DAL-TILE INTERNATIONAL INC.
1997 AMENDED AND RESTATED
STOCK OPTION PLAN
ARTICLE 1
GENERAL
1.1 PURPOSE. The purpose of this Dal-Tile International Inc. 1997 Amended
and Restated Stock Option Plan (the "Plan") is to provide for certain key
employees of Dal-Tile International Inc. ("Dal-Tile"), a Delaware corporation,
its successors and assigns and its subsidiaries and affiliates (collectively,
the "Company"), an incentive (i) to join and remain in the service of the
Company, (ii) to maintain and enhance the long-term performance and
profitability of the Company and (iii) to acquire a proprietary interest in the
success of the Company. The grant and exercise of Options under the Plan is
intended to meet the requirements of Rule 16b-3 of the 1934 Act (as hereinafter
defined) at all times during which the Company and its Insiders (as hereinafter
defined) are subject to the requirements of Section 16 of the 1934 Act.
1.2 DEFINITION OF CERTAIN TERMS.
(a) "Agreement" means an agreement issued pursuant to Section 2.1.
(b) "Board" means the Board of Directors of Dal-Tile.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means the Committee appointed to administer the Plan
in accordance with Section 1.3.
(e) "Common Stock" means the shares of common stock, par value $.01
per share, of Dal-Tile and, subject to Section 2.5, any other shares into which
such common stock shall thereafter be exchanged by reason of a recapitalization,
merger, consolidation, split-up, combination, exchange of shares or the like.
(f) "Date of Grant" means the date as of which an Option is granted
by the Committee under an Agreement.
(g) "Fair Market Value" per share as of a particular date means
(i) the closing sales price per share of Common Stock on the national
securities exchange on which the Common Stock is principally traded for the
last date (including the Date of Grant) on which there was a sale of such
Common Stock on such exchange, or (ii) if the shares of Common Stock are not
then traded on a national securities exchange, the average of the closing bid
and asked prices for the shares of Common Stock in the over-the-counter
market on which the Common Stock is principally traded for the last date
(including the Date of Grant) on which there was a sale of such Common Stock
in such market, or (iii) if the shares of Common Stock are not then listed on
a national securities exchange or traded in an over-the-counter market, such
value as the Committee, in its sole discretion, shall determine.
(h) "Insider" means an insider as so defined for purposes of
Section 16 of the 1934 Act.
(i) "Option" means any incentive stock option or "nonqualified"
stock option, both as described in Section 1.5, granted under the Plan.
(j) "Optionee" means an employee of the Company who has been
awarded any Option under this Plan.
(k) The terms "parent corporation" and "subsidiary corporation" as
used herein shall have the meaning given those terms in Code section 425(e)
and (f), respectively. A corporation shall be deemed a parent or a
subsidiary only for such periods during which the requisite ownership
relationship is maintained.
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(l) "Plan" means this Dal-Tile International Inc. 1997 Amended and
Restated Stock Option Plan and any predecessor plan.
(m) "Termination With Cause," with respect to any Optionee, means,
except as otherwise provided in an Agreement, termination by the Company of
such Optionee's employment for: (i) misappropriation of corporate funds,
(ii) conviction of a crime, (iii) willful violation of written directions of
the Chief Executive Officer or the Board of Directors of the Company; or (iv)
gross negligence and willful misconduct.
(n) "1934 Act" means the Securities Exchange Act of 1934, as
amended.
1.3 ADMINISTRATION.
(a) (i) Subject to Section 1.3(e), the Plan shall be administered
by a committee of the Board which shall consist of at least two members of
the Board and which shall have the power of the Board to authorize awards
under the Plan. At all times during which Dal-Tile and its Insiders are
subject to the requirements of Section 16 of the 1934 Act, all members of the
Committee shall be "Non-Employee Directors" as described in Rule 16b-3 of the
1934 Act. All members of the Committee or a subcommittee shall be "outside
directors" for purposes of Section 162(m) of the Code with respect to any
optionees whose compensation may be subject to the deductibility limitations
of Section 162(m) of the Code. The members of the Committee shall be
appointed by, and may be changed from time to time in the discretion of, the
Board.
