EXHIBIT 10.20
-------------
PLY GEM INVESTMENT HOLDINGS, INC.
2004 STOCK OPTION PLAN
INCENTIVE STOCK OPTION AGREEMENT
THIS AGREEMENT dated as of the date set forth on Exhibit A hereto,
between Ply Gem Investment Holdings, Inc., a Delaware Corporation (the
"Company"), and the person named on Exhibit A hereto (the "Optionee").
W I T N E S S E T H:
In consideration of the mutual promises and covenants made herein and
the mutual benefits to be derived herefrom, the parties hereto agree as follows:
1. GRANT OF STOCK OPTION.
Subject to the provisions of this Agreement and to the provisions of
the Ply Gem Investment Holdings, Inc. 2004 Stock Option Plan (the "Plan"), the
Company hereby grants to the Optionee as of the date set forth on Exhibit A
hereto (the "Grant Date") the right and option (the "Stock Option") to purchase
the number of shares of common stock of the Company, par value $.01 per share
("Common Stock"), set forth on Exhibit A hereto, at the exercise price per share
specified on Exhibit A hereto. Unless earlier terminated pursuant to the terms
of this Agreement, the Stock Option shall expire on the tenth anniversary of the
Grant Date (the "Option Period"). Capitalized terms not defined herein shall
have the meaning set forth in the Plan.
THE STOCK OPTION IS INTENDED TO QUALIFY AS AN INCENTIVE STOCK OPTION,
WITHIN THE MEANING OF SECTION 422 OF THE INTERNAL REVENUE CODE, AS AMENDED (THE
"CODE"). IF, FOR ANY REASON, THIS STOCK OPTION, OR ANY PORTION THEREOF, SHALL
NOT QUALIFY AS AN INCENTIVE STOCK OPTION WITHIN THE MEANING OF SECTION 422 OF
THE CODE, SUCH STOCK OPTION, OR SUCH PORTION, SHALL BE TREATED AS A NONQUALIFIED
STOCK OPTION GRANTED UNDER THE PLAN.
While the Plan was approved by the Company's stockholders in a manner
and to the degree required by Section 422 of the Code, the Company cannot
guarantee that the special tax treatment described in Section 421 of the Code
will apply. For example, if the Optionee sells the Common Stock acquired
pursuant to the exercise of the Stock Option either within two years after the
Grant Date or within one year after the date the Stock Option (or any part
thereof) is exercised, this special tax treatment will not apply.
2. EXERCISABILITY OF THE STOCK OPTION.
The Stock Option shall become vested and exercisable with respect to
20% of the shares covered thereby on each of the first five anniversaries of the
Grant Date in each case subject to earlier termination of the Stock Option
pursuant to this Agreement or the Plan. Notwithstanding the foregoing, all or a
portion of the Stock Option may become vested earlier than set forth in the
preceding sentence upon the
2
occurrence of a "Liquidity Event" (as defined in Exhibit A hereto), to the
extent necessary such that the vested percentage of the Stock Option following
any such earlier vesting shall be no less than the percentage of Common Stock
held by a stockholder who executed the Stockholder's Agreement as of the Grant
Date (an "Original Stockholder") that such stockholder may sell or otherwise
dispose of in connection with the Liquidity Event. By way of example and without
limitation, in the event that a Liquidity Event occurs in the second year
following the Grant Date whereby the Original Stockholders will each be
permitted to sell 35% of their shares of Common Stock, then the Optionee will be
vested as to 35% of the shares subject to the Stock Option upon the occurrence
of such Liquidity Event and will, upon the second anniversary of the Grant Date,
become vested as to an additional 5% of the shares subject to the Stock Option
such that he will then be vested as to 40% of the shares subject to the Stock
Option. Upon the Optionee's termination of employment for any reason, the
portion of the Stock Option that is not vested as of such date in accordance
with the foregoing provisions of this Section 2 shall cease vesting and
terminate immediately.
3. METHOD OF EXERCISE OF THE STOCK OPTION.
(a) The portion of the Stock Option as to which the
Optionee is vested shall be exercisable by delivery to the Company of a written
or electronic notice stating the number of whole shares to be purchased pursuant
to this Agreement and accompanied by payment of the full purchase price of the
shares of Common Stock to be purchased. Fractional share interests shall be
disregarded for this purpose except they may be accumulated.
