PLY GEM INDUSTRIES INC, 10-K, 1994-03-28

PLY GEM INDUSTRIES INC
10-K, 1994-03-28
MILLWOOD, VENEER, PLYWOOD, & STRUCTURAL WOOD MEMBERS

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)

[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

For the fiscal year ended Commission file number
DECEMBER 31, 1993 1-4087

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PLY GEM INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 11-1727150
(State or other jurisdiction (I.R.S. Employer Identification No.)
ofincorporation or organization)

777 THIRD AVENUE, NEW YORK, NEW YORK 10017
(Address of principal executive (Zip Code)
offices)

Registrant's telephone number, including area code: (212) 832-1550

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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
--------------------------------- ---------------------------------
<S> <C>
Common Stock, $.25 par value American Stock Exchange
Convertible Senior Subordinated
Discount Debentures Due 2008 American Stock Exchange
</TABLE>

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Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
--- ---

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

The aggregate market value of the voting stock held by non-affiliates of the
registrant, using the closing price which the registrant's voting stock was
sold on such date, was the following:

$297,507,551 AS OF MARCH 23, 1994

The number of shares outstanding of the registrant's common stock, $.25 par
value was 14,604,202 as of March 23, 1994.

DOCUMENTS INCORPORATED BY REFERENCE

<TABLE>
<CAPTION>
IDENTIFICATION OF DOCUMENT PART INTO WHICH INCORPORATED
---------------------------------- -----------------------------------
<S> <C>
Proxy Statement for Annual Meeting
of Stockholders to be held on May
12, 1994 Part III -- Items 10, 11, 12 and 13
</TABLE>

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PART I

ITEM 1. BUSINESS.

PLY GEM Industries, Inc., a Delaware corporation ("Ply Gem", hereinafter
with its subsidiaries referred to collectively as the "Company"), was
originally incorporated in 1946 in New York and reincorporated in Delaware in
1987. The Company is a leading manufacturer and distributor of a wide range of
specialty products for the home improvement industry. The Company believes
that it is among the nation's largest manufacturers of wood windows, vinyl
siding and accessories, and vinyl windows, and one of the major suppliers of
specialty wood and other related products. Each of the Company's ten wholly-
owned subsidiaries and its one division have achieved a leading market
position within their respective niches of the home improvement industry.

The home improvement industry includes products designed for all remodeling,
repair and alteration of residential structures, whether the work is performed
by the homeowner (the "do-it-yourselfer" or "D-I-Y"), or by a professional
contractor. Home improvement products, which in some cases are also used in
new construction applications, are sold either through retailers or specialty
wholesale distributors that in turn sell to retailers, contractors and
builders. The success of the recently introduced warehouse home center format,
such as that utilized by Home Depot, continues to change the traditional way
in which home improvement products are sold.

The Company's primary objective is to become the supplier of choice to the
home improvement industry for high margin specialty products. The Company
believes that it is uniquely positioned to provide products and services to
the major home center retailers, which the Company believes is the fastest
growing segment of the home improvement industry.

The Company's products are distributed through an extensive network which
includes major retail home center chains, specialty home remodeling
distributors, lumber and building products wholesalers, professional
contractors and Company operated distribution centers. The products are
marketed throughout the United States, Canada and Puerto Rico through Company
sales personnel and independent representatives.

The Company operates predominantly in one business segment -- Home
Improvement Products. Prior to 1992, the Company reported in two industry
segments, Home Improvement Products and Home Products. The operations of the
latter segment, consisting of manufacturing and distribution of disposable
paper and cloth vacuum cleaner bags, have become less significant over the
past several years and as a result the Home Products operations are not
material to an understanding of the Company's business taken as a whole.

BUSINESSES OF THE COMPANY

The Company operates in four primary business groups: Windows, Doors and
Siding; Specialty Wood Products; Distribution; and Home Products. Set forth
below are the operating entities within each group and the year in which the
entity was acquired by the Company. Ply*Gem Manufacturing is a division of the
Company and constitutes the Company's original business.

<TABLE>
<CAPTION>
YEAR ACQUIRED
-------------
<S> <C>
WINDOWS, DOORS AND SIDING
Variform, Inc. ("Variform")....................................... 1986
Great Lakes Window, Inc. ("Great Lakes").......................... 1986
SNE Enterprises, Inc. ("SNE")..................................... 1989
Richwood Building Products, Inc. ("Richwood")..................... 1992
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
YEAR ACQUIRED
-------------
<S> <C>
SPECIALTY WOOD PRODUCTS
Ply*Gem Manufacturing
Goldenberg Group, Inc. ("Goldenberg")............................. 1983
Hoover Treated Wood Products, Inc. ("Hoover") .................... 1983
Sagebrush Sales, Inc. ("Sagebrush")............................... 1988
Continental Wood Preservers, Inc. ("Continental")................. 1988
DISTRIBUTION
Allied Plywood Corporation ("Allied")............................. 1985
HOME PRODUCTS
Studley Products, Inc. ("Studley")................................ 1969
</TABLE>

WINDOWS, DOORS AND SIDING

SNE Enterprises, Inc: SNE is a major manufacturer of wood windows, competing
with companies such as Andersen, Marvin and Pella. The Company believes that it
is the second largest supplier of wood windows to the major home center
retailers.

SNE manufactures a full line of wood windows and patio doors, glass and
polycarbonate skylights, and wooden interior bifold doors and shutters. Its
products are sold under the Crestline(R) and Vetter(R) brand names and include
double hung, casement, sliding and awning windows as well as hinged and sliding
patio doors. SNE will shortly introduce a window that offers the maintenance
free and insulating benefits of a solid vinyl window yet has a wood interior
that can be painted or stained. SNE's windows are available primed, or with an
exterior cladding of either aluminum or vinyl. They are available in both
custom and stock sizes, and are sold through an extensive network of home
centers, lumber and building materials retailers, and specialized value added
distributors. SNE's products are primarily for the home improvement market.

The market for wood windows is highly competitive. SNE differentiates itself
from its competition by pursuing a dual brand strategy, having a distribution
base in both the remodeling and new construction markets, extensive custom
design and manufacturing capabilities, and a superior field service and support
network. In addition, SNE's strategy of manufacturing window components at its
main facility in Central Wisconsin for final assembly at one of four
strategically located assembly/distribution centers, allows for the delivery of
product to customers on a just-in-time basis. The Company believes that SNE
will continue to grow as its existing products gain brand recognition from
cooperative and other advertising programs with its retail customers, and as it
introduces new products. Furthermore, SNE is exploring opportunities to expand
its business into new geographic markets.

Variform, Inc.: Variform is a producer of vinyl siding in the United States
and a leading supplier to the major home center retailers. Its vinyl siding,
soffit and accessories are produced in a variety of patterns and colors,
including woodgrains. Vinyl siding is used in both remodeling and new
construction applications and has captured an increasing share of the market
for exterior siding materials (which primarily includes wood, aluminum and
masonry) due to its ease of installation, durability and low maintenance
requirements.

Vinyl siding is sold to either specialized wholesale distributors who in turn
sell directly to remodeling contractors (one-step distribution), or to building
materials distributors who sell to home centers and lumberyards who in turn
sell to remodeling contractors (two-step distribution). While Variform sells
through both channels of distribution, it focuses on the two-step market, where
management believes it is a dominant supplier to the major home center
retailers and retail lumber yards. The Company believes that Variform is able
to compete on favorable terms as a result of its broad distribution coverage,
high quality innovative products, and production efficiency. Additionally,
Variform is strongest in the retail segment of the market,

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which continues to grow at a rate that is faster than the overall market, as
warehouse retailers continue to take business away from the traditional one-
step market by offering remodeling contractors a "one-stop-shop" for all of
their home improvement materials needs.

Great Lakes Window, Inc.: Great Lakes is a manufacturer of high quality,
energy efficient, maintenance free vinyl replacement windows. Its products
include double hung, casement, sliding and awning windows as well as hinged and
sliding patio doors. Great Lakes offers a wide selection of products, including
a variety of exterior colors and interior woodgrains, several different grille
patterns and a wide assortment of glass options. Great Lakes products are
primarily used in replacement applications, where windows and patio doors are
manufactured for a specific order on a custom size basis. Accordingly, Great
Lakes maintains relatively little finished goods inventory. Great Lakes has
recently introduced a vinyl window to penetrate the new construction market
which will be sold primarily through two-step distribution.

Great Lakes sells its products through its highly trained sales force. It
sells its products to specialty window distributors who in turn sell to
remodeling contractors, and direct to large remodeling companies. The Company
believes that Great Lakes is able to compete successfully due to the breadth
and quality of its product offering, and its merchandising support that the
Company believes is one of the best in the industry. In addition, Great Lakes
has been the forerunner in introducing new designs to the industry. Great
Lakes' innovative locking system, interior woodgrains and its use of various
glass treatments, are a few examples of innovations that distinguish Great
Lakes from its competition. Great Lakes expects to continue to develop new
designs and features for its products in the future.

Richwood Building Products, Inc.: Richwood is a manufacturer of siding
accessories to the remodeling and new construction markets. Siding accessories
include blocks, which allow for the flush mounting of items like light fixtures
to the exterior of a home, and gable vents. Their products are sold through a
network of manufacturers representatives and directly to home centers,
lumberyards and wholesale distributors of building materials, electrical and
plumbing products. Richwood is the only manufacturer of siding accessories to
offer a color selection that matches the colors offered by most, if not all,
major manufacturers of vinyl siding in the United States and Canada.

SPECIALTY WOOD PRODUCTS

Hoover Treated Wood Products, Inc: Hoover is a producer of pressure treated
wood products, selling to home center chains, lumberyards and building
materials retailers and wholesalers. Its products include lumber and plywood
which have been treated for fire retardancy and for protection against moisture
and insect infestation.

Sagebrush Sales, Inc.: Sagebrush is a manufacturer and distributor of
specialty lumber and building products serving the home improvement and
building materials markets in the Southwest.

Goldenberg Group, Inc.: Goldenberg is a West Coast manufacturer and
distributor of furniture components, laminates and board products to furniture
manufacturers and other original equipment manufacturers, building material
retailers and wholesalers.

Ply*Gem Manufacturing is a manufacturer and distributor of decorative wall
coverings. Its products include decorator paneling, planking and tileboard for
the home improvement market. Ply Gem Manufacturing recently introduced a
complete line of imported ceramic, porcelain and marble floor tile marketed
through home centers and lumber yards.

Continental Wood Preservers, Inc.: Continental is a Midwestern manufacturer
of pressure treated wood products for home improvement retailers and
lumberyards in the Midwest.

While the specialty wood products industry is very competitive, the Company
believes it is able to compete effectively by providing superior customer
service, outstanding quality and, wherever possible,

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proprietary products. The companies within the group focus on high margin,
niche markets within the broader defined wood products industry which tends to
be commodity driven. Its products are sold through home center retailers and
wholesalers of building materials. The Company believes that growth of this
segment of its business will result from continued expansion of its share of
the growing home center market.

DISTRIBUTION

Allied Plywood Corporation: Allied is a national distributor of a broad range
of high end specialty wood and wood related products, including hardwood
plywood, melamine and other laminated board products, hardwood lumber, solid
surface materials and cabinet hardware. It is also a major importer of Russian
wood products, through its affiliate, Russian Wood Express Inc. ("Russian
Wood"). Allied's customers are industrial woodworkers, including cabinet
manufacturers, architectural millworkers, and manufacturers of store fixtures,
furniture, signs and exhibits. Allied sells its products through an extensive
network of twelve company operated warehouse facilities and utilizes numerous
public warehouses located in various major port cities. Sales are generated by
a well trained and experienced sales force.

Allied differentiates itself from its competitors, which primarily include
local independent distributors, by its superior customer service, geographic
coverage and breadth of product line. As a result, it has become a preferred
distributor of many products, selling them on an exclusive, or limited
exclusive, basis.

The Company believes that Allied's future growth will be from the
introduction of new products, expansion of its customer base and the
development of further opportunities through Russian Wood. Allied recently
began to penetrate the retail home center market with some of its products and,
the Company believes, will increase its sales to that industry segment.

HOME PRODUCTS

Studley Products, Inc.: Studley is a manufacturer of disposable cloth and
paper vacuum cleaner bags. In addition, it sells related floor care products,
grass catcher bags for the lawn care market, and filtration products for use in
pollution control applications. Studley's products are sold to manufacturers of
vacuum cleaners, mass merchandisers and other retailers and recently to the
retail home center market and other retailers.

Even though the market is very competitive, Studley is able to compete on the
basis of its technical expertise in the design and manufacture of its products,
and in its use of high performance materials. Studley recently introduced an
innovative new vacuum cleaner bag that is able to capture pollen and other
allergy causing bacteria through the use of high performance materials. The
continued introduction of new products and the fact that many consumers are now
likely to own more than one vacuum cleaner are expected to provide
opportunities for future growth.

PRODUCTION AND FACILITIES

The Windows, Doors and Siding group operates fifteen manufacturing and
warehouse facilities in the United States and one in Canada. Vinyl siding is
produced by an extrusion process which forms siding through various dies from
certain resin compounds, primarily polyvinyl chloride. Siding accessories are
manufactured through an injection molding process using proprietary mold
designs. Insulated vinyl framed replacement windows are manufactured, using a
patented process, from insulated glass and vinyl extrusions. The manufacturing
process of wood windows and patio doors involves cutting and shaping of
components that are assembled with high speed tools. Final assembly of most
wood window and door products takes place in four distribution centers located
in the Eastern and Midwestern United States. The manufacturing plants generally
operate in a "make-to-order" environment. In 1993, Variform completed
construction of a 75,000 square foot vinyl siding manufacturing facility in
Jasper, Tennessee and Great Lakes completed a 90,000 square foot plant
expansion at its vinyl window manufacturing facility in Toledo, Ohio.

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The Specialty Woods group operates thirteen manufacturing and warehouse
facilities in the United States. The treatment process of wood products
generally involves vacuum pressure impregnation of chemicals into the wood in
an enclosed vessel to ensure thorough penetration to meet industry and
government standards. Some of the wood is kiln dried after treatment to remove
moisture imparted during the pressure impregnation process, providing a clean,
dry and easily handled product. The Company's high-speed laminating production
facilities in Gloucester City, New Jersey afford flexibility in laminating
paper and vinyl to various substrate materials. Furniture components are
manufactured from particle board or fiberboard which is machined to customer
specifications. Several unique proprietary processes are employed to
manufacture these products efficiently. Specialty lumber products, including
siding, decking and paneling are manufactured by the Company in three
facilities with a combined annual production capacity in excess of 100 million
board feet.

Distribution operates twelve distribution centers located primarily in the
East and utilizes numerous public warehouses located in various major port
cities.

Disposable and cloth vacuum cleaner bags are manufactured at two facilities
in the United States and one in Canada. Disposable paper vacuum cleaner bags
are manufactured on highly automated equipment, the major part of which was
designed and built by the Company. Cloth vacuum cleaner bags are manufactured
by cutting fabric to a preformed pattern which is then sewn into the finished
product and packaged. The Company is continuously engaged in designing vacuum
cleaner bags for new vacuum cleaner models.

RAW MATERIALS

The principal raw materials used in the manufacture of the Company's products
are polyvinyl chloride, polypropylene, glass, vinyl extrusions, particle board,
fiberboard, plywood, various species of lumber such as pine, spruce, luaun,
hemlock and fir, various chemicals, filter paper, woven and non woven fabric,
and paper.

The Company purchases its raw materials from a large number of domestic and
international sources. The Company believes that there are alternative sources
of supply in the event of its inability to purchase from its present suppliers.

SEASONALITY

The Company's home improvement business is seasonal, particularly in the
Northeast and Midwest regions of the United States where inclement weather
during the winter months usually reduces the level of activity in both the home
improvement and new construction markets. The Company's lowest sales levels
usually occur during the first and fourth quarters. Since a high percentage of
the Company's manufacturing overhead and operating expenses are relatively
fixed throughout the year, operating income tends to be lower in quarters with
lower sales. Inventory and borrowings to satisfy working capital requirements
are usually at their highest level during the second and third quarters.

BACKLOG

In general, the Company does not produce against a backlog of firm orders;
production is geared primarily to the level of incoming orders and to
projections of future demand. Significant inventories of finished goods, work-
in-process and raw materials are maintained to meet delivery requirements of
customers.

Hoover and Continental maintain a steady backlog of firm orders to be filled
in an amount representing approximately 7% of their annual sales. Distribution
consists of warehouse operations where orders are filled from stock and where
there is no significant backlog.

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EMPLOYEES

On January 3, 1994, Monte R. Haymon became President, Chief Operating Officer
and a member of the Board of Directors of Ply Gem. Prior to joining Ply Gem,
Mr. Haymon was President and Chief Executive Officer of a $2 billion
manufacturing company. Mr. Haymon has over 20 years of experience in
successfully managing multiple business units and achieving outstanding
financial performance.

At December 31, 1993 approximately 4,000 persons were employed by the
Company. Approximately 1,300 of such employees are covered by collective
bargaining agreements which expire at various times over the next three years.
The Company has not had any significant work stoppages and considers its
relations with its employees to be good.

ITEM 2. PROPERTIES.

The Windows, Doors and Siding group operates fifteen manufacturing and
warehouse facilities in the United States and one in Canada ranging in size
from approximately 20,000 square feet to 660,000 square feet. Of these
facilities, nine are owned, and seven are leased under net leases that expire
at various dates through 2016. The group's manufacturing facilities operated at
ranges of approximately 75% to 95% of capacity during 1993.

The Specialty Woods group has thirteen manufacturing and warehouse facilities
in the United States ranging in size from approximately 35,000 square feet to
215,000 square feet. Of these facilities, seven are owned and six facilities
are leased under net leases that expire at various dates through 2005. The
group's manufacturing facilities operated at ranges of approximately 55% to 90%
of capacity during 1993.

Distribution operates twelve distribution centers located primarily in the
East ranging in size from approximately 16,000 square feet to 70,000 square
feet. Two facilities are owned and ten facilities are leased under leases that
expire at various dates through 1998.

Home Products has two manufacturing facilities in the United States and one
in Canada. These facilities range in size from approximately 39,000 square feet
to 160,000 square feet and are leased by the company under leases that expire
at various dates through 2007. The facilities operated at ranges of
approximately 60% to 65% of capacity during 1993.

The Company's building, machinery and equipment have been generally well
maintained, are in good operating condition and are adequate for current and
future production requirements.

The Company's executive offices are located at 777 Third Avenue, New York,
New York and consist of 9,500 square feet of office space which is leased
through 1999.

ITEM 3. LEGAL PROCEEDINGS.

Hoover, a wholly-owned subsidiary of Ply Gem, is a defendant, along with many
other parties, in a number of commercial lawsuits, including a purported class
action on behalf of certain Maryland homeowners, alleging property damage
caused by alleged defects in certain pressure treated interior wood products it
produced and sold through August, 1988. Sales of this product constituted less
than 3% of the total sales of Ply Gem and its subsidiaries on a consolidated
basis during the period January 1, 1984 through December 31, 1990. Ply Gem is
also a defendant in many of these suits. The number of lawsuits pending as of
December 31, 1993, as well as the number of lawsuits filed in 1993, has
declined significantly.

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carriers have brought actions challenging coverage. Hoover and Ply Gem believe
they have meritorious claims for coverage, are defending these actions, have
counterclaimed and are seeking declaratory judgments confirming coverage. Many
of the coverage claims have been settled and proceeds from those settlements,
along with the proceeds from a settlement of claims by Hoover against certain
suppliers of materials used by it in the production of treated wood, are
available for the settlement of the underlying property damage actions,
including the jury verdict now on appeal. Hoover believes that its remaining
coverage disputes will be resolved and a substantial amount of additional
coverage will be available to it.

Hoover and Ply Gem are vigorously defending those lawsuits which cannot be
resolved on a reasonable basis and believe that they have meritorious defenses
to those suits including, in the case of Ply Gem, the defense that it has been
improperly joined, as it did not manufacture or market the Hoover products at
issue, and is not legally liable for the damage allegedly caused by them.

In evaluating the effect of the lawsuits, a number of factors have been
considered, including: the number and exposure posed by the pending lawsuits;
the significant decline in the number of lawsuits filed in 1993; the
availability of various legal defenses, including statutes of limitation, the
existence of settlement protocols, an agreement indemnifying Hoover as to
certain past and future claims and Hoover's experience in settling with its
insurance companies and the likely availability of additional insurance. It is
estimated that the future cost of resolving those matters not presently covered
by existing settlements with insurance carriers and suppliers is sixteen
million dollars, which it expects will be covered by future recoveries from
additional insurance carriers. Based on its evaluation, the Company believes
that the ultimate resolution of the lawsuits and the insurance claims will not
have a material adverse effect upon the financial position of the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

NONE

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.

The Company's common stock is listed on the American Stock Exchange. The
following table sets forth, for the periods indicated, the high and low market
prices and dividends paid.

<TABLE>
<CAPTION>
1993 1992
------------------------ -----------------------
QUARTER HIGH LOW DIVIDEND HIGH LOW DIVIDEND
------- ------- ------- -------- ------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
First.......................... $13 3/8 $11 1/2 $.03 $12 $8 7/8 $.03
Second......................... 11 7/8 10 1/8 .03 14 1/2 9 3/4 .03
Third.......................... 13 1/2 10 3/8 .03 11 1/2 9 7/8 .03
Fourth......................... 18 1/4 14 1/4 .03 13 9 1/2 .03
</TABLE>

The Company has paid cash dividends on its Common Stock since 1976 and
presently pays quarterly dividends at the annual rate of $.12 per share.

The Company's revolving credit facility has limitations on the annual amounts
of the Company's dividends. Under the most restrictive provision, at December
31, 1993, approximately $2,192,000 was available for the payments of dividends
in 1994.

The number of stockholders of record of the Company's common stock as of
March 14, 1994 was 2,910.

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ITEM 6. SELECTED FINANCIAL DATA.

Set forth below is certain Selected Financial Data for each of the years
shown.

