DAL TILE INTERNATIONAL INC
S-8, 1999-01-21
STRUCTURAL CLAY PRODUCTS
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   AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 20, 1999
                                        REGISTRATION NO.  333-_______________
=============================================================================
                     SECURITIES AND EXCHANGE COMMISSION
                           WASHINGTON, D.C. 20549
                    -----------------------------------

                                  FORM S-8

                           REGISTRATION STATEMENT

                                   UNDER

                         THE SECURITIES ACT OF 1933

                    -----------------------------------
                        DAL-TILE INTERNATIONAL INC.
           (Exact name of registrant as specified in its charter)

         DELAWARE                                            13-3548809
     (State or other                                      (I.R.S. Employer
     jurisdiction of                                   Identification Number)
     incorporation or
      organization)
                           7834 C.F. HAWN FREEWAY
                              DALLAS, TX 75217
                               (214) 398-1411
                  (Address of principal executive offices)

                   CERTAIN SHARES TO BE ISSUED UNDER THE
                      DAL-TILE INTERNATIONAL INC. 1990
                STOCK OPTION PLAN (AS AMENDED AND RESTATED)
                          (Full title of the plan)

                             JACQUES R. SARDAS
                     PRESIDENT, CHIEF EXECUTIVE OFFICER
                         AND CHAIRMAN OF THE BOARD
                        DAL-TILE INTERNATIONAL INC.
                           7834 C.F. HAWN FREEWAY
                              DALLAS, TX 75217
                               (214) 398-1411
         (Name, address, and telephone number of agent for service)




<PAGE>



                      CALCULATION OF REGISTRATION FEE

=============================================================================
                                     PROPOSED     PROPOSED
 TITLE OF SECURITIES   AMOUNT TO     MAXIMUM      MAXIMUM        AMOUNT OF
  TO BE REGISTERED        BE         OFFERING     AGGREGATE     REGISTRATION
                       REGISTERED   PRICE PER     OFFERING          FEE
                                      SHARE        PRICE
- -----------------------------------------------------------------------------

Common Stock, par      2,803,931    $9.01(2)  $25,263,418.31(2)  $7,023.23(2)
value $.01 per share     shares(1)                   

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

Common Stock, par        725,875    $9.91(2)   $7,193,421.25(2)  $1,999.77(2)
value $.01 per share     shares(1)                   

=============================================================================

(1) Includes an  indeterminate  number of shares of Common Stock that may be
    issuable  by  reason  of  stock  splits,   stock  dividends  or  similar
    transactions  in accordance  with Rule 416 under the  Securities  Act of
    1933.

(2) Pursuant to Rule 457(h) under the  Securities  Act of 1933,  the amounts
    are  calculated  based upon the  maximum  price at which  stock  options
    covering the registered shares of Common Stock may be exercised.


<PAGE>


                              EXPLANATORY NOTE

     This  Registration  Statement  relates to  3,529,806  shares of common
stock of Dal-Tile  International  Inc. (the "Company",  "we", or "us"), par
value $.01 per share (the  "Common  Stock"),  which may be issued  upon the
exercise  of  non-qualified   stock  options  granted  under  the  Dal-Tile
International  Inc.  1990 Stock Option Plan,  as amended and restated  (the
"Plan").  These shares  constitute  only those shares of Common Stock which
are issuable  pursuant to the exercise of options  which were granted under
the Plan through and including January 1, 1996.  Shares underlying  options
granted  subsequent to January 1, 1996 are not covered by this Registration
Statement.

                                  PART II
             INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

ITEM 3.  INCORPORATION OF DOCUMENTS BY REFERENCE

     We file annual,  quarterly and special  reports,  proxy statements and
other  information with the SEC. You may read and copy any document we file
at the SEC's public  reference rooms in Washington,  D.C., New York, NY and
Chicago,  IL. Please call the SEC at 1-800-SEC-0330 for further information
on the public  reference  rooms.  Our SEC filings are also available to the
public from the SEC's web site at  http://www.sec.gov.  Reports,  proxy and
information  statements  and other  information  concerning  us can also be
inspected at the offices of the New York Stock  Exchange,  20 Broad Street,
New York, NY 10005.

     The SEC allows us to "incorporate by reference"  information into this
registration  statement,   which  means  that  we  can  disclose  important
information to you by referring you to another  document  filed  separately
with the SEC. The information incorporated by reference is considered to be
part of this  registration  statement,  and later  information that we file
with the SEC will  automatically  update this  registration  statement.  We
incorporate  by  reference  the  following  documents  listed below and any
future filings made with the SEC under Sections  13(a),  13(c), 14 or 15(d)
of  the  Securities  Exchange  Act  of  1934,  as  amended,  prior  to  the
termination of the offering:

     *    Annual  Report on Form 10-K and Form  10-K/A  for the year  ended
          January 2, 1998;

     *    Quarterly  Reports on Form 10-Q for the  quarterly  periods ended
          October 2, 1998, July 3, 1998 and April 3, 1998; and

     *    The description of the Common Stock contained in our registration
          statement on Form 8-A, dated July 16, 1996 (File No. 1-11939).

     You may  request a copy of these  filings  at no cost,  by  writing or
telephoning us at the following address:

          Mark A. Solls
          Vice President, General Counsel
            and Secretary
          Dal-Tile International Inc.
          7834 C.F. Hawn Freeway
          Dallas, Texas  75217
          (214) 398-1411

ITEM 5.  INTERESTS OF NAMED EXPERTS AND COUNSEL

     The legality of the securities  offered pursuant to this  Registration
Statement has been passed upon for the Company by Mark A. Solls, Esq., Vice
President,  General  Counsel and  Secretary of the Company.  Mr. Solls owns
shares and options to purchase shares of Common Stock of the Company.

