EXHIBIT 10.17
CHANGE OF CONTROL AGREEMENT
1. RECITALS
(a) This Change of Control Agreement ("Agreement") is between Dal-Tile
International Inc. (the "Company") and _________________ (the "Executive") and
is effective as of October 1, 2000.
(b) The address of the Company is 7834 C.F. Hawn Freeway, PO Box
170130, Dallas, Texas 75217. The address of the Executive is 4620 Melissa Lane,
Dallas, Texas 75229.
(c) The Executive is currently employed by the Company in the capacity
of ________________________ and the Executive is one of the key executives of
the Company.
(d) In consideration of the mutual promises contained herein and
other good and valuable consideration, the Executive and the Company have
entered into this Agreement.
2. TERM OF THIS AGREEMENT
(a) This Agreement shall remain in effect until December 31, 2005 (the
"Agreement Termination Date"), provided that on January 1, 2004 (and each
January 1st thereafter), the Agreement Termination Date shall be extended by
one year, unless the Company shall have notified the Executive at least six
months prior to such January 1st that the Agreement Termination Date shall not
be extended.
(b) Nothing contained in this Agreement shall prevent the Company at
any time from terminating the Executive's employment with the Company or
prevent the Company from removing the Executive from any position which the
Executive holds in the Company, subject to the obligation of the Company to
make payments and provide benefits if and to the extent required under this
Agreement, which payments and benefits shall be full and complete liquidated
damages, insofar as the obligations of the Company pursuant to this Agreement
are concerned, for any such action taken by the Company. The Executive
specifically acknowledges that, except for this Agreement, his employment by
the Company is employment-at-will, subject to termination by the Executive, or
by the Company, at any time with or without cause. The Executive acknowledges
that such employment-at-will status cannot be modified except in a specific
writing that has been authorized or ratified by the Board.
3. CHANGE OF CONTROL
Notwithstanding the other provisions of this Agreement, no benefit
shall be payable under this Agreement (and Sections 5 through 11, and Section
18, shall not apply) unless (i) a Change of Control of the Company shall be
deemed to have occurred, (ii) the Executive shall be employed by the Company at
the time of such Change of Control (except to the extent Section 3(g) is
applicable), and (iii) the Executive's employment by the Company shall have
been terminated (by the Executive or by the Company) within two (2) years
thereafter. For purposes of this Agreement, a "Change of Control of the
Company" shall be deemed to have occurred if:
(a) The Company is merged, consolidated or reorganized into or with
another corporation or other legal person, and immediately after such merger,
consolidation or reorganization less than fifty percent (50%) of the combined
voting power of the then-outstanding securities of such corporation or person
immediately after such transaction are held in the aggregate by the holders of
voting stock of the Company immediately prior to such transaction;
(b) The Company sells all or substantially all of its assets to any
other corporation or other legal person, and less than fifty percent (50%) of
the combined voting power of the then-outstanding securities of such
corporation or person immediately after such sale are held in the aggregate by
the holders of voting stock of the Company immediately prior to such sale;
(c) Any person or group of persons (as the term "person" is used in
Section 13(d)(3) or Section 14(d)(2) of the Exchange Act), other than DTI
Investors LLC or its members, or any affiliate or successor of DTI Investors
LLC or its members, becomes the beneficial owner (as the term "beneficial
owner" is defined under Rule 13d-3 or any successor rule or regulation
promulgated under the Exchange Act) of securities (i) representing 40% or more
of the issued and outstanding common stock of the Company or (ii) possessing
the power to elect a majority of the Board of Directors of the Company,
provided that a Change of Control under this Section 3(c) shall only be deemed
to occur if such person or persons shall own at such time a greater number of
shares of common stock than are owned at such time by DTI Investors LLC, or its
members, or its former members (taken as a group);
(d) The Company files a report or proxy statement with the Securities
and Exchange Commission pursuant to the Exchange Act disclosing in response to
Form 8-K or Schedule 14A (or any successor schedule, form or report or item
therein) that a Change of Control of the Company has occurred;
(e) The shareholders of the Company approve the liquidation or
dissolution of the Company;
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(f) If during any period of two consecutive years, individuals who
at the beginning of any such period constitute the Board of Directors of the
Company (the "Board") cease for any reason to constitute at least a majority
thereof, provided, however, that for purposes of this Section 3(f), each
Director who is first elected, or first nominated for election by the Company's
stockholders, by a vote of at least two thirds of the Directors of the Company
(or a committee thereof) then still in office who were Directors of the Company
at the beginning of any such period will be deemed to have been a Director of
the Company at the beginning of such period; or
(g) At the time of determination, the Company is actively engaged in
negotiations or other activities for the purpose of effecting a transaction of
the type referred to in Section 3(a), (b), (c), or (e) of this Agreement and,
in the case of this Section 3(g) only, the Executive's employment is terminated
by the Company.
