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TABLE OF CONTENTS

RECEIVABLES PURCHASE AGREEMENT

Dated as of October 26, 2001

Among

DTSC, INC.

as the Seller

and

ATLANTIC ASSET SECURITIZATION CORP.

as the Investor

and

CREDIT LYONNAIS NEW YORK BRANCH

as a Bank

and

CREDIT LYONNAIS NEW YORK BRANCH

as the Agent

and

DAL-TILE CORPORATION

as Collection Agent and Originator

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TABLE OF CONTENTS

    

 
   
   
PRELIMINARY STATEMENT
ARTICLE I 4
 
DEFINITIONS     SECTION 1.01.   Certain Defined Terms     SECTION 1.02.   Other
Terms
ARTICLE II
 
AMOUNTS AND TERMS OF THE PURCHASES     SECTION 2.01.   Purchase Facility    
SECTION 2.02.   Making Purchases     SECTION 2.03.   Receivable Interest
Computation     SECTION 2.04.   Settlement Procedures     SECTION 2.05.   Fees  
  SECTION 2.06.   Payments and Computations, Etc.     SECTION 2.07.   Dividing
or Combining Receivable Interests     SECTION 2.08.   Increased Costs    
SECTION 2.09.   Additional Yield on Receivable Interests Bearing a Eurodollar
Rate     SECTION 2.10.   Taxes     SECTION 2.11.   Security Interest     SECTION
2.12.   Repurchase Option
ARTICLE III
 
CONDITIONS OF PURCHASES     SECTION 3.01.   Conditions Precedent to Initial
Purchase     SECTION 3.02.   Conditions Precedent to All Purchases and
Reinvestments
ARTICLE IV
 
REPRESENTATIONS AND WARRANTIES     SECTION 4.01.   Representations and
Warranties of the Seller     SECTION 4.02.   Representations and Warranties of
the Collection Agent
ARTICLE V
 
COVENANTS     SECTION 5.01.   Covenants of the Seller     SECTION 5.02.  
Covenants of the Seller and Collection Agent Regarding Inspections
ARTICLE VI
 
ADMINISTRATION AND COLLECTION OF POOL RECEIVABLES     SECTION 6.01.  
Designation of Collection Agent     SECTION 6.02.   Duties of Collection Agent  
  SECTION 6.03.   Certain Rights of the Agent     SECTION 6.04.   Rights and
Remedies     SECTION 6.05.   Further Actions Evidencing Purchases     SECTION
6.06.   Changes in Credit and Collection Policy; Changes in Store Accounts    
SECTION 6.07.   Indemnities by the Collection Agent
ARTICLE VII
 
EVENTS OF TERMINATION     SECTION 7.01.   Events of Termination

ii

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ARTICLE VIII
 
THE AGENT     SECTION 8.01.   Authorization and Action     SECTION 8.02.  
Agent's Reliance, Etc.     SECTION 8.03.   Credit Lyonnais and Affiliates    
SECTION 8.04.   Bank's Purchase Decision
ARTICLE IX
 
INDEMNIFICATION     SECTION 9.01.   Indemnities by the Seller
ARTICLE X
 
MISCELLANEOUS     SECTION 10.01.   Amendments, Etc.     SECTION 10.02.  
Notices, Etc.     SECTION 10.03.   Assignability     SECTION 10.04.   Costs,
Expenses and Taxes     SECTION 10.05.   United States Federal Income Tax
Treatment     SECTION 10.06.   No Proceedings     SECTION 10.07.  
Confidentiality     SECTION 10.08.   GOVERNING LAW     SECTION 10.09.  
Execution in Counterparts     SECTION 10.10.   Survival of Termination    
SECTION 10.11.   Consent to Jurisdiction     SECTION 10.12.   WAIVER OF JURY
TRIAL     SECTION 10.13.   Excess Funds

SCHEDULES
SCHEDULE I
 
-Lock-Box Banks and Collection Account SCHEDULE II   -Credit and Collection
Policy SCHEDULE III   -Normal Concentration Limits SCHEDULE IV   -Store Accounts

iii

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ANNEXES
ANNEX A
 
-Form of Monthly Report ANNEX B   -Form of Weekly Report ANNEX C   -Forms of
Opinions of Counsel to the Seller ANNEX D   -Form of Bank Direction Agreement
ANNEX E-1   -Form of Lock-Box Agreement ANNEX E-2   -Form of Account Agreement

iv

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RECEIVABLES
PURCHASE AGREEMENT

Dated as of October 26, 2001

    DTSC, INC., a Delaware corporation (the "Seller"),ATLANTIC ASSET
SECURITIZATION CORP., a Delaware corporation, CREDIT LYONNAIS NEW YORK BRANCH,
as agent (the "Agent") for the Investors and the Banks (as defined herein) and
as a Bank, and DAL-TILE CORPORATION, a Pennsylvania corporation, as Collection
Agent and as Originator, agree as follows:

    PRELIMINARY STATEMENT. The Seller has acquired, and may continue to acquire,
Receivables (as hereinafter defined) from the Originator (as hereinafter
defined), either by purchase or by contribution to the capital of the Seller, as
determined from time to time by the Seller and the Originator. The Seller is
prepared to sell undivided fractional ownership interests (referred to and
defined herein as "Receivable Interests") in the Receivables. Atlantic may, in
its sole discretion, purchase such Receivable Interests, and the Banks shall, if
Atlantic does not, purchase such Receivable Interests, in each case on the terms
set forth herein. Accordingly, the parties agree as follows:

ARTICLE I

DEFINITIONS

    SECTION 1.01.  Certain Defined Terms.   As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):

    "Account Agreement" means an agreement with respect to the Collection
Account, in substantially the form of Annex E-2.

    "Adjusted Eurodollar Rate" means, for any Fixed Period, an interest rate per
annum equal to the rate per annum obtained by dividing (i) the Eurodollar Rate
for such Fixed Period by (ii) a percentage equal to 100% minus the Eurodollar
Rate Reserve Percentage for such Fixed Period.

    "Adverse Claim" means a lien, security interest or other charge or
encumbrance, or any other type of preferential arrangement.

    "Affiliate" means, as to any Person, any other Person that, directly or
indirectly, is in control of, is controlled by or is under common control with
such Person or, as used in Sections 6.07, 8.03 (other than the first sentence of
Section 8.03), 8.04, 9.01 and 10.04, is a director or officer of such Person.

    "Affiliated Obligor" means any Obligor that is an Affiliate of another
Obligor.

    "Agent's Account" means the special account (account number
01-25680-001-00-001) of the Agent maintained at the office of Credit Lyonnais at
1301 Avenue of the Americas, New York, New York.

    "Alternate Base Rate" means, as of any date, a fluctuating interest rate per
annum, which rate shall be equal to the higher of:

    (a) the rate of interest announced by Credit Lyonnais from time to time as
its base rate (it being understood that such rate is not necessarily intended to
be the lowest rate of interest determined by Credit Lyonnais in connection with
extensions of credit); and

    (b) 0.50% per annum above the Federal Funds Rate for such date.

    "Asset Purchase Agreement" means, in the case of any Bank, the liquidity
asset purchase agreement entered into by such Bank concurrently with its
execution of this Agreement or of the Assignment and Acceptance pursuant to
which it became party to this Agreement. The Asset Purchase Agreement with
Credit Lyonnais shall have an initial term expiring on October 25, 2002.

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    "Assignee Rate" for any Fixed Period for any Receivable Interest means an
interest rate per annum equal to 1.775% per annum above the Eurodollar Rate for
such Fixed Period; provided, however, that in case of:

(ii)any Fixed Period on or prior to the first day of which an Investor or Bank
shall have notified the Agent that the introduction of or any change in or in
the interpretation of any law or regulation makes it unlawful, or any central
bank or other governmental authority asserts that it is unlawful, for such
Investor or Bank to fund such Receivable Interest at the Assignee Rate set forth
above (and such Investor or Bank shall not have subsequently notified the Agent
that such circumstances no longer exist),

(iii)any Fixed Period of one to (and including) 35 days (it being understood and
agreed that this clause (ii) shall not be applicable to a Fixed Period for which
Yield is to be computed by reference to the Eurodollar Rate that is intended to
have a one-month duration),

(iv)any Fixed Period as to which the Agent does not receive notice, by no later
than 12:00 noon (New York City time) on the third Business Day preceding the
first day of such Fixed Period, that the related Receivable Interest will not be
funded by issuance of commercial paper, or

(v)any Fixed Period for a Receivable Interest the Capital of which allocated to
the Investors or the Banks is less than $500,000,

the "Assignee Rate" for such Fixed Period shall be an interest rate per annum
equal to the Alternate Base Rate in effect from time to time during such Fixed
Period; provided further that the Agent and the Seller may agree in writing from
time to time upon a different " Assignee Rate."

    "Assignment and Acceptance" means an assignment and acceptance agreement, in
form and substance satisfactory to the Agent, entered into by a Bank, an
Eligible Assignee and the Agent, pursuant to which such Eligible Assignee shall
become a party to this Agreement.

    "Atlantic" means Atlantic Asset Securitization Corp. and any successor or
permitted assign of Atlantic that is a receivables investment company which in
the ordinary course of its business issues commercial paper or other securities
to fund its acquisition and maintenance of receivables.

    "Bank Commitment" of any Bank means, (a) with respect to Credit Lyonnais,
$75,000,000 or such amount as reduced by any Assignment and Acceptance entered
into between Credit Lyonnais and other Banks; or (b) with respect to a Bank that
has entered into an Assignment and Acceptance, the amount set forth therein as
such Bank's Bank Commitment, in each case as such amount may be reduced by an
Assignment and Acceptance entered into between such Bank and an Eligible
Assignee, and as may be further reduced (or terminated) pursuant to the next
sentence. Any reduction (or termination) of the Purchase Limit pursuant to the
terms of this Agreement shall reduce ratably (or terminate) each Bank's Bank
Commitment.

    "Bank Direction Agreement" means an agreement, in substantially the form of
Annex D hereto, among the Originator, the Agent and a Store Account Bank,
pursuant to which such Store Account Bank agrees to remit all funds deposited in
the Store Account maintained by it to the Collection Account.

    "Banks" means Credit Lyonnais and each Eligible Assignee that shall become a
party to this Agreement pursuant to Section 10.03.

    "Business Day" means any day on which (i) banks are not authorized or
required to close in New York City or Dallas, Texas, and (ii) if this definition
of "Business Day" is utilized in connection with the Eurodollar Rate, dealings
are carried out in the London interbank market.

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    "Capital" of any Receivable Interest means the original amount paid to the
Seller for such Receivable Interest at the time of its purchase by Atlantic or a
Bank pursuant to this Agreement, or such amount divided or combined in
accordance with Section 2.07, in each case reduced from time to time by
Collections distributed on account of such Capital pursuant to Section 2.04(d);
provided that if such Capital shall have been reduced by any distribution and
thereafter all or a portion of such distribution is rescinded or must otherwise
be returned for any reason, such Capital shall be increased by the amount of
such rescinded or returned distribution, as though it had not been made.

    "Collection Account" means the bank account maintained by the Seller for the
purpose of receiving funds remitted from all of the Store Accounts.

    "Collection Agent" means at any time the Person then authorized pursuant to
Section 6.01 to administer and collect Pool Receivables, in its capacity as
Collection Agent, which initially will be the Originator.

    "Collection Agent Fee" has the meaning specified in Section 2.05(a).

    "Collections" means, with respect to any Receivable, all cash collections
and other cash proceeds of such Receivable, including, without limitation, all
cash proceeds of Related Security with respect to such Receivable, and any
Collection of such Receivable deemed to have been received pursuant to
Section 2.04.

    "Commitment Termination Date" means the earliest of (a) October 25, 2002,
unless, prior to such date (or the date so extended pursuant to this clause),
upon the Seller's request, made not more than 90 nor less than 45 days prior to
the then effective Commitment Termination Date, one or more Banks having Bank
Commitments equal to 100% of the Purchase Limit shall in their sole discretion
consent, which consent shall be given within 30 days of the receipt by each Bank
of such request, to the extension of the Commitment Termination Date to the date
occurring 364 days after the then Commitment Termination Date; provided,
however, that any failure of any Bank to respond to the Seller's request for
such extension within 30 days of the receipt by such Bank of such request shall
be deemed a denial of such request by such Bank, (b) the Facility Termination
Date, (c) the date determined pursuant to Section 7.01, and (d) the date the
Purchase Limit reduces to zero pursuant to Section 2.01(b).

    "Concentration Limit" means (i) at any time for any Obligor (other than an
Obligor referred to in clause (ii) below), the "Normal Concentration Limit" set
forth on Schedule III hereto corresponding to such Obligor's Debt Rating at such
time, and (ii) at any time for Home Depot Corporation, together with any of its
Affiliates, 15% or such other percentage ("Special Concentration Limit") for
such Obligor designated by the Agent in a writing delivered to the Seller;
provided, that if the Debt Rating of Home Depot Corporation is withdrawn at any
time by either Moody's or S&P or reduced at any time by either Moody's or S&P
below the Debt Rating for Home Depot Corporation on the date hereof, then the
Special Concentration Limit described above in respect of Home Depot Corporation
shall be canceled and replaced by the Normal Concentration Limit set forth on
Schedule III hereto corresponding to such Obligor's Debt Rating at such time;
and provided, further, that in the case of an Obligor with any Affiliated
Obligor, the Concentration Limit shall be calculated as if such Obligor and all
such Affiliated Obligors are one Obligor; provided, however, that if the "Normal
Concentration Limit" set forth on Schedule III hereto corresponding to the Debt
Rating of such Obligor and Affiliated Obligors are different, then the lowest
such Normal Concentration Limit shall apply to such Obligor and Affiliated
Obligors; and provided further that the Agent may cancel any Special
Concentration Limit upon three Business Days' notice to the Seller.

    "Contract" means an agreement between the Originator and an Obligor,
substantially in the form of one of the written contracts or (in the case of any
open account agreement) one of the invoices

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approved by the Agent, pursuant to or under which such Obligor shall be
obligated to pay for merchandise or services from time to time.

    "Credit Agreement" means the Amended and Restated Credit and Guarantee
Agreement dated as of October 26, 2001 (without giving effect to any amendments
or waivers thereto except as specifically provided herein) among Dal-Tile Group,
Dal-Tile International, the lenders listed therein, Bank of America, N.A., as
syndication agent, Credit Lyonnais New York Branch, First Union National Bank
and Mizuho Financial Group, as co-documentation agents and The Chase Manhattan
Bank, as administrative agent.

    "Credit and Collection Policy" means those receivables credit and collection
policies and practices of the Seller and the Originator in effect on the date of
this Agreement and described in Schedule II hereto, as modified in compliance
with this Agreement.

    "Credit Lyonnais" means Credit Lyonnais New York Branch, a branch licensed
under the laws of the State of New York of a banking corporation organized under
the laws of the Republic of France.

    "Dal-Tile Group" means Dal-Tile Group Inc., a Delaware corporation.

    "Dal-Tile International" means Dal-Tile International Inc., a Delaware
corporation.

    "Days Sales Outstanding" means, on any date, an amount equal to

OBPR   ×   D S        

where:

OBPR
 
=
 
the aggregate Outstanding Balance of all Pool Receivables at the end of the most
recently ended Fiscal Month.
S
 
=
 
the aggregate amount of all Pool Sales created during the most recently ended
Fiscal Month.
D
 
=
 
the number of days in the most recently ended Fiscal Month.

    "Debt" means (i) indebtedness for borrowed money, (ii) obligations evidenced
by bonds, debentures, notes or other similar instruments, (iii) obligations to
pay the deferred purchase price of property or services (other than current
unsecured accounts payable incurred in the ordinary course of business),
(iv) obligations as lessee under leases which shall have been or should be, in
accordance with generally accepted accounting principles, recorded as capital
leases, and (v) obligations under direct or indirect guaranties in respect of,
and obligations (contingent or otherwise) to purchase or otherwise acquire, or
otherwise to assure a creditor against loss in respect of, indebtedness or
obligations of others of the kinds referred to in clauses (i) through
(iv) above.

    "Debt Rating" means, for any Person, the rating by S&P or Moody's of such
Person's short-term senior unsecured non-credit-enhanced debt.

    "Default Ratio" means the ratio (expressed as a percentage) computed as of
the last day of each Fiscal Month by dividing (i) the aggregate Outstanding
Balance of all Originator Receivables that were Defaulted Receivables on such
day or that would have been Defaulted Receivables on such day had they not been
written off the books of the Originator or the Seller during such Fiscal Month
by (ii) the aggregate Outstanding Balance of all Originator Receivables on such
day.

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    "Defaulted Receivable" means an Originator Receivable:

(i)as to which any payment, or part thereof, remains unpaid for 91 or more days
from the original due date for such payment;

(ii)as to which the Obligor thereof or any other Person obligated thereon or
owning any Related Security in respect thereof has taken any action, or suffered
any event to occur, of the type described in Section 7.01(g); or

(iii)which has been or, consistent with the Credit and Collection Policy, would
be written off the Originator's or the Seller's books as uncollectible.

    "Deferred Purchase Price" has the meaning specified in the PCA.

    "Delinquency Ratio" means the ratio (expressed as a percentage) computed as
of the last day of each Fiscal Month by dividing (i) the aggregate Outstanding
Balance of all Originator Receivables that were Delinquent Receivables on such
day by (ii) the aggregate Outstanding Balance of all Originator Receivables on
such day.

    "Delinquent Receivable" means an Originator Receivable that is not a
Defaulted Receivable and:

(i)as to which any payment, or part thereof, remains unpaid for 61 or more days
from the original due date for such payment; or

(ii)which has been or, consistent with the Credit and Collection Policy, would
be classified as delinquent by the Originator or the Seller.

    "Diluted Receivable" means that portion (and only that portion) of any
Originator Receivable which is either (a) reduced or canceled as a result of
(i) any defective, rejected or returned merchandise or services or any failure
by the Originator to deliver any merchandise or provide any services or
otherwise to perform under the underlying Contract, (ii) any change in the terms
of or cancellation of a Contract or any cash discount, discount for quick
payment or other adjustment by the Originator or any other Person which reduces
the amount payable by the Obligor on the related Originator Receivable (except
any such change or cancellation resulting from or relating to the financial
inability to pay or insolvency of the Obligor of such Originator Receivable) or
(iii) any set-off by an Obligor in respect of any claim by such Obligor as to
amounts owed by it on the related Originator Receivable (whether such claim
arises out of the same or a related transaction or an unrelated transaction) or
(b) subject to any specific dispute, offset, counterclaim or defense whatsoever
(except the discharge in bankruptcy of the Obligor thereof), including, without
limitation, any non-payment by the Obligor due to failure by the Originator to
deliver any merchandise or provide any services; provided that Diluted
Receivables are calculated assuming that all chargebacks are resolved in the
Obligor's favor and do not include contractual adjustments to the amount payable
by an Obligor that are eliminated from an Originator Receivables balance sold to
the Seller through a reduction in the purchase price paid by the Seller for the
related Originator Receivable.

