AMENDED AND RESTATED EMPLOYMENT AGREEMENT
AMENDED AND RESTATED EMPLOYMENT AGREEMENT dated as of July 17, 1998, by
and between Dal-Tile International Inc., a Delaware corporation (the
"Company"), and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ (the "Executive").
The Company is engaged in the business of the manufacture,
distribution and marketing of glazed and unglazed tile. The Company desires
to employ the Executive and the Executive desires to accept such employment
on the terms and conditions of this Agreement.
The Executive has served as President and Chief Executive of the
Company since July 1, 1997 pursuant to an Employment Agreement dated as of
June 13, 1997 and amended as of October 10, 1997 (the "Original Employment
Agreement"). The Company and the Executive desire to extend the term of the
Original Employment Agreement and amend certain other of its provisions.
NOW, THEREFORE, in consideration of the mutual premises and
agreements herein contained, and other good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the Original Employment
Agreement is hereby amended and restated as follows:
1. TERM OF EMPLOYMENT. The term of the Executive's employment
under this Agreement (the "Term") shall commence on July 1, 1997 and continue
through and expire on December 31, 2001 unless earlier terminated as herein
provided.
2. DUTIES OF EMPLOYMENT. The Executive hereby agrees for the
Term to render his exclusive services to the Company as (subject to the last
sentence of this Section 2) its President and Chief Executive Officer, and in
connection therewith, to perform such duties commensurate with his office as
he shall reasonably be directed by the Board of Directors of the Company (the
"Board") to perform. The Executive shall devote during the Term all of his
business time, energy and skill to his executive duties
hereunder and perform such duties faithfully and efficiently, except for
reasonable vacations and except for periods of illness or incapacity. When
and if requested to do so by the Board, the Executive shall serve as a
director of the Company and a director and officer of any subsidiary or
affiliate of the Company provided, that the Executive shall be indemnified
for liabilities incurred by him in his capacity as a Director or an Officer
in accordance with an Indemnification Agreement in the form attached hereto
as Exhibit A and as provided in the Company's Certificate of Incorporation
and By-Laws as in effect from time to time. From and after January 1, 2001,
with the prior written consent of the Board, the Executive may resign from
his position as President and Chief Executive Officer of the Company; it
being understood that in such event (i) the Executive shall be obligated at
the request of the Board to serve as its Chairman for the remainder of the
Term, (ii) the Executive shall continue to perform services exclusively for
the Company for the remainder of the Term as the Board shall direct
consistent with his position as Chairman, (iii) the Annual Salary and Annual
Bonus shall remain the same, unless the Board and the Executive shall
reasonably agree otherwise and (iv) such resignation, and any circumstances
directly or indirectly related thereto, shall not constitute Good Reason (as
defined below).
3. COMPENSATION AND OTHER BENEFITS.
3.1 SALARY. As compensation for all services to be rendered
by the Executive during the Term, the Company shall pay to the Executive a
salary at the annual rate of $600,000 per year (which may be increased from
time to time by the Board (the "Annual Salary")), payable in accordance with
the Company's usual payroll practices for executives. The Executive shall be
eligible to receive annual salary reviews and salary increases as authorized
by the Board.
3.2 ANNUAL BONUS. In addition to his Annual Salary, the
Executive shall be eligible to be paid a bonus in respect of each fiscal year
of the Company (the "Annual Bonus") in accordance with the Company's bonus
plan (the
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"Plan"), which Annual Bonus shall be determined by the Section 162(m)
Committee of the Board and which bonus shall be paid not later than 120 days
after the end of such fiscal year. The amount of the bonus opportunity shall
be 100% of the amount of the Annual Salary upon attainment of the "target"
performance level.
