AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 30, 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)
STOCK APPRECIATION RIGHTS
GRANTED TO JAQUES R. SARDAS, W. CHRISTOPHER WELLBORN, DAVID F.
FINNIGAN, DAN L. COOKE AND MARC POWELL
(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 679,933 $8.82 (2) $5,997,009.06 $1,667.17
value $.01 per share shares (1) (2) (2)
- ---------------------------------------------------------------------------
(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) and (c) under the Securities Act of 1933, the
amounts are calculated based upon the average of the high and low
prices of a share of Common Stock as reported on the New York Stock
Exchange, Inc. Composite tape on March 30, 1999.
<PAGE>
EXPLANATORY NOTE
This Registration Statement relates to 679,933 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 stock appreciation rights ("SARs") granted to certain persons by
Dal-Tile International Inc. pursuant to Stock Appreciation Rights
Agreements between Dal-Tile International Inc. and such persons.
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 for the fiscal year ended January 1,
1999; 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 -- Stock Appreciation Rights Agreements, dated as of
February 20, 1998 between Dal-Tile International Inc.
and each of Jacques R. Sardas, W. Christopher Wellborn,
David F. Finnigan, Dan L. Cooke and Marc S. Powell.*
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.
<PAGE>
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 March 30, 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 President, Chief March 30, 1999
----------------------- Executive Officer and
Jacques R. Sardas Chairman of the Board of
Directors
/s/ William C. Wellborn Executive Vice President March 30, 1999
----------------------- and Chief Financial
William C. Wellborn Officer (Principal
Financial and Accounting
Officer)
/s/ Douglas D. Danforth Director March 30, 1999
------------------------
Douglas D. Danforth
/s/ John F. Fiedler Director March 30, 1999
------------------------
John F. Fiedler
/s/ John M. Goldsmith Director March 30, 1999
------------------------
John M. Goldsmith
/s/ Vincent A. Mai Director March 30, 1999
------------------------
Vincent A. Mai
/s/ Charles J. Pilliod, Jr.Director March 30, 1999
------------------------
Charles J. Pilliod, Jr.
/s/ Henry F. Skelsey Director March 30, 1999
------------------------
Henry F. Skelsey
/s/ Normal E. Wells, Jr. Director March 30, 1999
------------------------
Norman E. Wells, Jr.
<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 Stock Appreciation Rights Agreements, dated as of
February 20, 1998 between Dal-Tile International Inc. and
each of Jacques R. Sardas, W. Christopher Wellborn,
David F. Finnigan, Dan L. Cooke and Marc S. Powell.*
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
STOCK APPRECIATION RIGHTS AGREEMENT
THIS AGREEMENT, made as of the 20th day of February, 1998 (the "Grant
Date"), between Dal-Tile International Inc., a Delaware corporation
("Dal-Tile"), and Christopher Wellborn, 908 Suffolk Court, Southlake, Texas
76902 (the "Grantee").
The parties hereto agree as follows:
1. GRANT OF STOCK APPRECIATION RIGHT.
Dal-Tile hereby grants to the Grantee a Stock Appreciation Right (the
"Right") with respect to 300,000 shares of the common stock, par value $.01
per share (the "Common Stock") of Dal-Tile (the "Shares") on the terms and
conditions set forth in this Agreement. The base price for each Share
covered by this Right shall be $9.01 as adjusted pursuant to this Agreement
(the "Base Price").
2. AMOUNT AND FORM OF PAYMENT UPON EXERCISE OF RIGHT.
2.1 Upon exercise of all or any portion of the Right, the Grantee
shall be entitled to receive the amount determined by multiplying (i) the
excess (the "Single Share Excess") of the Fair Market Value of a Share on
the date of exercise, over the Base Price by (ii) the number of Shares in
respect of which the Right is being exercised; PROVIDED, HOWEVER, that for
purposes of determining the Single Share Excess, no amount of Fair Market
Value of a Share in excess of $11.94 (the "Ceiling Price") shall be taken
into account. Payment of the amount determined under this Section 2 shall,
in the sole discretion of the Committee, be made: (i) in cash; (ii) by
delivery of Shares having an aggregate Fair Market Value on the date of
such delivery equal to the amount of such payment (a "Payment-In-Kind"); or
(iii) by a combination of the foregoing (a "Mixed Payment"), and shall be
paid within ten (10) business days after the date of exercise. In the event
that such payment is made as: (x) a Payment-In-Kind; or (y) a Mixed
Payment, and the sum of the federal, state and other governmental income
tax incurred by Grantee with respect to the payment exceeds the cash
portion, if any, of such payment, the Committee shall make one or more
interest-bearing loans (each loan, a "Loan," and, collectively, the
"Loans") to the Grantee in an amount equal to such excess; PROVIDED,
HOWEVER, that Dal-Tile shall have no obligation to make a Loan in the event
the Grantee's employment by Dal-Tile has been terminated by Dal-Tile with
Cause (as defined in the Employment Agreement) or by the Grantee.
2.2 Each Loan shall bear interest at the lowest rate permitted by the
Internal Revenue Service without the imputation of interest. The principal
amount and accrued interest on each Loan shall be due and payable on August
25, 2007; PROVIDED, HOWEVER, that (a) the Grantee shall pay to Dal-Tile
promptly, as repayment of the outstanding principal amount and accrued
interest of the Loans, the after-tax proceeds received by the Grantee from
any disposition of Common Stock, or options to acquire Common Stock, held
from time to time by the Grantee, and (b) the outstanding principal amount
and accrued interest of all the Loans shall be immediately payable in the
event the Grantee's employment by Dal-Tile is terminated by Dal-Tile with
"Cause" (as defined in the Employment Agreement) or by the Grantee.
Repayments shall be applied first to the Loan which was most recently made.
Each Loan shall be secured by any and all shares of Common Stock and
options to acquire Common Stock held by the Grantee and by the Right.
3. VESTING; EXERCISABILITY; DURATION.
3.1 VESTING.
(a) Subject to Sections 6.2 and 6.3 hereof, the Grantee shall
vest in the cumulative percentage of Shares under the Right, at the times
provided in the following schedule:
APPLICABLE DATE CUMULATIVE PERCENTAGE OF SHARES
- --------------- -------------------------------
On the Grant Date.................................... 25%
On August 25, 1998................................... 50%
On August 25, 1999................................... 75%
On August 25, 2000................................... 100%
(b) The unvested portion of the Right shall be forfeited upon the
termination of the Grantee's employment with Dal-Tile for any reason,
subject to Section 6.3 hereof.
3.2 EXERCISABILITY.
Subject to Sections 6.2 and 6.3 hereof, the Grantee shall be
entitled to exercise the Right, with respect to the cumulative number of
Shares in which the Grantee may then be, or thereafter become, vested, only
if Dal-Tile reports, pursuant to its audited financial statements, positive
net income ("Net Income") for either its fiscal year ending December 31,
1998 or its fiscal year ending December 31, 1999 (the "Performance
Target"). The Right shall not be exercisable prior to the vesting thereof
and the time the Committee certifies that the Performance Target has been
satisfied. The Committee shall act within seven days with respect to
certification following the availability of the relevant audited financial
statements. For purposes of this Agreement, Net Income shall be calculated
without taking into account any charge against income which may arise as a
result of the Right granted pursuant to this Agreement or any other stock
appreciation right which may, from time to time, be granted by Dal-Tile.
3.3 DURATION.
Unless earlier terminated in accordance with the terms of this
Agreement, the Right shall terminate on August 25, 2007.
4. MANNER OF EXERCISE OF RIGHT.
Subject to the terms and conditions of this Agreement, the Right may
be exercised only by giving written notice (the "Exercise Notice") to
Dal-Tile in the form of Exhibit A attached hereto, at its principal
executive office. Such notice shall state that the Grantee is electing to
exercise the Right, and the number of Shares in respect of which the Right
is being exercised, and shall be signed by the person or persons exercising
the Right. The date of exercise for purposes of this Agreement shall be the
date Dal-Tile receives the Exercise Notice. If requested by Dal-Tile, such
person or persons shall: (i) deliver this Agreement to the Secretary of
Dal-Tile who shall endorse thereon a notation of such exercise; and (ii)
provide satisfactory proof as to the right of such person or persons to
exercise the Right.
5. NONASSIGNABILITY.
Neither the Right granted to the Grantee under this Agreement nor any
portion thereof shall be assignable or transferable (whether by operation
of law or otherwise, and whether voluntarily or involuntarily), other than
by will or by the laws of descent and distribution. The Right granted to
the Grantee under this Agreement shall be exercisable only by the Grantee
or his estate, heirs or personal representatives.
6. ADJUSTMENTS TO RIGHTS UPON CERTAIN EVENTS.
6.1 ADJUSTMENTS TO NUMBER OF SHARES AND CEILING AND BASE PRICES.
The number of Shares subject to this Right, the Ceiling Price and
the Base Price shall be equitably adjusted for any increase or decrease in
the number of issued Shares resulting from: (i) the subdivision or
combination of Shares or other capital adjustments; (ii) the payment of a
stock dividend or extraordinary cash dividend after the Grant Date; or
(iii) any other increase or decrease in the number of such Shares effected
without receipt of consideration by Dal-Tile; PROVIDED, HOWEVER, that any
fractional Shares resulting from any such adjustment shall be eliminated.
Adjustments under this Section 6.1 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.
6.2 CHANGE OF CONTROL.
Notwithstanding anything contained in this Agreement to the
contrary:
(a) in the event of a "Transaction" that does not also constitute
a "Non-Control Transaction" (each, as defined in the Stock Option Plan),
the Right shall, unless the Grantee and Dal-Tile shall otherwise agree,
automatically be converted into the right to receive, with respect to each
Share subject to the Right, at the consummation of such Transaction, a
payment of the same amount and kind of stock, securities, cash, property or
other consideration that each holder of a Share was entitled to receive in
such Transaction in respect of a Share, less the Base Price; PROVIDED,
HOWEVER, that the fair market value of such stock, securities, cash,
property or other consideration shall not exceed the Ceiling Price less the
Base Price. If more than one (1) form of consideration is included in such
Transaction, the various components thereof shall be appropriately
prorated; and
(b) in the event of a Non-Control Transaction, the Grantee shall
continue to vest in the Right only in accordance with Section 3.1 hereof,
which Right shall remain exercisable only in accordance with Section 3.2
hereof, and, the number of Shares subject to the Right, the Ceiling Price
and the Base Price shall be equitably adjusted by the Committee for any
change in the Shares resulting from a merger involving the Company.
Adjustments under this Section 6.2(b) 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.
6.3 TERMINATION OF EMPLOYMENT.
The Right (whether vested or unvested) shall terminate and expire
on the effective date of the termination of the Grantee's employment by
Dal-Tile with "Cause" (as such term is defined in the Employment
Agreement). In the event of the termination of the Grantee's employment by
Dal-Tile without Cause, the Grantee shall be vested in 100% of the Shares
subject to the Right, which Right shall, notwithstanding such vesting,
become exercisable only in accordance with Section 3.2 hereof. In the event
of the termination of the Grantee's employment by the Grantee, the Right,
to the extent then vested, shall become exercisable only in accordance with
Section 3.2 hereof and shall terminate on the earliest to occur of: (i) the
tenth anniversary of the Grant Date; and (ii) the date which is ten (10)
days after the later of: (A) such termination of the Grantee's employment;
and (B) the date that achievement of the Performance Target is certified,
and the unvested portion of the Right shall be forfeited. In the event of
the termination of the Grantee's employment by reason of the Grantee's
death or "disability" (as such term is used under the Employment
Agreement), the Right, to the extent then vested, shall be exercisable
until August 25, 2007, and the unvested portion of the Right shall be
forfeited on the effective date of such termination.
7. MISCELLANEOUS.
7.1 RULES OF CONSTRUCTION.
(a) In this Agreement, unless the context otherwise requires,
words in the singular number or in the plural number shall each include the
singular number and the plural number, words of the masculine gender shall
include the feminine and the neuter, and, when the sense so indicates,
words of the neuter gender may refer to any gender.
(b) The term "affiliate" shall mean any person directly or
indirectly controlling, controlled by, or under common control with the
person of which it is an affiliate.
(c) The term "Board" shall mean the Board of Directors of
Dal-Tile.
(d) The term "Code" shall mean the Internal Revenue Code of 1986,
as amended.
(e) The term "Committee" shall mean the Committee of the Board
appointed to administer the Stock Option Plan in accordance with the terms
of such plan.
(f) The term "control" shall mean with respect to any person, the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such person, whether through
the ownership of equity interests, by contract or otherwise.
(g) The term "Employment Agreement" shall mean the Employment
Agreement, dated as of August 25, 1997, and as amended from time to time,
by and between Dal-Tile and the Grantee.
(h) The term "Fair Market Value" per Share as of a particular
date shall mean: (i) the closing sales price of a Share on the national
securities exchange on which the Shares are principally traded for the last
date (including the date of exercise of the Right) on which there was a
sale of the Shares on such exchange; or (ii) if the Shares are not then
traded on a national securities exchange, the average of the closing bid
and asked prices for the Shares in the over-the-counter market on which the
Shares are principally traded for the last date (including the date of
exercise of the Right) on which there was a sale of the Shares in such
market; or (iii) if the Shares 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.
(i) The term "person" shall mean an individual, a corporation, a
partnership, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or
instrumentality thereof.
(j) The term "Stock Option Plan" shall mean the Dal-Tile
International Inc. 1997 Amended and Restated Stock Option Plan.
(k) The term "1934 Act" shall mean the Securities Exchange Act of
1934, as amended.
(l) There shall be included within the term "Dal-Tile" any
successor to Dal-Tile by merger, consolidation, acquisition of
substantially all the assets thereof, or otherwise.
(m) There shall be included within the term "Shares" any Common
Stock, and any and all securities of any kind whatsoever of Dal-Tile which
may be issued after the date hereof in respect of, or in exchange for,
shares of Common Stock pursuant to a merger, consolidation, stock split,
stock dividend, recapitalization of Dal-Tile or otherwise.
7.2 FURTHER ASSURANCES.
Each party hereto shall do and perform or cause to be done and
performed all further acts and things and shall execute and deliver all
other agreements, certificates, instruments, and documents as any other
party hereto reasonably may request in order to carry out the intent and
accomplish the purposes of this Agreement, and the consummation of the
transactions contemplated hereby.
7.3 GOVERNING LAW.
This Agreement and the rights and obligations of the parties
hereto shall be governed by, and construed and enforced in accordance with,
the laws of the State of Delaware, without giving effect to the principles
of conflicts of law thereof.
