Closing and affecting any of the
         Purchased Assets;

             (k) PURCHASE CONTRACTS. Any rights of Seller under this Agreement,
         the documents to be executed and delivered in connection herewith, or
         under any other agreement between Seller and Buyer;

             (l) EXCLUDED CLAIMS AND DEPOSITS. Deposits, prepayments, prepaid
         assets, refunds, causes of action, rights of recovery, rights of setoff
         and rights of recoupment of Seller arising prior to the Closing Date as
         itemized on Schedule 1.3(l); and

             (m) OTHER EXCLUDED ASSETS. The other excluded assets listed or
         described on Schedule 1.3(m).

         1.4 LIABILITIES. The Purchased Assets shall be sold and conveyed to
Buyer free and clear of all liabilities, obligations, liens, security interests
and encumbrances whatsoever (collectively, "LIENS", or, individually, a "LIEN")
other than Permitted Liens; PROVIDED, HOWEVER, that Buyer will assume at Closing
only the obligations under the Assumed Contracts (including unfilled purchase
orders as described below) that are to be performed after the Effective Time and
are disclosed in such Assumed Contracts. Buyer shall only assume Seller's
obligation under the Assumed Contracts which are purchase orders issued to
Seller to the extent that the goods ordered have not been shipped by Seller at
the Effective Time, and Buyer shall only assume Seller's obligation under the
Assumed Contracts which are purchase orders issued by Seller to the extent that
the goods ordered by Seller under such contracts have not been received by
Seller as of the Effective Time, and all of which shall be listed on Schedule
1.2(d).

         Except as specifically set forth above, Seller shall retain
responsibility for and indemnify Buyer against all liabilities in any way
related to the Business, the Purchased Assets and the Assumed Contracts
(including any existing breach thereof) arising prior to the Effective Time and
for all liabilities arising from Seller's operation of the Business prior to the
Effective Time, whether or not accrued and whether or not disclosed.
Specifically, but without limiting the generality of the foregoing, Seller shall
retain sole liability for and Buyer shall not assume any

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liability or obligation of Seller with respect to (i) unpaid Taxes of the Seller
or the Business (as defined in Section 3.4 below); (ii) accounts payable or
other liabilities or obligations of the Seller or the Business arising or
accruing as a result of, or caused by, events, conditions or circumstances,
prior to the Effective Time (even if the liability or obligation becomes known
after the Effective Time; (iii) the use, storage, transportation, discharge,
handling or disposal of any Hazardous Material (as defined below) prior to the
Effective Time; and (iv) employees or former employees of Seller, including any
liability for accrued salaries, wages, payroll taxes, severance pay
entitlements, health, medical, retirement, vacation or deferred compensation
benefits or any other obligations or expenses arising out of or relating to the
employment by Seller of its employees or Seller's termination of such employees,
including the terminations effected by Seller pursuant to this Agreement. Seller
shall retain and shall assume and discharge all liabilities and costs under the
Consolidated Omnibus Budget Reconciliation Act, as amended ("COBRA") (including
liabilities for violations thereof) for all "qualifying events" (as defined in
COBRA) occurring with respect to employees and their dependents prior to and on
the Effective Time, including qualifying events that occur as a result of the
sale of the Purchased Assets contemplated by this Agreement. Parent and Seller
agree that the sale of the Purchased Assets contemplated by this Agreement shall
not cause Buyer to become a "successor employer" within the meaning of Section
54.4980B-9, Q&A-8(c) of the Treasury Regulations. As used in this Agreement,
"Hazardous Material" means and includes asbestos, ACM's, polychlorinated
biphenyls, lead-based paints, any petroleum product, petroleum by-products
(including, but not limited to, crude oil or any fraction of it, diesel oil,
fuel oil, gasoline, lubrication oil, oil refuse, oil mixed with other wastes,
oil sludge and all other liquid hydrocarbons, regardless of specific gravity),
natural or synthetic gas products and/or hazardous substance or materials,
waste, pollutant or contaminant, defined as such in (or for the purposes of) the
Environmental Laws (as defined in Section 3.4).

                                   ARTICLE II
                                  CONSIDERATION

         2.1 PURCHASE PRICE. (a) The aggregate purchase price (the "PURCHASE
PRICE") for the Purchased Assets shall be the sum of (i) Thirty Million Eight
Hundred Thousand Dollars $30,800,000, for all of the Purchased Assets other than
Inventory, payable as provided below on the Closing Date, plus the amount
determined as the value of all Inventory on hand as of the Effective Time,
calculated and payable as provided below:

             (b) The Purchase Price shall be payable as follows: (i) $30,800,000
         shall be paid on the Closing Date by wire transfer of immediately
         available funds to account(s) designated by Seller; and (ii) the
         portion of the Purchase Price set forth in Section 2.1 (a)(ii) above
         shall be paid promptly after final determination of the Closing
         Inventory Value as provided below in Section 2.1(c).

             (c) On the Closing Date, Buyer and Seller shall jointly conduct a
         physical inspection of the Inventory and prepare a list of the
         Inventory of the Business as of such date. As soon as possible after
         the Closing Date, but in any event within fifteen (15) business days
         thereafter, Buyer shall provide to Seller a list of the Inventory and a
         valuation thereof at standard cost, determined and discounted, if
         applicable, in accordance with the Inventory Valuation Determination
         set forth on Schedule 2.1(c)

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         hereto (the "CLOSING INVENTORY VALUE"). Seller shall have a period of
         ten (10) business days following receipt of such Closing Inventory
         Value (the "SELLER OBJECTION PERIOD") to notify Buyer of any
         disagreement with Buyer's valuation, and Buyer and Seller shall jointly
         endeavor to make a mutually agreeable determination of the Closing
         Inventory Value prior to the expiration of the Seller Objection Period.
         If Buyer and Seller agree on the Closing Inventory Value, then Seller
         and Buyer shall set forth their agreement in writing, and Buyer shall
         pay such portion of the Purchase Price attributable to the Inventory
         promptly after the date of such mutually agreed written determination.
         If Seller and Buyer disagree as to the Closing Inventory Value and have
         not reached agreement prior to the expiration of the Seller Objection
         Period, then such disputed amount shall be submitted to
         PricewaterhouseCoopers for a final and binding determination of the
         Closing Inventory Value. The costs and expenses for the services of
         PricewaterhouseCoopers shall be borne by Seller and Buyer in proportion
         to the amount awarded to each party pursuant to the aforesaid
         determination.

         2.2 ALLOCATION. The Purchase Price shall be allocated among the
Purchased Assets as mutually agreed between Buyer and Seller, based on the
report to be delivered by Valuation Research Corporation, and such agreed upon
allocation shall be set forth in writing and attached to this Agreement as soon
as possible after Closing as SCHEDULE 2.2 hereto.

         2.3 PRORATIONS. The operation of the Business and the income and
expenses attributable thereto up to the Effective Time shall be for the account
of Seller and thereafter for the account of Buyer. All expenses, including,
without limitation, such items as ad valorem property taxes, prepaid items,
utility charges, and rents shall be prorated between Seller and Buyer as of the
Effective Time. Such prorations shall be made and paid by Seller insofar as is
possible as an adjustment to the Purchase Price at the Closing, and such other
proratable items shall be determined within 60 days thereafter, and Seller or
Buyer shall make such payment to the other as is required by such proration.
Unpaid employee salary, benefits and vacation pay, leave pay, severance pay and
other similar benefits or entitlements shall be paid by Seller to the employees
of the Business promptly after Closing as provided in Section 5.1 below.

                                  ARTICLE III
          REPRESENTATIONS AND WARRANTIES OF SELLER, BRETLIN AND PARENT

         Seller, Bretlin and Parent jointly and severally represent and warrant
to Buyer and C&A as follows:

         3.1 ORGANIZATION AND GOOD STANDING. Each of Seller, Bretlin and Parent
is a corporation duly organized, validly existing and in good standing under the
laws of the state of its incorporation. Seller has all requisite power and
authority to own, operate and lease the Purchased Assets and to conduct the
operations of the Business as presently conducted. Seller is duly qualified to
do business as a foreign corporation and is in good standing in all other
jurisdictions in which it is required to be so qualified and in which the
failure to qualify would have a Material Adverse Effect, and such jurisdictions
are listed on Schedule 3.1.