<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net sales......................... $722,660 $623,182 $561,550 $545,511 $506,845
Net income........................ 9,650 6,306 4,039 3,175 10,100
Total assets...................... 344,944 313,997 281,124 329,975 303,349
Long-term debt.................... 92,898 62,451 57,996 106,186 101,931
Capital lease obligations......... 7,166 7,215 105 236 397
Convertible subordinated deben-
tures............................ 50,000 50,000 50,000 46,489 42,167
Stockholders' equity.............. 128,942 118,439 111,349 107,620 107,868
Dividends per common share........ .12 .12 .12 .12 .12
</TABLE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of the Company's
consolidated results of operations and financial condition. The discussion
should be read in conjunction with the Consolidated Financial Statements and
Notes thereto.

RESULTS OF OPERATIONS

NET SALES

The Company achieved record net sales during 1993 of $722.7 million, an
increase of approximately $100 million or 16.0% over 1992 net sales of $623.2
million and an increase of approximately $161 million or 28.7% over 1991 net
sales of $561.6 million. Sales in each of the Company's 1993 quarters were
above those of comparable 1992 periods.

Substantially all operating entities of the Company reported higher net sales
for 1993 when compared with 1992. Of the total net sales increase in 1993,
approximately 10% is attributable to additional unit volume and approximately
6% to increases in average selling prices. The increase in net sales in 1992,
as compared with 1991, was primarily related to additional unit volume.

Strong sales in the Company's Windows, Doors, and Siding group continue to
fuel the Company's growth as this group has achieved double digit sales growth
in each of the last five years.

After several years of decline, due primarily to the closing and
consolidation of certain facilities and elimination of certain lower margin
product lines, Distribution reported substantial improvement in 1993, as net
sales were 19% higher than 1992.

GROSS PROFIT

Gross profit, expressed as a percentage of net sales, was 19.1% in 1993,
compared with 20.7% for 1992 and 21.5% in 1991. Higher raw material costs
(particularly wood and resin), competitive pricing pressures, and costs of
introducing new products accounted for most of the decline in 1993. The lower
margin in 1992 as compared to 1991 was due primarily to higher wood costs.

The Company's results of operations are affected by fluctuations in the
market prices of lumber and other wood products that have been used as raw
materials in its various manufacturing operations. During the last several
years, the market prices of lumber and other wood products have been volatile.
Although the Company attempts to increase the sales price of its products in
response to higher lumber and wood products costs, such sales price increases
often lag behind the escalation in the cost of the raw materials in question.
While the Company intends to increase prices in a timely manner to cover any
further increases in the cost of lumber and other wood products, its ability to
do so may be limited by competitive or other factors.

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The Company continues to explore various strategies to improve its gross
profit margins, including productivity enhancements, increased yields through
more efficient process technologies, cost reduction programs, and reviews of
manufacturing capacity and utilization.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses, as a percentage of net sales,
were 14.8% in 1993, compared to 16.3% in 1992 and 16.9% in 1991. The
improvement reflects the Company's continued progress in its ongoing efforts to
manage expense growth relative to revenue growth.

The significant improvement in 1993 and 1992 was primarily due to economies
resulting from the absorption of fixed expenses over a larger sales base.

INCOME FROM OPERATIONS

Income from operations increased 15.5% to $31.6 million in 1993 from $27.4
million in 1992. Income from operations was $25.8 million in 1991. The
improvements are due to the factors discussed above.

INTEREST EXPENSE

Interest expense was $10.1 million in 1993 compared to $9.6 million in 1992
and $14.1 million in 1991. The slight increase during 1993 as compared to 1992
is due primarily to higher average debt balances outstanding during 1993. Lower
interest rates, coupled with lower average debt outstanding during 1992,
favorably affected interest expense in 1992 by $4.5 million as compared to
1991.

In February 1994, the Company refinanced substantially all of its bank debt,
as more fully explained in Note 7 to the Consolidated Financial Statements and
in the Liquidity and Capital Resources discussion below. Pricing under the new
credit facility is expected to be substantially similar to pricing under the
prior facilities.

In March 1994, as more fully explained in Note 8 to the Consolidated
Financial Statements, holders of the Company's 10% Convertible Senior
Subordinated Discount Debentures ("Debentures") converted a total principal
amount of approximately $50 million into 2,751,349 shares of the Company's
common stock. As a result of this transaction, the Company will save, on an
annual basis, $5 million of interest costs.

OTHER INCOME (EXPENSE)

Other income (expense) for 1993 and 1992 primarily includes the costs
associated with the sale of receivables program, partially offset in 1993 by a
gain resulting from an involuntary conversion of property.

INCOME TAXES

The effective income tax rate was 44.8% in 1993, 44.6% in 1992, and 47.9% in
1991. During 1993 the federal statutory rate was increased by 1% retroactive to
January 1, 1993. The rate increase was offset by a proportionately lower amount
of non-deductible goodwill amortization in 1993 as compared to income before
taxes in 1992 and 1991. The higher tax rate in 1991 is primarily due to
operating losses of the Distribution subsidiaries for which no state tax
benefits were available.

NET INCOME

Net income advanced 53% to $9.7 million in 1993 from $6.3 million in 1992.
Net income was $4.0 million in 1991. The factors cited above were responsible
for the significantly improved results of the Company.

The results for 1993 featured a strong operating performance by the Company's
business groups. The Company's continuing success in the home improvement
industry is primarily attributable to an uncompromising emphasis on quality,
excellence in customer service, and superior product design.

9
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

The Company's financial position remained strong in 1993.

In February 1994, the Company entered into a five-year revolving credit
facility ("Credit Facility") with a syndicate of banks, which provides
financing of up to $200 million. Initial borrowings were used to repay amounts
outstanding under the Company's previous credit facilities. The Credit Facility
provides the Company with financing at competitive prices, strengthens its
balance sheet by extending debt maturities to 1999, and makes available
additional resources for its Teamwork 90s internal growth programs. See Note 7
to the Consolidated Financial Statements for additional information concerning
the Credit Facility.

As discussed above, holders of the Debentures converted a total principal
amount of approximately $50 million into 2,751,349 shares of the Company's
common stock. As a result, the Company's net worth will be increased by
approximately $50 million, and the Company will save $5 million of annual
interest expense.

The table below summarizes the Company's cash flow from operating, investing,
and financing activities as reflected in the Consolidated Statement of Cash
Flows.

<TABLE>
<CAPTION>
1993 1992 1991
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Cash provided by (used in)
Operating activities................................. $ 4.7 $ 5.5 $ 48.0
Investing activities................................. (11.0) (24.9) 11.6
Financing activities................................. 16.9 16.9 (58.0)
------ ------ ------
Net increase (decrease) in cash and cash equiva-
lents............................................. $ 10.6 $ (2.5) $ 1.6
====== ====== ======
</TABLE>

OPERATING ACTIVITIES

The amount of cash provided by operating activities in 1993 was relatively
unchanged from 1992. The significant increase in 1991 in cash from operating
activities as compared to 1992 resulted from the proceeds from the sale of
certain accounts receivable to a financial institution and to the success of
the Company's inventory reduction program.

The Company's working capital requirements for inventory and receivables are
impacted by changes in raw materials costs, the availability of raw materials,
growth of the Company's businesses and seasonality. As a result, such
requirements may fluctuate significantly.

INVESTING ACTIVITIES

Investing activities of the Company during the discussion periods primarily
consist of the acquisition and sale of property, plant and equipment and the
receipt and usage of funds held for construction.

During 1992, Variform began construction of a new vinyl siding facility in
Jasper, Tennessee and Great Lakes commenced a plant expansion at its facility
in Toledo, Ohio. Aggregate construction and initial production equipment costs,
which are being financed from the proceeds of industrial revenue bonds, are
$11.2 million. The Jasper facility was completed during the second quarter of
1993 and the Toledo facility during the third quarter of 1993.

Capital expenditures (excluding approximately $9.6 million of costs incurred
through December 31, 1993, of which $4.8 million was incurred during 1993 for
the aforementioned construction projects) were $15.7 million in 1993, compared
to $12.3 million in 1992 and $9.7 million in 1991. Most of the outlays were for
machinery and equipment used to expand capacity and improve productivity.

Funds Held for Construction relate to proceeds and usage of cash from the
industrial development revenue obligations discussed above.

10
<PAGE>

Fixed asset acquisitions provide a basis for future growth. The Company has
formalized an intensive review procedure for all capital expenditures. The
acceptability of a capital project is based on many factors, including its
discounted cash flow return on investment and projected payback period. The
Company expects to incur approximately $15 million in 1994 for capital
expenditures, excluding costs related to the construction projects discussed
above.

FINANCING ACTIVITIES

During 1993 the Company had borrowings of $ 34.8 million under its revolving
credit lines. Bank borrowings were primarily used to finance growth in working
capital and capital expenditures.

BALANCE SHEET CONTINUES TO BE STRONG

The pro forma capitalization of the Company (long-term debt plus
stockholders' equity) was $277.5 million at December 31, 1993. The pro forma
ratio of debt to capitalization was approximately 36% at December 31, 1993
which is substantially improved from such ratio at December 31, 1992 which was
approximately 50%.

The current ratio was 3.2 at December 31, 1993, significantly better than the
2.3 ratio at the end of 1992. The factors that contributed to this improvement
included the reduction of current debt obligations resulting from the Credit
Facility, increased cash balances and higher receivables caused by increased
sales. Cash and marketable securities totaled $14.4 million at December 31,
1993.

Long-term bank debt at December 31, 1993 was $92.9 million, compared with
$62.5 million at December 31, 1992. The higher debt level was needed to finance
higher working capital requirements and capital expenditures.

In addition to cash from operating activities, the Company has a new Credit
Facility available to meet future liquidity needs. After repayment of the prior
credit facilities, approximately $63 million was available for borrowing under
the Credit Facility. The Company has several interest rate agreements which
reduce the Company's exposure to rising interest rates.

SEASONAL NATURE OF BUSINESS

The home improvement business is seasonal, particularly in the Northeast and
Midwest regions of the United States where inclement weather during the winter
months usually reduces the level of building and remodeling activity in both
the home improvement and new construction markets. The Company's lowest sales
levels usually occur during the first and fourth quarters. Since a high
percentage of the Company's manufacturing overhead and operating expenses are
relatively fixed throughout the year, operating income tends to be lower in
quarters with lower sales. Inventory and borrowings to satisfy working capital
requirements are usually at their highest level during the second and third
quarters.

PROSPECTIVE FINANCIAL STANDARDS

The Financial Accounting Standards Board (FASB) issued Statement No. 115,
Accounting for Certain Investments in Debt and Equity Securities, and FASB No.
112, Employers' Accounting for Postemployment Benefits, which are effective
January 1, 1994. Adoption of these standards is not expected to have a material
impact on the Company's results of operations or financial position, nor will
it affect the Company's cash flows.

11
<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
(THE INDEX TO CONSOLIDATED FINANCIAL STATEMENTS IS INCORPORATED
BY REFERENCE IN ITEM 14(A) OF PART IV OF THIS FORM 10-K)

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Certified Public Accountants........................ 13
Financial Statements
Consolidated Balance Sheets at December 31, 1993 and 1992............... 14
Consolidated Statements of Income for the Three Years Ended December 31,
1993................................................................... 15
Consolidated Statements of Stockholders' Equity for the Three Years
Ended December 31, 1993................................................ 16
Consolidated Statements of Cash Flows for the Three Years Ended December
31, 1993............................................................... 17
Notes to Consolidated Financial Statements.............................. 18
Quarterly Data............................................................ 27
</TABLE>

12
<PAGE>

(ART)

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors and Stockholders
Ply Gem Industries, Inc.

We have audited the accompanying consolidated balance sheets of Ply Gem
Industries, Inc. and Subsidiaries (the "Company") as of December 31, 1993 and
1992, and the related consolidated statements of income, stockholders' equity,
and cash flows for each of the three years in the period ended December 31,
1993. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Ply Gem
Industries, Inc. and Subsidiaries as of December 31, 1993 and 1992, and the
consolidated results of their operations and their consolidated cash flows for
each of the three years in the period ended December 31, 1993, in conformity
with generally accepted accounting principles.

GRANT THORNTON

New York, New York
February 24, 1994 (except
for Note 8 as to which the
date is March 23, 1994)

13
<PAGE>

PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31,
<TABLE>
<S> <C> <C> <C>
ASSETS
<CAPTION>
PRO FORMA
(NOTE 8)
------------
1993 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Cash and cash equivalents............... $ 12,461,000 $ 12,499,000 $ 1,880,000
Marketable securities -- at cost in
1993; at market (cost $2,823,000) in
1992................................... 1,942,000 1,942,000 2,619,000
Accounts receivable, net of allowance of
$7,197,000; $5,330,000 in 1992......... 54,432,000 54,432,000 42,354,000
Inventories............................. 117,515,000 117,515,000 107,190,000
Deferred income taxes................... 4,000,000 4,000,000 3,100,000
Prepaid expenses and other current as-
sets................................... 7,077,000 7,077,000 6,654,000
------------ ------------ ------------
Total current assets................ 197,427,000 197,465,000 163,797,000
Funds held for construction............. 2,375,000 2,375,000 10,096,000
Property, plant and equipment -- at
cost, net.............................. 67,766,000 67,766,000 54,432,000
Patents and trademarks, net of
accumulated amortization of $6,677,000;
$5,532,000 in 1992..................... 17,595,000 17,595,000 18,713,000
Other intangible assets, net............ 20,037,000 21,557,000 23,859,000
Cost in excess of net assets acquired,
net.................................... 26,492,000 26,492,000 28,645,000
Other................................... 11,694,000 11,694,000 14,455,000
------------ ------------ ------------
$343,386,000 $344,944,000 $313,997,000
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses... $ 40,828,000 $ 41,328,000 $ 36,636,000
Accrued payroll and commissions......... 10,165,000 10,165,000 8,602,000
Accrued insurance....................... 3,090,000 3,090,000 3,014,000
Income taxes payable.................... 1,618,000 1,181,000 2,716,000
Notes payable........................... 2,365,000 2,365,000 7,117,000
Current maturities of long-term debt.... 2,841,000 2,841,000 12,011,000
------------ ------------ ------------
Total current liabilities........... 60,907,000 60,970,000 70,096,000
Long-term debt.......................... 92,898,000 92,898,000 62,451,000
Capital leases.......................... 7,166,000 7,166,000 7,215,000
Deferred income taxes................... 724,000 724,000 1,606,000
Other liabilities....................... 4,244,000 4,244,000 4,190,000
Convertible subordinated debentures..... -- 50,000,000 50,000,000
Stockholders' equity....................
Preferred stock, $.01 par value;
authorized 5,000,000 shares; none
issued...............................
Common stock, $.25 par value;
authorized 30,000,000 shares; issued
11,872,509 shares; 11,550,819 shares
in 1992.............................. 3,656,000 2,968,000 2,887,000
Additional paid-in capital............ 111,823,000 64,006,000 61,014,000
Retained earnings..................... 72,601,000 72,601,000 64,249,000
------------ ------------ ------------
188,080,000 139,575,000 128,150,000
Less
Treasury stock -- at cost (910,073
shares; 831,122 shares in 1992)...... 9,362,000 9,362,000 8,262,000
Unamortized restricted stock.......... 1,271,000 1,271,000 1,449,000
------------ ------------ ------------
Total stockholders' equity.......... 177,447,000 128,942,000 118,439,000
------------ ------------ ------------
$343,386,000 $344,944,000 $313,997,000
============ ============ ============
</TABLE>

The accompanying notes are an integral part of these statements.

14
<PAGE>

PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1993 1992 1991
------------ ------------ ------------
<S> <C> <C> <C>
Net sales............................ $722,660,000 $623,182,000 $561,550,000
Cost of goods sold................... 584,271,000 494,093,000 440,628,000
------------ ------------ ------------
Gross profit....................... 138,389,000 129,089,000 120,922,000
Selling, general and administrative
expenses............................ 106,812,000 101,738,000 95,143,000
------------ ------------ ------------
Income from operations............. 31,577,000 27,351,000 25,779,000
Amortization of goodwill and other
intangibles......................... (4,748,000) (4,825,000) (4,740,000)
Interest expense..................... (10,056,000) (9,644,000) (14,099,000)
Investment income, net............... 454,000 376,000 464,000
Other income (expense)............... 254,000 (1,884,000) 355,000
------------ ------------ ------------
Income before income taxes......... 17,481,000 11,374,000 7,759,000
Income taxes......................... 7,831,000 5,068,000 3,720,000
------------ ------------ ------------
NET INCOME......................... $ 9,650,000 $ 6,306,000 $ 4,039,000
============ ============ ============
Earnings per share
Primary............................ $.76 $.56 $.39
Fully diluted...................... .75 .56 .39
------------ ------------ ------------
Weighted average number of shares
outstanding
Primary............................ 14,217,000 13,065,000 10,424,000
Fully diluted...................... 14,217,000 13,065,000 13,448,000
------------ ------------ ------------
</TABLE>

The accompanying notes are an integral part of these statements.

15
<PAGE>

PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

THREE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991

<TABLE>
<CAPTION>
COMMON STOCK TREASURY STOCK
--------------------- ----------------------
NUMBER ADDITIONAL NUMBER
OF PAID-IN RETAINED OF
SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT
---------- ---------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1991................... 11,399,009 $2,849,000 $60,554,000 $56,408,000 1,212,085 $12,191,000
Purchase of shares...... 65,600 403,000
Cash dividends on common
stock ($.12 per share). (1,238,000)
Exercise of employee
stock option........... 9,000 3,000 47,000
Issuance of restricted
stock.................. (634,000) (250,000) (2,464,000)
Contribution of treasury
stock to employee
profit sharing trust... (251,000) (135,000) (1,331,000)
Other................... (15,000) (1,358) (13,000)
Net income.............. 4,039,000
---------- ---------- ----------- ----------- --------- -----------
Balance at December 31,
1991................... 11,408,009 2,852,000 59,701,000 59,209,000 891,327 8,786,000
Cash dividends on common
stock ($.12 per share). (1,266,000)
Exercise of employee
stock options.......... 142,810 35,000 1,070,000 32,501 389,000
Tax benefit arising from
exercise of nonquali-
fied stock options..... 121,000
Contribution of treasury
stock to employee
profit sharing trust... 30,000 (76,000) (749,000)
Other................... 92,000 (16,706) (164,000)
Net income.............. 6,306,000
---------- ---------- ----------- ----------- --------- -----------
Balance at December 31,
1992................... 11,550,819 2,887,000 61,014,000 64,249,000 831,122 8,262,000
Cash dividends on common
stock ($.12 per share). (1,298,000)
Exercise of employee
stock options.......... 321,690 81,000 2,591,000 87,356 1,185,000
Tax benefit arising from
exercise of nonquali-
fied stock options..... 210,000
Contribution of treasury
stock to employee
profit sharing trust... 42,000 (5,600) (58,000)
Other................... 149,000 (2,805) (27,000)
Net income.............. 9,650,000
---------- ---------- ----------- ----------- --------- -----------
Balance at December 31,
1993................... 11,872,509 $2,968,000 $64,006,000 $72,601,000 910,073 $ 9,362,000
========== ========== =========== =========== ========= ===========
</TABLE>

The accompanying notes are an integral part of these statements.

16
<PAGE>

PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------------
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Net income............ $ 9,650,000 $ 6,306,000 $ 4,039,000
Adjustments to
reconcile net income
to net cash provided
by operating
activities
Depreciation and
amortization......... $12,166,000 $11,830,000 $12,166,000
Accretion of original
issue discount....... 3,511,000
Deferred taxes........ (1,782,000) (2,389,000) (505,000)
Contribution to
employee profit
sharing trust........ 100,000 779,000 1,080,000
Provision for doubtful
accounts............. 4,642,000 4,652,000 5,383,000
Valuation allowance
for marketable
securities........... (205,000) (64,000) (36,000)
Changes in assets and
liabilities
Accounts receivable.. (16,720,000) (7,732,000) 10,324,000
Inventories.......... (10,325,000) (12,754,000) 13,935,000
Prepaid expenses and
other current
assets.............. (423,000) (2,199,000) (298,000)
Accounts payable and
accrued expenses.... 4,768,000 6,040,000 (176,000)
Income taxes payable. (1,535,000) 2,716,000
Other................ 4,378,000 (4,936,000) (1,709,000) (830,000) (1,391,000) 43,993,000
----------- ----------- ----------- ----------- ----------- -----------
Net cash provided by
operating
activities......... 4,714,000 5,476,000 48,032,000
----------- ----------- -----------
CASH FLOWS FROM
INVESTING ACTIVITIES
Additions to property,
plant and equipment.. (20,519,000) (17,138,000) (9,719,000)
Funds (held) used for
construction......... 7,721,000 (8,357,000)
Proceeds of property,
plant and equipment
sold................. 216,000 361,000 23,317,000
Additional purchase
price of previously
acquired businesses.. (1,580,000)
Other................. 1,564,000 247,000 (467,000)
----------- ----------- -----------
Net cash provided by
(used in) investing
activities......... (11,018,000) (24,887,000) 11,551,000
----------- ----------- -----------
CASH FLOWS FROM
FINANCING ACTIVITIES
Short-term debt
borrowings
(repayments), net.... (4,752,000) 5,928,000 (5,557,000)
Repayment of long-term
debt................. (13,482,000) (11,850,000) (50,788,000)
Purchase of treasury
shares............... (403,000)
Long-term borrowings.. 34,760,000 16,392,000
Additions to capital
leases............... 7,000,000
Cash dividends........ (1,298,000) (1,266,000) (1,238,000)
Other................. 1,695,000 669,000 (12,000)
----------- ----------- -----------
Net cash provided by
(used in) financing
activities......... 16,923,000 16,873,000 (57,998,000)
----------- ----------- -----------
Net increase
(decrease) in cash
and cash
equivalents........ 10,619,000 (2,538,000) 1,585,000
----------- ----------- -----------
Cash and cash
equivalents at
beginning of year.. 1,880,000 4,418,000 2,833,000
----------- ----------- -----------
CASH AND CASH
EQUIVALENTS AT END OF
YEAR.................. $12,499,000 $ 1,880,000 $ 4,418,000
=========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these statements.