7.4 INVALIDITY OF PROVISION.
The invalidity or unenforceability of any provision of this
Agreement in any jurisdiction shall not affect the validity or
enforceability of the remainder of this Agreement in that jurisdiction or
the validity or enforceability of this Agreement, including that provision,
in any other jurisdiction. If any provision of this Agreement is held
unlawful or unenforceable in any respect, such provision shall be revised
or applied in a manner that renders it lawful and enforceable to the
fullest extent possible under law.
7.5 NOTICE.
Any notice or other communication required or permitted hereunder
shall be writing and shall be delivered personally, telegraphed, telexed,
sent by facsimile transmission or sent by certified, registered or express
mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile
transmission or, if mailed, 5 days after the date of deposit in the United
States mail, as follows:
(i) if to Dal-Tile, to:
Dal-Tile International Inc.
7834 C.F. Hawn Freeway
Dallas, Texas 75217
Attention: Mark A. Solls
with a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Attention: Frederick H. Fogel, Esq.
(ii) if to the Grantee, to:
Christopher Wellborn
908 Suffolk Court
Southlake, Texas 76902
Any party may change its address for notice hereunder by notice
to the other parties hereto.
7.6 BINDING EFFECT.
This Agreement shall inure to the benefit of and shall be binding
upon the parties hereto and their respective heirs, legal representatives,
successors and assigns.
7.7 AMENDMENT AND MODIFICATION.
This Agreement may be amended, modified or supplemented only by
written agreement of the party against whom enforcement of such amendment,
modification or supplement is sought.
7.8 HEADING; EXECUTION IN COUNTERPARTS.
The headings and captions contained herein are for convenience
only and shall not control or affect the meaning or construction of any
provision hereof. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and which
together shall constitute one and the same instrument.
7.9 ENTIRE AGREEMENT.
This Agreement constitutes the entire agreement, and supersedes
all prior agreements and understandings, oral and written, between the
parties hereto with respect to the subject matter hereof.
7.10 RIGHT OF DISCHARGE RESERVED.
Nothing contained in this Agreement shall confer upon the Grantee
any right to continue in the employ or service of Dal-Tile or affect any
right which Dal-Tile may have to terminate the employment or services of
the Grantee.
7.11 WITHHOLDING.
The Company shall be entitled to withhold from any payments to
the Grantee an amount sufficient to satisfy any federal, state, and other
governmental tax required to be withheld in connection with any exercise of
the Right.
7.12 INTERPRETATION AND STOCKHOLDER APPROVAL.
(a) The Right granted under this Agreement is intended to be
performance-based compensation within the meaning of Section 162(m)(4)(C)
of the Code and the Committee shall interpret this Agreement accordingly.
(b) This Agreement and the grant of the Right hereunder is
subject to approval by Dal-Tile's stockholders in accordance with Section
162(m) of the Code.
7.13 NO RIGHTS AS A STOCKHOLDER.
Neither the Grantee nor any person succeeding to the Grantee's
rights hereunder shall have any rights as a stockholder with respect to any
Shares subject to the Right. Except for adjustments which the Committee may
make pursuant to Section 6.1 hereof, no adjustment shall be made for
dividends, distributions or other rights (whether ordinary or
extraordinary, and whether in cash, securities or other property). Neither
the Grantee nor any person succeeding to the Grantee's rights hereunder
shall have any rights as a stockholder with respect to any Shares issuable
in connection with a Payment-In-Kind or a Mixed Payment until the date of
the issuance of a stock certificate to him or her for any such Shares. 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.
7.14 GRANTEE'S ACKNOWLEDGMENTS.
The Grantee agrees and acknowledges that no member of the
Committee shall be liable for any action or determination made in good
faith with respect to this Agreement. The Committee shall have the right to
make all determinations, in respect of this Agreement, which determinations
shall be final, conclusive and binding on the Grantee.
7.15 RESTRICTIONS.
(a) If the Committee shall at any time determine based on the
advice of counsel that any Consent (as hereinafter defined) is necessary or
desirable as a condition of, or in connection with, the issuance of Shares
hereunder, then such issuance 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. Dal-Tile shall use its reasonable best
efforts to effect or obtain such Consent. If such Consent cannot be
effected or obtained within three months of exercise of the Right, payment
of the amount determined under Section 2 hereof will be made in cash.
(b) The term "Consent" as used herein with respect to the
issuance of Shares 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 or any person succeeding to
the Grantee's rights hereunder, as the case may be, with respect to the
disposition of the 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 the issuance of the Shares by any governmental or other regulatory
bodies.
IN WITNESS WHEREOF, this Agreement has been signed by or on
behalf of each of the parties hereto, all as of the date first above
written.
DAL-TILE INTERNATIONAL INC.
By: /s/ Jacques R. Sardas
-----------------------------------
Name: Jacques R. Sardas
Title: President and Chief
Executive Officer
/s/ Christopher Wellborn
--------------------------------------
Christopher Wellborn
<PAGE>
EXERCISE NOTICE
[TO BE EXECUTED UPON EXERCISE OF STOCK APPRECIATION RIGHT]
To Dal-Tile International Inc.
The undersigned hereby irrevocably elects to exercise the Right
represented by the attached Stock Appreciation Rights Agreement (the
"Agreement"), dated as of the 10th day of October, 1997, with respect to
_____ Shares, as provided for therein.
The undersigned represents and warrants to you that, with respect to
any amount paid to the undersigned by delivery of Shares:
ACQUISITION FOR OWN ACCOUNT. The undersigned is acquiring such Shares
for his/her own account for investment and not with a view to the sale or
distribution thereof or with any present intention of distributing or
selling the same.
SECURITIES ACT RESTRICTIONS. The undersigned covenants and agrees that
he/she will not sell, assign, transfer, pledge or otherwise dispose of any
of the Shares acquired by the undersigned hereunder unless and until they
are registered under the Securities Act of 1933, as amended (the
"Securities Act"), or unless an exemption from such registration is
available and until the undersigned shall have delivered to Dal-Tile
International Inc. a written opinion of counsel reasonably satisfactory to
Dal-Tile International Inc. that the disposition is in compliance with the
requirements of the Securities Act. The undersigned acknowledges that
he/she understands that the Shares are not so registered.
Please pay all cash to, and issue any certificate or certificates for
any Shares in the name of:
Name:
-----------------------------------------------------
Address:
--------------------------------------------------
Social Security or Tax I.D. Number:
-----------------------
(Please print)
Signature
-----------------------------
Dated , 199 .
----- -
<PAGE>
STOCK APPRECIATION RIGHTS AGREEMENT
THIS AGREEMENT, made as of the 20th day of February, 1998 (the "Grant
Date"), between Dal-Tile International Inc., a Delaware corporation
("Dal-Tile"), and Jacques Sardas, 6031 Orchid Lane, Dallas, Texas 75230
(the "Grantee").
The parties hereto agree as follows:
1. GRANT OF STOCK APPRECIATION RIGHT.
Dal-Tile hereby grants to the Grantee a Stock Appreciation Right (the
"Right") with respect to 250,000 shares of the common stock, par value $.01
per share (the "Common Stock"), of Dal-Tile (the "Shares") on the terms and
conditions set forth in this Agreement. The base price for each Share
covered by this Right shall be $9.01, as adjusted pursuant to this
Agreement (the "Base Price").
2. AMOUNT AND FORM OF PAYMENT UPON EXERCISE OF RIGHT.
2.1 Upon exercise of all or any portion of the Right, the Grantee
shall be entitled to receive the amount determined by multiplying (i) the
excess (the "Single Share Excess") of the Fair Market Value of a Share on
the date of exercise over the Base Price; by (ii) the number of Shares in
respect of which the Right is being exercised; PROVIDED, HOWEVER, that for
purposes of determining the Single Share Excess, no amount of Fair Market
Value of a Share in excess of $13.69 (the "Ceiling Price") shall be taken
into account. Payment of the amount determined under this Section 2 shall,
in the sole discretion of the Committee, be made: (i) in cash; (ii) by
delivery of Shares having an aggregate Fair Market Value on the date of
such delivery equal to the amount of such payment (a "Payment-In-Kind"); or
(iii) by a combination of the foregoing (a "Mixed Payment"), and shall be
paid within ten (10) business days after the date of exercise. In the event
that such payment is made as: (x) a Payment-In-Kind; or (y) a Mixed
Payment, and the sum of the federal, state and other governmental income
tax incurred by Grantee with respect to the payment exceeds the cash
portion, if any, of such payment, the Committee shall make one or more
interest-bearing loans (each loan, a "Loan," and, collectively, the
"Loans") to the Grantee in an amount equal to such excess; PROVIDED,
HOWEVER, that Dal-Tile shall have no obligation to make a Loan in the event
the Grantee's employment by Dal-Tile has been terminated by Dal-Tile with
Cause (as defined in the Employment Agreement) or by the Grantee without
Good Reason (as defined in the Employment Agreement).
2.2 Each Loan shall bear interest at the lowest rate permitted by the
Internal Revenue Service without the imputation of interest. The principal
amount and accrued interest on each Loan shall be due and payable on June
13, 2007; PROVIDED, HOWEVER, that (a) the Grantee shall pay to Dal-Tile
promptly, as repayment of the outstanding principal amount and accrued
interest of the Loans, the after-tax proceeds received by the Grantee from
any disposition of Common Stock, or options to acquire Common Stock, held
from time to time by the Grantee, and (b) the outstanding principal amount
and accrued interest of all the Loans shall be immediately payable in the
event the Grantee's employment by Dal-Tile is terminated by Dal-Tile with
"Cause" (as defined in the Employment Agreement) or by the Grantee without
Good Reason (as defined in the Employment Agreement). Repayments shall be
applied first to the Loan which was most recently made. Each Loan shall be
secured by such number of shares of Common Stock issued pursuant to the
Right that from time to time have a Fair Market Value equal to the
outstanding principal amount and accrued interest of all of the Loans.
3. VESTING; EXERCISABILITY; DURATION.
3.1 VESTING.
(a) Subject to Sections 6.2 and 6.3 hereof, the Grantee shall
vest in the cumulative number of Shares under the Right, at the times
provided in the following schedule:
APPLICABLE DATE CUMULATIVE PERCENTAGE OF SHARES
- --------------- -------------------------------
On the Grant Date ................................... 62,500
On June 13, 1998 .................................... 125,000
On June 13, 1999 .................................... 187,500
On December 31, 1999................................. 250,000
(b) The unvested portion of the Right shall be forfeited upon the
termination of the Grantee's employment with Dal-Tile for any reason,
subject to Section 6.3 hereof.
3.2 EXERCISABILITY.
Subject to Sections 6.2 and 6.3 hereof, the Grantee shall be
entitled to exercise the Right, with respect to the cumulative number of
Shares in which the Grantee may then be, or thereafter become, vested, only
if Dal-Tile reports, pursuant to its audited financial statements, positive
net income ("Net Income") for either its fiscal year ending December 31,
1998 or its fiscal year ending December 31, 1999 (the "Performance
Target"). The Right shall not be exercisable prior to the vesting thereof
and the time the Committee certifies that the Performance Target has been
satisfied. The Committee shall act within seven days with respect to
certification following the availability of the relevant audited financial
statements. For purposes of this Agreement, Net Income shall be calculated
without taking into account any charge against income which may arise as a
result of the Right granted pursuant to this Agreement or any other stock
appreciation right which may, from time to time, be granted by Dal-Tile.
3.3 DURATION.
Unless earlier terminated in accordance with the terms of this
Agreement, the Right shall terminate on June 13, 2007.
4. MANNER OF EXERCISE OF RIGHT.
Subject to the terms and conditions of this Agreement, the Right may
be exercised only by giving written notice (the "Exercise Notice") to
Dal-Tile in the form of Exhibit A attached hereto, at its principal
executive office. Such notice shall state that the Grantee is electing to
exercise the Right, and the number of Shares in respect of which the Right
is being exercised, and shall be signed by the person or persons exercising
the Right. The date of exercise for purposes of this Agreement shall be the
date Dal-Tile receives the Exercise Notice. If requested by Dal-Tile, such
person or persons shall: (i) deliver this Agreement to the Secretary of
Dal-Tile who shall endorse thereon a notation of such exercise; and (ii)
provide satisfactory proof as to the right of such person or persons to
exercise the Right.
5. NONASSIGNABILITY.
Neither the Right granted to the Grantee under this Agreement nor any
portion thereof shall be assignable or transferable (whether by operation
of law or otherwise, and whether voluntarily or involuntarily), other than
by will or by the laws of descent and distribution. The Right granted to
the Grantee under this Agreement shall be exercisable only by the Grantee
or his estate, heirs or personal representatives.
6. ADJUSTMENTS TO RIGHTS UPON CERTAIN EVENTS.
6.1 ADJUSTMENTS TO NUMBER OF SHARES AND CEILING AND BASE PRICES.
The number of Shares subject to this Right, the Ceiling Price and
the Base Price shall be equitably adjusted for any increase or decrease in
the number of issued Shares resulting from: (i) the subdivision or
combination of Shares or other capital adjustments; (ii) the payment of a
stock dividend or extraordinary cash dividend after the Grant Date; or
(iii) any other increase or decrease in the number of such Shares effected
without receipt of consideration by Dal-Tile;
PROVIDED, HOWEVER, that any fractional Shares resulting from any
such adjustment shall be eliminated. Adjustments under this Section 6.1
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.
6.2 CHANGE OF CONTROL.
Notwithstanding anything contained in this Agreement to the
contrary:
(a) the Grantee shall be vested in, and shall be entitled to
exercise the Right with respect to, 100% of the Shares subject to the Right
upon the occurrence of any transaction or series of related transactions as
a result of which any person or "group" of persons (as such expression is
used under the 1934 Act, and the rules thereunder) other than DTI Investors
LLC or its members or any of their affiliates or successors (collectively,
an "Acquiring Person"): (i) becomes the owner of a greater number of Shares
than are then owned by DTI Investors LLC or its members or former members
(taken as a group), provided that the Acquiring Person owns at least 40% of
the issued and outstanding Shares; or (ii) has the power to elect a
majority of the Board; and
(b) in the event of a "Transaction" that does not also constitute
a "Non-Control Transaction" (each, as defined in the Non-Qualified Stock
Option Agreement, dated as of February 20, 1998, between the Grantee and
Dal-Tile), the Right shall, unless the Grantee and Dal-Tile shall otherwise
agree, automatically be converted into the right to receive, with respect
to each Share subject to the Right, at the consummation of such
Transaction, a payment of the same amount and kind of stock, securities,
cash, property or other consideration that each holder of a Share was
entitled to receive in such Transaction in respect of a Share, less the
Base Price; PROVIDED, HOWEVER, that the fair market value of such stock,
securities, cash, property or other consideration shall not exceed the
Ceiling Price less the Base Price. If more than one (1) form of
consideration is included in such Transaction, the various components
thereof shall be appropriately prorated; and
(c) in the event of a Non-Control Transaction, the Grantee shall
continue to vest in the Right only in accordance with Section 3.1 hereof,
which Right shall remain exercisable only in accordance with Section 3.2
hereof, and, the number of Shares subject to the Right, the Ceiling Price
and the Base Price shall be equitably adjusted by the Committee for any
change in the Shares resulting from a merger involving the Company.