         3.2 AUTHORITY. Each of Seller, Bretlin and Parent has all requisite
power and authority to execute and deliver this Agreement, a Bill of Sale,
Assignment and Assumption Agreements,

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and NonSolicitation Agreement, and such other agreements as are necessary or
appropriate in Buyer's reasonable discretion to effect the transfer of the
Business and the Purchased Assets as contemplated hereby, to the extent each of
Seller, Bretlin and Parent is a party thereto (the "SELLER AGREEMENTS") and to
perform the transactions contemplated hereby and thereby. The execution,
delivery and performance of each of the Seller Agreements to which Seller,
Bretlin or Parent is a party, and the consummation of the transactions
contemplated hereby and thereby, have been duly and validly authorized by all
necessary corporate and shareholder action on the part of each of Seller,
Bretlin and Parent. The Seller Agreements have been, or with respect to Seller
Agreements to be executed at the Closing, will be, duly executed and delivered
by Seller, Bretlin and Parent, as applicable, and each constitutes or will
constitute when executed and delivered a valid and binding obligation of Seller,
Bretlin and Parent, enforceable against Seller, Bretlin and Parent in accordance
with its terms, to the extent it is a party thereto, except as enforceability
may be limited by equitable principles or by bankruptcy, fraudulent conveyance
or insolvency laws affecting the enforcement of creditors' rights generally.

         3.3 EFFECT OF AGREEMENT. Except as set forth on Schedule 3.3 hereto,
the execution, delivery and performance of the Seller Agreements do not: (a)
conflict with the Articles of Incorporation or Bylaws of Seller, Bretlin or
Parent; (b) violate any law or any rule or regulation of any governmental body
or administrative agency, or conflict with any judicial or administrative order
or decree relating to Seller, Bretlin, Parent or the Purchased Assets; (c)
constitute a breach or default under any Assumed Contract, Real Property Lease
or any other agreement or instrument by which Seller, Bretlin or Parent is bound
or the Purchased Assets are affected; (d) create any Lien on any of the
Purchased Assets; or (e) require any consent, notice to or filing with any
governmental authority or administrative agency or any private person or firm on
behalf of Seller, Bretlin or Parent. The matters described on Schedule 3.3 are
referred to as the "REQUIRED CONSENTS."

         3.4 COST DATA; BOOKS; NO UNDISCLOSED LIABILITIES. Seller's Cost
Reconciliation Report and detailed standard cost data for the year ended
December 31, 2001 and the two month period ended February 28, 2002 (the "COST
DATA"), true and complete copies of which are attached hereto as Schedule 3.4.1,
(a) are true, complete and correct in all material respects; and (b) are in
accordance with the books and records of the Seller. Seller has no liability or
obligation related to the Business that is not disclosed on Schedule 3.4.2
outside of the routine, daily, ordinary course of business. Except as disclosed
on Schedule 3.4.2, (i) there are no claims, actions, suits or investigations
("CLAIMS") or potential Claims pending, or to the Knowledge of Seller,
threatened, against Seller or the Business or affecting the Purchased Assets,
nor to the Knowledge of Seller does there exist any basis for a Claim; (ii)
there is not outstanding or, to the Knowledge of Seller, threatened, any order
or decree of any court, governmental agency or arbitration tribunal against or
involving Seller, the Business or the Purchased Assets; (iii) Seller is
currently, and has been at all times, in material compliance with all laws,
rules, regulations and licensing requirements of all federal, state, local and
foreign authorities applicable to the properties and operations of the Business;
(iv) Seller is not in violation of any of the material Permits, all of which are
listed on Schedule 3.4.3 hereto, and no proceedings are pending or, to the
Knowledge of Seller, threatened to revoke or limit any such Permit; (v) all
United States, state and local income, profits, franchise, sales, use,
occupancy, property, severance, excise, value added, withholding and other
taxes, and all taxes owing to any foreign countries and political subdivisions
thereof (including interest, penalties and any additions to tax) (the

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"TAXES") due from Seller or claimed to be due by each taxing authority for all
periods through the date of this Agreement, including without limitation any
Taxes arising from the transactions evidenced by this Agreement, have been, and
for all periods through the Effective Time will be, fully paid, and Seller has
timely filed all tax returns, reports and declarations of estimated tax required
to be filed before the Effective Time; and (vi) the existing and prior uses of
the Purchased Assets comply in all material respects with, and at all times have
complied in all material respects with, and Seller is not in violation of, and
has not violated, in connection with the ownership, use, maintenance or
operation of the Purchased Assets, any applicable federal, state, county or
local statutes, laws, regulations, rules, ordinances, codes, licenses or permits
of any governmental authorities relating to environmental matters, including by
way of illustration and not by way of limitation the Comprehensive Environmental
Response, Compensation and Liability Act as amended, the Resource Conservation
Recovery Act as amended, the Clean Air Act, the Clean Water Act, the
Occupational Safety and Health Act, the Toxic Substances Control Act, any
"Superfund" or "Superlien" law, all of their state counterparts and implementing
regulations, or any other federal, state or local statute, law, ordinance, code,
rule, regulation, order, decree or guideline (whether published or unpublished)
regulating, relating to or imposing liability or standards of conduct concerning
any petroleum, petroleum by-product (including, but not limited to, crude oil,
diesel oil, fuel oil, gasoline, lubrication oil, oil refuse, oil mixed with
other waste, oil sludge, and all other liquid hydrocarbons, regardless of
specific gravity), natural or synthetic gas, hazardous substance or materials,
toxic or dangerous waste, substance or material, pollutant or contaminant
(collectively "ENVIRONMENTAL LAWS"). The books and records of Seller relating to
the Purchased Assets are true, accurate and complete in all material respects
and have been maintained in accordance with generally accepted accounting
principles applied on a consistent basis.

         3.5 TITLE TO AND SUFFICIENCY OF ASSETS. Seller has good and marketable
title to all of the Purchased Assets, and as of the Closing Date the Purchased
Assets shall be free and clear of any Liens, other than Permitted Liens. Except
as set forth on Schedule 3.5.1, the Purchased Assets and the assets covered by
the Assumed Contracts constitute all of the assets of any nature required to
operate the Business in the manner presently operated by Seller and are all
located on the Real Property. No third party has any right, title or interest in
or to, or any claim whatsoever related to, the Purchased Assets, except as set
forth on Schedule 3.5.2, which will be terminated as of the Closing Date.

         3.6 REAL ESTATE. Schedules 1.2(a) contains a true and correct
description of the Real Property and a list of all buildings, fixtures and
improvements thereon (the "IMPROVEMENTS"). All Improvements conform in all
material respects to all applicable state and local laws, health and safety
ordinances and zoning and building ordinances. To the Knowledge of the Seller,
none of the Improvements encroach on the property of any third person. The Real
Property is zoned for the purposes for which it is presently being used.

             (i) The Real Property has adequate water and sewer supply for the
         current use of such property, and all sewer and water supply facilities
         required for the current use of all such property are properly and
         fully installed and operating. All other public or private utilities
         necessary for the operation of such property for current uses are
         properly and fully installed and operating.

                                       8

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             (ii) The Improvements have been completed, and there are no
         interior or exterior structural defects or other material defects in
         such Improvements or any material defects in the plumbing, electrical,
         mechanical, heating, ventilating or air-conditioning systems or other
         systems. All such systems are in satisfactory working order for current
         use, and all roofs and basements of the Improvements are in good
         condition, ordinary wear and tear excepted, and free of leaks.

             (iii) Each portion of the Improvements is covered by a permanent
         certificate of occupancy which is in full force and effect. Seller has
         no knowledge of any alteration, improvement or change in use of any of
         the Improvements which would require a new certificate of occupancy or
         amendment of an existing certificate of occupancy.

             (iv) Seller has received no notice and has no knowledge of any
         material violations of any applicable federal, state or local law,
         ordinance, regulation, order, rule or requirement affecting the Real
         Property, or the construction, management, ownership, maintenance, use,
         acquisition or sale thereof (including, without limitation, building,
         health and environmental laws, regulations and ordinances)
         (collectively, "LEGAL REQUIREMENTS"). Seller has no knowledge of any
         pending or contemplated change in any Legal Requirement which may
         materially adversely affect the use or ownership of such property.

             (v) Seller has entered into no agreement, oral or written, not
         referred to herein, with reference to the Real Property, and neither
         Seller nor any portion of such property is subject to any claim,
         demand, suit, unfiled lien, proceeding or litigation of any kind,
         pending or outstanding, or to the Knowledge of Seller or the Parent,
         threatened or likely to be made or instituted which would in any way be
         binding upon Buyer or its successors or assigns or would affect or
         limit the full use and enjoyment of such property by Buyer or its
         successors or assigns or which would limit or restrict in any way
         Seller's right or ability to enter into this Agreement and consummate
         the transactions described herein.

         3.7 TANGIBLE PROPERTY. Except as disclosed on Schedule 3.7, all
Improvements, all other tangible property included in the Purchased Assets and
all items of tangible property leased under leases to be assumed by Buyer (a)
are in good operating order, condition and repair, ordinary wear and tear
excepted; (b) are suitable for immediate use in the ordinary course of business
of the Business; and (c) are free from material defects.

