EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of August 25, 1997, and amended as of
October 10, 1997, by and between Dal-Tile International Inc., a Delaware
corporation (the "Company"), and Christopher Wellborn (the "Executive").
The Company is engaged in the business of the manufacture,
distribution and marketing of glazed and unglazed tile. The Company desires
to employ the Executive and the Executive desires to accept such employment
on the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual premises and
agreements herein contained, and other good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the parties hereby
agree as follows:
1. TERM OF EMPLOYMENT. The term of the Executive's employment
under this Agreement (the "Term") shall commence on August 25, 1997 and
continue through and expire on August 25, 2000 unless earlier terminated as
herein provided.
2. DUTIES OF EMPLOYMENT. The Executive hereby agrees for the Term
to render his exclusive services to the Company as its Chief Financial
Officer, and in connection therewith, to perform such duties commensurate
with his office as he shall reasonably be directed by the Chief Executive
Officer of the Company (the "CEO") to perform. The Executive shall devote
during the Term all of his business time, energy and skill to his executive
duties hereunder and perform such duties faithfully and efficiently, except
for reasonable vacations and except for periods of illness or incapacity.
When and if requested to do so by the Board of Directors of the Company (the
"Board"), the Executive shall, for no additional compensation, serve as a
director of the Company and a director and officer of any subsidiary or
affiliate of the Company provided that the Executive shall be indemnified for
liabilities incurred by him in his capacity as a director or an officer in
accordance with an Indemnification Agreement in the form attached
hereto as Exhibit A and as provided in the Company's Certificate of
Incorporation and By-Laws as in effect from time to time.
3. COMPENSATION AND OTHER BENEFITS.
3.1 SALARY. As compensation for all services to be rendered by
the Executive during the Term, the Company shall pay to the Executive a
salary at the rate of $300,000 per year (which may be increased from time to
time by the Board (the "Annual Salary")), payable in accordance with the
Company's usual payroll practices for executives. The Executive shall be
eligible to receive annual salary reviews and salary increases as authorized
by the Board.
3.2 BONUS. In addition to his Annual Salary, the Executive
shall be eligible to be paid a bonus in respect of each fiscal year of the
Company (the "Annual Bonus") in accordance with the Company's bonus plan (the
"Plan"), which Annual Bonus shall be determined by the Compensation Committee
of the Board. The amount of the Annual Bonus shall be up to 100% of the
amount of the Annual Salary upon attainment of the "target" performance goal
established under the Plan as determined by the Compensation Committee of the
Board and the Board. For the full fiscal year ending December 31, 1997, the
Company and the Executive have mutually agreed that the Annual Bonus shall be
50% of the Annual Salary, which shall be prorated for 1997 and which shall be
paid not later than January 31, 1998. In addition, the Company shall pay
Executive a sign-on bonus, which shall be payable on execution of this
Agreement. The sign-on bonus amount shall be equal to $140,000, subject to
the provisions of Section 6.3 hereof.
3.3 STOCK OPTION AGREEMENT. The Company shall, subject to
approval by its shareholders of the Dal-Tile International Inc. 1997 Amended
and Restated Stock Option Plan in accordance with Section 162(m) of the Code
(the "Option Plan"), grant options (the "Options") to purchase 310,000 shares
of its Common Stock at an exercise price per share equal to the fair market
value of the Common Stock on the
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date hereof on the terms and conditions set forth in the Option Plan and a
Stock Option Agreement to be entered into (the "Stock Option Agreement") in
the form attached hereto as Exhibit B. If Executive's employment with the
Company is terminated by the Company without Cause (as defined herein) or
upon the occurrence of a Transaction (as defined in the Stock Option Plan),
the Options shall be 100% vested.
3.4 PARTICIPATION IN EMPLOYEE BENEFIT PLANS. Commencing on the
respective eligibility dates of the employee benefit plans, during the Term,
the Executive shall be permitted to participate in any group life,
hospitalization or disability insurance plan, health program, pension plan,
similar benefit plan or other so-called "fringe benefit programs" of the
Company as now existing or as may hereafter be revised or adopted. In
addition, for the 90-day period commencing on the date hereof, the Executive
shall be reimbursed for the expense incurred by him to maintain his existing
medical insurance coverage under COBRA in an amount not to exceed $450.00 per
month.