    "Dilution Horizon Factor" means, as of any date, a ratio (expressed as a
percentage) computed by dividing (i) the aggregate Outstanding Balance (in each
case, at the time of creation) of all Originator Receivables created by the
Originators during the most recently ended Fiscal Month by (ii) the Outstanding
Balance of Eligible Receivables in the Receivables Pool as at the last day of
the most recently ended Fiscal Month.

    "Dilution Percentage" means, as of any date, the product of (i) the sum of
(A) the product of (1) two multiplied by (2) the average of the Dilution Ratios
for each of the twelve most recently ended Fiscal Months, plus (B) the Dilution
Volatility Ratio as at the last day of the most recently ended Fiscal Month,
multiplied by (ii) the Dilution Horizon Factor as of such date.

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    "Dilution Ratio" means, as of any date, the ratio (expressed as a
percentage) computed for the most recently ended Fiscal Month by dividing
(i) the aggregate amount of Originator Receivables which became Diluted
Receivables during such Fiscal Month by (ii) the aggregate Outstanding Balance
(in each case, at the time of creation) of all Originator Receivables created
during the Fiscal Month immediately preceding such Fiscal Month.

    "Dilution Reserve" means, for any Receivable Interest on any date, an amount
equal to:

DP   ×   C

where:

DP   =   the Dilution Percentage on such date.
C
 
=
 
the Capital of such Receivable Interest on such date.

    "Dilution Volatility Ratio" means, as of any date, a ratio (expressed as a
percentage) equal to the product of (a) the highest of the Dilution Ratios
calculated for each of the twelve most recently ended Fiscal Months minus the
average of the Dilution Ratios for each of the twelve most recently ended Fiscal
Months, and (b) a ratio calculated by dividing the highest of the Dilution
Ratios calculated for each of the twelve most recently ended Fiscal Months by
the average of the Dilution Ratios for each of the twelve most recently ended
Fiscal Months.

    "DTC Store" means any sales service center operated by the Originator.

    "Eligible Assignee" means (i) Credit Lyonnais or any of its Affiliates or
(ii) any financial or other institution acceptable to the Agent and having a
Debt Rating of at least A-1/P-1 that is approved in writing by the Seller (such
approval not to be unreasonably withheld or delayed); provided that if an Event
of Termination or Incipient Event of Termination has occurred and is continuing
at the time of such assignment, no approval by the Seller shall be required
under clause (ii).

    "Eligible Receivable" means, at any time, a Receivable:

(i)the Obligor of which (A) is a United States resident, (B) is not an Affiliate
of Dal-Tile International, Dal-Tile Group, the Originator or the Seller and
(C) is not a government or a governmental subdivision or agency that has the
benefit of an anti-assignment statute or other statute imposing restrictions on
the assignment of Receivables due from it;

(ii)which is not a Defaulted Receivable or a Delinquent Receivable;

(iii)which, according to the Contract related thereto, is required to be paid in
full either (A) within less than 60 days of the original billing date therefor
or (B) within 60 days of the original billing date therefor if the aggregate
Outstanding Balance of such Receivable and all other Receivables having similar
payment terms does not exceed 50% of the Outstanding Balance of all Originator
Receivables;

(iv)which is an "account" within the meaning of Article 9 of the UCC of the
applicable jurisdictions governing the perfection of the interest created by a
Receivable Interest;

(v)which is denominated and payable only in United States dollars in the United
States;

(vi)which arises under a Contract which, together with such Receivable, is in
full force and effect and constitutes the legal, valid and binding obligation of
the Obligor of such Receivable and is not subject to any Adverse Claim or any
dispute, offset, counterclaim or defense whatsoever (except the potential
discharge in bankruptcy of such Obligor);

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(vii)which, together with the Contract related thereto, does not contravene in
any material respect any laws, rules or regulations applicable thereto
(including, without limitation, laws, rules and regulations relating to usury,
consumer protection, truth in lending, fair credit billing, fair credit
reporting, equal credit opportunity, fair debt collection practices and privacy)
and with respect to which none of the Seller, the Originator or the Obligor is
in violation of any such law, rule or regulation in any material respect;

(viii)which arises under a Contract which (A) does not require the Obligor
thereunder to consent to the transfer, sale or assignment of the rights and
duties of the Seller or the Originator thereunder and (B) does not contain a
confidentiality provision that purports to restrict the ability of the Agent,
the Investors or the Banks to exercise their rights under this Agreement,
including, without limitation, their right to review the Contract;

(ix)which was generated in the ordinary course of the Originator's business;

(x)which has not been extended, rewritten or otherwise modified from the
original terms thereof (except as permitted by Section 6.02(c);

(xi)the transfer, sale or assignment of which does not contravene any applicable
law, rule or regulation;

(xii)which satisfies all applicable requirements of the Credit and Collection
Policy;

(xiii)which does not constitute a "bill and hold" sale; and

(xiv)as to which, prior to the Origination Date of such Receivable, the Agent
has not notified the Seller that such Receivable (or the Obligor of such
Receivable) is, in the reasonable good faith judgment of Atlantic and the Banks,
no longer acceptable for purchase by Atlantic and the Banks hereunder for
credit-related reasons.

    "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder.

    "Eurocurrency Liabilities" has the meaning assigned to that term in
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.

    "Eurodollar Rate" means, for any Fixed Period, an interest rate per annum
determined by the Agent equal to the offered rate per annum for deposits in U.S.
dollars in an amount substantially equal to the Capital associated with such
Fixed Period on the first day of such Fixed Period and for a period equal to
such Fixed Period, as of 11:00 A.M., London time, two Business Days prior to the
first day of the applicable Fixed Period, that appears on the display designated
as "Page 3750" on the Telerate Service (or such other page as may replace "Page
3750" on that service for the purpose of displaying London interbank offered
rates of major banks); provided, that if such rate is not available on any date
when the Eurodollar Rate is to be determined, then the rate shall be an interest
rate per annum determined by the Agent equal to the rate at which it would offer
deposits in U.S. dollars to prime banks in the London interbank market for a
period equal to such Fixed Period and in an amount substantially equal to the
Capital associated with such Fixed Period at or about 11:00 A.M. (London Time)
on the second Business Day before (and for value on) the first day of such Fixed
Period.

    "Eurodollar Rate Reserve Percentage" of any Investor or Bank for any Fixed
Period in respect of which Yield is computed by reference to the Eurodollar Rate
means the reserve percentage applicable two Business Days before the first day
of such Fixed Period under regulations issued from time to time by the Board of
Governors of the Federal Reserve System (or any successor) (or if more than one
such percentage shall be applicable, the daily average of such percentages for
those days in such Fixed Period during which any such percentage shall be so
applicable) for determining the maximum reserve requirement (including, without
limitation, any emergency, supplemental or other marginal reserve

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requirement) for such Investor or Bank with respect to liabilities or assets
consisting of or including Eurocurrency Liabilities (or with respect to any
other category of liabilities that includes deposits by reference to which the
interest rate on Eurocurrency Liabilities is determined) having a term equal to
such Fixed Period.

    "Event of Termination" has the meaning specified in Section 7.01.

    "Facility Termination Date" means the earliest of (a) October 22, 2004 or
(b) the date determined pursuant to Section 7.01 or (c) the date the Purchase
Limit reduces to zero pursuant to Section 2.01(b) or (d) the date that the Asset
Purchase Agreement expires without being renewed.

    "Federal Funds Rate" means, for any period, a fluctuating interest rate per
annum equal for each day during such period to the weighted average of the rates
on overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers, as published for such day (or, if such
day is not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day which
is a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it.

    "Fee Agreement" has the meaning specified in Section 2.05(b).

    "Fees" has the meaning specified in Section 2.05(b).

    "Fiscal Month" means a fiscal month of Dal-Tile International containing
four or five weeks as determined under the accounting policies and procedures of
Dal-Tile International and its Affiliates, as in effect on the date hereof.

    "Fixed Period" means with respect to any Receivable Interest:

    (a) initially the period commencing on the date of purchase of such
Receivable Interest and ending such number of days as the Seller shall select
and the Agent shall approve pursuant to Section 2.02, up to three months from
such date; and

    (b) thereafter each period commencing on the last day of the immediately
preceding Fixed Period for such Receivable Interest and ending such number of
days (not to exceed three months) as the Seller shall select and the Agent shall
approve on notice by the Seller received by the Agent (including notice by
telephone, confirmed in writing) not later than 11:00 A.M. (New York City time)
on such last day, except that if the Agent shall not have received such notice
or approved such period on or before 11:00 A.M. (New York City time) on such
last day, such period shall be one day;

provided that (i) any Fixed Period in respect of which Yield is computed by
reference to the Assignee Rate shall be a period from one to and including
35 days, or a period of one, two or three months, as the Seller may select as
provided above; (ii) any Fixed Period (other than of one day) which would
otherwise end on a day which is not a Business Day shall be extended to the next
succeeding Business Day (provided, however, if Yield in respect of such Fixed
Period is computed by reference to the Eurodollar Rate, and such Fixed Period
would otherwise end on a day which is not a Business Day, and there is no
subsequent Business Day in the same calendar month as such day, such Fixed
Period shall end on the next preceding Business Day); (iii) in the case of any
Fixed Period of one day, (A) if such Fixed Period is the initial Fixed Period
for a Receivable Interest, such Fixed Period shall be the day of purchase of
such Receivable Interest; (B) any subsequently occurring Fixed Period which is
one day shall, if the immediately preceding Fixed Period is more than one day,
be the last day of such immediately preceding Fixed Period, and, if the
immediately preceding Fixed Period is one day, be the day next following such
immediately preceding Fixed Period; and (C) if such Fixed Period occurs on a day
immediately preceding a day which is not a Business Day, such Fixed Period shall
be extended to

8

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the next succeeding Business Day; and (iv) in the case of any Fixed Period for
any Receivable Interest which commences before the Termination Date for such
Receivable Interest and would otherwise end on a date occurring after such
Termination Date, such Fixed Period shall end on such Termination Date and the
duration of each Fixed Period which commences on or after the Termination Date
for such Receivable Interest shall be of such duration as shall be selected by
the Agent or, in the absence of any such selection, each period of thirty days
from the last day of the immediately preceding Fixed Period.

    "Incipient Event of Termination" means an event that but for notice or lapse
of time or both would constitute an Event of Termination.

    "Investor" means Atlantic and all other owners by permitted assignment of a
Receivable Interest originally purchased by Atlantic.

    "Investor Rate" for any Fixed Period for any Receivable Interest means to
the extent Atlantic funds such Receivable Interest for such Fixed Period by
issuing commercial paper, the rate per annum (or if more than one rate, the
weighted average of the rates) at which commercial paper notes of Atlantic
having a term equal to such Fixed Period and to be issued to fund such
Receivable Interest may be sold by any placement agent or commercial paper
dealer selected by the Agent on behalf of Atlantic, as agreed between each such
agent or dealer and the Agent and notice of which has been given by the Agent to
the Seller; provided if the rate (or rates) as agreed between any such agent or
dealer and the Agent for any Fixed Period for any Receivable Interest is a
discount rate (or rates), then such rate shall be the rate (or if more than one
rate, the weighted average of the rates) resulting from converting such discount
rate (or rates) to an interest-bearing equivalent rate per annum.

    "Liquidation Day" means, for any Receivable Interest, (i) each day during a
Fixed Period for such Receivable Interest on which the conditions set forth in
Section 3.02 are not satisfied, and (ii) each day which occurs on or after the
Termination Date for such Receivable Interest.

    "Liquidation Fee" means, for (i) any Fixed Period during which a Liquidation
Day occurs or (ii) any Fixed Period for which Yield is computed by reference to
the Investor Rate or the Eurodollar Rate and a reduction of Capital is made for
any reason on any day other than the last day of such Fixed Period, the amount
(the calculation of which shall be made by the Agent and reported in reasonable
detail to the Seller), if any, by which (A) the additional Yield (calculated
without taking into account any Liquidation Fee or any shortened duration of
such Fixed Period pursuant to clause (iv) of the definition thereof) which would
have accrued during such Fixed Period on the reductions of Capital of the
Receivable Interest relating to such Fixed Period had such reductions remained
as Capital, exceeds (B) the income, if any, received (or receivable, acting in a
commercially reasonable manner and, in the case of the Investors, subject to the
guidelines of the Relevant Rating Agencies) by the Investors or the Banks which
hold such Receivable Interest from the investment of the proceeds of such
reductions of Capital.

    "Lock-Box Account" means a post office box administered by a Lock-Box Bank
and the associated account maintained at a Lock-Box Bank, in each case for the
purpose of receiving Collections.

    "Lock-Box Agreement" means an agreement, in substantially the form of Annex
E-1.

    "Lock-Box Bank" means any of the banks holding one or more Lock-Box
Accounts.

    "Loss Horizon Factor" means, as of any date, a ratio (expressed as a
percentage) computed by dividing (i) the aggregate Outstanding Balance (in each
case, at the time of creation) of all Originator Receivables created by the
Originators during the three most recently ended Fiscal Months by (ii) the Net
Receivables Pool Balance as at the last day of the most recently ended Fiscal
Month.

9

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    "Loss Percentage" means, as of any date, the greater of (a) the product of
(i) two multiplied by (ii) the Loss Horizon Factor as of the last day of the
most recently ended Fiscal Month multiplied by (iii) the highest of the Loss
Ratios for the twelve most recently ended Fiscal Months and (b) 12%.

    "Loss Ratio" means, as of any date, the average of the ratios (each
expressed as a percentage) for each of the three most recently ended Fiscal
Months computed for each such Fiscal Month by dividing (a) the sum of the
aggregate Outstanding Balance of Originator Receivables which were 61-90 days
past due as at the last day of such Fiscal Month plus (without duplication) the
aggregate write-offs during such Fiscal Month, by (b) the aggregate Outstanding
Balance (in each case, at the time of creation) of Originator Receivables
created during the fourth preceding Fiscal Month.

    "Loss Reserve" means, for any Receivable Interest on any date, an amount
equal to:

LP   ×   NRPB   ×   C

--------------------------------------------------------------------------------

                AC

where:

LP
 
=
 
the Loss Percentage on such date.
NRPB
 
=
 
the Net Receivables Pool Balance on such date.
C
 
=
 
the Capital of such Receivable Interest on such date.
AC
 
=
 
the aggregate Capital of all Receivable Interests on such date.

    "Monthly Report" means a report in substantially the form of Annex A hereto
and containing such additional information as the Agent may reasonably request
from time to time, furnished by the Collection Agent to the Agent pursuant to
Section 6.02(g).

    "Moody's" means Moody's Investors Service, Inc.

    "Net Receivables Pool Balance" means at any time the Outstanding Balance of
Eligible Receivables then in the Receivables Pool reduced by the sum of (i) the
aggregate amount by which the Outstanding Balance of Eligible Receivables of
each Obligor then in the Receivables Pool exceeds the product of (A) the
Concentration Limit for such Obligor multiplied by (B) the Outstanding Balance
of Eligible Receivables then in the Receivables Pool, (ii) the aggregate amount
of Collections on hand at such time for payment on account of any Eligible
Receivables, the Obligor of which has not been identified and (iii) the
aggregate Outstanding Balance of all Eligible Receivables in respect of which
any credit memo issued by the Originator or the Seller is outstanding at such
time to the extent deemed Collections have not been paid pursuant to
Section 2.04(e).

    "Obligor" means a Person obligated to make payments pursuant to a Contract.

    "Origination Date" means (i) the date of this Agreement, with respect to
Receivables existing on such date and (ii) the date on which such Receivable is
created, with respect to all other Receivables.

    "Originator" means Dal-Tile Corporation, a Pennsylvania corporation.

    "Originator Receivable" means the indebtedness of any Obligor (other than an
Obligor which is an Affiliate of Dal-Tile International or the Originator)
resulting from the provision or sale of merchandise or services by the
Originator under a Contract, and includes the right to payment of any interest
or finance charges and other obligations of the Obligor with respect thereto;
provided, however, that "Originator Receivable" does not include any such
indebtedness created by the Corporate Strategic Business Unit or the R&M
Strategic Business Unit of the Originator.

10

--------------------------------------------------------------------------------

    "Other Companies" means Dal-Tile International, the Originator and all of
their respective Subsidiaries except the Seller.

    "Outstanding Balance" of any Receivable or Originator Receivable, as the
case may be, at any time means the then outstanding principal balance thereof.

    "Parent Undertaking Agreement" means the Parent Undertaking Agreement dated
as of the date of this Agreement by each of Dal-Tile International and Dal-Tile
Group in favor of the Seller, the Agent, the Investors and the Banks, pursuant
to which Dal-Tile International and Dal-Tile Group, jointly and severally,
guaranty the performance of the obligations of the Originator and the Collection
Agent under the Transaction Documents, as the same may be amended, modified or
restated from time to time pursuant to the terms thereof.

    "PCA" means the Purchase and Contribution Agreement dated as of the date of
this Agreement between the Originator, as seller, and the Seller, as purchaser,
as the same may be amended, modified or restated from time to time pursuant to
the terms thereof and hereof.

    "Percentage" of any Bank means, (a) with respect to Credit Lyonnais, the
percentage set forth on the signature page to this Agreement, or such amount as
reduced by any Assignment and Acceptance entered into with an Eligible Assignee,
or (b) with respect to a Bank that has entered into an Assignment and
Acceptance, the amount set forth therein as such Bank's Percentage, or such
amount as reduced by an Assignment and Acceptance entered into between such Bank
and an Eligible Assignee.

    "Performance Dilution Ratio" means, as of any date, the ratio (expressed as
a percentage) computed for the most recently ended Fiscal Month by dividing
(i) the aggregate amount of Originator Receivables which became Diluted
Receivables during such Fiscal Month by (ii) the aggregate Outstanding Balance,
as of the last day of such Fiscal Month, of all Originator Receivables created
during such Fiscal Month.

    "Person" means an individual, partnership, corporation (including a business
trust), limited liability company, joint stock company, trust, unincorporated
association, joint venture or other entity, or a government or any political
subdivision or agency thereof.

