Exhibit 1.1
DRAFT
DAL-TILE INTERNATIONAL INC.
7,822,322
Shares of Common Stock, Par Value $.01 per Share
of Dal-Tile International Inc.
INDEMNIFICATION AGREEMENT
November __, 1998
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Dear Sirs and Mesdames:
In order to induce ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated (the
"UNDERWRITER") to enter into the Underwriting Agreement with ▇▇▇▇▇▇▇▇▇
World Industries, Inc. ("AWI") and ▇▇▇▇▇▇▇▇▇ Enterprises, Inc. ("AEI")
dated November __, 1998 (the "UNDERWRITING AGREEMENT"), and in
consideration of good and valuable consideration, receipt of which is
hereby acknowledged, Dal-Tile International Inc., a Delaware corporation
("DAL-TILE"), enters into this Agreement with the Underwriter in connection
with the filing for registration under the Securities Act of 1933, as
amended (the "SECURITIES ACT"), of up to 7,822,322 shares of Common Stock,
par value $.01, of Dal-Tile ("COMMON STOCK") being offered for sale by AWI
and AEI as selling shareholders (the "SHARES").
Dal-Tile has filed with the Securities and Exchange Commission (the
"COMMISSION") a registration statement, including a prospectus, relating to
the Shares. The registration statement as amended at the time it becomes
effective, including the information (if any) deemed to be part of the
registration statement at the time of effectiveness pursuant to Rule 430A
under the Securities Act, is hereinafter referred to as the "REGISTRATION
STATEMENT" and the prospectus in the form first used to confirm sales of
Shares (the "PROSPECTUS"). The term "PRELIMINARY PROSPECTUS" means a
preliminary prospectus relating to the Shares. As used herein, the terms
"PROSPECTUS" and "PRELIMINARY PROSPECTUS" shall include in each case the
documents, if any, incorporated by reference therein. If Dal-Tile has filed
an abbreviated registration statement to register additional shares of
Common Stock pursuant to Rule 462(b) under the Securities Act (the "RULE
462 REGISTRATION STATEMENT"), then any reference herein to the term
"REGISTRATION STATEMENT" shall be deemed to include such Rule 462
Registration Statement.
The terms "SUPPLEMENT," "AMENDMENT" and "AMEND" as used herein shall
include all documents subsequently filed by Dal-Tile with the Commission
pursuant to the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT") that are deemed to be incorporated by reference in the Dal-Tile
Prospectus.
1. Representations and Warranties of Dal-Tile. Dal-Tile represents and
warrants to and agrees with the Underwriter that:
a) The Registration Statement has become effective; no stop order
suspending the effectiveness of the Registration Statement is in
effect, and no proceedings for such purpose are pending before or, to
the knowledge of Dal-Tile, threatened by the Commission.
(b) (i) Each document, if any, filed or to be filed pursuant to
the Exchange Act and incorporated by reference in the Prospectus
complied or will comply when so filed in all material respects with
the Exchange Act and the applicable rules and regulations of the
Commission thereunder, (ii) the Registration Statement, when it became
effective, did not contain and, as amended or supplemented, if
applicable, will not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, (iii) the
Registration Statement and the Prospectus comply and, as amended or
supplemented, if applicable, will comply in all material respects with
the Securities Act and the applicable rules and regulations of the
Commission thereunder and (iv) the Prospectus does not contain and, as
amended or supplemented, if applicable, will not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that
the representations and warranties set forth in this paragraph do not
apply to statements or omissions in the Registration Statement or the
Prospectus based upon information relating to the Underwriter
furnished to Dal-Tile in writing by the Underwriter through you
expressly for use therein.
(c) Dal-Tile has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its
property and to conduct its business as described in the Prospectus
and is duly qualified to transact business and is in good standing in
each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification, except
to the extent that the failure to be so qualified or be in good
standing would not have a material adverse effect on Dal-Tile and its
subsidiaries, taken as a whole.
(d) (i) Each "significant subsidiary" (as that term is used in
Rule 1.02(w) of Regulation S-X under the Securities Act) of Dal-Tile,
which for purposes of this Agreement shall be deemed to include,
without limitation, Dal-Tile Group Inc., Dal-Tile Corporation and
Dal-Tile Mexico S.A. de C.V., (each, a "MATERIAL SUBSIDIARY") has been
duly incorporated, is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation, has
the corporate power and authority to own its property and to conduct
its business as described in the Prospectus and, to the extent
applicable under foreign law, is duly qualified to transact business
and is in good standing in each jurisdiction in which the conduct of
its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse
effect on Dal-Tile and its subsidiaries, taken as a whole; (ii) all of
the issued shares of capital stock of each Material Subsidiary of
Dal-Tile (x) have been duly and validly authorized and issued, are
fully paid and non-assessable and (y) except for the pledge of 100% of
the capital stock of Dal-Tile Group Inc. and certain of its domestic
subsidiaries and of 65% of the capital stock of Dal-Tile Mexico S.A.
de C.V. pursuant to the Bank Credit Agreement dated August 14, 1996
and as amended June 19, 1997 and September 30, 1997, among Dal-Tile
and the banks signatory thereto (the "CREDIT AGREEMENT"), are owned
directly or indirectly by Dal-Tile, free and clear of all liens,
encumbrances, equities or claims.