3.5 VACATION. The Executive shall be entitled to three (3)
weeks vacation per annum.
4. COVENANTS AGAINST COMPETITION. In order to induce the Company
to enter into this Agreement and the Stock Option Agreement, the Executive
hereby agrees as follows:
4.1 ACKNOWLEDGMENTS OF EXECUTIVE. The Executive acknowledges
that (i) the Company and any affiliates or subsidiaries thereof that are
currently existing or are acquired or formed during the Restricted Period, as
hereinafter defined (collectively, the "Companies"), are and will be engaged
primarily in the business of the manufacture of glazed and unglazed tile, for
which marketing and distribution is a primary business (the "Company
Business"); (ii) his work for the Companies will give him access to trade
secrets of and confidential information concerning the Companies, including,
without limitation, information concerning its organization, business and
affairs, organization and operations, "know-how", customer lists, details of
client or
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consultant contracts, pricing policies, financial information, operational
methods, marketing plans or strategies, business acquisition plans, new
personnel acquisition plans, technical processes, projects of the Companies,
financing projections, budget information and procedures, marketing plans or
strategies, and research products (collectively, the "Trade Secrets"); and
(iii) the agreements and covenants contained in this Section 4 are essential
to protect the Company Business and goodwill of the Companies.
4.2 RESTRICTIONS ON COMPETITION. During the Term and for a
two-year period after the end of the Term (the "Restricted Period") unless
this Agreement is terminated in accordance with the provisions of Section
5.4, the Executive shall not, in any place where the Company Business is now
or hereafter conducted by any of the Companies while the Executive is an
employee, agent, officer, director or shareholder of the Companies, directly
or indirectly (a) engage in the Company Business for his own account; (b)
enter the employ of, or render any services to any person or entity engaged
in the Company Business; or (c) become interested in any such person or
entity in any capacity, including, without limitation, as an individual,
partner, shareholder, officer, director, principal, agent, trustee or
consultant; provided, however, that the Executive may own, directly or
indirectly, solely as an investment, securities of any entity traded on any
national securities exchange or registered pursuant to Section 12(g) of the
Securities Exchange Act of 1934 if the Executive is not a controlling person
of, or a member of a group which controls, such entity and does not, directly
or indirectly, own 3% or more of any class of securities of such entity. The
Company shall notify the Executive of any additional entities which may
hereafter become "Companies" within the meaning of this Agreement.
4.3 CONFIDENTIAL INFORMATION; PERSONAL RELATIONSHIPS. During
the Restricted Period, the Executive shall keep secret and retain in
strictest confidence, and shall not use for the benefit of himself or others,
all confidential matters and Trade Secrets of the Companies.
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4.4 PROPERTY OF THE COMPANIES. All memoranda, notes, lists,
records and other documents or papers, (and all copies thereof), including
such items stored in computer memories, on microfiche or by any other means,
made or compiled by or on behalf of the Executive, or made available to the
Executive relating to the Companies are and shall be the Companies' property
and shall be delivered to the Companies upon the expiration of the Term
unless requested earlier by the Companies.
4.5 EMPLOYEES OF THE COMPANIES. The Executive acknowledges that
any attempt on the part of the Executive to induce any employee of any of the
Companies to leave any of the Companies' employ, or any efforts by the
Executive to interfere with the Companies' relationship with other employees,
would be harmful and damaging to the Companies. During the Restricted
Period, the Executive will not without the prior agreement of the Companies,
in any way, directly or indirectly: (i) induce or attempt to induce any
employee to terminate employment with the Companies; (ii) interfere with or
disrupt the Companies' relationship with any employee; or (iii) solicit or
entice any person employed by the Companies.