    "Pool Receivable" means a Receivable in the Receivables Pool.

    "Pool Sale" means a sale under a Contract which results in the creation of
an Originator Receivable.

    "Purchase Limit" means $75,000,000, as such amount may be reduced pursuant
to Section 2.01(b). References to the unused portion of the Purchase Limit shall
mean, at any time, the Purchase Limit, as then reduced pursuant to
Section 2.01(b), minus the then outstanding Capital of Receivable Interests
under this Agreement.

    "Receivable" means any Originator Receivable which has been acquired by the
Seller from the Originator by purchase or by capital contribution pursuant to
the PCA.

    "Receivable Interest" means, at any time, an undivided percentage ownership
interest in (i) all then outstanding Pool Receivables arising prior to the time
of the most recent computation or recomputation of such undivided percentage
interest pursuant to Section 2.03, (ii) all Related Security with respect to
such Pool Receivables, and (iii) all Collections with respect to, and other
proceeds of, such Pool Receivables. Such undivided percentage interest shall be
computed as

C + YFR + LR + DR
NRPB

11

--------------------------------------------------------------------------------

where:

C   =   the Capital of such Receivable Interest at the time of computation.
YFR
 
=
 
the Yield and Fee Reserve of such Receivable Interest at the time of
computation.
LR
 
=
 
the Loss Reserve of such Receivable Interest at the time of computation.
DR
 
=
 
the Dilution Reserve of such Receivable Interest at the time of computation.
NRPB
 
=
 
the Net Receivables Pool Balance at the time of computation.

Each Receivable Interest shall be determined from time to time pursuant to the
provisions of Section 2.03.

    "Receivables Pool" means at any time the aggregation of all then outstanding
Receivables.

    "Related Security" means with respect to any Receivable

(i)all of the Seller's interest in any merchandise (including returned
merchandise) the sale of which gives rise to such Receivable;

(ii)all security interests or liens and property subject thereto from time to
time purporting to secure payment of such Receivable, whether pursuant to the
Contract related to such Receivable or otherwise, together with all financing
statements signed by an Obligor describing any collateral securing such
Receivable;

(iii)all guaranties, insurance and other agreements or arrangements of whatever
character from time to time supporting or securing payment of such Receivable
whether pursuant to the Contract related to such Receivable or otherwise; and

(iv)the Contract and all other books, records and other information (including,
without limitation, computer programs, tapes, discs, punch cards, data
processing software and similar property and rights) to the extent relating to
such Receivable and the related Obligor.

    "Relevant Rating Agency" means, at any time, a statistical rating agency
that rates the commercial paper of any Investor at the request of such Investor
at such time.

    "S&P" means Standard and Poors, a division of the McGraw-Hill
Companies, Inc.

    "SEC" means the Securities and Exchange Commission.

    "Settlement Date" for any Receivable Interest means the last day of each
Fixed Period for such Receivable Interest.

    "Store Account" means a bank account maintained by the Originator for the
purpose of receiving Collections, funds constituting cash sales of merchandise
and other funds of any DTC Store.

    "Store Account Bank" means the bank holding any Store Account.

    "Subsidiary" of a specified Person means any corporation or other entity of
which securities having ordinary voting power to elect a majority of the board
of directors or other persons performing similar functions are at the time
directly or indirectly owned by such Person, or one or more of such Person's
Subsidiaries, or by such Person and one or more of such Person's Subsidiaries.

    "Tangible Net Worth" means at any time the excess of (i) the sum of (a) the
product of (x) 100% minus the Discount (as such term is defined in the PCA)
multiplied by (y) the Outstanding Balance of all Receivables other than
Defaulted Receivables plus (b) cash and cash equivalents of the Seller plus

12

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(c) the outstanding principal amount of Purchaser Loans (as such term is defined
in the PCA), minus (ii) the sum of (a) Capital plus (b) the Deferred Purchase
Price.

    "Termination Date" for any Receivable Interest means (i) in the case of a
Receivable Interest owned by an Investor, the earlier of (a) the Business Day
which the Seller or the Agent so designates by notice to the other at least one
Business Day in advance for such Receivable Interest and (b) the Facility
Termination Date and (ii) in the case of a Receivable Interest owned by a Bank,
the earlier of (a) the Business Day which the Seller so designates by notice to
the Agent at least one Business Day in advance for such Receivable Interest and
(b) the Commitment Termination Date.

    "Transaction Document" means any of this Agreement, the PCA, the Lock-Box
Agreements, the Account Agreement, the Fee Agreement, the Bank Direction
Agreements, the Parent Undertaking Agreement and all other agreements and
documents designated by the mutual agreement of the parties hereto as
"Transaction Documents" from time to time, and all amendments and supplements
hereto or thereto.

    "Transferee" means any Person to whom any Investor or Bank has transferred
all or any portion of its rights and obligations under this Agreement by way of
an assignment or participation as described in Section 10.03.

    "UCC" means the Uniform Commercial Code as from time to time in effect in
the specified jurisdiction.

    "Weekly Report" means a report in substantially the form of Annex B hereto
and containing such additional information as the Agent may reasonably request
from time to time, furnished by the Collection Agent to the Agent pursuant to
Section 6.02(h).

    "Yield" means:

(i)for each Receivable Interest for any Fixed Period to the extent Atlantic will
be funding such Receivable Interest through the issuance of commercial paper
notes,

IR   ×   C   ×   ED   +   LF                

--------------------------------------------------------------------------------

360        

(ii)for each Receivable Interest for any Fixed Period to the extent (x) Atlantic
will not be funding such Receivable Interest through the issuance of commercial
paper notes, or (y) the Banks will be funding such Receivable Interest,

AR   ×   C   ×   ED

--------------------------------------------------------------------------------

  +   LF                 360        

where:

AR   =   the Assignee Rate for such Receivable Interest for such Fixed Period
C
 
=
 
the Capital of such Receivable Interest during such Fixed Period
IR
 
=
 
the Investor Rate for such Receivable Interest for such Fixed Period
ED
 
=
 
the actual number of days elapsed during such Fixed Period
LF
 
=
 
the Liquidation Fee, if any, for such Receivable Interest for such Fixed Period

provided that no provision of this Agreement shall require the payment or permit
the collection of Yield in excess of the maximum permitted by applicable law;
and provided further that Yield for any

13

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Receivable Interest shall not be considered paid by any distribution to the
extent that at any time all or a portion of such distribution is rescinded or
must otherwise be returned for any reason.

    "Yield and Fee Reserve" means, for any Receivable Interest on any date, an
amount equal to

(C × YFRP) + AUYF

where:

C   =   the Capital of such Receivable Interest at the close of business of the
Collection Agent on such date.
YFRP
 
=
 
the Yield and Fee Reserve Percentage on such date.
AUYF
 
=
 
accrued and unpaid Yield, Collection Agent Fee and Fees on such date, in each
case for such Receivable Interest.

    "Yield and Fee Reserve Percentage" means, on any date, a percentage equal to

 (AER + CAF) × 2 × DSO
360

where:

AER   =   the one-month Adjusted Eurodollar Rate in effect on such date.
CAF
 
=
 
the percentage per annum used in the calculation of the Collection Agent Fee in
effect on such date.
DSO
 
=
 
the Days Sales Outstanding on such date.

14

--------------------------------------------------------------------------------

    SECTION 1.02.  Other Terms.   All accounting terms not specifically defined
herein shall be construed in accordance with generally accepted accounting
principles. All terms used in Article 9 of the UCC in the State of New York, and
not specifically defined herein, are used herein as defined in such Article 9.

ARTICLE II

AMOUNTS AND TERMS OF THE PURCHASES

    SECTION 2.01.  Purchase Facility.   (a) On the terms and conditions
hereinafter set forth, Atlantic may, in its sole discretion, and the Banks
shall, ratably in accordance with their respective Bank Commitments, purchase
Receivable Interests from the Seller from time to time during the period from
the date hereof to the Facility Termination Date (in the case of Atlantic) and
to the Commitment Termination Date (in the case of the Banks). Under no
circumstances shall Atlantic make any such purchase, or the Banks be obligated
to make any such purchase, if after giving effect to such purchase the aggregate
outstanding Capital of Receivable Interests (after giving effect to any
reduction of Capital of Receivable Interests held by any Investor to be made on
the date of such purchase from the proceeds of any purchases by the Banks) would
exceed the Purchase Limit.

    (b) The Seller may at any time, upon at least 30 days' notice to the Agent,
terminate the facility provided for in this Agreement in whole or, from time to
time, reduce in part the unused portion of the Purchase Limit; provided that
each partial reduction shall be in the amount of at least $10,000,000 or an
integral multiple of $1,000,000 in excess thereof.

    (c) Until the Agent gives the Seller the notice provided in
Section 3.02(c)(iii), the Agent, on behalf of the Investors which own Receivable
Interests, shall have the Collections attributable to such Receivable Interests
automatically reinvested pursuant to Section 2.04 in additional undivided
percentage interests in the Pool Receivables by making an appropriate
readjustment of such Receivable Interests. The Agent, on behalf of the Banks
which own Receivable Interests, shall have the Collections attributable to such
Receivable Interests automatically reinvested pursuant to Section 2.04 in
additional undivided percentage interests in the Pool Receivables by making an
appropriate readjustment of such Receivable Interests.

    SECTION 2.02.  Making Purchases.   (a) Each purchase by Atlantic or the
Banks shall be made on at least three Business Days' notice from the Seller to
the Agent. Each such notice of a purchase shall specify (i) the amount requested
to be paid to the Seller (such amount, which shall not be less than $1,000,000,
being referred to herein as the initial "Capital" of the Receivable Interest
then being purchased), (ii) the date of such purchase (which shall be a Business
Day), and (iii) the requested duration of the initial Fixed Period for such
Receivable Interest. The Agent shall promptly thereafter notify the Seller
whether Atlantic has determined to make a purchase and, if so, whether all of
the terms specified by the Seller are acceptable to Atlantic.

    If Atlantic has determined not to make a proposed purchase, the Agent shall
promptly send notice of the proposed purchase to all of the Banks concurrently
by telecopier, telex or cable specifying the date of such purchase, each Bank's
Percentage multiplied by the aggregate amount of Capital of Receivable Interest
being purchased, whether the Yield for the Fixed Period for such Receivable
Interest is calculated based on the Eurodollar Rate (which may be selected by
the Seller only if the notice referred to in the first sentence of this Section
is given at least three Business Days prior to the purchase date) or the
Alternate Base Rate, and the duration of the Fixed Period for such Receivable
Interest (which shall be one day if the Seller has not selected another period).

    (b) On the date of each such purchase of a Receivable Interest, Atlantic or
the Banks, as the case may be, shall, upon satisfaction of the applicable
conditions set forth in Article III, make available to the Seller in same day
funds an amount equal to the initial Capital of such Receivable Interest, to the

15

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Seller's account no. 3751842080, at Bank of America, N.A., 901 Main Street,
P.O. Box 832409, Dallas, Texas 75202, ABA No. 111000012 or such other account of
the Seller as the Seller may hereafter direct the Agent in writing; provided,
however, if such purchase is being made by the Banks following the designation
by the Agent of a Termination Date for a Receivable Interest owned by an
Investor pursuant to clause (i)(a) of the definition of Termination Date and any
Capital of such Receivable Interest is outstanding on such date of purchase, the
Seller hereby directs the Banks to pay the proceeds of such purchase (to the
extent of the outstanding Capital and accrued Yield on such Receivable Interest
of the Investor) to the Agent's Account, for application to the reduction of the
outstanding Capital and accrued Yield on such Receivable Interest of the
Investor.

    (c) Effective on the date of each purchase pursuant to this Section 2.02 and
each reinvestment pursuant to Section 2.04, the Seller hereby sells and assigns
to the Agent, for the benefit of the parties making such purchase, an undivided
percentage ownership interest, to the extent of the Receivable Interest then
being purchased, in each Pool Receivable then existing and in the Related
Security and Collections with respect thereto.

    (d) Notwithstanding the foregoing, a Bank shall not be obligated to make
purchases under this Section 2.02 at any time in an amount which would exceed
such Bank's Bank Commitment less such Bank's ratable share of the aggregate
outstanding Capital held by Atlantic (whether or not any portion thereof has
been assigned by Atlantic pursuant to the Asset Purchase Agreement), after
giving effect to any reductions of the Capital held by Atlantic to be made on
the date of such purchase from the proceeds of purchases by the Banks. Each
Bank's obligation shall be several, such that the failure of any Bank to make
available to the Seller any funds in connection with any purchase shall not
relieve any other Bank of its obligation, if any, hereunder to make funds
available on the date of such purchase, but no Bank shall be responsible for the
failure of any other Bank to make funds available in connection with any
purchase.

    SECTION 2.03.  Receivable Interest Computation.   Each Receivable Interest
shall be initially computed on its date of purchase. Thereafter until the
Termination Date for such Receivable Interest, such Receivable Interest shall be
automatically recomputed (or deemed to be recomputed) on each day other than a
Liquidation Day. Any Receivable Interest, as computed (or deemed recomputed) as
of the day immediately preceding the Termination Date for such Receivable
Interest, shall thereafter remain constant; provided, however, that from and
after the date on which the Termination Date shall have occurred for all
Receivable Interests and until each Receivable Interest becomes zero in
accordance with the next sentence, each Receivable Interest shall be calculated
as the percentage equivalent of a fraction the numerator of which is the
percentage representing such Receivable Interest immediately prior to such date
and the denominator of which is the sum of the percentages representing all
Receivable Interests which were outstanding immediately prior to such date. Each
Receivable Interest shall become zero when Capital thereof and Yield thereon
shall have been paid in full, and all Fees and other amounts owed by the Seller
hereunder to the Investors, the Banks or the Agent are paid and the Collection
Agent shall have received the accrued Collection Agent Fee thereon.

    SECTION 2.04.  Settlement Procedures.   (a) Collection of the Pool
Receivables shall be administered by a Collection Agent, in accordance with the
terms of Article VI of this Agreement. The Seller shall provide to the
Collection Agent (if other than the Seller) on a timely basis all information
needed for such administration, including notice of the occurrence of any
Liquidation Day and current computations of each Receivable Interest.

    (b) The Collection Agent shall, on each day on which Collections of Pool
Receivables are received by it:

     (i) with respect to each Receivable Interest, set aside on its books and
hold in trust (and, at the request of the Agent on any Liquidation Day with
respect to such Receivable Interest (but not prior to such request), segregate
into an account acceptable to the Agent) for the Investors or the

16

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Banks that hold such Receivable Interest, out of the percentage of such
Collections represented by such Receivable Interest, an amount equal to the
Yield, Fees and Collection Agent Fee accrued through such day for such
Receivable Interest and not previously set aside;

    (ii) with respect to each Receivable Interest, if such day is not a
Liquidation Day for such Receivable Interest, reinvest with the Seller on behalf
of the Investors or the Banks that hold such Receivable Interest the percentage
of such Collections represented by such Receivable Interest, to the extent
representing a return of Capital, by recomputation of such Receivable Interest
pursuant to Section 2.03;

    (iii) if such day is a Liquidation Day for any one or more Receivable
Interests, set aside on its books and hold in trust (and, at the request of the
Agent, segregate) for the Investors or the Banks that hold such Receivable
Interests (x) if such day is a Liquidation Day for less than all of the
Receivable Interests, the percentage of such Collections represented by such
Receivable Interests, and (y) if such day is a Liquidation Day for all of the
Receivable Interests, all of the remaining Collections (but not in excess of the
Capital of such Receivable Interests); provided that if amounts are set aside
and held in trust on any Liquidation Day occurring prior to the Termination
Date, and thereafter prior to the Settlement Date for such Fixed Period the
conditions set forth in Section 3.02 are satisfied or waived by the Agent, such
previously set aside amounts shall, to the extent representing a return of
Capital, be reinvested in accordance with the preceding subsection (ii) on the
day of such subsequent satisfaction or waiver of conditions; and

    (iv) during such times as amounts are required to be reinvested in
accordance with the foregoing subsection (ii) or the proviso to subsection
(iii), release to the Seller for its own account any Collections in excess of
both such amounts and of the amounts that are required to be set aside pursuant
to subsection (i) above.

    (c) The Collection Agent shall deposit into the Agent's Account, on the
Settlement Date for each Receivable Interest, Collections held for the Investors
or the Banks that relate to such Receivable Interest pursuant to
Section 2.04(b).

    (d) Upon receipt of funds deposited into the Agent's Account, the Agent
shall distribute them as follows:

     (i) if such distribution occurs on a day that is not a Liquidation Day,
first to the Investors or the Banks that hold the relevant Receivable Interest
and to the Agent in payment in full of all accrued Yield and Fees and then to
the Collection Agent in payment in full of all accrued Collection Agent Fee.

    (ii) if such distribution occurs on a Liquidation Day, first to the
Investors or the Banks that hold the relevant Receivable Interest and to the
Agent in payment in full of all accrued Yield and Fees, second to such Investors
or Banks in reduction to zero of all Capital, third to such Investors, Banks or
the Agent in payment of any other amounts owed by the Seller hereunder, and
fourth to the Collection Agent in payment in full of all accrued Collection
Agent Fee.

    After the Capital, Yield, Fees and Collection Agent Fee with respect to a
Receivable Interest, and any other amounts payable by the Seller to the
Investors, the Banks or the Agent hereunder, have been paid in full and any
contingent obligations of the Agent under any Account Agreement, Lock-Box
Agreement or Bank Direction Agreement have been released, all additional
Collections with respect to such Receivable Interest shall be paid to the Seller
for its own account.

    (e) For the purposes of this Section 2.04:

     (i) if on any day any Pool Receivable becomes (in whole or in part) a
Diluted Receivable, the Seller shall be deemed to have received on such day a
Collection of such Pool Receivable in the amount of such Diluted Receivable;

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    (ii) if on any day any of the representations or warranties contained in
Section 4.01(h) is no longer true with respect to any Pool Receivable, the
Seller shall be deemed to have received on such day a Collection of such Pool
Receivable in full;

    (iii) except as provided in subsection (i) or (ii) of this Section 2.04(e),
or as otherwise required by applicable law or the relevant Contract, all
Collections received from an Obligor of any Receivables shall be applied to the
Receivables of such Obligor in the order of the age of such Receivables,
starting with the oldest such Receivable, unless such Obligor designates its
payment for application to specific Receivables; and

    (iv) if and to the extent the Agent, the Investors or the Banks shall be
required for any reason to pay over to an Obligor any amount received on its
behalf hereunder, such amount shall be deemed not to have been so received but
rather to have been retained by the Seller and, accordingly, the Agent, the
Investors or the Banks, as the case may be, shall have a claim against the
Seller for such amount, payable when and to the extent that any distribution
from or on behalf of such Obligor is made in respect thereof.