(e) This Agreement has been duly authorized, executed and
delivered by Dal-Tile.
(f) The authorized capital stock of Dal-Tile conforms as to legal
matters to the description thereof contained in Form 8-A incorporated
by reference into the Prospectus.
(g) The outstanding shares of Common Stock (including the Shares)
have been duly authorized and are validly issued, fully paid and
non-assessable and are not subject to any preemptive or similar
rights.
(h) The execution and delivery by Dal-Tile of, and the
performance by Dal-Tile of its obligations under, this Agreement will
not contravene any provision of (i) applicable law or (ii) the
certificate of incorporation or by-laws of Dal-Tile or (iii) any
agreement or other instrument binding upon Dal-Tile or any of its
subsidiaries, or (iv) any judgment, order or decree of any
governmental body, agency or court having jurisdiction over Dal-Tile
or any subsidiary, except where, in the case of clauses (i), (iii) and
(iv), such contravention would not, individually or in the aggregate,
have a material adverse effect on Dal-Tile and its subsidiaries, taken
as a whole, and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for
the performance by Dal-Tile of its obligations under this Agreement,
except such as have been obtained under the Securities Act and as may
be required by the securities or Blue Sky laws of the various states
in connection with the offer and sale of the Shares.
(i) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of Dal-Tile and its subsidiaries, taken as a whole, from
that set forth in the Prospectus (exclusive of any amendments or
supplements thereto subsequent to the date of this Agreement).
(j) Other than as set forth in the Prospectus, there are no legal
or governmental proceedings pending or, to the knowledge of Dal-Tile,
threatened to which Dal-Tile or any of its subsidiaries is a party or
to which any of the properties of Dal-Tile or any of its subsidiaries
is subject that are required to be described in the Registration
Statement or the Prospectus and are not so described or any contracts
or other documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to
the Registration Statement that are not described or filed as
required.
(k) Each preliminary prospectus filed as part of the Registration
Statement as originally filed or as part of any amendment thereto, or
filed pursuant to Rule 424 under the Securities Act, complied when so
filed in all material respects with the Securities Act and the
applicable rules and regulations of the Commission thereunder.
(l) Dal-Tile is not an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended.
(m) Dal-Tile and its subsidiaries are in compliance with any and
all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment
or hazardous or toxic substances or wastes, pollutants or contaminants
("ENVIRONMENTAL LAWS"), have received all permits, licenses or other
approvals required of them under applicable Environmental Laws to
conduct their respective businesses and are in compliance with all
terms and conditions of any such permit, license or approval, except
where such noncompliance with Environmental Laws, failure to receive
required permits, licenses or other approvals or failure to comply
with the terms and conditions of such permits, licenses or approvals
would not, singly or in the aggregate, have a material adverse effect
on Dal-Tile and its subsidiaries, taken as a whole.
To the best of Dal-Tile's knowledge, there are no costs or
liabilities associated with Environmental Laws (including, without
limitation, any capital or operating expenditures required for
clean-up, closure of properties or compliance with Environmental Laws
or any permit, license or approval, any related constraints on
operating activities and any potential liabilities to third parties)
which would, singly or in the aggregate, have a material adverse
effect on Dal-Tile and its subsidiaries, taken as a whole.
(n) Other than the Shareholders Agreement dated December 29, 1995
(as amended July 15, 1996, the "SHAREHOLDERS AGREEMENT") by and among
Dal-Tile, AEA Investors Inc., DTI Investors LLC ("DTI INVESTORS"),
AWI, AEI and ▇▇▇▇▇▇▇▇▇ Cork Finance Corporation, there are no
contracts, agreements or understandings between Dal-Tile and any
person granting such person the right to require Dal-Tile to file a
registration statement under the Securities Act with respect to any
securities of Dal-Tile or to require Dal-Tile to include such
securities with the Shares registered pursuant to the Registration
Statement. No such rights, if any, were exercised in connection with
the sale of the Shares by DTI Investors.
(o) Except as disclosed in the Registration Statement and the
Prospectus, subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, (i)
Dal-Tile and its subsidiaries have not incurred any liability or
obligation, direct or contingent that is material to Dal-Tile and its
subsidiaries, taken as a whole, nor entered into any material
transaction not in the ordinary course of business that is material to
Dal-Tile and its subsidiaries, taken as a whole; (ii) Dal-Tile has not
purchased any of its outstanding capital stock, nor declared, paid or
otherwise made any dividend or distribution of any kind on its capital
stock other than ordinary and customary dividends; (iii) there has not
been any material change in the capital stock, short-term debt or
long-term debt of Dal-Tile and its consolidated subsidiaries; and (iv)
there has not been any development having or which could reasonably be
expected to have a material adverse effect on Dal-Tile and its
subsidiaries, taken as a whole.
(p) Dal-Tile and its subsidiaries have good and marketable title
in fee simple to all real property and good and marketable title to
all personal property owned by them, in each case free and clear of
all liens, encumbrances and defects except for liens created for the
benefit of the lenders pursuant to the Credit Agreement and except
such as do not materially adversely affect Dal-Tile and its
subsidiaries, taken as a whole, and do not materially interfere with
the use made and proposed to be made of such property by Dal-Tile and
its subsidiaries taken as a whole; and any real property and buildings
held under lease by Dal-Tile and its subsidiaries are held by them
under valid, subsisting and enforceable leases with such exceptions as
are not material and do not materially interfere with the use made and
proposed to be made of such property and buildings by Dal-Tile and its
subsidiaries, taken as a whole.