(b) The Committee shall have the authority (i) to exercise all of
the powers granted to it under the Plan, (ii) to construe, interpret and
implement the Plan and any Agreement executed pursuant to Section 2.1, (iii)
to prescribe, amend and rescind rules and regulations relating to the Plan,
(iv) to make all determinations necessary or advisable in administering the
Plan, and (v) to correct any defect, supply any omission and reconcile any
inconsistency in the Plan and (vi) to grant Options on such terms, not
inconsistent with the Plan, as it shall determine.
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(c) The determination of the Committee on all matters relating to
the Plan or any Agreement shall be conclusive.
(d) No member of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any award
thereunder.
(e) Notwithstanding anything to the contrary contained herein, the
Board may, in its sole discretion, at any time and from time to time, resolve
to administer the Plan. Such event, the term "Committee" as used herein
shall be deemed to mean the Board.
1.4 PERSONS ELIGIBLE FOR AWARDS. Awards under the Plan may be made
from time to time to such key employees of the Company as the Committee shall
in its sole discretion select, provided, however, that subject to Section
3.4, the Committee may not award Options to any such employee with respect to
more than 4,000,000 shares of Common Stock in any fiscal year during the term
of the Plan.
1.5 TYPES OF AWARDS UNDER THE PLAN. Awards may be made under the Plan
in the form of (a) stock options which may, in the Committee's discretion, be
granted either as (i) "nonqualified" stock options subject to the provisions
of section 83 of the Code or (ii) "incentive stock options" described in
section 422 of the Code, all as more fully set forth in Article 2.
1.6 SHARES AVAILABLE FOR AWARDS.
(a) Subject to Section 3.4 (relating to adjustments upon changes in
capitalization), as of any date the total number of shares of Common Stock with
respect to which Options may be outstanding under the Plan shall be equal to the
excess (if any) of (i) 7,836,425 shares over (ii) the sum of (A) the number of
shares subject to outstanding Options granted under the Plan and (B) the number
of shares previously transferred pursuant to the exercise of Options granted
under the Plan. In accordance with (and without limitation upon) the preceding
sentence, but subject to the requirements of Rule 16b-3 of the 1934 Act, if
applicable, shares of Common Stock covered by
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Options granted under the Plan which expire or terminate for any reason shall
again become available for award under the Plan.
(b) Shares that are issued upon the exercise of Options awarded under
the Plan shall be authorized and unissued or treasury shares of Common Stock.
(c) Without limiting the generality of the preceding provisions of
this Section 1.6, the Committee may, but solely with the Optionee's consent,
agree to cancel any award of Options under the Plan and issue new Options in
substitution therefor, provided that the Options as so substituted shall satisfy
all of the requirements of the Plan as of the date such new Options are awarded.
1.7 OPTION PRICE. Except as the Committee may otherwise provide, the
exercise price of each Option shall not be less than 100% of the Fair Market
Value of the shares of Common Stock covered by the Option as of the Date of
Grant.
ARTICLE 2
STOCK OPTIONS
2.1 AGREEMENTS EVIDENCING STOCK OPTIONS.
(a) Options awarded under the Plan shall be evidenced by Agreements
which shall not be inconsistent with the terms and provisions of the Plan, and,
in the case of incentive stock options, of section 422 of the Code, and which
shall contain such provisions as the Committee may in its sole discretion deem
necessary or desirable. Without limiting the generality of the foregoing, the
Committee may in any Agreement impose such restrictions or conditions upon the
exercise of such Option or upon the sale or other disposition of the shares of
Common Stock issuable upon exercise of such Option as the Committee may in its
sole discretion determine. By accepting an award pursuant to the Plan each
Optionee shall thereby agree that each such award shall
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be subject to all of the terms and provisions of the Plan, including, but not
limited to, the provisions of Section 1.3(d).
(b) Each Agreement shall set forth the number of shares of Common
Stock subject to the Option granted thereby.