ITEM 6.  INDEMNIFICATION OF DIRECTORS AND OFFICERS

     Article  SEVENTH of the Second  Amended and  Restated  Certificate  of
Incorporation of the Company provides as follows:

          "To  the  fullest  extent  permitted  by the  Delaware  General
          Corporation Law as the same exists or may hereafter be amended,
          a  Director  of the  Corporation  shall  not be  liable  to the
          Corporation or its stockholders for monetary damages for breach
          of fiduciary duty as a Director."

     Section  145 of the General  Corporation  Law of the State of Delaware
provides as follows:

     A corporation shall have power to indemnify any person who was or is a
party or is  threatened  to be made a party to any  threatened,  pending or
completed   action,   suit  or   proceeding,   whether   civil,   criminal,
administrative or investigative (other than an action by or in the right of
the  corporation),  by  reason  of the  fact  that the  person  is or was a
director,  officer,  employee  or  agent  of the  corporation  or is or was
serving at the request of the corporation as a director,  officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees),  judgments,  fines
and amounts  paid in  settlement  actually and  reasonably  incurred by the
person in  connection  with such action,  suit or  proceeding if the person
acted in good faith and in a manner the person reasonably believed to be in
or not opposed to the best interests of the  corporation  and, with respect
to any criminal  action or proceeding,  had no reasonable  cause to believe
his conduct was unlawful.

     In a  derivative  action,  i.e.,  one  by  or  in  the  right  of  the
corporation,  indemnification  may be made only for  expenses  actually and
reasonably  incurred  by a  director,  officer,  employee  or  agent of the
corporation,  or a  person  who is or was  serving  at the  request  of the
corporation  as  a  director,   officer,   employee  or  agent  of  another
corporation  or  business  association  in  connection  with the defense or
settlement of an action or suit, if such person has acted in good faith and
in a manner that he or she  reasonably  believed to be in or not opposed to
the best interests of the corporation, except that no indemnification shall
be made if such  person  shall  have  been  adjudged  to be  liable  to the
corporation  unless  and only to the  extent  that the  court in which  the
action  or suit was  brought  shall  determine  upon  application  that the
defendant is fairly and reasonably  entitled to indemnity for such expenses
despite such adjudication of liability.

     The Company has entered into agreements to provide indemnification for
the Company's directors in addition to the indemnification  provided for in
the Restated Bylaws of the Company.  These agreements,  among other things,
will indemnify the Company's  directors to the fullest extent  permitted by
Delaware law for certain  expenses  (including  attorneys'  fees),  losses,
claims,  liabilities,  judgments,  fines and settlement amounts incurred by
such indemnitee in any action or proceeding,  including any action by or in
the right of the  Company,  on account of services as a director or officer
of any  affiliate of the Company,  or as a director or officer of any other
company or  enterprise  that the  indemnitee  provides  services  to at the
request of the Company.

ITEM 8.  EXHIBITS

EXHIBIT NO.             DESCRIPTION OF EXHIBIT
- -----------             ----------------------

4.1   --  Second Amended and Restated  Certificate of Incorporation  of the
          Company (Filed as Exhibit 3.1 to the Company's Form 10-Q filed on
          November 7, 1996 and incorporated herein by reference).

4.2   --  Amended and Restated By-Laws of the Company (Filed as Exhibit 3.2
          to   the   Company's   Registration   Statement   on   Form   S-1
          (No. 333-5069) and incorporated herein by reference).

4.3   --  Specimen  form of certificate  for common stock (Filed as Exhibit
          4.1  to  the   Company's  Registration   Statement  on  Form  S-1
          (No. 333-5069) and incorporated herein by reference).

4.4   --  Dal-Tile International Inc. 1990 Stock Option Plan as amended and
          restated (entitled the Dal-Tile International Inc. 1998 Amended
          and Restated Stock Option Plan).*

5.1   --  Opinion  of  Mark A. Solls as to the  legality  of the  shares of
          Common Stock covered by the Registration Statement.*

23.1  --  Consent of Ernst & Young LLP.*

24.1  --  Powers of Attorney (included on the signature pages).

*    Filed herewith.



ITEM 9.  UNDERTAKINGS

     The Company hereby undertakes:

          (a)  To file,  during  any  period  in which  offers or sales are
     being made, a post-effective  amendment to the Registration  Statement
     to  include  any  material  information  with  respect  to the plan of
     distribution not previously disclosed in the Registration Statement or
     any material change to such information in the Registration Statement.

          (b)  That, for the purpose of determining any liability under the
     Securities  Act, each  post-effective  amendment to this  Registration
     Statement shall be deemed to be a new registration  statement relating
     to the securities offered therein, and the offering of such securities
     at that  time  shall be deemed to be the  initial  bona fide  offering
     thereof.

          (c)  To remove  from  registration  by means of a  post-effective
     amendment any of the securities  being  registered which remain unsold
     at the termination of the offering.

          (d)  That, for the purpose of determining any liability under the
     Securities Act, each filing of the Company's annual report pursuant to
     Section   13(a)  or  Section   15(d)  of  the  Exchange  Act  that  is
     incorporated  by reference  in this  Registration  Statement  shall be
     deemed to be a new registration  statement  relating to the securities
     offered  therein,  and the  offering of such  securities  at that time
     shall be deemed to be the initial bona fide offering thereof.

     Insofar  as   indemnification   for  liabilities   arising  under  the
Securities  Act may be permitted  to  directors,  officers and  controlling
persons of the Company pursuant to the foregoing provisions,  or otherwise,
the Company has been  advised  that in the opinion of the  Commission  such
indemnification is against public policy as expressed in the Securities Act
and  is,  therefore,   unenforceable.   In  the  event  that  a  claim  for
indemnification  against  such  liabilities  (other than the payment by the
Company of expenses incurred or paid by a director,  officer or controlling
person of the  Company in the  successful  defense of any  action,  suit or
proceeding) is asserted by such director,  officer or controlling person in
connection with the securities being  registered,  the Company will, unless
in the opinion of its counsel  the matter has been  settled by  controlling
precedent,  submit  to a court of  appropriate  jurisdiction  the  question
whether such indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final  adjudication  of such
issue.