         3.8 CONTRACTS AND LEASES. Schedule 3.8 lists all contracts,
commitments, agreements (including agreements for the borrowing of money or the
extension of credit), leases (other than leases for the Real Property),
licenses, understandings and obligations, whether written or oral, related to
the Business to which Seller is party or by which Seller or the Purchased Assets
is bound or affected or that are material to the operation of the Business,
including all contracts that relate to the costs of operations of the Business,
which in any case involve a financial obligation or impact of more than $5,000.
Schedule 1.2(d) lists all leases concerning the Real Property to which Seller,
Bretlin or Dixie is a party (the "REAL PROPERTY LEASES"). Seller has delivered
to Buyer true and complete copies of all Real Property Leases, all written
contracts and true and

                                       9

<Page>

complete memoranda of all oral contracts, including any and all amendments
thereto. Each of the Assumed Contracts and the Real Property Leases is valid,
binding and enforceable in accordance with its terms, except as enforceability
may be limited by equitable principles or by bankruptcy, fraudulent conveyance
or insolvency laws affecting the enforcement of creditors' rights generally, and
is in full force and effect. There are no existing defaults, and no events or
circumstances have occurred which, with or without notice or lapse of time or
both, would constitute defaults, under any of the Assumed Contracts or the Real
Property Leases. Except as set forth in Schedule 3.3, the assignment of the
Assumed Contracts and the Real Property Leases by Seller to Buyer will not, with
respect to any Assumed Contract or Real Property Lease, (a) constitute a default
or accelerate the obligations thereunder; (b) require the consent of any person
or party, except for the Required Consents; or (c) affect the continuation,
validity and effectiveness thereof or the terms thereof.

         3.9 INTELLECTUAL PROPERTY. Schedule 1.2(e) lists all intellectual
property rights (other than those included in Excluded Assets) used in
connection with the Business, which includes all intellectual property, trade
secrets, expertise, know-how, designs, ideas and concepts whether or not
patentable, all of which are owned by or licensed to Seller. There are no Marks
or patents used by Seller in connection with the Business. Seller has not
licensed any of the Intellectual Property to any third party, and no third party
has any right to use any of the Intellectual Property. There are no pending or
to the Knowledge of Seller threatened claims or suits challenging Seller's
ownership or right to use any of the Intellectual Property, or alleging that any
of the Intellectual Property infringes any rights of any third parties, nor to
the Knowledge of Seller does there exist any basis therefor.

         3.10 LABOR MATTERS. No employees of Seller who work in the Business
have been or are represented by a union or other labor organization or covered
by any collective bargaining agreement. There is no unfair labor practice
complaint, labor organizational effort, strike, slowdown or similar labor matter
pending or, to the Knowledge of Seller, threatened against or affecting Seller
or the Business.

         3.11 EMPLOYEES; BENEFITS. Schedule 3.11.1 sets forth a list of the
name, position, rate of compensation and any incentive compensation
arrangements, bonuses or commissions or fringe or other benefits, of each person
who is employed by the Business in any capacity. Except as set forth on Schedule
3.11.2, there are no Plans, as defined below, contributed to, maintained or
sponsored by Seller, to which Seller is obligated to contribute or with respect
to which Seller has any material liability or potential material liability,
whether direct or indirect, including all Plans contributed to, maintained or
sponsored by each member of the controlled group of companies, within the
meaning of Sections 414(b), 414(c), and 414(m) of the Internal Revenue Code (the
"CODE"), of which Seller is a member to the extent Seller has any potential
material liability with respect to such Plans. For purposes of this Agreement,
the term "PLANS" shall mean: (a) employee benefit plans as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), whether or not funded; (b) employment agreements; and (c) personnel
policies or fringe benefit plans, policies, programs and arrangements, whether
or not subject to ERISA, and whether or not funded, including, without
limitation, stock bonus, deferred compensation, pension, severance, bonus,
vacation, travel, incentive and health, disability and welfare plans.

                                       10

<Page>

         Each Plan and all related trusts, insurance contracts and funds have
been maintained, funded and administered in compliance in all respects with all
applicable laws and regulations, including, but not limited to, ERISA and the
Code.

         Each Plan that is intended to be qualified under Section 401(a) of the
Code, and each trust (if any) forming a part thereof, has received a favorable
determination letter from the Internal Revenue Service as to the qualification
under the Code of such Plan and the tax-exempt status of such related trust, and
nothing has occurred since the date of such determination letter that could
adversely affect the qualification of such Plan or the tax-exempt status of such
related trust.

         Seller does not now, nor has it ever, sponsored, maintained or made
contributions to a defined benefit plan (as such term is defined in Section
3(35) of ERISA) (a "DEFINED BENEFIT PLAN"), or any Plan which is subject to the
minimum funding requirements of Section 412 of the Code or the requirements of
Title IV of ERISA.

         No underfunded Defined Benefit Plan has been, during the five years
preceding the Closing Date, transferred out of the controlled group of companies
(within the meaning of Sections 414(b), (c) and (m) of the Code) of which Seller
is a member or was a member during such five-year period.

         3.12 ABSENCE OF CHANGES. Except as set forth on Schedule 3.12, since
December 31, 2001, Seller has conducted the operations of the Business only in
the ordinary course, and has not:

             (a) Suffered any damage to any material asset of the Business,
         whether or not covered by insurance;

             (b) Sold or disposed of any assets used in the operation of the
         Business other than in the ordinary course;

             (c) Made any general wage increase for its employees as a group;

             (d) Amended or terminated any Assumed Contract, or amended or
         terminated any other material contract other than in the ordinary
         course;

             (e) Incurred any obligation or liability, except normal trade or
         business obligations incurred in the ordinary course of business;

             (f) Introduced any new method of management, operations or
         accounting other than in the ordinary course;

             (g) Suffered any Material Adverse Effect, or any other event that
         might reasonably be expected to have a Material Adverse Effect; or

             (h) Agreed, whether in writing or otherwise, to take any action
         described in this Section.

                                       11

<Page>

         3.13 RELATED PARTY TRANSACTIONS. The Assumed Contracts and Real
Property Leases do not include any agreement with, or any other commitment to
(a) any officer or director of Seller, Bretlin or Parent; (b) any person related
by blood or marriage to any such officer or director; or (c) any corporation,
partnership, trust or other entity in which Seller, Bretlin, Parent or any such
officer, director or related person has an equity or participating interest.

                                   ARTICLE IV
                 REPRESENTATIONS AND WARRANTIES OF BUYER AND C&A

         Buyer and C&A jointly and severally represent and warrant to Seller,
Bretlin and Parent as follows:

         4.1 ORGANIZATION AND GOOD STANDING. Each of Buyer and C&A is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware.

         4.2 AUTHORITY. Each of Buyer and C&A has all requisite power and
authority to execute and deliver this Agreement and the Assumption Agreements
regarding the Assumed Contracts (collectively, the "BUYER AGREEMENTS") and to
perform the transactions contemplated hereby and thereby, to the extent it is a
party thereto. The execution, delivery and performance of the Buyer Agreements,
and the consummation of the transactions contemplated hereby and thereby, have
been duly and validly authorized by all necessary corporate action on the part
of Buyer and C&A. The Buyer Agreements have been, or with respect to Buyer
Agreements to be executed at the Closing, will be duly executed and delivered by
Buyer and C&A and each constitutes or will constitute when executed and
delivered a valid and binding obligation of each of Buyer and C&A, enforceable
against Buyer and C&A in accordance with its terms, to the extent it is a party
thereto.

         4.3 EFFECT OF AGREEMENT. The execution, delivery and performance of the
Buyer Agreements do not and will not (a) conflict with the Articles of
Incorporation or Bylaws of Buyer or C&A; (b) violate any law or any rule or
regulation of any governmental body or administrative agency, or conflict with
any judicial or administrative order or decree relating to Buyer or C&A; or (c)
require any consent, notice to or filing with any governmental authority on
behalf of Buyer or C&A.

                                   ARTICLE V
                                   COVENANTS

         Seller, Bretlin and Parent covenant and agree with Buyer as follows:

         5.1 TERMINATION OF SELLER'S EMPLOYEES; SETTLEMENT OF OBLIGATIONS OF
SELLER. Immediately prior to the Effective Time, Seller shall terminate all of
its employees utilized in or necessary to the operation of the Business. Seller
shall pay all employees of the Business promptly after Closing all outstanding
obligations of Seller to such employees, including accrued salaries, wages,
payroll taxes, any severance pay entitlements, health, medical, retirement,
vacation or deferred compensation benefits and any other obligations and
expenses of any kind or description of Seller arising out of or relating to the
employment by Seller or Seller's termination of the employment of such employees
through the Effective Time. Buyer agrees to offer at-will employment (subject to
Buyer's normal pre-employment testing requirements) to all

                                       12
<Page>

of the active full-time employees of the Business, which employment, if
accepted, would commence immediately upon the Effective Time. For purposes
hereof, the term "active employees" excludes all employees of the Business on
short or long term disability or maternity leave or other leave on the Closing
Date.

