Exhibit 10.2

 

TOPBUILD CORP.

2015 LONG TERM STOCK INCENTIVE PLAN

Amended and Restated Effective May 2, 2016

 

SECTION 1. Purposes.

 

The purposes of the 2015 Long Term Stock Incentive Plan (the “Plan”) are to encourage selected employees and non-employee directors of and  consultants to TopBuild Corp. (the  “Company”) and its Affiliates to acquire a proprietary interest in the Company in order to create an increased incentive to contribute to the Company’s future success and prosperity, and enhance the ability of the Company and its Affiliates to attract and retain exceptionally qualified individuals upon whom the sustained progress, growth and profitability of the Company depend, thus enhancing the value of the Company for the benefit of its stockholders. The Plan is intended to provide Plan Participants with forms of long-term incentive compensation that are not subject to the deduction limitation rules prescribed under Section 162(m) of the Code, and should be construed to the extent possible as providing for remuneration which is “performance-based compensation” within the meaning of Section 162(m) of the Code and the regulations promulgated thereunder.

 

SECTION 2. Definitions.

 

As used in the Plan, the following terms shall have the meanings set forth below:

 

(a)   “Affiliate” shall mean  any entity in which the Company’s direct or indirect equity interest is at least twenty percent, and any other  entity in which the Company has a significant direct or indirect equity interest, whether more or less than twenty percent, as determined  by the Committee.

 

(b)   “Award” shall mean  any Option, Stock Appreciation Right, Restricted Stock, Restricted  Stock Unit,  Performance Award, or Dividend Equivalent granted under the Plan.

 

(c)   “Award Agreement” shall mean  any agreement, contract or other instrument or document (including in an electronic medium) evidencing  any Award granted under  the Plan which may, but need not, be executed by the Participant.

 

(d)   “Board” shall mean the Board of Directors of the Company.

 

(e)   “Change in Control” shall mean at any time during a period of twenty-four consecutive calendar months, the individuals who at the beginning of such period constitute the Company’s Board, and any new directors (other than Excluded Directors, as hereinafter defined), whose election by such Board or nomination for election by stockholders was approved by a vote of at least two-thirds of the members of such Board who were either directors on such Board at the beginning of the period or whose election or nomination for election as directors was previously so approved, for any reason cease to constitute at least a majority of the members thereof. For purposes hereof, “Excluded Directors” are directors whose (i) election by the Board or approval by the Board for stockholder election occurred within one year after any “person” or “group of persons,” as such terms are used in Sections 13(d) and 14(d) of the Exchange Act, commencing a tender offer for, or becoming the beneficial owner of, voting securities representing 25 percent or more of the combined voting power of all outstanding voting securities of the Company, other than pursuant to a tender offer approved by the Board prior to its commencement or pursuant to stock acquisitions approved by the Board prior to their representing 25 percent or more of such combined voting power or (ii) initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 or Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of

 

 

proxies or consents by or on behalf of  an individual, corporation, partnership, group, associate or other entity or “person” other  than the Board.

 

(f)   “Code” shall mean the Internal  Revenue Code of 1986, as amended  from time to  time.

 

(g)   “Committee” shall mean a  committee of the Company’s directors designated  by the Board to administer the Plan and composed of not less than two directors, each of whom is a “non-employee director,” an “independent director”  and an “outside director,” within the meaning of  and to the  extent required respectively by Rule 16b-3, the applicable rules of the NYSE  and Section 162(m) of the Code,  and any regulations issued thereunder.

 

(h)   “Dividend Equivalent” shall mean  any right granted under Section 6(f) of the Plan.

 

(i)   “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

 

(j)   “Executive Group” shall mean  every person who the Committee believes may be both (i) a “covered employee” as defined in Section 162(m) of the Code  as of the  end of the taxable year in which the Company expects to take a deduction of the Award, and (ii) the recipient of compensation of more than $1,000,000 (as such amount appearing in Section 162(m) of the Code may be  adjusted  by any subsequent legislation) for that taxable year.

 

(k)   “Fair Market Value” of a Share means the closing price of a Share as reported by the consolidated tape of the NYSE on the date in question.