17
<PAGE>

PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of Ply Gem
Industries, Inc. and its wholly-owned subsidiaries after eliminating all
significant intercompany accounts and transactions. Certain prior year items
have been reclassified to conform to the 1993 presentation.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and temporary investments
having a maturity of three months or less.

Marketable Securities

Marketable securities are carried at the lower of aggregate cost or market.

Inventories

Inventories are stated at the lower of cost or market. Cost is determined on
the first-in, first-out (FIFO) method.

Property, Plant and Equipment

Owned property, plant and equipment are depreciated, generally on a straight-
line basis over their estimated useful lives. Leasehold improvements are
amortized on a straight-line basis over their respective lives or the terms of
the applicable leases, including expected renewal options, whichever is
shorter. Accelerated depreciation methods are used for tax purposes.
Capitalized leases are amortized on a straight-line basis over the terms of the
leases or their economic useful lives.

Intangible Assets

(a) Patents and Trademarks

Purchased patents and trademarks are recorded at appraised value at time of
acquisition and are being amortized on a straight-line basis over their
estimated remaining economic lives; thirteen to sixteen years for patents and
thirty years for trademarks.

(b) Other Intangibles

Cost in excess of net assets acquired is being amortized from twenty to
thirty years on a straight-line basis and is evaluated annually to determine
potential impairment by comparing its carrying value to the estimated future
cash flows of the related assets. Other purchased intangibles are being
amortized on a straight-line basis generally from ten to thirty-nine years.

Income Taxes

Deferred income taxes are provided to reflect temporary differences between
the financial reporting basis and the tax basis of the Company's assets and
liabilities.

18
<PAGE>

PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Earnings Per Share

Earnings per share of common stock are based on the weighted average number
of shares and common equivalent shares outstanding during each of the periods.
Primary and fully diluted earnings per share include the dilutive effect of
unexercised stock options as modified for options in excess of 20% of shares
outstanding. The assumed conversion of the Company's Convertible Subordinated
Debentures was not used in the fully diluted calculation because the result
would be anti-dilutive.

NOTE 2 -- CASH FLOWS

Supplemental cash flow information for the years ended December 31 is as
follows:

<TABLE>
<CAPTION>
1993 1992 1991
----------- ---------- ----------
<S> <C> <C> <C>
Interest paid (net of $510,000 capitalized in
1993, $263,000 in 1992 and $220,000 in
1991)....................................... $ 9,692,000 $9,723,000 $9,414,000
----------- ---------- ----------
Income taxes paid............................ $10,180,000 $4,064,000 $4,866,000
----------- ---------- ----------
</TABLE>

NOTE 3 -- SALE OF ACCOUNTS RECEIVABLE

In December 1991, the Company entered into a three-year agreement to sell,
with limited recourse, up to $20 million of undivided fractional interests in a
designated pool of accounts receivable. An interest in new accounts receivable
are sold as collections reduce previously sold interests. At December 31, 1993
and 1992, accounts receivable were reduced $20 million by these transactions.
Program costs of $1,495,000 and $1,502,000 are included in other income
(expense) in the 1993 and 1992 Consolidated Statements of Income, respectively.

NOTE 4 -- INVENTORIES

Inventories consisted of the following at December 31:

<TABLE>
<CAPTION>
1993 1992
------------ ------------
<S> <C> <C>
Finished goods..................................... $ 56,630,000 $ 46,834,000
Work in progress................................... 25,806,000 26,180,000
Raw materials...................................... 35,079,000 34,176,000
------------ ------------
$117,515,000 $107,190,000
============ ============
</TABLE>

NOTE 5 -- PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment at December 31 included:

<TABLE>
<CAPTION>
1993 1992
------------ ------------
<S> <C> <C>
Land............................................. $ 2,420,000 $ 2,272,000
Buildings and improvements....................... 26,240,000 22,238,000
Machinery and equipment.......................... 53,726,000 41,652,000
Transportation equipment......................... 2,720,000 3,946,000
Furniture and fixtures........................... 10,057,000 8,467,000
Capital leases................................... 7,364,000 666,000
Construction in progress......................... 3,943,000 9,394,000
------------ ------------
106,470,000 88,635,000
Accumulated depreciation and amortization........ (38,704,000) (34,203,000)
------------ ------------
$ 67,766,000 $ 54,432,000
============ ============
</TABLE>

19
<PAGE>

PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 6 -- INTANGIBLE AND OTHER ASSETS

The accumulated amortization of cost in excess of net assets acquired and
other intangible assets is $26,136,000 at December 31, 1993 and $22,022,000 at
December 31, 1992.

Other assets at December 31, 1993 include notes receivable from an executive
officer of $7,280,000 ($8,220,000 at December 31, 1992) at an average interest
rate of 7.1% and are due in approximately equal annual installments through
2003. Under the terms of the notes, principal and interest are forgiven upon
the attainment of at least a 20% improvement in net income versus the prior
year, or at the discretion of the Board of Directors. The performance goal was
achieved in 1993 and 1992. Furthermore, under the terms of the officer's
employment agreement the loan shall be forgiven upon the occurrence of a change
in control of the Company or permanent disability.

NOTE 7 -- LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
1993 1992
----------- -----------
<S> <C> <C>
Revolving credit facility expiring in 1999(a)....... $84,467,000
Revolving credit facilities, due January 1996,
refinanced in 1994................................. $30,700,000
Bank term loans refinanced in 1994
Due through March 1994 at 9.17%................... 400,000
Due through June 1995............................. 1,732,000
Due through April 1996............................ 18,750,000
Other, principally industrial development revenue
bonds
maturing at various dates to 2012, generally at
floating interest rates which are reset
periodically (4.6% average interest rate for 1993). 8,431,000 10,869,000
----------- -----------
$92,898,000 $62,451,000
=========== ===========
</TABLE>
- --------
(a) At the Company's option, interest rates are at the prevailing prime rate
and various LIBOR rates, or combinations thereof. The Company has entered
into interest rate cap agreements which limit the maximum interest rates on
a portion of these loans.

On February 24, 1994 the Company refinanced substantially all of its bank
debt under a $200 million five year syndicated bank credit facility which
replaced several separate bank agreements including short-term facilities.
Accordingly, the table above reflects this transaction as of December 31, 1993.
The loan agreement requires the attainment of certain working capital and
tangible net worth levels and the maintenance of various financial ratios,
among its provisions. Borrowings under this agreement are collateralized by the
common stock of the Company's principal subsidiaries. Under the most
restrictive of these covenants, at December 31, 1993 approximately $2,192,000
was available for the payment of dividends in 1994.

Future maturities of long-term debt, for the years 1995 through 1998 are:
1995--$430,000; 1996--$405,000; 1997--$425,000; and 1998--$448,000.

The net book value of property, plant and equipment pledged as collateral
under mortgages and industrial revenue bonds approximated $6,688,000 at
December 31, 1993.

20
<PAGE>

PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 8 -- CONVERTIBLE SUBORDINATED DEBENTURES--SUBSEQUENT EVENT

During the period February 23, 1994 to March 23, 1994 holders of $49,963,000
principal amount of 10% Convertible Senior Subordinated Discount Debentures,
due October 1, 2008, exchanged them for 2,751,349 shares of common stock of the
Company. The remaining $37,000 of the original $50 million face amount was
redeemed by the Company. The pro forma unaudited consolidated balance sheet
reflects this event as of December 31, 1993, including estimated costs. If this
transaction had occurred on January 1, 1993 primary and fully diluted earnings
per share for 1993 would have been $.84 and $.83, respectively.

NOTE 9 -- INCOME TAXES

Effective January 1, 1993 the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." The adoption of
this standard had no material effect on prior year or 1993 earnings.

The provision for income taxes is composed of the following:

<TABLE>
<CAPTION>
1993 1992 1991
---------- ----------- ----------
<S> <C> <C> <C>
Federal
Current............................... $8,196,000 $ 5,219,000 $2,683,000
Deferred.............................. (1,782,000) (1,266,000) (210,000)
Foreign................................. 190,000 245,000 341,000
State and local......................... 1,227,000 870,000 906,000
---------- ----------- ----------
$7,831,000 $ 5,068,000 $3,720,000
---------- ----------- ----------
</TABLE>

The significant components of the Company's deferred tax assets and
liabilities as of December 31, 1993 are summarized below:

<TABLE>
<S> <C> <C>
Assets Liabilities
---------- -----------
Bad debt reserves, net........................... $2,734,000
Accrued expenses deductible for tax purposes when
paid............................................ 1,209,000
Net state and local operating loss tax carry-for-
wards........................................... 669,000
Other............................................ 57,000
----------
4,669,000
Valuation allowance.............................. (669,000)
----------
$4,000,000
==========
Depreciation..................................... $ 2,844,000
Asset revaluations, net.......................... (1,790,000)
Involuntary conversion........................... 450,000
Income not recognized for book purposes.......... (493,000)
Other............................................ (287,000)
-----------
$ 724,000
===========
</TABLE>

21
<PAGE>

PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Prior to the change in accounting methods, the deferred tax provision was
comprised as follows:

<TABLE>
<CAPTION>
1992 1991
----------- ---------
<S> <C> <C>
Depreciation........................................ $ 204,000 $(496,000)
Bad debt reserves, net.............................. (690,000)
Accrued expenses deductible for tax purposes when
paid............................................... (400,000) (203,000)
Unusual charge...................................... (176,000) 587,000
Other............................................... (204,000) (98,000)
----------- ---------
$(1,266,000) $(210,000)
=========== =========
</TABLE>

The actual income tax expense varies from the Federal statutory rate applied
to consolidated income as follows:

<TABLE>
<CAPTION>
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
Federal statutory rate of 35%; 34% in 1992
and 1991.................................. $6,118,000 $3,867,000 $2,638,000
Increases resulting from
State and local income taxes net of
Federal income tax benefit.............. 798,000 574,000 598,000
Cost in excess of net assets acquired.... 513,000 498,000 473,000
Other--net............................... 402,000 129,000 11,000
---------- ---------- ----------
Actual tax expense....................... $7,831,000 $5,068,000 $3,720,000
========== ========== ==========
</TABLE>

NOTE 10 -- RETIREMENT PLANS

The Company provides retirement benefits to certain of its salaried and
hourly employees through non-contributory defined benefit pension plans. The
benefits provided are primarily based upon length of service and compensation,
as defined. The Company funds the plans in amounts as actuarially determined
and to the extent deductible for Federal income tax purposes. Plan assets
consist primarily of investments in mutual funds and unallocated general
accounts of guaranteed income contracts.

The components of pension expense are as follows:

<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Service cost--benefits earned in current
year........................................ $786,000 $809,000 $752,000
Interest cost on projected benefit obliga-
tion........................................ 665,000 595,000 551,000
Income earned on plan assets................. (680,000) (684,000) (596,000)
Net amortization and deferral................ (134,000) (71,000) 15,000
-------- -------- --------
$637,000 $649,000 $722,000
======== ======== ========
</TABLE>

Assumptions used in the computation of net pension expense are as follows:

<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Weighted average discount rate for plan obligations.......... 7.5% 8% 8%
Rate of future compensation increases........................ 5 5 5
Weighted average rate of return on plan assets............... 8.9 8.9 8
=== === ===
</TABLE>

22
<PAGE>

PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The plans' funded status as September 30 is as follows:

<TABLE>
<CAPTION>
1993 1992
----------- ----------
<S> <C> <C>
Plan assets at fair value............................. $10,255,000 $9,249,000
----------- ----------
Actuarial present value of benefit obligations
Vested benefits..................................... 7,917,000 6,856,000
----------- ----------
Accumulated benefits.................................. 8,408,000 7,194,000
Estimated future compensation increases............... 1,737,000 1,297,000
----------- ----------
Projected benefit obligations......................... 10,145,000 8,491,000
----------- ----------
Projected benefit obligations less than plan assets... (110,000) (758,000)
Unrecognized prior service cost....................... (23,000) (24,000)
Unrecognized net gain................................. 90,000 1,178,000
Unrecognized transition liability, net of amortiza-
tion................................................. (206,000) (243,000)
----------- ----------
Accrued (prepaid) pension............................. $ (249,000) $ 153,000
=========== ==========
</TABLE>

The Company maintains a discretionary profit sharing plan for certain of its
salaried and hourly employees who vest after meeting certain minimum age and
service requirements. Profit sharing plan expense is comprised as follows:

<TABLE>
<CAPTION>
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
Ply Gem common stock........................... $1,181,000 $1,155,000 $1,080,000
Cash........................................... 170,000 677,000 656,000
---------- ---------- ----------
$1,351,000 $1,832,000 $1,736,000
========== ========== ==========
</TABLE>

One of the Company's subsidiaries maintains a 401(k) plan for its salaried
employees which provides for a 1/3 match of the first six percent of employee
contributions. The matched portion totaled $187,000 in 1993; $187,000 in 1992
and $173,000 in 1991.

NOTE 11 -- STOCK OPTION PLANS

The Company's Executive Incentive Stock Option Plan provides for the granting
of options to key employees to purchase up to 2,037,500 shares of common stock.
Option prices must be 100% of fair market value at date of grant except for an
employee who owns in excess of 10% of the common stock outstanding, in which
case the exercise price is 110% of the fair market value at date of grant.
Options are exercisable in full or in part after one year from the date of
grant and expire within ten years (within five years for an employee owning in
excess of 10% of the outstanding common stock). Shares acquired must be held
for one year.

The Senior Executive Stock Option Plan ("the Senior Plan") authorizes the
granting of either incentive or non-qualified stock options only to executives
of businesses acquired by the Company or to newly employed executives. The
Senior Plan provides for 750,000 shares of the Company's common stock to be
reserved for issuance.

The 1989 Employee Incentive Stock Plan ("the 1989 Plan") authorizes the
granting of incentive and non-qualified stock options and awards of restricted
stock and is to be made available to executives and key employees of the
Company. As in the Senior Plan, option terms and holding and exercise periods
may vary except that no option may be exercised more than ten years after date
of grant. Stock awarded under the Plan will be subject to restrictions as to
sale or transfer. These restriction may lapse or be waived based on
performance, period of service or other factors. The 1989 Plan provides for
3,500,000 shares of the Company's common stock to be reserved for issuance.

23
<PAGE>

PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

In 1991, the Company granted 250,000 shares of restricted stock to an
executive officer of the Company. The restrictions of these shares will be
released at the rate of 25,000 shares per year upon the attainment of certain
profit goals and the continued employment of the officer. The restrictions will
be lifted in the event of a change in control of the Company. The unamortized
restricted stock resulting from this stock award has been deducted from
stockholders' equity and is being written off over ten years at the fair market
value on the dates the restrictions are lifted.

For the three years ended December 31, 1993, option activity was as follows:

<TABLE>
<CAPTION>
INCENTIVE OPTION PLAN NON QUALIFIED OPTIONS
------------------------ ------------------------
NUMBER OF NUMBER OF OPTION
SHARES OPTION PRICES SHARES PRICES
--------- ------------- --------- -----------
<S> <C> <C> <C> <C>
Outstanding, January 1, 1991 1,145,050 5.50-14.25 2,482,250 7.50-16.00
1991
Granted................... 295,500 6.63- 7.13 453,500 5.63- 7.38
Exercised................. (9,000) 5.50
Cancelled................. (36,900) 8.50-12.25 (35,500) 6.63-12.13
--------- ----------- --------- -----------
Outstanding, December 31,
1991 1,394,650 5.50-14.25 2,900,250 5.63-16.00
1992
Granted................... 289,675 9.75 539,000 6.75- 9.75
Exercised................. (77,880) 5.50-12.25 (64,930) 6.63-12.13
Cancelled................. (76,400) 6.63-12.25 (13,750) 6.63-12.13
--------- ----------- --------- -----------
Outstanding, December 31,
1992 1,530,045 5.50-14.25 3,360,570 5.63-16.00
1993
Granted................... 45,000 10.25-10.38 1,071,550 10.38-12.63
Exercised................. (198,370) 5.50-10.75 (123,320) 6.63-12.13
Cancelled................. (35,750) 6.63-12.25 (45,700) 8.38-12.13
--------- ----------- --------- -----------
At December 31, 1993
Outstanding............... 1,340,925 6.63-14.25 4,263,100 5.63-16.00
Exercisable............... 1,012,625 6.63-14.25 4,256,000 5.63-16.00
Available for future
grant.................... 144,821 1,069,525(a)
--------- ----------- --------- -----------
</TABLE>
- --------
(a) May be used for incentive and non qualified options and for restricted
stock.

NOTE 12 -- COMMITMENTS AND CONTINGENCIES

LEASES

The Company leases certain of its manufacturing, distribution and office
facilities as well as some transportation and manufacturing equipment under
noncancellable leases expiring at various dates through 2017. Certain of the
real estate leases contain escalation clauses and generally provide for payment
of various occupancy costs.

24
<PAGE>

PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Future minimum lease payments under capital and operating leases, together
with the present value at December 31, 1993 of net minimum lease payments of
capital leases are as follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
---------- -----------
<S> <C> <C>
Year ending December 31,
1994............................................... $ 51,000 $14,802,000
1995............................................... 48,000 11,453,000
1996............................................... 48,000 10,125,000
1997............................................... 49,000 7,211,000
1998............................................... 30,000 5,986,000
Subsequent years through 2017...................... 7,018,000 48,053,000
---------- -----------
Net minimum lease payments........................... 7,244,000 $97,630,000
===========
Amount representing interest......................... 40,000
----------
Present value of net minimum lease payments (includ-
ing $38,000 payable within one year)................ $7,204,000
==========
</TABLE>

Rental expense for operating leases amounted to approximately $21,224,000 in
1993, $20,146,000 in 1992, and $17,694,000 in 1991.

HOOVER TREATED WOOD PRODUCTS, INC. ("HOOVER")

Hoover, a wholly-owned subsidiary of the Company, is a defendant, along with
many other parties, in a number of commercial lawsuits, including a purported
class action on behalf of certain Maryland homeowners, alleging property damage
caused by alleged defects in certain pressure treated interior wood products it
produced and sold through August, 1988. The Company is also a defendant in many
of these suits. The number of lawsuits pending as of December 31, 1993, as well
as the number of lawsuits filed in 1993, has declined significantly.

Many of the suits and claims have been settled. In those suits that remain
pending, direct defense costs are being paid by either insurance carriers,
under reservations of rights agreements, or out of insurance proceeds. Two
actions have proceeded to trial against Hoover and resulted in jury verdicts
against it. In one of these actions, judgment was entered in Hoover's favor by
the court after a jury verdict against it and the plaintiff's petition to
appeal from the judgment entered in Hoover's favor has been denied. Hoover is
appealing the other judgment and believes that it has meritorious grounds for
overturning it in whole or in part. Certain carriers have brought actions
challenging coverage. Hoover and the Company believe they have meritorious
claims for coverage, are defending these actions, have counterclaimed and are
seeking declaratory judgments confirming coverage. Many of the coverage claims
have been settled and proceeds from those settlements, along with the proceeds
from a settlement of claims by Hoover against certain suppliers of materials
used by it in the production of treated wood, are available for the settlement
of the underlying property damage actions, including the jury verdict now on
appeal. Hoover believes that its remaining coverage disputes will be resolved
and a substantial amount of additional coverage will be available to it.

Hoover and the Company are vigorously defending those lawsuits which cannot
be resolved on a reasonable basis and believe that they have meritorious
defenses to those suits including, in the case of the Company, the defense that
it has been improperly joined, as it did not manufacture or market the Hoover
products at issue, and is not legally liable for the damage allegedly caused by
them.

In evaluating the effect of the lawsuits, the Company has considered a number
of factors, including: the number and exposure posed by the pending lawsuits;
the significant decline in the number of lawsuits filed in

25
<PAGE>

PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

1993; the availability of various legal defenses, including statutes of
limitation, the existence of settlement protocols, an agreement indemnifying
Hoover as to certain past and future claims and Hoover's experience in settling
with its insurance companies and the likely availability of additional
insurance. The Company estimates that the future cost of resolving those
matters not presently covered by existing settlements with insurance carriers
and suppliers is sixteen million dollars, which it expects will be covered by
future recoveries from additional insurance carriers. Based on its evaluation,
the Company believes that the ultimate resolution of the lawsuits and the
insurance claims will not have a material adverse effect upon the financial
position of the Company.

EXECUTIVE COMPENSATION

In the event of a change in control of the Company, as defined in resolutions
adopted by the Board of Directors, senior management, except for the chairman,
have the right to receive payments upon termination of employment or
resignation within one year. Such payments are to be 2.75 times average annual
compensation, as defined, plus 2.75 times the difference between the market and
exercise price of any unexercised incentive stock options. At December 31,
1993, the maximum amount payable, applicable to twenty-five individuals, would
be approximately $14,783,000 attributable to compensation and $15,248,000 to
the options.

LETTERS OF CREDIT

At December 31, 1993 $22,580,000 of letters of credit issued by the Company's
banks were outstanding, principally in connection with certain financing
transactions.

OTHER

The Company and its subsidiaries are subject to legal actions from time to
time which have arisen in the ordinary course of its business. In the opinion
of management, the resolution of these claims will not have a material adverse
effect upon the financial position of the Company.

NOTE 13 -- INDUSTRY SEGMENT

The Company operates predominantly in one business segment. Operations in the
Home Improvement Products Business consist of the manufacture and sale of
exterior vinyl siding, wood and vinyl-framed windows and patio doors,
prefinished decorative plywood and solid wood paneling, furniture components
and various pressure-treated wood products and the purchase and resale of a
variety of other products for the home improvement and industrial markets. One
customer accounted for 12.2% and 11.2% of the Company's net sales for the years
ended December 31, 1993 and December 31, 1992, respectively.