(b) The exercise price of the Stock Option shall be paid:
(i) in cash or by certified check or bank draft payable to the order of the
Company; (ii) by exchange of shares of unrestricted Common Stock of the Company
already owned by the Optionee (that have been held by the Optionee for six (6)
months prior to exercise or which were acquired in the open market) and having
an aggregate Fair Market Value equal to the aggregate purchase price, provided,
that the Optionee represents and warrants to the Company that the Optionee has
held the shares of Common Stock free and clear of liens and encumbrances and has
held the shares for at least six (6) months prior to exercise or that such
shares were acquired in the open market; (iii) if there shall be a public market
for the Common Stock, by delivering, along with a properly executed exercise
notice to the Company, a copy of irrevocable instructions to a broker to deliver
promptly to the Company the aggregate exercise price and, if requested by the
Optionee, the minimum amount of any applicable federal, state, local or foreign
withholding taxes required to be withheld by the Company, provided, however,
that such exercise may be implemented solely under a program or arrangement
established and approved by the Company with a brokerage firm selected by the
Company; (iv) by promissory note; or (v) by any other procedure approved by the
Committee, or by a combination of the foregoing. Notwithstanding the foregoing,
in no event shall an Optionee be permitted to exercise an Option in the manner
described in clause (iii) and (iv) of the preceding sentence if the Committee
determines that exercising an Option in such manner would violate the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002. Without limiting the generality of the foregoing,
the Committee may, in its discretion, permit the Optionee's estate to satisfy
the exercise
3
price of the Stock Option during the exercise period following the Optionee's
death by relinquishing the unexercised portion of the Stock Option to the
Company and receiving that number of shares of Common Stock the aggregate
"spread" of which on the date of exercise which is equal to the excess of (A)
the aggregate Fair Market Value over (B) the aggregate exercise price of the
number of shares of Common Stock subject to the unexercised portion of the Stock
Option.
(c) Prior to the effectiveness of the Optionee's exercise
of the Stock Option, he or she must enter into the Stockholders Agreement, dated
as of February 12, 2004, by and among the Company, ▇▇▇▇▇▇-▇▇▇▇▇▇ (Ply Gem), L.P.
and the other investors and individuals executing such Stockholders Agreement,
as in effect from time to time (the "Stockholders Agreement").
4. TERMINATION OF EMPLOYMENT.
(a) Except as provided in Section 4(b) below with regard
to the termination of the Optionee's employment for Cause, and Section 4(c)
below with regard to the termination of the Optionee's employment due to death
or Disability, in the event of the termination of Optionee's employment, the
portion of the Stock Option, if any, which is exercisable at the time of such
termination may be exercised prior to the earlier of (a) the expiration of the
three month period which commences on the date of termination and (b) the
expiration date of the Stock Option.
(b) In the event of the termination of the Optionee's
employment for Cause, the Optionee's entire Stock Option (whether or not vested)
shall be forfeited and canceled in its entirety upon such termination of
employment.
(c) In the event of the termination of the Optionee's
employment due to death (or, in the event of the Optionee's death following
termination of employment while the Stock Option remains exercisable) the
portion of the Stock Option, if any, which is exercisable at the time of death
may be exercised by the Optionee's estate or by a person who acquired the right
to exercise such Stock Option by bequest or inheritance or otherwise by reason
of the death of the Optionee at any time prior to the earlier of (a) the first
anniversary of the Optionee's death and (b) the expiration date of the Stock
Option. In the event of the termination of the Optionee's employment due to
Disability, the portion of the Stock Option, if any, which is exercisable at the
time of such termination may be exercised by the Optionee or the Optionee's
guardian or legal representative at any time prior to the earlier of (a) the
first anniversary of such termination and (b) the expiration date of the Stock
Option.
(d) Nothing in this Agreement or the Plan shall confer
upon the Optionee any right to continue in the employ of the Company or any of
its subsidiaries or Affiliates or interfere in any way with the right of the
Company or any of its Affiliates to terminate the Optionee's employment at any
time.
4
5. NONTRANSFERABILITY OF THE STOCK OPTION.
The Stock Option is non-transferable by the Optionee other than by will
or the laws of descent and distribution and the Stock Option may be exercised,
during the lifetime of the Optionee, only by the Optionee or by the Optionee's
guardian or legal representative or any transferee described above.
