VALHI, INC.
1987 STOCK OPTION-STOCK APPRECIATION RIGHTS PLAN
AMENDED AND RESTATED AS OF NOVEMBER 10, 1994
SECTION 1 Title and Purpose. The plan described herein, as amended and
restated, shall be known as the "Valhi, Inc. 1987 Stock Option-Stock
Appreciation Rights Plan" (the "Plan"). The purpose of the Plan is to advance
the interests of Valhi, Inc. ("Valhi") and any parent or subsidiary corporation
of Valhi (together with Valhi referred to collectively as the "Company") by
strengthening the Company's ability to attract and retain individuals of
training, experience and ability in the employ of the Company and to furnish
additional incentive to such key employees to promote the Company's financial
success. The Plan will be effected through the granting of stock options and/or
stock appreciation rights as herein provided, which stock options, it is
intended, may constitute "incentive stock options" ("ISOs") within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended, (the "Code") or
stock options which do not constitute ISOs or as other options ("non-qualified
stock options" or "NSOs") (ISOs and NSOs being collectively referred to as
"Stock Options"), as specified by the Committee (as defined in Section 4 below).
Stock Options granted under the Plan may be accompanied by stock appreciation
rights ("Stock Rights") as hereinafter set forth. The Plan may also be effected
through the awarding of restricted stock ("Restricted Stock Awards" or
"Restricted Stock") to key employees. As used herein "subsidiary corporation"
and "parent corporation" shall have the same meaning as such terms are defined
in Code Section 425.
SECTION 2 Shares of Stock Subject to the Plan. Stock which may be issued
pursuant to Stock Options, Stock Rights and/or Restricted Stock Awards, granted
from time to time under the Plan, shall not exceed in the aggregate 9,000,000
shares of Valhi common stock, $.01 par value, (the "Common Stock") (subject to
adjustment as provided in Section 16). The underlying shares issuable pursuant
to grants in any single fiscal year, of Stock Options, Stock Rights and/or
Restricted Stock Awards to a particular individual shall not exceed 500,000
shares of Common Stock. It is contemplated that the shares to be issued under
the Plan will be approved for listing by each securities exchange on which
shares of Common Stock are then listed.
In the event that any outstanding Stock Option granted under the Plan for
any reason expires or is terminated without having been exercised in full or
surrendered in full in connection with the exercise of Stock Rights, or any
shares awarded as Restricted Stock are forfeited, the shares of Common Stock
allocable to the unexercised portion of such Stock Option or Stock Right or
forfeited portion of such Restricted Stock Award shall (unless the Plan shall
have been terminated) become available for subsequent grants of Stock Options,
Stock Rights and/or Restricted Stock Awards under the Plan.
SECTION 3 Eligibility. Stock Options, Stock Rights and/or Restricted
Stock Awards may be granted to key employees of the Company (including officers
of the Company who may also be directors of the Company) by the Committee (as
defined in Section 4 below). In determining the employees to whom Stock
Options, Stock Rights and/or Restricted Stock Awards will be granted and the
number of shares to be covered by each, the Committee shall take into account
the duties of the respective employees, their present and potential
contributions to the success of the Company, the anticipated number of years of
effective service remaining, and such other factors as they shall deem relevant
in connection with accomplishing the purposes of the Plan. Neither Stock
Options, Stock Rights nor Restricted Stock Awards may be granted to an
individual under this Plan at a time when such individual is serving as a member
of the Committee. An employee owning stock possessing more than 10 percent of
the total combined voting power or value of all classes of stock of Valhi or any
parent or subsidiary corporation ("Ten Percent Stockholder") is not eligible to
receive an ISO unless the option price is at least 110 percent of the fair
market value of the Common Stock at the time the ISO is granted and the ISO
option by its terms is not exercisable more than 5 years from the date it is
granted. Restricted Stock Awards and Common Stock which a grantee may purchase
under outstanding Stock Options shall be treated as stock owned by such grantee
for purposes of this calculation.