(c) Each Agreement relating to Options shall set forth the amount
payable by the Optionee to Dal-Tile upon exercise of the Option evidenced
thereby, subject to adjustment by the Committee to reflect changes in
capitalization as contemplated by Section 3.4.
(d) An Option granted under this Plan shall be an incentive stock
option only if the relevant Agreement by its terms (i) expressly sets forth
the rules described in Sections 2.8 and 2.9 hereof, and (ii) expressly states
that it is intended to qualify as an incentive stock option. Any Option
granted under this Plan which does not satisfy the foregoing requirements of
this Section 2.1(d) is intended to be a nonqualified stock option subject to
the provisions of section 83 of the Code, and is intended not to qualify for
incentive stock option treatment under section 422 of the Code.
2.2 TERM OF OPTIONS.
(a) Each Agreement shall set forth the period during which the
Option evidenced thereby shall be exercisable, whether in whole or in part,
and any vesting provisions applicable to the Option, such terms to be
determined by the Committee in its discretion; provided that, notwithstanding
the foregoing or any other provision of the Plan, no Agreement shall permit
an incentive stock option to be exercisable more than 10 years after the date
of grant.
(b) Each Agreement shall set forth such other terms and
conditions, not inconsistent with the terms of the Plan, as the Committee
shall deem appropriate.
2.3 EXERCISE OF OPTIONS. Subject to the provisions of this Article 2,
each Option granted under the Plan shall be exercisable as follows:
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(a) An Option shall become exercisable at such times and subject
to such conditions as the applicable Agreement or the Committee may otherwise
provide.
(b) Unless the applicable Agreement otherwise provides, an Option
granted under the Plan may be exercised from time to time as to all or part
of the shares as to which such Option shall then be exercisable.
(c) An Option shall be exercised by the filing of a written notice
of exercise with Dal-Tile, on such form and in such manner as the Committee
shall in its sole discretion prescribe.
(d) Any written notice of exercise of an Option shall be
accompanied by payment of the exercise price for the shares being purchased.
Except as the Committee may otherwise provide, such payment shall be made by
certified or official bank check payable to Dal-Tile (or the equivalent
thereof, including shares of Common Stock). As soon as practicable after
receipt of such payment, Dal-Tile shall deliver to the Optionee a certificate
or certificates for the shares of Common Stock so purchased.
2.4 TERMINATION OF OPTIONS.
(a) Notwithstanding anything to the contrary in this Plan, except
as the Agreement or the Committee may otherwise provide and as set forth in
Section 2.4(b) and Section 2.4(d), all incentive stock options and
"nonqualified" stock options granted to an Optionee (and already vested but
not yet exercised) shall terminate on the earliest to occur of the expiration
of the term of the Option and the date which is 45 days after termination of
his employment with the Company for any reason (one year after termination by
reason of death, disability or retirement at or after the Optionee's
sixty-fifth birthday or at such earlier retirement age as may be approved by
the Committee).
(b) Notwithstanding anything to the contrary in this Plan, all
Options granted to an Optionee shall immediately expire and cease to be
exercisable and
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all rights granted to an Optionee under this Plan and such Optionee's
Agreement shall immediately expire in the event of a Termination With Cause
of the Optionee by the Company at any time.
(c) Unless the applicable Agreement or the Committee expressly
provides otherwise, Options awarded to Optionees under the terms of the Plan
will be exercisable only in accordance with the following vesting schedule:
CUMULATIVE
PERCENTAGE OF
VESTING DATE TOTAL SHARES
------------ ------------
On the date of the applicable Agreement 25%
On the first anniversary of the date of
the Agreement 50%
On the second anniversary of the date of
the Agreement 75%
On the third anniversary of the date of
the Agreement 100%
The Committee may modify this vesting schedule in any manner that it deems
appropriate in any Agreement or otherwise and may provide different vesting
schedules in different Agreements in its sole discretion. Except as set
forth in an Agreement or as the Committee may provide, in the event that an
Optionee's employment with the Company is terminated for any reason prior to
the date on which the Optionee's right to exercise the Options has fully
vested pursuant to this Section 2.4(c), the Options will immediately cease to
be exercisable with respect to any and all shares which have not vested as of
the date of such termination.