 

(l)   “Incentive Stock Option” shall mean  an Option granted under Section 6(a) of the Plan that  is intended to meet  the requirements of Section 422 of the Code, or  any successor provision thereto.

 

(m)   “Non-Qualified Stock Option” shall mean  an Option granted under Section 6(a) of the Plan that is not intended to be an Incentive Stock Option.

 

(n)   “NYSE” shall mean  the New  York Stock Exchange.

 

(o)   “Option” shall mean  an Incentive Stock Option or a Non-Qualified  Stock Option.

 

(p)   “Participant” shall mean  an  employee of or consultant to the Company or any Affiliate or a director of  the Company designated to be granted an Award under the Plan or, for the purpose of granting Substitute Awards, a holder of options or other equity based  awards relating to the shares of a company acquired  by the Company or with which the Company combines.

 

(q)   “Performance Award” shall mean  any right granted under Section 6(e) of the Plan.

 

(r)   “Restricted Period” shall mean the period of time during which Awards of Restricted  Stock or Restricted  Stock Units are subject  to restrictions.

 

(s)   “Restricted Stock” shall mean  any Share granted under Section 6(d) of the Plan.

 

(t)   “Restricted Stock Unit” shall mean  any right granted under Section 6(d) of the Plan that is denominated in Shares.

 

(u)   “Rule 16b-3” shall mean Rule 16b-3 promulgated by the Securities and Exchange Commission under the Exchange Act, or any successor rule or regulation.

 

(v)   “Section 16” shall mean  Section 16 of the Exchange Act, the  rules and regulations promulgated by the Securities and Exchange Commission thereunder, or  any successor provision, rule or  regulation.

(w)   “Shares” shall mean the Company’s common stock, par value $0.01 per share,  and such other securities or property as may become the subject of Awards, or become subject  to Awards, pursuant to  an  adjustment made under Section 4(c) of the Plan.

 

(x)   “Stock Appreciation Right” shall mean  any right granted under Section 6(c) of the Plan.

 

(y)   “Substitute Awards” shall mean Awards granted in assumption of, or in substitution for, outstanding awards previously granted by a  company acquired  by the Company or with which  the Company combines,  or  Awards granted in replacement or substitution of  awards previously granted by Masco Corporation prior to their forfeiture upon the effective date of the spin-off of the Company from Masco.

 

SECTION 3. Administration.

 

The Committee shall administer the Plan, and subject  to the terms of the Plan and applicable law, the Committee’s authority shall include without limitation the power to:

 

(a)   designate Participants;

 

(b)   determine the types  of  Awards to be granted;

 

(c)   determine the number of Shares to be covered  by Awards and any payments, rights or other matters to be calculated in connection therewith;

 

(d)   determine the terms and conditions of Awards and  amend the terms and  conditions of outstanding Awards;

 

(e)   determine how, whether, to what extent, and under  what circumstances Awards may be settled or exercised in cash, Shares, other securities, other  Awards or other property,  or  canceled, forfeited or suspended;

 

(f)   determine how, whether, to what extent, and under  what circumstances cash, Shares, other securities,  other Awards, 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;

 

(g)   determine the methods or procedures for  establishing the fair market value of  any property (including, without limitation, any Shares or other securities) transferred, exchanged, given or received with respect  to the Plan or  any Award;

 

(h)   prescribe and amend the forms of Award Agreements and other instruments required under or advisable with respect  to the Plan;

 

(i)   designate Options granted to key employees of the Company or its subsidiaries as  Incentive Stock Options;

 

(j)   interpret and administer the Plan, Award Agreements, Awards and any contract, document, instrument or  agreement relating thereto;

 

(k)   establish, amend, suspend or waive such  rules and regulations and appoint such agents as it shall deem appropriate for the  administration of the Plan;

 

(l)   decide all questions and settle all controversies and disputes which may arise in connection with the Plan, Award Agreements and Awards;

(m)   delegate to a committee of one or more directors of the Company, subject to such terms and limitations as the Committee shall determine, the authority to designate Participants and  grant Awards, and to amend Awards granted to Participants, except with respect  to  Participants who are officers or directors of the Company for purposes of Section 16 of the Exchange Act;