6. RIGHTS AS A STOCKHOLDER.
An Optionee or a transferee of the Stock Option shall have no rights as
a stockholder with respect to any shares covered by such Stock Option until the
date when his or her purchase is entered upon the records of the duly authorized
transfer agent of the Company. No adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other property) or
distribution of other rights for which the record date is prior to the date a
stock certificate is issued, except as provided in the Plan.
7. ADJUSTMENT IN THE EVENT OF CHANGE IN STOCK.
In the event of any change in corporate capitalization (including, but
not limited to, a change in the number of shares of Common Stock outstanding),
such as a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company, the number and kind of shares subject to the Stock
Option and/or the exercise price per share shall be subject to adjustment or
substitution, as determined by the Committee in its sole discretion to put the
Optionee in the same relative position via-a-vis equity and other option holders
as before the change and consistent with adjustments made under the Plan for
other Plan participants who have an outstanding Stock Option. The determination
of the Committee regarding any adjustment will be final and conclusive.
Notwithstanding the above, in the event of any of the following:
(a) The Company is merged or consolidated with another
corporation or entity and, in connection therewith, consideration is received by
shareholders of the Company in a form other than stock or other equity interests
of the surviving entity;
(b) All or substantially all of the stock or assets of
the Company are acquired by another person;
(c) The reorganization or liquidation of the Company; or
(d) The Company shall enter into a written agreement to
undergo an event described in clauses (a), (b), or (c) above,
then the Committee may, in its sole discretion and upon at least 10
days advance notice to the affected persons, cancel this Stock Option and cause
the Optionee to be paid, in cash or stock, or any combination thereof, the value
of the portion of this
5
Stock Option which is then exercisable based upon the price per share of Stock
received or to be received by other shareholders of the Company in the event.
8. PAYMENT OF TRANSFER TAXES, FEES AND OTHER EXPENSES.
The Company agrees to pay any and all original issue taxes and stock
transfer taxes that may be imposed on the issuance of shares acquired pursuant
to exercise of the Stock Option, together with any and all other fees and
expenses necessarily incurred by the Company in connection therewith.
Notwithstanding the foregoing, the Optionee shall be solely responsible for
other taxes (including, without limitation, federal, state, local or foreign
income, social security, estate or excise taxes) that may be payable as a result
of the Optionee's participation in the Plan or as a result of the exercise of
the Stock Option and/or the sale, disposition or transfer of any shares of
Common Stock acquired upon the Optionee's exercise of the Stock Option.
9. OTHER RESTRICTIONS.
The exercise of the Stock Option shall be subject to the requirement
that, if at any time the Committee shall determine that (i) the listing,
registration or qualification of the shares of Common Stock subject or related
thereto upon any securities exchange or under any state or federal law, or (ii)
the consent or approval of any government regulatory body or (iii) an agreement
by the Optionee with respect to the disposition of shares of Common Stock, is
necessary or desirable as a condition of, or in connection with, such exercise
or the delivery or purchase of shares pursuant thereto, then in any such event,
such exercise shall not be effective unless such listing, registration,
qualification, consent, or approval or agreement shall have been effected or
obtained free of any conditions not acceptable to the Committee.
The Company may, but will in no event be obligated to, register any
securities issuable upon the exercise of all or any portion of the Stock Option
pursuant to the Securities Act of 1933 (as now in effect or as hereafter
amended) or to take any other affirmative action in order to cause the exercise
of the Stock Option or the issuance of shares pursuant thereto to comply with
any law or regulation of any governmental authority. The certificates
representing shares issued to Optionee hereunder shall bear such legends as
Company determines appropriate referring to restrictions on the transfer of such
shares imposed by this Agreement and such other legends as are required or
appropriate under applicable law.
10. DISQUALIFYING DISPOSITION.
The Optionee agrees and covenants that if he disposes of any of the
Common Stock in a "disqualifying disposition," as described in Section 422 of
the Code, he will immediately contact the Company to inform it of such event.
