[LETTERHEAD]
August 5, 1999
DTI Investors LLC
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxx
Dear Xxxxxxx:
In order to facilitate the orderly sale of shares of common stock (the
"Common Stock") of Dal-Tile International Inc. (the "Company"), the Company
hereby agrees with DTI Investors LLC and its manager (individually or
collectively, "DTI") that DTI shall have the right from time to time, subject
to receipt of the approvals referred below, to request (each, a "Demand
Registration") registration of the sale of shares of Common Stock owned by
DTI, its members, affiliates of such members or family members or family
trusts of such members (the "DTI Parties").
The Company will not be obligated to effect (a) more than one Demand
Registration in 1999, (b) any Demand Registration in which the estimated net
proceeds are less than $20 million, and (c) any Demand Registration within
six months after the effective date of any previously filed registration
statement of the Company, and the Company shall have the right to postpone
any requested registration for up to 90 days if it determines that such
registration could reasonably be expected to have an adverse effect on any
proposal or plan by the Company or its subsidiaries to engage in any
acquisition, merger, disposition or other material corporate transaction
(based on a good faith determination by the Board of Directors of the Company
that, in light of such proposal or plan, such postponement is appropriate).
The Company will also not be obligated to effect any Demand Registration
prior to December 31, 2001 unless such Demand Registration is approved by the
CEO of the Company, provided that if Xxxxxxx Xxxxxx is not CEO at such time,
such Demand Registration must be approved by a majority of those directors of
the Company who are not officers, directors, employees or consultants of AEA
Investors Inc. or members of DTI Investors LLC. Notwithstanding the
immediately preceding sentence, but subject to the first sentence of this
paragraph, the Company shall be obligated to effect a Demand Registration if
notice of such Demand Registration is made after March 31, 2001 and the
holders of at least 40% of the aggregate outstanding limited liability
company units of DTI Investors LLC shall have requested that such Demand
Registration be effected.
Demand Registrations shall be underwritten offerings intended for broad
public distribution, and not "shelf" registrations on a continuous basis.
DTI shall have the right to select the managing underwriters for any Demand
Registration, who shall be of national prominence and reasonably acceptable
to the Company. The Company will use all reasonable efforts to effect the
registration and sale of any Common Stock subject to a Demand Registration as
promptly as practicable. The Company shall enter into customary agreements
(including any
7834 X. X. Xxxx Freeway
Dallas, Texas 75217
214.398.1411
DTI Investors LLC
August 5, 1999
Page 2
"lock-up" or indemnity agreements) and bear all expenses in connection with
the registrations provided for herein, other than DTI's legal expenses,
underwriting discounts and commissions and transfer taxes, if any. DTI
agrees, in connection with any registered public offering in which the
Company itself proposes to sell equity securities, or (to the extent the DTI
parties are not participating in such offering) any registered public
offering requested by Xxxxxxx Xxxxxx as contemplated in the penultimate
paragraph hereof, that it will enter into customary "lock up" agreements
restricting its sale of shares of Common Stock for a period not to exceed 180
days following the effective date of such public offering, in each case to
the extent required by the managing underwriter of such offering.
The obligations of the Company contained herein are subject to (i)
requirements of applicable law, (ii) restrictions that may be imposed, in
good faith, by the Company's underwriters, and (iii) the DTI Parties
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 (provided that the DTI Parties
(other than DTI) shall have no obligation to make representations to the
underwriters with respect to the Company).
Except as provided below, DTI's right to Demand Registrations provided
for herein does not include the right to participate in registration
statements filed by the Company for the sale of equity securities by the
Company (a "Primary Offering"), but does include the right to participate in
registration statements requested by Xxxxxxx Xxxxxx pursuant to Section
9(b)(ii) of his employment agreement, dated July 17, 1998 (the "Employment
Agreement"). Common Stock requested to be included in such registration by
Xx. Xxxxxx and DTI will be included pro rata on the basis of the number of
shares held by the participants in the registration, subject to reduction, if
necessary, based on the advice of the managing underwriter for the offering,
provided however that Xx. Xxxxxx shall not be obligated to reduce his
participation in such registration below 2 million shares of Common Stock.
DTI agrees that its registration rights hereunder (whether exercised by DTI
on its own behalf or on behalf of the DTI Parties) are subject to the
provisions of Section 9(b)(i) of the Employment Agreement. The parties
further agree that references in the last sentence of Section 9(b)(i) of the
Employment Agreement to "the number of shares of Common Stock held by the
Executive" and the reference in the second sentence of this paragraph to "the
number of shares held by the participants" shall include all shares subject
to stock options and all shares issuable under stock appreciation rights held
by the Executive. The Employment Agreement is deemed to be amended to the
extent it is inconsistent with this paragraph.
Notwithstanding the first sentence of the immediately preceding
paragraph, from and after March 31, 2001, DTI and, pursuant to Section
9(b)(ii) of his Employment Agreement (as a result of DTI's participation
therein), Xx. Xxxxxx, shall have the right to participate in, and cause the
Company to include in any registration statement for, a Primary Offering,
shares of Common Stock requested by DTI and Xx. Xxxxxx to be so included,
subject to reduction, if necessary, based on the advice of the managing
underwriter for such offering (it being understood that the Company shall
have priority in the event of any such reduction, and with respect to any
increase in the size of such offering). As between DTI and Xx. Xxxxxx,
participation will be pro rated as set forth in Section 9(b)(ii) of the
Employment Agreement, provided that Xx. Xxxxxx shall have priority as to
500,000 of his shares. The Company will give DTI prompt written notice of
its intention to effect a Primary Offering.
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DTI Investors LLC
August 5, 1999
Page 3
For the avoidance of doubt, it is agreed and acknowledged that DTI's
right, on behalf of the DTI Parties, to request registrations and to
participate in registrations made by the Company or others shall survive the
termination or dissolution of DTI Investors LLC (at which point its manager
shall continue to have such rights, to be exercised on behalf of the DTI
Parties), and shall be subject to the provisions contained in the second
paragraph of this Agreement.
This Agreement shall be governed by the law of the state of Delaware,
without regard to its rules of conflict of laws.
Very truly yours,
DAL-TILE INTERNATIONAL INC.
By: /s/ Xxxx X. Xxxxx
---------------------------------------
Name: Xxxx X. Xxxxx
Title: Vice President/Secretary
Agreed and Accepted:
DTI INVESTORS LLC
By: AEA Investors Inc., its Manager
By:
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Title:
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/s/ Xxxxxxx X. Xxxxxx
---------------------------------
Xxxxxxx X. Xxxxxx
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