EXHIBIT 10.5
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PLY GEM INVESTMENT HOLDINGS, INC.
2004 STOCK OPTION PLAN
(EFFECTIVE AS OF FEBRUARY 12, 2004)
1. PURPOSE
The purpose of the Plan is to provide a means through which the Company
and its Affiliates may attract able persons to enter and remain in the employ of
the Company and Affiliates and to provide a means whereby employees, directors
and consultants of the Company and its Affiliates can acquire and maintain
Common Stock ownership, thereby strengthening their commitment to the welfare of
the Company and Affiliates and promoting an identity of interest between
stockholders and these employees.
The Plan provides for granting Incentive Stock Options and Nonqualified
Stock Options.
2. DEFINITIONS
The following definitions shall be applicable throughout the Plan.
(a) "Affiliate" means (i) any entity that directly or indirectly
is controlled by, controls, or is under common control with the Company and (ii)
any entity in which the Company has a significant equity interest, in either
case as determined by the Committee.
(b) "Award" means, individually or collectively, any Incentive
Stock Option or Nonqualified Stock Option.
(c) "Board" means the Board of Directors of the Company.
(d) "Cause" means: (i) conviction of, or entry of a pleading of
guilty or no contest by, a Participant with respect to a felony or any lesser
crime of which fraud or dishonesty is a material element; (ii) a Participant's
willful and continued failure to perform substantially his or her duties with
the Company or any of its Subsidiaries, or a failure to follow the lawful
direction of the Board or any chief executive officer of the Company or any of
its Subsidiaries to whom such Participant reports after the Board of Directors
or such chief executive officer delivers a written demand for substantial
performance, specifically identifying the manner in which the Participant has
not substantially performed his material duties and the Participant neglects to
cure such a failure within 30 days; (iii) a Participant's theft, fraud or
embezzlement of any property or assets of the Company or any of its Affiliates
or Subsidiaries, or such Participant's dishonesty against the Company or any of
its Affiliates or Subsidiaries which has resulted in material damage to the
Company or any of its Affiliates or Subsidiaries or (iv) a Participant's breach
of any noncompetition, nonsolicitation or willful breach of any
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confidentiality requirements set forth in the Stockholder's Agreement whether or
not such agreement or requirement is enforceable under applicable law.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
Reference in the Plan to any section of the Code shall be deemed to include any
amendments or successor provisions to such section and any regulations under
such section.
(f) "Committee" means the compensation committee of the Board
established under the By-Laws of the Company, or if no such committee has yet
been established, the Board. The Committee shall consist of at least two people
as the Board may appoint to administer the Plan or, if no such committee has
been appointed by the Board, the Board. On and after the time that the Company
becomes subject to the Exchange Act, unless the Board is acting as the Committee
or the Board specifically determines otherwise, each member of the Committee
shall, at the time he takes any action with respect to an Award under the Plan,
be an Eligible Director; provided that the mere fact that a Committee member
shall fail to qualify as an Eligible Director shall not invalidate any Award
granted by the Committee which Award is otherwise validly granted under the
Plan.
(g) "Common Stock" means the common stock, par value $0.01 per
share, of the Company.
(h) "Company" means Ply Gem Investment Holdings, Inc., a Delaware
corporation.
(i) "Date of Grant" means the date on which the granting of an
Award is authorized, or such other date as may be specified in such
authorization or, if there is no such date, the date indicated on the Stock
Option Agreement.
(j) "Disability" means, with respect to any Participant, any event
of disability under the disability insurance plan of the Company or any of its
Affiliates or Subsidiaries covering such Participant, or if there shall be no
such disability plan, then as set forth in any agreement between such
Participant and the Company or any of its Affiliates or Subsidiaries, or if
there shall be no such agreement, then the inability of the Participant to
perform his or her duties as an employee of the Company or any of its Affiliates
or Subsidiaries for at least one-hundred eighty (180) days during any
consecutive 12-month period..
(k) "Effective Date" means February 12, 2004.