SECTION 4 Administration of the Plan. The Plan shall be administered by
the Management Development and Compensation Committee (the "Committee")
consisting of three or more individuals appointed by the board of directors of
Valhi (the "Board of Directors"). No individual may be appointed to the
Committee who is not a "disinterested person" with respect to the Plan or any
other stock option, stock appreciation, stock bonus, restricted stock or other
stock plan of the Company, so as to disqualify such individual as an
administrator of the Plan under Rule 16(b)-3 of the Securities and Exchange Act
of 1934, as amended, or any rules promulgated in substitution thereof (the
"Rule"). One of the members of the Committee shall be designated as its
chairman and the Committee shall hold its meetings at such times and places as
it shall deem advisable. A majority of the members of the Committee shall
constitute a quorum. All action of the Committee shall be taken by a majority
of its members. Any action may be taken by a written instrument signed by a
majority of the members of the Committee and any action so taken shall be fully
effective as if it had been taken by a vote of a majority of the members of the
Committee at a meeting duly called and held. The Committee may appoint a
secretary, keep minutes of its meetings, and shall make such rules and
regulations for the conduct of its business as it shall deem advisable.
SECTION 5 Powers of the Committee. The Committee shall have full
power and authority to determine the "key employees" of the Company to whom
Stock Options, Stock Rights and/or Restricted Stock Awards shall be granted, the
number of shares to be covered, the term period of each, the time or times at
which Stock Options, Stock Rights or Restricted Stock Awards shall be granted,
provided, with respect to ISOs, the term and the time are permitted by Section
422 of the Code, and to prescribe, amend, and rescind rules and regulations
relating to the Plan. Except as otherwise expressly provided in the Plan, the
Committee shall also have the power to determine, at the time of the grant of
each Stock Option, Stock Right or Restricted Stock Award or subsequently if
permitted by the Plan, all terms and conditions governing the rights and
obligations of the key employee with respect to such Stock Option, Stock Right
or Restricted Stock Award, including but not limited to: (a) the exercise price
or the method by which the exercise price shall be determined for the Stock
Option or Stock Right; (b) the length of the period during which the Stock
Option or Stock Right may be exercised and any limitations on the number of
shares purchasable with the Stock Option at any given time during such period;
(c) the time at which the Stock Option or Stock Right may be exercised; (d) any
conditions precedent to be satisfied before the Stock Option or Stock Right may
be exercised; (e) the date on which the restriction period of any Restricted
Stock shall lapse; and (f) any restrictions on resale of any Restricted Stock,
any shares purchased upon exercise of a Stock Option or any shares received upon
exercise of a Stock Right. The Committee shall also have full and final
authority: (i) to prescribe the form of each agreement evidencing Stock Options
and Stock Rights (the "Stock Option-Stock Appreciation Rights Agreement") and
Restricted Stock Awards (the "Restricted Stock Agreement"), which agreements
need not be identical for each grantee but shall be consistent with the Plan;
(ii) to adopt, amend and rescind such rules and regulations as may be advisable
in the opinion of the Committee to administer the Plan; (iii) to amend the terms
of any Stock Option or Stock Right in any manner the Committee could have
determined at the time the Stock Option or Stock Right was granted, including
the acceleration of the time at which the Stock Option or Stock Right may be
vested or exercised, and to remove any or all of the restrictions on any
Restricted Stock; (iv) to correct any defect or supply any omission or reconcile
any inconsistency in the Plan, including any correction or amendment which in
the judgment of the Committee is necessary to ensure compliance with the
requirements of the Rule; and (v) to construe and interpret the Plan and any
Stock Option - Stock Appreciation Rights Agreements and Restricted Stock
Agreements thereunder and any rules and regulations relating thereto, and to
make all other determinations deemed necessary or advisable for the
administration of the Plan. The Committee shall not possess any authority, the
possession or exercise of which would cause an ISO granted hereunder to be
disqualified as such under the Code.
SECTION 6 Liability of the Committee. In addition to such other rights of
indemnification as they may have as directors of Valhi or as members of the
Committee or otherwise, members of the Committee shall be indemnified by Valhi
as and to the fullest extent permitted by law, including without limitation,
indemnification against the reasonable expenses, including attorneys' fees,
actually and necessarily incurred in connection with the defense of any action,
suit or proceeding, or in connection with any appeal therein, to which they or
any of them may be a party by reason of any action taken or failure to act under
or in connection with the Plan, or any Stock Options, Stock Rights or Restricted
Stock Awards granted hereunder, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by independent legal
counsel selected by Valhi), or paid by them in satisfaction of a judgment in any
such action, suit or proceeding, except in relation to matters as to which it
shall be adjudged in such action, suit or proceeding that such Committee member
is liable for gross negligence, bad faith or misconduct in his duties.