    SECTION 2.05.  Fees.   (a) Each Investor and Bank shall pay to the
Collection Agent a fee (the "Collection Agent Fee") of 0.50% per annum on the
average daily Capital of each Receivable Interest owned by such Investor or
Bank, from the date of purchase of such Receivable Interest until the later of
the Termination Date for such Receivable Interest or the date on which such
Capital is reduced to zero, payable on the Settlement Date for such Receivable
Interest. Upon three Business Days' notice to the Agent, the Collection Agent
(if not the Originator, the Seller or its designee or an Affiliate of the
Seller) may elect to be paid, as such fee, another percentage per annum on the
average daily Capital of such Receivable Interest, but in no event in excess for
all Receivable Interests relating to the Receivables Pool of the lesser of
(i) 110% of the reasonable costs and expenses of the Collection Agent in
administering and collecting the Receivables in the Receivables Pool and
(ii) 1.00% per annum on the average daily Capital of all outstanding Receivable
Interests. The Collection Agent Fee shall be payable only from Collections
pursuant to, and subject to the priority of payment set forth in, Section 2.04.
So long as the Originator is acting as the Collection Agent hereunder, amounts
paid as the Collection Agent Fee pursuant to this Section 2.05(a) shall reduce,
on a dollar-for-dollar basis, the obligation of the Seller to pay the
"Collection Agent Fee" pursuant to Section 6.03 of the PCA, provided that such
obligation of the Seller shall in no event be reduced below zero.

    (b) The Seller shall pay to the Agent certain fees (collectively, the
"Fees") in the amounts and on the dates set forth in a separate fee agreement of
even date between the Seller and the Agent, as the same may be amended or
restated from time to time (the "Fee Agreement").

    SECTION 2.06.  Payments and Computations, Etc.   (a) All amounts to be paid
or deposited by the Seller or the Collection Agent hereunder shall be paid or
deposited no later than 12:00 noon (New York City time) on the day when due in
same day funds to the Agent's Account.

    (b) Each of the Seller and the Collection Agent shall, to the extent
permitted by law, pay interest on any amount not paid or deposited by it when
due hereunder, at an interest rate per annum equal to 2% per annum above the
Alternate Base Rate, payable on demand.

    (c) All computations of interest under subsection (b) above and all
computations of Yield, fees, and other amounts hereunder shall be made on the
basis of a year of 360 days for the actual number of days (including the first
but excluding the last day) elapsed. Whenever any payment or deposit to be made
hereunder shall be due on a day other than a Business Day, such payment or
deposit shall be made on the next succeeding Business Day and such extension of
time shall be included in the computation of such payment or deposit.

    SECTION 2.07.  Dividing or Combining Receivable Interests.   Either the
Seller or the Agent may, upon notice to the other party received at least three
Business Days prior to the last day of any Fixed

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Period in the case of the Seller giving notice, or up to the last day of such
Fixed Period in the case of the Agent giving notice, either (i) divide any
Receivable Interest into two or more Receivable Interests having aggregate
Capital equal to the Capital of such divided Receivable Interest, or
(ii) combine any two or more Receivable Interests originating on such last day
or having Fixed Periods ending on such last day into a single Receivable
Interest having Capital equal to the aggregate of the Capital of such Receivable
Interests; provided, however, that no Receivable Interest owned by Atlantic may
be combined with a Receivable Interest owned by any Bank.

    SECTION 2.08.  Increased Costs.   (a) If Credit Lyonnais, any Investor, any
Bank, any entity which enters into a commitment to purchase Receivable Interests
or interests therein, or any of their respective Affiliates (each, an "Affected
Person") determines that compliance with any law or regulation or any guideline
or request from any central bank or other governmental authority (whether or not
having the force of law) affects or would affect the amount of the capital
required or expected to be maintained by such Affected Person and such Affected
Person determines that the amount of such capital is increased by or based upon
the existence of any commitment to make purchases of or otherwise to maintain
the investment in Pool Receivables or interests therein related to this
Agreement or to the funding thereof and other commitments of the same type,
then, upon demand by such Affected Person (with a copy to the Agent), the Seller
shall immediately pay to the Agent for the account of such Affected Person (as a
third-party beneficiary), from time to time as specified by such Affected
Person, additional amounts sufficient to compensate such Affected Person in the
light of such circumstances, to the extent that such Affected Person reasonably
determines such increase in capital to be allocable to the existence of any of
such commitments. A certificate as to such amounts (which shall include
calculations in reasonable detail) submitted to the Seller and the Agent by such
Affected Person shall be conclusive and binding for all purposes, absent
manifest error.

    (b) If, due to either (i) the introduction of or any change (other than any
change by way of imposition or increase of reserve requirements referred to in
Section 2.09) in or in the interpretation of any law or regulation or
(ii) compliance with any guideline or request from any central bank or other
governmental authority (whether or not having the force of law), there shall be
any increase in the cost to any Investor or Bank of agreeing to purchase or
purchasing, or maintaining the ownership of, Receivable Interests in respect of
which Yield is computed by reference to the Eurodollar Rate, then, upon demand
by such Investor or Bank (with a copy to the Agent), the Seller shall
immediately pay to the Agent, for the account of such Investor or Bank (as a
third-party beneficiary), from time to time as specified by such Investor or
Bank, additional amounts sufficient to compensate such Investor or Bank for such
increased costs. A certificate as to such amounts submitted to the Seller and
the Agent by such Investor or Bank shall be conclusive and binding for all
purposes, absent manifest error.

    SECTION 2.09.  Additional Yield on Receivable Interests Bearing a Eurodollar
Rate.   The Seller shall pay to any Investor or Bank, so long as such Investor
or Bank shall be required under regulations of the Board of Governors of the
Federal Reserve System to maintain reserves with respect to liabilities or
assets consisting of or including Eurocurrency Liabilities, additional Yield on
the unpaid Capital of each Receivable Interest of such Investor or Bank during
each Fixed Period in respect of which Yield is computed by reference to the
Eurodollar Rate, for such Fixed Period, at a rate per annum equal at all times
during such Fixed Period to the remainder obtained by subtracting (i) the
Eurodollar Rate for such Fixed Period from (ii) the rate obtained by dividing
such Eurodollar Rate referred to in clause (i) above by that percentage equal to
100% minus the Eurodollar Rate Reserve Percentage of such Investor or Bank for
such Fixed Period, payable on each date on which Yield is payable on such
Receivable Interest. Such additional Yield shall be determined by such Investor
or Bank and notice thereof given to the Seller through the Agent within 30 days
after any Yield payment is made with respect to which such additional Yield is
requested. A certificate as to such additional Yield submitted to the Seller and
the Agent by such Investor or Bank shall be conclusive and binding for all
purposes, absent manifest error.

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    SECTION 2.10.  Taxes.   (a) Any and all payments and deposits required to be
made hereunder or under any other Transaction Document by the Collection Agent
or the Seller shall be made free and clear of and without deduction for any and
all present or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding (x) net income
taxes, franchise taxes, branch profits taxes and any other taxes imposed on an
Affected Person as a result of a present or former connection between such
Affected Person and the jurisdiction of the governmental authority imposing such
tax or any political subdivision or taxing authority thereof or therein other
than a connection arising solely from the transactions contemplated hereby,
(y) all taxes that are attributable to such Affected Person's failure to comply
with the requirements of paragraph (d) of this section, and (z) all taxes that
are taxes imposed other than as a result of a change in treaty, law or
regulation (or the application or interpretation thereof) after the date such
Affected Person becomes a party to this Agreement (all such non-excluded taxes,
levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If the Seller or the Collection Agent shall
be required by law to deduct any Taxes from or in respect of any sum payable
hereunder to any Affected Person, (i) the Seller shall make an additional
payment to such Affected Person, in an amount sufficient so that, after making
all required deductions (including deductions applicable to additional sums
payable under this Section 2.10), such Affected Person receives an amount equal
to the sum it would have received had no such deductions been made, (ii) the
Seller or the Collection Agent, as the case may be, shall make such deductions
and (iii) the Seller or the Collection Agent, as the case may be, shall pay the
full amount deducted to the relevant taxation authority or other authority in
accordance with applicable law.

    (b) In addition, the Seller agrees to pay any present or future stamp or
other documentary taxes or any other excise or property taxes, charges or
similar levies which arise from or under any Transaction Document or from the
execution, delivery or registration of this Agreement or any other Transaction
Document (hereinafter referred to as "Other Taxes").

    (c) The Seller will indemnify each Affected Person for the full amount of
Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes
imposed by any jurisdiction on amounts payable under this Section 2.10) paid by
such Affected Person and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto whether or not such Taxes or
Other Taxes were correctly or legally asserted. This indemnification shall be
made within thirty days from the date the Affected Person makes written demand
therefor (and a copy of such demand shall be delivered to the Agent). A
certificate as to the amount of such indemnification submitted to the Seller and
the Agent by such Affected Person, setting forth, in reasonable detail, the
basis for and the calculation thereof, shall be conclusive and binding for all
purposes absent manifest error.

    (d) (1) Each Investor and Bank and any Transferee that is not a "U.S.
person" as that term is defined in Section 7701(a)(30) of the United States
Internal Revenue Code (a "Non-U.S. Person") shall deliver to the Seller and the
Collection Agent, and if applicable, the assigning Investor or Bank (or, in the
case of a Transferee that holds a participation, to the Investor or Bank from
which the related participation shall have been transferred) on or before the
date on which it becomes a party to this Agreement or becomes a Transferee (or,
in the case of a Transferee that holds a participation, on or before the date on
which such Transferee receives the related participation) two duly completed and
signed copies of either Internal Revenue Service Form W-8BEN (relating to such
Non-U.S. Person and entitling it to a complete exemption from withholding of
U.S. Taxes on all amounts to be received by such Non-U.S. Person pursuant to
this Agreement and the other Transaction Documents) or Form W-8ECI (relating to
all amounts to be received by such Non-U.S. Person pursuant to this Agreement
and the other Transaction Documents), or successor and related applicable forms,
as the case may be; provided, however, that in the event that a Non-U.S. Person
is not a corporation for U.S. federal income tax purposes, such Non-U.S. Person
agrees to take any actions necessary, and to deliver all additional (or
alternative) Internal Revenue Service forms necessary to establish such Non-U.S.
Person's entitlement to a complete exemption from withholding of U.S. Taxes on
all amounts to be

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received by such Non-U.S. Person pursuant to this Agreement and the other
Transaction Documents (including causing its partners, members, beneficiaries or
owners, and their beneficial owners, to take any actions and deliver any forms
necessary to establish such exemption).

    (2) Further, each Non-U.S. Person agrees (i) to deliver to the Seller and
the Collection Agent, and if applicable, the assigning Investor or Bank (or, in
the case of a Transferee that holds a participation, to the Investor or Bank
from which the related participation shall have been transferred) two further
duly completed and signed copies of such Form W-8BEN or W-8ECI or such other
Internal Revenue Service forms required to be delivered pursuant to the proviso
following clause (1) of this Section 2.10(d), as the case may be, or successor
and related applicable forms, on or before the date that any such form expires
or becomes obsolete and promptly after the occurrence of any event requiring a
change from the most recent form(s) previously delivered by it to the Seller and
Collection Agent, and, if applicable, the assigning Investor or Bank (or, in the
case of a Transferee that holds a participation, to the Investor or Bank from
which the related participation shall have been transferred) in accordance with
applicable U.S. laws and regulations or (ii) to notify promptly the Seller and
the Collection Agent, and, if applicable, the assigning Investor or Bank (or, in
the case of a Transferee that holds a participation, the Investor or Bank from
which the related participation shall have been transferred) if it is no longer
able to deliver, or if it is required to withdraw or cancel, any form or
statement previously delivered by it pursuant to subsection 2.10(d)(1) and
(d)(2) including reliance on any forms provided to it pursuant to the proviso
following clause (1) of subsection 2.10(d).

    (3) Each Investor and Bank and any Transferee that is not a Non-U.S. Person
shall deliver to the Seller and the Collection Agent and, if applicable, the
assigning Investor or Bank (or, in the case of a Transferee that holds a
participation, to the Investor or Bank from which the related participation
shall have been transferred) two duly completed copies of United States Internal
Revenue Service Form W-9 (or applicable successor form) unless it establishes to
the satisfaction of the Seller that it is otherwise eligible for an exemption
from backup withholding tax or other applicable withholding tax. Each such
Investor, Bank or Transferee shall deliver to the Seller and the Collection
Agent and, if applicable, the assigning Investor or Bank (or, in the case of a
Transferee that holds a participation, to the Investor or Bank from which the
related participation shall have been transferred) two further properly
completed and duly executed forms and statements (or applicable successor forms)
at or before the time any such form or statement becomes obsolete.

    SECTION 2.11.  Security Interest.   As collateral security for the
performance by the Seller of all the terms, covenants and agreements on the part
of the Seller (whether as Seller or otherwise) to be performed under this
Agreement or any document delivered in connection with this Agreement in
accordance with the terms thereof, including the punctual payment when due of
all obligations of the Seller hereunder or thereunder, whether for
indemnification payments, fees, expenses or otherwise, the Seller hereby assigns
to the Agent for its benefit and the ratable benefit of the Investors and the
Banks, and hereby grants to the Agent for its benefit and the ratable benefit of
the Investors and the Banks, a security interest in, all of the Seller's right,
title and interest in and to (A) the PCA and the Parent Undertaking Agreement,
including, without limitation, (i) all rights of the Seller to receive moneys
due or to become due under or pursuant to the PCA or the Parent Undertaking
Agreement, (ii) all security interests and property subject thereto from time to
time purporting to secure payment of monies due or to become due under or
pursuant to the PCA or the Parent Undertaking Agreement, (iii) all rights of the
Seller to receive proceeds of any insurance, indemnity, warranty or guaranty
with respect to the PCA or the Parent Undertaking Agreement, (iv) claims of the
Seller for damages arising out of or for breach of or default under the PCA or
the Parent Undertaking Agreement, and (v) the right of the Seller to compel
performance and otherwise exercise all remedies thereunder, (B) all Receivables,
whether now owned and existing or hereafter acquired or arising, the Related
Security with respect thereto, the Lock-Box Accounts, the Collection Account and
the Collections and all other assets, including, without limitation, accounts,
chattel paper, instruments and general intangibles (as

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those terms are defined in the UCC), including undivided interests in any of the
foregoing, owned by the Seller and not otherwise purchased under this Agreement,
and (C) to the extent not included in the foregoing, all proceeds of any and all
of the foregoing. In the event that any purchase of Receivable Interests
hereunder is not characterized as a sale, the Seller shall, effective as of the
date hereof, be deemed to have granted (and the Seller hereby does grant) to the
Agent (for its benefit and the ratable benefit of the Investors and the Banks) a
security interest in all Receivables whether now owned and existing or hereafter
acquired or arising and all Related Security and Collections with respect
thereto, to secure payment of Capital, Yield, Fees and all other amounts payable
by the Seller hereunder, and this Agreement shall be deemed to be a security
agreement.

    SECTION 2.12.  Repurchase Option.   So long as no Event of Termination or
Incipient Event of Termination would occur or be continuing after giving effect
thereto, the Seller shall have the right (the "Call Right") to repurchase all,
but not less than all, of the Receivable Interests held by the Investors and the
Banks upon not less than thirty Business Days' prior written notice to the
Agent. Such notice shall specify the date that the Seller desires that such
repurchase occur (such date, the "Repurchase Date"). On the Repurchase Date, the
Seller shall transfer to the Agent's Account in immediately available funds an
amount equal to (i) the Capital of the Receivable Interests held by the
Investors and the Banks, (ii) all accrued and unpaid Yield thereon to the
Repurchase Date, (iii) all accrued and unpaid Fees owing to the Investors and
the Banks, (iv) the Liquidation Fee owing to the Investors and the Banks in
respect of such repurchase and (v) all expenses and other amounts payable
hereunder to any of the Agent, the Investors and the Banks (including, without
limitation, attorneys' fees and disbursements). Any repurchase pursuant to this
Section 2.12 shall be made without recourse to or warranty by the Agent, the
Investors or the Banks (except for a warranty that all Receivable Interests
repurchased are transferred free of any lien, security interest or Adverse Claim
created solely by the actions of the Agent, the Investors or the Banks).
Further, on the Repurchase Date the Bank Commitments for all the Banks shall
terminate, each of the Commitment Termination Date and Facility Termination Date
shall have occurred, the Termination Date for all Banks and the Investors shall
have occurred and no further purchases or reinvestments of Collections shall be
made hereunder.

ARTICLE III

CONDITIONS OF PURCHASES

    SECTION 3.01.  Conditions Precedent to Initial Purchase.   The initial
purchase of a Receivable Interest under this Agreement is subject to the
conditions precedent that the Agent shall have received on or before the date of
such purchase the following, each (unless otherwise indicated) dated as of such
date of purchase, in form and substance satisfactory to the Agent:

    (a) (i) Certified copies of the resolutions of the Board of Directors of the
Seller and the Originator approving this Agreement and the PCA and certified
copies of all documents evidencing other necessary corporate action, as the case
may be, and governmental approvals, if any, with respect to this Agreement and
the PCA and (ii) certified copies of the resolutions of the Board of Directors
of Dal-Tile International and Dal-Tile Group approving the Parent Undertaking
Agreement and certified copies of all documents evidencing other necessary
corporate action and governmental approvals, if any, with respect to the Parent
Undertaking Agreement.

    (b) (i) A certificate of the Secretary or Assistant Secretary of the Seller
and of the Originator certifying the names and true signatures of the officers
of the Seller and of the Originator authorized to sign the PCA and this
Agreement and the other documents to be delivered by it hereunder and thereunder
and (ii) a certificate of the Secretary or Assistant Secretary of Dal-Tile
International and Dal-Tile Group certifying the names and true signatures of the
officers of Dal-Tile International and Dal-Tile Group authorized to sign the
Parent Undertaking Agreement and any other documents to be delivered by it
thereunder.

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    (c) Acknowledgment copies or time stamped receipt copies (or other evidence
of filing) of proper financing statements, duly filed on or before the date of
such initial purchase under the UCC of all jurisdictions that the Agent may deem
necessary or desirable in order to perfect the ownership and security interests
contemplated by this Agreement and the PCA.