(l) "Eligible Director" means a person who is (i) a "non-employee
director" within the meaning of Rule 16b-3 under the Exchange Act, or a person
meeting any similar requirement under any successor rule or regulation and (ii)
an "outside director" within the meaning of Section 162(m) of the Code, and the
Treasury Regulations promulgated thereunder; PROVIDED, HOWEVER, that clause (ii)
shall apply only on and after the 162(m) Effective Date and only with respect to
grants of Awards with
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respect to which the Company's tax deduction could be limited by Section 162(m)
of the Code if such clause did not apply.
(m) "Eligible Person" means any (i) individual regularly employed
by the Company or an Affiliate who satisfies all of the requirements of Section
6 hereof; (ii) director of the Company or an Affiliate; or (iii) consultant or
advisor to the Company or an Affiliate who is entitled to participate in an
"employee benefit plan" within the meaning of 17 CFR ss. 230.405 (which, as of
the Effective Date, includes those who (A) are natural persons and (B) provide
BONA FIDE services to the Company other than in connection with the offer or
sale of securities in a capital-raising transaction, and do not directly or
indirectly promote or maintain a market for the Company's securities).
(n) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(o) "Fair Market Value" on a given date means, except to the
extent otherwise provided in a Stock Option Agreement, (i) if the Stock is
listed on a national securities exchange, the mean between the highest and
lowest sale prices reported as having occurred on the primary exchange with
which the Stock is listed and traded on the date prior to such date, or, if
there is no such sale on that date, then on the last preceding date on which
such a sale was reported; (ii) if the Stock is not listed on any national
securities exchange but is quoted in the National Market System of the National
Association of Securities Dealers Automated Quotation System ("NASDAQ") on a
last sale basis, the average between the high bid price and low ask price
reported on the date prior to such date, or, if there is no such sale on that
date, then on the last preceding date on which a sale was reported; or (iii) if
the Stock is not listed on a national securities exchange nor quoted in the
NASDAQ on a last sale basis, the amount determined by the Committee to be the
fair market value based upon a good faith attempt to value the Stock accurately.
(p) "Incentive Stock Option" means an Option granted by the
Committee to a Participant under the Plan which is designated by the Committee
as an incentive stock option as described in Section 422 of the Code.
(q) "Nonqualified Stock Option" means an Option granted by the
Committee to a Participant under the Plan which is not designated by the
Committee as an Incentive Stock Option and otherwise meets the requirements set
forth herein.
(r) "162(m) Effective Date" means the first date on which Awards
granted under the Plan do not qualify for an exemption from the deduction
limitations of Section 162(m) of the Code on account of an exemption, or a
transition or grandfather rule.
(s) "Option" means an award granted under Section 7.
(t) "Option Period" means the period described in Section 7(c).
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(u) "Option Price" means the exercise price for an Option as
described in Section 7(a).
(v) "Participant" means an Eligible Person who has been selected
by the Committee to participate in the Plan and to receive an Award pursuant to
Section 6.
(w) "Plan" means this Ply Gem Investment Holdings, Inc. 2004 Stock
Option Plan.
(x) "Securities Act" means the Securities Act of 1933, as amended.
(y) "Subsidiary" of a Person means any other Person (i) as to
which such Person has the power to elect a majority of the board of directors
(or other board, body or Person that serves the function of a board of
directors) of such other Person or (ii) which is included as a subsidiary in the
consolidated financial statements of such Person in accordance with United
States generally accepted accounting principles as in effect from time to time.
(z) "Stock" means the Common Stock or such other authorized shares
of stock of the Company as the Committee may from time to time authorize for use
under the Plan.
(aa) "Stock Option Agreement" means the agreement between the
Company and a Participant who has been granted an Option pursuant to Section 7
which defines the rights and obligations of the parties as required in Section
7(d).