4.6 BUSINESS OPPORTUNITIES. The Executive acknowledges that the
Companies have been considering, and during the Term may consider, the
acquisition of various entities engaged in the Company Business and that it
would be harmful and damaging to the Companies if he were to become
interested in any such entity without the Company's prior consent. During
the Restricted Period, the Executive will not, without the Company's prior
consent, become interested in any such entity in any capacity, including,
without limitation, as an individual, partner, shareholder, officer,
director, principal, agent, trustee or consultant, if the Executive was aware
at any time during the Term that the Companies had been considering the
acquisition of such entity.
4.7 RESTRICTIVE COVENANTS. For the purposes of this Agreement
all matters discussed in Sections 4.1, 4.2, 4.3, 4.4, 4.5 and 4.6 of this
Agreement shall be referred to as the "Restrictive Covenants."
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4.8 RIGHTS AND REMEDIES UPON BREACH. If the Executive breaches,
or threatens to commit a breach of, any of the provisions of the Restrictive
Covenants, the Company shall have the following rights and remedies with
respect to the Executive, each of which rights and remedies shall be
independent of the others and severally enforceable, and each of which is in
addition to, and not in lieu of, any other rights and remedies available to
the Company under law or in equity.
4.8.1 SPECIFIC PERFORMANCE. The right and remedy to have
the Restrictive Covenants specifically enforced, it being agreed that any
breach or threatened breach of the Restrictive Covenants would cause
irreparable injury to the Company and money damages will not provide an
adequate remedy to the Company.
4.8.2 ACCOUNTING. The right and remedy to require the
Executive to account for and pay over to the Company all compensation,
profits, monies, accruals, increments or other benefits derived or received
by him as a result of any transactions constituting a breach of the
Restrictive Covenants.
4.8.3 SEVERABILITY OF COVENANTS. The Executive
acknowledges and agrees that the Restrictive Covenants are reasonable and
valid in geographical and moral scope and in all other respects. If any
court determines that any of the Restrictive Covenants, or any part thereof,
are invalid or unenforceable, the remainder of the Restrictive Covenants
shall not thereby be affected and shall be given full effect, without regard
to the invalid portions.
4.8.4 BLUE-PENCILLING. If it is determined that any of
the Restrictive Covenants, or any part thereof, is unenforceable because of
the duration or geographic scope of such provision, the duration or scope of
such provision, as the case may be, shall be reduced so that such provisions
becomes enforceable and, in its reduced form, such provision shall then be
enforceable.
4.9 ENFORCEABILITY IN JURISDICTION. The Company and the
Executive intend to and hereby confer jurisdiction to enforce the Restrictive
Covenants upon the
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courts of any jurisdiction within the states or county which the Company does
business. If the courts of any one or more of such jurisdictions hold the
Restrictive Covenants unenforceable by reason of the breadth of such scope or
otherwise, it is the intention of the Company and the Executive that such
determination not bar or in any way affect the Company's right to relief
provided above in the courts of any other jurisdiction within the
geographical scope of the Restrictive Covenants, as to breaches of such
Restrictive Covenants in such other respective jurisdictions, such
Restrictive Covenants as they relate to each jurisdiction being, for this
purpose, severable into diverse and independent covenants.
5. TERMINATION.
5.1 TERMINATION UPON DEATH. If the Executive dies during the
Term, this Employment Agreement shall terminate immediately, except that the
Executive's legal representatives shall be entitled to receive any Annual
Salary to the extent such Annual Salary has accrued and remains payable up to
the date of the Executive's death (to be paid in accordance with the
Company's usual payroll practices for executives), plus a portion of the
Executive's Annual Bonus, as set forth in Section 3.2 computed on a pro rata
basis based on the performance of the Company from the beginning of such
bonus period to the date of Executive's death, and any benefits to which the
Executive, his heirs or legal representatives may be entitled under and in
accordance with the terms of any employee benefits plan or program maintained
by the Company.