4. NOTICE OF TERMINATION; DATE OF TERMINATION
(a) Any termination of the Executive's employment by the Company or
the Executive shall be communicated by written Notice of Termination to the
other party thereto. For purposes of this Agreement, a "Notice of Termination"
shall mean a notice which shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of employment
under the provision so indicated.
(b) "Date of Termination" shall mean:
(i) If the Agreement is terminated for Disability, thirty
(30) days after Notice of Termination is given
(provided that the Executive shall not have returned
to the performance of his duties on a full-time basis
during such thirty (30) day period),
(ii) If the Executive's employment is terminated for Good
Reason pursuant to Section 10, the date specified in
the Notice of Termination, or
(iii) If the Executive's employment is terminated for any
other reason, the date on which a Notice of
Termination is given.
5. COMPENSATION AFTER CHANGE OF CONTROL
Immediately after any Change of Control of the Company shall be
deemed to have occurred, the Executive shall be entitled to receive for the
remainder of the Term of this Agreement (as extended from time to time) (i) an
annual base salary
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(the "Base Salary"), payable in installments in accordance with the current
practice of the Company, at an annual rate at least equal to the aggregate
annual base salary payable to the Executive as of the date of the Change of
Control of the Company and (ii) an award under a Company incentive bonus plan
offering the Executive the opportunity to earn a target bonus at least
comparable to the target bonus opportunity offered under the Company's Annual
Incentive Plan immediately prior to the Change of Control. Subsequent to such
Change of Control, the Base Salary may be increased (but may not be decreased)
at any time and from time to time by action of the Board, any committee
thereof, or any individual having authority to take such action, in accordance
with the Company's regular practices, and, if so increased, such increased Base
Salary shall thereafter be the Base Salary for the purposes of this Agreement.
Any increase in the Base Salary shall not serve to limit or reduce any other
obligation of the Company hereunder.
6. BENEFIT PLANS
After a Change of Control of the Company shall be deemed to have
occurred,
(a) The Company agrees to continue in effect those perquisites, and
benefit or compensation plans, identified on Exhibit A hereto in which the
Executive is currently participating or, with continued service or retirement
would be eligible for participation (collectively referred to as the "Benefit
Plans"); or to maintain plans providing substantially similar benefits;
provided, however, that the Company may make modifications in such plans so
long as such modifications (i) are generally applicable to all salaried
employees of the Company and (ii) do not discriminate against highly-paid
employees of the Company;
(b) Except as permitted in the proviso contained in paragraph (a)
above, the Company agrees not to take any action that would adversely affect
the Executive's participation in, or materially reduce the benefits under, any
of the Benefit Plans or deprive the Executive of any material fringe benefit
currently enjoyed;
(c) The Company agrees to provide the Executive with the number of
paid vacation days to which he is entitled on the basis of years of service
with the Company in accordance with the Company's normal vacation policy in
effect on the date of the Change of Control of the Company or in accordance
with the Executive's individual employment agreement; and
(d) Benefits herein provided are in lieu of any severance payment
benefit otherwise provided under any other Agreement, policy or practice
provided by the Company except that Executive shall retain any rights that
Executive has with respect to accumulated and unused vacation or vacation pay.