3. EFFECTIVE DATE, DURATION AND SHAREHOLDER APPROVAL
The Plan is effective as of the Effective Date. The validity and
exercisability of any and all Awards granted pursuant to the Plan on and after
the 162(m) Effective Date is contingent upon approval of the Plan by the
shareholders of the Company in a manner intended to comply with the shareholder
approval requirements of Section 162(m) of the Code. No Option shall be treated
as an Incentive Stock Option unless the Plan has been approved by the
shareholders of the Company in a manner intended to comply with the shareholder
approval requirements of Section 422(b)(i) of the Code; provided that any Option
intended to be an Incentive Stock Option shall not fail to be effective solely
on account of a failure to obtain such approval, but rather such Option shall be
treated as a Nonqualified Stock Option unless and until such approval is
obtained.
The expiration date of the Plan, on and after which no Awards may be
granted hereunder, shall be the tenth anniversary of the Effective Date;
PROVIDED, HOWEVER, that the administration of the Plan shall continue in effect
until all matters relating to the payment of Awards previously granted have been
settled.
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4. ADMINISTRATION
The Committee shall administer the Plan. The majority of the members of
the Committee shall constitute a quorum. The acts of a majority of the members
present at any meeting at which a quorum is present or acts approved in writing
by a majority of the Committee shall be deemed the acts of the Committee.
(a) Subject to the provisions of the Plan and applicable law, the
Committee shall have the power, in addition to other express powers and
authorizations conferred on the Committee by the Plan, to: (i) designate
Participants; (ii) determine the type or types of Awards to be granted to a
Participant; (iii) determine the number of shares of Stock to be covered by, or
with respect to which payments, rights, or other matters are to be calculated in
connection with Awards; (iv) determine the terms and conditions of any Awards;
(v) determine whether, to what extent, and under what circumstances Awards may
be settled or exercised in cash, shares of Stock, other securities, other
Options, or other property, or canceled, forfeited, or suspended and the method
or methods by which Awards may be settled, exercised, canceled, forfeited, or
suspended; (vi) determine whether, to what extent, and under what circumstances
cash, shares of Stock, other securities, other Options, other property, and
other amounts payable with respect to an Award shall be deferred either
automatically or at the election of the holder thereof or of the Committee;
(vii) interpret, administer reconcile any inconsistency, correct any default
and/or supply any omission in the Plan and any instrument or agreement relating
to, or Award granted under the Plan; (viii) establish, amend, suspend, or waive
such rules and regulations and appoint such agents as it shall deem appropriate
for the proper administration of the Plan; and (ix) make any other determination
and take any other action specified under the Plan or that the Committee deems
necessary or desirable for the administration of the Plan.
(b) Unless otherwise expressly provided in the Plan, all
designations, determinations, interpretations, and other decisions under or with
respect to the Plan or any Award or any documents evidencing any and all Awards
granted pursuant to the Plan shall be within the sole discretion of the
Committee, may be made at any time and shall be final, conclusive and binding
upon all parties, including, without limitation, the Company, any Affiliate, any
Participant, any holder of any Award, and any shareholder.
(c) 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
hereunder.
5. GRANT OF AWARDS; SHARES SUBJECT TO THE PLAN
The Committee may, from time to time, grant Awards of Options to one or
more Eligible Persons; PROVIDED, HOWEVER, that:
(a) Subject to Section 9, the aggregate number of shares of Stock
in respect of which Awards may be granted under the Plan is 148,050 shares;
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(b) Such shares shall be deemed to have been issued in payment of
Awards whether or not they are actually delivered. In the event any Award shall
be surrendered, terminate, expire, or be forfeited, the number of shares of
Stock no longer subject thereto shall thereupon be released and shall thereafter
be available for new grants under the Plan;
(c) Stock delivered by the Company in settlement of Awards granted
under the Plan may be authorized and unissued Stock or Stock held in the
treasury of the Company or may be purchased on the open market or by private
purchase; and
(d) On and after the 162(m) Effective Date, no person may be
granted Options under the Plan during any calendar year with respect to more
than 15,000 shares of Stock; provided that such number shall be adjusted
pursuant to Section 9 only in a manner which will not cause the Options granted
under the Plan to fail to qualify as "performance-based compensation" for
purposes of Section 162(m) of the Code.
6. ELIGIBILITY
Participation shall be limited to Eligible Persons who have entered
into a Stock Option Agreement or who received written notification from the
Committee, or from a person designated by the Committee, that they have been
selected to participate in the Plan.