         5.2 COLLECTION OF RECEIVABLES. Buyer agrees to assist Seller, as
reasonably requested, in the collection of the Receivables after the Effective
Time and agrees to immediately forward to Seller all funds received by the Buyer
after the Closing for payment of any of the Receivables retained by the Seller
hereunder. Seller agrees to assist Buyer, as reasonably requested, in collecting
any receivables created by Buyer's operation of the Business after the Closing
Date and agrees to immediately forward to Buyer all funds received by the Seller
after the Closing for payment of any of the Buyer's receivables. Payments made
by customers of the Business after the Closing Date shall be applied (i) to the
invoices specified by such customer, or (ii) if the amount of payment
corresponds in amount to an invoice to such customer, then to such invoice, and
(iii) if neither (i) nor (ii) applies to such payment, then to the oldest
outstanding invoice first.

         5.3 EMPLOYEE BENEFIT MATTERS. As of the Effective Time, all of the
Seller's current employees in the Business (including those on lay-off,
disability or leave of absence, whether paid or unpaid), former employees and
retired employees ("BUSINESS EMPLOYEES") shall cease active participation in the
Dixie 401(k) Plan. Seller shall take, or cause to be taken, all such action as
may be necessary to effect such cessation of participation, and to permit
Business Employees to elect to receive or require Business Employees to receive
total distributions of their vested account balances under the Dixie 401(k) Plan
in accordance with applicable law as soon as reasonably practicable after the
Closing Date. Seller shall pay as a bonus the amount of any nonvested account
balances of the Business Employees in the Dixie 401(k) Plan to such persons as
soon as reasonably practicable after Closing after withholding all applicable
taxes. In any event such distributions of vested amounts and payment of all
nonvested account balances shall be finalized not later than ninety (90) days
after the Closing Date. Buyer's 401(k) plan shall accept eligible rollover
distributions from the Dixie 401(k) Plan. For purposes of administering Buyer's
401(k) Plan, service of a Business Employee with Seller and Parent shall be
deemed to be service with Buyer for participation and vesting purposes, but not
for purposes of benefit accrual. Also, Seller shall pay to the Business
Employees within the aforesaid ninety (90) day period any amounts owed under
Seller's Quarterly Incentive Plan for the period from January 1, 2002, through
the Closing Date.

                                   ARTICLE VI
                                     CLOSING

         6.1 CLOSING. The closing of the sale of the Purchased Assets (the
"CLOSING") shall take place at the offices of Witt, Gaither & Whitaker, P.C. in
Chattanooga, Tennessee at 10:00 a.m., local time, on the date that the Closing
Condition, defined below in Section 6.7, shall be satisfied, or such other date
as may be mutually agreed upon by the parties hereto (the "Closing Date"),
provided that if the Closing Condition as defined in Section 6.7 are not
satisfied by June 1, 2002, then this Agreement and the transactions contemplated
hereby shall be terminated and of no force and effect. For purposes of passage
of title, risk of loss, allocation of expenses and other economic effects, the
Closing when completed shall be deemed to have occurred at 7:00

                                       13
<Page>

a.m., local time, on the Closing Date (the "EFFECTIVE TIME"). The Business shall
be operated for the benefit and at the risk of the Buyer from and after the
Effective Time.

         6.2 DELIVERIES BY SELLER. At the Closing, Seller shall deliver or cause
to be delivered to Buyer the following:

             (a) A copy of all corporate resolutions authorizing the execution,
         delivery and performance of the Seller Agreements, and the consummation
         of the transactions contemplated herein and therein, accompanied by the
         certification of the Secretary of Seller to the effect that such
         resolutions are in full force and effect and have not been amended,
         modified or rescinded;

             (b) Good standing certificates from the Secretary of State of the
         state of Seller's incorporation and each of the states listed on
         Schedule 3.1, and certificates from the Departments of Revenue of each
         such jurisdiction stating that all required taxes regarding the
         Business have been paid by Seller in full;

             (c) Evidence of the termination of Liens;

             (d) The legal opinion in the form attached hereto as Exhibit C;

             (e) Evidence of that all Required Consents have been obtained or
         satisfied;

             (f) Assignments of Assumed Contracts, together with any necessary
         consent thereto;

             (g) Bills of Sale attached hereto as EXHIBIT A and such other
         instruments of transfer as Buyer may request to convey and vest in
         Buyer all of Seller's right, title and interest in and to all of the
         remaining Purchased Assets, free and clear of all Liens, other than
         Permitted Liens;

             (h) Assignment of any intellectual property rights included in the
         Purchased Assets;

         6.3 DELIVERIES BY BUYER. At the Closing, Buyer shall deliver or cause
to be delivered to Seller the following:

             (a) A copy of all corporate resolutions authorizing the execution,
         delivery and performance of the Buyer Agreements, and the consummation
         of the transactions contemplated herein and therein, accompanied by the
         certification of the Secretary of Buyer to the effect that such
         resolutions are in full force and effect and have not been amended,
         modified or rescinded;

             (b) An Instrument of Assignment and Assumption of the Assumed
         Contracts to be assumed by Buyer pursuant to Section 1.4;

             (c) The Purchase Price, evidenced by a wire transfer of immediately
         available funds; and

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<Page>

             (e) The legal opinion in the form set forth in Exhibit D hereto.

             (f) The Resale Certificate

         6.4 OTHER DELIVERIES. Each of the parties hereto shall execute and
deliver, or cause to be executed and delivered, to the other the following:

             (a) This Agreement

             (b) The Supply Agreement

             (c) The Non-Solicitation Agreement

             (d) The Transitional Services Agreement in the form of Exhibit F
         hereto

         6.5 FURTHER ASSURANCES. Seller and Parent shall, at any time on or
after the Closing Date, take any and all steps reasonably requested by Buyer to
place Buyer in possession and operating control of the Purchased Assets and the
Business, and will do, execute, acknowledge and deliver all such further acts,
deeds, assignments, transfers, conveyances, powers of attorney and assurances as
may be reasonably requested by Buyer for the more effective transfer to and
reduction to possession of Buyer, or its permitted successors or assigns, of any
of the Purchased Assets.

         6.6 REAL PROPERTY ACQUISITION. Buyer's obligations hereunder are
subject to and conditioned upon the simultaneous closing of the acquisition by
Buyer of the Real Property.

         6.7 CLOSING CONDITIONS. The parties acknowledge that the operations of
the Business have been interrupted due to electrical outage. The obligations of
all the parties hereunder shall be conditioned upon (i) the operation and
functioning of the Business consistent with past operations at full capacity
with production of first-quality products, satisfactory to Buyer in all
respects; (ii) absence of any material supplement to the Seller's disclosure
Schedules to this Agreement which reveals any change outside the ordinary course
and which is objectionable to Buyer in its sole discretion. Upon satisfaction of
the aforesaid Closing conditions, this Agreement will be deemed effective as of
the Effective Time and all of the agreements and other deliveries referred to in
Section 6 shall be dated as of such Closing Date, with appropriate conforming
date changes and the transactions shall be deemed completed as of such date; and
(iii) the completion of Buyer's acquisition of the Real Property; provided,
however, that if this condition is not met, Seller will exercise its option to
purchase the Real Property and sell such property to Buyer on or before June 1.