26
<PAGE>

PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 14 -- QUARTERLY RESULTS (UNAUDITED)

<TABLE>
<CAPTION>
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
----------- ----------- ----------- -----------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Year Ended December 31, 1993:
Net Sales.................... $146,347 $184,422 $208,966 $182,925
Gross Profit................. 26,009 35,900 40,772 35,708
Net Income (Loss)............ (2,046) 3,447 5,260 2,989
Per Share:
Primary.................... (.19) .31 .44 .23
Fully Diluted.............. (.19) .31 .41 .23
Year Ended December 31, 1992:
Net Sales.................... $128,044 $166,701 $176,638 $151,799
Gross Profit................. 22,624 34,429 38,460 33,576
Net Income (Loss)............ (2,673) 2,779 4,400 1,800
Per Share:
Primary.................... (.25) .24 .39 .16
Fully Diluted.............. (.25) .24 .38 .16
</TABLE>

Earnings per share calculations for each of the quarters presented are based
on the weighted average number of shares and common equivalent shares
outstanding during such periods. The sum of the quarters may not necessarily be
equal to the full year earnings per share amounts.

27
<PAGE>

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

NONE

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The information required is incorporated by reference from the Proxy
Statement prepared with respect to the Annual Meeting of Stockholders to be
held on May 12, 1994.

ITEM 11. EXECUTIVE COMPENSATION.

The information required is incorporated by reference from the Proxy
Statement prepared with respect to the Annual Meeting of Stockholders to be
held on May 12, 1994.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The information required is incorporated by reference from the Proxy
Statement prepared with respect to the Annual Meeting of Stockholders to be
held on May 12, 1994.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The information required is incorporated by reference from the Proxy
Statement prepared with respect to the Annual Meeting of Stockholders to be
held on May 12, 1994.

28
<PAGE>

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a) The following documents are filed as part of this report:

Financial Statements:

The list of consolidated financial statements is set forth in Part II, Item 8
of this Form 10-K and such Index to Consolidated Financial Statements is
incorporated herein by reference.

Financial Statement Schedules:

The financial statement schedules that are required by Part II, Item 8 of
this Form 10-K, will be filed by amendment.

Exhibits:

<TABLE>
<C> <S> <C>
3(a) Registrant's By-Laws as currently in effect is
incorporated by reference herein to the Registrant's
Annual Report on Form 10-K for the year ended December 31,
1992.
3(b) Registrant's Certificate of Incorporation, and all
amendments thereto is incorporated by reference herein to
the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1992.
4(a) Indenture, dated as of October 1, 1988, between the
Registrant and the Bank of Montreal Trust Company, is
incorporated by reference herein from the Registrant's
Current Report on Form 8-K dated November 10, 1988.
4(b) Security Indenture and Trust Agreement, dated as of
October 1, 1988, between the Registrant and Chemical Bank,
is incorporated by reference herein from the Registrant's
Current Report on Form 8-K dated November 10, 1988.
10(iii)(a) Registrant's 1989 Employee Incentive Stock Plan is
incorporated by reference herein from the Registrant's
Registration Statement on Form S-8 (Registration Number
33-28753), as amended by the Company's Registration
Statement on Form S-8 (Registration Number 33-52514).
10(iii)(b) Registrant's 1989 Senior Executive Stock Option Plan is
incorporated by reference herein from the Registrant's
Registration Statement on Form S-8 (Registration Number
33-28752).
10(iii)(c) Registrant's Executive Incentive Stock Option Plan is
incorporated herein by reference from the Registrant's
Registration Statement on Form S-8 (Registration Number 2-
84279), as amended by the Registrant's Registration
Statement on Form S-8 (Registration Number 33-52516).
10(iii)(d) Employment agreements with Ralph Delman, Herbert P.
Dooskin, Joseph Goldenberg, Monte R. Haymon, Donald Kruse
and Jeffrey S. Silverman.
11 Schedule of Computation of Net Income per Share.
12 Computation of Ratio of Earnings to Fixed Charges.
21 Subsidiaries of the Registrant.
23 Consent of Independent Certified Public Accountants.
</TABLE>

(b) Reports on Form 8-K

On December 15, 1993 the Company reported the approval of an employment
agreement with Monte R. Haymon, President, Chief Operating Officer and a
Director of the Company, effective January 3, 1994.

29
<PAGE>

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.

Ply Gem Industries, Inc.
(Registrant)

/s/ Jeffrey S. Silverman
By: _________________________________
JEFFREY S. SILVERMAN, CHAIRMAN
(MARCH 28, 1994)

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.

NAME TITLE DATE

/s/ Jeffrey S. Silverman Chairman, Chief March 28, 1994
- ------------------------------------- Executive Officer
JEFFREY S. SILVERMAN (Principal
Executive Officer)
and Director

/s/ Herbert P. Dooskin Executive Vice March 28, 1994
- ------------------------------------- President and
HERBERT P. DOOSKIN Director

/s/ Stanford Zeisel Secretary and March 28, 1994
- ------------------------------------- Treasurer
STANFORD ZEISEL (Principal
Financial Officer)

/s/ Jerome Baum Controller March 28, 1994
- -------------------------------------
JEROME BAUM

/s/ Albert Hersh Director March 28, 1994
- -------------------------------------
ALBERT HERSH

/s/ Elihu H. Modlin Director March 28, 1994
- -------------------------------------
ELIHU H. MODLIN

30
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
PAGE
EXHIBIT NO.
------- ----
<C> <S> <C>
3(a) Registrant's By-Laws as currently in effect is
incorporated by reference herein to the Registrant's
Annual Report on Form 10-K for the year ended December
31, 1992.
3(b) Registrant's Certificate of Incorporation, and all
amendments thereto is incorporated by reference herein to
the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1992.
4(a) Indenture, dated as of October 1, 1988, between the
Registrant and the Bank of Montreal Trust Company, is
incorporated by reference herein from the Registrant's
Current Report on Form 8-K dated November 10, 1988.
4(b) Security Indenture and Trust Agreement, dated as of
October 1, 1988, between the Registrant and Chemical
Bank, is incorporated by reference herein from the
Registrant's Current Report on Form 8-K dated November
10, 1988.
10(iii)(a) Registrant's 1989 Employee Incentive Stock Plan is
incorporated by reference herein from the Registrant's
Registration Statement on Form S-8 (Registration Number
33-28753), as amended by the Company's Registration
Statement on Form S-8 (Registration Number 33-52514).
10(iii)(b) Registrant's 1989 Senior Executive Stock Option Plan is
incorporated by reference herein from the Registrant's
Registration Statement on Form S-8 (Registration Number
33-28752).
10(iii)(c) Registrant's Executive Incentive Stock Option Plan is
incorporated herein by reference from the Registrant's
Registration Statement on Form S-8 (Registration Number
2-84279), as amended by the Registrant's Registration
Statement on Form S-8 (Registration Number 33-52516).
10(iii)(d) Employment agreements with Ralph Delman, Herbert P.
Dooskin, Joseph Goldenberg, Monte R. Haymon, Donald Kruse
and Jeffrey S. Silverman.
11 Schedule of Computation of Net Income per Share.
12 Computation of Ratio of Earnings to Fixed Charges.
21 Subsidiaries of the Registrant.
23 Consent of Independent Certified Public Accountants.
</TABLE>

<PAGE>

(LETTERHEAD OF SAGEBRUSH SALES INC. APPEARS HERE)

September 1, 1992

Mr. Donald Kruse
Sagebrush Sales, Inc.
6300 State Road 303
Albuquerque, New Mexico 87105

Dear Mr. Kruse:

Reference is made to your Employment Agreement dated as of February 9,
1988, pursuant to which you were employed for a period of up to five (5) years
as President of Sagebrush Sales, Inc. This letter shall constitute an
extension, modification and amendment to the aforementioned Employment
Agreement as follows:

1. Paragraph 2 shall be modified so that the Employment Term set forth
therein shall be extended and shall terminate upon the earlier of (a) February
9, 1998; or (b) the date on which the Employment Term is terminated pursuant
to any of the other provisions of Section 9 of the Employment Agreement.

2. A new Paragraph 9(e) is added as follows:

"(e) Subsequent to August 9, 1995, the Employment Term shall
terminate upon six months' advance notice thereof given by the Employee to
the Employer."

3. Exhibit A to the Employment Agreement shall be deemed amended so as
to provide that the Management Bonus Pool shall remain in effect during the
Employment Term including any extensions of the Employment Term.

4. Paragraph 4(a) is amended to indicate that the current compensation
is at the rate of $163,000.00 per annum which may be increased from time to
time by the Board of Directors of Sagebrush Sales, Inc.

<PAGE>

Mr. Donald Kruse
Page 2 September 1, 1992

5. A new Paragraph 5(d) is added to the Employment Agreement as follows:

"(d) During the Employment Term, the Employer shall use its best
efforts to keep Lincoln National Life Insurance Policy No. 2007173401 in
full force and effect."

6. Exhibit B shall be deemed amended to provide that Employee shall be
entitled to six weeks vacation per year effective after five year's
employment.

Except as modified and amended herein the Employment Agreement shall
remain in full force and effect.

Very truly yours,

SAGEBRUSH SALES, INC.

By:
-----------------------------

AGREED TO:

By:
--------------------------
Donald Kruse

<PAGE>

EMPLOYMENT AGREEMENT
--------------------

AGREEMENT, made as of the 9th day of February, 1988, by and between
SAGEBRUSH SALES, INC., a New Mexico corporation, having its principal offices
at 6300 State Road, 47 Southeast, Albuquerque, New Mexico 87125 (the
"Employer"), and DONALD F. KRUSE, an individual residing at 1524 Sagebrush
Trail SE, Albuquerque, New Mexico 87123 (the "Employee").

W I T N E S S E T H:
- - - - - - - - - -

WHEREAS, pursuant to a certain Stock Purchase Agreement among the
Employer, Gordon K. Runyon, the Employee and Hoover Treated Wood Products,
Inc. ("Hoover"), dated February 1, 1988 (the "Stock Purchase Agreement"),
Hoover has acquired all of the capital stock of the Employer;

WHEREAS, the Employee, prior to the date hereof, was the owner of 61.57%
of the outstanding shares of the Employer and has been employed by and has
served as President of the Employer and has served in such capacity since
1969;

WHEREAS, in connection with the Stock Purchase Agreement, the Employer
and the Employee desire to enter into an arrangement pursuant to which the
Employee will serve as an

<PAGE>

executive officer of the Employer upon the terms and conditions set forth in
this Agreement; and

WHEREAS, the Employer desires to retain the Employee's knowledge,
experience and abilities, and the Employee is willing to accept employment
with the Employer, all upon the terms and conditions hereinafter set forth.

NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants contained in this Agreement, the Employer and the Employee hereby
agree as follows:

1. Employment. Subject to the terms and conditions hereinafter set
----------
forth, the Employer hereby employs the Employee as President of the Employer,
and the Employee hereby accepts such employment.

2. Term. The term of employment of the Employee by the Employer
----
pursuant to this Agreement (the "Employment Term") shall commence on the date
hereof and shall terminate upon the earliest of (a) the fifth anniversary of
the execution of this Agreement; or (b) the date on which the Employment Term
is terminated pursuant to any of the other provisions of Section 9 of this
Agreement.

3. Employment Services. During the Employment Term, the Employee shall
-------------------
render his services to the Employer as President of the Employer or in such
other capacities as the

-2-

<PAGE>

Board of Directors of the Employer may, from time to time, designate. The
Employee shall hold, without additional compensation therefor, such offices or
membership of the Board of Directors, or Committees thereof, of the Employer
and/or any subsidiary or affiliate of the Employer to which, from time to time
during the Employment Term, the Employee may be elected or appointed. During
the Employment Term, the Employee shall devote his full business time, efforts
and his entire energy and skill to the business of the Employer and its
subsidiaries and affiliates in accordance with the reasonable directions and
orders of the Board of Directors or an appropriate executive officer of the
Employer or the Employer's parent, and will use his best efforts to promote
the interests thereof and will not engage in any other business or business
activity. The Employee shall render his services with due regard for the
prompt, efficient and economical operation of the business of the Employer and
its subsidiaries and affiliates to the end of maximizing the profitability of
the Employer and its subsidiaries and affiliates. The Employer agrees that the
Employee's duties will be substantially similar to those performed by the
Employee for Employer prior to the date hereof.

4. Compensation.
------------

(a) In consideration of the services to be rendered by the Employee
as an employee of the Employer

-3-

<PAGE>

pursuant to this Agreement, including, without limitation, any services which
may be rendered by the Employee as an officer or member of any Board of
Directors, or Committees thereof, of the Employer or any subsidiary or
affiliate of the Employer, the Employer shall pay or cause to be paid to the
Employee during the Employment Term, and the Employee shall accept,
compensation at the rate of $126,000 per annum. The foregoing salary shall
commence on the date hereof and shall be payable in bi-weekly installments
during the Employment Term. In the event of the termination of the Employment
Term, the unpaid portion of the salary payable to the Employee on account of
periods prior to the date of termination shall be computed and paid to the
Employee. The Employee's salary shall be subject to all applicable withholding
and other taxes.

(b) The Employee shall also participate in the Management Bonus Pool
Plan, the form of which is annexed hereto as Exhibit A (the "Pool"), in
accordance with the terms thereof and for so long as the Pool is in effect.

5. Employment Benefits. During the Employment Term the Employee shall
-------------------
be entitled to the following employment benefits:

(a) During the Employment Term, the Employee shall receive such
benefits, rights and privileges no less favorable than those the Employee
received under the Employer's medical, disability and death benefit plans
prior to the date hereof, all as identified in Exhibit B annexed hereto.

-4-

<PAGE>

(b) During the Employment Term, the Employee shall cooperate with
the Employer in obtaining any insurance on the life of the Employee which the
Employer may desire to obtain for its own benefit and shall undergo such
physical and other examinations as the Employer may request in connection with
the issuance of one or more of such policies of insurance.

(c) The Employee, shall have the option to purchase up to an
aggregate of 20,000 shares of common stock of Ply-Gem Industries, Inc.
("Ply-Gem") in accordance with the terms and conditions of the Option
Agreement the form of which is annexed hereto as Exhibit C.

6. Severance Compensation.
----------------------

In the event the Employment Term is terminated by Employer without
cause, Employer shall pay to Employee, in monthly installments, severance
compensation in an amount equal to the salary Employee would have received
pursuant to Section 4 of this Agreement for the Employment Term; provided,
however, Employer shall have no liability under this Section 6 if Employee is
terminated for cause (as defined in Section 9). Such severance compensation
shall represent liquidated damages and shall be reduced by any salary paid to
Employee to his satisfaction of his obligation to mitigate damages in
accordance with the provisions of Section 9(d) hereof. Employee shall not be
entitled to any other compensation or

-5-

<PAGE>

benefits under this Agreement after the termination of the Employment Term and
shall have no other claim against the Employer or Ply-Gem by reason of this
Agreement.

7. Ply-Gem Corporate Severance Pay Program.
---------------------------------------

The Employee shall be a "Designated Executive" and shall be included
in the Ply-Gem Corporate Severance Pay Program as adopted and approved August
7, 1985, a copy of which is annexed hereto as Exhibit D.

8. Expenses.
--------

During the Employment Term, the Employer will reimburse the Employee,
upon presentation of proper vouchers, for all actual travel, entertainment and
other out-of-pocket expenses which are reasonably and necessarily incurred by
the Employee in the performance of his duties hereunder and to the extent that
they are deductible in whole or in part by the Employer under the then
effective Internal Revenue Code and the rules and regulations promulgated
thereunder.

9. Termination.
-----------

(a) The Employer may at any time, and in its sole discretion,
immediately terminate this Agreement and the Employment Term for cause by
written notice to the Employee specifying the nature of such cause. For
purposes of this Agreement, "cause" shall include, without limitation, breach
of any of the terms of this Agreement (including, without

-6-

<PAGE>

limitation, the provisions of Section 12 of this Agreement), breach of the
Stock Purchase Agreement, fraud, conviction of a felony, habitual drunkenness,
use of illegal substances, gross incompetence, malfeasance, misappropriation,
dishonesty, embezzlement or similar misconduct by the Employee, willful
failure of the Employee to perform the duties of his employment, failure of
the Employee to follow the directions of the Board of Directors of the
Employer, other willful misconduct, or similar conduct or activities by or on
the part of the Employee.

(b) In the event that at any time during the Employment Term, the
Employee, due to physical or mental injury, illness, disability or incapacity,
shall fail to render satisfactorily the services to be performed by the
Employee pursuant to this Agreement either for a consecutive period of three
(3) months or for a non-consecutive period of five (5) months within any
twelve month period, the Employer may, at its option, place the Employee on
disability leave at a salary equal to one-half of the fixed salary which the
Employee is receiving pursuant to Section 4 at the time of the occurrence of
such injury, illness, disability or incapacity, for a period of six (6)
months, and, after the expiration of such six month period, the Employer shall
have the option to terminate this Agreement and the Employment Term upon not
less than thirty (30) days' written notice to the Employee. Any payments which
are made to or for the benefit of the Employee under any group

-7-

<PAGE>

or individual policy of disability insurance maintained or paid for by the
Employer shall reduce the amounts payable by the Employer to the Employee
pursuant to this Paragraph (b).

(c) If the Employee shall die during Employment Term, the Employment
Term shall terminate immediately upon the death of the Employee.

(d) In the event that the Employer terminates this Agreement for any
reason, the Employee shall use his best efforts to obtain substitute
employment and to mitigate any damages including any liquidated damages
payable pursuant to Section 6 hereof which may be payable by the Employer to
the Employee by reason of such termination.

10. Conflicting Agreements. The Employee hereby represents and warrants
----------------------
to the Employer that (a) neither the execution of this Agreement by the
Employee nor the performance by the Employee of any of the obligations or
duties of the Employee under this Agreement will conflict with or violate or
constitute a breach of the terms of any employment or other agreement to which
the Employee is a party or by which the Employee is bound, and (b) the
Employee is not required to obtain the consent of any person, firm,
corporation or other entity in order to enter into this Agreement or to
perform any of the obligations or duties of the Employee hereunder.

11. Inventions, Discoveries, Etc. The Employee hereby assigns, and shall
----------------------------
promptly and fully disclose and

-8-

<PAGE>

assign to the Employer, any and all inventions, discoveries, improvements,
developments, concepts and ideas which relate to any activities of the
Employer or any of the subsidiaries or affiliates of the Employer, whether or
not patentable and whether or not conceived, developed or reduced to practice
by the Employee alone or by himself and others, or both, during the period of
his employment with the Employer or with any affiliate or subsidiary of the
Employer.

12. Non-Disclosure of Confidential Information and Non-Competition.
--------------------------------------------------------------

(a) The Employee acknowledges that it is the policy of the
Employer to maintain as secret and confidential all valuable and unique
information and other information required by the Employer as confidential
heretofore or hereafter acquired, developed or used by the Employer or any
affiliate or subsidiary of the Employer relating to the business, operations,
employees, suppliers and customers of the Employer and of the subsidiaries and
affiliates of the Employer (all such information is hereinafter referred to as
"Confidential Information"). The parties recognize that the services to be
performed by the Employee pursuant to this Agreement are special and unique,
and that by reason of his employment by the Employer prior to the date hereof
after the date hereof, the Employee has acquired and will acquire Confidential
Information. The Employee recognizes that all such Confidential Information is
the property of the Employer and

-9-

<PAGE>

its subsidiaries and affiliates. In consideration of the Employee's employment
with the Employer pursuant to this Agreement, the Employee agrees that:

(i) except as required by the duties of his employment, without
the prior written consent of the Board of Directors of the Employer,
the Employee shall never, directly or indirectly, either during or
after the Employment Term, use, publish, disseminate or otherwise
disclose any Confidential Information obtained, whether prior or
subsequent to the date hereof, during his employment with the
Employer or any affiliate or subsidiary of the Employer;

(ii) both during and after the Employment Term, the Employee
shall exercise all due and diligent precautions to protect the
integrity of the business plans, customer lists, statistical data and
compilations, agreements, contracts, manuals or other documents of
the Employer and its subsidiaries and affiliates which embody any
Confidential Information, and upon the expiration or termination of
the Employment Term, the Employee shall return to the Employer and its
subsidiaries and affiliates all such documents (and copies thereof)
which are in the possession or under the control of the Employee.

The Employee agrees that the provisions of this Paragraph (a) are reasonably
necessary to protect the proprietary rights of

-10-

<PAGE>

the Employer and the subsidiaries and affiliates of the Employer in the
Confidential Information and their trade secrets, goodwill and reputation.

(b) During his employment with the Employer and for a period of
three (3) years after the expiration or termination, for any reason
whatsoever, of the Employment Term, the Employee shall not, in any manner, be
engaged, directly or indirectly, within the States of Arizona, Colorado, New
Mexico or Texas, or any other geographic area for which Employee has
significant sales, marketing or other responsibilities for Employer, Hoover,
Ply-Gem or their Affiliates during the aforesaid three-year period (or for
such lesser period of time or for such lesser geographical area as may be
determined by a court of law or equity to be a reasonable limitation on the
competitive activities of the Employee) as an employee, partner, officer,
director, owner, representative, consultant, agent or stockholder of any
corporation, partnership, proprietorship or other form of business entity,
other than the Employer, (1) which is engaged in any business which is or was
competitive with any business conducted by the Employer or by any subsidiary
or affiliate of the Employer; or (2) which manufactures or distributes any
products similar to those which were manufactured or distributed at any time
during the Employment Term either by the Employer or by any subsidiary or
affiliate of the Employer. The Employee shall not, either during the
Employment Term or for a period of three (3) years

-11-

<PAGE>

after the expiration or termination, for any reason whatsoever, of the
Employment Term, other than in his capacity as an employee of the Employer,
(i) seek to persuade any director, officer or employee of the Employer or any
subsidiary or affiliate of the Employer to discontinue that individual's
status or employment with the Employer or any such subsidiary or affiliate of
the Employer or to become employed in any activity similar to or competitive
with the activities of the Employer or any subsidiary of affiliate of the
Employer; (ii) hire or retain any such person at any time within twelve (12)
months following the date of cessation of employment of such person with the
Employer or any subsidiary or affiliate of the Employer; or (iii) solicit (or
cause or authorize), directly or indirectly, to be solicited, for or on behalf
of himself or any third party, any business from others who were, at any time
within five (5) years prior to the expiration or termination of the Employment
Term, customers of the Employer or any subsidiary or affiliate of the
Employer. The Employer and the Employee acknowledge that nothing contained in
this Section 12 shall prohibit the Employee from acquiring equity securities of
a publicly held company engaged in the activities specified in (i) above which
in the aggregate do not exceed 5% of the equity securities of such publicly
held company, or a greater percentage if the activities specified in (i) above
constitute an insubstantial part of the business of such publicly held
company.