SECTION 7 Price of Stock Options. The purchase price of the shares of
Common Stock which shall be covered by each NSO shall be established by the
Committee at the time of granting the NSO, but at no time shall such a grant be
less than 85% of the fair market value of the Common Stock as defined in this
Section 7 at the time of such grant. The purchase price of the shares of Common
Stock which shall be covered by each ISO shall be no less than the fair market
value of the Common Stock at the time of granting the ISO. In the event that
any ISO is granted to a Ten Percent Stockholder, the price at which shares of
Common Stock shall be purchasable under such ISO shall not be less than 110
percent of the fair market value of such shares at the time of the grant. If
the primary market for the Common Stock is a national securities exchange, the
NASDAQ National Market System, or other market quotation system in which last
sale transactions are reported on a contemporaneous basis, such fair market
value shall be deemed to be the last reported sale price of the Common Stock on
such exchange or in such quotation system on the day as of which the option
shall be granted, or, if there shall not have been a sale on such exchange or
reported through such system on such trading day, the closing or last bid
quotation therefor on such exchange or quotation system on such trading day. If
the primary market for the Common Stock is not such an exchange or quotation
market in which transactions are contemporaneously reported, such fair market
value shall be deemed to be the closing or last bid quotation in the
over-the-counter market on such trading day as reported by the National
Association of Securities Dealers through NASDAQ, its automated system for
reporting quotations, or its successor or such other generally accepted source
of publicly reported bid quotations as the Company may reasonably designate on
the day as of which the option shall be granted. In all other cases, such fair
market value shall be determined in good faith by the Committee as of the day
the option is granted. If the price so determined shall include a fraction of a
cent, it shall be rounded up to the next full cent.
SECTION 8 Medium and Time of Payment Upon Exercise of Stock Options. The
purchase price payable upon the exercise of a Stock Option shall be payable at
the time of such exercise and may be paid in cash, by check, with shares of
Common Stock, or in any combination thereof. For purposes of making such
payment in shares of Common Stock, such shares shall be valued at their fair
market value as provided in Section 7 on the day of exercise of the Stock Option
and shall have been held by the grantee for a period of at least six (6) months.
SECTION 9 Limitation on Grant of ISOs. The aggregate fair market value
(determined as of the time the ISO is granted) of the shares with respect to
which ISOs are exercisable for the first time by a grantee during any calendar
year (under all such plans of the Company) shall not exceed $100,000.
SECTION 10 Maximum Term of Stock Option or Stock Right. The period
during which each Stock Option or Stock Right granted hereunder may be exercised
will be determined by the Committee in each case; provided, however, that no
Stock Option or Stock Right shall by its terms be exercisable after the
expiration of 10 years from the date such Stock Option or Stock Right is
granted. In the event that any ISO is granted to a Ten Percent Stockholder the
maximum expiration period described above shall be reduced to 5 years from the
date the ISO is granted.
SECTION 11 Limitations on Right to Exercise. The exercisability of Stock
Options or Stock Rights granted under the Plan shall be subject to such
restrictions as the Committee may impose, which restrictions may differ with
respect to each grantee and which may be included in a Stock Option - Stock
Appreciation Rights Agreement or which the Committee may otherwise inform the
grantee. Absence or leave approved by the Company, to the extent permitted by
the applicable provisions of the Code, shall not be considered an interruption
of employment for any purpose under the Plan. The exercise of any Stock Option
or Stock Right granted under the Plan will be contingent upon the advice of
counsel to the Company that such shares have been duly registered or are exempt
from registration under the applicable securities laws, and upon receipt by the
Committee of cash, check, Common Stock or combination thereof in payment of the
full purchase price of such shares. Except upon the issuance of shares of
Common Stock upon the exercise of a Stock Option or Stock Right, the holder of a
Stock Option or Stock Right shall not have any of the rights of a stockholder
with respect to the shares covered by the Stock Option or Stock Right.