7. TERMS OF OPTIONS
The Committee is authorized to grant one or more Incentive Stock
Options or Nonqualified Stock Options to any Eligible Person; PROVIDED, HOWEVER,
that no Incentive Stock Options shall be granted to any Eligible Person who is
not an employee of the Company or a "parent" or "subsidiary" of the Company, as
such terms are used in Section 422(a)(2) of the Code. Each Option so granted
shall be subject to the following conditions, or to such other conditions as may
be reflected in the applicable Stock Option Agreement. In all events, the
provisions in the applicable Stock Option Agreement shall control the terms of
the Option issued pursuant thereto. If there shall be a conflict between the
provisions of the Plan and such Stock Option Agreement, the provisions of the
Plan shall control.
(a) OPTION PRICE. The Option Price per share of Stock for each
Option shall be set by the Committee at the time of grant but shall not be less
than (i) in the case of an Incentive Stock Option, and subject to Section 7(e),
the Fair Market Value of a share of Stock at the Date of Grant, and (ii) in the
case of a Nonqualified Stock Option, the par value of a share of Stock;
PROVIDED, HOWEVER, that all Options granted on and after the 162(m) Effective
Date which are intended to qualify as "performance-based compensation" under
Section 162(m) of the Code shall have an Option Price per share of Stock no less
than the Fair Market Value of a share of Stock on the Date of Grant.
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(b) MANNER OF EXERCISE AND FORM OF PAYMENT. No shares of Stock
shall be delivered pursuant to any exercise of an Option until payment in full
of the aggregate exercise price therefor is received by the Company. Options
which have become exercisable may be exercised by delivery of written notice of
exercise to the Committee accompanied by payment of the Option Price. The Option
Price shall be payable in cash and/or shares of Stock valued at the Fair Market
Value at the time the Option is exercised (including by means of attestation of
ownership of a sufficient number of shares of Stock in lieu of actual delivery
of such shares to the Company); PROVIDED, HOWEVER, that such shares are not
subject to any pledge or other security interest and have either been held by
the Participant for six months, previously acquired by the Participant on the
open market or meet such other requirements as the Committee may determine
necessary in order to avoid an accounting earnings charge in respect of the
Option) or, in the discretion of the Committee, either (i) in other property
having a fair market value on the date of exercise equal to the Option Price,
(ii) if there shall be a public market for the Stock, by delivering to the
Committee a copy of irrevocable instructions to a stockbroker to deliver
promptly to the Company an amount of loan proceeds, or proceeds of the sale of
the Stock subject to the Option, sufficient to pay the Option Price or (iii) by
such other method as the Committee may allow. Notwithstanding the foregoing, in
no event shall a Participant be permitted to exercise an Option in the manner
described in clause (ii) of the preceding sentence if the Committee determines
that exercising an Option in such manner would violate the Sarbanes-Oxley Act of
2002.
(c) VESTING, OPTION PERIOD AND EXPIRATION. Options shall vest and
become exercisable in such manner and on such date or dates determined by the
Committee and shall expire after such period, not to exceed ten years, as may be
determined by the Committee (the "Option Period"); PROVIDED, HOWEVER, that
notwithstanding any vesting dates set by the Committee, the Committee may in its
sole discretion accelerate the exercisability of any Option, which acceleration
shall not affect the terms and conditions of any such Option other than with
respect to exercisability. If an Option is exercisable in installments, such
installments or portions thereof which become exercisable shall remain
exercisable until the Option expires. Unless otherwise stated in the applicable
Stock Option Agreement, the Option shall expire earlier than the end of the
Option Period in the following circumstances:
(i) If prior to the end of the Option Period, the
Participant's employment with the Company terminates due to a
termination by the Company or any Affiliate without Cause or due to the
Participant's death or Disability, the Option shall expire on the
earlier of the last day of the Option Period or the date that is three
months after the date of such termination. In such event, the Option
shall remain exercisable by the Participant until its expiration, only
to the extent the Option was vested and exercisable at the time of such
termination.