-12-

<PAGE>

13. The Company's Right to Injunctive Relief. The Employee acknowledges
----------------------------------------
that the services to be rendered by the Employee to the Employer are of a
unique character which gives them a special value to the Employer and its
subsidiaries and affiliates. The Employee further acknowledges that any breach
or threatened breach by the Employee of any of the provisions of Section 11 or
Section 12 hereof will result in irreparable and continuing harm to the
Employer and its subsidiaries and affiliates for which the Employer and its
subsidiaries and affiliates would have no adequate remedy at law. Therefore,
in addition to any other remedy which the Employer and its subsidiaries and
affiliates may have at law or in equity, the Employer and its subsidiaries and
affiliates shall be entitled to injunctive relief or other equitable remedies
in the event of any such breach or threatened breach.

14. Invalidity of Covenants. The parties acknowledge that the laws and
-----------------------
public policies of the various states of the United States and the District of
Columbia may differ as to the validity and enforceability of the covenants
contained in Section 12. It is the intention of the parties that activities of
Employee be restricted only to the extent necessary for the protection of
legitimate business interests of Employer, that the provisions of this
paragraph shall, to the fullest extent

-13-

<PAGE>

permissible under the law and public policy, be enforced by the courts of each
state and jurisdiction in which enforcement is sought, and that the
unenforceable (or the modification necessary to conform the covenants
contained in Section 12 with such law and public policy) part of Section 12
shall be adjudicated to be invalid or unenforceable without affecting any
other part of Section 12. Accordingly, if any part of Section 12 shall be
adjudicated to be invalid or unenforceable in any action or proceeding in
which Employee, or Employee's heirs, executors or administrators and Employer,
its successors or assigns, are parties, whether in its entirety or as modified
as to duration, territory or to otherwise, then such part shall be deemed
modified so as to be enforceable or, if required, deleted from the Agreement
or amended, as the case may be, in order to render the remainder of Section 12
valid and enforceable. Any such deletion or amendment shall apply only where
the court rendering the same has jurisdiction. The invalidity or
unenforceability of any particular provision of this Agreement shall not
affect the other provisions hereof, and this Agreement shall be construed in
all respects as if such invalid or unenforceable provision were omitted.

15. Signing Bonus. (a) In consideration of the Employee's execution of
-------------
this Agreement, the Employee shall receive from the Employer by check or wire
transfer, an amount equal to thirty-three and 34/100 percent (33.34%) of the
income

-14-
<PAGE>

before taxes, cumulative effect of changes in accounting principles and
extraordinary items of the Employer during the period October 1, 1987 through
December 31, 1987 determined as set forth in paragraph (b) below, which shall
be paid to Kruse within ten (10) days after determination pursuant to
paragraph (b). For purposes of this paragraph, calculation of income before
taxes shall not include a deduction for the payment of the signing bonus
payable hereunder or the signing bonus payable to Gordon K. Runyon pursuant to
his employment agreement with the Company.

(b) On or before February 29, 1988 the Employer shall have had the
independent certified public accountants for the Employer, Ernst & Whinney
("E&W"), prepare a financial statement of the Employer for the three months
ending December 31, 1987 (the "December 1987 Interim Financial Statements")
and prepare a review report thereon. Such statement shall have been prepared
in accordance with generally accepted accounting principles applied on a basis
consistent with the 1987 Financial Statements and such review shall have been
performed in accordance with standards established by the American Institute
of Certified Public Accountants. Upon the conclusion of such review, E&W shall
have delivered its review report (the "Auditor's Report") to Hoover, the
Employer and the Employee to the effect that their examination of the December
1987 Interim Financial Statements was made in accordance with generally

-15-

<PAGE>

accepted auditing standards and that they are not aware of any
material modifications that should be made to the December 1987 Interim
Financial Statements in order for them to be in accordance with generally
accepted accounting principles.
Hoover shall have had the right, through its own personnel or its own
independent certified public accountants, and at its own expense, to consult
with E&W, review their work papers and all memoranda in connection with
such review and familiarize themselves with the performance of the review. In
the event that Hoover does not agree with the determination of income before
taxes, cumulative effect of changes in accounting principles and extraordinary
items, Hoover shall, within seven (7) business days after the date on which the
December 1987 Interim Financial Statements are furnished to Hoover, deliver
to the Employer or the Employee a letter stating the specific respects in
which Hoover disagrees with such determination. Hoover, the Employer
represented by its stockholder Hoover, and the Employee shall then consult to
resolve the matters in dispute and, if necessary, the determination shall be
revised to reflect such resolution. If, within five (5) business days after
the expiration of said 7-day period, Hoover and the Employee are unable to
resolve the matters in dispute, Hoover shall retain, at Hoover's expense, a
certified public accounting firm of national standing ("Hoover's Accountants")
to review the determination by E&W. In the event E&W and

-16-

<PAGE>

Hoover's Accountants have not resolved the matters in dispute within ten (10)
calendar days after the expiration of said 5-day period, such matters shall be
submitted to an independent accounting firm of recognized national standing,
whose decision as to such matters shall be conclusive and binding upon the
parties. Such independent accounting firm shall be selected by Hoover's
Accountants and E&W within two (2) business days after the expiration of said
10-day period, but if they are unable to agree on such an independent
accounting firm within said 2-day period, such firm shall be chosen by lot
from among the so-called "Big-Eight" accounting firms (other than any
accounting firm which has served Ply-Gem, Hoover or the Employer since January
1, 1982). Each party shall pay the fees and expenses of its own auditors under
this paragraph (b), but as to E&W, only those expenses incurred in resolving
any disagreement over its initial determination of income before taxes and
extraordinary items (the cost of the initial review to be borne by the
Employer) and one-half of the fees and expenses of any third independent
accounting firm, if required.

16. Notices. Any notice, request, information or other document to be
-------
given under this Agreement to any party hereunder by any other party hereunder
shall be in writing and delivered personally, or sent by registered or
certified mail, postage prepaid to the following addresses:

-17-

<PAGE>

If to the Employer:

Sagebrush Sales, Inc.
6300 State Road
47 Southeast
Albuquerque, New Mexico 87125
Attention: President

with copies to:

Hoover Treated Wood Products, Inc.
P.O. Box 746
Knox Shopping Center
Thomson, Georgia 30824
Attention: President

Ply-Gem Industries, Inc.
919 Third Avenue
New York, New York 10019
Attention: President

and

Spengler Carlson Gubar
Brodsky & Frischling
280 Park Avenue
New York, New York 10017
Attention: Edward Brodsky, Esq.

If to the Employee:

Donald F. Kruse
1524 Sagebrush Trail SE
Albuquerque, New Mexico 87123

with a copy to:

Threet & King
Suite 500 West Tower
6400 Uptown Blvd., N.W.
Albuquerque, New Mexico
Attention: M. Edwin Threet, Esq.

or to such other address as a party hereto may hereafter designate in writing
to the other party, provided that any notice of a change of address shall
become effective only upon receipt thereof.

-18-

<PAGE>

17. Benefit; Assignment.
-------------------
(a) This Agreement shall be binding upon and shall inure to the
benefit of the Employer and the Employee and their respective heirs, legal
representatives, successors and permitted assigns.

(b) This Agreement is personal to the Employee and the Employee may
not assign any of his rights or delegate any of his duties under this
Agreement.

18. Certain Definitions. For purposes of this Agreement, (a) a
-------------------
"subsidiary" of a corporation, person or entity shall mean any corporation,
partnership, firm or other entity in which such corporation, person or entity
holds an equity ownership interest of fifty percent (50%) or more; and (b) an
"affiliate" of a corporation, person or entity shall mean any corporation,
partnership, firm or other entity which controls, is controlled by, or is
under common control with, such corporation, person or entity.

19. Entire Agreement; Amendment. This Agreement contains the entire
---------------------------
understanding between the Employer and the Employee with respect to the
employment of the Employee and supersedes all prior negotiations and
understandings between the Employer and the Employee with respect to the
employment of

-19-
<PAGE>

the Employee by the Employer. This Agreement may not be amended or modified
except by a written instrument signed by both the Employer and the Employee.

20. Severability. In the event any one or more provisions of this
------------
Agreement is held to be invalid or unenforceable, such illegality or
unenforceability shall not affect the validity or enforceability of the other
provisions hereof and such other provisions shall remain in full force and
effect, unaffected by such invalidity or unenforceability.

21. Execution in Counterparts. This Agreement may be executed in any
-------------------------
number of counterparts, each of which shall be deemed to be an original, but
all of which together shall constitute one and the same instrument.

22. Governing Law. This Agreement is made and entered into in the State
-------------
of New York and shall be interpreted and construed in accordance with its laws
and judicial decisions.

-20-

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.

SAGEBRUSH SALES, INC.

By: (signature appears here)
--------------------------

(signature appears here)
--------------------------
DONALD F. KRUSE

Ply-Gem Industries, Inc. agrees to be bound by the provisions of Section 5(c)
and 7 of the foregoing Employment Agreement as of the date set forth above.

PLY-GEM INDUSTRIES, INC.

By: (signature appears here)
-------------------------
Executive Vice President

-21-

<PAGE>

EXHIBIT A
[to Kruse Employment
Agreement]

EXHIBIT A
---------
MANAGEMENT BONUS POOL PLAN
--------------------------

(a) Sagebrush Sales, Inc., a New Mexico corporation (the "Company"),
shall establish a management bonus pool (the "Pool") from which periodic bonuses
may be paid to certain of the Company's management employees. On or before each
March 31 in 1989, 1990, 1991, 1992, and 1993, the Company shall pay into the
Pool an aggregate amount equal to ten percent (10%) of the annual income
before taxes and extraordinary items of the Company (determined as hereafter
provided) up to the applicable Threshold Amount (as hereinafter defined) and
twenty percent (20%) of the annual income before taxes and extraordinary items
of the Company in excess of the applicable Threshold Amount for each of the
periods commencing on January 1 and ending on December 31, 1988, 1989, 1990,
1991 and 1992 (each such period being hereinafter referred to as a "Bonus
Period") immediately preceding the respective payment date. The amount to be
paid into the Pool shall be computed separately for each Bonus Period. For
purposes hereof, the Threshold Amount for each Period shall be $1,000,000.
The payments described in this Paragraph (a) shall cease to accrue after
December 31, 1992.

<PAGE>

(b) For purposes of calculating the amount to be paid into the Pool for
a Bonus Period (the "Pool Amount") the income before taxes, cumulative effect
of changes in accounting principles and extraordinary items of the Company
will be determined in conformity with generally accepted accounting principles
applied consistently with those used in preparing the September 30, 1987
Financial Statements (as defined in the Stock Purchase Agreement among the
Company, its shareholders and Hoover Treated Wood Products, Inc. ("Hoover"),
dated February 1, 1988 (the "Stock Purchase Agreement")) of the company except
that: (1) gain or loss on sales or dispositions of capital assets including,
without limitation, real property and equipment, shall be excluded; (2) no
charge shall be made for (A) amortization of any goodwill occasioned by the
transaction contemplated by the Stock Purchase Agreement, (B) depreciation of
fixed assets of the Company in excess of (x) depreciation on the actual cost
of assets acquired after the Closing Date under the Stock Purchase Agreement and
(y) depreciation that would be taken on assets owned by the Company on such
Closing Date based on the method of depreciation used by the Company for the
fiscal year ended September 30, 1987, (C) overhead, management or similar
charges of Hoover, Ply-Gem Industries, Inc. ("Ply-Gem") and their affiliates
(collectively the "Parent Group") other than the Company's allocable share of
professional fees, audit charges, insurance, compensation,

-2-

<PAGE>

profit sharing, employee stock ownership plan contributions, pension
contributions and other employee benefits and all other expenses which are
paid or accrued by the Parent Group for or on behalf of the Company; (D) bonus
payments made or accrued pursuant to this Management Bonus Pool Plan; (E)
payments made or accrued by Kruse and Runyon pursuant to respective Agreements
Not To Compete dated as of February __, 1988 with Hoover; and (F) Signing
Bonus payments made to Kruse and Runyon pursuant to respective Employment
Agreements dated as of February __, 1988 with the Company; and (3) interest
expense shall not include interest expense paid or accrued by the Parent Group
for the purchase of shares of the Company, but shall include any interest
expense paid or accrued by or on behalf of the Company for any of the
following purposes: (A) interest on indebtedness incurred by the Company in
the ordinary course of business or to acquire assets for use in the business
of the Company; (B) interest at the working capital rate charged by the Parent
Group to members of the Parent Group other than the Company on advances made
by the Parent Group to the Company; and (C) working capital charges by the
Parent Group to the Company at the same rates charged by members of the Parent
Group to members of the Parent Group other than the Company. The Company
shall cause its pre-tax income to be timely determined by the independent
certified public accountants (the "Accountant") retained by Ply-Gem to audit
the

-3-
<PAGE>

consolidated financial statements of the Parent Group for each Bonus Period.
Such report of the Accountant, so long as made in good faith and absent
manifest error, shall represent the final determination of the pre-tax income
of the Company and shall be valid and binding upon the Company and the
employees of the Company.

(c) For each Bonus Period, the Allocator (as such term is defined in
this paragraph (c)) shall determine in his sole discretion, which, if any, of
the Company's management employees, which may include the Allocator, shall
receive bonuses from the Pool and the amount of such bonuses. To be eligible
for any payment hereunder, a management employee of the Company, including
the Allocator, must be employed by the Company on the last day of the
applicable Bonus Period, unless the employee's termination during such Bonus
Period was due to his death, disability, or retirement after age 62. The
"Allocator", as such term is used herein, shall mean the President of the
Company in office at the end of any Bonus Period.

(d) The Pool Amount shall be determined utilizing the amount
reported as "Income Before Taxes and Extraordinary Items" in the Accountant's
Report (as defined in Paragraph (e)) for each Bonus Period, and the Board of
Directors of the Company shall cause the Pool Amount for each such Bonus
Period to be determined no later than ninety (90) days following the

-4-
<PAGE>

end of such Bonus Period. Within ten (10) days after the Allocator is notified
by the Board of Directors of the Company (the "Board") of the final
determination of the Pool Amount, the Allocator shall give the Board written
notice of the employees selected by the Allocator to receive a bonus from the
Pool and the amount of each bonus (the "Bonus List"). The Company shall
distribute such bonus payments immediately after the Board receives and
approves the Bonus List. The bonus payments shall be made in a single cash
payment to each recipient unless the Board and a bonus recipient have
otherwise previously agreed in writing.
(e) Until December 31, 1992, the Parent Group shall maintain separate
unconsolidated books and records for the Company, for internal review
purposes, and will, for a sixty (60) day period following each fiscal year end
of the Company, make such books and records reasonably available for
inspection by the Allocator and any accounting firm selected by the Allocator
whose fees shall be paid by the Allocator. The Company's Income Before Taxes
and Extraordinary Items shall be timely determined and reported by the
Accountant. The Accountant's report (the "Accountant's Report") shall be in
writing, shall set forth calculations made to reach the determination of the
Company's Income Before Taxes and Extraordinary Items, the manner in which the
determination was made and an opinion that the audit of Ply-Gem's consolidated

-5-

<PAGE>

financial statements was performed in accordance with generally accepted
audited standards and that as a result of such audit and the audit procedures
performed on the separate unconsolidated books and records of the Company,
nothing came to the Accountant's attention which indicates that the
calculation of the Company's Income Before Taxes and Extraordinary Items was
not performed in accordance with the terms contained herein. Failure of the
Allocator to object to the Accountant's Report within thirty (30) days shall
be conclusive acceptance thereof for all purposes.

-6-
<PAGE>

EXHIBIT B
[to Kruse Employment
Agreement]

EMPLOYER'S BENEFIT PLAN
-----------------------

1. Northbrook Life Insurance Co. Policy #64852246

a) $10,000.00 Term Life
b) Standard Group Health coverage

2. Crown Life Insurance Co. Policy #3,070,696

3. Transamerican Life Insurance Co. Policy #92009397

4. Vacation Policy - 3 weeks per year after 5 years
Sick Leave - 6 days per year

-22-
<PAGE>

EXHIBIT C

PLY-GEM INDUSTRIES, INC.

SELLERS STOCK OPTION AGREEMENT

STOCK OPTION AGREEMENT, made as of the 9th day of February, 1988, between
Ply-Gem Industries, Inc., a Delaware corporation (the "Company"), and
DONALD F. KRUSE, residing at 1524 Sagebrush Trail SE, Albuquerque, New Mexico
87105 ("Kruse").

W I T N E S S E T H:

WHEREAS, the Company desires to provide Kruse with an opportunity to
acquire Common Stock, $.25 par value ("Common Stock"), of the Company on
favorable terms as an inducement for Kruse's execution of an Employment
Agreement between Sagebrush Sales, Inc., a New Mexico corporation
("Sagebrush") and Kruse dated as of February 9, 1988.

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration, the parties hereto have
agreed and do hereby agree as follows:

1. Grant of Options. The Company hereby grants to Kruse the right and
----------------
option (hereinafter referred to as the
<PAGE>

"Option") to purchase all or any part of an aggregate of 20,000 shares of the
common stock, of the Company, $.25 par value (hereinafter referred to as
"Common Stock"), on the terms and conditions hereinafter set forth in this
option agreement, such number of shares of Common Stock being subject to
adjustment as provided in paragraph 4 hereof.

2. Purchase Price. The purchase price (hereinafter referred to as the
--------------
"Option Price") of the shares of Common Stock covered by the Option shall be
$11.125 per share.

3. Duration of Option. The Option granted hereunder shall be for a
------------------
period of five (5) years from the date hereof, unless sooner terminated
pursuant to paragraph 9 hereof. Subject to the provisions of the Agreement,
the Option may be exercised at any time after the date hereof, as to any part
of or all of the shares covered thereby. The purchase price of the shares as
to which the Option shall be exercised shall be paid in full in current funds
at the time of exercise. The holder of the Option shall not have any rights
of a stockholder with respect to the shares covered by the Option unless and
until the certificate or certificates for such shares shall have been issued
and delivered to him.

-2-
<PAGE>

4. Adjustments. In the event of any change in the Common Stock of the
-----------
Company by reason of any merger, consolidation, recapitalization,
reclassification, stock split, combination of shares or dividend payable in
Common Stock of the Company (in excess of five (5%) percent thereof) after the
date hereof, then appropriate adjustment shall be made in the number and kind
of shares subject to the Option, and /or to the price of the Option;
provided, however, that no fractional share shall be issued upon any such
exercise, and the aggregate price paid shall be appropriately reduced on
account of any fractional share not issued. Any such adjustment made by the
Board of Directors of the Company as provided in this paragraph 4 shall be
conclusive as long as such adjustments shall be made in the same manner to all
similar outstanding options of the Company.

5. Exercise of Option. Subject to the terms and conditions of this
------------------
Option Agreement, the option may be exercised by Kruse, his heirs or assigns
by delivery of written notice to the Company as its principal office which is
now located at 919 Third Avenue, New York, New York. Such notice shall state
the election to exercise the Option and the number of shares in respect of
which it shall be exercised and shall be signed by the person or persons so
exercising the Option. Such notice shall be accompanied by payment of the

-3-
<PAGE>

full purchase price of such shares by certified check payable to the Company.
The certificate or certificates for the shares as to which the Option shall
have been so exercised shall be registered in the name of the person or
persons so exercising the Option and shall be delivered, as provided above, to
or upon the written order of the person or persons exercising the Option
within fifteen (15) days (except as otherwise provided below in this paragraph
6) after the due and proper exercise of this Option.

It is expressly understood that it shall be a condition of the issuance
and delivery of any stock upon the due and proper exercise of the Option or
any part thereof that prior to the delivery of the certificate or
certificates as to which the Option shall have been so exercised as aforesaid,
Kruse (or anyone acting under him or his heirs or designs, as the case may be)
shall deliver to the Company a warranty and representation that it is the
present intention to acquire the shares being purchased for investment only
and not for distribution or resale and that any offer or sale by him of any
such shares will not be made or offered in violation of the provisions of the
Securities Act of 1933, as amended (the "Securities Act"), or any rules and
regulations thereunder. The time of the delivery of such certificate or
certificates of stock may be postponed by the Company for such period as may
be

-4-

<PAGE>

required by the Company to comply with any listing requirements of any
national securities exchange or to comply with any applicable state or federal
laws.

The Company shall not be obligated to sell, issue or deliver any shares
as to which the Option or any part thereof shall have been exercised as
aforesaid unless the shares with respect to which the Option shall be
exercised are at that time effectively registered or exempt from registration
under the Securities Act.

All shares that shall be purchased upon the exercise of the Option as
provided herein shall be fully paid and non-assessable.

6. Representations of Kruse. Kruse acknowledges that he is acquiring
------------------------
the Option for investment and not with a view towards distribution and that he
will not sell, assign or transfer the Option, or the shares acquired upon
exercise thereof without an opinion of counsel to the Company that the Option
or shares, as the case may be, are exempt from registration under the
Securities Act or if such shares or options are required to be registered,
then such shares, assignment or sale shall not be effective prior to such
registration.

7. No Transfer. Anything herein to the contrary notwithstanding, this
-----------
Option or the rights with respect hereto

-5-
<PAGE>

may not be transferred, assigned or collateralized in any manner whatsoever,
it being the intent of the parties hereto that this Option is personal and may
be exercised only by Kruse, or in the event of his death, by the legal
representatives of his estate not later than three (3) months from the date
of his death or (1) month after the appointment of said legal representatives,
whichever date is later.