5.2 TERMINATION UPON DISABILITY. If the Executive becomes
disabled during his employment hereunder so that he is unable substantially
to perform his services hereunder for 180 days during any 365 day period,
then the term of this Agreement may be terminated by resolution of the Board
sixty days after the expiration of such 180 days, such termination to be
effective upon delivery of written notice to the Executive of the adoption of
such resolution; provided, that the Executive shall be
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entitled to receive any accrued and unpaid Annual Salary through such
effective date of termination (to be paid in accordance with the Company's
usual payroll practices for executives), plus a portion of the Executive's
Annual Bonus, as set forth in Section 3.2 computed on a pro rata basis based
on the performance of the Company from the beginning of such bonus period to
the date of termination, and any benefits to which the Executive may be
entitled under and in accordance with the terms of any employee benefits plan
or program maintained by the Company.
5.3 TERMINATION FOR CAUSE. The Company has the right, at any
time during the Term, subject to all of the provisions hereof, exercisable by
serving notice, effective in accordance with its terms, to terminate the
Executive's employment under this Agreement and discharge the Executive for
"Cause" (as defined below). If such right is exercised, the Executive shall
be entitled to receive unpaid and accrued base salary prorated through the
date of such termination, any benefits vested as of the date of such
termination and any other compensation or benefits otherwise required to be
paid under applicable law. Except for such payments, the Company shall be
under no further obligation to the Executive. As used in this Section 5, the
term "Cause" shall mean and include (i) the conviction of or plea of guilty
by the Executive of any felony or other serious crime involving the Company,
or (ii) gross or willful misconduct by the Executive in the performance of
his duties hereunder; provided however, that no act shall be considered gross
or willful misconduct if the Executive believes he was acting in good faith
or in a manner not opposed to the interests of the Company. The Company
shall be entitled to terminate the Executive for Cause only upon approval of
a resolution adopted by the affirmative vote of not less than two-thirds of
the membership of the Board (excluding Executive). The Company agrees to
provide to the Executive prior written notice (the "Notice") of its intention
to terminate Executive's employment for Cause, such notice to state in detail
the particular acts or failures to act which constitute grounds for the
termination. The Executive shall be entitled to a hearing before the Board
to
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contest the Board's findings, and to be accompanied by counsel. Such hearing
shall be held within 15 days of the request thereof to the Company by the
Executive, provided that such request must be made within 15 days of delivery
of the Notice. If, following any such hearing, the Board maintains its
determination to terminate the Executive's employment for Cause, the
effective date of such termination shall be as specified in the Notice.
5.4 TERMINATION WITHOUT CAUSE. The Company shall have the right
at any time during the Term to terminate the Executive's employment
hereunder, without Cause, at which time the Company's sole obligation
hereunder shall be to (i) pay to the Executive an amount equal to any Annual
Salary accrued and due and payable to the Executive hereunder on the date of
termination (to be paid in accordance with the Company's usual payroll
practices for executives), (ii) thereafter, pay to the Executive all Annual
Salary for the remainder of the Term to be paid in accordance with the
Company's usual payroll practices for executives and (iii) provide to the
Executive for the remainder of the Term any benefits to which the Executive
may be entitled under and in accordance with the terms of any employee
benefits plan or program maintained by the Company. Effective as of the date
of such termination, accrual of vacation time shall be discontinued.
Notwithstanding the foregoing provisions of this Section 5.4, in no event
shall Annual Salary be provided for less than one (1) year from the date of
such termination.
5.5. NON-RENEWAL OF EMPLOYMENT AGREEMENT. If the Company
shall not renew this Agreement at the end of the Term, the Company's sole
obligation hereunder shall be to (i) pay to the Executive an amount equal to
any Annual Salary accrued and due and payable to the Executive hereunder on
the effective date of non-renewal (to be paid in accordance with the
Company's usual payroll practices for executives), (ii) thereafter, pay to
the Executive an amount equal to a maximum of Annual Salary payable for one
year to be paid in accordance with the Company's usual
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payroll practices for executives and (iii) provide to the Executive for a
maximum period of one year commencing on the effective date of non-renewal
any benefits to which the Executive may be entitled under and in accordance
with the terms of any employee benefits plan or program maintained by the
Company. As of the effective date of such non-renewal, accrual of vacation
time shall be discontinued. Upon acceptance by Executive of an employment
opportunity other than with the Company, payments by the Company pursuant to
clauses (ii) and (iii) of this Section 5.5 shall terminate.