3.3 MULTI-YEAR BONUS. The Executive shall be eligible to be
paid a bonus in respect of the full three year period commencing on January
1, 1999 and ending December 31, 2001 pursuant to a multi-year bonus plan to
be adopted by the Company as soon as reasonably practicable hereafter (the
"Multi-Year Bonus"), subject to approval of the plan by the Company's
stockholders in accordance with Section 162(m) of the Code. The amount of
the bonus opportunity shall be a maximum of $1,200,000 if the "goal"
performance levels for such three year period are attained. The Executive
shall be eligible to receive a smaller bonus if lower performance levels are
attained. Performance levels will be established by the Section 162(m)
Committee of the Board based on the strategic plan of the Company adopted by
the Board subsequent to its initial presentation on July 30, 1998.
3.4 STOCK SUBSCRIPTION. Simultaneous with the execution of
this Agreement, the Executive shall purchase from the Company 100,000 shares
of common stock of the Company ("Common Stock") at a per share price equal to
the closing price of a share of Common Stock on the New York Stock Exchange
on the date hereof on the terms and conditions set forth in the Management
Subscription Agreement attached hereto as Exhibit B.
3.5 STOCK OPTION AGREEMENT. The Company shall simultaneously
herewith, subject to approval by its shareholders of the Dal-Tile
International Inc. 1998 Amended and Restated Stock Option Plan in accordance
with Section 162(m) of the Code (the "Option Plan"), grant Executive options
(the "Options") to purchase 2,000,000 shares of Common Stock at an exercise
price per share equal to the fair market value of the Common Stock on the
date hereof on the terms and conditions set forth in the Option Plan
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and a Stock Option Agreement to be entered into (the "Stock Option
Agreement") in the form attached hereto as Exhibit C, provided that the
Company shall not be obligated to issue options at an exercise price lower
than the fair market value of the Common Stock on the date of grant. The
Company shall use its best efforts to obtain such shareholder approval
promptly. The Amended and Restated Nonqualified Stock Option Agreement,
dated as of October 10, 1997, between the Executive and the Company (the
"Existing Option Agreement") shall remain in full force and effect in
accordance with its terms. The options provided for in the Existing Option
Agreement shall be referred to as the "Existing Options."
3.6 PARTICIPATION IN EMPLOYEE BENEFIT PLANS. During the
Term, the Executive shall be permitted to participate in any group life,
hospitalization or disability insurance plan, health program, pension plan,
similar benefit plan or other so-called "fringe benefit programs" of the
Company as now existing or as may hereafter be revised or adopted.
4. COVENANTS AGAINST COMPETITION. In order to induce the Company
to enter into the Original Employment Agreement, the Existing Option
Agreement, the SAR Agreement (as defined below), this Agreement, the Stock
Option Agreement and the Management Subscription Agreement, the Executive
hereby agrees as follows:
4.1 ACKNOWLEDGMENTS OF EXECUTIVE. The Executive acknowledges
that (i) the Company and any affiliates or subsidiaries thereof that are
currently existing or are acquired or formed during the Restricted Period, as
hereinafter defined (collectively, the "Companies"), are and will be engaged
primarily in the business of the manufacture, distribution and marketing of
glazed and unglazed tile (the "Company Business"); (ii) his work for the
Companies will give him access to trade secrets of and confidential
information concerning the Companies, including, without limitation,
information concerning its organization, business and affairs, organization
and operations, "know-how", customer lists, details of client or consultant
contracts, pricing policies,
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financial information, operational methods, marketing plans or strategies,
business acquisition plans, new personnel acquisition plans, technical
processes, projects of the Companies, financing projections, budget
information and procedures, marketing plans or strategies, and research
products (collectively, the "Trade Secrets"); and (iii) the agreements and
covenants contained in this Section 4 are essential to protect the Company
Business and goodwill of the Companies.