SECTION 12 Award of Stock Rights.
(a) Stock Rights may be granted to such key employees holding Stock
Options granted under the Plan as the Committee may select and upon such terms
and conditions as the Committee may prescribe. Each Stock Right shall relate to
a specific Stock Option granted and may be granted concurrently with the Stock
Option to which it relates or at any time prior to the exercise, expiration or
termination of such Stock Option (except as otherwise provided in Section 19
hereof). A Stock Right shall entitle the grantee, subject to the provisions of
the Plan and the related Stock Option-Stock Appreciation Rights Agreement, to
receive from the Company an amount equal to the excess of the fair market value,
on the exercise date, of the number of shares of Common Stock for which the
Stock Right is exercised over the purchase price for such shares of Common Stock
under the related Stock Option. For this purpose, such fair market value shall
be determined as provided in Section 7 on the close of business on the day of
exercise.
(b) A Stock Right shall be exercisable on such dates or during such
periods as may be determined by the Committee from time to time, except that in
no event shall such right be exercisable when the related Stock Option is not
eligible to be exercised or when the fair market value per share of the Common
Stock on the exercise date does not exceed the exercise price per share of the
related Stock Option.
(c) A Stock Right may be exercised only upon surrender of the related
Stock Option by the grantee which shall be terminated to the extent of the
number of shares for which the Stock Right is exercised. Shares covered by such
a terminated Stock Option or portion thereof granted under the Plan shall not be
available for further grants under the Plan.
(d) The amount payable by the Company upon exercise of a Stock Right may
be paid in cash, in shares of Common Stock (valued at their fair market value on
the exercise date determined as provided in Section 7) or in any combination
thereof as the Committee shall determine from time to time. No fractional
shares shall be issued and the grantee shall receive cash in lieu thereof.
(e) The Committee may impose any other conditions upon the exercise of a
Stock Right, which conditions may include a condition that the Stock Right may
be exercised only in accordance with rules and regulations adopted by the
Committee from time to time. Such rules and regulations may govern the right to
exercise Stock Rights granted prior to the adoption or amendment of such rules
and regulations as well as Stock Rights granted thereafter.
(f) The Committee may at any time amend, terminate or suspend any Stock
Right theretofore granted under the Plan, provided that the terms of any Stock
Right after any amendment shall conform to the provisions of the Plan. A Stock
Right shall terminate upon the termination or expiration of the related Stock
Option.
(g) Notwithstanding the provisions of this Section 12, a Stock Right may
not be exercised until the expiration of six (6) months from the date of grant
of such Stock Right unless, prior to the expiration of such six (6) month
period, the holder of such Stock Right ceases to be an employee of the Company
by reason of such holder's retirement, death or disability.
(h) The Company intends that this Section 12 shall comply with the
requirements of the Rule during the term of the Plan. Should any provision of
this Section 12 not be necessary to comply with the requirements of the Rule or
should any additional provisions be necessary for this Section 12 to comply with
the requirements of the Rule, the Board of Directors may amend the Plan to add
or to modify the provisions of the Plan accordingly.
SECTION 13 Award of Restricted Stock.
(a) The Committee shall have the authority (i) to grant Restricted Stock
Awards, (ii) to issue or transfer Restricted Stock and (iii) to establish terms,
conditions and restrictions in connection with the issuance or transfer of
Restricted Stock.
(b) The grantee of a Restricted Stock Award shall execute and deliver to
the Committee a Restricted Stock Agreement satisfactory to the Committee with
respect to the Restricted Stock covered by such agreement as well as any other
documents that the Committee may require in connection with the Restricted Stock
Award. The Committee shall then cause stock certificates registered in the name
of the grantee to be issued and deposited, together with the related Restricted
Stock Agreement, with an escrow agent to be designated by the Committee, which
may be the Company.
(c) Restricted Stock Awards shall be subject to such restrictions as the
Committee may impose, which may differ with respect to each grantee and which
restrictions may be included in a Restricted Stock Agreement or which the
Committee may otherwise inform the grantee.