                                 SIGNATURES

     Pursuant  to the  requirements  of the  Securities  Act of  1933,  the
Company  certifies that it has reasonable  grounds to believe that it meets
all of the  requirements  for filing on Form S-8 and has duly  caused  this
Registration  Statement  to be  signed on its  behalf  by the  undersigned,
thereunto duly authorized, in Dallas, Texas, on January 20, 1999.


                                    DAL-TILE INTERNATIONAL INC.
                                    


                                    By: /s/ Mark A. Solls
                                       ---------------------------
                                       Mark A. Solls
                                       Vice President, General Counsel
                                       and Secretary


                             POWER OF ATTORNEY

     KNOW ALL PERSONS BY THESE  PRESENTS,  that each person whose signature
appears below hereby  constitutes and appoints Mark A. Solls, as his or her
true and lawful attorney-in-fact and agent, with full power of substitution
and resubstitution, for him in his or her name, place and stead, in any and
all  capacities,  to  sign  any  and all  amendments  to this  Registration
Statement  and  any   additional   registration   statements   pursuant  to
Instruction  E to  Form  S-8  and  any  and  all  documents  in  connection
therewith,  and to file  the  same,  with  all  exhibits  thereto,  and all
documents  in  connection  therewith,  with  the  Securities  and  Exchange
Commission,  granting unto said  attorney-in-fact  and agent full power and
authority  to do and  perform  each and every act and thing  requisite  and
necessary to be done in and about the premises, as fully to all intents and
purposes  as he or she might or could do in person,  and  hereby  ratifies,
approves and confirms all that his or her said  attorney-in-fact and agent,
or his or her  substitute  or  substitutes,  may lawfully do or cause to be
done by virtue hereof.

     Pursuant  to the  requirements  of the  Securities  Act of 1933,  this
Registration  Statement  has been  signed by the  following  persons in the
capacities and on the dates indicated:

            SIGNATURE                      TITLE                     DATE
            ---------                      -----                     ----

   /s/ Jacques R. Sardas
   ----------------------                                     Jan. 20, 1999
   Jacques R. Sardas          President, Chief Executive
                              Officer and Chairman of the
                              Board of Directors
   /s/ William C. Wellborn
   ------------------------                                    Jan. 20, 1999
   William C. Wellborn        Executive Vice President and
                              Chief Financial Officer
                              (Principal Financial and
                              Accounting Officer)

   /s/ John M. Goldsmith
   -----------------------                                    Jan. 20, 1999
   John M. Goldsmith          Director

   /s/ Charles J. Pilliod, Jr.
   -----------------------                                    Jan. 20, 1999
   Charles J. Pilliod, Jr.    Director

   /s/ Henry  F. Skelsey
   -----------------------                                    Jan. 20, 1999
   Henry F. Skelsey           Director

   /s/ Douglas D. Danforth
   -----------------------                                    Jan. 20, 1999
   Douglas D. Danforth        Director

   /s/ Vincent A. Mai
   -----------------------                                    Jan. 20, 1999
   Vincent A. Mai             Director

   /s/ Norman E. Wells, Jr.
   -----------------------                                    Jan. 20, 1999
   Norman E. Wells, Jr.       Director

   /s/ John F. Fiedler
   -----------------------                                    Jan. 20, 1999
   John F. Fiedler            Director


<PAGE>


                             INDEX TO EXHIBITS
                             -----------------

 EXHIBIT NO.               DESCRIPTION OF EXHIBIT
 -----------               ----------------------

    4.1     Second Amended and Restated Certificate of Incorporation of
            the  Company  (Filed as Exhibit 3.1 to the  Company's  Form
            10-Q filed on November 7, 1996 and  incorporated  herein by
            reference).
 
    4.2     Amended  and  Restated  By-Laws of the  Company   (Filed as
            Exhibit 3.2 to the  Company's  Registration   Statement  on
            Form  S-1  (No. 333-5069)   and   incorporated   herein  by
            reference).

    4.3     Specimen  form of  Certificate   for Common Stock (Filed as
            Exhibit 4.1 to the  Company's   Registration  Statement  on
            Form  S-1  (No. 333-5069)   and   incorporated   herein  by
            reference.)

    4.4     Dal-Tile  International  Inc.  1990  Stock  Option  Plan as
            amended and restated (entitled the Dal-Tile International
            Inc. 1998 Amended and Restated Stock Option Plan).*

    5.1     Opinion  of  Mark  A.  Solls  as to  the  legality  of  the
            securities covered by the Registration Statement.*

    23.1    Consent of Ernst & Young LLP.*

    24.1    Powers of Attorney (included on the signature pages).


*    Filed herewith.




                                                                EXHIBIT 4.4

                        DAL-TILE INTERNATIONAL INC.

                         1998 AMENDED AND RESTATED
                             STOCK OPTION PLAN


                                 ARTICLE 1

                                  GENERAL

          1.1 Purpose. The purpose of this Dal-Tile International Inc. 1998
Amended  and  Restated  Stock  Option  Plan (the  "Plan") is to provide for
certain  key  employees  of Dal-Tile  International  Inc.  ("Dal-Tile"),  a
Delaware  corporation,  its successors and assigns and its subsidiaries and
affiliates  (collectively,  the  "Company"),  an incentive  (i) to join and
remain in the  service of the  Company,  (ii) to  maintain  and enhance the
long-term performance and profitability of the Company and (iii) to acquire
a  proprietary  interest  in the  success  of the  Company.  The  grant and
exercise of Options under the Plan is intended to meet the  requirements of
Rule 16b-3 of the 1934 Act (as  hereinafter  defined)  at all times  during
which the Company and its Insiders (as hereinafter  defined) are subject to
the requirements of Section 16 of the 1934 Act.