The Executive waives all rights to any other severance payments under any such
agreement, policy or practice provided, however, that this waiver shall not
extend to any retirement plan,
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excess benefit plan, or applicable supplemental pension plan.
7. TERMINATION FOR CAUSE
(a) The Company may terminate the Executive's employment for Cause.
For the purposes of this Agreement, 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 believed
he was acting in good faith or in a manner not opposed to the interests of the
Company. The Company agrees to provide to the Executive prior written notice
(the "Notice") of its intention to terminate Executive's employment for Cause,
such notice to state in detail the particular acts or failures to act that
constitute grounds for the termination.
(b) If the Executive's employment shall be terminated for Cause, the
Company shall pay the Executive his full Base Salary through the Date of
Termination at the rate in effect at the time Notice of Termination is given
and the Company shall have no further obligations to the Executive under this
Agreement.
8. TERMINATION FOR DEATH OR DISABILITY
(a) The Executive's employment shall terminate in the event of
Executive's death.
(b) The Company may terminate Executive's employment for "Disability"
if the Executive is "Disabled." For purposes of this Agreement, the Executive
shall be considered Disabled only if, as a result of his incapacity due to
physical or mental illness, he shall have been absent from his duties with the
Company on a full-time basis for a period of one year and a physician selected
by him is of the opinion that (i) he is suffering from "Total Disability" as
defined in the Company's qualified pension plan as of the date hereof, or any
successor plan or program and (ii) he will qualify for Social Security
Disability Payment and (iii) within thirty (30) days after written notice of
termination is given, he shall not have returned to the full-time performance
of his duties.
(c) If, subsequent to a Change of Control, the Executive's employment
terminates on account of the Executive's death or because the Executive is
Disabled, the Company shall pay to the Executive (or his successors) the
amounts, and provide to the Executive the benefits, set forth in Section 11
hereof.
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9. TERMINATION FOLLOWING RETIREMENT
(a) Executive's employment will terminate upon the Executive's
Retirement. For purposes of this Agreement, "Retirement" shall mean termination
of the Executive's employment with his consent in accordance with the Company's
retirement policy (including early retirement) generally applicable to its
salaried employees or in accordance with any retirement arrangement established
with the Executive's consent with respect to him.
(b) In the event Executive's employment terminates as a result of
Executive's Retirement, the Company shall pay to the Executive his full Base
Salary through the Date of Termination at the rate in effect at the time Notice
of Termination is given and the Company shall have no further obligation to the
Executive under this Agreement, and the Executive shall not be entitled to the
payments and benefits set forth in Section 11 hereof.
10. TERMINATION OF EMPLOYMENT BY THE EXECUTIVE FOR GOOD REASON
The Executive may terminate his employment for Good Reason. For
purposes of this Agreement, Good Reason will exist if any one or more of the
following occur:
(i) Failure by the Company to honor any of its obligations under
Sections 5, 6, 12, or 13; or
(ii) Any purported termination by the Company of the Executive's
employment that is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 4 above
and, for purposes of this Agreement, no such purported
termination shall be effective; or
(iii) Failure to elect or reelect or otherwise to maintain the
Executive to or in the office or the position (or a
substantially equivalent office or position) in the Company
that the Executive held immediately prior to a Change of
Control of the Company having been deemed to occur, or the
removal of the Executive as a Director of the Company (or any
successor thereto) if the Executive shall have been a Director
of the Company immediately prior to the Change of Control of
the Company having been deemed to occur; or
(iv) A significant adverse change in the nature or scope of the
authorities, powers, functions, responsibilities (including
reporting responsibilities), or duties attached to the
position with the Company which the Executive held immediately
prior
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to the Change of Control of the Company having been deemed to
occur, without the prior written consent of the Executive,
which is not remedied within 10 calendar days after receipt by
the Company of written notice from the Executive of such
change; or
(v) A determination by the Executive made in good faith that as a
result of a Change of Control of the Company having been
deemed to occur and a change in circumstances thereafter
significantly affecting his position, including without
limitation a change in the scope of the business or other
activities for which he was responsible immediately prior to a
Change of Control of the Company having been deemed to occur,
he has been rendered substantially unable to carry out, has
been substantially hindered in the performance of, or has
suffered a substantial reduction in, any of the authorities,
powers, functions, responsibilities or duties attached to the
position held by the Executive immediately prior to the Change
of Control of the Company having been deemed to occur, which
situation is not remedied within 10 calendar days after
written notice to the Company from the Executive of such
determination; or
(vi) The Company shall relocate its principal executive offices, or
require the Executive to have his principal location of work
changed, to any location which is in excess of 50 miles from
the location thereof immediately prior to the change of
control of the Company having been deemed to occur or to
travel away from his office in the course of discharging his
responsibilities or duties hereunder significantly more (in
terms of either consecutive days or aggregate days in any
calendar year) than was required of him prior to the change of
control of the Company having been deemed to occur without, in
either case, his prior written consent; or
(vii) the cessation of the Company's status as a corporation the
stock of which is publicly traded on a national securities
exchange.