Adjustments under this Section 6.2(c) 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.
6.3 TERMINATION OF EMPLOYMENT.
The Right (whether vested or unvested) shall terminate and expire
on the effective date of the termination of the Grantee's employment by
Dal-Tile with "Cause." In the event of the termination of the Grantee's
employment by Dal-Tile without Cause or by the Grantee with "Good Reason":
(i) on or prior to June 30, 1998, the Grantee shall be vested in 50% of the
Shares subject to the Right, which Right shall, notwithstanding such
vesting, become exercisable only in accordance with Section 3.2 hereof; and
(ii) after June 30, 1998, the Grantee shall be vested in 100% of the
Shares subject to the Right, which Right shall, notwithstanding such
vesting, become exercisable only in accordance with Section 3.2 hereof. In
the event of the termination of the Grantee's employment by the Grantee
without Good Reason, the Right, to the extent then vested, shall become
exercisable only in accordance with Section 3.2 hereof and shall terminate
on the earliest to occur of: (i) the tenth anniversary of the Grant Date;
and (ii) the date which is ten (10) days after the later of: (A) such
termination of the Grantee's employment; and (B) the date that achievement
of the Performance Target is certified, and the unvested portion of the
Right shall be forfeited. In the event of the termination of the Grantee's
employment by reason of the Grantee's death or "disability" (as such term
is used under the Employment Agreement), the Right, to the extent then
vested, shall be exercisable until the tenth anniversary of the Grant Date,
and the unvested portion of the Right shall be forfeited on the effective
date of such termination.
7. MISCELLANEOUS.
7.1 RULES OF CONSTRUCTION.
(a) In this Agreement, unless the context otherwise requires,
words in the singular number or in the plural number shall each include the
singular number and the plural number, words of the masculine gender shall
include the feminine and the neuter, and, when the sense so indicates,
words of the neuter gender may refer to any gender.
(b) The term "affiliate" shall mean any person directly or
indirectly controlling, controlled by, or under common control with the
person of which it is an affiliate.
(c) The term "Board" shall mean the Board of Directors of
Dal-Tile.
(d) The term "Code" shall mean the Internal Revenue Code of 1986,
as amended.
(e) The term "Committee" shall mean the Committee of the Board
appointed to administer the Stock Option Plan in accordance with the terms
of such plan.
(f) The term "control" shall mean with respect to any person, the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such person, whether through
the ownership of equity interests, by contract or otherwise.
(g) The term "Employment Agreement" shall mean the Employment
Agreement, dated as of June 13, 1997, and as amended from time to time, by
and between Dal-Tile and the Grantee.
(h) The term "Fair Market Value" per Share as of a particular
date shall mean: (i) the closing sales price of a Share on the national
securities exchange on which the Shares are principally traded for the last
date (including the date of exercise of the Right) on which there was a
sale of the Shares on such exchange; or (ii) if the Shares are not then
traded on a national securities exchange, the average of the closing bid
and asked prices for the Shares in the over-the-counter market on which the
Shares are principally traded for the last date (including the date of
exercise of the Right) on which there was a sale of the Shares in such
market; or (iii) if the Shares 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.
(i) The term "person" shall mean an individual, a corporation, a
partnership, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or
instrumentality thereof.
(j) The term "Stock Option Plan" shall mean the Dal-Tile
International Inc. 1997 Amended and Restated Stock Option Plan.
(k) The term "1934 Act" shall mean the Securities Exchange Act of
1934, as amended.
(l) There shall be included within the term "Dal-Tile" any
successor to Dal-Tile by merger, consolidation, acquisition of
substantially all the assets thereof, or otherwise.
(m) There shall be included within the term "Shares" any Common
Stock, and any and all securities of any kind whatsoever of Dal-Tile which
may be issued after the date hereof in respect of, or in exchange for,
shares of Common Stock pursuant to a merger, consolidation, stock split,
stock dividend, recapitalization of Dal-Tile or otherwise.
7.2 FURTHER ASSURANCES.
Each party hereto shall do and perform or cause to be done and
performed all further acts and things and shall execute and deliver all
other agreements, certificates, instruments, and documents as any other
party hereto reasonably may request in order to carry out the intent and
accomplish the purposes of this Agreement, and the consummation of the
transactions contemplated hereby.
7.3 GOVERNING LAW.
This Agreement and the rights and obligations of the parties
hereto shall be governed by, and construed and enforced in accordance with,
the laws of the State of Delaware, without giving effect to the principles
of conflicts of law thereof.
7.4 INVALIDITY OF PROVISION.
The invalidity or unenforceability of any provision of this
Agreement in any jurisdiction shall not affect the validity or
enforceability of the remainder of this Agreement in that jurisdiction or
the validity or enforceability of this Agreement, including that provision,
in any other jurisdiction. If any provision of this Agreement is held
unlawful or unenforceable in any respect, such provision shall be revised
or applied in a manner that renders it lawful and enforceable to the
fullest extent possible under law.
7.5 NOTICE.
Any notice or other communication required or permitted hereunder
shall be writing and shall be delivered personally, telegraphed, telexed,
sent by facsimile transmission or sent by certified, registered or express
mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile
transmission or, if mailed, 5 days after the date of deposit in the United
States mail, as follows:
(i) if to Dal-Tile, to:
Dal-Tile International Inc.
C.F. Hawn Freeway
Dallas, Texas 75217
Attention: Mark A. Solls
with a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Attention: Frederick H. Fogel, Esq.
(ii) if to the Grantee, to:
Jacques Sardas
6031 Orchid Lane
Dallas, Texas 75230
with a copy to:
Ira C. Kaplan, Esq.
Benesch, Friedlander, Coplan & Aronoff, LLP
2300 BP America Building
200 Public Square
Cleveland, Ohio 44114
Any party may change its address for notice hereunder by notice
to the other parties hereto.
7.6 BINDING EFFECT.
This Agreement shall inure to the benefit of and shall be binding
upon the parties hereto and their respective heirs, legal representatives,
successors and assigns.
7.7 AMENDMENT AND MODIFICATION.
This Agreement may be amended, modified or supplemented only by
written agreement of the party against whom enforcement of such amendment,
modification or supplement is sought.
7.8 HEADING; EXECUTION IN COUNTERPARTS.
The headings and captions contained herein are for convenience
only and shall not control or affect the meaning or construction of any
provision hereof. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and which
together shall constitute one and the same instrument.
7.9 ENTIRE AGREEMENT.
This Agreement constitutes the entire agreement, and supersedes
all prior agreements and understandings, oral and written, between the
parties hereto with respect to the subject matter hereof.
7.10 RIGHT OF DISCHARGE RESERVED.
Nothing contained in this Agreement shall confer upon the Grantee
any right to continue in the employ or service of Dal-Tile or affect any
right which Dal-Tile may have to terminate the employment or services of
the Grantee.
7.11 WITHHOLDING.
The Company shall be entitled to withhold from any payments to
the Grantee an amount sufficient to satisfy any federal, state, and other
governmental tax required to be withheld in connection with any exercise of
the Right.
7.12 INTERPRETATION AND STOCKHOLDER APPROVAL.
(a) The Right granted under this Agreement is intended to be
performance-based compensation within the meaning of Section 162(m)(4)(C)
of the Code and the Committee shall interpret this Agreement accordingly.
(b) This Agreement and the grant of the Right hereunder is
subject to approval by Dal-Tile's stockholders in accordance with Section
162(m) of the Code.
7.13 NO RIGHTS AS A STOCKHOLDER.
Neither the Grantee nor any person succeeding to the Grantee's
rights hereunder shall have any rights as a stockholder with respect to any
Shares subject to the Right. Except for adjustments which the Committee may
make pursuant to Section 6.1 hereof, no adjustment shall be made for
dividends, distributions or other rights (whether ordinary or
extraordinary, and whether in cash, securities or other property). Neither
the Grantee nor any person succeeding to the Grantee's rights hereunder
shall have any rights as a stockholder with respect to any Shares issuable
in connection with a Payment-In-Kind or a Mixed Payment until the date of
the issuance of a stock certificate to him or her for any such Shares. 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.
7.14 GRANTEE'S ACKNOWLEDGMENTS.
The Grantee agrees and acknowledges that no member of the
Committee shall be liable for any action or determination made in good
faith with respect to this Agreement. The Committee shall have the right to
make all determinations in respect of this Agreement, which determinations
shall be final, conclusive and binding on the Grantee.
7.15 RESTRICTIONS.
(a) If the Committee shall at any time determine based on the
advice of counsel that any Consent (as hereinafter defined) is necessary or
desirable as a condition of, or in connection with, the issuance of Shares
hereunder, then such issuance 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. Dal-Tile shall use its reasonable best
efforts to effect or obtain such Consent. If such Consent cannot be
effected or obtained within three months of exercise of the Right, payment
of the amount determined under Section 2 hereof will be made in cash.
(b) The term "Consent" as used herein with respect to the
issuance of Shares 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 or any person succeeding to
the Grantee's rights hereunder, as the case may be, with respect to the
disposition of the 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 the issuance of the Shares by any governmental or other regulatory
bodies.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been signed by or on
behalf of each of the parties hereto, all as of the date first above
written.
DAL-TILE INTERNATIONAL INC.
By: /s/ Mark A. Solls
-----------------------------------
Name: Mark A. Solls
Title: Vice President, General Counsel
and Secretary
/s/ Jacques R. Sardas
--------------------------------------
Jacques R. Sardas
<PAGE>
EXERCISE NOTICE
[TO BE EXECUTED UPON EXERCISE OF STOCK APPRECIATION RIGHT]
To Dal-Tile International Inc.
The undersigned hereby irrevocably elects to exercise the Right
represented by the attached Stock Appreciation Rights Agreement (the
"Agreement"), dated as of the 10th day of October, 1998, with respect to
_____ Shares, as provided for therein.
The undersigned represents and warrants to you that, with respect to
any amount paid to the undersigned by delivery of Shares:
ACQUISITION FOR OWN ACCOUNT. The undersigned is acquiring such Shares
for his/her own account for investment and not with a view to the sale or
distribution thereof or with any present intention of distributing or
selling the same.
SECURITIES ACT RESTRICTIONS. The undersigned covenants and agrees that
he/she will not sell, assign, transfer, pledge or otherwise dispose of any
of the Shares acquired by the undersigned hereunder unless and until they
are registered under the Securities Act of 1933, as amended (the
"Securities Act"), or unless an exemption from such registration is
available and until the undersigned shall have delivered to Dal-Tile
International Inc. a written opinion of counsel reasonably satisfactory to
Dal-Tile International Inc. that the disposition is in compliance with the
requirements of the Securities Act.
The undersigned acknowledges that he/she understands that the Shares
are not so registered.
Please pay all cash to, and issue any certificate or certificates for
any Shares in the name of:
Name:
-----------------------------------------------------
Address:
--------------------------------------------------
Social Security or Tax I.D. Number:
-----------------------
(Please print)
Signature
-----------------------------
Dated , 199 .
----- -
<PAGE>
STOCK APPRECIATION RIGHTS AGREEMENT
THIS AGREEMENT, made as of the 20th day of February, 1998 (the "Grant
Date"), between Dal-Tile International Inc., a Delaware corporation
("Dal-Tile"), and Jacques Sardas, 6031 Orchid Lane, Dallas, Texas 75230
(the "Grantee").
The parties hereto agree as follows:
1. GRANT OF STOCK APPRECIATION RIGHT.
Dal-Tile hereby grants to the Grantee a Stock Appreciation Right (the
"Right") with respect to 2,000,000 shares of the common stock, par value
$.01 per share (the "Common Stock"), of Dal-Tile (the "Shares") on the
terms and conditions set forth in this Agreement. The base price for each
Share covered by this Right shall be $9.01, as adjusted pursuant to this
Agreement (the "Base Price").
2. AMOUNT AND FORM OF PAYMENT UPON EXERCISE OF RIGHT.
2.1 Upon exercise of all or any portion of the Right, the Grantee
shall be entitled to receive the amount determined by multiplying (i) the
excess (the "Single Share Excess") of the Fair Market Value of a Share on
the date of exercise over the Base Price; by (ii) the number of Shares in
respect of which the Right is being exercised; PROVIDED, HOWEVER, that for
purposes of determining the Single Share Excess, no amount of Fair Market
Value of a Share in excess of $11.94 (the "Ceiling Price") shall be taken
into account. Payment of the amount determined under this Section 2 shall,
in the sole discretion of the Committee, be made: (i) in cash; (ii) by
delivery of Shares having an aggregate Fair Market Value on the date of
such delivery equal to the amount of such payment (a "Payment-In-Kind"); or
(iii) by a combination of the foregoing (a "Mixed Payment"), and shall be
paid within ten (10) business days after the date of exercise. In the event
that such payment is made as: (x) a Payment-In-Kind; or (y) a Mixed
Payment, and the sum of the federal, state and other governmental income
tax incurred by Grantee with respect to the payment exceeds the cash
portion, if any, of such payment, the Committee shall make one or more
interest-bearing loans (each loan, a "Loan," and, collectively, the
"Loans") to the Grantee in an amount equal to such excess; PROVIDED,
HOWEVER, that Dal-Tile shall have no obligation to make a Loan in the event
the Grantee's employment by Dal-Tile has been terminated by Dal-Tile with
Cause (as defined in the Employment Agreement) or by the Grantee without
Good Reason (as defined in the Employment Agreement).