4.2 RESTRICTIONS ON COMPETITION. During the Term and for a
two-year period after the end of the Term (the "Restricted Period") unless
this Agreement is terminated in accordance with the provisions of Section
5.4, the Executive shall not, in any place where the Company Business is now
or hereafter conducted by any of the Companies while the Executive is an
employee, agent, officer, director or shareholder of the Companies, directly
or indirectly (a) engage in the Company Business for his own account; (b)
enter the employ of, or render any services to any person or entity engaged
in the Company Business; or (c) become interested in any such person or
entity in any capacity, including, without limitation, as an individual,
partner, shareholder, officer, director, principal, agent, trustee or
consultant; provided, however, that the Executive may own, directly or
indirectly, solely as an investment, securities of any entity traded on any
national securities exchange or registered pursuant to Section 12(g) of the
Securities Exchange Act of 1934 if the Executive is not a controlling person
of, or a member of a group which controls, such entity and does not, directly
or indirectly, own 3% or more of any class of securities of such entity. The
Company shall notify the Executive of any additional entities which may
hereafter become "Companies" within the meaning of this Agreement.
4.3 CONFIDENTIAL INFORMATION; PERSONAL RELATIONSHIPS. During
the Restricted Period, the Executive shall keep secret and retain in
strictest confidence, and shall not use for the benefit of himself or others,
all confidential matters and Trade Secrets of the Companies.
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4.4 PROPERTY OF THE COMPANIES. All memoranda, notes, lists,
records and other documents or papers, (and all copies thereof), including
such items stored in computer memories, on microfiche or by any other means,
made or compiled by or on behalf of the Executive, or made available to the
Executive relating to the Companies are and shall be the Companies' property
and shall be delivered to the Companies upon the expiration of the Term
unless requested earlier by the Companies.
4.5 EMPLOYEES OF THE COMPANIES. The Executive acknowledges
that any attempt on the part of the Executive to induce any employee of any
of the Companies to leave any of the Companies' employ, would be harmful and
damaging to the Companies. During the Restricted Period, the Executive will
not without the prior agreement of the Companies, in any way, directly or
indirectly: (i) induce or attempt to induce any employee to terminate
employment with the Companies; (ii) disrupt the Companies' relationship with
any employee; or (iii) solicit or entice any person employed by the Companies.
4.6 BUSINESS OPPORTUNITIES. The Executive acknowledges that
the Companies have been considering, and during the Term may consider, the
acquisition of various entities engaged in the Company Business and that it
would be harmful and damaging to the Companies if he were to become
interested in any such entity without the Company's prior consent. During
the Restricted Period, the Executive will not, without the Company's prior
consent, become interested in any such entity in any capacity, including,
without limitation, as an individual, partner, shareholder, officer,
director, principal, agent, trustee or consultant, if the Executive was aware
at any time during the Term that the Companies had been considering the
acquisition of such entity.
4.7 RESTRICTIVE COVENANTS. For the purposes of this
Agreement all matters discussed in Sections 4.1, 4.2, 4.3, 4.4, 4.5 and 4.6
of this Agreement shall be referred to as the "Restrictive Covenants."
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4.8 RIGHTS AND REMEDIES UPON BREACH. If the Executive
breaches, or threatens to commit a breach of, any of the provisions of the
Restrictive Covenants, the Company shall have the following rights and
remedies with respect to the Executive, each of which rights and remedies
shall be independent of the others and severally enforceable, and each of
which is in addition to, and not in lieu of, any other rights and remedies
available to the Company under law or in equity.
4.8.1 SPECIFIC PERFORMANCE. The right and remedy to
have the Restrictive Covenants specifically enforced, it being agreed that
any breach or threatened breach of the Restrictive Covenants would cause
irreparable injury to the Company and money damages will not provide an
adequate remedy to the Company.
4.8.2 ACCOUNTING. The right and remedy to require
the Executive to account for and pay over to the Company all compensation,
profits, monies, accruals, increments or other benefits derived or received
by him as a result of any transactions constituting a breach of the
Restrictive Covenants.
4.8.3 SEVERABILITY OF COVENANTS. The Executive
acknowledges and agrees that the Restrictive Covenants are reasonable and
valid in geographical and moral scope and in all other respects. If any
court determines that any of the Restrictive Covenants, or any part thereof,
are invalid or unenforceable, the remainder of the Restrictive Covenants
shall not thereby be affected and shall be given full effect, without regard
to the invalid portions.