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11. COMPENSATION UPON CERTAIN TERMINATIONS
(a) If, subsequent to a Change of Control, (i) the Company shall
terminate the Executive's employment other than pursuant to Section 7 hereof or
(ii) the Executive shall terminate his employment for Good Reason pursuant to
Section 10 hereof, then the Company shall pay to the Executive in a lump sum on
the fifteenth business day following the Date of Termination, the following
amounts:
(i) The Executive's Base Salary through the Date of Termination at
the rate in effect at the time Notice of Termination is given;
(ii) A pro-rata portion of the Executive's target bonus for the
year in which the Date of Termination occurs, based upon the
number of days that have elapsed during the year in question
prior to the Date of Termination.
(iii) In lieu of any further salary and bonus payments for periods
subsequent to the Date of Termination, an amount equal to 2.5
multiplied by the sum of (i) the Executive's current Base
Salary at such time and (ii) the greater of (I) the average of
the bonuses actually received by the Executive with respect to
the two calendar years immediately preceding the year in which
the Date of Termination occurs or (II) the Executive's target
bonus for the year in which the Date of Termination occurs.
(iv) All legal fees and expenses incurred as a result of such
termination (including all such fees and expenses, if any,
incurred in contesting or disputing any such termination, in
seeking to obtain or enforce any right or benefit provided by
this Agreement, or in interpreting this Agreement).
(b) If, subsequent to a Change of Control, (i) the Company shall
terminate the Executive's employment other than pursuant to Section 7 hereof, or
(ii) the Executive shall terminate his employment for Good Reason pursuant to
Section 10 hereof, the Company shall maintain in full force and effect, for the
Executive's continued benefit for thirty (30) months after the Date of
Termination, all medical and dental employee benefit plans, programs, or
arrangements in which he was entitled to participate immediately prior to the
Date of Termination, provided that continued participation is possible under the
general terms and provisions of such plans and programs. In the event that
participation in any such plan or program is barred, the Company shall arrange
to provide him with benefits substantially similar in coverage and cost to those
which he is entitled to receive under such plans and programs.
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(c) If, subsequent to a Change of Control, (i) the Company shall
terminate the Executive's employment other than pursuant to Section 7 hereof, or
(ii) the Executive shall terminate his employment for Good Reason pursuant to
Section 10 hereof, the Company shall allow the Executive, at Company expense, to
utilize the services of the public accounting firm used by the Company to audit
its books and records (or such other firm as shall be designated by the Company)
for assistance in preparation of his tax returns relating to the taxable year in
which the Executive's employment was terminated (and for any other taxable year
that is affected by the Change of Control).
12. TREATMENT OF STOCK OPTIONS
Notwithstanding any provision to the contrary in any stock option
plan or any agreement relating to the Executive that provides for less favorable
treatment of any stock option or stock appreciation right, in the event of the
consummation of a Change of Control of the Company (excluding for this purpose
the application of Section 3(g) hereof), all stock options and stock
appreciation rights granted prior to the Change of Control by the Company to the
Executive with respect to the stock of the Company shall immediately vest and
become immediately exercisable and shall remain so for a period of three (3)
months subsequent to the date that Executive's employment is terminated. To the
extent any stock option plan or any agreement relating to Executive permits
Executive to exercise a stock option or a stock appreciation right for a longer
period, the terms of such plan or agreement shall control.