          1.2 Definition of Certain Terms.

               (a)  "Agreement"  means  an  agreement  issued  pursuant  to
Section 2.1.

               (b) "Board" means the Board of Directors of Dal-Tile.

               (c)  "Code"  means the  Internal  Revenue  Code of 1986,  as
amended.

               (d) "Committee" means the Committee  appointed to administer
the Plan in accordance with Section 1.3.

               (e) "Common  Stock"  means the shares of common  stock,  par
value $.01 per share,  of Dal-Tile  and,  subject to Section 2.5, any other
shares into which such common stock shall thereafter be exchanged by reason
of  a  recapitalization,   merger,  consolidation,  split-up,  combination,
exchange of shares or the like.

               (f) "Date of Grant"  means the date as of which an Option is
granted by the Committee under an Agreement.

               (g) "Fair Market  Value" per share as of a  particular  date
means (i) the closing sales price per share of Common Stock on the national
securities exchange on which the Common Stock is principally traded for the
last date  (including  the Date of Grant) on which there was a sale of such
Common  Stock on such  exchange,  or (ii) if the shares of Common Stock are
not then  traded on a  national  securities  exchange,  the  average of the
closing  bid and  asked  prices  for the  shares  of  Common  Stock  in the
over-the-counter market on which the Common Stock is principally traded for
the last date  (including  the Date of Grant) on which  there was a sale of
such Common  Stock in such  market,  or (iii) if the shares of Common Stock
are not then  listed  on a  national  securities  exchange  or traded in an
over-the-counter   market,  such  value  as  the  Committee,  in  its  sole
discretion, shall determine.

               (h) "Insider" means an insider as so defined for purposes of
Section 16 of the 1934 Act.

               (i)   "Option"   means  any   incentive   stock   option  or
"nonqualified"  stock  option,  both as described  in Section 1.5,  granted
under the Plan.

               (j) "Optionee" means an employee of the Company who has been
awarded any Option under this Plan.

               (k)  The  terms   "parent   corporation"   and   "subsidiary
corporation"  as used herein  shall have the  meaning  given those terms in
Code section 425(e) and (f), respectively.  A corporation shall be deemed a
parent or a  subsidiary  only for such periods  during which the  requisite
ownership relationship is maintained.

               (l)  "Plan"  means this  Dal-Tile  International  Inc.  1997
Amended and Restated Stock Option Plan and any predecessor plan.

               (m) "Termination  With Cause," with respect to any Optionee,
means,  except as otherwise  provided in an Agreement,  termination  by the
Company  of  such  Optionee's   employment  for:  (i)  misappropriation  of
corporate  funds,  (ii) conviction of a crime,  (iii) willful  violation of
written directions of the Chief Executive Officer or the Board of Directors
of the Company; or (iv) gross negligence and willful misconduct.

               (n) "1934 Act" means the Securities Exchange Act of 1934, as
amended.

          1.3 Administration.

               (a) (i)  Subject  to  Section  1.3(e),  the  Plan  shall  be
administered  by a committee  of the Board which shall  consist of at least
two  members  of the Board and which  shall  have the power of the Board to
authorize awards under the Plan. At all times during which Dal-Tile and its
Insiders are subject to the requirements of Section 16 of the 1934 Act, all
members of the Committee shall be "Non-Employee  Directors" as described in
Rule 16b-3 of the 1934 Act. All members of the Committee or a  subcommittee
shall be "outside  directors"  for  purposes of Section  162(m) of the Code
with  respect to any  optionees  whose  compensation  may be subject to the
deductibility limitations of Section 162(m) of the Code. The members of the
Committee  shall be  appointed  by, and may be changed from time to time in
the discretion of, the Board.

               (b) The  Committee  shall have the authority (i) to exercise
all of the powers granted to it under the Plan, (ii) to construe, interpret
and implement the Plan and any Agreement  executed pursuant to Section 2.1,
(iii) to prescribe, amend and rescind rules and regulations relating to the
Plan,   (iv)  to  make  all   determinations   necessary  or  advisable  in
administering the Plan, and (v) to correct any defect,  supply any omission
and  reconcile any  inconsistency  in the Plan and (vi) to grant Options on
such terms, not inconsistent with the Plan, as it shall determine.

               (c)  The  determination  of the  Committee  on  all  matters
relating to the Plan or any Agreement shall be conclusive.

               (d) No  member  of the  Committee  shall be  liable  for any
action or determination  made in good faith with respect to the Plan or any
award thereunder.

               (e)  Notwithstanding  anything  to  the  contrary  contained
herein, the Board may, in its sole discretion, at any time and from time to
time,  resolve to administer the Plan. Such event,  the term "Committee" as
used herein shall be deemed to mean the Board.

          1.4 Persons  Eligible  for Awards.  Awards  under the Plan may be
made  from  time to  time  to such  key  employees  of the  Company  as the
Committee  shall in its sole discretion  select,  provided,  however,  that
subject to Section 3.4,  the  Committee  may not award  Options to any such
employee with respect to more than 6,000,000  shares of Common Stock in any
fiscal year during the term of the Plan.

          1.5 Types of Awards Under the Plan.  Awards may be made under the
Plan  in the  form of (a)  stock  options  which  may,  in the  Committee's
discretion,  be granted either as (i) "nonqualified"  stock options subject
to the  provisions  of  section  83 of the  Code or (ii)  "incentive  stock
options"  described in section 422 of the Code, all as more fully set forth
in Article 2.