                                  ARTICLE VII
                                 INDEMNIFICATION

         7.1 INDEMNIFICATION BY SELLER, BRETLIN AND PARENT. Seller, Bretlin and
Parent shall jointly and severally indemnify, defend and hold harmless Buyer,
C&A and their officers, directors and affiliates (the "BUYER INDEMNITEES") from,
against, and with respect to any and all loss, damage, claim, obligation,
liability, cost and expense (including, without limitation, reasonable
attorneys' fees and costs and expenses incurred in investigating, preparing,
defending

                                       15

<Page>

against or prosecuting any litigation, claim, proceeding or demand), of any kind
or character (a "LOSS") arising out of or in connection with any of the
following:

             (a) any breach of any of the representations or warranties of
         Seller, Bretlin and/or Parent contained in or made pursuant to this
         Agreement or any of the Seller Agreements;

             (b) any failure by Seller, Bretlin or Parent to perform or observe,
         in full, any covenant, agreement or condition to be performed or
         observed by it pursuant to this Agreement or any of the Seller
         Agreements;

             (c) Seller's ownership and operation of the Business and the
         Purchased Assets prior to the Effective Time, including any and all
         liabilities under the Assumed Contracts which relate to events
         occurring prior to the Effective Time, and including all other
         liabilities and obligations of the Seller and Parent;

             (d) any use, release, threatened release, emission, generation,
         storage, transportation, disposal, or arrangement for the disposal of
         Hazardous Materials by the Seller or the presence of any Hazardous
         Materials or circumstance or condition at any Real Property which would
         require remediation or other action under any Environmental Laws;
         PROVIDED that any required environmental remediation shall be
         controlled by Buyer and conducted in accordance with applicable law;
         and PROVIDED that Buyer's conduct of such remediation or other response
         shall be limited to the work reasonably prudent and necessary to
         address requirements imposed by applicable Environmental Laws and
         government authorities.

             (e) noncompliance by Seller or Buyer with the provisions of the
         Georgia bulk sales laws; and

             (f) any Taxes accruing prior to the Effective Time, any failure to
         properly complete and duly and timely file all tax returns, reports and
         declarations of estimated tax, and any failure to make all required
         withholdings and payments of Taxes due;

             (g) failure to obtain Required Consents with respect to any
         subleases of any equipment, computers or other assets, or any
         sublicenses of any software, delivered to Buyer at Closing.

         7.2 INDEMNIFICATION BY BUYER. Buyer and C&A shall jointly and severally
indemnify, defend and hold harmless Seller, Bretlin and Parent and their
officers, directors and affiliates from, against and with respect to any Loss
arising out of or in connection with any of the following:

             (a) any breach of any of the representations and warranties of
         Buyer or C&A contained in or made pursuant to this Agreement;

             (b) any failure by Buyer or C&A to perform or observe, in full, any
         covenant, agreement or condition to be performed or observed by it
         pursuant to this Agreement;

                                       16

<Page>

             (c) all obligations under the Assumed Contracts assumed by Buyer
         arising on or after the Effective Time, as provided under Section 1.4;
         or

             (d) Buyer's or C&A's ownership and operation of the Business and
         the Purchased Assets on and after the Effective Time.

         7.3 NOTICE OF CLAIM. Any party seeking to be indemnified hereunder (the
"INDEMNIFIED PARTY") shall, within 60 days following discovery of the matters
giving rise to a Loss, notify the party from whom indemnity is sought (the
"INDEMNITY OBLIGOR") in writing of any claim for recovery, specifying in
reasonable detail the nature of the Loss and the amount of the liability
estimated to arise therefrom. The failure of the Indemnified Party to notify the
Indemnity Obligor on a timely basis will not relieve the Indemnity Obligor of
any liability that it may have to the Indemnified Party, subject to the survival
provisions of Section 8.1 hereof to the extent applicable, except to the extent
that the Indemnified Party demonstrates that the defense of such action is
materially prejudiced by the Indemnity Obligor's failure to give such notice.

         7.4 DEFENSE. If the facts pertaining to a Loss arise out of the claim
of any third party, or if there is any claim against a third party available by
virtue of the circumstances of the Loss, the Indemnity Obligor may, by giving
written notice to the Indemnified Party within 15 days following its receipt of
the notice of such claim, elect to assume the defense or the prosecution
thereof, including the employment of counsel or accountants at its cost and
expense; PROVIDED, HOWEVER, that during the interim the Indemnified Party shall
use its reasonable efforts to take such actions (not including settlement) as
are reasonably necessary to protect against further damage or loss with respect
to the Loss; and provided further that the Indemnity Obligor can only assume the
defense if (i) it provides evidence acceptable to the Indemnified Party that it
will have the financial resources to defend the claim and satisfy its
indemnification obligations; (ii) it obtains counsel which is satisfactory to
the Indemnified Party; (iii) the third party claim involves only money damages
and does not seek an injunction or other equitable relief; (iv) the Indemnity
Obligor conducts the defense of the claim actively and diligently, and (v) such
Loss does not arise from a claim made by a customer or employee of the Business
after the Closing. The Indemnified Party shall have the right to employ counsel
separate from counsel employed by the Indemnity Obligor in any such action and
to participate therein, but the fees and expenses of such counsel shall be at
the Indemnified Party's own expense. Whether or not the Indemnity Obligor
chooses so to defend or prosecute such claim, all the parties hereto shall
cooperate in the defense or prosecution thereof.

         7.5 OTHER REMEDIES. The foregoing indemnification provisions are in
addition to, and not in derogation of any equitable claim or cause of action or
common law claim or cause of action for fraud any party may have as a result of
a Loss, but shall be deemed an exclusive election of remedies with respect to
all other claims or causes of action.

         7.6 LIMITATION. Notwithstanding the provisions of Sections 7.1 or 7.2,
no Indemnity Obligor shall have any indemnification obligation under Sections
7.1(a) or 7.2(a) of this Agreement unless and until the aggregate amount of the
Losses of the Indemnified Party arising from all breaches of representations and
warranties exceeds Three Hundred Thousand Dollars ($300,000) in the aggregate,
whereupon the Indemnity Obligor shall be liable to indemnify the Indemnified
Party to the extent of the entire amount of such Losses; provided that this
Section

                                       17

<Page>

7.6 shall not apply to any breach of warranty contained in Sections 3.4 or 3.5.
Provided, that once a breach of any representation or warranty in this Agreement
occurs, any materiality or knowledge qualification contained in such
representation or warranty shall be disregarded in determining the magnitude of
any Loss occasioned by the breach of such representation or warranty for
purposes of this Section 7.6.

                                  ARTICLE VIII
                                  MISCELLANEOUS

         8.1 SURVIVAL OF REPRESENTATIONS. All representations and warranties of
the parties hereto contained in this Agreement or otherwise made in writing in
connection with the transactions contemplated hereby shall survive the execution
and delivery of this Agreement and the Closing for a period of twenty-four
months thereafter, other than the representations and warranties contained in
Sections 3.4 and 3.5 which shall survive until the expiration of the applicable
statute of limitation.

         8.2 BULK SALES. To the extent any bulk sales law applies to the
transaction evidenced hereby, the parties agree to waive the requirements, if
any, of all applicable bulk sales laws. As an inducement to Buyer to enter into
such waiver, Seller expressly covenants that (a) it will not be rendered
insolvent by the transactions contemplated by this Agreement; and (b) all debts,
obligations and liabilities relating to the Business that are not expressly
assumed by Buyer under this Agreement will be promptly paid and discharged by
Seller as and when they become due.

         8.3 RISK OF LOSS. The risk of loss, damage or condemnation of any of
the Purchased Assets from any cause whatsoever shall be borne by Seller at all
times prior to the Effective Time.

         8.4 BROKERS. Each party represents and warrants to the other (a) that
no brokers or agents have been retained or employed by it, and (b) that there
are no claims for any brokerage commission, finder's fee or similar payment due
or claimed to be due from it with respect to this transaction.

         8.5 TAX FILINGS. Each of the parties acknowledges its understanding of
the requirement under Section 1060 of the Internal Revenue Code for the filing
by each of Form 8594 for its respective tax year in which the Closing occurs and
agrees to timely and properly file such forms with its federal income tax
return. Each of Seller and Buyer agrees to timely and properly allocate the
Purchase Price among the Purchased Assets in accordance with EXHIBIT A hereto
and to use such allocation for all federal, state and local income tax purposes.

         8.6 EXPENSES. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expense, whether or not the sale of the Purchased Assets is
consummated. Sales taxes (if any), shall be borne by Seller and recording and
filing fees on the transfer of the Purchased Assets shall be borne by Buyer.

         8.7 PUBLICITY. Any press releases or other announcements concerning the
transactions contemplated by this Agreement shall be approved by both Buyer and
Seller prior to their issuance; PROVIDED, HOWEVER, that each of the parties
hereto shall be permitted to make all such

                                       18

<Page>

disclosures as are determined to be reasonably necessary to be made in order to
comply with relevant securities laws.