8. Legend. Certificates for all Shares acquired upon the exercise of
------
the Option shall be inscribed with a legend giving notice of all restrictions
with respect to such Shares including but not limited to restrictions imposed
on the transferability thereof contained in this Agreement and in any other
agreement between Kruse and the Company with respect thereto.

9. Termination. The Option granted pursuant to this Agreement shall
-----------
terminate upon the earlier of (i) the fifth (5th) anniversary of the date of
this Agreement, or (ii) the material breach by Kruse of the terms of a Stock
Purchase Agreement dated February 1, 1988, among the Company's subsidiary,
Hoover Treated Wood Products, Inc. ("Hoover"), Kruse and Gordon K. Runyon or
the termination of the employment of Kruse under an Employment Agreement dated
as of February 9, 1988 among Kruse and Sagebrush Sales, Inc. (other than a
termination by Sagebrush without cause), or violation by Kruse of the
provisions of Section 12 or 13 of such Employment

-6-
<PAGE>

Agreement, or the material breach by Kruse of the terms of an Agreement Not To
Compete dated February 9, 1988 between Hoover and Kruse.

IN WITNESS WHEREOF, the Company has caused this Sellers Stock Option
Agreement to be duly executed by an officer thereof thereunto duly authorized,
and Kruse has hereunto set his hand, as of the day and year first above
written.

PLY-GEM INDUSTRIES, INC.

By:
---------------------

------------------------
DONALD F. KRUSE
ATTEST:

- ---------------------------
, Secretary

-7-
<PAGE>

"EXHIBIT D"

August 7, 1985

RESOLVED, that the Board of Directors has hereby designated certain
executives of the Company and or its subsidiaries as "Designated Executives."
The names of such Designated Executives have been presented to this meeting
and a schedule setting forth their respective names is ordered attached to the
minutes of this meeting; and be it further

RESOLVED, Designated Executives shall have the right to receive severance
pay under certain circumstances upon the occurrence of an event which may not
be in the best interests of the Company (an "Event," which is hereinafter
defined) under the following conditions:

A. In the event that their employment is terminated within one year
of an Event; or

B. In the event that they resign their positions as executives of the
Company for any reason whatsoever within one year of the occurrence of an
Event; and be it further

RESOLVED, within 30 days of their resignation or the termination of their
employment as aforesaid, Designated Executives shall receive severance pay
computed as follows:

(i) an amount equal to 2.75 times the average per annum total
aggregate compensation which the Designated Executive received
during the five (5) years prior to resignation or the
termination of employment. Aggregate compensation shall be
deemed to include salary and bonus; plus

(ii) an amount equal to 2.75 times the difference between the
exercise price of all Incentive Stock Options held by the
Designated Executive and the market price of the Common Stock of
the Company. Market price of the Company's Common Stock shall be
deemed to be the highest closing price of the Company's Common
Stock on the American Stock Exchange during the three (3)
months prior to termination of employment or resignation. The
outstanding options shall be deemed cancelled; and be it further

<PAGE>

RESOLVED, for purposes of the above, an Event shall be deemed to have
occurred:

A. If any individual or group of individuals are the holders of record
of 45% or more of the Company's outstanding Common Stock; or

B. If, subsequent to any election of new members to the Board of
Directors, individuals who prior to such election constituted the Board of
Directors, for any reason whatsoever cease to constitute a majority thereof,
unless the election of each director who was not a director prior to such
election has been approved in advance by directors representing at least two
thirds (2/3) of the directors in office who were directors prior to the
election.

Nothwithstanding the aforesaid, if a majority of the Board of Directors in
office immediately prior to an Event determine that such Event is in the
best interests of the Company then for purposes of the aforesaid, the Event
shall not be deemed to have occurred.

<PAGE>

EMPLOYMENT AGREEMENT
--------------------

THIS EMPLOYMENT AGREEMENT (the "Agreement"), dated as of November ____,
1993, is between PLY GEM INDUSTRIES, INC, a Delaware corporation, (the
"Company"), and Monte R. Haymon (the "Executive").

WHEREAS, the Company desires to obtain the services of the Executive, and
the Executive desires to be employed by the Company upon the following terms
and conditions.

NOW, THEREFORE, in consideration of mutual agreements and understandings
set forth herein, the Company and the Executive hereby agree as follows:

1. Employment: Term.
-----------------

The Company hereby employs the Executive as its President and Chief
Operating Officer and the Executive hereby accepts employment from the
Company and agrees to perform in such capacity upon the terms and conditions
set forth herein, for a term commencing no later than January 3, 1994 or such
earlier date as Executive shall be available (the "Start Date") 1993, and
continuing thereafter until December 31, 1997, subject to any automatic
extensions in accordance with the provisions of Section 6 hereof, unless
earlier terminated in accordance with the provisions of Section 5 hereof. For
purposes of this Agreement, the "Term of Employment" shall mean the initial
term and any renewal term as provided in Section 6 hereof. The date on which
the Executive's employment is terminated due to the expiration of the Term of
Employment or pursuant to Section 5 shall be referred to herein as the
"Termination Date". The Chairman and Chief Executive Officer (the "Chairman")
of the Company shall promptly submit this Agreement to the Company's Board of
Directors for its required approval and recommend and vote in favor of such
approval.

2. Position, Duties, Responsibility.
--------------------------------

(a) Position. During the term hereof, the Executive shall be employed
--------
as the President and Chief Operating Officer of the Company, with authority
and powers to hire, restructure or otherwise take such action as Executive
deems necessary to accomplish the goals and objectives of the Company. The
Executive shall faithfully and diligently use his best efforts to perform the
duties and bear the responsibilities as President and Chief Operating Officer
and report and be responsible to the Chairman. The Executive shall devote all
of his professional time to the business of the Company in order to
satisfactorily discharge his duties and responsibilities to the Company,
except for reasonable time spent for trade, civic and charitable activities
or for service on other boards of directors, subject
<PAGE>

to approval as provided in 2(b) below. The Executive shall report only to
Jeffrey Silverman, in his capacity as the Chairman, it being the intent of
the parties that Executive shall be the second ranking officer of the Company
after the Chairman.

(b) Other Activities. Except upon the prior oral or written consent of
----------------
the Chairman, the Executive, during the Term of Employment, shall not (1)
accept any other employment, (ii) serve on the board of directors of other
corporations or (iii) engage, directly or indirectly, as an owner, employee,
officer, advisor, consultant or independent contractor, or otherwise, in any
other business activity that is competitive with activities of the Company or
any affiliated entity, except nothing shall prevent the Executive from making
an investment in a publicly held company as long as the Executive does not own
five percent (5%) or more of the equity interest in such company. Any such
activity referred to in clause (iii) above, whether performed during the Term
of Employment or thereafter, shall be referred to herein as a "Competitive
Activity", Executive agrees that only if his employment shall be terminated
for Cause, or if he shall voluntarily terminate his employment without the
consent of the Company and without Good Reason, then, for the lesser of one
(1) year or the remaining initial term of this Agreement, Executive shall not
engage in any Competitive Activity, provided that, if the Company wishes to
require Executive to comply with the foregoing post-termination restrictive
covenant, the Company shall give written notice thereof to Executive within
ten (10) business days of such termination, and the Company shall continue to
pay Executive during such period of non-competition his base salary then in
effect. "Competitive Activity", after termination of this Agreement, shall not
include Executive's employment by a party, the activities of which are
partially competitive to the Company, if Executive is not directly involved in
such competitive activities. Nothing in this Agreement shall prevent Executive
from serving on the Boards of trade, civic or charitable institutions.

(c) Board Member, Other Duties. The Chairman shall nominate and vote for
--------------------------
the Executive, and the Executive agrees to serve, for no additional
compensation, as a member of the Board of Directors. However such position
shall be (i) initially subject to the election of the Executive to such
position by the duly elected Board of Directors acting within the scope of its
authority and in conformity with the obligations of such Board of Directors to
the Company and its stockholders and (ii) subject to nomination and election
or re-election in conformity with the Company's By-laws and other charter
documents and the Delaware General Corporation law. Subject to Section 5(d)
hereof, the failure of the Executive to be a member of the Board of Directors
at any time for any reason shall not be considered to be a breach of any
provision hereof or a termination hereof. Executive further agrees to serve as
an officer or director of such other subsidiaries or affiliates of the Company
as the Chairman shall request, without any additional compensation.

<PAGE>

3. Salary and Benefits.
-------------------

(a) Salary. In consideration of the services to be rendered hereunder,
------
the Executive shall be paid a base salary of not less than $600,000 per year
payable at the same intervals as the other senior executives employees of the
Company. This salary shall be reviewed periodically and no less than once per
year in accordance with the Company's regular administrative practice for
adjusting salaries of the Company's senior executive employees, but shall be
subject to minimum annual increases at the beginning of every calendar year
commencing January 1, 1995 and through the year commencing January 1, 1997
equal to five percent (5%) of the base salary of the prior calendar year.

(b) Bonus. In addition to the compensation set forth in Section 3(a)
-----
hereof, the Executive shall be entitled to bonuses pursuant to incentive plans
hereafter described. On or before September 1, 1994, the Company will adopt a
long-term incentive plan (the "Long-Term Plan") and an annual incentive plan
(the "Annual Plan"), the purpose of which will be to reward performance of the
Executive. One or both of the plans may include other executives of the
Company. The foregoing plans will be retroactive in their application to
Executive to January 1, 1994.

(i) The Long Term Plan will consist of three year performance cycles.
All awards under the plan would be made annually. Aggressive,
but realistically achievable goals for each cycle would be
established on an annual basis by the mutual agreement between
the Executive and the Chairman. It is agreed that the Annual
Plan and Long Term Plan will generate payment to the Executive
consistent with performance relative to the mutually agreed upon
goals for each plan and consistent with major corporate
compensation practices and payment guidelines for senior
executive positions.

(ii) Each year, the Executive and the Chairman will establish
aggressive, but realistically achievable operating goals, both
financial and non-financial, for the following year, in
connection with the Annual Plan. The Executive shall receive
minimum bonuses under the Annual Plan of $400,000 for the
1994 calendar year, $250,000 for the 1995 calendar year and
$250,000 for the 1996 calendar year.

(iii) The Company agrees to determine the amount of the bonus, if
any, to which Executive shall be entitled as soon as possible
after the end of each calendar year, and to pay such bonus
promptly after such determination.

(c) Benefits. During the Executive's employment hereunder, the Executive
--------
shall be entitled to participate in any plan, arrangement or policy of the
Company providing for medical benefits, dental benefits, life insurance,
disability insurance, vacation time, sick leave and other benefits to the
extent consistent with Executive's position in the Company.

<PAGE>

(d) Withholding. The Company shall make all legally required deductions
-----------
from all payments of salary and bonus to the Executive.

(e) Expense Reimbursement. The Company shall reimburse Executive for
---------------------
all reasonable and necessary business expenses incurred by him in connection
with his duties, provided such expenses are appropriately vouchered.

(f) Relocation. The parties contemplate that Executive shall be based
----------
at the Company's principal offices in New York City, provided that they shall
mutually agree on the timing of Executive's relocation. At the time that the
Executive is required to relocate in connection with his employment with the
Company, the Company will provide a relocation package as agreed by the
Chairman and the Executive.

(g) Physical Examination. The Executive agrees that after the Start
--------------------
Date he shall undergo any physical examinations and/or tests required for key
man, disability and employee benefit life insurance, as are reasonably required
to obtain such insurance. Executive will make immediately available to the
Chairman and/or a medical representative of the Company the results of his
last physical examination. It is agreed that such information will remain
confidential. Executive shall promptly sign any insurance applications
submitted to enable the Company to obtain Keyman insurance.

4. Early Resignation by the Executive.
----------------------------------

If the Executive resigns on or before June 30, 1994, the Executive shall
pay to the Company, as liquidated damages, the sum of one million five hundred
thousand dollars ($1,500,000).

5. Termination of Employment.
-------------------------

Subject to the other terms and condition hereof, the Executive's employment
under this Agreement will terminate upon the earlier to occur of any of the
following events:

(a) By Expiration. The expiration of the Term of Employment.
-------------

(b) By Death. The death of the Executive.
--------

(c) By Permanent Disability. Upon the "Permanent Disability" of the
-----------------------
Executive, "Permanent Disability" shall mean, with respect to the
Executive, (i) the absence of the Executive from his employment by reason of
any mental or physical illness, disability or incapacity for a period of six
months during any twelve-month period or (ii) the suffering of any mental or
physical illness, disability or incapacity to the extent that Executive is
unable to perform and shall be unable to perform his duties prospectively for
a period of 180 days or more ("incapacity"). If the Company shall determine
that the Executive suffers from an incapacity, it shall so notify Executive and
the Company shall appoint a

4
<PAGE>

physician for the purpose of conducting a physical or mental examination of
Executive. Executive shall cooperate in submitting to such an examination.
The physician shall render an opinion to the Company and Executive, within 5
days of said examination and determine whether or not the Executive is capable
of performing his duties and if not, whether Executive shall be capable of
performing his duties within a period of 180 days. If such physician's
written opinion concludes that the Executive shall not be able to resume his
duties within a period of 180 days and the Executive disagrees with such
opinion, he shall be free to engage a physician of his own choice for the
purpose of rendering another opinion with respect to Executive's capacity to
perform. Such physician shall render his written opinion to the Executive and
the Company within 5 days. If Executive's physician disagrees with the
opinion of the Company's physician, the two physicians together shall choose a
third physician, who in turn will conduct a third examination of Executive to
determine his capacity to perform his duties under this Agreement. Such third
physician shall render his opinion to the Company and the Executive within 5
days of such examination and such third physician's written opinion shall be
conclusive and binding upon both the Company and the Executive with respect to
whether the Executive is capable of resuming his duties within a period of 180
days. The measuring period for the resumption of duties within 180 days shall
commence from the date upon which the Company first gave notice to the
Executive of its request that he submit to a physical or mental examination
for the purpose of determining his capacity to perform his duties hereunder.
The Termination Date shall be the last day of such applicable period.

(d) By The Executive -- Good Reason. By the Executive for "Good Reason"
-------------------------------
upon the giving of notice to the Company, effective as of the date set forth
in such notice. For purposes of this Section 5(d) Good Reason shall mean:

(i) a change in Executive's title, authorities or duties as set
forth in Section 2(a) of this Agreement, other than an
immaterial change,

(ii) the Company's continuing breach of a material term of this
Agreement for a period of thirty days after its receipt of
written notice of such breach from Executive specifying the
alleged breach,

(iii) Jeffrey Silverman shall no longer be Chairman and/or Chief
Executive Officer,

(iv) the Executive shall no longer be the second highest ranking
officer of the Company,

(v) the Executive is not a member of the Board of Directors of the
Company.

(e) By the Company. By the Company with or without "Causes," upon the
--------------
giving of notice to the Executive, effective as of the date set forth in such
notice. "Cause" shall exist if (a) the Executive is convicted of a felony,
(b) the

5
<PAGE>

Executive engages in gross negligence or willful misconduct in the performance
of his duties hereunder, (c) the Executive willfuly fails to substantially
perform the duties of his position provided that Executive shall have received
written notice from the Chairman of the specific acts of misconduct or
failures under clauses (b) and (c) of this Section 5(e), and shall not have
commenced to cure such failure within thirty days and completed such cure
within ninety days of such written notice. Cause shall not include bad
judgment or negligence other than as described herein, nor any act or omission
in good faith to have been in or not opposed to the interest of the Company.

(f) By the Executive -- Change of Control. In the case of a "Change of
-------------------------------------
Control" upon the giving of notice to the Company, effective as of the date
set forth in such notice. For the purpose of this Section 5(f) a Change of
Control shall mean the acquisition of a majority of the issued and outstanding
voting securities of the Company, whether by purchase merger, or otherwise, by
any person, firm or corporation, other than Jeffrey Silverman, or any
affiliate of Jeffrey Silverman. Change in control shall also include a merger
in which a person, firm or coporation other than Jeffrey Silverman or his
affiliate acquires a majority of the surviving corporation's voting
securities and the Company is not the surviving company.

The Executive may terminate his employment pursuant to this Section 5(f)
at any time beginning on the date of the Change of Control and ending on the
thirtieth (30th) day following the one (1) year anniversary of the date of the
Change of Control.

(g) Termination Obligations of the Company. Upon the termination of the
--------------------------------------
Executive's employment:

(i) Pursuant to Section 5(b) (death) or Section 5(c) (disability),
Executive shall be entitled to all accrued compensation and
benefits;

(ii) pursuant to Section 5(d) (by Executive for Good Reason),
Section 5(a) (end of term) or by the Company without Cause, the
Executive will receive an amount equal to (A) four (4) times
base salary if such termination occurs before the first
anniversary of the Start Date, (B) three (3) times base salary
then if effect if after the first anniversary of the Start
Date, and (C) two times base salary then if effect if such
termination occurs after the second anniversary of the Start
Date or if this Agreement is not renewed in accordance with
Section 6 hereof, provided, however, that all such payments
shall be made by the Company ratably over the unexpired term of
this Agreement. In addition, the Executive shall be entitled to
the unpaid portion of each of the minimum guaranteed bonuses
described in Section 3(b), payable at such times as such
bonuses would have been paid had the Executive's employment not
been terminated.

<PAGE>

(iii) pursuant to Section 5(e) (by the Company for Cause) or by the
Executive voluntarily without the consent of the Company and
without Good Reason, than Executive shall receive no payments
hereunder other than those which have accrued to the date of
termination, and all restricted stock subject to forfeiture
shall be forfeited and all unvested stock options, stock
appreciation or other benefits shall lapse and also be
forfeited unless otherwise determined by the Chairman.

(iv) pursuant to Section 5(f) (by Executive Upon Change of Control),
the Executive will receive an amount equal to 2.75 times the
base salary then in effect, plus 2.75 times the bonus earned by
the Executive in the calendar year preceding the Date of
Termination.

(v) In all cases other than a termination for Cause pursuant to
Section 5(e), a voluntary termination of this agreement by the
Executive without the consent of the Company and without Good
Reason, all restrictions on shares subject to restriction
issued to Executive by the Company shall immediately lapse, all
stock options shall be accelerated and be immediately
exercisable and all other unvested benefit plans, stock
appreciation or similar rights shall immediately vest.

(vi) In the case of any termination of the Executive's employment
other than for Cause, or by the Executive voluntarily without
the consent of the Company without Good Reason, the Executive
shall be entitled to a bonus for the year of termination in an
amount equal to a pro rata portion of the bonus the Executive
would have earned under the Annual Plan and the Long Term Plan
had his employment not been terminated during such year,
provided however, that no such proration payment shall occur
prior to the fourth year of this Agreement although such payment,
in the case of the Long Term Plan may relate to prior years.
The Company agrees to determine the bonus as soon as possible
after the end of the year, and to pay such bonus immediately
after the determination is made.

(h) Termination Obligations of Executive.
------------------------------------

(i) The Executive hereby acknowledges and agrees that all personal
property and equipment furnished to or prepared by the
Executive in the course of or incident to his employment,
belong to the Company and shall be promptly returned to the
Company upon termination of the Term of Employment. "Personal
property" includes, without limitation, all books, manuals,
records, reports, notes, contracts, lists, blueprints,

<PAGE>

and other documents, or materials, or copies thereof, and all
other Proprietary Information (as defined below) relating to
the business of the Company. Following termination, the
Executive will not retain any written or other tangible
material containing any Proprietary Information (as defined
below) relating to the business of the Company.

(ii) The Executive hereby acknowledges that prior to and for the
duration of this Agreement, he has gained and will gain
knowledge of certain information which is confidential and
proprietary to the Company (the "Proprietary Information"). Such
information includes but is not limited to: (A) marketing,
competitive or other information available only to top
management of the Company; (B) information pertaining to the
contracts between the Company and its customers, including the
identity of the customers, pricing information and contract
termination dates; (C) any and all other information related to
the Company of which the Executive may become aware but which is
not generally known to outsiders, including but not limited to
cost allocations and other confidential information concerning
or relating to any of the customers, business or methods of
operation of the Company; and (D) various trade secrets which
are or will in the future be owned by the Company and which are
or will be regularly used in the business of the Company.

(iii) The Executive shall not during the Term of Employment or at any
time thereafter use (other than in the performance of his
duties to the Company) or disclose to any person, firm,
corporation, partnership or other entity whatsoever outside the
Company or to any officer, director, stockholder, partner,
associate, employee, agent or representative of any thereof
(except as required by law or with the express prior written
approval of the Chairman and Chief Executive Officer of the
Company) any such Proprietary Information either directly or
indirectly. The foregoing provisions shall not be construed to
prevent the Executive from making use of or disclosing
information which is in the public domain through no fault on
the part of the Executive; however, specific information shall
not be deemed to be in the public domain merely because it is
encompassed by some general information that is published or in
the public domain or in the Executive's prior possession. The
Company shall be entitled, in addition to any other right and
remedy it may have, at law or in equity, to seek an injunction,
enjoining or restraining the Executive from any violation or
threatened violation of this Section 4(h), and Executive agrees
and understands that such injunction is a possible remedy.

<PAGE>

(i) Other Positions. Upon termination of the Term of Employment or
---------------
other termination of the Executive's employment, the Executive shall be deemed
to have resigned from all offices and directorships then held with the Company
and any affiliated entity.

(j) Survival. The representations, warranties, covenants and agreements
--------
contained in Sections 2(b) and 5(h) hereof shall survive termination of the
Term of Employment and the expiration of this Agreement pursuant to their
respective terms.

6. Renewal of Term of Employment.
-----------------------------

Unless the Company shall, prior to ninety (90) days before the expiration
of the Term of Employment (including all Renewal Terms, as hereinafter
defined), notify the Executive in writing of its intention to terminate the
Term of Employment, the Term of Employment shall be extended for a period of
one year. Each one year extension shall be referred to as a "Renewal Term."
Thereafter, the Company shall have the equivalent option, in its sole
discretion, to terminate the Term of Employment at the end of any Renewal Term
and shall notify the Executive in writing of the Company's intent prior to
ninety (90) days before the expiration of any Renewal Term. The Executive
shall have no right, express or implied, to continue his employment after the
expiration of the Term of Employment or any Renewal Term if the Company
exercises its rights pursuant to this Section.