 

(n)   delegate to one or more officers or managers of the Company,  or a committee of such officers and managers, the  authority, subject  to such terms and limitations as the Committee shall determine, to cancel, modify, waive rights with respect  to, alter, discontinue, suspend or terminate Awards held by employees, except employees who are officers or directors of the Company for purposes of Section 16 of the Exchange Act; provided, however, that any delegation to management shall conform with the requirements of the NYSE  applicable to the Company and Delaware corporate law; and

 

(o)   make  any other determination and take  any other  action that the Committee deems necessary or desirable for the interpretation, application and administration of the Plan, Award Agreements and Awards.

 

All designations, determinations, interpretations and other decisions under or with respect to the Plan, Award Agreements or any Award shall be within the sole discretion of the Committee, may be made  at any time and shall be final, conclusive  and binding upon all persons, including the Company, Affiliates, Participants, beneficiaries of Awards and stockholders  of the Company.

 

SECTION 4. Shares Available for Awards.

 

(a)   Shares  Available. Subject  to  adjustment as provided in Section 4(c), the maximum number of Shares available for issuance in respect of Awards made under the Plan shall be 4,000,000 Shares, provided, however, that if for any reason any Award under the Plan other than a Substitute Award is forfeited, canceled, expired, or settled in cash, the number of Shares available for issuance in respect of Awards under the Plan shall be increased  by the number  of  Shares so forfeited, canceled, expired or settled in cash.

 

Notwithstanding anything to the contrary contained herein, the following shall not increase the number of Shares available for issuance in respect of Awards under the Plan:  (i) Shares delivered in payment of an Option, (ii) Shares that are repurchased by the Company with Option proceeds and (iii) Shares withheld to satisfy withholding taxes on any Award. In addition, Shares covered by an SAR, to the extent that it is exercised and settled in Shares, and regardless of whether or not Shares are actually issued to the Participant upon exercise of the SAR, shall be considered issued or transferred pursuant to the Plan. Subject to the foregoing, Shares may be made available from the authorized but unissued Shares of the Company or from Shares reacquired by the Company.

 

Additionally, in the event that a corporation acquired by (or combined with) the Company or any subsidiary has shares available under a pre-existing plan approved by stockholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for awards under the Plan and shall not reduce the Shares authorized for grant under the Plan; provided that awards using such

available shares shall not be made after the date awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and shall only be made to individuals who were not employees or directors of the Company or any subsidiary prior to such acquisition or combination.

 

(b)   Individual Stock-Based Awards. Subject  to  adjustment as provided in Section 4(c), no Participant may receive Options or Stock Appreciation Rights under the Plan in any calendar  year that  relate to more than 1,000,000 Shares in the aggregate; provided, however, that such number may be increased with respect  to  any Participant by any Shares available for grant to such Participant in  accordance with this Section 4(b) in any prior years that were not granted in such prior year. No provision of this Section 4(b) shall be construed  as limiting the amount of any other stock-based or cash-based  award which may be granted to any Participant. In any fiscal year of the Company, no Participant who is a non-employee director of the Company may be granted Awards valued at more than $450,000 at the time of grant.

 

(c)   Adjustments. Upon the occurrence of any dividend or other distribution (whether in the form of cash, Shares, other securities or other property), change in the capital or shares of capital stock, recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company or extraordinary transaction or event which affects the Shares, then the Committee shall make such adjustment, if any, in such manner as it deems appropriate to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, in (i) the number and type of Shares (or other securities or property) which thereafter may be made the subject of Awards both to any individual and to all Participants, (ii) outstanding Awards including without limitation the number and type of Shares (or other securities or property) subject thereto, and (iii) the grant, purchase or exercise price with respect to outstanding Awards and, if deemed appropriate, make provision for cash payments to the holders of outstanding Awards; provided, however, that the number of Shares subject to any Award denominated in Shares shall always be a whole number.

 

(d)   Substitute Awards. Shares underlying Substitute Awards shall not reduce the number of shares  remaining available  for issuance under  the  Plan for  any purpose.