2.2 Each Loan shall bear interest at the lowest rate permitted by the
Internal Revenue Service without the imputation of interest. The principal
amount and accrued interest on each Loan shall be due and payable on June
13, 2007; PROVIDED, HOWEVER, that (a) the Grantee shall pay to Dal-Tile
promptly, as repayment of the outstanding principal amount and accrued
interest of the Loans, the after-tax proceeds received by the Grantee from
any disposition of Common Stock, or options to acquire Common Stock, held
from time to time by the Grantee, and (b) the outstanding principal amount
and accrued interest of all the Loans shall be immediately payable in the
event the Grantee's employment by Dal-Tile is terminated by Dal-Tile with
"Cause" (as defined in the Employment Agreement) or by the Grantee without
Good Reason (as defined in the Employment Agreement). Repayments shall be
applied first to the Loan which was most recently made. Each Loan shall be
secured by such number of shares of Common Stock issued pursuant to the
Right that from time to time have a Fair Market Value equal to the
outstanding principal amount and accrued interest of all of the Loans.
3. VESTING; EXERCISABILITY; DURATION.
3.1 VESTING.
(a) Subject to Sections 6.2 and 6.3 hereof, the Grantee shall
vest in the cumulative number of Shares under the Right, at the times
provided in the following schedule:
APPLICABLE DATE CUMULATIVE PERCENTAGE OF SHARES
- --------------- -------------------------------
On the Grant Date................................ 25%
On June 13, 1998................................. 50%
On June 13, 1999................................. 75%
On December 31, 1999............................. 100%
(b) The unvested portion of the Right shall be forfeited upon the
termination of the Grantee's employment with Dal-Tile for any reason,
subject to Section 6.3 hereof.
3.2 EXERCISABILITY.
Subject to Sections 6.2 and 6.3 hereof, the Grantee shall be
entitled to exercise the Right, with respect to the cumulative number of
Shares in which the Grantee may then be, or thereafter become, vested, only
if Dal-Tile reports, pursuant to its audited financial statements, positive
net income ("Net Income") for either its fiscal year ending December 31,
1998 or its fiscal year ending December 31, 1999 (the "Performance
Target"). The Right shall not be exercisable prior to the vesting thereof
and the time the Committee certifies that the Performance Target has been
satisfied. The Committee shall act within seven days with respect to
certification following the availability of the relevant audited financial
statements. For purposes of this Agreement, Net Income shall be calculated
without taking into account any charge against income which may arise as a
result of the Right granted pursuant to this Agreement or any other stock
appreciation right which may, from time to time, be granted by Dal-Tile.
3.3 DURATION.
Unless earlier terminated in accordance with the terms of this
Agreement, the Right shall terminate on June 13, 2007.
4. MANNER OF EXERCISE OF RIGHT.
Subject to the terms and conditions of this Agreement, the Right may
be exercised only by giving written notice (the "Exercise Notice") to
Dal-Tile in the form of Exhibit A attached hereto, at its principal
executive office. Such notice shall state that the Grantee is electing to
exercise the Right, and the number of Shares in respect of which the Right
is being exercised, and shall be signed by the person or persons exercising
the Right. The date of exercise for purposes of this Agreement shall be the
date Dal-Tile receives the Exercise Notice. If requested by Dal-Tile, such
person or persons shall: (i) deliver this Agreement to the Secretary of
Dal-Tile who shall endorse thereon a notation of such exercise; and (ii)
provide satisfactory proof as to the right of such person or persons to
exercise the Right.
5. NONASSIGNABILITY.
Neither the Right granted to the Grantee under this Agreement nor any
portion thereof shall be assignable or transferable (whether by operation
of law or otherwise, and whether voluntarily or involuntarily), other than
by will or by the laws of descent and distribution. The Right granted to
the Grantee under this Agreement shall be exercisable only by the Grantee
or his estate, heirs or personal representatives.
6. ADJUSTMENTS TO RIGHTS UPON CERTAIN EVENTS.
6.1 ADJUSTMENTS TO NUMBER OF SHARES AND CEILING AND BASE PRICES.
The number of Shares subject to this Right, the Ceiling Price and
the Base Price shall be equitably adjusted for any increase or decrease in
the number of issued Shares resulting from: (i) the subdivision or
combination of Shares or other capital adjustments; (ii) the payment of a
stock dividend or extraordinary cash dividend after the Grant Date; or
(iii) any other increase or decrease in the number of such Shares effected
without receipt of consideration by Dal-Tile; PROVIDED, HOWEVER, that any
fractional Shares resulting from any such adjustment shall be eliminated.
Adjustments under this Section 6.1 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.
6.2 CHANGE OF CONTROL.
Notwithstanding anything contained in this Agreement to the
contrary:
(a) the Grantee shall be vested in, and shall be entitled to
exercise the Right with respect to, 100% of the Shares subject to the Right
upon the occurrence of any transaction or series of related transactions as
a result of which any person or "group" of persons (as such expression is
used under the 1934 Act, and the rules thereunder) other than DTI Investors
LLC or its members or any of their affiliates or successors (collectively,
an "Acquiring Person"): (i) becomes the owner of a greater number of Shares
than are then owned by DTI Investors LLC or its members or former members
(taken as a group), provided that the Acquiring Person owns at least 40% of
the issued and outstanding Shares; or (ii) has the power to elect a
majority of the Board; and
(b) in the event of a "Transaction" that does not also constitute
a "Non-Control Transaction" (each, as defined in the Non-Qualified Stock
Option Agreement, dated as of February 20, 1998, between the Grantee and
Dal-Tile), the Right shall, unless the Grantee and Dal-Tile shall otherwise
agree, automatically be converted into the right to receive, with respect
to each Share subject to the Right, at the consummation of such
Transaction, a payment of the same amount and kind of stock, securities,
cash, property or other consideration that each holder of a Share was
entitled to receive in such Transaction in respect of a Share, less the
Base Price; PROVIDED, HOWEVER, that the fair market value of such stock,
securities, cash, property or other consideration shall not exceed the
Ceiling Price less the Base Price. If more than one (1) form of
consideration is included in such Transaction, the various components
thereof shall be appropriately prorated; and
(c) in the event of a Non-Control Transaction, the Grantee shall
continue to vest in the Right only in accordance with Section 3.1 hereof,
which Right shall remain exercisable only in accordance with Section 3.2
hereof, and, the number of Shares subject to the Right, the Ceiling Price
and the Base Price shall be equitably adjusted by the Committee for any
change in the Shares resulting from a merger involving the Company.
Adjustments under this Section 6.2(c) 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.
6.3 TERMINATION OF EMPLOYMENT.
The Right (whether vested or unvested) shall terminate and expire
on the effective date of the termination of the Grantee's employment by
Dal-Tile with "Cause." In the event of the termination of the Grantee's
employment by Dal-Tile without Cause or by the Grantee with "Good Reason":
(i) on or prior to June 30, 1998, the Grantee shall be vested in 50% of the
Shares subject to the Right, which Right shall, notwithstanding such
vesting, become exercisable only in accordance with Section 3.2 hereof; and
(ii) after June 30, 1998, the Grantee shall be vested in 100% of the
Shares subject to the Right, which Right shall, notwithstanding such
vesting, become exercisable only in accordance with Section 3.2 hereof. In
the event of the termination of the Grantee's employment by the Grantee
without Good Reason, the Right, to the extent then vested, shall become
exercisable only in accordance with Section 3.2 hereof and shall terminate
on the earliest to occur of: (i) the tenth anniversary of the Grant Date;
and (ii) the date which is ten (10) days after the later of: (A) such
termination of the Grantee's employment; and (B) the date that achievement
of the Performance Target is certified, and the unvested portion of the
Right shall be forfeited. In the event of the termination of the Grantee's
employment by reason of the Grantee's death or "disability" (as such term
is used under the Employment Agreement), the Right, to the extent then
vested, shall be exercisable until the tenth anniversary of the Grant Date,
and the unvested portion of the Right shall be forfeited on the effective
date of such termination.
7. MISCELLANEOUS.
7.1 RULES OF CONSTRUCTION.
(a) In this Agreement, unless the context otherwise requires,
words in the singular number or in the plural number shall each include the
singular number and the plural number, words of the masculine gender shall
include the feminine and the neuter, and, when the sense so indicates,
words of the neuter gender may refer to any gender.
(b) The term "affiliate" shall mean any person directly or
indirectly controlling, controlled by, or under common control with the
person of which it is an affiliate.
(c) The term "Board" shall mean the Board of Directors of
Dal-Tile.
(d) The term "Code" shall mean the Internal Revenue Code of 1986,
as amended.
(e) The term "Committee" shall mean the Committee of the Board
appointed to administer the Stock Option Plan in accordance with the terms
of such plan.
(f) The term "control" shall mean with respect to any person, the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such person, whether through
the ownership of equity interests, by contract or otherwise.
(g) The term "Employment Agreement" shall mean the Employment
Agreement, dated as of June 13, 1997, and as amended from time to time, by
and between Dal-Tile and the Grantee.
(h) The term "Fair Market Value" per Share as of a particular
date shall mean: (i) the closing sales price of a Share on the national
securities exchange on which the Shares are principally traded for the last
date (including the date of exercise of the Right) on which there was a
sale of the Shares on such exchange; or (ii) if the Shares are not then
traded on a national securities exchange, the average of the closing bid
and asked prices for the Shares in the over-the-counter market on which the
Shares are principally traded for the last date (including the date of
exercise of the Right) on which there was a sale of the Shares in such
market; or (iii) if the Shares 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.
(i) The term "person" shall mean an individual, a corporation, a
partnership, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or
instrumentality thereof.
(j) The term "Stock Option Plan" shall mean the Dal-Tile
International Inc. 1997 Amended and Restated Stock Option Plan.
(k) The term "1934 Act" shall mean the Securities Exchange Act of
1934, as amended.
(l) There shall be included within the term "Dal-Tile" any
successor to Dal-Tile by merger, consolidation, acquisition of
substantially all the assets thereof, or otherwise.
(m) There shall be included within the term "Shares" any Common
Stock, and any and all securities of any kind whatsoever of Dal-Tile which
may be issued after the date hereof in respect of, or in exchange for,
shares of Common Stock pursuant to a merger, consolidation, stock split,
stock dividend, recapitalization of Dal-Tile or otherwise.
7.2 FURTHER ASSURANCES.
Each party hereto shall do and perform or cause to be done and
performed all further acts and things and shall execute and deliver all
other agreements, certificates, instruments, and documents as any other
party hereto reasonably may request in order to carry out the intent and
accomplish the purposes of this Agreement, and the consummation of the
transactions contemplated hereby.
7.3 GOVERNING LAW.
This Agreement and the rights and obligations of the parties
hereto shall be governed by, and construed and enforced in accordance with,
the laws of the State of Delaware, without giving effect to the principles
of conflicts of law thereof.
7.4 INVALIDITY OF PROVISION.
The invalidity or unenforceability of any provision of this
Agreement in any jurisdiction shall not affect the validity or
enforceability of the remainder of this Agreement in that jurisdiction or
the validity or enforceability of this Agreement, including that provision,
in any other jurisdiction. If any provision of this Agreement is held
unlawful or unenforceable in any respect, such provision shall be revised
or applied in a manner that renders it lawful and enforceable to the
fullest extent possible under law.
7.5 NOTICE.
Any notice or other communication required or permitted hereunder
shall be writing and shall be delivered personally, telegraphed, telexed,
sent by facsimile transmission or sent by certified, registered or express
mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile
transmission or, if mailed, 5 days after the date of deposit in the United
States mail, as follows:
(i) if to Dal-Tile, to:
Dal-Tile International Inc.
C.F. Hawn Freeway
Dallas, Texas 75217
Attention: Mark A. Solls
with a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Attention: Frederick H. Fogel, Esq.
(ii) if to the Grantee, to:
Jacques Sardas
6301 Orchid Lane
Dallas, TX 75230
with a copy to:
Ira C. Kaplan, Esq.
Benesch, Friedlander, Coplan & Arnoff, LLP
2300 BP America Building
200 Public Square
Cleveland, Ohio 44114
Any party may change its address for notice hereunder by notice
to the other parties hereto.
7.6 BINDING EFFECT.
This Agreement shall inure to the benefit of and shall be binding
upon the parties hereto and their respective heirs, legal representatives,
successors and assigns.
7.7 AMENDMENT AND MODIFICATION.
This Agreement may be amended, modified or supplemented only by
written agreement of the party against whom enforcement of such amendment,
modification or supplement is sought.
7.8 HEADING; EXECUTION IN COUNTERPARTS.
The headings and captions contained herein are for convenience
only and shall not control or affect the meaning or construction of any
provision hereof. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and which
together shall constitute one and the same instrument.
7.9 ENTIRE AGREEMENT.
This Agreement constitutes the entire agreement, and supersedes
all prior agreements and understandings, oral and written, between the
parties hereto with respect to the subject matter hereof.
7.10 RIGHT OF DISCHARGE RESERVED.
Nothing contained in this Agreement shall confer upon the Grantee
any right to continue in the employ or service of Dal-Tile or affect any
right which Dal-Tile may have to terminate the employment or services of
the Grantee.
7.11 WITHHOLDING.
The Company shall be entitled to withhold from any payments to
the Grantee an amount sufficient to satisfy any federal, state, and other
governmental tax required to be withheld in connection with any exercise of
the Right.
7.12 INTERPRETATION AND STOCKHOLDER APPROVAL.
(a) The Right granted under this Agreement is intended to be
performance-based compensation within the meaning of Section 162(m)(4)(C)
of the Code and the Committee shall interpret this Agreement accordingly.
(b) This Agreement and the grant of the Right hereunder is
subject to approval by Dal-Tile's stockholders in accordance with Section
162(m) of the Code.
7.13 NO RIGHTS AS A STOCKHOLDER.
Neither the Grantee nor any person succeeding to the Grantee's
rights hereunder shall have any rights as a stockholder with respect to any
Shares subject to the Right. Except for adjustments which the Committee may
make pursuant to Section 6.1 hereof, no adjustment shall be made for
dividends, distributions or other rights (whether ordinary or
extraordinary, and whether in cash, securities or other property). Neither
the Grantee nor any person succeeding to the Grantee's rights hereunder
shall have any rights as a stockholder with respect to any Shares issuable
in connection with a Payment-In-Kind or a Mixed Payment until the date of
the issuance of a stock certificate to him or her for any such Shares. 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.
7.14 GRANTEE'S ACKNOWLEDGMENTS.
The Grantee agrees and acknowledges that no member of the
Committee shall be liable for any action or determination made in good
faith with respect to this Agreement. The Committee shall have the right to
make all determinations in respect of this Agreement, which determinations
shall be final, conclusive and binding on the Grantee.