(d) The restriction period of Restricted Stock shall commence on the date
of grant and, unless otherwise established by the Committee in the Restricted
Stock Agreement setting forth the terms of the Restricted Stock Award, shall
expire five years from the date of grant.
(e) Subject to Section 21 and any requirement imposed by the Committee in
a Restricted Stock Agreement, or otherwise, at the expiration of a restriction
period and at the written request of a grantee, a stock certificate evidencing
the Restricted Stock with respect to which a restriction period has expired (to
the nearest full share) shall be delivered without charge to the grantee, or his
personal representative, free of all restrictions under the Plan.
SECTION 14 Limitations on Transfer. No Stock Option, Stock Right or
Restricted Stock Award granted under the Plan shall be transferable otherwise
than by will or the laws of descent and distribution, and no Stock Option or
Stock Right granted under the Plan may be exercised by any person other than the
person to whom the Stock Option or Stock Right shall initially have been granted
during the lifetime of such original grantee (other than the person's guardian
or legal representative). After the death of such original grantee, the
"holder" of any Stock Option, Stock Right or Restricted Stock Award granted
under the Plan shall be deemed to be the person to whom the original grantee's
rights shall pass under the original grantee's will or under the laws of descent
and distribution.
SECTION 15 No Right to Employment Conferred. Nothing in the Plan or in
any Stock Option-Stock Appreciation Rights Agreement or Restricted Stock
Agreement shall confer upon any employee any right to continue in the employ of
the Company or interfere in any way with the right of the Company to terminate
such employee's employment at any time.
SECTION 16 Adjustments.
(a) In the event the outstanding shares of Common Stock, as constituted
from time to time, shall be changed as a result of a stock dividend or stock
split or other change in the capitalization of the Company or a combination,
merger, or reorganization of the Company into or with any other corporation, or
any other transaction with similar effects, there then shall be substituted for
each share of Common Stock theretofore subject, or which may become subject, to
issuance or transfer under the Plan, the number and kind of shares of Common
Stock or other securities or other property as are equitably determined by the
Committee. In the event of an equity restructuring transaction such as a spin-
off or recapitalization through an extraordinary, special and nonrecurring
dividend, or other distribution (including any distribution of shares of stock
of any subsidiary or other property to holders of shares of Common Stock) or
transactions with similar effects, the Committee shall make such adjustments to
the number of shares issuable pursuant to, and/or exercise price per share of,
any Stock Option or Stock Right theretofore granted and whether or not then
exercisable as are equitably determined by the Committee. Notwithstanding any
other provision contained herein, the Committee shall make such other equitable
adjustments to any outstanding Stock Options, Stock Rights and/or Restricted
Stock Awards granted pursuant to the Plan as the Committee determines
appropriate. Each adjustment made pursuant to this Section 16 shall be made
with a view toward preserving the value the affected Stock Option, Stock Right
or Restricted Stock Award had prior to the event or transaction giving cause to
such adjustment.
(b) In the event of any change in applicable laws or any change in
circumstances which results in or would result in any dilution of the rights
granted under the Plan, or which otherwise warrants equitable adjustment because
it interferes with the intended operation of the Plan, then, if the Committee
shall, in its sole discretion, determine that such change equitably requires an
adjustment in the number or kind of shares of stock or other securities or other
property theretofore subject, or which may become subject, to issuance or
transfer under the Plan or in the terms and conditions of any outstanding Stock
Option, Stock Right or Restricted Stock Award, such adjustment shall be made in
accordance with such determination. Any adjustment of an ISO under this
paragraph shall be made only to the extent it does not constitute a
"modification" within the meaning of Section 425(h)(3) of the Code. The
Committee shall give notice to each grantee of any adjustment made under the
Plan and, upon such notice, such adjustment shall be effective and binding for
all purposes of the Plan.
SECTION 17 Stockholder Approval. The Plan is expressly made subject to
the approval by the holders of a majority of the issued and outstanding shares
of Valhi entitled to vote at a meeting of stockholders of Valhi (the
"Stockholders") duly called in accordance with applicable law. If the Plan is
not so approved within one year after its adoption by the Board of Directors,
the Plan shall not come into effect, and any Stock Option, Stock Right or
Restricted Stock Award granted pursuant hereto shall terminate and end. No
option or right granted hereunder shall be exercisable nor restricted stock vest
unless and until such Stockholder approval is obtained and unless and until such
further Stockholder approval required pursuant to Section 19 is obtained.