(ii) If the Participant ceases employment or service with
the Company and Affiliates for reasons other than the terminations
described in clause (i) above, the Option shall expire immediately upon
such cessation of employment or service.
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(d) STOCK OPTION AGREEMENT - OTHER TERMS AND CONDITIONS. Each
Option granted under the Plan shall be evidenced by a Stock Option Agreement,
which shall contain such provisions as may be determined by the Committee and,
except as may be specifically stated otherwise in such Stock Option Agreement,
which shall be subject to the following terms and conditions:
(i) Each Option or portion thereof that is exercisable
shall be exercisable for the full amount or for any part thereof.
(ii) Each share of Stock purchased through the exercise of
an Option shall be paid for in full at the time of the exercise. Each
Option shall cease to be exercisable, as to any share of Stock, when
the Participant purchases the share or when the Option expires.
(iii) Subject to Section 8(h), Options shall not be
transferable by the Participant except by will or the laws of descent
and distribution and shall be exercisable during the Participant's
lifetime only by him.
(iv) Each Option shall vest and become exercisable by the
Participant in accordance with the vesting schedule established by the
Committee and set forth in the Stock Option Agreement evidencing such
Option.
(v) Unless otherwise provided in a Stock Option
Agreement, prior to the effectiveness of any Participant's exercise of
an Option, such Participant must enter into the Stockholders Agreement,
dated as of February __, 2004, by and among the Company, Caxton-Iseman
(Ply Gem), L.P. and the other investors and individuals executing such
Stockholders Agreement, as in effect from time to time.
(vi) Each Stock Option Agreement may contain a provision
that, upon demand by the Committee for such a representation, the
Participant shall deliver to the Committee at the time of any exercise
of an Option a written representation that the shares to be acquired
upon such exercise are to be acquired for investment and not for resale
or with a view to the distribution thereof, and any other
representations deemed necessary by the Committee to ensure compliance
with all applicable federal and state securities laws. Upon such
demand, delivery of such representation prior to the delivery of any
shares issued upon exercise of an Option shall be a condition precedent
to the right of the Participant or such other person to purchase any
shares. In the event certificates for Stock are delivered under the
Plan with respect to which such investment representation has been
obtained, the Committee may cause a legend or legends to be placed on
such certificates to make appropriate reference to such representation
and to restrict transfer in the absence of compliance with applicable
federal or state securities laws.
(vii) Each Incentive Stock Option Agreement shall contain a
provision requiring the Participant to notify the Company in writing
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immediately after the Participant makes a disqualifying disposition of
any Stock acquired pursuant to the exercise of such Incentive Stock
Option. A disqualifying disposition is any disposition (including any
sale) of such Stock before the later of (a) two years after the Date of
Grant of the Incentive Stock Option or (b) one year after the date the
Participant acquired the Stock by exercising the Incentive Stock
Option.
(e) INCENTIVE STOCK OPTION GRANTS TO 10% STOCKHOLDERS.
Notwithstanding anything to the contrary in this Section 7, if an Incentive
Stock Option is granted to a Participant who owns stock representing more than
ten percent of the voting power of all classes of stock of the Company, the
Option Period shall not exceed five years from the Date of Grant of such Option
and the Option Price shall be at least 110 percent of the Fair Market Value (on
the Date of Grant) of the Stock subject to the Option.
(f) $100,000 PER YEAR LIMITATION FOR INCENTIVE STOCK OPTIONS. To
the extent the aggregate Fair Market Value (determined as of the Date of Grant)
of Stock for which Incentive Stock Options are exercisable for the first time by
any Participant during any calendar year (under all plans of the Company)
exceeds $100,000, such excess Incentive Stock Options shall be treated as
Nonqualified Stock Options.
(g) VOLUNTARY SURRENDER. The Committee may permit the voluntary
surrender of all or any portion of any Nonqualified Stock Option, if any,
granted under the Plan to be conditioned upon the granting to the Participant of
a new Option for the same or a different number of shares as the Option
surrendered or require such voluntary surrender as a condition precedent to a
grant of a new Option to such Participant. Such new Option shall be exercisable
at an Option Price, during an Option Period, and in accordance with any other
terms or conditions specified by the Committee at the time the new Option is
granted, all determined in accordance with the provisions of the Plan without
regard to the Option Price, Option Period, or any other terms and conditions of
the Nonqualified Stock Option surrendered.