13. SUCCESSORS, BINDING AGREEMENT
The Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company, by agreement in form and substance
satisfactory to the Executive, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. Failure of the
Company to obtain such agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle the Executive
to compensation from the Company in the same amount and on the same terms as
would apply if the Executive terminated his employment for Good Reason, except
that for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of Termination. As used in
this Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid that executes and delivers
the agreement provided for in this section or which otherwise becomes bound by
all the terms and provisions of this Agreement by operation of law. This
Agreement shall inure to the benefit of and be enforceable
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by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive should die while any amount would still be payable hereunder had the
Executive continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to his
devisee, legatee, or other designee or, if there be no such designee, to his
estate.
14. NOTICE
Notices and all other communications provided for in this Agreement
shall be in writing and shall be deemed to have been duly given when delivered
or mailed by facsimile, overnight delivery service, or United States registered
mail, return receipt requested, postage prepaid, addressed to the respective
addresses set forth on the first page of this Agreement, provided that all
notices to the Company shall be directed to the attention of the Secretary of
the Company, or to such other address as either party may have furnished to the
other in writing in accordance herewith, except that notices of change of
address shall be effective only upon receipt.
15. MISCELLANEOUS
No provisions of this Agreement may be modified, waived or discharged
unless such modification, waiver or discharge is agreed to in writing signed by
the Executive and such officer as may be specifically designated by the Board of
Directors of the Company. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreement or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Texas.
16. VALIDITY
The invalidity or unenforceability of any one or more provisions of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
17. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
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18. ALTERNATIVE DISPUTE RESOLUTION
Any and all disputes arising out of or relating to this Agreement or
the breach, termination or validity thereof shall be settled by arbitration
before a sole arbitrator in accordance with the then current CPR Rules for
Non-Administered Arbitration. The arbitration shall be governed by the Federal
Arbitration Act, 9 U.S.C. Section 116, and judgment upon the award rendered by
the arbitrator may be entered by any court having jurisdiction thereof. The
arbitration shall be held in Dallas, Texas and, unless the parties agree
otherwise, the arbitrator shall be selected from CPR's panel of neutrals.
Either party may demand arbitration by sending to the other party by
certified mail a written notice of demand for arbitration, setting forth the
matters to be arbitrated. The arbitrator shall have the authority to award only
compensatory damages, and neither party shall be entitled to written or
deposition discovery from the other. The Company will pay the fees and expenses
of the arbitrator, as well as any attorneys' fees, expert witness fees, and
other expenses to the extent provided in Section 21 hereof. The arbitrator shall
have no authority to alter, amend or modify any of the terms and conditions of
this Agreement.
Before arbitrating the dispute, the parties, if they so agree, may
endeavor to settle the dispute by mediation under the then current CPR Mediation
Procedure. Unless otherwise agreed, the parties will select a mediator from the
CPR panel of neutrals. If the mediation is not successfully concluded within
thirty (30) days, the dispute will proceed to arbitration as set forth above.
Notwithstanding the pendency of any dispute or controversy concerning
termination or the effects thereof, the Company will continue to pay the
Executive his full compensation in effect immediately before any notice of
termination giving rise to the dispute was given and continue him as a
participant in all compensation, benefit and insurance plans in which he was
then participating, until an award has been entered by the arbitrator. Any
amounts paid hereunder shall be set off against or reduced by any other amounts
due under this Agreement.