6
11. TAXES AND WITHHOLDING.
As a condition of the exercise of the Stock Option, the Optionee shall
pay to the Company or make arrangements satisfactory to the Committee regarding
payment of any federal, state or local taxes of any kind required by law to be
withheld upon the exercise of such Stock Option and the Company shall, to the
extent permitted or required by law, have the right to deduct from any payment
of any kind otherwise due to the Optionee, federal, state and local taxes of any
kind required by law to be withheld upon the exercise of such Stock Option.
12. NOTICES.
All notices and other communications under this Agreement shall be in
writing and shall be given by hand delivery to the other party or by facsimile,
overnight courier, or registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:
If to the Optionee: to the address specified in Exhibit A hereto
If to the Company:
Ply Gem Investment Holdings, Inc.
c/o ▇▇▇▇▇▇-▇▇▇▇▇▇ Capital, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Chairman
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
, or to such other address or facsimile number as any party shall have furnished
to the other in writing in accordance with this Section 12. Notice and
communications shall be effective when actually received by the addressee.
13. EFFECT OF AGREEMENT.
Except as otherwise provided hereunder, this Agreement shall be binding
upon and shall inure to the benefit of any successor or successors of the
Company, and to any transferee or successor of the Optionee pursuant to Section
5.
14. LAWS APPLICABLE TO CONSTRUCTION.
The interpretation, performance and enforcement of this Agreement shall
be governed by the laws of the State of Delaware without reference to principles
of conflict of laws, as applied to contracts executed in and performed wholly
within the State of Delaware.
7
15. SEVERABILITY.
The invalidity or enforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement. If the final judgment of a court of competent jurisdiction declares
that any provision of this Agreement is invalid or unenforceable, the parties
hereto agree that the court making the determination of invalidity or
unenforceability shall have the power, and is hereby directed, to reduce the
scope, duration or area of the provision, to delete specific words or phrases
and to replace any invalid or unenforceable provision with a provision that is
valid and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable provision and this Agreement shall be enforceable as so
modified.
16. CONFLICTS AND INTERPRETATION.
This Agreement is subject to all the terms, conditions and provisions
of the Plan. In the event of any conflict between this Agreement and the Plan,
the Plan shall control. In the event of any ambiguity in this Agreement, any
term which is not defined in this Agreement, or any matters as to which this
Agreement is silent, the Plan shall govern including, without limitation, the
provisions thereof pursuant to which the Committee has the power, among others,
to (i) interpret the Plan, (ii) prescribe, amend and rescind rules and
regulations relating to the Plan and (iii) make all other determinations deemed
necessary or advisable for the administration of the Plan.
17. HEADINGS.
The headings of Sections herein are included solely for convenience of
reference and shall not affect the meaning or interpretation of any of the
provisions of this Agreement.
18. AMENDMENT.
This Agreement may not be modified, amended or waived, to the extent it
would impair the rights of the Optionee, except by an instrument in writing
signed by both parties hereto. The waiver by either party of compliance with any
provision of this Agreement shall not operate or be construed as a waiver of any
other provision of this Agreement, or of any subsequent breach by such party of
a provision of this Agreement.
19. TERM.
The term of this Agreement is ten years from the Grant Date, unless
terminated prior to such date in accordance with the provisions herein.
20. COUNTERPARTS.
This Agreement may be executed in counterparts, which together shall
constitute one and the same original.
8
IN WITNESS WHEREOF, as of the date first above written, the Company has
caused this Agreement to be executed on its behalf by a duly authorized officer
and the Optionee has hereunto set the Optionee's hand.
PLY GEM INVESTMENT HOLDINGS, INC.
By: /s/
-----------------------------------
Name:
Title:
---------------------------------------
Optionee
Exhibit A to
Incentive Stock Option Agreement
of PlyGem Investment Holdings, Inc.
DATE OF OPTION GRANT: ______________
NAME AND ADDRESS
OF OPTIONEE: ________________________________
________________________________
________________________________
NUMBER OF SHARES
SUBJECT TO STOCK OPTION: ______________
EXERCISE PRICE PER SHARE: ______________
"Liquidity Event" means any transaction in which ▇▇▇▇▇▇-▇▇▇▇▇▇ (Ply Gem), L.P.
has the right to exercise "Drag Along Rights" pursuant to Section 4.7 of the
Stockholders Agreement or the closing of the initial underwritten public
offering of shares of Common Stock pursuant to an effective registration
statement under the Securities Act.