7. Certain Stock Matters.
---------------------

In addition to the foregoing compensation described in this Agreement,
upon the start date, the Executive shall be granted the following restricted
shares and stock options:

(a) 175,000 shares of the Company's common stock at no cost to
Executive, pursuant to a Restricted Stock Agreement, the terms of which shall
provide for the lapsing of the restrictions ratably over a four year term,
based upon Executive's continued employment by the Company. The Restricted
Stock Agreement shall be approved and adopted by the Company no later than one
(1) year after Start Date. The Company agrees to cause the Restricted Stock,
when issued to the Executive, to be registered under the Securities Act and to
use its best efforts to deliver certificates representing the shares of
Restricted Stock, within three (3) weeks after the lapse of the applicable
restrictions.

(b) The Company will issue to Executive options covering a total of
400,000 shares pursuant to a Stock Option Agreement the terms of which shall
be substantially as follows:

(i) 150,000 shares with an exercise price that shall be equal to
the closing price of the Company's common stock on the Start
Date ("Start Price"), provided, however, that such options shall
not vest until one (1) year from the Start Date;

9
<PAGE>

(ii) 62,500 shares with an exercise price that shall be equal to the
Start Price, but exercisable at any time during the term on and
after the price of the Company's Common Stock has reached or
exceeded the higher of $19.00 per share or a price which shall
be equal to 125% of the Start Price;

(iii) 62,500 shares at an exercise price that shall be the Start
Price, but exercisable at any time during the term on and after
the price of the Company's Common Stock has reached or exceeded
the higher of $19.00 per share or a price which shall be equal
to 150% of the Start Price; and

(iv) 125,000 shares at an exercise price which will be the Start
Price, but exercisable at any time during the term on and after
the price of the Company's Common Stock has reached or exceeded
the higher of $19.00 per share or a price which shall be equal
to 200% of the Start Price.

A portion of the options may be incentive stock options qualifying as
such under the Internal Revenue Code. All options granted pursuant to this
Section 7(b) shall be for ten (10) years and the Option Agreement shall
provide for normal and usual anti-dilution protection. Furthermore, after the
execution of this Agreement the Chairman and the Executive shall explore the
advisability of the Company adopting a Stock Appreciation Rights plan, the
purpose of which shall be to provide Executive with compensation with which to
pay any tax incurred as a result of the lapsing of any restrictions on the
restricted stock or the exercise of any of the options at an exercise price
which is below the quoted market price of the Company's common stock on the
date of exercise. Any such Stock Appreciation Rights Plans shall (i) only be
adopted if the Chairman and the Executive agree that such Plan is in the best
interests of the Company, and (ii) if granted to Executive, shall be in
substitution, and in lieu of an equal number of shares of restricted stock or
stock options granted under Section 7 hereof and not in addition to any of
such restricted shares or stock options. Any stock acquired pursuant to the
exercise of the option shall have no other holding period under the option
agreement, other than as required by law.

(c) Neither the issuance of the restricted stock nor the granting of the
options provided in this Section 7 shall preclude the issuance to the
Executive of additional options or stock. The Company agrees that during the
term of the Executive's employment, the Executive shall be entitled to
additional stock options and/or restricted stock consistent with the
Executive's position with the Company as determined in the discretion of the
Chairman. At the discretion of the Company, and upon the recommendation of the
Chairman, the lapse of any restrictions or the vesting period of any
restricted shares or options may be accelerated based upon Executive's
performance.

10
<PAGE>

8. Representation of the Executive.
-------------------------------

The Executive hereby represents and warrants to the Company that he is
not bound by any Employment Agreement, restrictive covenant, confidentiality
or proprietary information or other Agreement that would prohibit or inhibit
in any way the full and complete performance by the executive of his duties
hereunder or as the President and Chief Operating Officer of the Company. The
Executive further represents, warrants and agrees that he will not use any
trade secret, confidential or other proprietary information of any former
employer or other person or entity in the course of performing his duties
hereunder or as the President and Chief Operating Officer of the Company and
will not disclose any such information to the Company or any of its
representatives.

9. Assignment: Successors and Assigns.
----------------------------------
This Agreement may not be assigned, nor may any obligations hereunder be
delegated, by the Executive. Nothing in this Agreement shall prevent the
consolidation of the Company with, or its merger into, any other corporation,
or the sale by the Company of all or substantially all of its properties or
assets, or the assignment by the Company of this Agreement and the performance
of its obligations hereunder in connection with any such transaction. Subject
to the foregoing, the Agreement shall be binding upon and shall insure to the
benefit of the parties and their respective heirs, legal representatives,
successors and permitted assigns, and shall not benefit any person or entity
other than those enumerated above.

10. Notices.
-------

Any notice, request, claim, demand, document and other communication
hereunder to any party shall be effective upon receipt or, in the case of
transmission by mail as set forth below, three (3) business following deposit
of such notice, request, claim, demand, document or communication with the
postal service, and shall be in writing and delivered personally or sent by
telex,telecopy, or certified or registered mail, postage prepaid, or other
similar means of communication, as follows:

(a) If to the Company, addressed to its principal executive offices to
the attention of its Chairman;

(b) If to the Executive, to him at the address set forth below under his
signature or at any such other address as either party shall have specified by
notice in writing to the other.

11. Entire Agreement.
----------------

The terms of this Agreement together with the Stock Agreements are
intended by the parties to be the final expression of their agreement with
respect to the employment of the Executive of the Company and may not be
contradicted by evidence of any prior or contemporaneous agreement. The
parties further intend that this Agreement and the Stock Agreements shall
constitute the

11
<PAGE>

complete and exclusive statement of their terms and that no extrinsic evidence
whatsoever may be introduced in any judicial, administrative or other legal
proceeding involving this Agreement or the Stock Agreements.

12. Prior Agreements.
----------------

The parties hereby agree that this Agreement shall be in effect as of
the date hereof and shall supersede and be in lieu of any and all prior
Agreement or understandings regarding the employment of the Executive, whether
verbal or written.

13. Amendments: Waivers.
-------------------

This Agreement may not be modified, amended or terminated except by an
instrument in writing, signed by the Executive and by the Chairman. By an
instrument in writing similarly executed, either party may waive compliance by
the other party with any provision of this Agreement that such other party was
or is obligated to comply with or perform. A waiver of any provision of this
Agreement shall not be deemed a waiver of any other provision of this
Agreement. No waiver of any breach of any provision of this Agreement shall be
deemed the waiver of any subsequent breach thereof or of any other provision.

14. Severability: Enforcement.
-------------------------
If any provision of this Agreement, or the application thereof to any
person, place or circumstance, shall be held by a court of competent
jurisdiction to be invalid, unenforceable or void, the remainder of this
Agreement and such provisions as applied to other persons, places and
circumstances shall remain in full force and effect.

15. Governing Law.
-------------

The validity, interpretation, enforceability and performance of this
Agreement shall be governed by and construed in accordance with the internal
substantive laws (and not the law of conflict of laws) of the State of New
York.

12
<PAGE>

IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.

PLY GEM INDUSTRIES, INC.

By: /s/ Jeffrey S. Silverman
-------------------------------
Jeffrey S. Silverman
Chairman of the Board, Chief
Executive Officer and President

EXECUTIVE

/s/ Monte R. Haymon
-----------------------------------
Monte R. Haymon
55 Aspen Lane
Glenco, IL 60022

<PAGE>

February 15, 1993

Mr. Joseph M. Goldenberg
Goldenberg Plywood and Lumber
Co., Inc.
2540 Industry Way
P.O. Box 190
Lynwood, California 90262-0190

Dear Mr. Goldenberg:

Reference is made to the letter agreement between us dated February 11,
1988 with respect to your employment by Goldenberg Plywood and Lumber Co.,
Inc.

This letter shall constitute a memorandum of our understanding and
agreement pursuant to which the term of the aforementioned Employment
Agreement shall be further extended for additional one year periods subsequent
to April 30, 1993 upon the same terms and conditions therein stated.

The term of the Agreement as herein extended shall be automatically
extended for additional one year periods unless terminated by either of us
upon the delivery of four months' advance written notice prior to the
commencement of any renewal term.

We further acknowledge that the Consulting Agreement dated September 18,
1987 shall remain in effect except that (1) the reference in the first
paragraph to your services as "President" shall be changed to "Chairman" and
(2) the reference in paragraph 2 therein requiring nine months notice in
advance of retirement shall be modified to require four months notice.

If the aforesaid meets with your approval, kindly sign a copy and return
to us.

Sincerely yours,

GOLDENBERG PLYWOOD AND LUMBER
CO., INC.

BY: /s/ Lee M. Greenberg
------------------------------
Lee M. Greenberg
President
AGREED TO:

/s/ Joseph M. Goldenberg
- ------------------------
Joseph M. Goldenberg

<PAGE>

February 11, 1988

Mr. Joseph Goldenberg
Goldenberg Plywood and Lumber
Co., Inc.
824 E. 29th Street
Los Angeles, CA 90011

Dear Joe:

Reference is made to the Employment Agreement dated April 4, 1983 (as
amended August 16, 1985) between yourself and Goldenberg Plywood and Lumber
Co., Inc. (the "Company").

This letter shall constitute a memorandum of our understanding and
agreement pursuant to which the term of the aforementioned Employment
Agreement shall be extended for five (5) years until April 30, 1993 upon the
same terms and conditions except that:

1. The initial fixed compensation referred to in Paragraph 4(a) of
the Employment Agreement shall be $300,000 for the period commencing January
1, 1988; and

2. You shall receive a bonus each year equal to ten (10%) percent
of the Income before Working Capital Charges and Management Fee of the
Company. In the event that Income before Working Capital charges and
Management Fees is less than $3 Million in any one year, then you shall not be
entitled to receive any bonus for that year. The bonus payable for each year
during the term of this Agreement shall be based on the Income before
Management Fee for the calendar year ending December 31 next preceeding the
commencement of the applicable Employment Year provided, however, that the
initial bonus shall be payable during the Employment Year commencing January
1, 1988 based upon the Income Before Management Fees of the Company for the
year ended December 31, 1988 to be payable in two installments no later than
September 1, 1988 and no later than March 31, 1989, respectively. Payments for
subsequent years shall be similarly made on September 1 and March 31
thereafter. The payment to be made on or before September 1 shall be deemed to
be an estimated payment based upon the results of operations for the first six
months of the year. The second payment shall reflect the balance due based
upon the results of operations for the entire year. In the event the estimated
payment made on or before September 1 exceeds the amount due based upon the
results of operations for the full year, you will refund to us the
overpayment.

<PAGE>

Mr. Joseph Goldenberg
Page 2
February 11, 1988

For purposes of this Agreement, Income before Management Fee shall
mean the net operating profits of the Company computed after all charges
including working capital charges payable to Ply-Gem (before provision for
taxes based on income and before provision for management fees), as determined
on an accrual basis in accordance with generally accepted accounting
principles consistent with the financial statements of the Company prepared
for the year ended December 31, 1987 exclusive of (a) all gains and losses
form the sale, exchange or other disposition of capital or fixed assets, (b)
other profit and loss items which, for profit and loss statement purposes, are
treated as extraordinary income or expense items under generally accepted
accounting principles, and (c) all expenses attributable to the purchase of
the Company by Ply-Gem Industries, Inc. and amortization of goodwill and
amortization of intangibles. Exhibit "A" attached hereto illustrated the
computation of the Bonus.

For the purposes of this Agreement Income before Working Capital
charges and Management Fees shall mean the sum of Income before Management
Fees plus Working Capital charges.

3. You may retire at any time subsequent to December 31, 1989 upon
giving notice in the same fashion as is required pursuant to the terms of the
Consulting Agreement between us dated September 18, 1987.

Except as hereinabove modified, the Employment Agreement shall remain
in full force and effect for the period as above specified.

Kindly sign a copy of this letter indicating your agreement.

Sincerely yours,

GOLDENBERG PLYWOOD & LUMBER
CO., INC.

By: /s/
AGREED TO: --------------------------------

/S/
- -------------------------------
JOSEPH GOLDENBERG
<PAGE>

EXHIBIT B

EMPLOYMENT AGREEMENT
--------------------

AGREEMENT, made on April __, 1983, by and between GOLDENBERG PLYWOOD
AND LUMBER CO., INC., a California corporation (hereinafter referred to as the
"Company"), and JOSEPH M. GOLDENBERG (hereinafter referred to as the
"Executive").

W I T N E S S E T H :
- - - - - - - - - -

WHEREAS, the Company wishes to obtain the services of Executive and
Executive desires to render such services;

NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and for other good and valuable consideration, receipt of which is
hereby acknowledged, the Company and the Executive hereby agree as follows:

1. Engagement of Executive.
-----------------------

The Company hereby engages the Executive to serve as the President
and Chief Operating Officer of the Company, Goldenhill Wood Products, Inc. and
Continental Wood Products Corporation and any successor to their business and
Executive hereby accepts such engagement, upon the terms and conditions herein
contained.

2. Term.
----

Unless sooner terminated as provided in this Agreement, the term of
employment of the Executive hereunder shall be for an initial period of five
(5) years, commencing
<PAGE>

on the date hereof and terminating on April 30, 1988. Subsequent to April 30,
1988, the term of employment shall continue on a year to year basis, provided
that either party may terminate this Agreement by not less than three months
prior written notice to the other given at any time after January 31, 1988.

3. Employment Services.
-------------------

The Executive shall devote his full time and efforts and his
energy and skill to such executive duties commensurate with his position as
the Board of Directors of the Company may reasonably assign him and will use
his best efforts to promote the best interests of the Company. In addition,
the Executive will hold without additional compensation such other offices and
directorships in the Company, its subsidiaries or any parent or affiliate of
the Company to which, from time to time he may be appointed or elected.
Executive's services are to be rendered primarily in Los Angeles County. Company
shall maintain in force, during all times that Executive may be an officer or
director of Ply-Gem Industries, Inc., (the parent of the Company), insurance
in an amount at least equal to the amount that Ply-Gem currently maintains for
officers and directors liability insurance.

4. Compensation.
------------
(a) In consideration of the services to be rendered by the
Executive hereunder, including, without lim-

-2-
<PAGE>

itation, any services rendered by him as an officer or director of the Company
or its subsidiaries, the Company shall pay or cause its subsidiaries to pay to
the Executive, and the Executive agrees to accept, as full compensation for
such services, fixed compensation at the rate of One Hundred Twenty-Five
Thousand Dollars ($125,000.00) per annum payable in equal weekly installments;
provided, however, that the compensation of the Executive shall be increased
on May 1, 1984 and as of each May 1 thereafter during the term of this
Agreement by a percentage equal to the average percentage increase of the base
salary of the members of the executive management committee of Ply-Gem
Industries, Inc. for the calendar year during which such May 1 falls as
determined on such May 1.

(b) The Executive shall be reimbursed for certain reasonable and
necessary expenses incurred by the Executive by performing his employment
hereunder, provided such expenses are adequately documented in accordance with
the Company's policy. Notwithstanding the foregoing, the Executive agrees
that he shall at his own expense, which shall not be reimbursed, promote the
business of the Company.

5. Benefits.
--------

(a) During the term of his employment hereunder, the Executive
shall be entitled to vacations, sick leave and fringe benefits in accordance
with the Company's policies and

-3-

<PAGE>

plans from time to time in effect for executive officers of the Company.
Without limiting the foregoing, the Executive shall be entitled to such
medical and dental benefits as the Company provides to its other employees,
pension benefits similar to those received by other employees of the Company,
benefits under the employees stock ownership plan of Ply-Gem Industries, Inc.
similar to benefits received by other employees of Ply-Gem similarly situated,
such benefits under the life insurance plan of the Company as previously
received and disability payment benefits if Executive qualifies for the
Ply-Gem disability plan; provided, however, in addition to the aforesaid the
Company shall agree to pay in the aggregate not more than $25,000 per annum
for benefits other than the benefits previously referred to in this sentence.
The Company at any time in its sole discretion may alter or terminate any
benefits that it provides to its employees including the Executive including
but not limited to altering or terminating any employee pension plan as such
term is defined in Section 3 of the Employee Retirement Income Security Act of
1974, as amended.

(b) Company shall provide the Executive with an automobile for
business use during the term of this Agreement and the Company shall pay or
reimburse the Executive for the expenses of operating and maintaining such
automobile for such business use. The Executive shall return such automobile to

-4-

<PAGE>

the Company upon the termination of this Agreement; provided, however, the
executive may elect to purchase at any time the automobile that is being
provided to him on the date of this Agreement for a price equal to the book
value of such automobile. The cost of providing the Executive with an
automobile shall not be included for purposes of satisfying the Company's
obligation to provide benefits pursuant to Section 5(a).

6. Termination.
-----------

(a) The Executive's employment hereunder may be terminated by the
Company for cause upon written notice to the Executive. Cause for purposes of
this Agreement shall mean (1) willful disregard of duties, (2) habitual
absence from employment, (3) habitual drunkenness or (4) dishonesty.

(b) In the event the Executive, due to physical or mental injury,
illness, disability or incapacity, shall fail to render the services provided
for in this Agreement for a consecutive period of six (6) months, the Company
may, at its option, terminate the Executive's employment hereunder by thirty
(30) days' prior written notice to the Executive.

7. Non-Disclosure of Confidential
Information and Non-Competition.
-------------------------------

(a) The Executive acknowledges that it is the policy of the Company
(for purposes of Section 7, the term

-5-
<PAGE>

Company shall also refer to any subsidiary or affiliate of the Company
including, but not limited to, Ply-Gem Industries, Inc.) to maintain as secret
and confidential all valuable and unique information heretofore or hereafter
acquired, developed or used by the Company relating to the business,
operations, employees and customers of the Company which gives the Company a
competitive advantage in its industry (all such information is hereinafter
referred to as "Confidential Information"). The Executive recognizes that the
services to be performed by the Executive are special and unique, and that by
reason of his duties, he will acquire Confidential Information. The Executive
recognizes that all such Confidential Information is the property of the
Company. In consideration of the Company's entering into this Agreement, the
Executive agrees that:

(i) he shall never directly or indirectly, use, publish,
disseminate or otherwise disclose any Confidential Information
obtained during his employment by the Company without the prior
written consent of the Company's Board of Directors, acting
independently, it being understood that this subparagraph shall
survive the term of this Agreement; and

(ii) during the term of his employment by the Company, he shall

-6-

<PAGE>

exercise all due and diligent precautions to protect the integrity of
the Company's customer lists, mailing lists and sources thereof,
statistical data and compilations, agreements, contracts, manuals or
other documents embodying any Confidential Information and, upon
termination of his employment, he shall return all such documents
(and copies thereof) in his possession or control.

The Executive agrees that the provisions of this paragraph (a) are reasonably
necessary to protect the proprietary rights of the Company in the Confidential
Information and its trade secrets, goodwill and reputation.

(b)(1) During the Non-Competition Period (as hereinafter defined),
the Executive shall not in any way, be engaged, directly or indirectly,
anywhere in the United States (or for such lesser period of time or for such
lesser geographical areas as may be determined by a court of law or equity to
be a reasonable limitation on the competitive activities of the
Executive) during such period as an employee, partner, officer, director,
representative, consultant, agent or stockholder (other than as the holder of
not more than five percent (5%) of the stock of a corporation the shares of
which are publicly traded) of any corporation, partnership, proprietor--

-7-
<PAGE>

ship or other form of business entity engaged in the business of distributing
and fabricating plywood and board panels or other vinyl or board products for
the construction or furniture industry or any other business of Company with
respect to which Executive had supervisory authority at any time during the
term of his employment with the Company anywhere in the continental United
States. Without limiting the foregoing, during the Non-Competition Period the
Executive shall not seek to persuade, directly or indirectly, any director,
officer or employee of the Company to discontinue that individual's status or
employment with the Company, nor to become employed in any activity similar to
or competitive with the activities of the Company, nor will he, directly or
indirectly, hire or retain any such person, nor will he solicit or cause or
authorize, directly or indirectly, to be solicited, for or on behalf of
himself or any third party, from others who are customers of the Company, any
business which is competitive with the Company.

(2) For purposes of this Agreement, the Non-Competition Period
shall mean the period ending on the date two years following the termination
of Executive's employment hereunder.

(c) The Executive acknowledges that any breach or threatened breach
or alleged breach or alleged threatened breach by him of the provisions of
this Section 7 can cause

-8-

<PAGE>

irreparable harm to the Company for which the Company would have no adequate
remedy at law. In the event of a breach or threatened breach or an alleged
breach or alleged threatened breach by the Executive of any of such
provisions, the Company, in addition to any and all other rights and remedies
it may have under this Agreement or otherwise, may immediately seek any
judicial action that the Company may deem necessary including, without
limitation, the obtaining of temporary and preliminary injunctive relief.

8. Notices.
-------

Any notice, request, instruction or other document to be given under this
Agreement to any party hereunder by any other party hereunder shall be in
writing and delivered personally, or sent by registered or certified mail,
postage prepaid to the following addresses:

If to the Company:

Goldenberg Plywood and Lumber Co., Inc.
c/o Ply-Gem Industries, Inc.
919 Third Avenue
New York, New York 10022

Attention: President
---------

With a copy to:

Spengler Carlson Gubar Brodsky & Rosenthal
280 Park Avenue
New York, New York 10017

Attention: Edward Brodsky, Esq.
---------

-9-

<PAGE>

If to the Executive:

Mr. Joseph M. Goldenberg
824 East 29th Street
Los Angeles, California 90011

With a copy to:

Sanders, Barnet, Goldsmith & Jacobson
1901 Avenue of the Stars
Los Angeles, California 90067

Attention: Edward Sanders
---------

or to such other address as a party hereto may hereafter designate in writing
to the other party. Delivery as aforesaid of process shall be sufficient and
adequate service of process to establish personal jurisdiction over the person
served.