19. CERTAIN TAX MATTERS
(a) ADDITIONAL PAYMENTS
(i) Anything in this Agreement to the contrary
notwithstanding (other than as provided in Section
19(b) hereof), in the event it shall be determined
(as hereafter provided) that any payment or
distribution to or for the Executive's benefit,
whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement
or otherwise pursuant to or by reason of any
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other agreement, policy, plan, program or
arrangement (including without limitation any stock
option agreement), or similar right (a "Payment"),
would be subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986
(the "Code") (or any successor provision thereto),
or any interest or penalties with respect to such
excise tax (such excise tax, together with any such
interest and penalties, are hereafter collectively
referred to as the "Excise Tax"), then the Executive
shall be entitled to receive an additional payment
or payments (a "Gross-Up Payment") in an amount such
that, after payment by the Executive of all taxes
(including any interest or penalties imposed with
respect to such taxes), including any Excise Tax,
imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to
the Excise Tax imposed upon the Payments.
(ii) Subject to the provisions of Section 19(a)(v), all
determinations required to be made under this Section
19(a), including whether an Excise Tax is payable by
the Executive, the amount of such Excise Tax, whether
a Gross-Up Payment is required, and the amount of
such Gross-Up Payment, shall be made by a
nationally-recognized legal or accounting firm (the
"Firm") selected by the Company in the Company's sole
discretion. The Executive agrees to direct the Firm
to submit its determination and detailed supporting
calculations to both the Executive and the Company as
promptly as practicable. If the Firm determines that
any Excise Tax is payable by the Executive and that a
Gross-Up Payment is required, the Company shall pay
the Executive the required Gross-Up Payment within
fifteen business days after receipt of such
determination and calculations. If the Firm
determines that no Excise Tax is payable by the
Executive, it shall, at the same time as it makes
such determination, furnish the Executive with an
opinion that the Executive has substantial authority
not to report any Excise Tax on the Executive's
federal income tax return. Any determination by the
Firm as to the amount of the Gross-Up Payment shall
be binding upon the Executive and the Company. As a
result of the uncertainty in the application of
Section 4999 of the Code (or any successor provision
thereto) at the time of the initial determination by
the Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company
should have been made (an "Underpayment"). In the
event that the Company exhausts its remedies pursuant
to Section 19(a)(v) hereof and the Executive
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thereafter is required to make a payment of any
Excise Tax, the Executive may direct the Firm to
determine the amount of the Underpayment (if any)
that has occurred and to submit its determination and
detailed supporting calculations to both the
Executive and the Company as promptly as possible.
Any such Underpayment shall be promptly paid by the
Company to the Executive, or for the Executive's
benefit, within ten business days after receipt of
such determination and calculations.
(iii) The Executive and the Company shall each provide the
Firm access to and copies of any books, records and
documents in the possession of the Company or the
Executive, as the case may be, reasonably requested
by the Firm, and otherwise cooperate with the Firm in
connection with the preparation and issuance of the
determination contemplated by Section 19(a)(ii)
hereof.
(iv) The fees and expenses of the Firm for its services in
connection with the determinations and calculations
contemplated by Section 19(a)(ii) hereof shall be
borne by the Company. If such fees and expenses are
initially paid by the Executive, the Company shall
reimburse the Executive the full amount of such fees
and expenses within ten business days after receipt
from the Executive of a statement therefor and
reasonable evidence of the Executive's payment
thereof.
(v) The Executive agrees to notify the Company in writing
of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company
of a Gross-Up Payment. Such notification shall be
given as promptly as practicable but no later than 10
business days after the Executive actually receives
notice of such claim. The Executive agrees to further
apprise the Company of the nature of such claim and
the date on which such claim is requested to be paid
(in each case, to the extent known by the Executive).