4.8.4 BLUE-PENCILLING. If it is determined that any
of the Restrictive Covenants, or any part thereof, is unenforceable because
of the duration or geographic scope of such provision, the duration or scope
of such provision, as the case may be, shall be reduced so that such
provisions becomes enforceable and, in its reduced form, such provision shall
then be enforceable.
4.9 ENFORCEABILITY IN JURISDICTION. The Company and the Executive
intend to and hereby confer jurisdiction to enforce the Restrictive Covenants
upon the
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courts of any jurisdiction within the states or county which the Company does
business. If the courts of any one or more of such jurisdictions hold the
Restrictive Covenants unenforceable by reason of the breadth of such scope or
otherwise, it is the intention of the Company and the Executive that such
determination not bar or in any way affect the Company's right to relief
provided above in the courts of any other jurisdiction within the
geographical scope of the Restrictive Covenants, as to breaches of such
Restrictive Covenants in such other respective jurisdictions, such
Restrictive Covenants as they relate to each jurisdiction being, for this
purpose, severable into diverse and independent covenants.
5. TERMINATION.
5.1 TERMINATION UPON DEATH. If the Executive dies during the
Term, this Employment Agreement shall terminate immediately, except that the
Executive's legal representatives shall be entitled to receive any Annual
Salary to the extent such Annual Salary has accrued and remains payable up to
the date of the Executive's death (to be paid in accordance with the
Company's usual payroll practices for executives), plus a portion of the
Executive's Annual Bonus and Multi-Year Bonus, as set forth in Sections 3.2
and 3.3 computed on a pro rata basis based on the performance of the Company
from the beginning of the relevant bonus period to the date of Executive's
death (to be paid as promptly as practicable, but no later than 10 days after
the determination thereof), and any benefits to which the Executive, his
heirs or legal representatives may be entitled under and in accordance with
the terms of any employee benefits plan or program maintained by the Company.
5.2 TERMINATION UPON DISABILITY. If the Executive becomes
disabled during his employment hereunder so that he is unable substantially
to perform his services hereunder for 180 consecutive days, then the term of
this Agreement may be terminated by resolution of the Board sixty days after
the expiration of such 180 days, such termination to be effective upon
delivery of written notice to the Executive of the
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adoption of such resolution; provided, that the Executive shall be entitled
to receive any accrued and unpaid Annual Salary through such effective date
of termination (to be paid in accordance with the Company's usual payroll
practices for executives), plus a portion of the Executive's Annual Bonus and
Multi-Year Bonus, as set forth in Sections 3.2 and 3.3 computed on a pro rata
basis based on the performance of the Company from the beginning of the
relevant bonus period to the date of termination (to be paid as promptly as
practicable, but no later than 10 days after the determination thereof), and
any benefits to which the Executive may be entitled under and in accordance
with the terms of any employee benefits plan or program maintained by the
Company.
5.3 TERMINATION FOR CAUSE. The Company has the right, at any
time during the Term, subject to all of the provisions hereof, exercisable by
serving notice, effective in accordance with its terms, to terminate the
Executive's employment under this Agreement and discharge the Executive for
"Cause" (as defined below). If such right is exercised, the Executive shall
be entitled to receive unpaid and accrued Annual Salary prorated through the
date of such termination, any benefits vested as of the date of such
termination and any other compensation or benefits otherwise required to be
paid under applicable law. Except for such payments, the Company shall be
under no further obligation to the Executive. As used in this Section 5, the
term "Cause" shall mean (i) the conviction of or plea of guilty by the
Executive of any felony or other serious crime involving the Company, or (ii)
gross or willful misconduct by the Executive in the performance of his duties
hereunder; provided however, that no act shall be considered gross or willful
misconduct if the Executive believes he was acting in good faith or in a
manner not opposed to the interests of the Company. The Company shall be
entitled to terminate the Executive for Cause only upon approval of a
resolution adopted by the affirmative vote of not less than two-thirds of the
membership of the Board (excluding Executive). The Company agrees to provide
to the Executive prior written notice (the "Notice") of its intention to
terminate Executive's employment for Cause, such notice to
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state in detail the particular acts or failures to act which constitute
grounds for the termination. The Executive shall be entitled to a hearing
before the Board to contest the Board's findings, and to be accompanied by
counsel. Such hearing shall be held within 15 days of the request thereof to
the Company by the Executive, provided that such request must be made within
15 days of delivery of the Notice. If, following any such hearing, the Board
maintains its determination to terminate the Executive's employment for
Cause, the effective date of such termination shall be as specified in the
Notice.