          1.6 Shares Available for Awards.

               (a) Subject to Section 3.4  (relating  to  adjustments  upon
changes in  capitalization),  as of any date the total  number of shares of
Common Stock with  respect to which  Options may be  outstanding  under the
Plan shall be equal to the excess (if any) of (i)  10,586,425  shares  over
(ii) the sum of (A) the  number of shares  subject to  outstanding  Options
granted under the Plan and (B) the number of shares previously  transferred
pursuant to the exercise of Options  granted  under the Plan. In accordance
with (and without limitation upon) the preceding  sentence,  but subject to
the  requirements  of Rule 16b-3 of the 1934 Act, if applicable,  shares of
Common  Stock  covered by Options  granted  under the Plan which  expire or
terminate  for any reason shall again become  available for award under the
Plan.

               (b) Shares  that are  issued  upon the  exercise  of Options
awarded under the Plan shall be authorized and unissued or treasury  shares
of Common Stock.

               (c)  Without   limiting  the  generality  of  the  preceding
provisions  of this  Section 1.6,  the  Committee  may, but solely with the
Optionee's consent, agree to cancel any award of Options under the Plan and
issue new Options in substitution therefor, provided that the Options as so
substituted  shall  satisfy all of the  requirements  of the Plan as of the
date such new Options are awarded.

          1.7 Option Price.  Except as the Committee may otherwise provide,
the  exercise  price of each Option shall not be less than 100% of the Fair
Market Value of the shares of Common Stock  covered by the Option as of the
Date of Grant.

                                 ARTICLE 2
                               STOCK OPTIONS

          2.1 Agreements Evidencing Stock Options.

               (a) Options  awarded  under the Plan shall be  evidenced  by
Agreements which shall not be inconsistent with the terms and provisions of
the Plan,  and, in the case of incentive  stock options,  of section 422 of
the Code,  and which shall contain such  provisions as the Committee may in
its sole  discretion  deem  necessary or  desirable.  Without  limiting the
generality of the foregoing, the Committee may in any Agreement impose such
restrictions  or  conditions  upon the  exercise of such Option or upon the
sale or other  disposition  of the  shares of Common  Stock  issuable  upon
exercise  of  such  Option  as the  Committee  may in its  sole  discretion
determine.  By accepting an award  pursuant to the Plan each Optionee shall
thereby agree that each such award shall be subject to all of the terms and
provisions of the Plan,  including,  but not limited to, the  provisions of
Section 1.3(d).

               (b) Each  Agreement  shall set forth the number of shares of
Common Stock subject to the Option granted thereby.

               (c) Each  Agreement  relating to Options shall set forth the
amount  payable by the  Optionee  to Dal-Tile  upon  exercise of the Option
evidenced  thereby,  subject  to  adjustment  by the  Committee  to reflect
changes in capitalization as contemplated by Section 3.4.

               (d) An Option  granted under this Plan shall be an incentive
stock option only if the relevant Agreement by its terms (i) expressly sets
forth  the  rules  described  in  Sections  2.8 and 2.9  hereof,  and  (ii)
expressly  states  that it is  intended  to qualify as an  incentive  stock
option.  Any Option  granted  under this Plan  which does not  satisfy  the
foregoing  requirements  of  this  Section  2.1(d)  is  intended  to  be  a
nonqualified  stock option  subject to the  provisions of section 83 of the
Code, and is intended not to qualify for incentive  stock option  treatment
under section 422 of the Code.

          2.2 Term of Options.

               (a) Each  Agreement  shall set forth the period during which
the Option evidenced  thereby shall be exercisable,  whether in whole or in
part, and any vesting provisions applicable to the Option, such terms to be
determined   by  the   Committee   in  its   discretion;   provided   that,
notwithstanding  the  foregoing  or any other  provision  of the  Plan,  no
Agreement  shall permit an incentive  stock option to be  exercisable  more
than 10 years after the date of grant.

               (b) Each  Agreement  shall set forth  such  other  terms and
conditions,  not inconsistent  with the terms of the Plan, as the Committee
shall deem appropriate.

          2.3  Exercise  of  Options.  Subject  to the  provisions  of this
Article  2, each  Option  granted  under the Plan shall be  exercisable  as
follows:

               (a) An Option  shall  become  exercisable  at such times and
subject to such conditions as the applicable Agreement or the Committee may
otherwise provide.

               (b) Unless the applicable  Agreement otherwise provides,  an
Option  granted under the Plan may be exercised from time to time as to all
or part of the shares as to which such Option shall then be exercisable.

               (c) An Option  shall be exercised by the filing of a written
notice of exercise  with  Dal-Tile,  on such form and in such manner as the
Committee shall in its sole discretion prescribe.

               (d) Any written  notice of  exercise  of an Option  shall be
accompanied  by  payment  of  the  exercise  price  for  the  shares  being
purchased.  Except as the  Committee may  otherwise  provide,  such payment
shall be made by certified or official  bank check  payable to Dal-Tile (or
the  equivalent  thereof,  including  shares of Common  Stock).  As soon as
practicable  after receipt of such payment,  Dal-Tile  shall deliver to the
Optionee a certificate  or  certificates  for the shares of Common Stock so
purchased.

          2.4 Termination of Options.

               (a)  Notwithstanding  anything to the contrary in this Plan,
except as the Agreement or the  Committee may otherwise  provide and as set
forth in Section 2.4(b) and Section 2.4(d), all incentive stock options and
"nonqualified" stock options granted to an Optionee (and already vested but
not  yet  exercised)  shall  terminate  on the  earliest  to  occur  of the
expiration  of the term of the  Option  and the date which is 45 days after
termination  of his  employment  with the  Company for any reason (one year
after termination by reason of death,  disability or retirement at or after
the Optionee's  sixty-fifth  birthday or at such earlier  retirement age as
may be approved by the Committee).