5.6 OTHER. Except as otherwise provided herein, upon the
expiration or other termination of this Agreement, including the resignation
of Executive, all obligations of the Company shall forthwith terminate,
except as to any stock option rights as provided in the Stock Option
Agreement and the Right (as defined in the Stock Appreciation Rights
Agreement, dated as of October 10, 1997, between the Executive and the
Company (the "SAR Agreement")) and except as otherwise required by applicable
law.
6. EXPENSES.
6.1 GENERAL. During the Term, the Executive will be reimbursed
for his reasonable expenses incurred for the benefit of the Company in
accordance with the general policy of the Company or directives and
guidelines established by management of the Company and upon submission of
documentation satisfactory to the Company. With respect to any expenses
which are to be reimbursed by the Company to the Executive, the Executive
shall be reimbursed upon his presenting to the Company an itemized expense
voucher.
6.2 RELOCATION. Executive shall be reimbursed for reasonable
expenses incurred by him to relocate from Pennsylvania to Dallas, Texas, plus
reasonable living expenses for the 90-day period commencing on the date
hereof. Relocation expenses shall include (i) normal and customary closing
costs in connection with the sale of Executive's Pennsylvania residence (the
"Pennsylvania Residence") and the purchase
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of Executive's residence in Texas and (ii) moving expenses. The Company and
the Executive have mutually agreed that the Company shall arrange the
movement of Executive's household items from Pennsylvania to Dallas, Texas.
In addition, the Company shall pay to the Executive an amount equal to the
Federal tax liability (based on a 28% income tax rate) incurred by Executive
in connection with the expenses set forth in this Section 6.2.
6.3 PRICE PROTECTION. Executive shall be responsible for the
sale of the Pennsylvania Residence. In connection therewith, if Executive
sells the Pennsylvania Residence for an amount equal to or less than
$390,000, the Company shall pay Executive an amount equal to $40,000 (the
"Price Protection Amount"), which Price Protection Amount has been included
in Executive's sign-on bonus. If Executive sells the Pennsylvania Residence
for an amount greater than $390,000 but less than $430,000, Executive shall
repay to the Company the difference between the price at which the
Pennsylvania Residence is sold and $390,000. If Executive sells the
Pennsylvania Residence for an amount equal to or greater than $430,000,
Executive shall repay $40,000 to the Company.
7. OTHER PROVISIONS.
7.1 NOTICES. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally,
telegraphed, telexed, sent by facsimile transmission or sent by certified,
registered or express mail, postage prepaid. Any such notice shall be deemed
given when so delivered personally, telegraphed, telexed or sent by facsimile
transmission or, if mailed, five days after the date of deposit in the United
States mail, as follows:
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(i) if to the Company, to:
Dal-Tile International Inc.
c/o AEA Investors Inc.
65 East 55 Street
New York, NY 10022
Attention: Christine J. Smith
(ii) if to the Executive, to:
Christopher Wellborn
13 Highview Lane
Yardley, PA 19067
Any party may change its address for notice hereunder by notice to the
other parties hereto.
7.2 ENTIRE AGREEMENT. This Agreement, the Option Agreement and
the SAR Agreement contains the entire agreement between the parties with
respect to the subject matter hereof and supersedes all prior agreements,
written or oral, with respect thereto.
7.3 WAIVERS AND AGREEMENTS. This Agreement may be amended,
modified, superseded, cancelled, renewed or extended, and the terms and
conditions hereof may be waived, only by a written instrument signed by the
parties or, in the case of a waiver, by the party waiving compliance. No
delay on the part of any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any waiver on the part
of any party of any right, power or privilege hereunder, nor any single or
partial exercise of any right, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, power
or privilege hereunder.