 

SECTION 5. Eligibility.

 

Any employee of or  consultant to the Company or any Affiliate, or any director of the Company, is eligible to be designated a Participant.

 

SECTION 6. Awards.

 

(a)   Options.

 

(i)      Grant. The Committee is authorized to grant Options to Participants with such terms and conditions, not inconsistent with  the provisions of the Plan, as the Committee shall determine, as specified in the applicable Award Agreement. The Award Agreement shall specify:

 

(A)   the purchase price per Share under  each Option, provided, however, that such price shall be not less than 100% of the fair market  value of the Shares underlying such Option on the date of grant (except in the case of Substitute Awards);

 

(B)   the term of each Option (not to  exceed ten years); 

 

(C)   the time or times at which an Option may be exercised, in whole or in part, the method or methods by which and the form or forms (including, without limitation, cash, Shares, other  Awards or other property,  or  any combination thereof, having a fair market value on the  exercise date  equal  to the relevant exercise price) in which payment of the exercise price with respect  thereto may be made or deemed to have been made;

 

(i)   vesting requirements including, for time-based Awards in excess of 5% of the number of Shares available for Awards pursuant to Section 4, a vesting period of no less than one year, except with respect to substitute awards for grants made under a plan of an acquired business entity or in limited cases of an intervening event related to death, disability, retirement, or a Change in Control, and

 

(E)   all other terms and conditions applicable to the Option as shall be determined by the Committee in its discretion, including provisions applicable in the event the Participant terminates employment.

 

A Participant shall have the rights of a stockholder only as and when  Shares have been actually issued to the Participant pursuant to the Plan.

 

(ii)      ISOs.  The terms of any  Incentive Stock Option granted under the Plan shall  comply in all respects with the provisions of Section 422 of the Code, or any successor provision thereto, and any regulations promulgated thereunder. The maximum number of Shares that may be awarded  as Incentive Stock Options is 4,000,000. Each Award Agreement shall specify whether (or the extent to which) the Option is an Incentive Stock Option or a Non-Qualified Stock Option. Notwithstanding any such designation, to the extent that the aggregate Fair Market Value of the Shares with respect to which Options designated as Incentive Stock Options are exercisable for the first time by an Participant during any calendar year (under all plans of the Company) exceeds $100,000, such Options shall be treated as Non-Qualified Stock Options. Options failing to qualify as Incentive Stock Options for any reason will be treated as Non-Qualified Stock Options, rather than forfeited.

 

(b)   Restoration Options. The Committee may not grant restoration options.

 

(c)   Stock Appreciation Rights. The Committee is authorized to grant Stock Appreciation Rights to  Participants. Subject  to the terms of the Plan, a Stock Appreciation Right granted

 

under the Plan shall confer on the holder thereof a right to receive, upon exercise thereof, the  excess of (i) the fair market value of one Share on the date of  exercise or, if the Committee shall so determine in the case of any such right other than one related to any  Incentive Stock Option, at  any time during a specified period before or after the date of  exercise over (ii) the fair market value on the date of grant. 

 

Subject to the terms of the Plan, the Committee shall determine the grant price, which shall not be less than 100% of the fair market value of the Shares underlying the Stock Appreciation Right on the date of grant, term (not to exceed ten years).  The Committee shall also determine, in its discretion, methods of exercise and settlement and any other terms and conditions of any Stock Appreciation Right and may impose such conditions or restrictions on the exercise of any Stock Appreciation Right as it may deem appropriate, which terms and conditions shall be described in the applicable Award Agreement.  The Award Agreement shall set forth applicable vesting requirements including, for time-based Awards in excess of 5% of the number of Shares available for Awards pursuant to Section 4, a vesting period of no less than one year, except with respect to substitute awards for grants made under a plan of an acquired business entity or in limited cases of an intervening event related to death, disability, retirement, or a Change in Control.

 

(d)   Restricted Stock and Restricted Stock Units.