7.15 RESTRICTIONS.
(a) If the Committee shall at any time determine based on the
advice of counsel that any Consent (as hereinafter defined) is necessary or
desirable as a condition of, or in connection with, the issuance of Shares
hereunder, then such issuance 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. Dal-Tile shall use its reasonable best
efforts to effect or obtain such Consent. If such Consent cannot be
effected or obtained within three months of exercise of the Right, payment
of the amount determined under Section 2 hereof will be made in cash.
(b) The term "Consent" as used herein with respect to the
issuance of Shares 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 or any person succeeding to
the Grantee's rights hereunder, as the case may be, with respect to the
disposition of the 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 the issuance of the Shares by any governmental or other regulatory
bodies.
IN WITNESS WHEREOF, this Agreement has been signed by or on
behalf of each of the parties hereto, all as of the date first above
written.
DAL-TILE INTERNATIONAL INC.
By: /s/ Mark A. Solls
-----------------------------------
Name: Mark A. Solls
Title: Vice President, General Counsel
and Secretary
/s/ Jacques R. Sardas
--------------------------------------
Jacques R. Sardas
<PAGE>
EXERCISE NOTICE
[TO BE EXECUTED UPON EXERCISE OF STOCK APPRECIATION RIGHT]
To Dal-Tile International Inc.
The undersigned hereby irrevocably elects to exercise the Right
represented by the attached Stock Appreciation Rights Agreement (the
"Agreement"), dated as of the 10th day of October, 1998, with respect to
_____ Shares, as provided for therein.
The undersigned represents and warrants to you that, with respect to
any amount paid to the undersigned by delivery of Shares:
ACQUISITION FOR OWN ACCOUNT. The undersigned is acquiring such Shares
for his/her own account for investment and not with a view to the sale or
distribution thereof or with any present intention of distributing or
selling the same.
SECURITIES ACT RESTRICTIONS. The undersigned covenants and agrees that
he/she will not sell, assign, transfer, pledge or otherwise dispose of any
of the Shares acquired by the undersigned hereunder unless and until they
are registered under the Securities Act of 1933, as amended (the
"Securities Act"), or unless an exemption from such registration is
available and until the undersigned shall have delivered to Dal-Tile
International Inc. a written opinion of counsel reasonably satisfactory to
Dal-Tile International Inc. that the disposition is in compliance with the
requirements of the Securities Act.
The undersigned acknowledges that he/she understands that the Shares
are not so registered.
Please pay all cash to, and issue any certificate or certificates for
any Shares in the name of:
Name:
------------------------------------------------
Address:
---------------------------------------------
Social Security or Tax I.D. Number:
------------------
(Please print)
Signature
------------------------
Dated , 199 .
----- -
<PAGE>
STOCK APPRECIATION RIGHTS AGREEMENT
THIS AGREEMENT, made as of the 20th day of February, 1998 (the "Grant
Date"), between Dal-Tile International Inc., a Delaware corporation
("Dal-Tile"), and David F. Finnigan, 5744 Meadow Haven Drive, Plano, TX 75093
(the "Grantee").
The parties hereto agree as follows:
1. GRANT OF STOCK APPRECIATION RIGHT.
Dal-Tile hereby grants to the Grantee a Stock Appreciation Right (the
"Right") with respect to 60,000 shares of the common stock, par value $.01
per share (the "Common Stock") of Dal-Tile (the "Shares") on the terms and
conditions set forth in this Agreement. The base price for each Share
covered by this Right shall be $9.01 as adjusted pursuant to this Agreement
(the "Base Price").
2. AMOUNT AND FORM OF PAYMENT UPON EXERCISE OF RIGHT.
2.1 Upon exercise of all or any portion of the Right, the Grantee
shall be entitled to receive the amount determined by multiplying (i) the
excess (the "Single Share Excess") of the Fair Market Value of a Share on
the date of exercise, over the Base Price by (ii) the number of Shares in
respect of which the Right is being exercised; PROVIDED, HOWEVER, that for
purposes of determining the Single Share Excess, no amount of Fair Market
Value of a Share in excess of $11.94 (the "Ceiling Price") shall be taken
into account. Payment of the amount determined under this Section 2.1
shall, in the sole discretion of the Committee, be made: (i) in cash; (ii)
by delivery of Shares having an aggregate Fair Market Value on the date of
such delivery equal to the amount of such payment (a "Payment-In-Kind"); or
(iii) by a combination of the foregoing (a "Mixed Payment"), and shall be
paid within ten (10) business days after the date of exercise. In the event
that such payment is made as: (x) a Payment-In-Kind; or (y) a Mixed
Payment, and the sum of the federal, state and other governmental income
tax incurred by the Grantee with respect to the payment exceeds the cash
portion, if any, of such payment, the Committee shall make one or more
interest-bearing loans (each loan, a "Loan," and, collectively, the
"Loans") to the Grantee in an amount equal to such excess; PROVIDED,
HOWEVER, that Dal-Tile shall have no obligation to make a loan in the event
of the "Termination With Cause" (as defined in the Stock Option Plan) of
the Grantee's employment by Dal-Tile or the termination of the Grantee's
employment voluntarily by the Grantee.
2.2 Each Loan shall bear interest at the lowest rate permitted by the
Internal Revenue Service without the imputation of interest. The principal
amount and accrued interest on each Loan shall be due and payable on
September 1, 2007; PROVIDED, HOWEVER, that (a) the Grantee shall pay to
Dal-Tile promptly, as repayment of the outstanding principal amount and
accrued interest of the Loans, the after-tax proceeds received by the
Grantee from any disposition of Common Stock, or options to acquire Common
Stock, held from time to time by the Grantee, and (b) the outstanding
principal amount and accrued interest of all the Loans shall be immediately
payable in the event of the Termination With Cause of the Grantee's
employment by Dal-Tile or the termination of the Grantee's employment
voluntarily by the Grantee. Repayments shall be applied first to the Loan
which was most recently made. Each Loan shall be secured by any and all
shares of Common Stock and options to acquire Common Stock held by the
Grantee and by the Right.
3. VESTING; EXERCISABILITY; DURATION.
3.1 VESTING.
(a) Subject to Sections 6.2 and 6.3 hereof, the Grantee shall
vest in the cumulative percentage of Shares under the Right, at the times
provided in the following schedule:
APPLICABLE DATE CUMULATIVE PERCENTAGE OF SHARES
- --------------- -------------------------------
On the Grant Date.................................. 25%
On June 13, 1998................................... 50%
On June 13, 1999................................... 75%
On December 31, 1999............................... 100%
(b) The unvested portion of the Right shall be forfeited upon the
termination of the Grantee's employment with Dal-Tile for any reason.
3.2 EXERCISABILITY.
Subject to Sections 6.2 and 6.3 hereof, the Grantee shall be
entitled to exercise the Right, with respect to the cumulative percentage
of Shares subject to the Right in which the Grantee may then be, or
thereafter become, vested, only if Dal-Tile reports, pursuant to its
audited financial statements, positive net income ("Net Income") for either
its fiscal year ending December 31, 1998 or its fiscal year ending December
31, 1999 (the "Performance Target"). The Right shall not be exercisable
prior to the vesting thereof and the time the Committee certifies that the
Performance Target has been satisfied. The Committee shall act within seven
days with respect to certification following the availability of the
relevant audited financial statements. For purposes of this Agreement, Net
Income shall be calculated without taking into account any charge against
income which may arise as a result of the Right granted pursuant to this
Agreement or any other stock appreciation right which may, from time to
time, be granted by Dal-Tile.
3.3 DURATION.
Unless earlier terminated in accordance with the terms of this
Agreement, the Right shall terminate on September 1, 2007.
4. MANNER OF EXERCISE OF RIGHT.
Subject to the terms and conditions of this Agreement, the Right may
be exercised only by giving written notice (the "Exercise Notice") to
Dal-Tile in the form of Exhibit A attached hereto, at its principal
executive office. Such notice shall state that the Grantee is electing to
exercise the Right, and the number of Shares in respect of which the Right
is being exercised, and shall be signed by the person or persons exercising
the Right. The date of exercise for purposes of this Agreement shall be the
date Dal-Tile receives the Exercise Notice. If requested by Dal-Tile, such
person or persons shall: (i) deliver this Agreement to the Secretary of
Dal-Tile who shall endorse thereon a notation of such exercise; and (ii)
provide satisfactory proof as to the right of such person or persons to
exercise the Right.
5. NONASSIGNABILITY.
Neither the Right granted to the Grantee under this Agreement nor any
portion thereof shall be assignable or transferable (whether by operation
of law or otherwise, and whether voluntarily or involuntarily), other than
by will or by the laws of descent and distribution. The Right granted to
the Grantee under this Agreement shall be exercisable only by the Grantee
or his estate, heirs or personal representatives.
6. ADJUSTMENTS TO RIGHTS UPON CERTAIN EVENTS.
6.1 ADJUSTMENTS TO NUMBER OF SHARES AND CEILING AND BASE PRICES.
The number of Shares subject to this Right, the Ceiling Price and
the Base Price shall be equitably adjusted for any increase or decrease in
the number of issued Shares resulting from: (i) the subdivision or
combination of Shares or other capital adjustments; (ii) the payment of a
stock dividend or extraordinary cash dividend after the Grant Date; or
(iii) any other increase or decrease in the number of such Shares effected
without receipt of consideration by Dal-Tile; PROVIDED, HOWEVER, that any
fractional Shares resulting from any such adjustment shall be eliminated.
Adjustments under this Section 6.1 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.
6.2 CHANGE OF CONTROL.
Notwithstanding anything contained in this Agreement to the
contrary:
(a) upon the consummation of a "Transaction" that does not also
constitute a "Non-Control Transaction" (each, as defined in the Stock
Option Plan), the Grantee shall, unless the Grantee and Dal-Tile shall
otherwise agree, be vested in, and shall be entitled to exercise the Right
with respect to, 100% of the Right, and the Grantee shall be entitled to
receive, with respect to each Share subject to the Right, upon exercise of
all or any portion of the Right, a payment of the same amount and kind of
stock, securities, cash, property or other consideration that each holder
of a Share was entitled to receive in such Transaction in respect of a
Share, less the Base Price; PROVIDED, HOWEVER, that the fair market value
of such stock, securities, cash, property or other consideration shall not
exceed the Ceiling Price less the Base Price. If more than one (1) form of
consideration is included in such Transaction, the various components
thereof shall be appropriately prorated; and
(b) in the event of a Non-Control Transaction, the Grantee shall
continue to vest in the Right only in accordance with Section 3.1 hereof,
which Right shall remain exercisable only in accordance with Section 3.2
hereof, and, the number of Shares subject to the Right, the Ceiling Price
and the Base Price shall be equitably adjusted by the Committee for any
changes in the Shares resulting from a merger involving Dal-Tile.
Adjustments under this Section 6.2(b) 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.
6.3 TERMINATION OF EMPLOYMENT.
The Right (whether vested or unvested) shall terminate and expire
on the effective date of the Termination With Cause of the Grantee's
employment by Dal-Tile. Unless the Committee determines otherwise, in the
event of the termination of the Grantee's employment for any reason other
than a Termination With Cause by Dal-Tile, the Right, to the extent then
vested, shall become exercisable only in accordance with Section 3.2 hereof
and shall terminate on the earliest to occur of: (i) September 1, 2007; and
(ii) the date which is ten (10) days (one (1) year in the case of a
termination by reason of death, disability or retirement on or after the
Grantee's sixty-fifth birthday or such earlier retirement age as may be
approved by the Committee) after the later of: (A) such termination of the
Grantee's employment; and (B) the date that achievement of the Performance
Target is certified, and the unvested portion of the right shall be
forfeited
7. MISCELLANEOUS.
7.1 RULES OF CONSTRUCTION.
(a) In this Agreement, unless the context otherwise requires,
words in the singular number or in the plural number shall each include the
singular number and the plural number, words of the masculine gender shall
include the feminine and the neuter, and, when the sense so indicates,
words of the neuter gender may refer to any gender.
(b) The term "affiliate" shall mean any person directly or
indirectly controlling, controlled by, or under common control with the
person of which it is an affiliate.
(c) The term "Board" shall mean the Board of Directors of
Dal-Tile.
(d) The term "Code" shall mean the Internal Revenue Code of 1986,
as amended.
(e) The term "Committee" shall mean the Committee of the Board
appointed to administer the Stock Option Plan in accordance with the terms
of such plan.
(f) The term "control" shall mean with respect to any person, the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such person, whether through
the ownership of equity interests, by contract or otherwise.
(g) The term "Fair Market Value" per Share as of a particular
date shall mean: (i) the closing sales price of a Share on the national
securities exchange on which the Shares are principally traded for the last
date (including the date of exercise of the Right) on which there was a
sale of the Shares on such exchange; or (ii) if the Shares are not then
traded on a national securities exchange, the average of the closing bid
and asked prices for the Shares in the over-the-counter market on which the
Shares are principally traded for the last date (including the date of
exercise of the Right) on which there was a sale of the Shares in such
market; or (iii) if the Shares 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) The term "person" shall mean an individual, a corporation, a
partnership, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or
instrumentality thereof.
(i) The term "Stock Option Plan" shall mean the Dal-Tile
International Inc. 1997 Amended and Restated Stock Option Plan.
(j) The term "1934 Act" shall mean the Securities Exchange Act of
1934, as amended.
(k) There shall be included within the term "Dal-Tile" any
successor to Dal-Tile by merger, consolidation, acquisition of
substantially all the assets thereof, or otherwise.
(l) There shall be included within the term "Shares" any Common
Stock, and any and all securities of any kind whatsoever of Dal-Tile which
may be issued after the date hereof in respect of, or in exchange for,
shares of Common Stock pursuant to a merger, consolidation, stock split,
stock dividend, recapitalization of Dal-Tile or otherwise.
7.2 FURTHER ASSURANCES.
Each party hereto shall do and perform or cause to be done and
performed all further acts and things and shall execute and deliver all
other agreements, certificates, instruments, and documents as any other
party hereto reasonably may request in order to carry out the intent and
accomplish the purposes of this Agreement, and the consummation of the
transactions contemplated hereby.
7.3 GOVERNING LAW.
This Agreement and the rights and obligations of the parties
hereto shall be governed by, and construed and enforced in accordance with,
the laws of the State of Delaware, without giving effect to the principles
of conflicts of law thereof.