7.4 GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware applicable to
agreements made and to be performed entirely within such State.
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7.5 ASSIGNMENT. Executive may not delegate the performance of
any of his duties hereunder. Neither party hereto may assign any rights
hereunder without the written consent of the other party hereto.
7.6 COUNTERPARTS. This Agreement may be executed in two
counterparts, each of which shall be deemed an original but both of which
together shall constitute one and the same instrument.
7.7 HEADINGS. The headings in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation
of this Agreement.
8. ARBITRATION. In the event of a dispute between the Company and
the Executive over the terms of this Agreement which is not settled by the
parties, then the Company and the Executive agree to settle any and all such
disputed issues by arbitration in accordance with the then-existing rules of
the American Arbitration Association. The Company and the Executive shall
jointly appoint one person to act as the arbitrator. In the event the
Company and the Executive cannot agree to an arbitrator within 30 days, the
arbitrator shall be chosen by the President of the American Arbitration
Association. The decision of the arbitrator shall be binding upon the
parties and there shall be no appeal therefrom other than for bias, fraud or
misconduct. The costs of the arbitration, including the fees and expenses of
the arbitrator, shall be borne fifty percent by the Company, on the one hand,
and fifty percent by the Executive, on the other, but each party shall pay
its own attorneys' fees; provided, however, that if the arbitrator shall rule
for the Executive, the Company shall pay or reimburse the Executive's
reasonable attorneys' fees and the Executive's share of the arbitration costs
incurred in connection with such arbitration. Notwithstanding the foregoing,
it is specifically understood that Executive shall remain free to assert and
enforce in any court of competent jurisdiction such rights, if any, as
Executive may have under federal law, including without limitation, rights
arising under Title VII of the Civil Rights Act of 1964, as amended, the Age
Discrimination and
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Employment Act of 1967, as amended, and/or the Americans With Disabilities
Act of 1990.
9. PIGGYBACK RIGHTS.
(a) If the Company proposes to effect an underwritten
secondary registration on behalf of DTI Investors LLC or its members, the
Company will provide prompt notice to the Executive thereof and will permit
the Executive to include in such registration shares of Common Stock owned by
him with respect to which the Company has received written request for
inclusion therein within 20 days after the receipt of the Company's notice.
Common Stock requested by the Executive to be included in such registration
will be included pro rata on the basis of the number of shares of Common
Stock held by the Executive and the other participants in such registration,
subject to reduction, if necessary, if the managing underwriter for the
offering advises the Company that such reduction is advisable in order to
avoid an adverse effect on the proposed offering. The Company shall bear all
expenses in connection with such registration, other than underwriting
discounts and commissions and transfer taxes, if any, and fees and expenses
of the Executive's legal and other advisers, attributable to the inclusion in
such registration of Common Stock owned by Executive.
(b) The obligations of the Company contained in this Section 9 are
subject to (i) requirements of applicable law, (ii) restrictions that may be
imposed by the Company's underwriters, and (iii) Executive cooperating and
providing any needed consents, agreements (including any required "lock up"
or customary indemnity agreements, to the extent such arrangements are
requested of members of Company management or significant shareholders,
generally) and information. Executive agrees that he will discontinue any
exercise of Options or Rights or sale of shares of Common Stock upon notice
from the Company that an event or development makes amendment or supplement
of any Registration Statement of the Company (or suspension of effectiveness
thereof) necessary, and will not resume such exercise or sale until the
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Company informs Executive he may do so (provided that the Company shall not
require such discontinuance for more than 90 days in any 360-day period).
Executive specifically agrees that, in connection with a Filing Event
described in clause (i) of the definition thereof, he will not sell, transfer
or otherwise dispose of any shares of Common Stock, for a period of 180 days
following such event, unless the underwriters for the relevant public
offering determine a shorter period to be appropriate.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
DAL-TILE INTERNATIONAL INC.
By:
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Name:
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Title:
--------------------------------
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Christopher Wellborn
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