2.5 Unless otherwise determined by the Committee coincident with the
grant of an Option or subsequently, in the event of a Transaction which does
not also constitute a Non-Control Transaction (as hereinafter defined), the
Options shall vest and each Optionee shall be entitled to receive in respect
of each share of Common Stock subject to his Options (whether or not vested),
upon exercise, the same amount and kind of stock, securities, cash, property
or other consideration that each holder of a share of Common Stock was
entitled to receive in the Transaction in respect of each share. In the
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event of a Non-Control Transaction, each Optionee shall be entitled to
receive in respect of each share of Common Stock subject to his Options, upon
exercise of such Options after the vesting thereof, the same kind of stock,
securities, cash, property or other consideration that each holder of a share
of Common Stock was entitled to receive in the Non-Control Transaction in
respect of a share. Unless otherwise determined by the Committee, Options
will not automatically vest upon the occurrence of a Non-Control Transaction.
"Transaction" means, except as otherwise provided in an Agreement (i) the
approval by stockholders of the liquidation or dissolution of the Company, (ii)
a sale or other disposition of 80% or more of the outstanding voting stock of
the Company, or (iii) the merger or consolidation of the Company with or into
any entity. "Non-Control Transaction" means (i) a merger or consolidation in
which the Company is the surviving corporation and the shares of its outstanding
Common Stock are not changed into other securities or property pursuant to such
merger or consolidation, (ii) a merger or consolidation with an affiliate of the
Company following which those persons who owned directly or indirectly a
majority of the outstanding shares of voting stock immediately prior to such
merger or consolidation will own a majority of the outstanding shares of voting
stock of the surviving corporation, or (iii) a sale or other disposition of
capital stock of the Company following which those persons who owned directly or
indirectly a majority of the outstanding shares of voting stock of the Company
immediately prior to such sale will own a majority of the outstanding shares of
voting stock of the purchasing entity. Notwithstanding anything in the Plan,
the merger of DTI Merger Company with and into Dal-Tile (the "Merger"), pursuant
to which Dal-Tile is the surviving corporation, shall not affect the operation
of the Plan in any manner whatsoever, and, in particular, shall not be or be
deemed to be a Transaction and immediately subsequent to the Merger each Option
shall continue to be exercisable for Class A common stock, par value $.01 per
share, of Dal-Tile.
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2.6 RULE 16B-3. Notwithstanding anything in the Plan to the contrary, the
Plan shall be administered, and Options shall be granted and exercised, in
accordance with the 1934 Act and, specifically, Rule 16b-3 thereof.
2.7 $100,000 LIMITATION ON ANNUAL VESTING OF INCENTIVE STOCK OPTIONS.
(a) Subject to the further provisions of this Section 2.7, to the
extent that the aggregate fair market value of stock with respect to which
incentive stock options (determined without regard to the provisions of this
Section 2.7) are exercisable for the first time by any Optionee during any
calendar year (under all plans of the Optionee's employer corporation and its
parent and subsidiary corporations) exceeds $100,000 (or such limitation as set
forth in Section 422 of the Code as may be amended from time to time), such
Options shall be treated as Options that are "nonqualified" stock options.
(b) For purposes of Section 2.7(a), which shall be applied by taking
options into account in the order in which they were granted, the Fair Market
Value of any stock shall be determined as of the time the Option with respect to
such stock is granted.
(c) In applying the provisions of Section 2.7(a), there shall be
taken into account solely (i) incentive stock options granted to an Optionee
under this Plan, and (ii) incentive stock options granted to the Optionee after
December 31, 1986 under all other stock option plans of his employer
corporation, and its parent or subsidiary corporations.
(d) The foregoing provisions of this Section 2.7 shall in no way
limit or restrict the aggregate fair market value of the stock which may be
acquired in any calendar year upon the exercise of "nonqualified" stock options
granted under the Plan or under any other stock option plan of the Optionee's
employer corporation, or its parent or subsidiary corporations.