    (d) Proper financing statements (together with such written authorizations
to file such financing statements or such other written statements with respect
to the filing of such financing statements as the Agent may request), if any,
necessary to release all security interests and other rights of any Person
(other than the interests evidenced by the financing statement filings referred
to in the second sentence of Section 4.01(h)) in (i) the Receivables, Contracts
or Related Security previously granted by the Seller or the Originator and
(ii) the collateral security referred to in Section 2.11 previously granted by
the Seller.

    (e) Completed requests for information, dated on or before the date of such
initial purchase, listing all effective financing statements filed in Texas and
the jurisdictions referred to in subsection (c) above that name the Seller or
the Originator as debtor, together with copies of such financing statements
(none of which shall cover any Receivables, Contracts, Related Security or the
collateral security referred to in Section 2.11).

    (f)  Executed copies of Lock-Box Agreements with each Lock-Box Bank and the
Account Agreement with the bank holding the Collection Account.

    (g) Executed copies of Bank Direction Agreements with respect to the Store
Accounts maintained at Bank of America-East, Bank of America-West, Bank One
Chicago, Bank One Michigan, Bank One Texas, First Union and Wells Fargo Bank.

    (h) Favorable opinions of (i) Fried, Frank, Harris, Shriver & Jacobson,
(ii) Dechert and (iii) Mark A. Solls, each as counsel for the Seller, the
Originator, Dal-Tile International and Dal-Tile Group substantially in the forms
of Annex C hereto and as to such other matters as the Agent may reasonably
request.

    (i)  An executed copy of the Fee Agreement.

    (j)  An executed copy of the PCA.

    (k) A copy of the by-laws of the Seller, certified by the Secretary or
Assistant Secretary of the Seller, and of the by-laws of the Originator,
certified by the Secretary or Assistant Secretary of the Originator.

    (l)  A copy of the certificate of incorporation of the Seller and of the
certificate of incorporation of the Originator, certified as of a recent date by
the Secretary of State or other appropriate official of the state of its
organization, and a certificate as to the good standing of each of the Seller
and the Originator from such Secretary of State or other official, dated as of a
recent date.

    (m) The opening pro forma balance sheet of the Seller referred to in
Section 4.01(e).

    (n) Confirmation (informally but to the reasonable satisfaction of the
Agent) by each of S&P and Moody's that the commercial paper notes of Atlantic
issued in connection with this Agreement will be, or will continue to be, rated
at least A-1 and P-1, respectively.

    (o) An executed copy of the Parent Undertaking Agreement.

    SECTION 3.02.  Conditions Precedent to All Purchases and Reinvestments.
  Each purchase (including the initial purchase) and each reinvestment shall be
subject to the further conditions precedent that (a) in the case of each
purchase, the Collection Agent shall have delivered to the Agent at least one
Business Day prior to such purchase, in form and substance satisfactory to the
Agent, a completed Monthly Report (or, in the case of the initial purchase, a
pro forma Monthly Report for the

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period ending September 28, 2001) containing information covering the most
recently ended reporting period for which information is required pursuant to
Section 6.02(g) and demonstrating that after giving effect to such purchase no
Event of Termination or Incipient Event of Termination under
Section 7.01(i) would occur, (b) in the case of each reinvestment, the
Collection Agent shall have delivered to the Agent on or prior to the date of
such reinvestment, in form and substance satisfactory to the Agent, a completed
Monthly Report containing information covering the most recently ended reporting
period for which information is required pursuant to Section 6.02(g), (c) on the
date of such purchase or reinvestment the following statements shall be true,
except that the statement in clause (iii) below is required to be true only if
such purchase or reinvestment is by an Investor (and acceptance of the proceeds
of such purchase or reinvestment shall be deemed a representation and warranty
by the Seller and the Collection Agent (each as to itself) that such statements
are then true):

     (i) The representations and warranties contained in Section 4.01 (in the
case of the Seller) and 4.02 (in the case of the Collection Agent) are correct
on and as of the date of such purchase or reinvestment as though made on and as
of such date,

    (ii) No event has occurred and is continuing, or would result from such
purchase or reinvestment, that constitutes an Event of Termination or an
Incipient Event of Termination,

    (iii) The Agent shall not have given the Seller at least one Business Day's
notice that the Investors have terminated the reinvestment of Collections
attributable to their Receivable Interests in Receivable Interests, and

    (iv) The Originator shall have sold or contributed to the Seller, pursuant
to the PCA, all Originator Receivables outstanding on the date hereof and
thereafter arising through and including such purchase or reinvestment date, and

    (d) the Agent shall have received such other approvals, opinions or
documents as it may reasonably request.

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES

    SECTION 4.01.  Representations and Warranties of the Seller.   The Seller
hereby represents and warrants as follows:

    (a) The Seller is a corporation duly formed, validly existing and in good
standing under the laws of Delaware, and is duly qualified to do business, and
is in good standing, in every jurisdiction where the nature of its business
requires it to be so qualified.

    (b) The execution, delivery and performance by the Seller of the Transaction
Documents to which it is a party and the other documents to be delivered by it
hereunder, including the Seller's use of the proceeds of purchases and
reinvestments, (i) are within the Seller's corporate powers, (ii) have been duly
authorized by all necessary corporate action, (iii) do not contravene (1) the
Seller's certificate of incorporation or bylaws, (2) any law, rule or regulation
applicable to the Seller, (3) any contractual restriction binding on or
affecting the Seller or its property, including, without limitation, the Credit
Agreement and the documents related thereto, or (4) any order, writ, judgment,
award, injunction or decree binding on or affecting the Seller or its property,
and (iv) do not result in or require the creation of any lien, security interest
or other charge or encumbrance upon or with respect to any of its properties
(except for the interest created pursuant to this Agreement). Each of the
Transaction Documents to which the Seller is a party has been duly executed and
delivered by the Seller.

    (c) No authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required for the
due execution, delivery and performance by the Seller of the Transaction
Documents to which the Seller is a party or any other document to be delivered
thereunder, except for the filing of UCC financing statements which are referred
to herein.

    (d) Each of the Transaction Documents to which the Seller is a party
constitutes the legal, valid and binding obligation of the Seller enforceable
against the Seller in accordance with its terms except that such enforceability
may be subject to bankruptcy, insolvency, reorganization, moratorium (whether
general or specific) and other similar laws now or hereafter in effect affecting
creditors rights generally.

    (e) The opening pro forma balance sheet of the Seller as of September 28,
2001, giving effect to the initial purchase to be made under this Agreement, a
copy of which has been furnished to the Agent, fairly presents, in all material
respects, the financial condition of the Seller as at such date, in accordance
with generally accepted accounting principles, and since September 28, 2001
there has been no material adverse change in the business, operations, property
or financial or other condition of the Seller.

    (f)  There is no pending or threatened action or proceeding affecting the
Seller before any court, governmental agency or arbitrator which may reasonably
be expected to materially adversely affect the financial condition or operations
of the Seller or the ability of the Seller to perform its obligations under the
Transaction Documents, or which purports to affect the legality, validity or
enforceability of the Transaction Documents.

    (g) No proceeds of any purchase or reinvestment will be used, whether
directly or indirectly, to purchase or carry Margin Stock (as such term is
defined in Regulation U of the Board of Governors of the Federal Reserve System
of the United States, as in effect from time to time) or to extend credit to
others for the purpose of purchasing or carrying Margin Stock or to refund
indebtedness originally incurred for such purpose.

    (h) Immediately prior to the purchase by the Investor or the Banks, as the
case may be, the Seller is the legal and beneficial owner of the Pool
Receivables and Related Security free and clear of any Adverse Claim; upon each
purchase or reinvestment, the Investors or the Banks, as the case may be,

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shall acquire a valid and perfected first priority undivided percentage
ownership interest to the extent of the pertinent Receivable Interest in each
Pool Receivable then existing or thereafter arising and in the Related Security
and Collections with respect thereto. No effective financing statement or other
instrument similar in effect covering any Contract or any Pool Receivable or the
Related Security or Collections with respect thereto is on file in any recording
office, except those filed in favor of the Agent relating to this Agreement and
those filed against the Originator pursuant to the PCA.

    (i)  Each Monthly Report and Weekly Report (if prepared by the Seller or one
of its Affiliates, or to the extent that information contained therein is
supplied by the Seller or an Affiliate), information, exhibit, financial
statement, document, book, record or report furnished or to be furnished at any
time by or on behalf of the Seller to the Agent, the Investors or the Banks in
connection with this Agreement is or will be accurate in all material respects
as of its date or (except as otherwise disclosed to the Agent, Investors or the
Banks, as the case may be, at such time) as of the date so furnished, and no
such document contains or will contain any untrue statement of a material fact
or omits or will omit to state a material fact necessary in order to make the
statements contained therein, in the light of the circumstances under which they
were made, not misleading.

    (j)  The principal place of business and chief executive office of the
Seller and the office where the Seller keeps its records concerning the Pool
Receivables are located at the address or addresses referred to in
Section 5.01(b).

    (k) The names and addresses of all the Lock-Box Banks, together with the
account numbers of the Lock-Box Accounts of the Seller at such Lock-Box Banks,
are as specified in Schedule I hereto, as such Schedule I may be updated from
time to time pursuant to Section 5.01(g). The name and address of the bank
holding the Collection Account, together with the account number of the
Collection Account, are as specified in Schedule I hereto, as such Schedule I
may be updated from time to time pursuant to Section 5.01(g). The names and
addresses of all the Store Account Banks, together with the account numbers of
the Store Accounts at such Store Account Banks, are as specified in Schedule IV
hereto, as such Schedule IV may be updated from time to time pursuant to
Section 6.06(c).

    (l)  The Seller is not known by and does not use any tradename or
doing-business-as name.

    (m) The Seller was incorporated on September 4, 2001, and the Seller did not
engage in any business activities prior to the date of this Agreement. The
Seller has no Subsidiaries.

    (n) (i) The fair value of the property of the Seller is greater than the
total amount of liabilities, including contingent liabilities, of the Seller,
(ii) the present fair salable value of the assets of the Seller is not less than
the amount that will be required to pay all probable liabilities of the Seller
on its debts as they become absolute and matured, (iii) the Seller does not
intend to, and does not believe that it will, incur debts or liabilities beyond
the Seller's abilities to pay such debts and liabilities as they mature and
(iv) the Seller is not engaged in a business or a transaction, and is not about
to engage in a business or a transaction, for which the Seller's property would
constitute unreasonably small capital.

    (o) With respect to each Pool Receivable, the Seller (i) shall have received
such Pool Receivable as a contribution to the capital of the Seller by the
Originator or (ii) shall have purchased such Pool Receivable from the Originator
in exchange for payment (made by the Seller to the Originator in accordance with
the provisions of the PCA) of cash, Deferred Purchase Price, or a combination
thereof in an amount which constitutes fair consideration and reasonably
equivalent value. Each such sale referred to in clause (ii) of the preceding
sentence shall not have been made for or on account of an antecedent debt owed
by the Originator to the Seller and no such sale is or may be voidable or
subject to avoidance under any section of the Federal Bankruptcy Code.

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    SECTION 4.02.  Representations and Warranties of the Collection Agent.   The
Collection Agent hereby represents and warrants as follows:

    (a) The Collection Agent is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Pennsylvania, and
is duly qualified to do business, and is in good standing, in every jurisdiction
where the nature of its business requires it to be so qualified, except where
the failure to be so qualified would not reasonably be expected to have a
material adverse effect on the business, operations, property or financial or
other condition of the Collection Agent.

    (b) The execution, delivery and performance by the Collection Agent of this
Agreement and any other documents to be delivered by it hereunder (i) are within
the Collection Agent's corporate powers, (ii) have been duly authorized by all
necessary corporate action, (iii) do not contravene (1) the Collection Agent's
charter or by-laws, (2) any law, rule or regulation applicable to the Collection
Agent, (3) any material contractual restriction binding on or affecting the
Collection Agent or its property, including, without limitation, the Credit
Agreement and the documents related thereto or (4) any order, writ, judgment,
award, injunction or decree binding on or affecting the Collection Agent or its
property, and (iv) do not result in or require the creation of any lien,
security interest or other charge or encumbrance upon or with respect to any of
its properties pursuant to any material agreement. This Agreement has been duly
executed and delivered by the Collection Agent.

    (c) No authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required for the
due execution, delivery and performance by the Collection Agent of this
Agreement or any other document to be delivered by it hereunder.

    (d) This Agreement constitutes the legal, valid and binding obligation of
the Collection Agent enforceable against the Collection Agent in accordance with
its terms except that such enforceability may be subject to bankruptcy,
insolvency, reorganization, moratorium (whether general or specific) and other
similar laws now or hereafter in effect affecting creditors rights generally.

    (e) The consolidated balance sheet of Dal-Tile International and its
consolidated Subsidiaries as at December 29, 2000, and the related consolidated
statements of income and retained earnings of Dal-Tile International and its
consolidated Subsidiaries for the fiscal year then ended, copies of which have
been furnished to the Agent, fairly present, in all material respects, the
financial condition of Dal-Tile International and its consolidated Subsidiaries
as at such date and the results of the operations of Dal-Tile International and
its consolidated Subsidiaries for the period ended on such date, all in
accordance with generally accepted accounting principles consistently applied,
and since December 29, 2000 there has been no material adverse change in the
business, financial condition or operations of Dal-Tile International and its
consolidated Subsidiaries taken as a whole that could reasonably be expected to
adversely affect the value or collectibility of the Receivable Interests or the
Receivables Pool or the ability of the Seller, the Originator or the Collection
Agent to collect Pool Receivables or otherwise perform its obligations under
this Agreement or the other Transaction Documents.

    (f)  There is no pending or threatened action or proceeding affecting the
Collection Agent or any of its Subsidiaries before any court, governmental
agency or arbitrator which may reasonably be expected to materially adversely
affect the financial condition or operations of the Collection Agent and its
consolidated Subsidiaries taken as a whole or the ability of the Collection
Agent to perform its obligations under this Agreement, or which purports to
affect the legality, validity or enforceability of this Agreement.

    (g) On the date of each purchase and reinvestment (and after giving effect
thereto), the sum of the Receivable Interests is not greater than 100%.

    (h) The Collection Agent has a system in place which allows it to determine
(and adjust) the Outstanding Balance of each particular Receivable in respect of
which a credit memo issued by the Originator or the Seller is outstanding.

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ARTICLE V

COVENANTS

    SECTION 5.01.  Covenants of the Seller.   Until the latest of the Facility
Termination Date or the date on which no Capital of or Yield on any Receivable
Interest shall be outstanding or the date all other amounts owed by the Seller
hereunder to the Investors, the Banks or the Agent are paid in full:

    (a)  Compliance with Laws, Etc.   The Seller will comply in all material
respects with all applicable laws, rules, regulations and orders and preserve
and maintain its corporate existence, rights, franchises, qualifications, and
privileges except to the extent that the failure so to comply with such laws,
rules and regulations or the failure so to preserve and maintain such rights,
franchises, qualifications, and privileges would not materially adversely affect
the collectibility of the Receivables Pool or the ability of the Seller to
perform its obligations under the Transaction Documents.

    (b)  Offices, Records and Books of Account.   The Seller will keep its
principal place of business and chief executive office and the office where it
keeps its records concerning the Pool Receivables at the address of the Seller
set forth under its name on the signature pages to this Agreement or, upon
30 days' prior written notice to the Agent, at any other locations within the
United States. The Seller will not change its name or its state of organization,
unless (i) the Seller shall have provided the Agent with at least 30 days' prior
written notice thereof,(ii) no later than the effective date of such change, all
actions reasonably requested by the Agent to protect and perfect the interest in
the Pool Receivables have been taken and completed and (iii) such name change
would not be reasonably likely to mislead a Person as to the separate identity
of the Originator and the Seller. The Seller also will maintain and implement
administrative and operating procedures (including, without limitation, an
ability to recreate records evidencing Pool Receivables and related Contracts in
the event of the destruction of the originals thereof), and keep and maintain
all documents, books, records and other information reasonably necessary or
advisable for the collection of all Pool Receivables (including, without
limitation, records adequate to permit the daily identification of each Pool
Receivable and all Collections of and adjustments to each existing Pool
Receivable).

    (c)  Performance and Compliance with Contracts and Credit and Collection
Policy.   The Seller will, at its expense, timely and fully perform and comply
with all material provisions, covenants and other promises required to be
observed by it under the Contracts related to the Pool Receivables, and timely
and fully comply in all material respects with the Credit and Collection Policy
in regard to each Pool Receivable and the related Contract.

    (d)  Sales, Liens, Etc.   Except for the interests created hereunder in
favor of the Agent, the Seller will not sell, assign (by operation of law or
otherwise) or otherwise dispose of, or create or suffer to exist any Adverse
Claim upon or with respect to, the Seller's undivided interest in any Pool
Receivable, Related Security, related Contract or Collections, or upon or with
respect to any account to which any Collections of any Pool Receivable are sent,
or assign any right to receive income in respect thereof, other than as
contemplated by the Transaction Documents.

    (e)  Extension or Amendment of Receivables.   Except as provided in
Section 6.02(c), the Seller will not (and will not permit the Collection Agent
or the Originator to) extend, amend or otherwise modify the terms of any Pool
Receivable, or amend, modify or waive any term or condition of any Contract
related thereto.

    (f)  Change in Business or Credit and Collection Policy.   The Seller will
not make any change in the character of its business or in the Credit and
Collection Policy that would, in either case, materially adversely affect the
collectibility of the Receivables Pool or the ability of the Seller to perform
its obligations under this Agreement.

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    (g)  Change in Payment Instructions to Obligors.   The Seller will not add
or terminate any bank or bank account as a Lock-Box Bank or Lock-Box Account
from those listed in Schedule I to this Agreement, or make any change in its
instructions to Obligors regarding payments to be made to the Seller or payments
to be made to any Lock-Box Bank, unless the Agent shall have received notice of
such addition, termination or change (including an updated Schedule I) and a
fully executed Lock-Box Agreement with each new Lock-Box Bank or with respect to
each new Lock-Box Account. The Seller will not change the Collection Account,
unless the Agent shall have received notice of such change (including an updated
Schedule I) and a fully executed Account Agreement with respect to such new
Collection Account.