SECTION 18 Time of Granting Stock Options, Stock Rights or Restricted
Stock Awards. Neither anything contained in the Plan nor in any resolutions
adopted or to be adopted by the Board of Directors or the Stockholders nor any
action taken by the Committee shall constitute the granting of any Stock Option,
Stock Right or Restricted Stock Award. The granting of a Stock Option, Stock
Right or Restricted Stock Award shall take place only when a written Stock
Option-Stock Appreciation Rights Agreement or Restricted Stock Agreement shall
have been duly executed and delivered by the Company and the grantee.
SECTION 19 Termination and Amendment of the Plan. The Plan shall
terminate on the earlier of (i) ten years from the date the Plan is adopted by
the Board of Directors or by the Stockholders, whichever is earlier, or (ii)
such time as a new stock option-stock appreciation rights and restricted stock
plan is adopted by the Board of Directors in replacement of the Plan. No Stock
Option, Stock Right or Restricted Stock Award shall be granted under the Plan
after its termination date, but the termination of the Plan shall not adversely
affect any Stock Option, Stock Right or Restricted Stock Award theretofore
granted under the Plan. Subject to the foregoing, the Plan may at any time or
from time to time be terminated, modified or amended by (1) the Board of
Directors and (2), if and to the extent that Stockholder approval is required
under Section 422 of the Code or by any securities exchange on which the shares
of Common Stock are then listed, or if directed by the Board of Directors, by
the Stockholders.
SECTION 20 Plan Provisions Control Terms of Agreement. The terms of the
Plan shall govern all Stock Options, Stock Rights or Restricted Stock Awards
granted under the Plan and in no event shall the Committee have the power to
grant any Stock Option, Stock Right or Restricted Stock Award under the Plan
which is contrary to any of the provisions of the Plan.
SECTION 21 Agreement by Grantee Regarding Withholding Taxes. If the
Committee shall so require, as a condition of exercise of each Stock Option or
Stock Right and vesting of each Restricted Stock Award, each grantee shall agree
that:
(a) no later than the date of exercise of any Stock Option or Stock Right
granted hereunder, the grantee will pay to the Company or make arrangements
satisfactory to the Committee regarding payment of any Federal, state or local
taxes of any kind required by law to be withheld upon the exercise of such Stock
Option or Stock Right;
(b) no later than the date of expiration of a restrictive period of any
Restricted Stock Award granted hereunder, the grantee will pay to the Company or
make arrangements satisfactory to the Committee regarding payment of any
Federal, state or local taxes of any kind required by law to be withheld upon
the vesting of such Restricted Stock; and
(c) the Company shall, to the extent permitted or required by law, have
the right to deduct from any payment of any kind otherwise due to the grantee,
Federal, state or local taxes of any kind required by law to be withheld upon
the exercise of such Stock Option or Stock Right or vesting of such Restricted
Stock.
SECTION 22 Effective Date of Plan. The Plan is effective as of May 28,
1987. The Plan, as amended and restated, as of December 4, 1990, shall be
effective as of December 4, 1990; the Plan, as amended and restated as of
January 28, 1991, shall be effective as of January 28, 1991; the Plan, as
amended and restated as of February 18, 1992, shall be effective as of February
18, 1992; the Plan, as amended and restated as of March 10, 1994, shall be
effective as of March 10, 1994; and the Plan, as amended and restated as of
November 10, 1994, shall be effective as of November 10, 1994.
W I T N E S S E T H:
Pursuant to the authority granted to the undersigned by the Board of
Directors of Valhi, Inc., the amended and restated Valhi, Inc. 1987 Stock Option
- - Stock Appreciation Rights Plan attached hereto be, and it hereby is, adopted
effective as of November 10, 1994.
Dated as of this 10th day of November, 1994.
Valhi, Inc.
By: ____________________________________
Harold C. Simmons, Chairman of the
Board, President and Chief Executive
Officer
Attest:
______________________________
Steven L. Watson, Secretary