               (b)  Notwithstanding  anything to the contrary in this Plan,
all Options granted to an Optionee shall immediately expire and cease to be
exercisable  and all rights granted to an Optionee under this Plan and such
Optionee's Agreement shall immediately expire in the event of a Termination
With Cause of the Optionee by the Company at any time.

               (c)  Unless  the  applicable   Agreement  or  the  Committee
expressly provides otherwise,  Options awarded to Optionees under the terms
of the Plan  will be  exercisable  only in  accordance  with the  following
vesting schedule:


                                                      CUMULATIVE
                                                      PERCENTAGE OF
                  VESTING DATE                        TOTAL SHARES
                  ------------                        -------------

            On the date of the applicable Agreement         25%
            On the first anniversary of the date of
            the Agreement                                   50%
            On the second anniversary of the date of
            the Agreement                                   75%
            On the third anniversary of the date of
            the Agreement                                  100%

The Committee may modify this vesting  schedule in any manner that it deems
appropriate in any Agreement or otherwise and may provide different vesting
schedules in different  Agreements  in its sole  discretion.  Except as set
forth in an Agreement or as the Committee may provide, in the event that an
Optionee's  employment  with the Company is terminated for any reason prior
to the date on which the Optionee's right to exercise the Options has fully
vested pursuant to this Section 2.4(c),  the Options will immediately cease
to be exercisable  with respect to any and all shares which have not vested
as of the date of such termination.

          2.5 Unless otherwise  determined by the Committee coincident with
the grant of an Option or subsequently, in the event of a Transaction which
does  not  also  constitute  a  Non-Control   Transaction  (as  hereinafter
defined),  the Options  shall vest and each  Optionee  shall be entitled to
receive in respect of each  share of Common  Stock  subject to his  Options
(whether or not vested), upon exercise,  the same amount and kind of stock,
securities,  cash,  property or other  consideration  that each holder of a
share of Common Stock was entitled to receive in the Transaction in respect
of each share.  In the event of a  Non-Control  Transaction,  each Optionee
shall be  entitled  to receive  in  respect  of each share of Common  Stock
subject to his Options,  upon  exercise of such  Options  after the vesting
thereof,  the same  kind of  stock,  securities,  cash,  property  or other
consideration  that each holder of a share of Common  Stock was entitled to
receive  in the  Non-Control  Transaction  in  respect  of a share.  Unless
otherwise determined by the Committee,  Options will not automatically vest
upon the occurrence of a Non-Control Transaction.

          "Transaction" means, except as otherwise provided in an Agreement
(i) the approval by  stockholders  of the liquidation or dissolution of the
Company, (ii) a sale or other disposition of 80% or more of the outstanding
voting stock of the Company,  or (iii) the merger or  consolidation  of the
Company  with or into any  entity.  "Non-Control  Transaction"  means (i) a
merger or consolidation  in which the Company is the surviving  corporation
and the shares of its  outstanding  Common Stock are not changed into other
securities  or property  pursuant to such merger or  consolidation,  (ii) a
merger or  consolidation  with an affiliate of the Company  following which
those  persons  who  owned   directly  or  indirectly  a  majority  of  the
outstanding  shares of voting  stock  immediately  prior to such  merger or
consolidation will own a majority of the outstanding shares of voting stock
of the  surviving  corporation,  or  (iii) a sale or other  disposition  of
capital  stock of the  Company  following  which  those  persons  who owned
directly or indirectly a majority of the outstanding shares of voting stock
of the  Company  immediately  prior to such sale will own a majority of the
outstanding   shares   of   voting   stock   of  the   purchasing   entity.
Notwithstanding anything in the Plan, the merger of DTI Merger Company with
and  into  Dal-Tile  (the  "Merger"),  pursuant  to which  Dal-Tile  is the
surviving  corporation,  shall not affect the  operation of the Plan in any
manner  whatsoever,  and, in particular,  shall not be or be deemed to be a
Transaction  and  immediately  subsequent  to the Merger each Option  shall
continue to be  exercisable  for Class A common  stock,  par value $.01 per
share, of Dal-Tile.

          2.6  Rule  16b-3.  Notwithstanding  anything  in the  Plan to the
contrary, the Plan shall be administered,  and Options shall be granted and
exercised,  in accordance with the 1934 Act and,  specifically,  Rule 16b-3
thereof.

          2.7 $100,000  Limitation  on Annual  Vesting of  Incentive  Stock
Options.

               (a) Subject to the further  provisions  of this Section 2.7,
to the extent that the aggregate fair market value of stock with respect to
which incentive stock options  (determined without regard to the provisions
of this  Section  2.7) are  exercisable  for the first time by any Optionee
during  any  calendar  year  (under  all plans of the  Optionee's  employer
corporation and its parent and subsidiary  corporations)  exceeds  $100,000
(or  such  limitation  as set  forth in  Section  422 of the Code as may be
amended from time to time),  such Options  shall be treated as Options that
are "nonqualified" stock options.

               (b) For purposes of Section  2.7(a),  which shall be applied
by taking options into account in the order in which they were granted, the
Fair  Market  Value of any  stock  shall be  determined  as of the time the
Option with respect to such stock is granted.

               (c) In applying  the  provisions  of Section  2.7(a),  there
shall be taken into account solely (i) incentive  stock options  granted to
an Optionee under this Plan, and (ii)  incentive  stock options  granted to
the Optionee  after December 31, 1986 under all other stock option plans of
his employer corporation, and its parent or subsidiary corporations.

               (d) The foregoing provisions of this Section 2.7 shall in no
way limit or restrict  the  aggregate  fair market value of the stock which
may be acquired in any calendar  year upon the  exercise of  "nonqualified"
stock  options  granted under the Plan or under any other stock option plan
of the  Optionee's  employer  corporation,  or  its  parent  or  subsidiary
corporations.