    (h)  Deposits of Collections.   The Seller will instruct or cause the
Collection Agent to instruct all Obligors to remit all their payments in respect
of Receivables to a Lock-Box Account. The Seller will instruct or cause the
Collection Agent to instruct the appropriate responsible employees at each DTC
Store to remit all payments in respect of Receivables which, notwithstanding the
aforementioned instructions given to the Obligors, are received at such DTC
Store on any Business Day to a Store Account at the end of such Business Day or
by 12:00 noon on the next Business Day. If the Seller shall receive any
Collections directly (rather than at a DTC Store), it shall immediately (and in
any event within two Business Days) deposit the same to a Lock-Box Account or
the Collection Account. The Seller will not deposit or otherwise credit, or
cause or permit to be so deposited or credited, to any Lock-Box Account cash or
cash proceeds other than Collections of Receivables. The Seller will instruct or
otherwise cause, or cause the Collection Agent to instruct or otherwise cause,
each bank holding a Store Account to remit, on each Business Day from and after
the date of this Agreement, by wire transfer, ACH debit or other electronic
method, all funds deposited and collected in each Store Account to the
Collection Account.

    (i)  Marking of Records.   At its expense, the Seller will cause the master
data processing records evidencing Pool Receivables to be marked to indicate
that Receivable Interests related to such Pool Receivables have been sold in
accordance with this Agreement.

    (j)  Further Assurances.   (i) The Seller agrees from time to time, at its
expense, upon the request of the Agent, promptly to execute and deliver all
further instruments and documents, and to take all further actions, that may be
necessary or desirable, or that the Agent may reasonably request, to perfect,
protect or more fully evidence the Receivable Interests purchased under this
Agreement, or to enable the Investors, the Banks or the Agent to exercise and
enforce their respective rights and remedies under this Agreement. Without
limiting the foregoing, the Seller will, upon the request of the Agent, execute
and file such financing or continuation statements, or amendments thereto, and
such other instruments and documents, that may be necessary or desirable, or
that the Agent may reasonably request, to perfect, protect or evidence such
Receivable Interests.

    (ii) The Seller authorizes the Agent to file financing or continuation
statements, and amendments thereto and assignments thereof, relating to the Pool
Receivables and the Related Security, the related Contracts and the Collections
with respect thereto without the signature of the Seller where permitted by law.

    (k)  Reporting Requirements.   The Seller will provide to the Agent (in
multiple copies, if requested by the Agent) the following:

     (i) as soon as available and in any event within 45 days after the end of
the first three quarters of each fiscal year of Dal-Tile International, an
unaudited consolidated balance sheet of Dal-Tile International and its
consolidated Subsidiaries as of the end of such quarter and consolidated
statements of income and retained earnings of Dal-Tile International and its
consolidated Subsidiaries for the period commencing at the end of the previous
fiscal year of Dal-Tile International and ending with the end of such quarter,
certified by the chief financial officer of Dal-Tile International;

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    (ii) as soon as available and in any event within 90 days after the end of
each fiscal year of Dal-Tile International, a copy of the annual report for such
fiscal year of Dal-Tile International and its consolidated Subsidiaries,
containing consolidated financial statements for such year audited by an
independent public accountant acceptable to the Agent;

    (iii) as soon as available and in any event within 45 days after the end of
the first three quarters and within 90 days after the end of the fourth fiscal
quarter of each fiscal year of the Seller, an unaudited balance sheet of the
Seller as of the end of such quarter and an unaudited statement of income and
retained earnings of the Seller for the period commencing at the end of the
previous fiscal year of the Seller and ending with the end of such quarter,
certified by the chief financial officer of the Seller;

    (iv) as soon as possible and in any event within three Business Days after
the occurrence of each Event of Termination or Incipient Event of Termination, a
statement of the chief financial officer of the Seller setting forth details of
such Event of Termination or Incipient Event of Termination and the action that
the Seller has taken and proposes to take with respect thereto;

    (v) promptly after the sending or filing thereof, copies of all reports that
Dal-Tile International sends to any of its security holders generally, and
copies of all Form 10-K, Form 10-Q and Form 8-K reports and all other reports
and registration statements that Dal-Tile International or any Subsidiary
thereof files with the SEC or any national securities exchange;

    (vi) promptly after the filing or receiving thereof, copies of all reports
and notices that the Seller or any Affiliate files under ERISA with the Internal
Revenue Service or the Pension Benefit Guaranty Corporation or the U.S.
Department of Labor or that the Seller or any Affiliate receives from any of the
foregoing or from any multiemployer plan (within the meaning of
Section 4001(a)(3) of ERISA) to which the Seller or any Affiliate is or was,
within the preceding five years, a contributing employer, in each case in
respect of the assessment of withdrawal liability or an event or condition which
could, in the aggregate, result in the imposition of liability on the Seller
and/or any such Affiliate in excess of $5,000,000;

   (vii) at least 30 days prior to any change in the name or jurisdiction of
organization of the Originator or the Seller a notice setting forth the new name
or jurisdiction of organization and the effective date thereof;

   (viii) as soon as possible and in any event within three Business Days after
the Seller obtains knowledge thereof, notice of any "Event of Termination" or
"Facility Termination Date" under the PCA or any "Event of Default" under the
Credit Agreement;

    (ix) so long as any Capital shall be outstanding, as soon as possible and in
any event no later than the day of occurrence thereof, notice that the
Originator has stopped selling or contributing to the Seller, pursuant to the
PCA, all newly arising Originator Receivables;

    (x) at the time of the delivery of the financial statements provided for in
clauses (i) and (ii) of this paragraph, a certificate of the chief financial
officer or treasurer of the Seller, to the effect that, to the best of such
officer's knowledge, no Event of Termination has occurred and is continuing or,
if any Event of Termination has occurred and is continuing, specifying the
nature and extent thereof;

    (xi) promptly after receipt thereof, copies of all notices received by the
Seller from the Originator under the PCA; and

   (xii) such other information respecting the Receivables or the condition or
operations, financial or otherwise, of the Seller, Dal-Tile International,
Dal-Tile Group or the Originator as the Agent may from time to time reasonably
request.

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    (l)  Separateness.   (i) The Seller shall at all times maintain at least one
independent director who (x) is not currently and has not been during the five
years preceding the date of this Agreement an officer, director or employee of
an Affiliate of the Seller or any Other Company, (y) is not a current or former
officer or employee of the Seller and (z) is not a stockholder of any Other
Company or any of their respective Affiliates and otherwise meets the
requirements of an independent director under the Seller's certificate of
incorporation.

    (ii) The Seller shall not direct or participate in the management of any of
the Other Companies' operations.

    (iii) The Seller shall conduct its business from an office separate from
that of the Other Companies (but which may be located in the same facility as
one or more of the Other Companies, provided that such office would not be
reasonably likely to mislead a Person as to the separate identity of the
Originator and the Seller). The Seller shall have stationery and other business
forms and a mailing address and a telephone number separate from that of the
Other Companies.

    (iv) The Seller shall at all times be adequately capitalized in light of its
contemplated business.

    (v) The Seller shall at all times provide for its own operating expenses and
liabilities from its own funds.

    (vi) The Seller shall maintain its assets and transactions separately from
those of the Other Companies and reflect such assets and transactions in
financial statements separate and distinct from those of the Other Companies and
evidence such assets and transactions by appropriate entries in books and
records separate and distinct from those of the Other Companies.

   (vii) The Seller shall hold itself out to the public under the Seller's own
name as a legal entity separate and distinct from the Other Companies.

   (viii) The Seller shall not hold itself out as having agreed to pay, or as
being liable, primarily or secondarily, for, any obligations of the Other
Companies.

    (ix) The Seller shall not maintain any joint account with any Other Company
or become liable as a guarantor or otherwise with respect to any Debt or
contractual obligation of any Other Company.

    (x) The Seller shall not make any payment or distribution of assets with
respect to any obligation of any Other Company or grant an Adverse Claim on any
of its assets to secure any obligation of any Other Company.

    (xi) The Seller shall not make loans, advances or otherwise extend credit to
any of the Other Companies other than Purchaser Loans (as defined in the PCA) on
the terms and conditions set forth in the PCA.

   (xii) The Seller shall hold regular duly noticed meetings of its directors
and make and retain minutes of such meetings (or otherwise duly effect the same
by means of written consents).

   (xiii) The Seller shall have bills of sale (or similar instruments of
assignment) and, if appropriate, UCC-1 financing statements, with respect to all
assets purchased from any of the Other Companies.

   (xiv) The Seller shall not engage in any transaction with any of the Other
Companies, except as permitted by this Agreement and as contemplated by the PCA
and the other Transaction Documents.

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   (xv) The Seller shall comply with (and cause to be true and correct) each of
the facts and assumptions contained in the "Assumption of Facts" section of the
opinion of Olshan Grundman Frome Rosenzweig and Woloskly LLP delivered pursuant
to Section 3.01(g) and designated as Annex C to this Agreement.

    (m)  PCA and Parent Undertaking Agreement.   The Seller will not amend,
waive or modify any provision of the PCA or the Parent Undertaking Agreement
(provided that the Seller may (i) extend the "Facility Termination Date" under
the PCA or (ii) increase or reduce the Discount (as defined under the PCA)
within the range of 3.0% to 5.0%) or waive the occurrence of any "Event of
Termination" under the PCA, without in each case the prior written consent of
the Agent. The Seller will perform all of its obligations under the PCA in all
material respects and will enforce the PCA in accordance with its terms in all
material respects.

    (n)  Nature of Business.   The Seller will not engage in any business other
than the purchase of Originator Receivables, Related Security and Collections
from the Originator and the transactions contemplated by this Agreement and the
other Transaction Documents. The Seller will not create or form any Subsidiary.

    (o)  Mergers, Etc.   The Seller will not merge with or into or consolidate
with or into, or convey, transfer, lease or otherwise dispose of (whether in one
transaction or in a series of transactions), all or substantially all of its
assets (whether now owned or hereafter acquired) to, or acquire all or
substantially all of the assets or capital stock or other ownership interest of,
or enter into any joint venture or partnership agreement with, any Person, other
than as contemplated by this Agreement and the PCA.

    (p)  Distributions, Etc.   The Seller will not declare or make any dividend
payment or other distribution of assets, properties, cash, rights, obligations
or securities on account of any shares of any class of capital stock of the
Seller, or return any capital to its shareholders as such, or purchase, retire,
defease, redeem or otherwise acquire for value or make any payment in respect of
any shares of any capital stock of the Seller or any warrants, rights or options
to acquire any such shares, now or hereafter outstanding; provided, however,
that the Seller may declare and pay cash dividends on its capital stock to its
shareholders so long as (i) no Event of Termination shall then exist or would
occur as a result thereof, (ii) such dividends are in compliance with all
applicable law including the corporate law of the state of Seller's
incorporation, and (iii) such dividends have been approved by all necessary and
appropriate corporate action of the Seller.

    (q)  Debt.   The Seller will not incur any Debt, other than any Debt
incurred pursuant to this Agreement and the Deferred Purchase Price.

    (r)  Certificate of Incorporation.   The Seller will not amend or delete
Articles Third, Sixth, Seventh or Ninth of its certificate of incorporation.

    (s)  Tangible Net Worth.   The Seller will maintain Tangible Net Worth at
all times equal to at least 3% of the Outstanding Balance of the Receivables at
such time.

    (t)  Taxes.   The Seller will file all Federal and other material tax
returns and reports required by law to be filed by it and will promptly pay all
Federal and other material taxes and governmental charges at any time owing,
except such as are being contested in good faith by appropriate proceedings and
for which appropriate reserves have been established in accordance with, and to
the extent required by, generally accepted accounting principles in the United
States. The Seller will pay when due any taxes payable in connection with the
Receivables, exclusive of taxes on or measured by income or gross receipts of
the Agent, the Investors and the Banks.

    SECTION 5.02.  Covenants of the Seller and Collection Agent Regarding
Inspections.   Until the latest of the Facility Termination Date or the date on
which no Capital of or Yield on any Receivable

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Interest shall be outstanding or the date all other amounts owed by the Seller
hereunder to the Investors, the Banks or the Agent are paid in full, each of the
Seller and the Collection Agent will, at their respective expense, from time to
time during regular business hours as reasonably requested by the Agent, permit
the Agent or its agents or representatives (including independent public
accountants, which may be the Seller's or the Collection Agent's independent
public accountants), (i) to conduct periodic audits of the Receivables, the
Related Security and the related books and records and collections systems of
the Seller and/or the Collection Agent, as the case may be, (ii) to examine and
make copies of and abstracts from all books, records and documents (including,
without limitation, computer tapes and disks) in the possession or under the
control of the Seller or the Collection Agent, as the case may be, relating to
Pool Receivables and the Related Security, including, without limitation, the
Contracts, and (iii) to visit the offices and properties of the Seller or the
Collection Agent, as the case may be, for the purpose of examining such
materials described in clause (ii) above, and to discuss matters relating to
Pool Receivables and the Related Security or the Seller's or the Collection
Agent's performance under the Transaction Documents or under the Contracts with
any of the officers or employees of the Seller or the Collection Agent, as the
case may be, having knowledge of such matters; provided however, that so long as
no Event of Termination or Incipient Event of Termination shall have occurred
and be continuing, the liability of the Seller for the expenses of such periodic
auditing during any one calendar year shall not exceed $6,000.

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ARTICLE VI

ADMINISTRATION AND COLLECTION OF POOL RECEIVABLES

    SECTION 6.01.  Designation of Collection Agent.   The servicing,
administration and collection of the Pool Receivables shall be conducted by the
Collection Agent so designated hereunder from time to time. Until the Agent
gives notice to the Seller of the designation of a new Collection Agent (which
notice may only be given following the occurrence and during the continuation of
an Event of Termination), the Originator is hereby designated as, and hereby
agrees to perform the duties and obligations of, the Collection Agent pursuant
to the terms hereof. The Agent at any time during the existence of an Event of
Termination may designate as Collection Agent itself or any Person that is a
financial institution and/or in the business of servicing pools of receivables
to succeed the Originator or any successor Collection Agent, if such Person
shall consent and agree to the terms hereof. The Collection Agent may, with the
prior consent of the Agent, subcontract with any other Person or Persons for the
servicing, administration or collection of the Pool Receivables. Any such
subcontract shall not affect the Collection Agent's liability for performance of
its duties and obligations pursuant to the terms hereof.

    SECTION 6.02.  Duties of Collection Agent.   (a) The Collection Agent shall
take or cause to be taken all such actions as may be necessary or advisable to
collect each Pool Receivable from time to time, all in accordance with
applicable laws, rules and regulations, with reasonable care and diligence, and
in accordance with the Credit and Collection Policy. The Seller and the Agent
hereby appoint the Collection Agent, from time to time designated pursuant to
Section 6.01, as agent for themselves and for the Investors and the Banks to
enforce their respective rights and interests in the Pool Receivables, the
Related Security and the Collections with respect thereto. In performing its
duties as Collection Agent, the Collection Agent shall exercise the same care
and apply the same policies as it would exercise and apply if it owned such
Receivables and shall act in the best interests of the Seller, the Investors and
the Banks.

    (b) The Collection Agent shall administer the Collections in accordance with
the procedures described in Section 2.04.

    (c) If no Event of Termination or Incipient Event of Termination shall have
occurred and be continuing, the Originator, while it is the Collection Agent,
may, in accordance with the Credit and Collection Policy, extend the maturity or
adjust the Outstanding Balance of any Receivable as the Originator deems
appropriate to maximize Collections thereof, or otherwise amend or modify the
terms of any Receivable, provided that the classification of any such Receivable
as a Delinquent Receivable or Defaulted Receivable shall not be affected by any
such extension.

    (d) The Collection Agent shall hold in trust for the Seller and each
Investor and Bank, in accordance with their respective interests, all documents,
instruments and records (including, without limitation, computer tapes or disks)
which evidence or relate to Pool Receivables. The Collection Agent shall cause
the master data processing records evidencing the Pool Receivables to be marked
to indicate that Receivable Interests therein have been sold in accordance with
this Agreement.

    (e) The Collection Agent shall, as soon as practicable following receipt,
turn over to the Seller or other Person entitled thereto any cash collections or
other cash proceeds received with respect to Receivables or other property not
constituting Pool Receivables.

    (f)  The Collection Agent shall, from time to time at the request of the
Agent, furnish to the Agent (promptly after any such request) a calculation of
the amounts set aside for the Investors and the Banks pursuant to Section 2.04.

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    (g) Prior to the 10th Business Day of each Fiscal Month, the Collection
Agent shall prepare and forward to the Agent a Monthly Report relating to the
Receivable Interests outstanding on the last day of the immediately preceding
Fiscal Month.

    (h) So long as any Event of Termination or Incipient Event of Termination
shall have occurred and be continuing, and if the Agent shall so request, the
Collection Agent shall, on or prior to the second Business Day of each week,
prepare and forward to the Agent a Weekly Report relating to the Receivable
Interests outstanding on the last day of the immediately preceding week.

    SECTION 6.03.  Certain Rights of the Agent.   (a) The Agent is authorized at
any time during the existence of an Event of Termination or Incipient Event of
Termination, to date, and to deliver to the Lock-Box Banks, a notice in the form
attached to the Lock-Box Agreements. The Seller hereby transfers to the Agent,
effective when the Agent delivers such notices, the exclusive ownership of the
Lock-Box Accounts. The Seller shall take any actions reasonably requested by the
Agent to effect such transfer. The Agent may notify the Obligors of Pool
Receivables, at any time and at the Seller's expense, of the ownership of
Receivable Interests under this Agreement.

    (b) At any time during the existence of an Event of Termination or Incipient
Event of Termination:

     (i) The Agent may direct the Obligors of Pool Receivables that all payments
thereunder be made directly to the Agent or its designee.

    (ii) At the Agent's request and at the Seller's expense, the Seller shall
notify each Obligor of Pool Receivables of the ownership of Receivable Interests
under this Agreement and direct that payments be made directly to the Agent or
its designee.

    (iii) At the Agent's request and at the Seller's expense, the Seller and the
Collection Agent shall (A) assemble all of the documents, instruments and other
records (including, without limitation, computer tapes and disks) that evidence
or relate to the Pool Receivables and the related Contracts and Related
Security, or that are otherwise necessary or desirable to collect the Pool
Receivables, and shall make the same available to the Agent at a place selected
by the Agent or its designee, and (B) segregate all cash, checks and other
instruments received by it from time to time constituting Collections of Pool
Receivables in a manner acceptable to the Agent and, promptly upon receipt,
remit all such cash, checks and instruments, duly indorsed or with duly executed
instruments of transfer, to the Agent or its designee.