7.4 INVALIDITY OF PROVISION.
The invalidity or unenforceability of any provision of this
Agreement in any jurisdiction shall not affect the validity or
enforceability of the remainder of this Agreement in that jurisdiction or
the validity or enforceability of this Agreement, including that provision,
in any other jurisdiction. If any provision of this Agreement is held
unlawful or unenforceable in any respect, such provision shall be revised
or applied in a manner that renders it lawful and enforceable to the
fullest extent possible under law.
7.5 NOTICE.
Any notice or other communication required or permitted hereunder
shall be writing and shall be delivered personally, telegraphed, telexed,
sent by facsimile transmission or sent by certified, registered or express
mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile
transmission or, if mailed, 5 days after the date of deposit in the United
States mail, as follows:
(i) if to Dal-Tile, to:
Dal-Tile International Inc.
7834 C.F. Hawn Freeway
Dallas, Texas 75217
Attention: Mark A. Solls
with a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Attention: Frederick H. Fogel, Esq.
(ii) if to the Grantee, to:
David Finnigan
5744 Meadow Haven Drive
Plano, TX 75093
Any party may change its address for notice hereunder by notice
to the other parties hereto.
7.6 BINDING EFFECT.
This Agreement shall inure to the benefit of and shall be binding
upon the parties hereto and their respective heirs, legal representatives,
successors and assigns.
7.7 AMENDMENT AND MODIFICATION.
This Agreement may be amended, modified or supplemented only by
written agreement of the party against whom enforcement of such amendment,
modification or supplement is sought.
7.8 HEADING; EXECUTION IN COUNTERPARTS.
The headings and captions contained herein are for convenience
only and shall not control or affect the meaning or construction of any
provision hereof. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and which
together shall constitute one and the same instrument.
7.9 ENTIRE AGREEMENT.
This Agreement constitutes the entire agreement, and supersedes
all prior agreements and understandings, oral and written, between the
parties hereto with respect to the subject matter hereof.
7.10 RIGHT OF DISCHARGE RESERVED.
Nothing contained in this Agreement shall confer upon the Grantee
any right to continue in the employ or service of Dal-Tile or affect any
right which Dal-Tile may have to terminate the employment or services of
the Grantee.
7.11 WITHHOLDING.
The Company shall be entitled to withhold from any payments to
the Grantee an amount sufficient to satisfy any federal, state, and other
governmental tax required to be withheld in connection with any exercise of
the Right.
7.12 INTERPRETATION AND STOCKHOLDER APPROVAL.
(a) The Right granted under this Agreement is intended to be
performance-based compensation within the meaning of Section 162(m)(4)(C)
of the Code and the Committee shall interpret this Agreement accordingly.
(b) This Agreement and the grant of the Right hereunder is
subject to approval by Dal-Tile's stockholders in accordance with Section
162(m) of the Code.
7.13 NO RIGHTS AS A STOCKHOLDER.
Neither the Grantee nor any person succeeding to the Grantee's
rights hereunder shall have any rights as a stockholder with respect to any
Shares subject to the Right. Except for adjustments which the Committee may
make pursuant to Section 6.1 hereof, no adjustment shall be made for
dividends, distributions or other rights (whether ordinary or
extraordinary, and whether in cash, securities or other property). Neither
the Grantee nor any person succeeding to the Grantee's rights hereunder
shall have any rights as a stockholder with respect to any Shares issuable
in connection with a Payment-In-Kind or a Mixed Payment until the date of
the issuance of a stock certificate to him or her for any such Shares. 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.
7.14 GRANTEE'S ACKNOWLEDGMENTS.
The Grantee agrees and acknowledges that no member of the
Committee shall be liable for any action or determination made in good
faith with respect to this Agreement. The Committee shall have the right to
make all determinations, in respect of this Agreement, which determinations
shall be final, conclusive and binding on the Grantee.
7.15 RESTRICTIONS.
(a) If the Committee shall at any time determine based on the
advice of counsel that any Consent (as hereinafter defined) is necessary or
desirable as a condition of, or in connection with, the issuance of Shares
hereunder, then such issuance 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. Dal-Tile shall use its reasonable best
efforts to effect or obtain such Consent. If such Consent cannot be
effected or obtained within three (3) months of exercise of the Right,
payment of the amount determined under Section 2.1 hereof will be made in
cash.
(b) The term "Consent" as used herein with respect to the
issuance of Shares 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 or any person succeeding to
the Grantee's rights hereunder, as the case may be, with respect to the
disposition of the 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 the issuance of the Shares by any governmental or other regulatory
bodies.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been signed by or on
behalf of each of the parties hereto, all as of the date first above
written.
DAL-TILE INTERNATIONAL INC.
By: /s/ Jacques R. Sardas
-----------------------------------
Name: Jacques R. Sardas
Title: President and Chief Executive
Officer
/s/ David Finnigan
--------------------------------------
David Finnigan
<PAGE>
EXERCISE NOTICE
[TO BE EXECUTED UPON EXERCISE OF STOCK APPRECIATION RIGHT]
To Dal-Tile International Inc.
The undersigned hereby irrevocably elects to exercise the Right
represented by the attached Stock Appreciation Rights Agreement (the
"Agreement"), dated as of the 10th day of October, 1997, with respect to
Shares, as provided for therein.
The undersigned represents and warrants to you that, with respect to
any amount paid to the undersigned by delivery of Shares:
ACQUISITION FOR OWN ACCOUNT. The undersigned is acquiring such Shares
for his/her own account for investment and not with a view to the sale or
distribution thereof or with any present intention of distributing or
selling the same.
SECURITIES ACT RESTRICTIONS. The undersigned covenants and agrees that
he/she will not sell, assign, transfer, pledge or otherwise dispose of any
of the Shares acquired by the undersigned hereunder unless and until they
are registered under the Securities Act of 1933, as amended (the
"Securities Act"), or unless an exemption from such registration is
available and until the undersigned shall have delivered to Dal-Tile
International Inc. a written opinion of counsel reasonably satisfactory to
Dal-Tile International Inc. that the disposition is in compliance with the
requirements of the Securities Act.
The undersigned acknowledges that he/she understands that the Shares
are not so registered.
Please pay all cash to, and issue any certificate or certificates for
any Shares in the name of:
Name:
------------------------------------------------
Address:
---------------------------------------------
Social Security or Tax I.D. Number:
------------------
(Please print)
Signature
------------------------
Dated , 199 .
----- -
<PAGE>
STOCK APPRECIATION RIGHTS AGREEMENT
THIS AGREEMENT, made as of the 20th day of February, 1998 (the "Grant
Date"), between Dal-Tile International Inc., a Delaware corporation
("Dal-Tile"), and Dan L. Cooke, 5501 Windmier Circle, Dallas, TX 75275 (the
"Grantee").
The parties hereto agree as follows:
1. GRANT OF STOCK APPRECIATION RIGHT.
Dal-Tile hereby grants to the Grantee a Stock Appreciation Right (the
"Right") with respect to 50,000 shares of the common stock, par value $.01
per share (the "Common Stock") of Dal-Tile (the "Shares") on the terms and
conditions set forth in this Agreement. The base price for each Share
covered by this Right shall be $9.01 as adjusted pursuant to this Agreement
(the "Base Price").
2. AMOUNT AND FORM OF PAYMENT UPON EXERCISE OF RIGHT.
2.1 Upon exercise of all or any portion of the Right, the Grantee
shall be entitled to receive the amount determined by multiplying (i) the
excess (the "Single Share Excess") of the Fair Market Value of a Share on
the date of exercise, over the Base Price by (ii) the number of Shares in
respect of which the Right is being exercised; PROVIDED, HOWEVER, that for
purposes of determining the Single Share Excess, no amount of Fair Market
Value of a Share in excess of $11.94 (the "Ceiling Price") shall be taken
into account. Payment of the amount determined under this Section 2.1
shall, in the sole discretion of the Committee, be made: (i) in cash; (ii)
by delivery of Shares having an aggregate Fair Market Value on the date of
such delivery equal to the amount of such payment (a "Payment-In-Kind"); or
(iii) by a combination of the foregoing (a "Mixed Payment"), and shall be
paid within ten (10) business days after the date of exercise. In the event
that such payment is made as: (x) a Payment-In-Kind; or (y) a Mixed
Payment, and the sum of the federal, state and other governmental income
tax incurred by the Grantee with respect to the payment exceeds the cash
portion, if any, of such payment, the Committee shall make one or more
interest-bearing loans (each loan, a "Loan," and, collectively, the
"Loans") to the Grantee in an amount equal to such excess; PROVIDED,
HOWEVER, that Dal-Tile shall have no obligation to make a loan in the event
of the "Termination With Cause" (as defined in the Stock Option Plan) of
the Grantee's employment by Dal-Tile or the termination of the Grantee's
employment voluntarily by the Grantee.
2.2 Each Loan shall bear interest at the lowest rate permitted by the
Internal Revenue Service without the imputation of interest. The principal
amount and accrued interest on each Loan shall be due and payable on April
18, 2007; PROVIDED, HOWEVER, that (a) the Grantee shall pay to Dal-Tile
promptly, as repayment of the outstanding principal amount and accrued
interest of the Loans, the after-tax proceeds received by the Grantee from
any disposition of Common Stock, or options to acquire Common Stock, held
from time to time by the Grantee, and (b) the outstanding principal amount
and accrued interest of all the Loans shall be immediately payable in the
event of the Termination With Cause of the Grantee's employment by Dal-Tile
or the termination of the Grantee's employment voluntarily by the Grantee.
Repayments shall be applied first to the Loan which was most recently made.
Each Loan shall be secured by any and all shares of Common Stock and
options to acquire Common Stock held by the Grantee and by the Right.
3. VESTING; EXERCISABILITY; DURATION.
3.1 VESTING.
(a) Subject to Sections 6.2 and 6.3 hereof, the Grantee shall
vest in the cumulative percentage of Shares under the Right, at the times
provided in the following schedule:
APPLICABLE DATE CUMULATIVE PERCENTAGE OF SHARES
- --------------- -------------------------------
On the Grant Date....................................... 25%
On June 13, 1998........................................ 50%
On June 13, 1999........................................ 75%
On December 31, 1999.................................... 100%
(b) The unvested portion of the Right shall be forfeited upon the
termination of the Grantee's employment with Dal-Tile for any reason.
3.2 EXERCISABILITY.
Subject to Sections 6.2 and 6.3 hereof, the Grantee shall be
entitled to exercise the Right, with respect to the cumulative percentage
of Shares subject to the Right in which the Grantee may then be, or
thereafter become, vested, only if Dal-Tile reports, pursuant to its
audited financial statements, positive net income ("Net Income") for either
its fiscal year ending December 31, 1998 or its fiscal year ending December
31, 1999 (the "Performance Target"). The Right shall not be exercisable
prior to the vesting thereof and the time the Committee certifies that the
Performance Target has been satisfied. The Committee shall act within seven
days with respect to certification following the availability of the
relevant audited financial statements. For purposes of this Agreement, Net
Income shall be calculated without taking into account any charge against
income which may arise as a result of the Right granted pursuant to this
Agreement or any other stock appreciation right which may, from time to
time, be granted by Dal-Tile.
3.3 DURATION.
Unless earlier terminated in accordance with the terms of this
Agreement, the Right shall terminate on April 18, 2007.
4. MANNER OF EXERCISE OF RIGHT.
Subject to the terms and conditions of this Agreement, the Right may
be exercised only by giving written notice (the "Exercise Notice") to
Dal-Tile in the form of Exhibit A attached hereto, at its principal
executive office. Such notice shall state that the Grantee is electing to
exercise the Right, and the number of Shares in respect of which the Right
is being exercised, and shall be signed by the person or persons exercising
the Right. The date of exercise for purposes of this Agreement shall be the
date Dal-Tile receives the Exercise Notice. If requested by Dal-Tile, such
person or persons shall: (i) deliver this Agreement to the Secretary of
Dal-Tile who shall endorse thereon a notation of such exercise; and (ii)
provide satisfactory proof as to the right of such person or persons to
exercise the Right.
5. NONASSIGNABILITY.
Neither the Right granted to the Grantee under this Agreement nor any
portion thereof shall be assignable or transferable (whether by operation
of law or otherwise, and whether voluntarily or involuntarily), other than
by will or by the laws of descent and distribution. The Right granted to
the Grantee under this Agreement shall be exercisable only by the Grantee
or his estate, heirs or personal representatives.
6. ADJUSTMENTS TO RIGHTS UPON CERTAIN EVENTS.
6.1 ADJUSTMENTS TO NUMBER OF SHARES AND CEILING AND BASE PRICES.
The number of Shares subject to this Right, the Ceiling Price and
the Base Price shall be equitably adjusted for any increase or decrease in
the number of issued Shares resulting from: (i) the subdivision or
combination of Shares or other capital adjustments; (ii) the payment of a
stock dividend or extraordinary cash dividend after the Grant Date; or
(iii) any other increase or decrease in the number of such Shares effected
without receipt of consideration by Dal-Tile;
PROVIDED, HOWEVER, that any fractional Shares resulting from any
such adjustment shall be eliminated. Adjustments under this Section 6.1
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.
6.2 CHANGE OF CONTROL.
Notwithstanding anything contained in this Agreement to the
contrary:
(a) upon the consummation of a "Transaction" that does not also
constitute a "Non-Control Transaction" (each, as defined in the Stock
Option Plan), the Grantee shall, unless the Grantee and Dal-Tile shall
otherwise agree, be vested in, and shall be entitled to exercise the Right
with respect to, 100% of the Right, and the Grantee shall be entitled to
receive, with respect to each Share subject to the Right, upon exercise of
all or any portion of the Right, a payment of the same amount and kind of
stock, securities, cash, property or other consideration that each holder
of a Share was entitled to receive in such Transaction in respect of a
Share, less the Base Price; PROVIDED, HOWEVER, that the fair market value
of such stock, securities, cash, property or other consideration shall not
exceed the Ceiling Price less the Base Price. If more than one (1) form of
consideration is included in such Transaction, the various components
thereof shall be appropriately prorated; and
(b) in the event of a Non-Control Transaction, the Grantee shall
continue to vest in the Right only in accordance with Section 3.1 hereof,
which Right shall remain exercisable only in accordance with Section 3.2
hereof, and, the number of Shares subject to the Right, the Ceiling Price
and the Base Price shall be equitably adjusted by the Committee for any
changes in the Shares resulting from a merger involving Dal-Tile.
Adjustments under this Section 6.2(b) 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.