(q) No material labor dispute with the employees of Dal-Tile or
any of its subsidiaries exists, or, to the knowledge of Dal-Tile, is
imminent; and Dal-Tile is not aware of any existing, threatened or
imminent labor disturbance by the employees of any of its principal
suppliers, manufacturers or contractors that could result in any
material adverse effect on Dal-Tile and its subsidiaries, taken as a
whole.
(r) Dal-Tile and its subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state or
foreign regulatory authorities ("PERMITS") necessary to conduct their
respective businesses, and neither Dal-Tile nor any such subsidiary
has received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit which,
individually or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would have a material adverse effect on
Dal-Tile and its subsidiaries, taken as a whole.
(s) Dal-Tile maintains with respect to itself and each of its
subsidiaries a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorizations; (ii)
transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting
principles and to maintain asset accountability; (iii) access to
assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for
assets is compared with the existing assets at reasonable intervals
and appropriate action is taken with respect to any differences.
2. Agreements of Dal-Tile (Conditions to the Underwriter's Obligations
under the Underwriting Agreement).
(a) Dal-Tile agrees that it will not, for a period ending on the
later of (i) January 1, 1999 or (ii) 45 days following the date of the
Prospectus, without the prior written consent of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co.
Incorporated, (i) offer, pledge, loan, sell, contract to sell, sell
any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase, or otherwise
transfer or dispose of, directly or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or
exchangeable for shares of Common Stock (except through gifts to
persons who agree in writing to be bound by the restrictions of this
paragraph), or (ii) enter into any swap or other arrangement that
transfers to another, in whole or in part, any of the economic
consequences of the ownership of shares of Common Stock, whether any
such transaction described in clause (i) or (ii) above is to be
settled by delivery of shares of Common Stock or such other
securities, in cash or otherwise. The foregoing sentence shall not
apply to the issuance by Dal-Tile of shares of Common Stock or options
to purchase Common Stock under existing stock option and stock
purchase plans. Dal-Tile agrees that, without the prior written
consent of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated (which consent shall not
be unreasonably withheld), during the period ending on the later of
(i) January 1, 1999 or (ii) 45 days following the date of the
Prospectus, it will not file a registration statement with the
Commission for an offering of Common Stock or any securities
convertible into, or exercisable or exchangeable for Common Stock
other than the filing of a registration statement on Form S-8 or an
equivalent form.
(b) Dal-Tile shall deliver to the Underwriter on the Closing Date
(as defined in the Underwriting Agreement) a certificate, dated the
Closing Date and signed by an executive officer of Dal-Tile, to the
effect that the representations and warranties of Dal-Tile contained
in this Agreement are true and correct as of the Closing Date and that
Dal-Tile has complied with all of the agreements and satisfied all of
the conditions on its part to be performed or satisfied hereunder on
or before the Closing Date (with such exceptions and modifications as
such officer may deem appropriate).
The officer signing and delivering such certificate may rely upon
the best of his or her knowledge as to proceedings threatened.
(c) Dal-Tile shall use reasonable efforts to ensure that the
Underwriter shall have received on the Closing Date an opinion of
Fried, Frank, Harris, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, counsel for Dal-Tile, dated
the Closing Date, to the effect that:
(i) Dal-Tile is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation,
has the corporate power and authority to own its property and to
conduct its business as described in the Prospectus;
(ii) Dal-Tile Group Inc., a Delaware corporation ("DAL-TILE
GROUP"), is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, has the
corporate power and authority to own its property and to conduct
its business as described in the Prospectus;
(iii) the Shares have been duly authorized and are validly
issued, fully paid and non-assessable;
(iv) all of the outstanding shares of capital stock of
Dal-Tile Group have been duly authorized and validly issued, and
are fully paid and non-assessable;
(v) this Agreement has been duly authorized, executed and
delivered by Dal-Tile;
(vi) the execution and delivery by Dal-Tile of, and the
performance by Dal-Tile of its obligations under, this Agreement
do not and will not (a) contravene any provision of the Restated
Certificate of Incorporation or Restated By-Laws of Dal-Tile or
Dal-Tile Group Inc., (b) contravene, result in a breach of or
constitute a default under the Credit Agreement or any other
agreement or instrument binding upon Dal-Tile (or any of its
Subsidiaries) (1) that is listed as an exhibit to the
Registration Statement or Dal-Tile's Annual Report on Form 10-K
for the fiscal year ended January 3, 1998 or (2) that is listed
as an exhibit to any document filed with the Commission
subsequent to January 3, 1998 and prior to the date of this
opinion that is incorporated or deemed to be incorporated in the
Registration Statement or (c) violate (1) any present statute,
rule or regulation of any governmental agency or authority of the
United States of America or the State of New York or any present
provision of the General Corporation Law of the State of Delaware
(the "DGCL") applicable to Dal-Tile, or (2) any judgment, decree
or order of any court or governmental agency or body of the
United States of America or the State of New York or of the State
of Delaware pursuant to the DGCL set forth in the Officers'
Certificate to be attached to such opinion; provided, however,
that such counsel need express no opinion with respect to any
violation, breach or default not ascertainable from the face of
any such agreement, instrument, judgment, decree or order, or
arising under or based upon any cross-default provision insofar
as such violation relates to a default under an agreement that is
not referred to in subclause (1) or (2) of clause (b) above or
arising under or based upon any covenant of a financial or
numerical nature or which requires arithmetic computation.