    (iv) The Seller authorizes the Agent to take any and all steps in the
Seller's name and on behalf of the Seller that are necessary or desirable, in
the determination of the Agent, to collect amounts due under the Pool
Receivables, including, without limitation, endorsing the Seller's name on
checks and other instruments representing Collections of Pool Receivables and
enforcing the Pool Receivables and the Related Security and related Contracts.

    SECTION 6.04.  Rights and Remedies.   (a) If the Collection Agent fails to
perform any of its obligations under this Agreement, the Agent may (but shall
not be required to) itself perform, or cause performance of, such obligation;
and the Agent's costs and expenses incurred in connection therewith shall be
payable by the Collection Agent.

    (b) The Seller and the Originator shall perform their respective obligations
under the Contracts related to the Pool Receivables to the same extent as if
Receivable Interests had not been sold and the exercise by the Agent on behalf
of the Investors and the Banks of their rights under this Agreement shall not
release the Collection Agent or the Seller from any of their duties or
obligations with respect to any Pool Receivables or related Contracts. Neither
the Agent, the Investors nor the Banks shall have any obligation or liability
with respect to any Pool Receivables or related Contracts, nor shall any of them
be obligated to perform the obligations of the Seller thereunder.

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    (c) In the event of any conflict between the provisions of Article VI of
this Agreement and Article VI of the PCA, the provisions of this Agreement shall
control.

    SECTION 6.05.  Further Actions Evidencing Purchases.   The Originator agrees
from time to time, at its expense, upon the request of the Agent, to promptly
execute and deliver all further instruments and documents, and to take all
further actions, that may be necessary or desirable, or that the Agent may
reasonably request, to perfect, protect or more fully evidence the Receivable
Interests purchased hereunder, or to enable the Investors, the Banks or the
Agent to exercise and enforce their respective rights and remedies hereunder.
Without limiting the foregoing, the Originator will (i) upon the request of the
Agent, execute and file, or cause to be executed and filed, such financing or
continuation statements, or amendments thereto, and such other instruments and
documents, that may be necessary or desirable, or that the Agent may reasonably
request, to perfect, protect or evidence such Receivable Interests; and
(ii) cause the master data processing records evidencing the Pool Receivables to
be marked to indicate that Receivable Interests therein have been sold in
accordance with this Agreement.

    SECTION 6.06.  Changes in Credit and Collection Policy; Changes in Store
Accounts.   (a) The Originator will not make any change in the Credit and
Collection Policy that would impair the collectibility of any Pool Receivable or
the ability of the Originator (if it is acting as Collection Agent) to perform
its obligations under this Agreement. In the event that the Collection Agent or
the Originator makes any change to the Credit and Collection Policy, it shall,
contemporaneously with such change, provide the Agent with an updated Credit and
Collection Policy and a summary of all material changes.

    (b) The Originator will not open or close any Store Account, unless the
Agent shall have received prior notice of such change (including an updated
Schedule IV) and a fully executed Bank Direction Agreement with respect to each
new Store Account.

    (c) On or prior to March 31, 2002, the Originator will deliver to the Agent
fully executed Bank Direction Agreements in form reasonably acceptable to the
Agent with respect to each Store Account other than those Store Accounts for
which (i) the Agent may waive the requirements of this Section 6.06(c) or
(ii) Bank Direction Agreements have already been delivered pursuant to
Section 3.01(g).

    SECTION 6.07.  Indemnities by the Collection Agent.   Without limiting any
other rights that the Agent, any Investor, any Bank or any of their respective
Affiliates (each, a "Special Indemnified Party") may have hereunder or under
applicable law, and in consideration of its appointment as Collection Agent, the
Collection Agent hereby agrees to indemnify each Special Indemnified Party from
and against any and all claims, losses and liabilities (including reasonable
attorneys' fees) (all of the foregoing being collectively referred to as
"Special Indemnified Amounts") arising out of or resulting from any of the
following (excluding, however, (a) Special Indemnified Amounts to the extent
found in a final non-appealable judgment of a court of competent jurisdiction to
have resulted from gross negligence or willful misconduct on the part of such
Special Indemnified Party, (b) recourse for uncollectible Receivables or (c) any
taxes (other than Taxes or Other Taxes)incurred by such Special Indemnified
Party arising out of or as a result of this Agreement or the ownership of
Receivable Interests or in respect of any Receivable or any Contract):

     (i) any representation or warranty made or deemed made by the Collection
Agent pursuant to Section 4.02(g) hereof which shall have been incorrect in any
respect when made or any other representation or warranty or statement made or
deemed made by the Collection Agent under or in connection with this Agreement
which shall have been incorrect in any material respect when made;

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    (ii) the failure by the Collection Agent to comply with any applicable law,
rule or regulation with respect to any Pool Receivable or Contract; or the
failure of any Pool Receivable or Contract to conform to any such applicable
law, rule or regulation;

    (iii) the failure to have filed, or any delay in filing, financing
statements or other similar instruments or documents under the UCC of any
applicable jurisdiction or other applicable laws with respect to any Receivables
in, or purporting to be in, the Receivables Pool, the Contracts and the Related
Security and Collections in respect thereof, whether at the time of any purchase
or reinvestment or at any subsequent time;

    (iv) any failure of the Collection Agent to perform its duties or
obligations in accordance with the provisions of this Agreement;

    (v) the commingling of Collections of Pool Receivables at any time by the
Collection Agent with other funds;

    (vi) any action or omission by the Collection Agent reducing or impairing
the rights of the Investors or the Banks with respect to any Pool Receivable or
the value of any Pool Receivable;

   (vii) any Collection Agent Fees or other costs and expenses payable to any
replacement Collection Agent, to the extent a current market rate fee and to the
extent in excess of the Collection Agent Fees payable to the Collection Agent
hereunder; or

   (viii) any claim brought by any Person other than a Special Indemnified Party
arising from any activity by the Collection Agent or its Affiliates in
servicing, administering or collecting any Receivable.

ARTICLE VII

EVENTS OF TERMINATION

    SECTION 7.01.  Events of Termination.   If any of the following events
("Events of Termination") shall occur and be continuing:

    (a) The Collection Agent (i) shall fail to perform or observe any term,
covenant or agreement under this Agreement (other than as referred to in
clause (ii) of this subsection (a)) and such failure shall remain unremedied for
five Business Days, or in the case of a failure of the Collection Agent to
deliver any Monthly Report or Weekly Report when required hereunder, three
Business Days or (ii) shall fail to make when due any payment or deposit to be
made by it under this Agreement; or

    (b) The Seller shall fail to make any payment required under
Section 2.04(e); or

    (c) Any representation or warranty made or deemed made by the Seller, the
Originator, Dal-Tile International, Dal-Tile Group or the Collection Agent (or
any of their respective officers) under or in connection with this Agreement or
any other Transaction Document or any information or report delivered by the
Seller, the Originator, Dal-Tile International, Dal-Tile Group or the Collection
Agent pursuant to this Agreement or any other Transaction Document shall prove
to have been incorrect or untrue in any material respect when made or deemed
made or delivered and, solely in the case of the representation made or deemed
made by the Collection Agent pursuant to Section 4.02(g) hereof, such
representation shall remain incorrect on the fifth Business Day following the
end of the Fiscal Month in which such representation is made; or

    (d) The Seller, the Originator, Dal-Tile International or Dal-Tile Group
shall fail to perform or observe any other term, covenant or agreement contained
in any Transaction Document on its part to be performed or observed and any such
failure shall remain unremedied for 10 Business Days (provided, however, that no
grace period shall be permitted for (X) any failure by the Seller or the

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Originator (as Collection Agent or otherwise) under any of Sections 5.01(a),
(d), (e), (f), (g), (h), (k)(iv), (k)(viii), (l), (m), (n), (o), (p), (q),
(r) or (t) hereof) or (Y) any failure of Dal-Tile International under Sections
7(a),(b) or (c) of the Parent Undertaking Agreement; or

    (e) Dal-Tile International, Dal-Tile Group or the Originator shall fail to
pay any principal of or premium or interest on any of its Debt (other than Debt
outstanding under the Credit Agreement) which is outstanding in a principal
amount of at least $5,000,000 in the aggregate when the same becomes due and
payable (whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise), and such failure is not waived by the applicable lenders
or other Persons and shall continue after the applicable grace period, if any,
specified in the agreement or instrument relating to such Debt; or any other
event shall occur or condition shall exist under any agreement or instrument
relating to any such Debt and shall continue after the applicable grace period,
if any, specified in such agreement or instrument, if the effect of such event
or condition is to accelerate the maturity of such Debt; or any such Debt shall
be declared to be due and payable, or required to be prepaid (other than by a
regularly scheduled required prepayment), redeemed, purchased or defeased, or an
offer to repay, redeem, purchase or defease such Debt shall be required to be
made, in each case prior to the stated maturity thereof; or

    (f)  Other than pursuant to the terms hereof, any purchase or any
reinvestment pursuant to this Agreement shall for any reason cease to create, or
any Receivable Interest shall for any reason cease to be, a valid and perfected
first priority undivided percentage ownership interest to the extent of the
pertinent Receivable Interest in each applicable Pool Receivable and the Related
Security and Collections with respect thereto; or the security interest created
pursuant to Section 2.11 shall for any reason cease to be a valid and perfected
first priority security interest in the collateral security referred to in that
section; or

    (g) Dal-Tile International, Dal-Tile Group, the Originator or the Seller
shall generally not pay its debts as such debts become due, or shall admit in
writing its inability to pay its debts generally, or shall make a general
assignment for the benefit of creditors; or any proceeding shall be instituted
by or against Dal-Tile International, Dal-Tile Group, the Originator or the
Seller seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief, or
composition of it or its debts under any law relating to bankruptcy, insolvency
or reorganization or relief of debtors, or seeking the entry of an order for
relief or the appointment of a receiver, trustee, custodian or other similar
official for it or for any substantial part of its property and, in the case of
any such proceeding instituted against Dal-Tile International, Dal-Tile Group,
the Originator or the Seller (but not instituted by Dal-Tile International,
Dal-Tile Group, the Originator or the Seller), either such proceeding shall
remain undismissed or unstayed for a period of 45 days, or any of the actions
sought in such proceeding (including, without limitation, the entry of an order
for relief against, or the appointment of a receiver, trustee, custodian or
other similar official for, Dal-Tile International, Dal-Tile Group, the
Originator or the Seller or for any substantial part of the Seller's, Dal-Tile
International's, Dal-Tile Group's or the Originator's property) shall occur; or
Dal-Tile International, Dal-Tile Group, the Originator or the Seller shall take
any corporate or other action to authorize any of the actions set forth above in
this subsection (g); or

    (h) As of the last day of any Fiscal Month, (i) the Default Ratio for such
Fiscal Month shall exceed 4.50%; (ii) the average of the Default Ratio for each
of such Fiscal Month and the two prior Fiscal Months shall exceed 4.40%;
(iii) the Delinquency Ratio for such Fiscal Month shall exceed 6.75%; (iv) the
average of the Delinquency Ratio for each of such Fiscal Month and the two prior
Fiscal Months shall exceed 6.50%; (v) the Performance Dilution Ratio for such
Fiscal Month shall exceed 5.50%; or (vi) the average of the Performance Dilution
Ratio for each of such Fiscal Month and the two prior Fiscal Months shall exceed
4.50% or

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    (i)  The sum of the Receivable Interests shall be greater than 100% as of
the end of any Fiscal Month and shall remain greater than 100% on the fifth
Business Day thereafter; or

    (j)  There shall have occurred any material adverse change in the business,
financial condition or operations of the Seller since September 28, 2001, the
Originator since June 29, 2001, or Dal-Tile International and its consolidated
Subsidiaries taken as a whole since June 29, 2001, that could reasonably be
expected to adversely affect the value or collectibility of the Receivable
Interests or the Receivables Pool or the ability of the Seller, the Originator
or the Collection Agent to collect Pool Receivables or otherwise perform its
obligations under this Agreement or the other Transaction Documents; or

    (k) An "Event of Termination" or "Facility Termination Date" shall occur
under the PCA, or the PCA or the Parent Undertaking Agreement shall cease to be
in full force and effect; or

    (l)  100% of the capital stock of Dal-Tile Group shall cease to be owned, of
record and beneficially, directly or indirectly, by Dal-Tile International
unless Dal-Tile Group shall have been merged with and into Dal-Tile
International; or

    (m) 100% of the capital stock of the Originator shall cease to be owned, of
record and beneficially, directly or indirectly, by Dal-Tile Group or Dal-Tile
International; or

    (n) 100% of the capital stock of the Seller shall cease to be owned, of
record and beneficially, directly, by the Originator; or

    (o) At any time when the Agent is a party to the Credit Agreement, there
shall have occurred any Event of Default under the Credit Agreement, as in
effect on the date hereof and giving effect solely to any subsequent amendments
or waivers thereto which are granted at a time when the Agent is a party to the
Credit Agreement but only to the extent that a written statement (which such
statement shall be requested by the Agent to the extent the Agent deems such
statement to be required under the terms of any agreement governing the
activities of any Investor) has been obtained from each Relevant Rating Agency
that the rating of the commercial paper of each Investor that is rated by such
Relevant Rating Agency will not be downgraded or withdrawn solely as a result of
such amendment or waiver; or

    (p) At any time when the Agent is not a party to the Credit Agreement, there
shall have occurred any (i) default under the financial condition covenants
contained in Section 8.1 of the Credit Agreement, as in effect on the date
hereof and giving effect solely to any subsequent amendments or waivers thereto
which were granted at a time when the Agent was a party to the Credit Agreement
(but only to the extent that a written statement (which such statement shall be
requested by the Agent to the extent the Agent deems such statement to be
required under the terms of any agreement governing the activities of any
Investor) has been obtained from each Relevant Rating Agency that the rating of
the commercial paper of each Investor that is rated by such Relevant Rating
Agency will not be downgraded or withdrawn solely as a result of such amendment
or waiver) or which are specifically approved in writing by the Agent at a time
when the Agent is not a party to the Credit Agreement, or (ii) default under any
other provision of the Credit Agreement which is not waived by the applicable
lenders thereunder; then, and in any such event, any or all of the following
actions may be taken by notice to the Seller: (x) the Investor or the Agent may
declare the Facility Termination Date to have occurred (in which case the
Facility Termination Date shall be deemed to have occurred), (y) the Agent may
declare the Commitment Termination Date to have occurred (in which case the
Commitment Termination Date shall be deemed to have occurred), and (z) without
limiting any right under this Agreement to replace the Collection Agent, the
Agent may designate another Person to succeed the Originator as the Collection
Agent; provided, that, automatically upon the occurrence of any event (without
any requirement for the passage of time or the giving of notice) described in
paragraph (g) of this Section 7.01, the Facility Termination Date and the
Commitment Termination Date shall occur, the

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Originator (if it is then serving as the Collection Agent) shall cease to be the
Collection Agent, and the Agent or its designee shall become the Collection
Agent; and provided, further, that, automatically upon the occurrence of any
event described in paragraph (i) of this Section 7.01 which continues for 5
Business Days, the Facility Termination Date and the Commitment Termination Date
shall occur. Upon any such declaration or designation or upon such automatic
termination, the Investors, the Banks and the Agent shall have, in addition to
the rights and remedies which they may have under this Agreement, all other
rights and remedies provided after default under the UCC and under other
applicable law, which rights and remedies shall be cumulative.

ARTICLE VIII

THE AGENT

    SECTION 8.01.  Authorization and Action.   Each Investor and each Bank
hereby appoints and authorizes the Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement as are delegated to the
Agent by the terms hereof, together with such powers as are reasonably
incidental thereto.

    SECTION 8.02.  Agent's Reliance, Etc.   Neither the Agent nor any of its
directors, officers, agents or employees shall be liable for any action taken or
omitted to be taken by it or them as Agent under or in connection with this
Agreement (including, without limitation, the Agent's servicing, administering
or collecting Pool Receivables as Collection Agent), except for its or their own
gross negligence or willful misconduct. Without limiting the generality of the
foregoing, the Agent: (a) may consult with legal counsel (including counsel for
the Seller, the Originator and the Collection Agent), independent certified
public accountants and other experts selected by it and shall not be liable for
any action taken or omitted to be taken in good faith by it in accordance with
the advice of such counsel, accountants or experts; (b) makes no warranty or
representation to any Investor or Bank (whether written or oral) and shall not
be responsible to any Investor or Bank for any statements, warranties or
representations (whether written or oral) made in or in connection with this
Agreement; (c) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement on the part of the Seller or the Collection Agent or to inspect the
property (including the books and records) of the Seller or the Collection
Agent; (d) shall not be responsible to any Investor or Bank for the due
execution, legality, validity, enforceability, genuineness, sufficiency or value
of this Agreement or any other instrument or document furnished pursuant hereto;
and (e) shall incur no liability under or in respect of this Agreement by acting
upon any notice (including notice by telephone), consent, certificate or other
instrument or writing (which may be by telecopier or telex) believed by it to be
genuine and signed or sent by the proper party or parties.

    SECTION 8.03.  Credit Lyonnais and Affiliates.   The obligation of Credit
Lyonnais to purchase Receivable Interests under this Agreement may be satisfied
by Credit Lyonnais or any of its Affiliates. With respect to any Receivable
Interest or interest therein owned by it, Credit Lyonnais shall have the same
rights and powers under this Agreement as any Bank and may exercise the same as
though it were not the Agent. Credit Lyonnais and any of its Affiliates may
generally engage in any kind of business with the Seller, Dal-Tile
International, the Originator, the Collection Agent or any Obligor, any of their
respective Affiliates and any Person who may do business with or own securities
of the Seller, Dal-Tile International, the Originator, the Collection Agent or
any Obligor or any of their respective Affiliates, all as if Credit Lyonnais
were not the Agent and without any duty to account therefor to the Investors or
the Banks.

    SECTION 8.04.  Bank's Purchase Decision.   Each Bank acknowledges that it
has, independently and without reliance upon the Agent, any of its Affiliates or
any other Bank and based on such documents and information as it has deemed
appropriate, made its own evaluation and decision to enter into this Agreement.
Each Bank also acknowledges that it will, independently and without

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reliance upon the Agent, any of its Affiliates or any other Bank and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own decisions in taking or not taking action under this
Agreement.