5.4 TERMINATION WITHOUT CAUSE OR FOR GOOD REASON. The
Company shall have the right at any time during the Term to terminate the
Executive's employment hereunder without Cause. Upon such a termination or
the termination by the Executive for Good Reason, the Company's sole
obligation hereunder, except as otherwise provided in Section 3.5, shall be
to pay to the Executive (i) an amount equal to any Annual Salary accrued and
due and payable to the Executive hereunder on the date of termination (to be
paid in accordance with the Company's usual payroll practices for
executives), (ii) thereafter all Annual Salary for the remainder of the Term,
in accordance with the Company's usual payroll practices for executives,
(iii) in a lump sum payment (to be paid as promptly as practicable, but no
later than 10 days after the determination thereof), the greater of (A) a
portion of the Executive's Annual Bonus as set forth in Section 3.2 computed
on a pro rated basis based on the performance of the Company from the
beginning of the bonus period to the date of termination and (B) an amount
equal to the amount of the Annual Bonus for the fiscal year preceding the
fiscal year in which the date of termination occurs, pro rated based on the
number of days elapsed in the year of termination, and (iv) in a lump sum
payment (to be paid as promptly as practicable, but no later than 10 days
after the determination thereof) a portion of the Executive's Multi-Year
Bonus as set forth in Section 3.3 computed on a pro rated basis based on the
performance of the Company from January 1, 1999 to the date of termination.
For purposes of this Agreement, "Good Reason" shall mean (i) a reduction
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in the Annual Salary or maximum bonus opportunity as specified in Section 3.2
or 3.3, (ii) a relocation of the Company's headquarters or required
relocation of the Executive more than 100 miles outside of the Dallas/Fort
Worth Metropolitan area, (iii) a material diminution in the Executive's
duties or responsibilities, (iv) an adverse change in the Executive's title,
(v) assignment to Executive of duties and responsibilities that are
inconsistent with his position in any material respect, or (vi) failure of
the Board to nominate Executive for election to the Board, or removal of the
Executive from the Board without his consent.
5.5 OTHER. Except as otherwise provided herein, upon the
expiration or other termination of this Agreement, including the resignation
of Executive, all obligations of the Company shall forthwith terminate,
except as to any stock option rights as provided in the Stock Option
Agreement, the Existing Option Agreement and the Right (as defined below) as
provided in the SAR Agreement (as defined below) and except as otherwise
required by applicable law.
6. EXPENSES.
6.1 GENERAL. During the Term, the Executive will be
reimbursed for his reasonable professional and personal expenses incurred for
the benefit of the Company in accordance with the general policy of the
Company or directives and guidelines established by management of the Company
and upon submission of documentation satisfactory to the Company. Such
expenses shall include, but shall not be limited to, travel, entertainment,
club dues and promotional expenses and transportation expenses. With respect
to any expenses which are to be reimbursed by the Company to the Executive,
the Executive shall be reimbursed upon his presenting to the Company an
itemized expense voucher.
7. OTHER PROVISIONS.
7.1 NOTICES. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally,
telegraphed,
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telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile transmission
or, if mailed, five days after the date of deposit in the United States mail,
as follows:
(i) if to the Company, to:
Dal-Tile International Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇, Esq.
with a copy to:
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
Fried, Frank, Harris, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
(ii) if to the Executive, to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
with a copy to:
▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Benesch, Friedlander, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Any party may change its address for notice hereunder by notice to
the other parties hereto.