(vii) No consent, approval, authorization, order,
qualification of or registration with any court or government
agency of the United States of America or the States of New York
or Delaware (as it relates to the General Corporation Law of the
State of Delaware) is required for the performance by Dal-Tile of
its obligations hereunder (except such as have been obtained
under the Securities Act and such as may be required under state
securities or Blue Sky laws) in connection with the sale of the
Shares;
(viii) Dal-Tile is not an "investment company" as such term
is defined in the Investment Company Act of 1940, as amended; and
(ix) (a) The Registration Statement and the Prospectus (in
each case excluding the documents incorporated or deemed to be
incorporated by reference therein), as of their respective
effective or issue dates (other than the financial statements,
the notes and schedules thereto and the other financial
information included therein or omitted therefrom, as to which we
express no opinion), each appeared on its face to be responsive
as to form in all material respects to the requirements of the
Securities Act and the rules and regulations of the Commission
thereunder and (b) the documents incorporated or deemed to be
incorporated by reference in the Prospectus (other than the
financial statements, the notes and schedules thereto and the
other financial information included therein or omitted
therefrom, as to which we express no opinion), when they were
filed with the Commission, each appeared on its face to be
responsive as to form in all material respects to the
requirements of the Exchange Act and the rules and regulations of
the Commission thereunder.
In addition, such counsel shall state that in the course of the
preparation by Dal-Tile of the Registration Statement and the
Prospectus, such counsel participated in conferences with certain of
the officers and representatives of, and the independent public
accountants for, Dal-Tile, at which the contents of the Registration
Statement and the Prospectus were discussed. Between the date of the
effectiveness of the Registration Statement and the time of delivery
of such opinion, such counsel participated in additional conferences
with certain of the officers and representatives of, and independent
public accountants for, Dal-Tile, at which the contents of the
Prospectus were discussed to a limited extent. Such counsel shall
state that, given the limitations inherent in the independent
verification of factual matters and the character of determinations
involved in the registration process, such counsel shall not pass upon
or assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement or
the Prospectus. Subject to the foregoing and on the basis of the
information gained in the performance of the services referred to
above, including information obtained from officers and other
representatives of, and the independent public accountants for,
Dal-Tile, such counsel shall state that no facts have come to their
attention that have caused them to believe that the Registration
Statement, as of its effective date, contained any untrue statement of
a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein
not misleading, or that the Prospectus, as of the date hereof,
contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading. Also, subject to the foregoing,
such counsel shall state that no facts have come to their attention in
the course of the procedures described in the second sentence of this
paragraph that cause them to believe that the Prospectus, as of the
date and time of delivery of such opinion, contains an untrue
statement of a material fact or omits to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading. Such counsel shall state that they express
no view or belief, however, with respect to financial statements, the
notes or schedules thereto or other financial information included in
or incorporated by reference into or omitted from the Registration
Statement or the Prospectus.
(d) Dal-Tile shall use reasonable efforts to ensure that the
Underwriter shall have received on the Closing Date an opinion of ▇▇▇▇
▇. ▇▇▇▇▇, Esq., Vice President, Secretary and General Counsel of
Dal-Tile, dated the Closing Date, to the effect that:
(i) Dal-Tile is duly qualified to transact business and is
in good standing in the State of Delaware;
(ii) Dal-Tile Group is duly qualified to transact business
and is in good standing in the State of Delaware;
(iii) Dal-Tile Corporation is duly qualified to transact
business and is in good standing in each jurisdiction set forth
in the officer's certificate attached to such opinion; and
(iv) after due inquiry, such counsel does not know of any
legal or governmental proceedings pending or threatened to which
Dal-Tile or any of its subsidiaries is a party or to which any of
the properties of Dal-Tile or any of its subsidiaries is subject
that are required to be described in the Registration Statement
or the Prospectus and are not so described or of any contracts or
other documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement that are not described or
filed as required.