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2.8 SPECIAL RULES FOR 10% STOCKHOLDERS. Notwithstanding any provisions to
the contrary, an incentive stock option may not be granted under this Plan to an
individual who, at the time the option is granted, owns stock possessing more
than 10% of the total combined voting power of all classes of stock of his
employer corporation or of its parent or subsidiary corporations (as such
ownership may be determined for purposes of section 422 of the Code) unless (a)
at the time such incentive stock option is granted the option exercise price is
at least 110% of the Fair Market Value of the shares subject to the incentive
stock option and (b) the incentive stock option by its terms is not exercisable
after the expiration of 5 years from the date such incentive stock option is
granted.
ARTICLE 3
MISCELLANEOUS
3.1 AMENDMENT OF THE PLAN; MODIFICATION OF AWARDS.
(a) The Board may, without stockholder approval, from time to time
suspend or discontinue the Plan or revise or amend it in any respect whatsoever,
except that no such amendment shall impair any rights or obligations under any
award theretofore made under the Plan without the consent of the person to whom
such award was made, PROVIDED, FURTHER, that an amendment which requires
stockholder approval in order for the Plan to continue to comply with Rule 16b-3
or any other law, regulation or stock exchange requirement shall not be
effective unless approved by the requisite vote of stockholders.
(b) With the consent of the Optionee and subject to the terms and
conditions of the Plan (including Section 3.1(a)), the Committee may amend
outstanding Agreements with such Optionee, for example, to (i) accelerate the
time or
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times at which an Option may be exercised or (ii) extend the scheduled
expiration date of the Option.
3.2 NONASSIGNABILITY. Except as the Committee may otherwise provide, no
right granted to any Optionee under the Plan or under any Agreement shall be
assignable or transferable other than by will or by the laws of descent and
distribution. Except as the Committee may otherwise provide, during the life of
the Optionee, all rights granted to the Optionee under the Plan or under any
Agreement shall be exercisable only by him.
3.3 WITHHOLDING OF TAXES.
(a) The Company shall be entitled to withhold from any payments to an
Optionee an amount sufficient to satisfy any federal, state and other
governmental tax required to be withheld in connection with the exercise of an
Option. Whenever under the Plan shares of Common Stock are to be delivered upon
exercise of an Option, Dal-Tile shall be entitled to require as a condition of
delivery that the Optionee remit an amount sufficient to satisfy all federal,
state and other governmental tax withholding requirements related thereto.
(b) DISPOSITION OF INCENTIVE STOCK OPTIONS. If an Optionee makes a
disposition, within the meaning of Section 424(c) of the Code and regulations
promulgated thereunder, of any share or shares of Common Stock issued to such
Optionee pursuant to the exercise of an Option granted as an Incentive Stock
Option within the two-year period commencing on the date after the Date of Grant
or within the one-year period commencing on the date after the date of transfer
of such share or shares of Common Stock to the Optionee pursuant to such
exercise, the Optionee shall, within ten (10) days of such disposition, notify
Dal-Tile thereof, by delivery of written notice to Dal-Tile at its principal
executive office.
3.4 ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. The number of shares of
Common Stock or other stock or securities which may be issued pursuant to the
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exercise of Options granted under the Plan in the aggregate and to any
Optionee and the exercise price of Options shall be equitably adjusted for
any increase or decrease in the number of issued shares of Common Stock
resulting from the subdivision or combination of shares of Common Stock or
other capital adjustments, or the payment of a stock dividend or
extraordinary cash dividend after the effective date of this Plan, or other
increase or decrease in the number of such shares of Common Stock effected
without receipt of consideration by Dal-Tile; provided, however, that any
Options to purchase fractional shares of Common Stock resulting from any such
adjustment shall be eliminated. Adjustments under this Section 3.4 shall be
made by the Committee, whose determination as to what adjustments shall be
made, and the extent thereof, shall be final, binding and conclusive.