The Executive agrees not to pay such claim prior to
the earlier of (a) the expiration of the
30-calendar-day period following the date on which
the Executive gives such notice to the Company and
(b) the date that any payment with respect to such
claim is due. If the Company notifies the Executive
in writing at least five business days prior to the
expiration of such period that it desires to contest
such claim, the Executive agrees to:
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(a) provide the Company with any written records
or documents in the Executive's possession
relating to such claim reasonably requested
by the Company;
(b) take such action in connection with
contesting such claim as the Company shall
reasonably request in writing from time to
time, including without limitation accepting
legal representation with respect to such
claim by an attorney competent in respect of
the subject matter and reasonably selected
by the Company;
(c) cooperate with the Company in good faith in
order effectively to contest such claim; and
(d) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay
directly all costs and expenses (including interest and
penalties) incurred in connection with such contest and
shall indemnify and hold the Executive harmless, on an
after-tax basis, from and against any Excise Tax or income
tax, including interest and penalties with respect thereto,
imposed as a result of such representation and payment of
costs and expenses. Without limiting the foregoing
provisions of this Section 19(a)(v), the Company shall
control all proceedings taken in connection with the
contest of any claim contemplated by this Section 19(a)(v)
and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such
claim (provided, however, that the Executive may
participate therein at the Executive's own cost and
expense) and may, at its option, either direct the
Executive to pay the tax claimed and sue for a refund or
contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a
court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however,
that if the Company directs the Executive to pay the tax
claimed and sue for a refund, the Company shall advance the
amount of such payment to the Executive on an interest-free
basis and shall indemnify and hold the Executive harmless,
on an after-tax basis, from any Excise Tax or income tax,
including
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interest or penalties with respect thereto, imposed with
respect to such advance; and provided further, however,
that any extension of the statute of limitations relating
to payment of taxes for the Executive's taxable year with
respect to which the contested amount is claimed to be due
is limited solely to such contested amount. Furthermore,
the Company's control of any such contested claim shall be
limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be
entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any
other taxing authority.
(vi) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 19(a)(v)
hereof, the Executive receives any refund with
respect to such claim, the Executive agrees (subject
to the Company's complying with the requirements of
Section 19(a)(v) hereof) to promptly pay to the
Company the amount of such refund (together with any
interest paid or credited thereon after any taxes
applicable thereto). If, after the Executive's
receipt of an amount advanced by the Company pursuant
to Section 19(a)(v) hereof, a determination is made
that the Executive is not entitled to any refund with
respect to such claim and the Company does not notify
the Executive in writing of its intent to contest
such denial of refund prior to the expiration of 30
calendar days after such determination, then such
advance shall be forgiven and shall not be required
to be repaid and the amount of such advance shall
offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid pursuant to this Section
19(a).
(b) Notwithstanding Section 19(a), in the event that the excess
of (i) the amount of "parachute payments" (as defined in
Section 280G of the Code) received by the Executive
pursuant to this Agreement (or any other agreement between
the Company and the Executive) over (ii) 2.99 times the
Executive's "base amount" (as defined in Section 280G of
the Code), is less than $50,000, the Executive agrees to
waive such payments and benefits as he may choose so as to
reduce the payments and benefits that he shall receive to
an amount that will not result in any loss of a deduction
to the Company for such payments and benefits pursuant to
Section 280G nor the imposition of an excise tax on the
Executive for such payments and benefits pursuant to
Section 4999.
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20. WITHHOLDING OF TAXES
The Company may withhold from any amounts payable under this
Agreement all federal, state, city or other taxes as shall be required pursuant
to any law or government regulation or ruling.
21. LEGAL FEES AND EXPENSES
It is the intent of the Company that the Executive not be required to
incur the legal expenses associated with (i) the obtaining of any right or
benefit under, this Agreement or (ii) the enforcement of his rights under this
Agreement by litigation or other legal action, because the cost and expense
thereof would substantially detract from the benefits intended to be extended to
the Executive hereunder. Accordingly, the Company irrevocably authorizes the
Executive from time to time to retain counsel of his choice, at the expense of
the Company as hereafter provided, to represent the Executive in connection with
the interpretation or enforcement of this Agreement, including the initiation or
defense of any litigation or other legal action, whether by or against the
Company or any Director, officer, stockholder or other person affiliated with
the Company, in any jurisdiction. Notwithstanding any existing or prior
attorney-client relationship between the Company and such counsel, the Company
irrevocably consents to the Executive's entering into an attorney-client
relationship with such counsel, and in that connection the Company and the
Executive agree that a confidential relationship shall exist between the
Executive and such counsel. The Company shall pay or cause to be paid and shall
be solely responsible for any and all attorneys' and related fees and expenses
incurred by the Executive under this Section 21.
Dal-Tile International Inc.
BY:
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Title:
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[Name]
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