6.3 TERMINATION OF EMPLOYMENT.
The Right (whether vested or unvested) shall terminate and expire
on the effective date of the Termination With Cause of the Grantee's
employment by Dal-Tile. Unless the Committee determines otherwise, in the
event of the termination of the Grantee's employment for any reason other
than a Termination With Cause by Dal-Tile, the Right, to the extent then
vested, shall become exercisable only in accordance with Section 3.2 hereof
and shall terminate on the earliest to occur of: (i) April 18, 2007; and
(ii) the date which is ten (10) days (one (1) year in the case of a
termination by reason of death, disability or retirement on or after the
Grantee's sixty-fifth birthday or such earlier retirement age as may be
approved by the Committee) after the later of: (A) such termination of the
Grantee's employment; and (B) the date that achievement of the Performance
Target is certified, and the unvested portion of the right shall be
forfeited on the effective date of such termination.
7. MISCELLANEOUS.
7.1 RULES OF CONSTRUCTION.
(a) In this Agreement, unless the context otherwise requires,
words in the singular number or in the plural number shall each include the
singular number and the plural number, words of the masculine gender shall
include the feminine and the neuter, and, when the sense so indicates,
words of the neuter gender may refer to any gender.
(b) The term "affiliate" shall mean any person directly or
indirectly controlling, controlled by, or under common control with the
person of which it is an affiliate.
(c) The term "Board" shall mean the Board of Directors of
Dal-Tile.
(d) The term "Code" shall mean the Internal Revenue Code of 1986,
as amended.
(e) The term "Committee" shall mean the Committee of the Board
appointed to administer the Stock Option Plan in accordance with the terms
of such plan.
(f) The term "control" shall mean with respect to any person, the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such person, whether through
the ownership of equity interests, by contract or otherwise.
(g) The term "Fair Market Value" per Share as of a particular
date shall mean: (i) the closing sales price of a Share on the national
securities exchange on which the Shares are principally traded for the last
date (including the date of exercise of the Right) on which there was a
sale of the Shares on such exchange; or (ii) if the Shares are not then
traded on a national securities exchange, the average of the closing bid
and asked prices for the Shares in the over-the-counter market on which the
Shares are principally traded for the last date (including the date of
exercise of the Right) on which there was a sale of the Shares in such
market; or (iii) if the Shares 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) The term "person" shall mean an individual, a corporation, a
partnership, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or
instrumentality thereof.
(i) The term "Stock Option Plan" shall mean the Dal-Tile
International Inc. 1997 Amended and Restated Stock Option Plan.
(j) The term "1934 Act" shall mean the Securities Exchange Act of
1934, as amended.
(k) There shall be included within the term "Dal-Tile" any
successor to Dal-Tile by merger, consolidation, acquisition of
substantially all the assets thereof, or otherwise.
(l) There shall be included within the term "Shares" any Common
Stock, and any and all securities of any kind whatsoever of Dal-Tile which
may be issued after the date hereof in respect of, or in exchange for,
shares of Common Stock pursuant to a merger, consolidation, stock split,
stock dividend, recapitalization of Dal-Tile or otherwise.
7.2 FURTHER ASSURANCES.
Each party hereto shall do and perform or cause to be done and
performed all further acts and things and shall execute and deliver all
other agreements, certificates, instruments, and documents as any other
party hereto reasonably may request in order to carry out the intent and
accomplish the purposes of this Agreement, and the consummation of the
transactions contemplated hereby.
7.3 GOVERNING LAW.
This Agreement and the rights and obligations of the parties
hereto shall be governed by, and construed and enforced in accordance with,
the laws of the State of Delaware, without giving effect to the principles
of conflicts of law thereof.
7.4 INVALIDITY OF PROVISION.
The invalidity or unenforceability of any provision of this
Agreement in any jurisdiction shall not affect the validity or
enforceability of the remainder of this Agreement in that jurisdiction or
the validity or enforceability of this Agreement, including that provision,
in any other jurisdiction. If any provision of this Agreement is held
unlawful or unenforceable in any respect, such provision shall be revised
or applied in a manner that renders it lawful and enforceable to the
fullest extent possible under law.
7.5 NOTICE.
Any notice or other communication required or permitted hereunder
shall be writing and shall be delivered personally, telegraphed, telexed,
sent by facsimile transmission or sent by certified, registered or express
mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile
transmission or, if mailed, 5 days after the date of deposit in the United
States mail, as follows:
(i) if to Dal-Tile, to:
Dal-Tile International Inc.
7834 C.F. Hawn Freeway
Dallas, Texas 75217
Attention: Mark A. Solls
with a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Attention: Frederick H. Fogel, Esq.
(ii) if to the Grantee, to:
Dan L. Cook
5501 Windmier Circle
Dallas, TX 75275
Any party may change its address for notice hereunder by notice
to the other parties hereto.
7.6 BINDING EFFECT.
This Agreement shall inure to the benefit of and shall be binding
upon the parties hereto and their respective heirs, legal representatives,
successors and assigns.
7.7 AMENDMENT AND MODIFICATION.
This Agreement may be amended, modified or supplemented only by
written agreement of the party against whom enforcement of such amendment,
modification or supplement is sought.
7.8 HEADING; EXECUTION IN COUNTERPARTS.
The headings and captions contained herein are for convenience
only and shall not control or affect the meaning or construction of any
provision hereof. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and which
together shall constitute one and the same instrument.
7.9 ENTIRE AGREEMENT.
This Agreement constitutes the entire agreement, and supersedes
all prior agreements and understandings, oral and written, between the
parties hereto with respect to the subject matter hereof.
7.10 RIGHT OF DISCHARGE RESERVED.
Nothing contained in this Agreement shall confer upon the Grantee
any right to continue in the employ or service of Dal-Tile or affect any
right which Dal-Tile may have to terminate the employment or services of
the Grantee.
7.11 WITHHOLDING.
The Company shall be entitled to withhold from any payments to
the Grantee an amount sufficient to satisfy any federal, state, and other
governmental tax required to be withheld in connection with any exercise of
the Right.
7.12 INTERPRETATION AND STOCKHOLDER APPROVAL.
(a) The Right granted under this Agreement is intended to be
performance-based compensation within the meaning of Section 162(m)(4)(C)
of the Code and the Committee shall interpret this Agreement accordingly.
(b) This Agreement and the grant of the Right hereunder is
subject to approval by Dal-Tile's stockholders in accordance with Section
162(m) of the Code.
7.13 NO RIGHTS AS A STOCKHOLDER.
Neither the Grantee nor any person succeeding to the Grantee's
rights hereunder shall have any rights as a stockholder with respect to any
Shares subject to the Right. Except for adjustments which the Committee may
make pursuant to Section 6.1 hereof, no adjustment shall be made for
dividends, distributions or other rights (whether ordinary or
extraordinary, and whether in cash, securities or other property). Neither
the Grantee nor any person succeeding to the Grantee's rights hereunder
shall have any rights as a stockholder with respect to any Shares issuable
in connection with a Payment-In-Kind or a Mixed Payment until the date of
the issuance of a stock certificate to him or her for any such Shares. 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.
7.14 GRANTEE'S ACKNOWLEDGMENTS.
The Grantee agrees and acknowledges that no member of the
Committee shall be liable for any action or determination made in good
faith with respect to this Agreement. The Committee shall have the right to
make all determinations, in respect of this Agreement, which determinations
shall be final, conclusive and binding on the Grantee.
7.15 RESTRICTIONS.
(a) If the Committee shall at any time determine based on the
advice of counsel that any Consent (as hereinafter defined) is necessary or
desirable as a condition of, or in connection with, the issuance of Shares
hereunder, then such issuance 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. Dal-Tile shall use its reasonable best
efforts to effect or obtain such Consent. If such Consent cannot be
effected or obtained within three (3) months of exercise of the Right,
payment of the amount determined under Section 2.1 hereof will be made in
cash.
(b) The term "Consent" as used herein with respect to the
issuance of Shares 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 or any person succeeding to
the Grantee's rights hereunder, as the case may be, with respect to the
disposition of the 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 the issuance of the Shares by any governmental or other regulatory
bodies.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been signed by or on
behalf of each of the parties hereto, all as of the date first above
written.
DAL-TILE INTERNATIONAL INC.
By: /s/ Jacques R. Sardas
-----------------------------------
Name: Jacques R. Sardas
Title: President and Chief Executive
Officer
/s/ Dan L. Cooke
--------------------------------------
Dan L. Cooke
<PAGE>
EXERCISE NOTICE
[TO BE EXECUTED UPON EXERCISE OF STOCK APPRECIATION RIGHT]
To Dal-Tile International Inc.
The undersigned hereby irrevocably elects to exercise the Right
represented by the attached Stock Appreciation Rights Agreement (the
"Agreement"), dated as of the 10th day of October, 1997, with respect to
_____ Shares, as provided for therein.
The undersigned represents and warrants to you that, with respect to
any amount paid to the undersigned by delivery of Shares:
ACQUISITION FOR OWN ACCOUNT. The undersigned is acquiring such Shares
for his/her own account for investment and not with a view to the sale or
distribution thereof or with any present intention of distributing or
selling the same.
SECURITIES ACT RESTRICTIONS. The undersigned covenants and agrees that
he/she will not sell, assign, transfer, pledge or otherwise dispose of any
of the Shares acquired by the undersigned hereunder unless and until they
are registered under the Securities Act of 1933, as amended (the
"Securities Act"), or unless an exemption from such registration is
available and until the undersigned shall have delivered to Dal-Tile
International Inc. a written opinion of counsel reasonably satisfactory to
Dal-Tile International Inc. that the disposition is in compliance with the
requirements of the Securities Act. The undersigned acknowledges that
he/she understands that the Shares are not so registered.
Please pay all cash to, and issue any certificate or certificates for
any Shares in the name of:
Name:
------------------------------------------------
Address:
---------------------------------------------
Social Security or Tax I.D. Number:
------------------
(Please print)
Signature
------------------------
Dated , 199 .
----- -
<PAGE>
STOCK APPRECIATION RIGHTS AGREEMENT
THIS AGREEMENT, made as of the 20th day of February, 1998 (the "Grant
Date"), between Dal-Tile International Inc., a Delaware corporation
("Dal-Tile"), and Marc Powell, 205 White Chapel Court, Southlake, Texas
76092 (the "Grantee").
The parties hereto agree as follows:
1. GRANT OF STOCK APPRECIATION RIGHT.
Dal-Tile hereby grants to the Grantee a Stock Appreciation Right (the
"Right") with respect to 50,000 shares of the common stock, par value $.01
per share (the "Common Stock") of Dal-Tile (the "Shares") on the terms and
conditions set forth in this Agreement. The base price for each Share
covered by this Right shall be $9.01 as adjusted pursuant to this Agreement
(the "Base Price").
2. AMOUNT AND FORM OF PAYMENT UPON EXERCISE OF RIGHT.
2.1 Upon exercise of all or any portion of the Right, the Grantee
shall be entitled to receive the amount determined by multiplying (i) the
excess (the "Single Share Excess") of the Fair Market Value of a Share on
the date of exercise, over the Base Price by (ii) the number of Shares in
respect of which the Right is being exercised; PROVIDED, HOWEVER, that for
purposes of determining the Single Share Excess, no amount of Fair Market
Value of a Share in excess of $11.94 (the "Ceiling Price") shall be taken
into account. Payment of the amount determined under this Section 2.1
shall, in the sole discretion of the Committee, be made: (i) in cash; (ii)
by delivery of Shares having an aggregate Fair Market Value on the date of
such delivery equal to the amount of such payment (a "Payment-In-Kind"); or
(iii) by a combination of the foregoing (a "Mixed Payment"), and shall be
paid within ten (10) business days after the date of exercise. In the event
that such payment is made as: (x) a Payment-In-Kind; or (y) a Mixed
Payment, and the sum of the federal, state and other governmental income
tax incurred by the Grantee with respect to the payment exceeds the cash
portion, if any, of such payment, the Committee shall make one or more
interest-bearing loans (each loan, a "Loan," and, collectively, the
"Loans") to the Grantee in an amount equal to such excess; PROVIDED,
HOWEVER, that Dal-Tile shall have no obligation to make a loan in the event
of the "Termination With Cause" (as defined in the Stock Option Plan) of
the Grantee's employment by Dal-Tile or the termination of the Grantee's
employment voluntarily by the Grantee.
2.2 Each Loan shall bear interest at the lowest rate permitted by the
Internal Revenue Service without the imputation of interest. The principal
amount and accrued interest on each Loan shall be due and payable on April
18, 2007; PROVIDED, HOWEVER, that (a) the Grantee shall pay to Dal-Tile
promptly, as repayment of the outstanding principal amount and accrued
interest of the Loans, the after-tax proceeds received by the Grantee from
any disposition of Common Stock, or options to acquire Common Stock, held
from time to time by the Grantee, and (b) the outstanding principal amount
and accrued interest of all the Loans shall be immediately payable in the
event of the Termination With Cause of the Grantee's employment by Dal-Tile
or the termination of the Grantee's employment voluntarily by the Grantee.
Repayments shall be applied first to the Loan which was most recently made.
Each Loan shall be secured by any and all shares of Common Stock and
options to acquire Common Stock held by the Grantee and by the Right.
3. VESTING; EXERCISABILITY; DURATION.
3.1 VESTING.
(a) Subject to Sections 6.2 and 6.3 hereof, the Grantee shall
vest in the cumulative percentage of Shares under the Right, at the times
provided in the following schedule:
APPLICABLE DATE CUMULATIVE PERCENTAGE OF SHARES
- --------------- -------------------------------
On the Grant Date.................................... 25%
On June 13, 1998..................................... 50%
On June 13, 1999..................................... 75%
On December 31, 1999................................. 100%
(b) The unvested portion of the Right shall be forfeited upon the
termination of the Grantee's employment with Dal-Tile for any reason.
3.2 EXERCISABILITY.
Subject to Sections 6.2 and 6.3 hereof, the Grantee shall be
entitled to exercise the Right, with respect to the cumulative percentage
of Shares subject to the Right in which the Grantee may then be, or
thereafter become, vested, only if Dal-Tile reports, pursuant to its
audited financial statements, positive net income ("Net Income") for either
its fiscal year ending December 31, 1998 or its fiscal year ending December
31, 1999 (the "Performance Target"). The Right shall not be exercisable
prior to the vesting thereof and the time the Committee certifies that the
Performance Target has been satisfied. The Committee shall act within seven
days with respect to certification following the availability of the
relevant audited financial statements. For purposes of this Agreement, Net
Income shall be calculated without taking into account any charge against
income which may arise as a result of the Right granted pursuant to this
Agreement or any other stock appreciation right which may, from time to
time, be granted by Dal-Tile.