(e) Dal-Tile shall use reasonable efforts to ensure that the
Underwriter shall have received on the Closing Date an opinion of
Consultoria Juridicia Mercantil, S.A. de C.V., counsel for Dal-Tile
Mexico, S.A. de C.V., dated the Closing Date, to the effect that:
(i) Dal-Tile Mexico, S.A. de C.V. (the "MEXICAN SUBSIDIARY")
is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation,
with full corporate power and authority to own, lease, and
operate its properties and to conduct its business as described
in the Registration Statement and the Prospectus; and (x) all the
outstanding shares of capital stock of the Mexican Subsidiary
have been duly authorized and validly issued, are fully paid and
non-assessable, and (y) all the outstanding shares of capital
stock of the Mexican Subsidiary are owned by Dal-Tile directly or
indirectly (except for directors' qualifying shares in the case
of the Mexican Subsidiary), free and clear of any lien,
encumbrances, claim or equity, except for the lien on 65% of the
stock of the Mexican Subsidiary granted in favor of certain
lenders pursuant to the Pledge Agreement dated as of October 4,
1996 by Dal-Tile Group, Inc. to the Chase Manhattan Bank as
administrative agent for such lenders);
(ii) the Mexican Subsidiary is not (A) in violation of its
respective certificate of incorporation or bylaws or other
organizational documents, or (B) to the best knowledge of such
counsel after reasonable inquiry, in default in the performance
of any material obligation, agreement or condition contained in
any bond, debenture, note or other evidence of indebtedness,
except as may be disclosed in the Prospectus;
(iii) neither the execution, delivery or performance by
Dal-Tile of this Agreement conflicts or will conflict with or
constitutes or will constitute a breach of, or default under, the
certificate of incorporation or bylaws or other organizational
documents of the Mexican Subsidiary or any agreement, indenture,
lease or other instrument to which the Mexican Subsidiary is a
party or by which it or any of its properties is bound that is an
exhibit to the Registration Statement, or is known to such
counsel after reasonable inquiry, or will result in the creation
or imposition of any lien, encumbrance, equity or claim upon any
property or assets of the Mexican Subsidiary, nor will any such
action result in any violation of any existing Mexican rule, law,
regulation, ruling, judgment, injunction, order or decree known
to such counsel after reasonable inquiry, and applicable to the
Mexican Subsidiary, or any of its properties;
(iv) to the best knowledge of such counsel after reasonable
inquiry, other than as described or contemplated in the
Prospectus, there are no legal or governmental proceedings
pending or threatened against the Mexican Subsidiary, or to which
the Mexican Subsidiary, or any of its property, is subject;
(v) to the best knowledge of such counsel after reasonable
inquiry, (A) the Mexican Subsidiary is not in violation of any
law, ordinance, administrative or governmental rule or regulation
applicable to the Mexican Subsidiary or of any decree of any
Mexican court or governmental agency or body having jurisdiction
over the Mexican Subsidiary and (B) the Mexican Subsidiary has
such Permits as are necessary to own its properties and to
conduct its respective business in the manner described in the
Prospectus; and the Mexican Subsidiary has fulfilled and
performed all its material obligations with respect to such
Permits and no event has occurred that allows, or after notice or
lapse of time would allow, revocation or termination thereof or
results in any other material impairment of the rights of the
holder of any such Permit;
(vi) the Mexican Subsidiary has good and marketable title to
all property (real and personal) described in the Prospectus as
being owned by it, free and clear of all liens, claims, security
interests or other encumbrances, and all the property described
in the Prospectus as being held under lease by the Mexican
Subsidiary is held by it under valid, subsisting and enforceable
leases;
(vii) the Mexican Subsidiary has filed all material tax
returns required by Mexican law to be filed, which returns are
true, complete and correct, and the Mexican Subsidiary is not in
default in the payment of any taxes which were payable pursuant
to said returns or any assessments with respect thereto;
(viii) except as described in the Registration Statement and
the Prospectus, the Mexican Subsidiary (i) is in compliance in
all material respects with Mexican Environmental Laws (as
hereinafter defined) and (ii) has received, and is in compliance
in all material respects with all terms and conditions of, all
material permits, licenses, authorizations or other approvals
required of it under Mexican Environmental Laws to conduct its
respective businesses; and
(ix) except as described in the Registration Statement and
the Prospectus, there are no past or present actions (including
on-site and off-site disposal of Mexican Hazardous Substances (as
hereinafter defined)), omissions or conditions regarding the
Mexican Subsidiary or any real property upon which any of them
conduct their respective business operations that have formed, or
are reasonably likely to form, the basis of any material claim or
violation against the Mexican Subsidiary (including releases or
discharges of Mexican Hazardous Substances) under Mexican
Environmental Laws.
As used herein, "Mexican Environmental Laws" means any and
all applicable Mexican laws, regulations, rules, ordinances,
judgments or decrees relating to the protection of human health,
safety or the environment, the preservation of natural resources,
or to Hazardous Substances. As used herein, "Mexican Hazardous
Substances" means any and all explosive, radioactive, hazardous,
toxic or otherwise dangerous materials, pollutants, contaminants
or wastes regulated pursuant to Mexican Environmental Laws.
(x) to the best knowledge of such counsel, no labor problem
exists with employees of the Mexican Subsidiary or is imminent
that could adversely affect the Mexican Subsidiary.
The opinions of Fried, Frank, Harris, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇.
Solls and Consultoria Juridicia Mercantil, S.A. de C.V. described in
Sections 2(c), 2(d) and 2(e) above shall be rendered to the
Underwriter at the request of Dal-Tile (and of Dal-Tile Mexico, S.A.
de C.V., in the case of the opinion of Consultoria Juridicia
Mercantil, S.A. de C.V.), and shall so state therein.
(f) Dal-Tile shall use reasonable efforts to ensure that the
Underwriter shall have received, on each of the date hereof and the
Closing Date, a letter dated the date hereof or the Closing Date, as
the case may be, in form and substance satisfactory to the
Underwriter, from Ernst & Young LLP, independent public accountants,
containing statements and information of the type ordinarily included
in accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial information contained in
the Registration Statement and the Prospectus; provided that the
letter delivered on the Closing Date shall use a "cut-off date" not
earlier than the date hereof.
