PLY GEM PRIME HOLDINGS, INC. INCENTIVE STOCK OPTION AGREEMENT
Exhibit
10.5
PLY
GEM PRIME HOLDINGS, INC.
2004
STOCK OPTION PLAN
THIS
AGREEMENT, dated as of _______________, is entered into by and between Ply
Gem
Prime Holdings, Inc., a Delaware corporation (the “Company”),
and
___________________ (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
Prime
Holdings, Inc. 2004 Stock Option Plan (the “Plan”), the Company hereby grants to
the Optionee as of the date of this Agreement (the “Grant Date”), the right and
option to purchase __________ shares of common stock of the Company, par
value
$.01 per share (“Common Stock”) at an exercise price per share equal to
$________ (the “Stock Option”). Unless earlier terminated pursuant to the terms
of this Agreement, the Stock Option shall expire on the tenth anniversary
of the
Grant Date. 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 shall be submitted to the Company’s stockholders for their approval 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 by the Stock Option 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 and to the Optionee’s continued employment with
the Company, or any of its subsidiaries or Affiliates, through such vesting
date. Notwithstanding the foregoing, all or a portion of the Stock Option
may
become vested earlier than set forth in the preceding sentence upon the
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 of the Company who executed the Stockholder’s Agreement
(or any predecessor stockholders 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 and in connection therewith, 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 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 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 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 24, 2006, by
and
among the Company, Ply Gem Investment Holdings, Inc., a Delaware corporation
and
subsidiary of the Company, ▇▇▇▇▇▇-▇▇▇▇▇▇ (Ply Gem), L.P. and the Other Investors
and management stockholders, as defined therein and 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.
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:
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;
All
or
substantially all of the stock or assets of the Company are acquired by another
person;
The
reorganization or liquidation of the Company; or
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 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.
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
Prime 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.
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.
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 PRIME
HOLDINGS, INC.
________________________________
By:
Title:
_______________________________
Doc
#:NY7:162176.1
Exhibit
A to
of
PlyGem
Prime 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.