         8.8 NOTICES. All notices, demands and other communications made
hereunder shall be in writing and shall be given either by personal delivery, by
nationally recognized overnight courier (with charges prepaid) or by telecopy
(with telephone confirmation), and shall be deemed to have been given or made
when personally delivered, the day following the date deposited with such
overnight courier service or when transmitted to telecopy machine and confirmed
by telephone, addressed to the respective parties at the following addresses (or
such other address for a party as shall be specified by like notice):

             If to the Seller:

                      Candlewick Yarns, Inc.
                      Post Office Box 12542
                      185 S. Industrial Boulevard
                      Calhoun, GA 30703
                      Attention: Gary A. Harmon, Vice President
                      Phone: (706) 629-9234
                      Facsimile: (706) 625-0782

             If to Bretlin:

                      Bretlin, Inc.
                      Post Office Box 12542
                      185 S. Industrial Boulevard
                      Calhoun, GA 30703
                      Attention: Gary A. Harmon, Vice President
                      Phone: (706) 629-9234
                      Facsimile: (706) 625-0782

             If to the Parent:

                      The Dixie Group, Inc.
                      345-B Nowlin Lane
                      Chattanooga, Tennessee 37421
                      Attention: Gary A. Harmon, CFO
                      Phone: (706) 629-9234
                      Facsimile: (706) 625-0782

         With a copy in any such case (which shall not constitute notice) to:

                                       19

<Page>

                      John F. Henry, Jr., Esq.
                      Witt, Gaither & Whitaker, P.C.
                      1100 SunTrust Bank Building
                      Chattanooga, Tennessee 37402-2608
                      Phone: (423) 265-8881
                      Facsimile: (423) 266-4138

             If to Buyer:

                      CAF Extrusion, Inc.
                      311 Smith Industrial Boulevard
                      Dalton, Georgia 30720
                      Attn: Chief Financial Officer
                      Facsimile: (706) 259-2125

             If to C&A:

                      Collins & Aikman Floorcoverings, Inc.
                      311 Smith Industrial Boulevard
                      Dalton, Georgia 30720
                      Attn: Chief Financial Officer
                      Facsimile: (706) 259-2125

         With a copy in either case (which shall not constitute notice) to:

                      Womble Carlyle Sandridge & Rice
                      1201 West Peachtree Street
                      Suite 3500
                      Atlanta, Georgia 30309
                      Attention: G. Donald Johnson, Esq.
                      Telephone: 404-888-7456
                      Fax:       404-870-4878

         8.9 GOVERNING LAW. This agreement shall be governed by the laws of the
State of Georgia applicable to agreements made and to be performed entirely
within such state.

                                       20

<Page>

         8.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

         8.11 ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. This Agreement may not be assigned by any of the parties hereto without
the prior written consent of all other parties hereto, and any purported
assignment without such consent shall be void; PROVIDED, HOWEVER, that Buyer may
assign its rights hereunder to any subsidiary that is wholly-owned by Buyer.

         8.12 THIRD PARTY BENEFICIARIES. None of the provisions of this
Agreement or any document contemplated hereby is intended to grant any right or
benefit to any person or entity which is not a party to this Agreement.

         8.13 HEADINGS. The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of this
Agreement and shall not in any way affect the meaning or interpretation of this
Agreement.

         8.14 AMENDMENTS. Any waiver, amendment, modification or supplement of
or to any term or condition of this Agreement shall be effective only if in
writing and signed by all parties hereto, and the parties hereto waive the right
to amend the provisions of this Section 8.14 orally.

         8.15 SPECIFIC PERFORMANCE. Seller acknowledges that the Purchased
Assets are unique and that if Seller fails to consummate the transactions
contemplated by this Agreement such failure will cause irreparable harm to Buyer
for which there will be no adequate remedy at law. Buyer shall be entitled, in
addition to its other remedies at law, to specific performance of this Agreement
if Seller shall, without cause, refuse to consummate the transactions
contemplated by this Agreement.

         8.16 JURISDICTION. Any action or proceeding seeking to enforce any
provision, or based on any right arising out of, this Agreement may be brought
against any of the parties in the courts of the State of Georgia, County of
Whitfield, or if it has, or can acquire, jurisdiction in the United States
District Court for the Northern District of Georgia, and each of the parties
consents to the jurisdiction of such courts (and of the appropriate appellate
courts) in any such action or proceeding and waives any objection to venue laid
therein. Process in any action or proceeding referred to in the preceding
sentence may be served on any party anywhere in the world.

         8.17 SEVERABILITY. In the event that any provision in this Agreement
shall be determined to be invalid, illegal or unenforceable in any respect, the
remaining provisions of this Agreement shall not be in any way impaired, and the
illegal, invalid or unenforceable provision shall be fully severed from this
Agreement and there shall be automatically added in lieu thereof a provision as
similar in terms and intent to such severed provision as may be legal, valid and
enforceable.

         8.18 ENTIRE AGREEMENT. This Agreement and the Schedules and Exhibits
hereto, constitute the entire contract between the parties hereto pertaining to
the subject matter hereof, and supersede all prior and contemporaneous
agreements and understandings between the parties with respect to such subject
matter. Any items disclosed on any Schedule hereto shall relate only

                                       21

<Page>

to the representations and warranties in the Section of the Agreement to which
they expressly refer. No Schedule to this Agreement shall incorporate any
disclosure set forth on any other Schedule to this Agreement or in any other
document.

         8.19 CERTAIN DEFINITIONS. As used in this Agreement, the following
terms shall have the meanings set forth below:

             (a) "AFFILIATE" shall mean, with respect to any person, any other
         person which directly or indirectly controls, is controlled by or is
         under common control with such person. For purposes hereof, "control"
         shall mean the direct or indirect ownership of more than fifty percent
         of the voting or income interests of such Person.

             (b) The phrases, "KNOWLEDGE OF THE SELLER", "Seller has no
         knowledge" and like phrases shall mean that no person named on Schedule
         8.19 hereto has any actual knowledge, after due inquiry, that the
         statement made is incorrect.

             (c) "MATERIAL ADVERSE EFFECT" shall mean any material adverse
         effect, loss, consequence or result on the business, prospects,
         condition (financial or otherwise) or operations of the Business, the
         Purchased Assets or the operations of the Facility.

         8.20 SCHEDULES. All Schedules hereto are provided as of the date hereof
(or as otherwise set forth in such Schedule). Schedules may be supplemented or
updated at Closing to reflect any and all changes in the ordinary course of
business between the date hereof (or such other date set forth in such Schedule)
and Closing.

                                       22
<Page>

         IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be signed by its duly authorized officer as of the date first above
written.

                                     SELLER:

                                     CANDLEWICK YARNS, INC.

                                     By: /s/ Gary A. Harmon
                                         ---------------------------------------
                                         Gary A. Harmon, Vice President

                                     PARENT:

                                     THE DIXIE GROUP, INC.

                                     By: /s/ Daniel K. Frierson
                                         ---------------------------------------
                                         Daniel K. Frierson, Chairman

                                     BRETLIN:

                                     BRETLIN, INC.

                                     By: /s/ Gary A. Harmon
                                         ---------------------------------------
                                         Gary A. Harmon, Vice President

                                     BUYER:

                                     CAF EXTRUSION, INC.

                                     By: /s/ Edgar M. Bridger
                                         ---------------------------------------
                                         Edgar M. Bridger, President

                                       23

<Page>

                                     C&A:

                                     COLLINS & AIKMAN FLOORCOVERINGS, INC.

                                     By: /s/ Edgar M. Bridger
                                         ---------------------------------------
                                         Edgar M. Bridger, President

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Exhibit 10.1
  to Form 10-Q
  for the period ending
  March 30, 2002    
  

MOTOROLA OMNIBUS

INCENTIVE PLAN OF 2002  

        1.    Purpose.    The purposes of the Motorola Omnibus Incentive Plan of 2002 (the "Plan") are (i) to encourage
outstanding individuals to accept or continue employment with Motorola, Inc. ("Motorola" or the "Company") and its subsidiaries or to serve as directors of Motorola, and (ii) to furnish
maximum incentive to those persons to improve operations and increase profits and to strengthen the mutuality of interest between those persons and Motorola's stockholders by providing them stock
options and other stock and cash incentives. 

        2.    Administration.    The Plan will be administered by a Committee (the "Committee") of the Motorola Board of
Directors consisting of two or more directors as the Board may designate from time to time, each of whom shall qualify as a "Non-Employee Director" within the meaning set forth in
Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act") or any successor legislation. The Committee shall have the authority to construe
and interpret the Plan and any benefits granted thereunder, to establish and amend rules for Plan administration, to change the terms and conditions of options and other benefits at or after grant,
and to make all other determinations which it deems necessary or advisable for the administration of the Plan. The determinations of the Committee shall be made in accordance with their judgment as to
the best interests of Motorola and its stockholders and in accordance with the purposes of the Plan. A majority of the members of the Committee shall constitute a quorum, and all determinations of the
Committee shall be made by a majority of its members. Any determination of the Committee under the Plan may be made without notice or meeting of the Committee, in writing signed by all the Committee
members. The Committee may delegate the administration of the Plan, in whole or in part, on such terms and conditions as it may impose, to such other person or persons as it may determine in its
discretion, except with respect to benefits to officers subject to Section 16 of the Exchange Act or officers who are or may be "covered employees" within the meaning of Section 162(m)
of the Internal Revenue Code ("Covered Employees"). 