7.2 ENTIRE AGREEMENT. This Agreement, the Management
Subscription Agreement, the SAR Agreement, the Existing Option Agreement and
the Option Agreement contain the entire agreement between the parties with
respect to the
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subject matter hereof and supersede all prior agreements, written or oral,
with respect thereto, including, without limitation, the Original Employment
Agreement.
7.3 WAIVERS AND AGREEMENTS. This Agreement may be amended,
modified, superseded, cancelled, renewed or extended, and the terms and
conditions hereof may be waived, only by a written instrument signed by the
parties or, in the case of a waiver, by the party waiving compliance. No
delay on the part of any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any waiver on the part
of any party of any right, power or privilege hereunder, nor any single or
partial exercise of any right, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, power
or privilege hereunder.
7.4 GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware applicable to
agreements made and to be performed entirely within such State.
7.5 ASSIGNMENT. Executive may not delegate the performance
of any of his duties hereunder. Neither party hereto may assign any rights
hereunder without the written consent of the other party hereto. Subject to
the foregoing, this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns.
7.6 COUNTERPARTS. This Agreement may be executed in two
counterparts, each of which shall be deemed an original but both of which
together shall constitute one and the same instrument.
7.7 HEADINGS. The headings in this Agreement are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
8. ARBITRATION. In the event of a dispute between the Company
and the Executive over the terms of this Agreement which is not settled by
the parties, then the
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Company and the Executive agree to settle any and all such disputed issues by
arbitration in accordance with the then-existing rules of the American
Arbitration Association. The Company and the Executive shall jointly appoint
one person to act as the arbitrator. In the event the Company and the
Executive cannot agree to an arbitrator within 30 days, the arbitrator shall
be chosen by the President of the American Arbitration Association. The
decision of the arbitrator shall be binding upon the parties and there shall
be no appeal therefrom other than for bias, fraud or misconduct. The costs
of the arbitration, including the fees and expenses of the arbitrator, shall
be borne fifty percent by the Company, on the one hand, and fifty percent by
the Executive, on the other, but each party shall pay its own attorneys'
fees; provided, however, that if the arbitrator shall rule for the Executive,
the Company shall pay or reimburse the Executive's reasonable attorneys' fees
and the Executive's share of the arbitration costs incurred in connection
with such arbitration. Notwithstanding the foregoing, it is specifically
understood that Executive shall remain free to assert and enforce in any
court of competent jurisdiction such rights, if any, as Executive may have
under federal law, including without limitation, rights arising under Title
VII of the Civil Rights Act of 1964, as amended, the Age Discrimination and
Employment Act of 1967, as amended, and/or the Americans With Disabilities
Act of 1990.
9. STOCK OPTIONS; REGISTRATION.
(a) The Company agrees, upon the occurrence of a Filing Event (as
defined below), as promptly as practicable but not later than 45 days after
such occurrence, to (i) file with the Securities and Exchange Commission (the
"SEC"), at the Company's cost and expense, a Registration Statement on Form
S-8 (or similar form) with respect to the shares of Common Stock issuable
upon exercise of the Options, the Existing Options and the Right (as defined
in the Stock Appreciation Rights Agreement, dated as of October 10, 1997,
between the Company and Executive (the "SAR Agreement")), (ii) maintain the
effectiveness of such Registration Statement (subject to
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the other provisions of this Section 9) until all of the Options, the
Existing Options and the Right shall have been exercised in full or shall
have expired, whichever shall first occur, and (iii) provide to Executive
copies of the Registration Statement and all amendments, if any, thereto.
The Company further agrees to cause any Registration Statement on Form S-8
filed by the Company on behalf of its other employees to cover the Options,
the Existing Options and the Right held by the Executive.