(g) Dal-Tile shall use reasonable efforts to ensure that the
"lock-up" agreements, each substantially in the form of Exhibit A
hereto, between you and certain stockholders, officers and directors
of Dal-Tile relating to sales and certain other dispositions of shares
of Common Stock or certain other securities, be delivered to you on or
before the date hereof, shall be in full force and effect on the
Closing Date.
3. Additional Covenants of Dal-Tile. In further consideration of the
agreements of the Underwriter herein contained, Dal-Tile further covenants
with the Underwriter as follows:
(a) To furnish to you, without charge, two signed copies of the
Registration Statement (including exhibits thereto) and to furnish to
you in New York City, without charge, prior to 5:00 p.m., New York
City time, on the business day next succeeding the date of this
Agreement and during the period mentioned in Section 3(c) below, as
many copies of the Prospectus and any supplements and amendments
thereto or to the Registration Statement as you may reasonably
request.
(b) Before amending or supplementing the Registration Statement
or the Prospectus, to furnish to you a copy of each such proposed
amendment or supplement and not to file any such proposed amendment or
supplement to which you reasonably object, and to file with the
Commission within the applicable period specified in Rule 424(b) under
the Securities Act any prospectus required to be filed pursuant to
such Rule.
(c) If, during such period after the first date of the public
offering of the Shares as in the opinion of counsel for the
Underwriter the Prospectus is required by law to be delivered in
connection with sales by the Underwriter or dealer, any event shall
occur or condition exist as a result of which it is necessary to amend
or supplement the Prospectus in order to make the statements therein,
in the light of the circumstances when the Prospectus is delivered to
a purchaser, not misleading, or if, in the reasonable judgment of
Dal-Tile or in the opinion of counsel for the Underwriter, it is
necessary to amend or supplement the Prospectus to comply with
applicable law, forthwith to prepare, file with the Commission and
furnish, at its own expense, to the Underwriter and to the dealers
(whose names and addresses you will furnish to Dal-Tile) to which
Shares may have been sold by you and to any other dealers upon
request, either amendments or supplements to the Prospectus so that
the statements in the Prospectus as so amended or supplemented will
not, in the light of the circumstances when the Prospectus is
delivered to a purchaser, be misleading or so that the Prospectus, as
amended or supplemented, will comply with law.
(d) To endeavor to qualify the Shares for offer and sale under
the securities or Blue Sky laws of such jurisdictions as you shall
reasonably request.
(e) To make generally available to Dal-Tile's security holders
and to you as soon as practicable an earnings statement covering the
twelve-month period beginning on the first day of the first full
fiscal quarter after the Closing Date that satisfies the provisions of
Section 11(a) of the Securities Act and the rules and regulations of
the Commission thereunder.
4. Expenses. Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, Dal-Tile agrees
to pay or cause to be paid all expenses incident to the performance of its
obligations under this Agreement, including: (i) the fees, disbursements
and expenses of accountants and counsel for Dal-Tile and counsel for AWI in
connection with the registration and delivery of the Shares under the
Securities Act and all other fees or expenses in connection with the
preparation and filing of the Registration Statement, any preliminary
prospectus, the Prospectus and amendments and supplements to any of the
foregoing, including all printing costs associated therewith, and the
mailing and delivering of copies thereof to the Underwriter and dealers, in
the quantities hereinabove specified, (ii) the cost of printing or
producing any Blue Sky or Legal Investment memorandum in connection with
the offer and sale of the Shares under state securities laws and all
expenses in connection with the qualification of the Shares for offer and
sale under state securities laws as provided in Section 3(d) hereof,
including filing fees and the reasonable fees and disbursements of counsel
for the Underwriter in connection with such qualification and in connection
with the Blue Sky or Legal Investment memorandum, (iii) all filing fees and
the reasonable fees and disbursements of counsel to the Underwriter
incurred in connection with the review and qualification of the offering of
the Shares by the National Association of Securities Dealers, Inc., (iv)
all costs and expenses incident to listing the Shares on the NYSE, (v) the
costs and charges of any transfer agent, registrar or depositary for the
Shares, (vi) the costs and expenses of Dal-Tile relating to investor
presentations on any "road show" undertaken in connection with the
marketing of the offering of the Shares, including, without limitation,
expenses associated with the production of road show slides and graphics,
fees and expenses of any consultants engaged in connection with the road
show presentations with the prior approval of Dal-Tile, travel and lodging
expenses of the representatives and officers of Dal-Tile and any such
consultants, and (vii) all other costs and expenses incident to the
performance of the obligations of Dal-Tile hereunder for which provision is
not otherwise made in this Section. It is understood, however, that except
as provided in this Section, Section 5 and the last paragraph of Section 7
below, the Underwriter will pay all of their costs and expenses, including
fees and disbursements of their counsel, stock transfer taxes payable on
resale of any of the Shares by them and any advertising expenses connected
with any offers they may make.
The provisions of this Section shall not supersede or otherwise affect
any agreement that Dal-Tile and AWI may otherwise have for the allocation
of such expenses among themselves.