 

(i)   Issuance.  The Committee is authorized to grant to  Participants Awards of Restricted  Stock, which shall consist of Shares, and Restricted  Stock Units which shall give the Participant the right to  receive cash, Shares, other securities, other Awards or other property, in each case subject  to the termination of the Restricted Period determined  by the Committee. Notwithstanding the following terms, the Committee may impose other terms that  may be more or less favorable to the Company as it deems fit. In the  absence of any such differing provisions, Awards of Restricted Stock  and Restricted Stock Units shall have the provisions described below.

 

(ii)   Restrictions. The Restricted Period may differ among Participants and may have different expiration dates with respect to portions of Shares covered by the same Award.  Subject to the terms of the Plan, Awards of Restricted Stock and Restricted Stock Units shall have such restrictions as the Committee may impose (including, without limitation, limitations on the right to vote Restricted Stock or the right to receive any dividend or other right or property), which restrictions may lapse separately or in combination at such time or times, in installments or otherwise (including the achievement of performance measures as set forth in Section 6(e) hereof), as the Committee may deem appropriate. The applicable Award Agreement shall set forth all such restrictions, as well as such other terms and conditions applicable to the Award as shall be determined by the Committee in its discretion, including provisions related to vesting and the provisions applicable in the event the Participant terminates employment.  The Award Agreement shall set forth applicable vesting requirements including, for time-based Awards in excess of 5% of the number of Shares available for Awards pursuant to Section 4, a vesting period of no less than one year, except with respect to substitute awards for grants made under a plan of an acquired business entity or in limited cases of an intervening event related to death, disability, retirement, or a Change in Control.  Subject to the aforementioned restrictions and the

provisions of the Plan, including the provisions of Section 4(c)  hereof, a  Participant shall have  all of the rights of a stockholder  with respect to Restricted  Stock.

 

(iii)   Registration. Restricted Stock granted under the Plan may be  evidenced in such manner  as the Committee may deem appropriate, including, without limitation, book-entry registration or issuance of stock  certificates.

 

(e)   Performance Awards.

 

(i)   The Committee is hereby authorized to grant Performance Awards to Participants.

 

(ii)   Subject to the terms of the Plan, a Performance Award granted under the Plan (A) may be denominated or payable in cash, Shares (including, without limitation, Restricted Stock or Restricted Stock Units), other securities or other Awards, and (B) shall confer on the holder thereof rights valued as determined by the Committee and payable to, or exercisable by, the holder of the Performance Award, in whole or in part, upon the achievement of such performance goals during such performance periods as the Committee shall establish. Subject to the terms of the Plan, the performance goals to be achieved during any performance period, the length of any performance period, the amount of any Performance Award granted and the amount of any payment or transfer to be made pursuant to any Performance Award shall be determined by the Committee. Unless the Committee determines otherwise, the performance period relating to any Performance Award shall be at least one calendar year commencing January 1 and ending December 31 (except in circumstances in connection with a Change in Control, in which event the performance period may be shorter than one year).

 

(iii)   If the Committee intends that a Performance Award to a member of the Executive Group should constitute “qualified performance-based compensation” for purposes of Section 162(m) of the Code, then such award shall include a pre-established formula, such that payment, retention or vesting of the Award is subject to the achievement during a performance period or periods, as determined by the Committee, of a level or levels, as determined by the Committee, of one or more performance measures with respect to the Company or any of its Affiliates.  Available performance measures shall be based on the following performance measures (or an equivalent metric) each determined in accordance with generally accepted accounting principles, where applicable, as consistently applied by the Company:

 

 

 