          2.8  Special  Rules  for 10%  Stockholders.  Notwithstanding  any
provisions  to the contrary,  an incentive  stock option may not be granted
under this Plan to an  individual  who,  at the time the option is granted,
owns stock  possessing  more than 10% of the total combined voting power of
all  classes  of stock of his  employer  corporation  or of its  parent  or
subsidiary  corporations  (as such ownership may be determined for purposes
of section  422 of the Code)  unless (a) at the time such  incentive  stock
option is granted  the option  exercise  price is at least 110% of the Fair
Market Value of the shares  subject to the  incentive  stock option and (b)
the  incentive  stock  option  by its  terms is not  exercisable  after the
expiration of 5 years from the date such incentive stock option is granted.


                                 ARTICLE 3
                               MISCELLANEOUS

          3.1 Amendment of the Plan; Modification of Awards.

               (a) The Board may, without stockholder  approval,  from time
to time  suspend  or  discontinue  the  Plan or  revise  or amend it in any
respect  whatsoever,  except that no such amendment shall impair any rights
or obligations  under any award theretofore made under the Plan without the
consent of the person to whom such award was made, provided,  further, that
an amendment which requires  stockholder  approval in order for the Plan to
continue  to comply with Rule 16b-3 or any other law,  regulation  or stock
exchange  requirement  shall  not  be  effective  unless  approved  by  the
requisite vote of stockholders.

               (b) With the  consent  of the  Optionee  and  subject to the
terms and conditions of the Plan (including Section 3.1(a)),  the Committee
may amend outstanding  Agreements with such Optionee,  for example,  to (i)
accelerate  the time or times at which an Option may be  exercised  or (ii)
extend the scheduled expiration date of the Option.

          3.2  Nonassignability.  Except  as the  Committee  may  otherwise
provide,  no right  granted  to any  Optionee  under  the Plan or under any
Agreement shall be assignable or transferable  other than by will or by the
laws of descent and  distribution.  Except as the  Committee  may otherwise
provide,  during  the  life of the  Optionee,  all  rights  granted  to the
Optionee under the Plan or under any Agreement shall be exercisable only by
him.

          3.3 Withholding of Taxes.

               (a) The  Company  shall be  entitled  to  withhold  from any
payments to an Optionee an amount sufficient to satisfy any federal,  state
and other  governmental  tax required to be withheld in connection with the
exercise of an Option.  Whenever  under the Plan shares of Common Stock are
to be delivered  upon exercise of an Option,  Dal-Tile shall be entitled to
require  as a  condition  of  delivery  that the  Optionee  remit an amount
sufficient  to  satisfy  all  federal,  state  and other  governmental  tax
withholding requirements related thereto.

               (b) Disposition of Incentive  Stock Options.  If an Optionee
makes a  disposition,  within the meaning of Section 424(c) of the Code and
regulations promulgated thereunder,  of any share or shares of Common Stock
issued to such Optionee pursuant to the exercise of an Option granted as an
Incentive  Stock Option within the two-year  period  commencing on the date
after the Date of Grant or within the  one-year  period  commencing  on the
date after the date of transfer of such share or shares of Common  Stock to
the Optionee pursuant to such exercise, the Optionee shall, within ten (10)
days of such disposition,  notify Dal-Tile thereof,  by delivery of written
notice to Dal-Tile at its principal executive office.

          3.4  Adjustments  Upon Changes in  Capitalization.  The number of
shares of Common  Stock or other  stock or  securities  which may be issued
pursuant to the exercise of Options granted under the Plan in the aggregate
and to any Optionee and the  exercise  price of Options  shall be equitably
adjusted  for any  increase or  decrease in the number of issued  shares of
Common Stock  resulting  from the  subdivision  or combination of shares of
Common  Stock or  other  capital  adjustments,  or the  payment  of a stock
dividend or  extraordinary  cash dividend  after the effective date of this
Plan, or other  increase or decrease in the number of such shares of Common
Stock effected  without  receipt of  consideration  by Dal-Tile;  provided,
however,  that any Options to purchase  fractional  shares of Common  Stock
resulting from any such adjustment shall be eliminated.  Adjustments  under
this Section 3.4 shall be made by the Committee,  whose determination as to
what  adjustments  shall be made, and the extent  thereof,  shall be final,
binding and conclusive.  3.5 Right of Discharge  Reserved.  Nothing in this
Plan or in any Agreement shall confer upon any employee or other person the
right to continue in the employment or service of the Company or affect any
right which the Company may have to terminate the  employment or service of
such employee or other person.

          3.6 No Rights  as a  Stockholder.  No  Optionee  or other  person
holding an Option shall have any of the rights of a stockholder of Dal-Tile
with  respect to shares  subject to an Option until the issuance of a stock
certificate to him for such shares. Except as otherwise provided in Section
3.4, no  adjustment  shall be made for  dividends,  distributions  or other
rights (whether ordinary or extraordinary,  and whether in cash, securities
or other  property)  for  which the  record  date is prior to the date such
stock certificate is issued.

          3.7 Nature of Payments.

               (a) Any and all  payments of shares of Common  Stock or cash
hereunder  shall  be  granted,  transferred  or  paid in  consideration  of
services performed by the Optionee for the Company.

               (b) All such grants, issuances and payments shall constitute
a special incentive payment to the Optionee and shall not, unless otherwise
determined by the Committee,  be taken into account in computing the amount
of salary or  compensation  of the Optionee for the purposes of determining
any pension,  retirement,  death or other  benefits  under (i) any pension,
retirement, life insurance or other benefit plan of the Company or (ii) any
agreement between the Company and the Optionee.

