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 NUMBER OF SHARES
--------------- ---------------------------
On the Grant Date 500,000
On June 13, 1998 1,000,000
On June 13, 1999 1,500,000
On December 31, 1999 2,000,000
(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
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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
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(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.
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(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.
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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.
7.4 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
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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.
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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.
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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:
Name:_________________________
Title:________________________
______________________________
Jacques R. Sardas
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EXHIBIT A
EXERCISE NOTICE
[TO BE EXECUTED UPON EXERCISE OF STOCK APPRECIATION RIGHT]
To Dal-Tile International Inc.
The undersigned hereby irrevocable 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____.
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 NUMBER 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
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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
3
(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.
4
(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.
5
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.
7.4 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
6
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
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.
8
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:____________________________________
Name:__________________________________
Title:_________________________________
_______________________________________
Jacques R. Sardas
9
EXHIBIT A
EXERCISE NOTICE
[TO BE EXECUTED UPON EXERCISE OF STOCK APPRECIATION RIGHT]
To Dal-Tile International Inc.
The undersigned hereby irrevocable 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__.
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.
-2-
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.
-3-
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.
-4-
(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.
-5-
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.
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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.
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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: ________________________________
____________________________________
Christopher Wellborn
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EXHIBIT A
EXERCISE NOTICE
[TO BE EXECUTED UPON EXERCISE OF STOCK APPRECIATION RIGHT]
To Dal-Tile International Inc.
The undersigned hereby irrevocable 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__.
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%
April 18, 1998 50%
April 18, 1999 75%
April 18, 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.
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.
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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.
-3-
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
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.
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(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:
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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. Cooke
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.
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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
-7-
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.
-8-
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: ________________________________
Name: ______________________________
Title: _____________________________
____________________________________
Dan L. Cooke
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EXHIBIT A
EXERCISE NOTICE
[TO BE EXECUTED UPON EXERCISE OF STOCK APPRECIATION RIGHT]
To Dal-Tile International Inc.
The undersigned hereby irrevocable 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____.
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%
April 18, 1998 50%
April 18, 1999 75%
April 18, 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.
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.
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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.
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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
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
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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.
-5-
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.
-6-
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.
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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.
-8-
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: _____________________________
Name: ___________________________
Title: __________________________
_________________________________
Marc Powell
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EXHIBIT A
EXERCISE NOTICE
[TO BE EXECUTED UPON EXERCISE OF STOCK APPRECIATION RIGHT]
To Dal-Tile International Inc.
The undersigned hereby irrevocable 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__.
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"), 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%
September 1, 1998 50%
September 1, 1999 75%
September 1, 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.
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.
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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.
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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.
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(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:
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(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 F. 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.
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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
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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.
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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:_____________________________________
Name:___________________________________
Title:__________________________________
________________________________________
David F. Finnigan
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EXHIBIT A
EXERCISE NOTICE
[TO BE EXECUTED UPON EXERCISE OF STOCK APPRECIATION RIGHT]
To Dal-Tile International Inc.
The undersigned hereby irrevocable 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____.