The Applicable performance measures shall be described in the Award Agreement. If the Committee so provides in an Award Agreement, the following may be excluded in determining whether any performance criterion has been attained: impact of charges for restructurings, the effects of acquisitions and divestitures and related expenses, losses resulting from discontinued operations, extraordinary losses (in accordance with generally accepted accounting principles, as currently in effect), the cumulative effect of changes in accounting principles and other unusual, non-recurring items of loss that are separately identified and quantified in the Company’s audited financial statements. Performance measures may vary from Performance Award to Performance Award and from Participant to Participant and may be established on a stand-alone basis, in tandem or in the alternative; in addition, performance measures may be applied on a corporate-wide or division/business segment basis, and may be applied to the performance of the Company and/or one or more Affiliates relative to a market index, a group of other companies or a combination thereof, all as determined by the Committee. To the extent a Performance Award is designed to constitute performance-based compensation under Section 162(m) of the Code, performance measures shall be established within 90 days of the beginning of the period of service to which the performance measures relate.  For any Performance Award, the maximum amount that may be delivered or earned in settlement of all such Awards granted in any year shall be (x) if and to the extent that such Awards are denominated in Shares, 1,000,000 Shares (subject to adjustment as provided in Section 4(c)) and (y) if and to the extent that such Awards are denominated in cash, $5,000,000. Notwithstanding any provision of the Plan to the contrary, the Committee shall not be authorized to increase the amount payable under any Award to which this Section 6(e)(iii) applies upon attainment of such pre-established formula.

 

(f)   Dividend Equivalents. The Committee is authorized to grant to  Participants Awards under  which the holders thereof shall be  entitled to receive payments equivalent to dividends or interest with respect  to a number of Shares determined by the Committee,  and the Committee may provide that such  amounts (if any) shall be deemed to have been reinvested in additional Shares or otherwise reinvested. Subject  to the terms of the Plan, such Awards may have such terms and conditions as the Committee shall determine, as set forth in the Award Agreement, but shall not be awarded on Options or Stock Appreciation Rights, or on unearned  Performance Awards.

 

(g)   Termination of Employment. Except as otherwise provided in the Plan or the applicable Award Agreement, or as determined  by the Committee:

 

(i)   Awards granted to, or otherwise held by,  employees will terminate, expire  and be forfeited upon termination of  employment, which shall include a  change in status from employee to consultant and termination by reason of the fact that an  entity is no longer an Affiliate, and

(ii)   a Participant’s employment shall not be considered to be terminated (A) in the case of approved sick leave or other  approved leave of absence  (not to  exceed one year or such  other period as the Committee may determine), or  (B) in the case of a transfer  among the Company  and its Affiliates.

 

(h)   Section 409A Compliance. To the extent an Award constitutes “deferred compensation” within the meaning of Section 409A of the Code, the Committee shall establish Award Agreement terms and provisions that comply with Section 409A of the Code and regulations thereunder.

 

SECTION 7. General.

 

(a)   No Cash Consideration for Awards. Awards may be granted for no cash consideration or for such minimal cash consideration as may be required  by applicable law.

 

(b)   Awards May Be Granted Separately or Together. Subject to the provisions of Section 7(h), awards may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with or in substitution for any other Award or any award granted under any other Plan of the Company or any Affiliate. Awards granted in addition to or in tandem with other Awards or in addition to or in tandem with awards granted under another Plan of the Company or an Affiliate, may be granted either at the same time as or at a different time from the grant of such other Awards or awards.

 

(c)   Forms of Payment Under Awards. Subject  to the terms of the Plan and of  any applicable Award Agreement, payments or transfers to be made by the Company or  an Affiliate upon the grant, exercise, or payment of an Award may be made in such form or  forms as the Committee shall determine, including, without limitation, cash, Shares, other securities, other  Awards, or other property,  or  any combination thereof,  and may be made in a single payment or transfer, in installments, or on a deferred basis, in each  case in accordance with rules and procedures  established by the Committee.  Such rules and procedures may include, without limitation, provisions for the payment or crediting of reasonable interest on installment or deferred payments or the grant or crediting of  Dividend Equivalents in respect of installment or deferred payments.

 

(d)   Limits on Transfer of Awards. Awards cannot be transferred, except the Committee is hereby authorized to permit  the transfer of Awards under the  following terms and conditions and with such  additional terms and conditions, in either case not inconsistent with the provisions of the Plan, as the Committee shall determine:

 

(i)   No Award or  right under  any Award may be sold, encumbered, pledged, alienated, attached, assigned or transferred in any manner  and  any attempt to do any of the foregoing shall be void and unenforceable against the Company.

 

(ii)   Notwithstanding the provisions of Section 7(d)(i)  above:  

 

(A)   An Option may be transferred:

 

(1)   to a beneficiary designated by the Participant in writing on a form approved  by the Committee;