8. GENERAL
(a) ADDITIONAL PROVISIONS OF AN AWARD. Awards granted to a
Participant under the Plan also may be subject to such other provisions (whether
or not applicable to Awards granted to any other Participant) as the Committee
determines appropriate including, without limitation, provisions to assist the
Participant in financing the purchase of Stock upon the exercise of Options
(provided, that the Committee determines that providing such financing does not
violate the Sarbanes-Oxley Act of 2002), provisions for the forfeiture of or
restrictions on resale or other disposition of shares of Stock acquired under
any Award, provisions giving the Company the right to repurchase shares of Stock
acquired under any Award in the event the Participant elects to dispose of such
shares or terminate employment, provisions allowing the Participant to elect to
defer the receipt of payment in respect of Awards for a specified period or
until a specified event and provisions to comply with federal and state
securities laws and
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federal and state tax withholding requirements. Any such provisions shall be
reflected in the Stock Option Agreement.
(b) PRIVILEGES OF STOCK OWNERSHIP. Except as otherwise
specifically provided in the Plan, no person shall be entitled to the privileges
of ownership in respect of shares of Stock which are subject to Awards hereunder
until such shares have been issued to that person.
(c) GOVERNMENT AND OTHER REGULATIONS. The obligation of the
Company to make payment of Awards in Stock or otherwise shall be subject to all
applicable laws, rules, and regulations, and to such approvals by governmental
agencies as may be required. Notwithstanding any terms or conditions of any
Award to the contrary, the Company shall be under no obligation to offer to sell
or to sell and shall be prohibited from offering to sell or selling any shares
of Stock pursuant to an Award unless such shares have been properly registered
for sale pursuant to the Securities Act with the Securities and Exchange
Commission or unless the Company has received an opinion of counsel,
satisfactory to the Company, that such shares may be offered or sold without
such registration pursuant to an available exemption therefrom and the terms and
conditions of such exemption have been fully complied with. The Company shall be
under no obligation to register for sale under the Securities Act any of the
shares of Stock to be offered or sold under the Plan. If the shares of Stock
offered for sale or sold under the Plan are offered or sold pursuant to an
exemption from registration under the Securities Act, the Company may restrict
the transfer of such shares and may legend the Stock certificates representing
such shares in such manner as it deems advisable to ensure the availability of
any such exemption.
(d) TAX WITHHOLDING.
(i) A Participant may be required to pay to the Company
or any Affiliate and the Company or any Affiliate shall have the right
and is hereby authorized to withhold from any shares of Stock or other
property deliverable under any Award or from any compensation or other
amounts owing to a Participant the amount (in cash, Stock or other
property) of any required tax withholding and payroll taxes in respect
of an Award, its exercise, or any payment or transfer under an Award or
under the Plan and to take such other action as may be necessary in the
opinion of the Company to satisfy all obligations for the payment of
such taxes.
(ii) Without limiting the generality of clause (i) above,
if so provided in Stock Option Agreement, a Participant may satisfy, in
whole or in part, the foregoing withholding liability (but no more than
the minimum required withholding liability) by delivery of shares of
Stock owned by the Participant with a Fair Market Value equal to such
withholding liability (provided that such shares are not subject to any
pledge or other security interest and have either been held by the
Participant for six months, previously acquired by the Participant on
the open market or meet such other requirements as the Committee may
determine necessary in order to avoid an accounting earnings charge),
or by
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having the Company withhold from the number of shares of Stock
otherwise issuable pursuant to the exercise or settlement of the Award
a number of shares with a Fair Market Value equal to such withholding
liability.
(e) CLAIM TO AWARDS AND EMPLOYMENT RIGHTS. No employee of the
Company or an Affiliate, or other person, shall have any claim or right to be
granted an Award under the Plan or, having been selected for the grant of an
Award, to be selected for a grant of any other Award. Neither the Plan nor any
action taken hereunder shall be construed as giving any Participant any right to
be retained in the employ or service of the Company or an Affiliate.