        3.    Participants.    Participants may consist of all employees of Motorola and its subsidiaries and all
Non-Employee Directors of Motorola. Any corporation or other entity in which a 50% or greater interest is at the time directly or indirectly owned by Motorola shall be a subsidiary for
purposes of the Plan. Designation of a participant in any year shall not require the Committee to designate that person to receive a benefit in any other year or to receive the same type or amount of
benefit as granted to the participant in any other year or as granted to any other participant in any year. The Committee shall consider all factors that it deems relevant in selecting participants
and in determining the type and amount of their respective benefits. 

        4.    Shares Available under the Plan.    There is hereby reserved for issuance under the Plan an aggregate of
45 million shares of Motorola common stock. If there is a lapse, expiration, termination or cancellation of any stock option issued under the Plan prior to the issuance of shares thereunder or
if shares of common stock are issued under the Plan and thereafter are reacquired by Motorola, the shares subject to those options and the reacquired shares shall be added to the shares available for
benefits under the Plan. Shares covered by a Benefit granted under the Plan shall not be counted as used unless and until they are actually issued and delivered to a Participant. In addition, any
shares of common stock exchanged by an optionee as full or partial payment to Motorola of the exercise price under any stock option exercised under the Plan, any shares retained by Motorola pursuant
to a participant's tax withholding election, and any shares covered by a benefit which is settled in cash shall be added to the shares available for benefits under the Plan. All shares issued under
the Plan may be either authorized and unissued shares or issued shares reacquired by Motorola. Under the Plan, no 

 

participant may receive in any calendar year (i) Stock Options relating to more than 3,000,000 shares, (ii) Restricted Stock or Restricted Stock Units that are subject to the attainment
of Performance Goals of Section 13 hereof relating to more than 300,000 shares, (iii) Stock Appreciation Rights relating to more than 3,000,000 shares, or (iv) Performance Shares
relating to more than 300,000 shares. The shares reserved for issuance and the limitations set forth above shall be subject to adjustment in accordance with Section 15 hereof. All of the
available shares may, but need not, be issued pursuant to the exercise of incentive stock options. Notwithstanding anything else contained in this Section 4 the number of shares that may be
issued under the Plan for benefits other than stock options shall not exceed a total of 5,000,000 shares (subject to adjustment in accordance with Section 15 hereof. 

        5.    Types of Benefits.    Benefits under the Plan shall consist of Stock Options, Stock Appreciation Rights,
Restricted Stock, Restricted Stock Units, Performance Stock, Performance Units, Annual Management Incentive Awards and Other Stock or Cash Awards, all as described below. 

        6.    Stock Options.    Subject to the terms of the Plan, Stock Options may be granted to participants, at any time as
determined by the Committee. The Committee shall determine the number of shares subject to each option and whether the option is an Incentive Stock Option. The option price for each option
shall be determined by the Committee but shall not be less than 100% of the fair market value of Motorola's common stock on the date the option is granted. Each option shall expire at such time as the
Committee shall determine at the time of grant. Options shall be exercisable at such time and subject to such terms and conditions as the Committee shall determine; provided, however, that no option
shall be exercisable later than the tenth anniversary of its grant. The option price, upon exercise of any option, shall be payable to Motorola in full by (a) cash payment or its equivalent,
(b) tendering previously acquired shares (held for at least six months) having a fair market value at the time of exercise equal to the option price or certification of ownership of such
previously-acquired shares, (c) delivery of a properly executed exercise notice, together with irrevocable instructions to a broker to promptly deliver to Motorola the amount of sale proceeds
from the option shares or loan proceeds to pay the exercise price and any withholding taxes due to Motorola, and (d) such other methods of payment as the Committee, at its discretion, deems
appropriate. In no event shall the Committee cancel any outstanding Stock Option for the purpose of reissuing the option to the participant at a lower exercise price or reduce the option price of an
outstanding option. 

        7.    Stock Appreciation Rights.    Subject to the terms of the Plan, Stock Appreciation Rights ("SARs") may be
granted to participants at any time as determined by the Committee. An SAR may be granted in tandem with a Stock Option granted under this Plan or on a free-standing basis. The grant price
of a tandem SAR shall be equal to the option price of the related option. The grant price of a free-standing SAR shall be equal to the fair market value of Motorola's common stock on the
date of its grant. An SAR may be exercised upon such terms and conditions and for the term as the Committee in its sole discretion determines; provided, however, that the term shall not exceed the
option term in the case of a tandem SAR or ten years in the case of a free standing SAR. Upon exercise of an SAR, the participant shall be entitled to receive payment from Motorola in cash or stock,
at the discretion of the Committee, in an amount determined by multiplying the excess of the fair market value of a share of common stock on the date of exercise over the grant price of the SAR by the
number of shares with respect to which the SAR is exercised. 

        8.    Restricted Stock and Restricted Stock Units.    Subject to the terms of the Plan, Restricted Stock and
Restricted Stock Units may be awarded or sold to participants under such terms and conditions as shall be established by the Committee. Restricted Stock and Restricted Stock Units shall be subject to
such restrictions as the Committee determines, including, without limitation, any of the following: 

(a)    a
prohibition against sale, assignment, transfer, pledge, hypothecation or other encumbrance for a specified period; or 

2

 

(b)    a
requirement that the holder forfeit (or in the case of shares or units sold to the participant resell to Motorola at cost) such shares or units in the event of termination of
employment during the period of restriction. 

All
restrictions shall expire at such times as the Committee shall specify. 

        9.    Performance Stock.    Subject to the terms of the Plan, the Committee shall designate the participants to whom
long-term performance stock ("Performance Stock") is to be awarded and determine the number of shares, the length of the performance period and the other terms and conditions of each such
award. Each award of Performance Stock shall entitle the participant to a payment in the form of shares of common stock upon the attainment of performance goals and other terms and conditions
specified by the Committee. 

        Notwithstanding
satisfaction of any performance goals, the number of shares issued under a Performance Stock award may be adjusted by the Committee on the basis of such further
consideration as the Committee in its sole discretion shall determine. However, the Committee may not, in any event, increase the number of shares earned upon satisfaction of any performance goal by
any participant who is a Covered Employee. The Committee may, in its discretion, make a cash payment equal to the fair market value of shares of common stock otherwise required to be issued to a
participant pursuant to a Performance Stock award. 

        10.    Performance Units.    Subject to the terms of the Plan, the Committee shall designate the participants to whom
long-term performance units ("Performance Units") are to be awarded and determine the number of units and the terms and conditions of each such award. Each Performance Unit award shall
entitle the participant to a payment in cash upon the attainment of performance goals and other terms and conditions specified by the Committee. 

        Notwithstanding
the satisfaction of any performance goals, the amount to be paid under a Performance Unit award may be adjusted by the Committee on the basis of such further
consideration as the Committee in its sole discretion shall determine. However, the Committee may not, in any event, increase the amount earned under Performance Unit awards upon satisfaction of any
performance goal by any participant who is a Covered Employee and the maximum amount earned by a Covered Employee in any calendar year may not exceed $5,000,000. The Committee may, in its discretion,
substitute actual shares of common stock for the cash payment otherwise required to be made to a participant pursuant to a Performance Unit award. 

        11.    Annual Management Incentive Awards.    The Committee may designate Motorola executive officers who are eligible
to receive a monetary payment in any calendar year based on a percentage of an incentive pool equal to 5% of Motorola's consolidated operating earnings for the calendar year. The Committee shall
allocate an incentive pool percentage to each designated participant for each calendar year. In no event may the incentive pool percentage for any one participant exceed 30% of the total pool.
Consolidated operating earnings shall mean the consolidated earnings before income taxes of the Company, computed in accordance with generally accepted accounting principles, but shall exclude the
effects of Extraordinary Items. Extraordinary Items shall mean (i) extraordinary, unusual and/or non-recurring items of gain or loss (ii) gains or losses on the disposition
of a business, (iii) changes in tax or accounting regulations or laws, or (iv) the effect of a merger or acquisition, all of which must be
identified in the audited financial statements, including footnotes, or the Management Discussion and Analysis section of the Company's annual report. 

        As
soon as possible after the determination of the incentive pool for a Plan year, the Committee shall calculate the participant's allocated portion of the incentive pool based upon the
percentage established at the beginning of the calendar year. The participant's incentive award then shall be determined by the Committee based on the participant's allocated portion of the incentive
pool subject to adjustment in the sole discretion of the Committee. In no event may the portion of the incentive 

3

 

pool allocated to a participant who is a Covered Employee be increased in any way, including as a result of the reduction of any other participant's allocated portion. 