5. Indemnity and Contribution. (a) Dal-Tile agrees to indemnify and
hold harmless the Underwriter and each person, if any, who controls the
Underwriter within the meaning of either Section 15 of the Securities Act
or Section 20 of the Exchange Act, from and against any and all losses,
claims, damages and liabilities (including, without limitation, any legal
or other expenses reasonably incurred in connection with defending or
investigating any such action or claim) caused by any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or any amendment thereof, any preliminary prospectus or the
Prospectus (as amended or supplemented if Dal-Tile shall have furnished any
amendments or supplements thereto) or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as
such losses, claims, damages or liabilities are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon
information relating to the Underwriter furnished to Dal-Tile in writing by
you expressly for use therein; provided, however, that the foregoing
indemnity agreement with respect to any preliminary prospectus shall not
inure to the benefit of the Underwriter, or any person controlling the
Underwriter, if a copy of the Prospectus (as then amended or supplemented
if Dal-Tile shall have furnished any amendments or supplements thereto) was
not sent or given by or on behalf of the Underwriter to such person, if
required by law so to have been delivered, at or prior to the written
confirmation of the sale of the Shares to such person, and if the
Prospectus (as so amended or supplemented) would have cured the defect
giving rise to such losses, claims, damages or liabilities, unless such
failure is solely the result of noncompliance by Dal-Tile with Section 3(a)
hereof.
(b) The Underwriter agrees to indemnify and hold harmless Dal-Tile,
the directors of Dal-Tile, the officers of Dal-Tile who sign the
Registration Statement and each person, if any, who controls Dal-Tile
within the meaning of either Section 15 of the Securities Act or Section 20
of the Exchange Act from and against any and all losses, claims, damages
and liabilities (including, without limitation, any legal or other expenses
reasonably incurred in connection with defending or investigating any such
action or claim) caused by any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement or any amendment
thereof, any preliminary prospectus or the Prospectus (as amended or
supplemented if Dal-Tile shall have furnished any amendments or supplements
thereto), or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, but only with reference to information
relating to the Underwriter furnished to Dal-Tile in writing by you
expressly for use therein.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may
be sought pursuant to Section 5(a) or 5(b), such person (the "INDEMNIFIED
PARTY") shall promptly notify the person against whom such indemnity may be
sought (the "INDEMNIFYING PARTY") in writing and the indemnifying party,
upon request of the indemnified party, shall retain counsel reasonably
satisfactory to the indemnified party to represent the indemnified party
and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall have the
right to retain its own counsel, but the fees and expenses of such counsel
shall be at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually agreed to
the retention of such counsel or (ii) the named parties to any such
proceeding (including any impleaded parties) include both the indemnifying
party and the indemnified party and representation of both parties by the
same counsel would be inappropriate due to actual or potential differing
interests between them. It is understood that the indemnifying party shall
not, in respect of the legal expenses of any indemnified party in
connection with any proceeding or related proceedings in the same
jurisdiction, be liable for (i) the fees and expenses of more than one
separate firm (in addition to any local counsel) for the Underwriter and
all persons, if any, who control the Underwriter within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act
and (ii) the fees and expenses of more than one separate firm (in addition
to any local counsel) for Dal-Tile, its directors, its officers who sign
the Registration Statement and each person, if any, who controls Dal-Tile
within the meaning of either such Section, and that all such fees and
expenses shall be reimbursed as they are incurred. In the case of any such
separate firm for the Underwriter and such control persons of the
Underwriter, such firm shall be designated in writing by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ &
Co. Incorporated. In the case of any such separate firm for Dal-Tile, and
such directors, officers and control persons of Dal-Tile, such firm shall
be designated in writing by Dal-Tile. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment
for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any
time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel as
contemplated by the second and third sentences of this paragraph, the
indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 90 days after receipt by such indemnifying party of
the aforesaid request and (ii) such indemnifying party shall not have
reimbursed the indemnified party in accordance with such request prior to
the date of such settlement (other than with respect to requests for
reimbursement of an indemnified party contested in good faith). No
indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been
a party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter
of such proceeding.
(d) To the extent the indemnification provided for in Section 5(a) or
5(b) is unavailable to an indemnified party or insufficient in respect of
any losses, claims, damages or liabilities referred to therein, then each
indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims,
damages or liabilities (i) in such proportion as is appropriate to reflect
the relative benefits received by the indemnifying party or parties on the
one hand and the indemnified party or parties on the other hand from the
offering of the Shares, or (ii) if the allocation provided by clause
5(d)(i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
5(d)(i) above but also the relative fault of the indemnifying party or
parties on the one hand and of the indemnified party or parties on the
other hand in connection with the statements or omissions that resulted in
such losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative benefits received by Dal-Tile on the
one hand and the Underwriter on the other hand in connection with the
offering of the Shares, shall be deemed to be in the same respective
proportions as the net proceeds from the offering (before deducting
expenses) of the Shares, received by AWI and the total underwriting
discounts and commissions received by the Underwriter, in each case as set
forth in the table on the cover of the Prospectus, bear to the aggregate
public offering price of the Shares. The relative fault of Dal-Tile on the
one hand and the Underwriter on the other hand shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by Dal-Tile or by the
Underwriter and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission.