ARTICLE IX

INDEMNIFICATION

    SECTION 9.01.  Indemnities by the Seller.   Without limiting any other
rights that the Agent, the Investors, the Banks or any of their respective
Affiliates (each, an "Indemnified Party") may have hereunder or under applicable
law, the Seller hereby agrees to indemnify each Indemnified Party from and
against any and all claims, losses and liabilities (including reasonable
attorneys' fees) (all of the foregoing being collectively referred to as
"Indemnified Amounts") arising out of or resulting from this Agreement or the
other Transaction Documents or the use of proceeds of purchases or reinvestments
or the ownership of Receivable Interests or in respect of any Receivable or any
Contract, excluding, however, (a) Indemnified Amounts to the extent found in a
final, non-appealable judgment of a court of competent jurisdiction to have
resulted from gross negligence or willful misconduct on the part of such
Indemnified Party, (b) recourse for uncollectible Receivables or (c) any taxes
(other than Taxes or Other Taxes)incurred by such Indemnified Party arising out
of or as a result of this Agreement or the ownership of Receivable Interests or
in respect of any Receivable or any Contract. Without limiting the foregoing,
the Seller shall pay on demand to each Indemnified Party any and all amounts
necessary to indemnify such Indemnified Party from and against any and all
Indemnified Amounts relating to or resulting from any of the following (subject
to the exclusions included in clauses (a) and (c) of the previous sentence):

     (i) the characterization in any Monthly Report, Weekly Report or other
written statement made by or on behalf of the Seller of any Receivable as an
Eligible Receivable or as included in the Net Receivables Pool Balance which, as
of the date of such Monthly Report, Weekly Report or other statement, is not an
Eligible Receivable or should not be included in the Net Receivables Pool
Balance;

    (ii) any representation or warranty or statement made or deemed made by the
Seller (or any of its officers) under or in connection with this Agreement or
any of the other Transaction Documents which shall have been incorrect in any
material respect when made;

    (iii) the failure by the Seller or the Originator to comply with any
applicable law, rule or regulation with respect to any Pool Receivable or the
related Contract; or the failure of any Pool Receivable or the related Contract
to conform to any such applicable law, rule or regulation;

    (iv) the failure to vest in the Investors or the Banks, as the case may be,
(a) a perfected undivided percentage ownership interest, to the extent of each
Receivable Interest, in the Receivables in, or purporting to be in, the
Receivables Pool and the Related Security and Collections in respect thereof, or
(b) a perfected security interest as provided in Section 2.11, in each case free
and clear of any Adverse Claim;

    (v) the failure to have filed, or any delay in filing, financing statements
or other similar instruments or documents under the UCC of any applicable
jurisdiction or other applicable laws with respect to any Receivables in, or
purporting to be in, the Receivables Pool and the Related Security and
Collections in respect thereof, whether at the time of any purchase or
reinvestment or at any subsequent time;

    (vi) any dispute, claim, offset or defense (other than discharge in
bankruptcy of the Obligor or other financial inability of the Obligor to pay) of
the Obligor to the payment of any Receivable in, or purporting to be in, the
Receivables Pool (including, without limitation, a defense based on

41

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such Receivable or the related Contract not being a legal, valid and binding
obligation of such Obligor enforceable against it in accordance with its terms),
or any other claim resulting from the sale of the merchandise or services
related to such Receivable or the furnishing or failure to furnish such
merchandise or services or relating to collection activities with respect to
such Receivable (if such collection activities were performed by the Seller or
any of its Affiliates acting as Collection Agent);

   (vii) any failure of the Seller to perform its duties or obligations in
accordance with the provisions hereof or to perform its duties or obligations
under the Contracts;

   (viii) any products liability or other claim arising out of or in connection
with merchandise, insurance or services which are the subject of any Contract;

    (ix) the commingling of Collections of Pool Receivables at any time with
other funds;

    (x) any investigation, litigation or proceeding related to this Agreement or
the use of proceeds of purchases or reinvestments or the ownership of Receivable
Interests or in respect of any Receivable or Related Security or Contract;

    (xi) any failure of the Seller to comply with its covenants contained in
this Agreement or any other Transaction Document; or

   (xii) any claim brought by any Person other than an Indemnified Party arising
from any activity by the Seller or any Affiliate of the Seller in servicing,
administering or collecting any Receivable.

It is expressly agreed and understood by the parties hereto (i) that the
foregoing indemnification is not intended to, and shall not, constitute a
guarantee of or other recourse for the collectibility or payment of the
Receivables and (ii) that nothing in this Section 9.01 shall require the Seller
to indemnify any Person for Receivables which are not collected, not paid or
uncollectible solely on account of the insolvency, bankruptcy, or financial
inability to pay of the applicable Obligor.

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ARTICLE X

MISCELLANEOUS

    SECTION 10.01.  Amendments, Etc.   No amendment or waiver of any provision
of this Agreement or consent to any departure by the Seller therefrom shall be
effective unless in a writing signed by the Agent, as agent for the Investors
and the Banks (and, in the case of any amendment, also signed by the Seller and
the Originator), and then such amendment, waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given;
provided, however, that no amendment, waiver or consent shall, unless in writing
and signed by the Collection Agent in addition to the Agent, affect the rights
or duties of the Collection Agent under this Agreement. Notwithstanding the
foregoing (but only to the extent required by any Relevant Rating Agency), no
material amendment to or material waiver of any provision of this Agreement, nor
consent to any material departure by the Seller or Collection Agent therefrom,
shall be effective unless a written statement is obtained from such Relevant
Rating Agency that the rating of the commercial paper of each Investor that is
rated by such Relevant Rating Agency will not be downgraded or withdrawn solely
as a result of such amendment, waiver or consent (provided that no such
statement shall be required in connection with an amendment the sole purpose of
which is to extend the Commitment Termination Date or the Facility Termination
Date or to cure any ambiguity). No failure on the part of the Investors, the
Banks or the Agent to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other right.

    SECTION 10.02.  Notices, Etc.   All notices and other communications
hereunder shall, unless otherwise stated herein, be in writing (which shall
include facsimile communication) and faxed or delivered, to each party hereto,
at its address set forth under its name on the signature pages hereof or at such
other address as shall be designated by such party in a written notice to the
other parties hereto. Notices and communications by facsimile shall be effective
when sent (and shall be followed by hard copy sent by regular mail), and notices
and communications sent by other means shall be effective when received.

    SECTION 10.03.  Assignability.   (a) This Agreement and the Investors'
rights and obligations herein (including ownership of each Receivable Interest)
shall be assignable by the Investors and their successors and assigns. Each
assignor of a Receivable Interest or any interest therein shall notify the Agent
and the Seller of any such assignment. Each assignor of a Receivable Interest or
any interest therein may, in connection with the assignment or participation,
disclose to the assignee or participant any information relating to the Seller,
Dal-Tile International, Dal-Tile Group or the Originator, including the
Receivables, furnished to such assignor by or on behalf of the Seller or by the
Agent; provided that such assignee agrees in writing to be bound by the
provisions of Section 10.07(b).

    (b) Each Bank may assign to any Eligible Assignee all or a portion of its
rights and obligations under this Agreement (including, without limitation, all
or a portion of its Bank Commitment and any Receivable Interests or interests
therein owned by it). The parties to each such assignment shall execute and
deliver to the Agent an Assignment and Acceptance. In addition, each Bank may
grant a participation to any Eligible Assignee or any Person which would be an
Eligible Assignee but for the fact that its Debt Rating is not at least A-1/P-1
in all or a portion of its rights and obligations under this Agreement
(including, without limitation, all or a portion of its Bank Commitment and any
Receivable Interests or interests therein owned by it).

    (c) This Agreement and the rights and obligations of the Agent herein shall
be assignable by the Agent and its successors and assigns.

    (d) The Seller may not assign its rights or obligations hereunder or any
interest herein without the prior written consent of the Agent.

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    (e) No Transferee that holds a participation shall receive any greater
amount with respect to such participation pursuant to Section 2.10 of this
Agreement than the Investor or Bank from whom such participation was transferred
would have been entitled to receive in respect of the amount of the
participation transferred by such Investor or Bank to such participant had no
such transfer occurred.

    SECTION 10.04.  Costs, Expenses and Taxes.   (a) In addition to the rights
of indemnification granted under Section 9.01 hereof, the Seller agrees to pay
on demand all reasonable costs and expenses in connection with the preparation,
execution, delivery and administration (including periodic auditing and the
other activities contemplated in Section 5.02; provided, that so long as no
Event of Termination or Incipient Event of Termination shall have occurred and
be continuing, the liability of the Seller with respect to such periodic
auditing during any one calendar year shall not exceed $6,000) of this
Agreement, any Asset Purchase Agreement and the other documents and agreements
to be delivered hereunder, including, without limitation, the reasonable fees
and out-of-pocket expenses of counsel for the Agent, Credit Lyonnais, Atlantic,
and their respective Affiliates with respect thereto and with respect to
advising the Agent, Credit Lyonnais, Atlantic, and their respective Affiliates
as to their rights and remedies under this Agreement, and all costs and
expenses, if any (including reasonable counsel fees and expenses), of the Agent,
Credit Lyonnais, the Investors, the Banks and their respective Affiliates, in
connection with the enforcement of this Agreement and the other documents and
agreements to be delivered hereunder.

    (b) In addition, the Seller shall pay, to the extent not included in the
calculation of Yield, (i) any and all commissions of placement agents and
dealers in respect of commercial paper notes issued by Atlantic to fund the
purchase or maintenance of any Receivable Interest, and (ii) any and all costs
and expenses of any issuing and paying agent or other Person responsible for the
administration of Atlantic's commercial paper program in connection with the
preparation, completion, issuance, delivery or payment of commercial paper notes
issued to fund the purchase or maintenance of any Receivable Interest.

    SECTION 10.05.  United States Federal Income Tax Treatment.   Each of the
Seller, the Agent, the Collection Agent, each Investor, each Bank, and each
Transferee, if any, agrees to treat (i) each transfer of a Receivable Interest
by Seller in exchange for Capital with respect to such Receivable Interest
pursuant to Article II of this Agreement as a loan of such Capital to Seller
secured by such Receivable Interest and (ii) Seller's payment of Yield to each
Investor, each Bank, or each Transferee, if any, as a payment of interest, in
the case of (i) and (ii), for all United States federal income tax purposes and
neither the Seller, the Agent, the Collection Agent, any Investor, any Bank, nor
any Transferee shall take any action inconsistent with such treatment for United
States federal income tax purposes.

    SECTION 10.06.  No Proceedings.   Each of the Seller, the Agent, the
Collection Agent, each Investor, each Bank, each assignee of a Receivable
Interest or any interest therein and each entity which enters into a commitment
to purchase Receivable Interests or interests therein hereby agrees that it will
not institute or join or encourage or assist any other Person in instituting
against Atlantic any proceeding of the type referred to in Section 7.01(g) for
one year and a day after the latest maturing commercial paper note issued by
Atlantic is paid.

    SECTION 10.07.  Confidentiality.   (a) Each of the Seller and the Collection
Agent agrees to maintain the confidentiality of this Agreement and the other
Transaction Documents in communications with third parties and otherwise;
provided that this Agreement and the other Transaction Documents may be
disclosed (i) to the Originator, Dal-Tile Group and Dal-Tile International if
they agree to hold such documents confidential, (ii) to the legal counsel and
auditors of the Seller, Dal-Tile International, the Originator and the
Collection Agent if they agree to hold such documents confidential, (iii) to the
extent required by applicable law or regulation or by any court, regulatory body
or agency having jurisdiction over such party and (iv) to other Persons to the
extent

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such disclosure is made pursuant to a written agreement of confidentiality in
form and substance reasonably satisfactory to the Agent; and provided, further,
that such party shall have no obligation of confidentiality in respect of any
information which may be generally available to the public or becomes available
to the public through no fault of such party.

    (b) Each Investor, each Bank and the Agent agrees to maintain the
confidentiality of all information with respect to the Seller, Dal-Tile
International, the Originator or the Receivables Pool (including the Monthly
Reports and Weekly Reports) furnished or delivered to it pursuant to this
Agreement; provided, that such information may be disclosed (i) to such party's
legal counsel and auditors and to such party's assignees and participants and
potential assignees and participants and their respective counsel if they agree
to hold it confidential on the same terms as the disclosing party, (ii) to the
Relevant Rating Agencies and the providers of liquidity or credit enhancement
for each Investor, and (iii) to the extent required by applicable law or
regulation or by any court, regulatory body or agency having jurisdiction over
such party; and provided, further, that such party shall have no obligation of
confidentiality in respect of any information which may be generally available
to the public or becomes available to the public through no fault of such party.

    SECTION 10.08.  GOVERNING LAW.   THIS AGREEMENT SHALL, IN ACCORDANCE WITH
SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK, BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK
WITHOUT REGARD TO ANY CONFLICT OF LAWS PRINCIPLES THEREOF THAT WOULD CALL FOR
THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION, EXCEPT TO THE EXTENT
THAT, PURSUANT TO THE UCC OF THE STATE OF NEW YORK, THE PERFECTION AND THE
EFFECT OF PERFECTION OR NON-PERFECTION OF THE INTERESTS OF THE INVESTORS AND THE
BANKS IN THE RECEIVABLES AND THE PCA ARE GOVERNED BY THE LAWS OF A JURISDICTION
OTHER THAN THE STATE OF NEW YORK.

    SECTION 10.09.  Execution in Counterparts.   This Agreement may be executed
in any number of counterparts, each of which when so executed shall be deemed to
be an original and all of which when taken together shall constitute one and the
same agreement.

    SECTION 10.10.  Survival of Termination.   The provisions of Sections 2.08,
2.09, 6.07, 9.01, 10.04, 10.06, 10.07 and 10.13 shall survive any termination of
this Agreement.

    SECTION 10.11.  Consent to Jurisdiction.   (a) Each party hereto hereby
irrevocably submits to the non-exclusive jurisdiction of any New York State or
Federal court sitting in New York City in any action or proceeding arising out
of or relating to this Agreement, and each party hereto hereby irrevocably
agrees that all claims in respect of such action or proceeding may be heard and
determined in such New York State court or, to the extent permitted by law, in
such Federal court. The parties hereto hereby irrevocably waive, to the fullest
extent they may effectively do so, the defense of an inconvenient forum to the
maintenance of such action or proceeding. The parties hereto agree that a final
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.

    (b) Each of the Seller and the Collection Agent consents to the service of
any and all process in any such action or proceeding by the mailing of copies of
such process to it at its address specified in Section 10.02. Nothing in this
Section 10.10 shall affect the right of the parties hereto to serve legal
process in any other manner permitted by law.

    SECTION 10.12.  WAIVER OF JURY TRIAL.   EACH PARTY HERETO HEREBY WAIVES, TO
THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, TRIAL BY JURY IN ANY JUDICIAL
PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN
TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED

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TO, OR CONNECTED WITH THIS AGREEMENT OR ANY DOCUMENT EXECUTED OR DELIVERED
PURSUANT HERETO.

    SECTION 10.13.  Excess Funds.   Each of the Seller, the Collection Agent,
the Originator, the Banks and the Agent agrees that any Investor shall be liable
for any claims that such party may have against such Investor only to the extent
that such Investor has excess funds and to the extent such excess funds are
insufficient to satisfy the obligations of such Investor hereunder, such
Investor shall have no liability with respect to any amount of such obligations
remaining unpaid and such unpaid amount shall not constitute a claim against
such Investor. Any and all claims against any Investor shall be subordinate to
the claims against such Investor of the holders of such Investor's commercial
paper notes and any Person providing liquidity support to such Investor.

    IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their respective officers thereunto duly authorized, as of the date first above
written.

SELLER   DTSC, INC.
 
 
By:
 
 
 
         

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Title:
 
 
 
 
c/o Global Securitization Services, LLC
103 Foulk Road, Suite 205-11
Wilmington, Delaware 19803
Attention: Frank B. Bilotta
Facsimile No. (302) 652-8667
INVESTOR:
 
ATLANTIC ASSET SECURITIZATION CORP.
 
 
By:
 
Credit Lyonnais New York Branch, as Attorney-in-Fact
 
 
 
 
By
 
             

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Vice President
 
 
 
 
 
 
c/o Lord Securities Corporation
2 Wall Street, 19th Floor
New York, N.Y. 10006
Attention: Dwight Jenkins
Facsimile No. (212)346-9012
AGENT:
 
CREDIT LYONNAIS NEW YORK BRANCH, as Agent
 
 
By
 
 
 
         

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Vice President
 
 
 
 
1301 Avenue of the Americas
New York, N.Y. 10019
Attention: Gary Miller
Facsimile No. (212)459-3258

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BANK:
 
CREDIT LYONNAIS NEW YORK BRANCH
 
 
By:
 
 
 
         

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Percentage Interest: 100%
 
 
 
 
1301 Avenue of the Americas
New York, N.Y. 10019
Attention: Gary Miller
Facsimile No. (212)459-3258
COLLECTION AGENT AND ORIGINATOR:
 
DAL-TILE CORPORATION
 
 
By:
 
 
 
         

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Title:
 
 
 
 
7834 C.F. Hawn Freeway
P.O. Box 170130
Dallas, Texas 75217
Attention: Scott Veldman
Facsimile Number: (214) 309-3499

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Schedule I to
Receivables Purchase Agreement

Lock-Box Banks

Bank

--------------------------------------------------------------------------------

  P.O. Box

--------------------------------------------------------------------------------

  Account Number

--------------------------------------------------------------------------------

Bank One, N.A. 1717 Main Street
Dallas, Texas 75201   70671   5596297

Collection Account

Bank

--------------------------------------------------------------------------------

  P.O. Box

--------------------------------------------------------------------------------

  Account Number

--------------------------------------------------------------------------------

Bank of America, N.A.
901 Main Street
P.O. Box 832409
Dallas, Texas 75202   N.A.   3751842080

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SCHEDULE III

Normal Concentration Limits

Debt Rating of Obligor (S&P/Moody's)

    Level I

--------------------------------------------------------------------------------

  Level II

--------------------------------------------------------------------------------

  Level III

--------------------------------------------------------------------------------

  Level IV

--------------------------------------------------------------------------------

    A-1+/P-1

--------------------------------------------------------------------------------

  A-1 /P-1

--------------------------------------------------------------------------------

  A-2/P-2

--------------------------------------------------------------------------------

  lower than A-2/P-2

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Normal Concentration Limit   10%   8%   6%   3%

    In the event that (a) the Debt Ratings fall within different Levels, the
higher-numbered Level shall apply, and (b) the Debt Rating of either S&P or
Moody's (but not both) is available or no Debt Rating is available from either
S&P or Moody's, then Level IV shall apply.

49

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Schedule IV to
Receivables Purchase Agreement

Store Accounts

DTC Store

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  Bank

--------------------------------------------------------------------------------

  Address

--------------------------------------------------------------------------------

  Account No.

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