(f) NO LIABILITY OF COMMITTEE MEMBERS. No member of the Committee
shall be personally liable by reason of any contract or other instrument
executed by such member or on his behalf in his capacity as a member of the
Committee nor for any mistake of judgment made in good faith, and the Company
shall indemnify and hold harmless each member of the Committee and each other
employee, officer or director of the Company to whom any duty or power relating
to the administration or interpretation of the Plan may be allocated or
delegated, against any cost or expense (including counsel fees) or liability
(including any sum paid in settlement of a claim) arising out of any act or
omission to act in connection with the Plan unless arising out of such person's
own fraud or willful bad faith; PROVIDED, HOWEVER, that approval of the Board
shall be required for the payment of any amount in settlement of a claim against
any such person. The foregoing right of indemnification shall not be exclusive
of any other rights of indemnification to which such persons may be entitled
under the Company's Articles of Incorporation or By-Laws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold them
harmless.
(g) GOVERNING LAW. The Plan shall be governed by and construed in
accordance with the internal laws of the State of Delaware without regard to the
principles of conflicts of law thereof, or principles of conflicts of laws of
any other jurisdiction which could cause the application of the laws of any
jurisdiction other than the State of Delaware.
(h) FUNDING. No provision of the Plan shall require the Company,
for the purpose of satisfying any obligations under the Plan, to purchase assets
or place any assets in a trust or other entity or otherwise to segregate any
assets, nor shall the Company maintain separate bank accounts, books, records or
other evidence of the existence of a segregated or separately maintained or
administered fund for such purposes. Participants shall have no rights under the
Plan other than as unsecured general creditors of the Company, except that
insofar as they may have become entitled to payment of additional compensation
by performance of services, they shall have the same rights as other employees
under general law.
(i) NONTRANSFERABILITY. Each Award shall be exercisable only by
the Participant during the Participant's lifetime, or, if permissible under
applicable law, by the Participant's legal guardian or representative. No Award
may be assigned, alienated, pledged, attached, sold or otherwise transferred or
encumbered by a Participant
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otherwise than by will or by the laws of descent and distribution and any such
purported assignment, alienation, pledge, attachment, sale, transfer or
encumbrance shall be void and unenforceable against the Company or an Affiliate.
(j) RELIANCE ON REPORTS. Each member of the Committee and each
member of the Board shall be fully justified in relying, acting or failing to
act, and shall not be liable for having so relied, acted or failed to act in
good faith, upon any report made by the independent public accountant of the
Company and Affiliates and upon any other information furnished in connection
with the Plan by any person or persons other than himself.
(k) RELATIONSHIP TO OTHER BENEFITS. No payment under the Plan
shall be taken into account in determining any benefits under any pension,
retirement, profit sharing, group insurance or other benefit plan of the Company
or any Affiliate except as otherwise specifically provided in such other plan.
(l) EXPENSES. The expenses of administering the Plan shall be
borne by the Company and Affiliates.
(m) PRONOUNS. Masculine pronouns and other words of masculine
gender shall refer to both men and women.
(n) TITLES AND HEADINGS. The titles and headings of the sections
in the Plan are for convenience of reference only, and in the event of any
conflict, the text of the Plan, rather than such titles or headings shall
control.
(o) TERMINATION OF EMPLOYMENT. For all purposes herein, a person
who transfers from employment or service with the Company to employment or
service with an Affiliate or vice versa shall not be deemed to have terminated
employment or service with the Company or an Affiliate.
(p) SEVERABILITY. If any provision of the Plan or any Stock Option
Agreement is or becomes or is deemed to be invalid, illegal, or unenforceable in
any jurisdiction or as to any person or Award, or would disqualify the Plan or
any Award under any law deemed applicable by the Committee, such provision shall
be construed or deemed amended to conform to the applicable laws, or if it
cannot be construed or deemed amended without, in the determination of the
Committee, materially altering the intent of the Plan or the Award, such
provision shall be stricken as to such jurisdiction, person or Award and the
remainder of the Plan and any such Award shall remain in full force and effect.
