On November 8, 2004, The Dixie Group, Inc. ("Dixie"), completed its acquisition of the partnership interest in Chroma Systems Partnership ("Chroma"), held by Monterey Color Systems, Inc. ("MCSI"), a wholly-owned subsidiary of Monterey Carpets, Inc. ("Monterey") for a nominal cash consideration. The transaction was structured as a purchase by Chroma of the general partnership interest held by MCSI. Chroma Technologies, Inc. ("CTI"), Dixie's wholly-owned subsidiary, joined in the agreement, and Dixie executed the agreement as guarantor of the obligations of its subsidiary. Collins & Aikman, Inc. ("C&A") executed the agreement as guarantor of the obligations of its subsidiary, Monterey. In addition, the parties entered into an agreement to facilitate the orderly transition of the dyeing and finishing services performed by Chroma for Monterey to other facilities owned by C&A. As a consequence of the transaction, Dixie now effectively owns 100% of the partnership. Prior to the transaction, Chroma performed dyeing and finishing services principally for Dixie and Monterey, and was owned jointly by them, through wholly-owned subsidiaries.

On November 10, 2004, Dixie, each of the subsidiaries of Dixie as guarantors, and Fleet Capital Corporation, as Agent and sole Lender, entered into that certain First Amendment to Amended and Restated Loan and Security Agreement (the "First Amendment"). The agreement amends that certain Amended and Restated Loan and Security Agreement, dated April 14, 2004, pursuant to which Lenders agreed to make certain loans and other extensions of credit to Dixie from time to time. Among other things, the First Amendment modifies certain financial covenants, increases the amount of the Revolver Commitments by $5.0 million to $45.0 million and provides for a new $10.0 million capital expenditure loan facility. Dixie entered into the First Amendment to enhance its financial flexibility and support the high rate of growth its businesses are experiencing.