(e) Dal-Tile and the Underwriter agree that it would not be just or
equitable if contribution pursuant to this Section 5 were determined by pro
rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to in Section 5(d). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or
claim. Notwithstanding the provisions of this Section 5, the Underwriter
shall not be required to contribute any amount in excess of the amount by
which the total price at which the Shares, underwritten by it and
distributed to the public were offered to the public exceeds the amount of
any damages that the Underwriter has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The remedies provided for in this Section 5 are not
exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.
(f) The indemnity and contribution provisions contained in this
Section 5 and the representations, warranties and other statements of
Dal-Tile contained in this Agreement shall remain operative and in full
force and effect regardless of (i) any termination of this Agreement, (ii)
any investigation made by or on behalf of the Underwriter or any person
controlling the Underwriter, or Dal-Tile, its officers or directors or any
person controlling Dal-Tile and (iii) acceptance of and payment for any of
the Shares.
6. Termination. This Agreement shall be subject to termination by
notice given by you to Dal-Tile, if you elect to terminate the Underwriting
Agreement pursuant to Section 7 thereof.
7. Effectiveness. This Agreement shall become effective upon the
execution and delivery hereof by the parties hereto.
If the Underwriting Agreement shall be terminated by the Underwriter
because of any failure or refusal on the part of Dal-Tile to comply with
the terms or to fulfill any of the conditions of this Agreement, or if for
any reason Dal-Tile shall be unable to perform its obligations under this
Agreement, Dal-Tile will reimburse the Underwriter for all out-of-pocket
expenses (including the fees and disbursements of their counsel) reasonably
incurred by the Underwriter in connection with this Agreement, the
Underwriting Agreement or the offerings contemplated hereunder or
thereunder.
8. Counterparts. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as
if the signatures thereto and hereto were upon the same instrument.
9. Applicable Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York.
10. Headings. The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed a part
of this Agreement.
Very truly yours,
DAL-TILE INTERNATIONAL INC.
By:
--------------------------
Name:
Title:
Accepted as of the date hereof
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & CO. INCORPORATED
By:
-----------------------------
Name:
Title:
EXHIBIT A
[FORM OF LOCK-UP LETTER]
____________, 1998
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Dear Sirs and Mesdames:
The undersigned understands that ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated
("▇▇▇▇▇▇ ▇▇▇▇▇▇▇") proposes to enter into an Indemnification Agreement (the
"INDEMNIFICATION AGREEMENT") with Dal-Tile International Inc., a Delaware
corporation ("DAL-TILE"), relating to the sale by ▇▇▇▇▇▇▇▇▇ World
Industries, Inc. ("AWI") or ▇▇▇▇▇▇▇▇▇ Enterprises Inc. ("AEI") of ______
shares of the Common Stock, $.01 par value, of Dal-Tile (the "Common
Stock") (the "SHARES")(the "OFFERING").
To induce ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ to continue its efforts in connection with
the Offering, the undersigned hereby agrees that, without the prior written
consent of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, [it] [he] will not, during the period ending the
later of (i) January 1, 1999 or (ii) 45 days after the date of the final
prospectus relating to the Offering (the "PROSPECTUS"), [for so long as he
remains a director or executive officer of Dal-Tile,] (1) offer, pledge,
loan, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant
to purchase, or otherwise transfer or dispose of (each, a "TRANSFER"),
directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock (whether
such shares or any such securities all then owned by the undersigned or are
thereafter acquired directly from Dal-Tile), or (2) enter into any swap or
other arrangement that transfers to another, in whole or in part, any of
the economic consequences of ownership of the Common Stock, whether any
such transaction described in clause (1) or (2) above is to be settled by
delivery of Common Stock or such other securities, in cash or otherwise. In
addition, the undersigned agrees that, without the prior written consent of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, [it] [he] will not, during the period commencing on the
date hereof and ending the later of (i) January 1, 1999 or (ii) 45 days
after the date of the Dal-Tile Prospectus, make any demand for or exercise
any right with respect to, the registration of any shares of Common Stock
or any security convertible into or exercisable or exchangeable for Common
Stock. Notwithstanding anything to the contrary in the foregoing, the
consent of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ shall not be required for (i) any Transfer by the
undersigned to (A) any affiliate of the undersigned, or (B) any member of
the undersigned's immediate family, or to a trust for the benefit of the
undersigned or any member of the undersigned's immediate family, provided
that any such transferee shall agree in writing, prior to or
contemporaneously with such Transfer, to be bound by the provisions of this
agreement to the same extent as the undersigned, and (ii) any pledge by the
undersigned of shares of Common Stock, or any securities convertible into
or exercisable or exchangeable for Common Stock, to secure indebtedness,
provided that the pledgee shall agree in writing, prior to or
contemporaneously with such pledge, to be bound by the provisions of this
agreement to the same extent as the undersigned. The undersigned further
agrees that Dal-Tile may note such restrictions on the books and records of
Dal-Tile.
Whether or not the Offering actually occurs depends on a number of
factors, including market conditions. The Offering will only be made
pursuant to an Underwriting Agreement, the terms of which are subject to
negotiation between AWI and the Underwriter.
Very truly yours,
--------------------------------------------
(Name)
--------------------------------------------
(Address)