(b) (i) If the Company proposes to effect an underwritten
secondary registration on behalf of DTI Investors LLC or its members, the
Company will provide prompt notice to the Executive thereof and will permit
the Executive to include in such registration shares of Common Stock owned by
him (including shares acquired pursuant to the exercise of options by him)
with respect to which the Company has received written request for inclusion
therein within 20 days after the receipt of the Company's notice. Common
Stock requested by the Executive to be included in such registration will be
included pro rata on the basis of the number of shares of Common Stock held
by the Executive and the other participants in such registration, subject to
reduction, if necessary, if the managing underwriter for the offering advises
the Company that such reduction is advisable in order to avoid an adverse
effect on the proposed offering.
(ii) Subject to receipt of requisite third party consents, at
any time during the period commencing January 31, 2002 and ending December
31, 2003, Executive shall have the right to make one request for registration
on Form S-3 of shares of Common Stock owned by him (including shares acquired
pursuant to the exercise of options by him), provided that such request shall
not be effective unless the Common Stock subject thereto has an estimated
market value of at least $15,000,000. The Company will not be obligated to
effect any such registration within six months after the effective date of
any previously filed registration statement of the Company, and the Company
shall have the right to postpone any requested registration for up to six
months if it determines in good faith that such registration could reasonably
be expected to have
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an adverse effect on any proposal or plan by the Company or its subsidiaries
to engage in any acquisition, merger, disposition or other material corporate
transaction. Executive shall have the right to select the managing
underwriters to administer the registered public offering requested pursuant
hereto, who shall be of national prominence and reasonably acceptable to the
Company. Upon any request pursuant hereto, the Company will use all
reasonable efforts to effect the registration and the sale of the Common
Stock subject thereto as promptly as practicable. Executive acknowledges
that any registration requested pursuant hereto will be subject to any "piggy
back" registration rights in effect at the time of the Executive's request,
provided, however, that the Executive shall have the right to make one or
more additional requests for registration (on the same terms and conditions
provided for in this subparagraph (ii), except that the $15 million minimum
referred to above shall be $10 million) if shares of Common Stock owned by
him were excluded from registration as a result of "piggy back" registration
rights of others exercised by others. No such "piggy back" registration
rights shall have priority over those granted to the Executive pursuant to
this subparagraph (ii).
(iii) The Company shall bear all expenses in connection with
the registrations provided for herein, other than underwriting discounts and
commissions and transfer taxes, if any, and fees and expenses of the
Executive's legal and other advisers, attributable to the inclusion in any
such registration of Common Stock owned by Executive.
(c) The obligations of the Company contained in this Section 9 are
subject to (i) requirements of applicable law, (ii) restrictions that may be
imposed by the Company's underwriters, and (iii) Executive cooperating and
providing any needed consents, agreements (including any required "lock up"
or customary indemnity agreements, to the extent such arrangements are
requested of members of Company management or significant shareholders,
generally) and information. Executive agrees that he will discontinue any
exercise of the Options, the Existing Options or the Rights or
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sale of shares of Common Stock upon notice from the Company that an event or
development makes amendment or supplement of any Registration Statement of
the Company covering shares of Common Stock owned by the Executive (or
suspension of effectiveness thereof) necessary, and will not resume such
exercise or sale until the Company informs Executive he may do so (provided
that the Company shall not require such discontinuance for more than 90 days
in any 360-day period). Executive specifically agrees that, in connection
with a Filing Event described in clause (i) of the definition thereof, he
will not sell, transfer or otherwise dispose of any shares of Common Stock,
for a period of 180 days following such event, unless the underwriters for
the relevant public offering determine a shorter period to be appropriate.
(d) For the purpose of this Section 9, "Filing Event" shall mean
the earliest to occur of the following events: (i) the sale in a registered
public offering of at least 10% of the shares of Common Stock held at such
time by DTI Investors LLC or its members (taken as a group); and (ii) the
date of the termination of the Executive's employment (A) by the Company
without Cause or by reason of disability or by the Executive for Good Reason,
(B) as a result of the expiration of the Term of this Agreement (December 31,
2001), or (C) by reason of the Executive's death.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
DAL-TILE INTERNATIONAL INC.
By:
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Name:
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Title:
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