3.3 DURATION.
Unless earlier terminated in accordance with the terms of this
Agreement, the Right shall terminate on April 18, 2007.
4. MANNER OF EXERCISE OF RIGHT.
Subject to the terms and conditions of this Agreement, the Right may
be exercised only by giving written notice (the "Exercise Notice") to
Dal-Tile in the form of Exhibit A attached hereto, at its principal
executive office. Such notice shall state that the Grantee is electing to
exercise the Right, and the number of Shares in respect of which the Right
is being exercised, and shall be signed by the person or persons exercising
the Right. The date of exercise for purposes of this Agreement shall be the
date Dal-Tile receives the Exercise Notice. If requested by Dal-Tile, such
person or persons shall: (i) deliver this Agreement to the Secretary of
Dal-Tile who shall endorse thereon a notation of such exercise; and (ii)
provide satisfactory proof as to the right of such person or persons to
exercise the Right.
5. NONASSIGNABILITY.
Neither the Right granted to the Grantee under this Agreement nor any
portion thereof shall be assignable or transferable (whether by operation
of law or otherwise, and whether voluntarily or involuntarily), other than
by will or by the laws of descent and distribution. The Right granted to
the Grantee under this Agreement shall be exercisable only by the Grantee
or his estate, heirs or personal representatives.
6. ADJUSTMENTS TO RIGHTS UPON CERTAIN EVENTS.
6.1 ADJUSTMENTS TO NUMBER OF SHARES AND CEILING AND BASE PRICES.
The number of Shares subject to this Right, the Ceiling Price and
the Base Price shall be equitably adjusted for any increase or decrease in
the number of issued Shares resulting from: (i) the subdivision or
combination of Shares or other capital adjustments; (ii) the payment of a
stock dividend or extraordinary cash dividend after the Grant Date; or
(iii) any other increase or decrease in the number of such Shares effected
without receipt of consideration by Dal-Tile; PROVIDED, HOWEVER, that any
fractional Shares resulting from any such adjustment shall be eliminated.
Adjustments under this Section 6.1 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.
6.2 CHANGE OF CONTROL.
Notwithstanding anything contained in this Agreement to the
contrary:
(a) upon the consummation of a "Transaction" that does not also
constitute a "Non-Control Transaction" (each, as defined in the Stock
Option Plan), the Grantee shall, unless the Grantee and Dal-Tile shall
otherwise agree, be vested in, and shall be entitled to exercise the Right
with respect to, 100% of the Right, and the Grantee shall be entitled to
receive, with respect to each Share subject to the Right, upon exercise of
all or any portion of the Right, a payment of the same amount and kind of
stock, securities, cash, property or other consideration that each holder
of a Share was entitled to receive in such Transaction in respect of a
Share, less the Base Price; PROVIDED, HOWEVER, that the fair market value
of such stock, securities, cash, property or other consideration shall not
exceed the Ceiling Price less the Base Price. If more than one (1) form of
consideration is included in such Transaction, the various components
thereof shall be appropriately prorated; and
(b) in the event of a Non-Control Transaction, the Grantee shall
continue to vest in the Right only in accordance with Section 3.1 hereof,
which Right shall remain exercisable only in accordance with Section 3.2
hereof, and, the number of Shares subject to the Right, the Ceiling Price
and the Base Price shall be equitably adjusted by the Committee for any
changes in the Shares resulting from a merger involving Dal-Tile.
Adjustments under this Section 6.2(b) 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.
6.3 TERMINATION OF EMPLOYMENT.
The Right (whether vested or unvested) shall terminate and expire
on the effective date of the Termination With Cause of the Grantee's
employment by Dal-Tile. Unless the Committee determines otherwise, in the
event of the termination of the Grantee's employment for any reason other
than a Termination With Cause by Dal-Tile, the Right, to the extent then
vested, shall become exercisable only in accordance with Section 3.2 hereof
and shall terminate on the earliest to occur of: (i) April 18, 2007; and
(ii) the date which is ten (10) days (one (1) year in the case of a
termination by reason of death, disability or retirement on or after the
Grantee's sixty-fifth birthday or such earlier retirement age as may be
approved by the Committee) after the later of: (A) such termination of the
Grantee's employment; and (B) the date that achievement of the Performance
Target is certified, and the unvested portion of the right shall be
forfeited on the effective date of such termination.
7. MISCELLANEOUS.
7.1 RULES OF CONSTRUCTION.
(a) In this Agreement, unless the context otherwise requires,
words in the singular number or in the plural number shall each include the
singular number and the plural number, words of the masculine gender shall
include the feminine and the neuter, and, when the sense so indicates,
words of the neuter gender may refer to any gender.
(b) The term "affiliate" shall mean any person directly or
indirectly controlling, controlled by, or under common control with the
person of which it is an affiliate.
(c) The term "Board" shall mean the Board of Directors of
Dal-Tile.
(d) The term "Code" shall mean the Internal Revenue Code of 1986,
as amended.
(e) The term "Committee" shall mean the Committee of the Board
appointed to administer the Stock Option Plan in accordance with the terms
of such plan.
(f) The term "control" shall mean with respect to any person, the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such person, whether through
the ownership of equity interests, by contract or otherwise.
(g) The term "Fair Market Value" per Share as of a particular
date shall mean: (i) the closing sales price of a Share on the national
securities exchange on which the Shares are principally traded for the last
date (including the date of exercise of the Right) on which there was a
sale of the Shares on such exchange; or (ii) if the Shares are not then
traded on a national securities exchange, the average of the closing bid
and asked prices for the Shares in the over-the-counter market on which the
Shares are principally traded for the last date (including the date of
exercise of the Right) on which there was a sale of the Shares in such
market; or (iii) if the Shares 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) The term "person" shall mean an individual, a corporation, a
partnership, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or
instrumentality thereof.
(i) The term "Stock Option Plan" shall mean the Dal-Tile
International Inc. 1997 Amended and Restated Stock Option Plan.
(j) The term "1934 Act" shall mean the Securities Exchange Act of
1934, as amended.
(k) There shall be included within the term "Dal-Tile" any
successor to Dal-Tile by merger, consolidation, acquisition of
substantially all the assets thereof, or otherwise.
(l) There shall be included within the term "Shares" any Common
Stock, and any and all securities of any kind whatsoever of Dal-Tile which
may be issued after the date hereof in respect of, or in exchange for,
shares of Common Stock pursuant to a merger, consolidation, stock split,
stock dividend, recapitalization of Dal-Tile or otherwise.
7.2 FURTHER ASSURANCES.
Each party hereto shall do and perform or cause to be done and
performed all further acts and things and shall execute and deliver all
other agreements, certificates, instruments, and documents as any other
party hereto reasonably may request in order to carry out the intent and
accomplish the purposes of this Agreement, and the consummation of the
transactions contemplated hereby.
7.3 GOVERNING LAW.
This Agreement and the rights and obligations of the parties
hereto shall be governed by, and construed and enforced in accordance with,
the laws of the State of Delaware, without giving effect to the principles
of conflicts of law thereof.
7.4 INVALIDITY OF PROVISION.
The invalidity or unenforceability of any provision of this
Agreement in any jurisdiction shall not affect the validity or
enforceability of the remainder of this Agreement in that jurisdiction or
the validity or enforceability of this Agreement, including that provision,
in any other jurisdiction. If any provision of this Agreement is held
unlawful or unenforceable in any respect, such provision shall be revised
or applied in a manner that renders it lawful and enforceable to the
fullest extent possible under law.
7.5 NOTICE.
Any notice or other communication required or permitted hereunder
shall be writing and shall be delivered personally, telegraphed, telexed,
sent by facsimile transmission or sent by certified, registered or express
mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile
transmission or, if mailed, 5 days after the date of deposit in the United
States mail, as follows:
(i) if to Dal-Tile, to:
Dal-Tile International Inc.
7834 C.F. Hawn Freeway
Dallas, Texas 75217
Attention: Mark A. Solls
with a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Attention: Frederick H. Fogel, Esq.
(ii) if to the Grantee, to:
Marc Powell
205 White Chapel Court
Southlake, Texas 76902
Any party may change its address for notice hereunder by notice
to the other parties hereto.
7.6 BINDING EFFECT.
This Agreement shall inure to the benefit of and shall be binding
upon the parties hereto and their respective heirs, legal representatives,
successors and assigns.
7.7 AMENDMENT AND MODIFICATION.
This Agreement may be amended, modified or supplemented only by
written agreement of the party against whom enforcement of such amendment,
modification or supplement is sought.
7.8 HEADING; EXECUTION IN COUNTERPARTS.
The headings and captions contained herein are for convenience
only and shall not control or affect the meaning or construction of any
provision hereof. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and which
together shall constitute one and the same instrument.
7.9 ENTIRE AGREEMENT.
This Agreement constitutes the entire agreement, and supersedes
all prior agreements and understandings, oral and written, between the
parties hereto with respect to the subject matter hereof.
7.10 RIGHT OF DISCHARGE RESERVED.
Nothing contained in this Agreement shall confer upon the Grantee
any right to continue in the employ or service of Dal-Tile or affect any
right which Dal-Tile may have to terminate the employment or services of
the Grantee.
7.11 WITHHOLDING.
The Company shall be entitled to withhold from any payments to
the Grantee an amount sufficient to satisfy any federal, state, and other
governmental tax required to be withheld in connection with any exercise of
the Right.
7.12 INTERPRETATION AND STOCKHOLDER APPROVAL.
(a) The Right granted under this Agreement is intended to be
performance-based compensation within the meaning of Section 162(m)(4)(C)
of the Code and the Committee shall interpret this Agreement accordingly.
(b) This Agreement and the grant of the Right hereunder is
subject to approval by Dal-Tile's stockholders in accordance with Section
162(m) of the Code.
7.13 NO RIGHTS AS A STOCKHOLDER.
Neither the Grantee nor any person succeeding to the Grantee's
rights hereunder shall have any rights as a stockholder with respect to any
Shares subject to the Right. Except for adjustments which the Committee may
make pursuant to Section 6.1 hereof, no adjustment shall be made for
dividends, distributions or other rights (whether ordinary or
extraordinary, and whether in cash, securities or other property). Neither
the Grantee nor any person succeeding to the Grantee's rights hereunder
shall have any rights as a stockholder with respect to any Shares issuable
in connection with a Payment-In-Kind or a Mixed Payment until the date of
the issuance of a stock certificate to him or her for any such Shares. 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.
7.14 GRANTEE'S ACKNOWLEDGMENTS.
The Grantee agrees and acknowledges that no member of the
Committee shall be liable for any action or determination made in good
faith with respect to this Agreement. The Committee shall have the right to
make all determinations, in respect of this Agreement, which determinations
shall be final, conclusive and binding on the Grantee.
7.15 RESTRICTIONS.
(a) If the Committee shall at any time determine based on the
advice of counsel that any Consent (as hereinafter defined) is necessary or
desirable as a condition of, or in connection with, the issuance of Shares
hereunder, then such issuance 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. Dal-Tile shall use its reasonable best
efforts to effect or obtain such Consent. If such Consent cannot be
effected or obtained within three (3) months of exercise of the Right,
payment of the amount determined under Section 2.1 hereof will be made in
cash.
(b) The term "Consent" as used herein with respect to the
issuance of Shares 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 or any person succeeding to
the Grantee's rights hereunder, as the case may be, with respect to the
disposition of the 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 the issuance of the Shares by any governmental or other regulatory
bodies.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been signed by or on
behalf of each of the parties hereto, all as of the date first above
written.
DAL-TILE INTERNATIONAL INC.
By: /s/ Jacques R. Sardas
-----------------------------------
Name: Jacques R. Sardas
Title: President and Chief Executive
Officer
/s/ Marc Powell
--------------------------------------
Marc Powell
<PAGE>
EXHIBIT A
EXERCISE NOTICE
[TO BE EXECUTED UPON EXERCISE OF STOCK APPRECIATION RIGHT]
To Dal-Tile International Inc.
The undersigned hereby irrevocably elects to exercise the Right
represented by the attached Stock Appreciation Rights Agreement (the
"Agreement"), dated as of the 10th day of October, 1997, with respect to
Shares, as provided for therein.
The undersigned represents and warrants to you that, with respect to
any amount paid to the undersigned by delivery of Shares:
ACQUISITION FOR OWN ACCOUNT. The undersigned is acquiring such Shares
for his/her own account for investment and not with a view to the sale or
distribution thereof or with any present intention of distributing or
selling the same.
SECURITIES ACT RESTRICTIONS. The undersigned covenants and agrees that
he/she will not sell, assign, transfer, pledge or otherwise dispose of any
of the Shares acquired by the undersigned hereunder unless and until they
are registered under the Securities Act of 1933, as amended (the
"Securities Act"), or unless an exemption from such registration is
available and until the undersigned shall have delivered to Dal-Tile
International Inc. a written opinion of counsel reasonably satisfactory to
Dal-Tile International Inc. that the disposition is in compliance with the
requirements of the Securities Act.
The undersigned acknowledges that he/she understands that the Shares
are not so registered. Please pay all cash to, and issue any certificate or
certificates for any Shares in the name of:
Name:
------------------------------------------------
Address:
---------------------------------------------
Social Security or Tax I.D. Number:
------------------
(Please print)
Signature
------------------------
Dated , 199 .
----- -
EXHIBIT 5.1
March 30, 1999
Dal-Tile International
7834 C.F. Hawn Freeway
Dallas, TX 75217
RE: Registration Statement on Form S-8 for Stock Appreciation
Rights (the "SARs") granted to Jacques R. Sardas, W.
Christopher Wellborn, David F. Finnigan, Dan L. Cooke and
Marc S. Powell
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 679,933 shares of common stock of the Company,
par value $.01 per share (the "Common Stock") which may be issued upon the
exercise of SARs granted on October 10, 1997, as amended on February 20,
1998.
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 679,933 shares of
Common Stock which may 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
We consent to the incorporation by reference in the Registration Statement
(post-effective amendment No. 1 to Form S-8 No. 333-70879) of our report
dated February 10, 1999, with respect to the consolidated financial
statements and schedule of Dal-Tile International Inc. included in its
Annual Report (Form 10-K) for the year ended January 1, 1999, filed with
the Securities and Exchange Commission.
/s/ Ernst & Young LLP
---------------------
ERNST & YOUNG LLP
March 30, 1999
Dallas, Texas