3.5 RIGHT OF DISCHARGE RESERVED. Nothing in this Plan or in any
Agreement shall confer upon any employee or other person the right to
continue in the employment or service of the Company or affect any right
which the Company may have to terminate the employment or service of such
employee or other person.
3.6 NO RIGHTS AS A STOCKHOLDER. No Optionee or other person holding an
Option shall have any of the rights of a stockholder of Dal-Tile with respect
to shares subject to an Option until the issuance of a stock certificate to
him for such shares. Except as otherwise provided in Section 3.4, no
adjustment shall be made for dividends, distributions or other rights
(whether ordinary or extraordinary, and whether in cash, securities or other
property) for which the record date is prior to the date such stock
certificate is issued.
3.7 NATURE OF PAYMENTS.
(a) Any and all payments of shares of Common Stock or cash
hereunder shall be granted, transferred or paid in consideration of services
performed by the Optionee for the Company.
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(b) All such grants, issuances and payments shall constitute a
special incentive payment to the Optionee and shall not, unless otherwise
determined by the Committee, be taken into account in computing the amount of
salary or compensation of the Optionee for the purposes of determining any
pension, retirement, death or other benefits under (i) any pension, retirement,
life insurance or other benefit plan of the Company or (ii) any agreement
between the Company and the Optionee.
3.8 NON-UNIFORM DETERMINATIONS.
The Committee's determinations under the Plan need not be uniform and
may be made by it selectively among persons who receive, or are eligible to
receive, awards under the Plan (whether or not such persons are similarly
situated). Without limiting the generality of the foregoing, the Committee
shall be entitled, among other things, to make non-uniform and selective
determinations, and to enter into non-uniform and selective Agreements, as to
(i) the persons to receive awards under the Plan, and (ii) the terms and
provisions of awards under the Plan.
3.9 OTHER PAYMENTS OR AWARDS. Nothing contained in the Plan shall be
deemed in any way to limit or restrict the Company or the Committee from making
any award or payment to any person under any other plan, arrangement or
understanding, whether now existing or hereafter in effect.
3.10 RESTRICTIONS.
(a) If the Committee shall at any time determine that any Consent (as
hereinafter defined) is necessary or desirable as a condition of, or in
connection with, the granting of any award under the Plan, the issuance or
purchase of shares or other rights thereunder or the taking of any other action
thereunder (each such action being hereinafter referred to as a "Plan Action"),
then such Plan Action shall not be taken, in whole or in part, unless and until
such Consent shall have been effected or obtained to the full satisfaction of
the Committee.
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(b) The term "Consent" as used herein with respect to any Plan Action
means (i) any and all listings, registrations or qualifications in respect
thereof upon any securities exchange or under any federal, state or local law,
rule or regulation, (ii) any and all written agreements and representations by
the grantee with respect to the disposition of shares, or with respect to any
other matter, which the Committee shall deem necessary or desirable to comply
with the terms of any such listing, registration or qualification or to obtain
an exemption from the requirement that any such listing, qualification or
registration be made and (iii) any and all consents, clearances and approvals in
respect of a Plan Action by any governmental or other regulatory bodies.
3.11 SECTION HEADINGS. The section headings contained herein are for the
purposes of convenience only and are not intended to define or limit the
contents of said sections.
3.12 INTERPRETATION. Unless expressly stated in the relevant Agreement,
each Option is intended to be performance-based compensation within the meaning
of Section 162(m)(4)(C) and the Committee shall interpret the Plan accordingly.
3.13 EFFECTIVE DATE AND TERM OF PLAN.
(a) The 1997 Amended and Restated Stock Option Plan was approved by
the Board effective as of June 11, 1997, subject to approval of the Plan by a
majority of the voting stockholders of the Company.
(b) The Plan shall terminate 10 years after its adoption by the
Board, and no awards shall thereafter be made under the Plan. Notwithstanding
the foregoing, all awards made under the Plan prior to the date on which the
Plan terminates shall remain in effect until such awards have been satisfied or
terminated in accordance with the terms and provisions of the Plan.
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