          3.8 Non-Uniform Determinations.

                  The  Committee's  determinations  under the Plan need not be
uniform and may be made by it  selectively  among persons who receive,  or are
eligible to receive,  awards  under the Plan  (whether or not such persons are
similarly  situated).  Without  limiting the generality of the foregoing,  the
Committee  shall be entitled,  among other  things,  to make  non-uniform  and
selective  determinations,   and  to  enter  into  non-uniform  and  selective
Agreements,  as to (i) the persons to receive  awards under the Plan, and (ii)
the terms and provisions of awards under the Plan.

          3.9 Other Payments or Awards. Nothing contained in the Plan shall
be deemed in any way to limit or restrict the Company or the Committee from
making any award or payment to any person under any other plan, arrangement
or understanding, whether now existing or hereafter in effect.

          3.10 Restrictions.

               (a) If the Committee  shall at any time  determine  that any
Consent (as  hereinafter  defined) is necessary or desirable as a condition
of, or in connection  with,  the granting of any award under the Plan,  the
issuance or purchase of shares or other rights  thereunder or the taking of
any other action thereunder (each such action being hereinafter referred to
as a "Plan Action"),  then such Plan Action shall not be taken, in whole or
in part, unless and until such Consent shall have been effected or obtained
to the full satisfaction of the Committee.

               (b) The term  "Consent"  as used herein with  respect to any
Plan Action means (i) any and all listings, registrations or qualifications
in respect thereof upon any securities exchange or under any federal, state
or local law, rule or regulation,  (ii) any and all written  agreements and
representations  by the grantee with respect to the  disposition of shares,
or with  respect  to any other  matter,  which  the  Committee  shall  deem
necessary  or  desirable  to  comply  with the  terms of any such  listing,
registration  or   qualification   or  to  obtain  an  exemption  from  the
requirement  that any such listing,  qualification  or registration be made
and (iii) any and all  consents,  clearances  and approvals in respect of a
Plan Action by any governmental or other regulatory bodies.

          3.11 Section Headings.  The section headings contained herein are
for the  purposes  of  convenience  only and are not  intended to define or
limit the contents of said sections.

          3.12  Interpretation.  Unless  expressly  stated in the  relevant
Agreement,  each Option is intended  to be  performance-based  compensation
within  the  meaning  of  Section  162(m)(4)(C)  and  the  Committee  shall
interpret the Plan accordingly.

          3.13 Effective Date and Term of Plan.

               (a) The 1998  Amended  and  Restated  Stock  Option Plan was
approved by the Board  effective as of July 17, 1998 subject to approval of
the Plan by a majority of the voting stockholders of the Company.

               (b) The Plan shall  terminate 10 years after its adoption by
the  Board,  and no  awards  shall  thereafter  be  made  under  the  Plan.
Notwithstanding the foregoing,  all awards made under the Plan prior to the
date on which the Plan terminates  shall remain in effect until such awards
have  been  satisfied  or  terminated  in  accordance  with the  terms  and
provisions of the Plan.



                                                                  EXHIBIT 5.1
                [LETTERHEAD OF DAL-TILE INTERNATIONAL INC.]


January 20, 1999


Dal-Tile International
7834 C.F. Hawn Freeway
Dallas, TX  75217

        RE: Registration Statement on Form S-8 for the Dal-Tile International
            Inc. 1990 Stock-Option Plan (As Amended and Restated) (the "Plan")

Ladies and Gentlemen:

          This opinion is delivered in connection with the registration by
Dal-Tile International Inc., a Delaware corporation (the "Company"), on
Form S-8 (the "Registration Statement"), under the Securities Act of 1933
(the "Act"), as amended, of 3,529,806 shares of common stock of the
Company, par value $.01 per share (the "Common Stock") issuable upon the
exercise of stock options granted on or prior to January 1, 1996 pursuant
to the Plan.

          In arriving at this opinion, I have examined such corporate
instruments, documents, statements and records of the Company, and I have
examined such statutes and regulations and have conducted such legal
analysis, as I have deemed relevant, necessary and appropriate for the
purposes of this opinion. I have assumed the genuineness of all signatures
and the authenticity of all documents submitted to me as originals, the
conformity to original documents of all the documents submitted to me as
certified or photostatic copies, and the authenticity of the originals of
such latter documents. I also have assumed that any future changes to the
terms and conditions of the Plan will be duly authorized by the Company and
will comply with all applicable laws.

          Based on the foregoing, I am of the opinion that the 3,529,806
shares of Common Stock to be issued pursuant to the Registration Statement
have been duly authorized and, when issued and delivered by the Company in
accordance with the terms and conditions of the Plan, will be validly
issued, fully paid and nonassessable securities of the Company.

          I hereby consent to the reference to my name in the Registration
Statement and further consent to the inclusion of this opinion as Exhibit
5.1 to the Registration Statement. In giving this consent, I do not hereby
admit that I am in the category of persons whose consent is required under
Section 7 of the Act or the rules and regulations of the Securities and
Exchange Commission.

          The opinion expressed herein is solely for your benefit in
connection with the Registration Statement and may not be relied on in any
manner or for any purpose by any other person or entity and may not be
quoted in whole or in part without my prior written consent.

                                    Very truly yours,

                                    /s/ Mark A. Solls
                                    -------------------------------
                                    Mark A. Solls
                                    Vice President, General Counsel
                                    and Secretary



                                                                  EXHIBIT 23.1

INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in the Registration Statement
(Form S-8) pertaining to the Dal-Tile International Inc. 1990 Stock Option
Plan (as amended and restated) of our report dated February 16, 1998 with
respect to the consolidated financial statements of Dal-Tile International
Inc., as amended, included in its Form 10-K/A.


                                        /s/ Ernst & Young LLP
                                        ---------------------
                                        ERNST & YOUNG LLP
Dallas, Texas
January 15, 1999



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