        12.    Other Stock or Cash Awards.    In addition to the incentives described in sections 6 through 11 above, and
subject to the terms of the Plan, the Committee may grant other incentives payable in cash or in common stock under the Plan as it determines to be in the best interests of Motorola and subject to
such other terms and conditions as it deems appropriate. 

        13.    Performance Goals.    Awards of Restricted Stock, Restricted Stock Units, Performance Stock, Performance Units
and other incentives under the Plan may be made subject to the attainment of performance goals relating to one or more business criteria within the meaning of Section 162(m) of the Internal
Revenue Code, including, but not limited to, cash flow; cost; ratio of debt to debt plus equity; profit before tax; earnings before interest and taxes; earnings before interest, taxes, depreciation
and amortization; earnings per share; operating earnings; economic value added; ratio of operating earnings to capital spending; free cash flow; net profit; net sales; price of Motorola common stock;
return on net assets, equity or stockholders' equity; market share; or total return to shareholders ("Performance Criteria"). Any Performance Criteria may be used to measure the performance of the
Company as a whole or any business unit of the Company. Any Performance Criteria may include or exclude Extraordinary Items. Performance Criteria shall be calculated in accordance with the Company's
financial statements, generally accepted accounting principles, or under a methodology established by the Committee prior to the issuance of an award which is consistently applied and identified in
the audited financial statements, including footnotes, or the Management Discussion and Analysis section of the Company's annual report. However, the Committee may not in any event increase the amount
of compensation payable to a Covered Employee upon the attainment of a performance goal. 

        14.    Change in Control.    Except as otherwise determined by the Committee at the time of grant of an award, upon a
Change in Control of Motorola, all outstanding Stock Options and SARs shall become vested and exercisable; all restrictions on Restricted Stock and Restricted Stock Units shall lapse; all performance
goals shall be deemed achieved at target levels and all other terms and conditions met; all Performance Stock shall be delivered; all Performance Units and Restricted Stock Units shall be paid out as
promptly as practicable; all Annual Management Incentive Awards shall be paid out based on the consolidated operating earnings of the immediately preceding year or such other method of payment as may
be determined by the Committee at the time of award or thereafter but prior to the
Change in Control; and all Other Stock or Cash Awards shall be delivered or paid. A "Change in Control" shall mean: 

        A
Change in Control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act, or any
successor provision thereto, whether or not Motorola is then subject to such reporting requirement; provided that, without limitation, such a Change in Control shall be deemed to have occurred if
(a) any "person" or "group" (as such terms are used in Section 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of Motorola representing 20% or more of the combined voting power of Motorola's then outstanding securities (other than Motorola or any
employee benefit plan of Motorola; and, for purposes of the Plan, no Change in Control shall be deemed to have occurred as a result of the "beneficial ownership," or changes therein, of Motorola's
securities by either of the foregoing), (b) there shall be consummated (i) any consolidation or merger of Motorola in which Motorola is not the surviving or continuing corporation or
pursuant to which shares of common stock would be converted into or exchanged for cash, securities or other property, other than a merger of Motorola in which the holders of common stock immediately
prior to the merger have, directly or indirectly, at least a 65% ownership interest in the outstanding common stock of the surviving corporation immediately after the merger, or (ii) any sale,
lease, exchange or other 

4

 

transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of Motorola other than any such transaction with entities in which the holders of
Motorola Common Stock, directly or indirectly, have at least a 65% ownership interest, (c) the stockholders of Motorola approve any plan or proposal for the liquidation or dissolution of
Motorola, or (d) as the result of, or in connection with, any cash tender offer, exchange offer, merger or other business combination, sale of assets, proxy or consent solicitation (other than
by the Board), contested election or substantial stock accumulation (a "Control Transaction"), the members of the Board immediately prior to the first public announcement relating to such Control
Transaction shall thereafter cease to constitute a majority of the Board 

        15.    Adjustment Provisions.    

(a)    If
Motorola shall at any time change the number of issued shares of common stock by stock dividend, stock split, spin-off, split-off, spin-out,
recapitalization, merger, consolidation, reorganization, combination, or exchange of shares, the total number of shares reserved for issuance under the Plan, the maximum number of shares which may be
made subject to an award in any calendar year, and the number of shares covered by each outstanding award and the price therefor, if any, shall be equitably adjusted by the Committee, in its sole
discretion. 

(b)    Subject
to the provisions of Section 14, without affecting the number of shares reserved or available hereunder the Board of Directors or the Committee may authorize the
issuance or assumption of benefits under this Plan in connection with any merger, consolidation, acquisition of property or stock, or reorganization upon such terms and conditions as it may deem
appropriate. 

(c)    In
the event of any merger, consolidation or reorganization of Motorola with or into another corporation, other than a merger, consolidation or reorganization in which Motorola is the
continuing corporation and which does not result in the outstanding common stock being converted into or exchanged for different securities, cash or other property, or any combination thereof, there
shall be substituted, on an equitable basis as determined by the Committee in its discretion, for each share of common stock then subject to a benefit granted under the Plan, the number and kind of
shares of stock, other securities, cash or other property to which holders of common stock of Motorola will be entitled pursuant to the transaction. 

        16.    Nontransferability.    Each benefit granted under the Plan shall not be transferable otherwise than by will or
the laws of descent and distribution and each Stock Option and SAR shall be exercisable during the participant's lifetime only by the participant or, in the event of disability, by the participant's
personal representative. In the event of the death of a participant, exercise of any benefit or payment with respect to any benefit shall be made only by or to the executor or administrator of the
estate of the deceased participant or the person or persons to whom the deceased participant's rights under the benefit shall pass by will or the laws of descent and distribution. Notwithstanding the
foregoing, at its discretion, the Committee may permit the transfer of a Stock Option by the participant, subject to such terms and conditions as may be established by the Committee. 

        17.    Taxes.    Motorola shall be entitled to withhold the amount of any tax attributable to any amounts payable or
shares deliverable under the Plan, after giving the person entitled to receive such payment or delivery notice and Motorola may defer making payment or delivery as to any award, if any such tax is
payable until indemnified to its satisfaction. A participant may pay all or a portion of any required withholding taxes arising in connection with the exercise of a Stock Option or SAR or the receipt
or vesting of shares hereunder by electing to have Motorola withhold shares of common stock, having a fair market value equal to the amount required to be withheld. 

        18.    Duration, Amendment and Termination.    No Incentive Stock Option shall be granted more than ten years after
the date of adoption of this Plan by the Board of Directors; provided, however, that the terms and conditions applicable to any benefit granted on or before such date may thereafter 

5

 

be amended or modified by mutual agreement between Motorola and the participant, or such other person as may then have an interest therein. The Board of Directors or the Committee may amend the Plan
from time to time or terminate the Plan at any time. However, no such action shall reduce the amount of any existing award or change the terms and conditions thereof without the participant's consent.
No amendment of the Plan shall be made without stockholder approval if stockholder approval is required by law, regulation, or stock exchange rule. 

        19.    Fair Market Value.    The fair market value of Motorola's common stock at any time shall be determined in such
manner as the Committee may deem equitable, or as required by applicable law or regulation. 

        20.    Other Provisions.    

        (a)  The
award of any benefit under the Plan may also be subject to other provisions (whether or not applicable to the benefit awarded to any other participant) as the
Committee determines appropriate, including provisions intended to comply with federal or state securities laws and stock exchange requirements, understandings or conditions as to the participant's
employment, requirements or inducements for continued ownership of common stock after exercise or vesting of benefits, forfeiture of awards in the event of termination of employment shortly after
exercise or vesting, or breach of noncompetition or confidentiality agreements following termination of employment, or provisions permitting the deferral of the receipt of a benefit for such period
and upon such terms as the Committee shall determine. 

        (b)  In
the event any benefit under this Plan is granted to an employee who is employed or providing services outside the United States and who is not compensated from a
payroll maintained in the United States, the Committee may, in its sole discretion, modify the provisions of the Plan as they pertain to such individuals to comply with applicable law, regulation or
accounting rules. 

        21.    Governing Law.    The Plan and any actions taken in connection herewith shall be governed by and construed in
accordance with the laws of the state of Delaware (without regard to applicable Delaware principles of conflict of laws). 

        22.    Stockholder Approval.    The Plan was adopted by the Board of Directors on March 19, 2002, subject to
stockholder approval. The Plan and any benefits granted thereunder shall be null and void if stockholder approval is not obtained at the next annual meeting of stockholders. 

6

QuickLinks

Exhibit 10.1

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