9. CHANGES IN CAPITAL STRUCTURE
Awards granted under the Plan and any agreements evidencing such
awards, the maximum number of shares of Stock subject to all Options stated in
Section 5(a) and the maximum number of shares of Stock with respect to which any
one person may be granted Options during any period stated in Section 5(d) shall
be subject to adjustment or substitution, as determined by the Committee in its
sole discretion, as to the
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number, price or kind of a share of Stock or other consideration subject to such
Awards or as otherwise determined by the Committee to be equitable (i) in the
event of changes in the outstanding Stock or in the capital structure of the
Company by reason of stock or extraordinary cash dividends, stock splits,
reverse stock splits, recapitalization, reorganizations, mergers,
consolidations, combinations, exchanges, or other relevant changes in
capitalization occurring after the Date of Grant of any such Award or (ii) in
the event of any change in applicable laws or any change in circumstances which
results in or would result in any substantial dilution or enlargement of the
rights granted to, or available for, Participants, or which otherwise warrants
equitable adjustment because it interferes with the intended operation of the
Plan. Any adjustment in Incentive Stock Options under this Section 9 shall be
made only to the extent not constituting a "modification" within the meaning of
Section 424(h)(3) of the Code, and any adjustments under this Section 9 shall be
made in a manner which does not adversely affect the exemption provided pursuant
to Rule 16b-3 under the Exchange Act. Further, with respect to Awards granted on
and after the 162(m) Effective Date which are intended to qualify as
"performance-based compensation" under Section 162(m) of the Code, such
adjustments or substitutions shall be made only to the extent that the Committee
determines that such adjustments or substitutions may be made without causing
Awards granted under the Plan to fail to qualify as such "performance-based
compensation." The Company shall give each Participant notice of an adjustment
hereunder and, upon notice, such adjustment shall be conclusive and binding for
all purposes.
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 any outstanding Awards and cause the
holders thereof to be paid, in cash or stock, or any combination thereof, the
value of such Awards which are then exercisable based upon the price per share
of Stock received or to be received by other shareholders of the Company in the
event. The terms of this Section 9 may be varied by the Committee in any
particular Stock Option Agreement.
10. NONEXCLUSIVITY OF THE PLAN
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Neither the adoption of this Plan by the Board nor the submission of
this Plan to the stockholders of the Company for approval shall be construed as
creating any limitations on the power of the Board to adopt such other incentive
arrangements as it may deem desirable, including, without limitation, the
granting of stock options otherwise than under this Plan, and such arrangements
may be either applicable generally or only in specific cases.
11. AMENDMENTS AND TERMINATION
(a) AMENDMENT AND TERMINATION OF THE PLAN. The Board may amend,
alter, suspend, discontinue, or terminate the Plan or any portion thereof at any
time; PROVIDED that no such amendment, alteration, suspension, discontinuation
or termination shall be made without shareholder approval if such approval is
necessary to comply with any tax or regulatory requirement applicable to the
Plan (including as necessary to prevent Awards granted under the Plan on and
after the 162(m) Effective Date from failing to qualify as "performance-based
compensation" for purposes of Section 162(m) of the Code); and PROVIDED FURTHER
that any such amendment, alteration, suspension, discontinuance or termination
that would impair the rights of any Participant or any holder of any Award
theretofore granted shall not to that extent be effective without the consent of
the affected Participant or holder.
(b) AMENDMENT OF STOCK OPTION AGREEMENTS. The Committee may, to
the extent consistent with the terms of any Stock Option Agreement, waive any
conditions or rights under, amend any terms of, or alter, suspend, discontinue,
cancel or terminate, any Award theretofore granted, prospectively or
retroactively; provided that any such waiver, amendment, alteration, suspension,
discontinuance, cancellation or termination that would impair the rights of any
Participant in respect of any Award theretofore granted shall not to that extent
be effective without the consent of the affected Participant.
* * *
As adopted by the Board of Directors of
Ply Gem Investment Holdings, Inc. as of February 12, 2004.