9. Benefit.
-------

This Agreement shall be binding upon and shall inure to the benefit of
the Company and the Executive and their respective heirs, legal
representatives, successors and assigns.

10. Amendment and Entire Agreement.
------------------------------

This Agreement cannot be modified or changed except by an instrument in
writing, signed by the parties hereto. This Agreement contains the entire
understanding between the Company and Executive with respect to the matters
referred to herein.

-10-

<PAGE>

11. Severability.
------------

In the event of the invalidity or unenforceability of any one or more
provisions of this Agreement, such illegality or unenforceability shall not
affect the validity or enforceability of the other provisions hereof and such
other provisions shall be deemed to remain in full force and effect.

12. Execution in Counterparts.
-------------------------

This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written.

GOLDENBERG PLYWOOD AND LUMBER
CO., INC.

By /s/
----------------------------
/s/
----------------------------
Joseph M. Goldenberg

-11-
<PAGE>

DEFERRED COMPENSATION AGREEMENT
-------------------------------

This Agreement, made and entered into this 2nd day of January, 1984 by
and between Goldenberg Plywood and Lumber Co., Inc. (hereinafter referred to
as "Employer") and Joseph M. Goldenberg (hereinafter referred to as
"Employee") The parties contract with reference to the following facts:

A. On April 4, 1983, the parties entered into an employment agreement
under the terms of which Employer employed Employee for a period ending April
30, 1988 and any mutual extension of such employment.

B. The parties now desire to amend said agreement to provide for payment
to Employee of additional deferred compensation as more particularly set forth
below.

NOW, THEREFORE, IT IS AGREED AS FOLLOWS:

1. Deferred Compensation Account: Effective with the year ending
-----------------------------
December 31, 1984, Employer shall credit to a general ledger account
(hereinafter referred to as the "account") an amount equal to 15% of the total
gross compensation including salary and bonuses paid to Employee by Employer
for the then current year. Such credit shall continue each year during the
continuance of the Employee's employment by Employer. The amounts so credited
shall be in addition to the compensation provided to be paid to Employee
pursuant to the agreement dated

<PAGE>

April 4, 1983.

2. Increase in Account: Any such account so credited shall be increased
-------------------
at the end of each month by an amount equal to the interest which would be
payable if said account bore simple interest at the rate equal to the federal
discount rate applicable at the beginning of such month.

3. Benefits Payable: The benefits to be paid as deferred compensation
----------------
are as follows:

a. Termination of Employment Other Than Death: If Employee's employment
------------------------------------------
is terminated for any reason other than death, the amount of the account shall
be paid in one lump sum to Employee on the first day of the next succeeding
calendar year or, if Employee dies before said date, to his designated
beneficiary on said date.

b. Death of Employee: If Employee's employment is terminated because of
-----------------
death while he is in the employ of the Employer, the Employer shall pay the
amount of said account to the Employee's designated beneficiary in one lump
sum on the first day of the year following the year of Employee's death.

c. Designated Beneficiary: The Beneficiary referred to in this paragraph
----------------------
may be designated or changed by the Employee (without the consent of any prior
beneficiary) on a form provided by the Employer and delivered to the Employer

2
<PAGE>

before the Employee's death. If no such beneficiary shall have been
designated or if no designated beneficiary shall survive the Employee,
payment of the amount of said account shall be made to the Employee's estate.

4. No Trust: Nothing contained in this Agreement and no action taken
--------
pursuant to the provisions of this Agreement shall create or be construed to
create a trust of any kind or a fiduciary relationship between the Employer
and the Employee, designated beneficiary or any person.

5. No Assignment: The rights of the Employee or any other person to the
-------------
payment of deferred compensation or other benefits under this Agreement shall
not be assigned, transferred or encumbered except by will or by the laws of
descent and distribution.

6. Incapacity of Beneficiary: If the Employer shall find that any
-------------------------
person to whom any payment is payable is unable to care for his affairs
because of illness, accident or is a minor, any payment due (unless a prior
claim therefore shall have been made by a duly appointed guardian, committee
or other legal representative) may be paid to the spouse, child, a parent or a
brother or sister or to any person deemed by the Employer to have incurred
expense for such person otherwise entitled to payment in accordance with the
provisions of paragraph 2 hereof. Any such

<PAGE>

payment shall be a complete discharge of the liabilities of the Employer under
this Agreement.

7. Binding Effect: This Agreement shall be binding upon and inure to
--------------
the benefit of the Employer, its successors, assigns and the Employee and his
heirs, executors, administrators and legal representatives.

8. Compliance with the Internal Revenue Code: It is intended and
-----------------------------------------
understood by the parties hereto that this Agreement complies with the
provisions of the Internal Revenue Code and regulations in effect at the time
of its execution. If, at a later date, the laws of the United States or of
the State of California are construed in such a way to make this Agreement
void and of no effect, then this Agreement shall be given effect in such
manner as will best carry out the purposes and intentions of the parties.

In witness whereof, the parties hereto have executed this Agreement
the day and year first above written.

GOLDENBERG PLYWOOD AND LUMBER COMPANY, INC

BY /s/ Jeffrey Silverman, Vice President
----------------------------------------
Jeffrey Silverman, Vice President
(Employer)

/s/ Joseph M. Goldenberg
----------------------------------------
Joseph M. Goldenberg (Employee)

4
<PAGE>

March 7, 1986

Mr. Herbert Dooskin
22 Cambridge Drive
North Caldwell, NJ 07006

Dear Mr. Dooskin:

We have had discussions with you with respect to your employment as an
executive of Ply-Gem Industries, Inc. (the "Company"). We have felt that it is
in each of our best interests for us to enter into an arrangement pursuant to
which the Company shall have the benefit of your services for an extended
period of time and you agree to commit yourself to the Company and to be
obligated to serve as a principal executive officer of the Company during the
foreseable future.

This letter shall constitute the agreement between us with respect to
your employment as a principal executive officer of the Company upon the
following terms and conditions:

1. You have agreed to serve as a principal executive officer of the
Company and we have agreed to employ you as such. This agreement shall
commence on March 15, 1986 and, unless extended as set forth herein, shall
terminate on March 31, 1988 (the "Employment Period"). As of April 1, 1987 and
on April 1 of each subsequent year thereafter, this agreement (and the
Employment Period) shall be automatically extended for an additional year
unless the Board of Directors of the Company shall decide

<PAGE>

otherwise and shall deliver to you written notice of their intent not to
extend the contract as aforesaid beyond the then termination date. Such
notice shall be delivered to you not later than the January 1 prior to the
April 1 extension date. This agreement and the Employment Period shall be
extended as aforesaid on the same terms and conditions as set forth herein
including without limitation this extension provision. As illustration and as
an example, unless notice of non-extension is delivered to you by the Board of
Directors prior to January 1, 1987, the agreement shall be extended until
March 31, 1989. The Employment Period is therefore extended one additional
year at that time. As of each subsequent April 1, the Employment Period shall
be extended for an additional year unless notice is given to you as aforesaid
prior to January 1 or the appropriate year.

During the Employment Period you may be terminated only for cause,
which is defined for the purpose of this agreement as a material breach of
your obligations as an officer and an employee.

You have further agreed that you will not voluntarily resign without
as least three months advance written notice to us.

2. During the Employment Period, you agree to serve as a principal
executive officer of the Company and to perform such services consistent with
such position as may be indicated from time to time by the Board of Directors.
By your designation as a principal executive officer it is understood that you
are to

2.
<PAGE>

serve initially as Executive Vice President and as a Director of the Company.
Subsequently you shall perform such other services and serve in such
capacities as the Board of Directors shall from time to time indicate all as
consistent with your position as a principal executive officer.

You will not be required to relocate your residence or principal place of
employment outside of the New York Metropolitan Area without your written
consent.

3. Anything in this agreement to the contrary notwithstanding, in the
event of your physical or mental disability during the Employment Period under
such circumstances that you are unable to discharge your responsibilities in
accordance with this agreement, or in the event of your death during the term
of the Employment Period, you or your estate (as the case may be), shall
continue to receive all payments of salary (in accordance with Paragraph 4
hereof) and bonus (in accordance with Paragraph 5 hereof) for twelve months
subsequent to the date of your disability or death, as the case may be. You
have agreed to submit to such periodic physical examinations as we deem
necessary and which are usual and customary for executives in positions such
as yourself. You further agree to take such physical examinations as may be
required in order for us to obtain life insurance on your life.

4. The salary to be paid to you during the Employment Period as
foresaid shall be determined annually by the Board of Directors and shall be
set and paid to you on a

<PAGE>

calendar-year basis. Your salary shall be not less than $250,000 per annum
which shall be payable in weekly installments. In addition, you shall receive
all employee benefits and executive perquisites receivable by executive
employees in capacities similar to yours. The company further agrees to waive
any waiting period with respect to such benefits unless such waiver would
constitute a violation of law or of an outstanding agreement to which the
Company is a party.

5. The Board of Directors of the Company shall award to you an annual
bonus reflective upon your performance and the performance of the Company for
each year. For purposes of this paragraph the minimum bonus to be paid to you
annually during the Employment Period shall be $50,000 per annum, which amount
shall be due and payable to you irrespective of your performance or the
performance of the Company. During December of each year commencing with
December 1986, the Board of Directors shall determine whether the minimum
bonus should be increased. The bonus shall be payable to you within thirty
(30) days of each year end. (For example, the increase in the bonus, if any,
to be determined in December 1986 shall be based upon performance during the
year 1986 and the entire bonus shall be paid in January 1987). The bonus to be
payable to you shall be in the absolute discretion of the Board of Directors
subject however to the minimum commitment set forth herein.

4.
<PAGE>

6. During the Employment Period and for eighteen (18) months subsequent
thereto, you have agreed that you will not in your individual capacity or as
an officer or employee of any corporation involve yourself in business
enterprises in competition with the Company or any of its subsidiaries as
presently constituted. In recognition of the importance of the provisions of
this paragraph to the Company, the Company shall have the right to immediate
injunctive relief in the event of your violation of the provisions herein.

7. It is understood and agreed that your services during the Employment
Period are to be deemed full-time employment and you shall devote such time as
is reasonably necessary in order to discharge your duties as aforesaid. You
shall be entitled to reimbursement of all out-of-pocket expenses incurred by
you in the course of the performance of your services at all times.

8. In consideration of your employment in accordance with this
agreement, the Board of Directors has agreed to grant to you no later than May
1, 1986 a non-qualified stock option to purchase 75,000 shares of the
Company's common stock. These options are to be exercisable for a period of
ten (10) years and are to be substantially in the form of the stock option
agreement attached hereto.

9. This agreement is binding upon and shall inure to our mutual benefit
and to the benefit of our respective successors, heirs and assigns.

<PAGE>

Kindly sign a copy of this letter indicating your agreement with the
aforesaid.

Very truly yours,

PLY-GEM INDUSTRIES, INC.

By: /s/ Jeffrey S. Silverman
------------------------
Jeffrey S. Silverman
President

AGREED TO:

/s/ Herbert Dooskin 3/7/86
- ----------------------------
Herbert Dooskin

6.
<PAGE>

May 4, 1987

Mr. Herbert Dooskin
22 Cambridge Drive
North Caldwell, NJ 07006

Dear Mr. Dooskin:

Reference is made to the letter agreement between us dated March 7, 1986
with respect to your employment as a principal executive officer of Ply-Gem
Industries, Inc. (the "Company). It is in each of our best interests for us
to enter into arrangements pursuant to which the Company shall have the
benefit of your services for an extended period of time. You have agreed to
commit yourself to the Company and to be obligated to serve as a principal
executive officer of the Company during the foreseeable future.

This letter shall constitute a modification it its entirety of the
agreement dated March 7, 1986 between us with respect to your employment as a
principal executive officer of the Company upon the following terms and
conditions.

1. You presently serve as a principal executive officer of the Company.
We have agreed to continue such employment during the employment period (the
"Employment Period") which shall commence January 1, 1987 and shall terminate
on
<PAGE>

December 31, 1989. Notwithstanding the aforementioned termination date, the
termination date of the Agreement (and the Employment Period) shall be
automatically extended in a constant fashion so that the Employment Period
shall always have three years remaining unless the Chairman of the Board of
Directors of the Company shall decide otherwise and shall deliver to you
written notice of the intent to terminate at the end of the then Employment
Period. At the time such notice shall be delivered to you, the termination
date shall then be fixed at a date no earlier than three years from the date
of the notice, and shall not be subject to further extension. Unless this
agreement is terminated in the manner as aforesaid, this employment agreement
and the Employment Period shall be extended as aforesaid without any further
action on the same terms and conditions as set forth herein including without
limitation the extension provision to provide for a constant three year
remaining Employment Period.

During the Employment Period you may be terminated only for cause, which
is defined for the purpose of this agreement as a material breach of your
obligations as an officer and an employee.

You have further agreed that you will not voluntarily resign without at
least three months advance written notice to us.

2. During the Employment Period, you agree to serve as a principal
executive officer of the Company and to perform such services consistent with
such position as may be indicated
<PAGE>

from time to time by the Chairman of the Board of Directors. By your
designation as a principal executive officer it is understood that you are to
continue to serve as Executive Vice President and as a Director of the
Company. Subsequently you shall perform such other services and serve in such
capacities as the Chairman of the Board of Directors shall from time to time
indicate all of which shall be consistent with your position as a principal
executive officer.

You will not be required to relocate your residence or principal place of
employment outside of the New York Metropolitan Area without your written
consent.

3. Anything in this agreement to the contrary notwithstanding, in the
event of your physical or mental disability during the Employment Period under
such circumstances that you are unable to discharge your responsibilities in
accordance with this agreement, or in the event of your death during the term
of the Employment Period, you or your estate (as the case may be), shall
continue to receive all payments of salary (in accordance with Paragraph 5
hereof) for twelve months subsequent to the date of your disability or death,
as the case may be. You have agreed to submit to such periodic physical
examinations as we deem necessary and which are usual and customary for
executives in positions such as yourself. You further agree to take such
physical examinations as may be required in order for us to obtain life
insurance on your life. The Company has purchased a disability income policy
<PAGE>

for your benefit which shall pay to you the sum of $10,000 per month. Any
amount paid to you as a benefit under this policy or any other individual
disability policy purchased by the Company shall be a deduction from the
amounts paid to you in accordance with this paragraph.

4. The Company shall purchase a Life Insurance Policy on your life in
the principal amount of $1,000,000 which shall be payable to your estate of
your designee upon your death. All premiums with respect to this policy shall
be paid by the Company. The payments to your estate or designee in accordance
with this paragraph shall be in addition to the payments provided for in
Paragraph 3 above in the event of your death.

5. The salary to be paid to you during the Employment Period as
aforesaid shall be determined annually by the Board of Directors and shall be
set and paid to you on a calendar-year basis. The action by the Board of
Directors shall be upon the recommendation of the Chairman of the Board. The
Board of Directors shall take no action on this matter contrary to the
Chairman's recommendation. Your salary shall be not less than $360,000 per
annum which shall be payable in weekly installments. In addition, you shall
receive all employee benefits and executive perquisites receivable by executive
employees in capacities not senior to yours. The company further agrees to
waive any waiting period with respect to such benefits unless such waiver
would constitute a violation of law or of an outstanding agreement to which
the Company is a party.

<PAGE>

6. During the Employment Period and for two (2) years subsequent
thereto, you have agreed that you will not in your individual capacity or as
an officer or employee of any corporation involve yourself in business
enterprises in competition with the Company or any of its subsidiaries as
presently constituted. In recognition of the importance of the provisions of
this paragraph to the Company, the Company shall have the right to immediate
injunctive relief in the event of your violation of the provisions herein.

8. This agreement is binding upon and shall inure to our mutual benefit
and to the benefit of our respective successors, heirs and assigns.

Kindly sign a copy of this letter indicating your agreement with the
aforesaid.

Very truly yours,

PLY-GEM INDUSTRIES, INC.

By: /s/ Jeffrey S. Silverman
---------------------------
Jeffrey S. Silverman
AGREED TO: Chairman and President

/s/ Herbert Dooskin
- ---------------------------
Herbert Dooskin
<PAGE>

December 23, 1992

Mr. Jeffrey S. Silverman
Ply Gem Industries, Inc.
777 Third Avenue
New York, New York 10017

Dear Mr. Silverman:

Reference is made to your employment agreement dated July 17, 1986 and
to certain subsequent amendments and modifications (the "Agreement"). In
accordance with discussions that we have recently had, and in accordance with
action taken this day by the Board of Directors of Ply Gem, we have mutually
deemed that it is in our respective best interests to modify in certain
respects provisions of the Agreement as follows:

1. Paragraph "1" of the Agreement shall be modified in its entirety
as follows:

"1. You have agreed to serve as the Chief Executive Officer of the
Company and we have agreed to employ you as such. This agreement shall be
effective as of the date hereof and shall terminate on April 30, 2003 (the
"Basic Employment Period"). As of April 30, 1993 and on April 15 of each
subsequent one year thereafter, this agreement shall be automatically
extended for an additional year subsequent to its then expiration date
unless the Board of Directors of the Company shall decide otherwise and
shall deliver to you written notice of their intent not to extend the
contract as aforesaid beyond the then termination date. such notice shall be
delivered to you not later than the August 1 prior to the applicable April
15 extension date. This agreement shall be extended as aforesaid on the same
terms and conditions as set forth herein including without limitation this
renewal

<PAGE>

Mr. Jeffrey S. Silverman
Page 2 December 23, 1992

provision. As illustration and as an example, unless written notice is
delivered to you by the Board of Directors on or prior to August 1, 1993, the
agreement shall be extended until April 30, 2004. The Basic Employment
Period is therefore extended one additional year at that time. As of each
subsequent April 15, the Basic Employment Period shall be extended for an
additional year unless written notice is given to you as aforesaid prior to
August 1 of the appropriate year."

2. The annual salary (as referred to and defined in Paragraph "5" of
the Agreement) for the year commencing January 1, 1993 shall be $1,873,625.
During all subsequent years (commencing January 1, 1994) your annual salary
shall be $1,873,625, plus increases in accordance with the formula set forth
in paragraph "5"of the Agreement.

3. As further consideration of our mutual agreement to modify the
Agreement in the manner set forth herein, we have agreed to provide to you a
one-time loan in the principal amount of $3.5 million to be repaid by you in
ten periodic installments, any one of which together with the interest
thereon, or all of which, will be forgiven by Ply Gem in the event Ply Gem
meets certain profit milestones in the future. This loan shall be evidenced by
a promissory note and shall be repaid in ten equal annual installments
commencing April 30, 1994, together with interest at the rate of 7.30 % per
annum. Interest on the unpaid principal balance shall be paid annually
commencing April 30, 1994. The proceeds of the loan shall be used by you to
repay prior advances by the Company to you.

Anything herein contained to the contrary notwithstanding, the Board
of Directors of the Company may, by action prior to any principal payment
date, forgive the payment of interest and the repayment of any principal
payment. The determination of the Board of Directors of the Company with
respect to such forgiveness shall be based upon such factors as the growth of
the Company, increase in profitability and such other factors which may be
determined from time to time by the Board of Directors.

Notwithstanding the aforesaid, and payment of interest or principal
due on April 30 of any year shall be forgiven if the net income of the Company
during the prior year shall have increased by at least 20% in excess of the
net income of the Company during the next preceding year thereto. The
repayment of the loan and all accrued interest thereon shall be forgiven prior
to its maturity (i) upon your permanent disability, or (ii) upon an
involuntary termination of your employment (except for "Cause") or upon a
termination of employment initiated by

<PAGE>

Mr. Jeffrey S. Silverman
Page 3 December 23, 1992

you which occurs (a) with a "Change in Employment Status" or (b) with "Good
Reason" subsequent to a "Change in Control Event" or "Potential Change in
Control Event."

Anything herein to the contrary notwithstanding, the provisions of the
modification to the Agreement dated February 19, 1991 and November 3, 1992
insofar as they relate to the loans and promissory notes referred to therein
shall remain in full force and effect.

4. Paragraph "8" of the Agreement shall be amended in its entirety so as
to read as follows:

"8. (a) The Company has purchased life insurance policies in the
aggregate principal amount of $12.5 million on your life (New England Mutual
Life Insurance Company Policy No. 110042929 and 110042930 each in the amount
of $5 Million and Policy No. 110017965 in the amount of $2,500,000). We have
agreed to assign these policies to you or to an insurance trust which you
designate in accordance with your instructions. Notwithstanding the
aforementioned, during the Basic Employment Period, the Consulting Term
(as set forth in Paragraph 3) or during such period as you are mentally or
physically disabled and payments are made to you in the manner set forth in
Paragraph 3 above, the Company shall remain obligated to pay the premiums
on the aforementioned policies.

(b) In the event of your death during the Basic Employment
Agreement, the Consulting Period or during such period as you are mentally
or physically disabled and payments are being made to you in the manner set
forth in Paragraph 3 above, the Company agrees to continue to provide your
wife with hospitalization, medical and major medical expense reimbursement
insurance during the balance of her life and to pay all premiums for
insurance with respect thereto.

(c) In addition to the life insurance policies referred to in sub-
paragraph (a) of Paragraph 8 above, the Company has agreed to pay the
premiums on life insurance policies maintained upon your life, which
policies are described and are more particularly referred to on Schedule A
attached hereto, during the Basic Employment Period, during the Consulting
Period and for two years subsequent thereto."

<PAGE>

Mr. Jeffrey S. Silverman
Page 4 December 23, 1992

As herein amended the Agreement is deemed ratified by each of us and is
deemed to be in full force and effect. Kindly sign a copy of this letter
indicating your agreement as aforesaid.

Very truly yours,

PLY GEM INDUSTRIES, INC.

By: /s/
-----------------------------

Agreed to and Accepted:

/s/
- ----------------------
Jeffrey S. Silverman

<PAGE>

November 3, 1992

Mr. Jeffrey s. Silverman
Ply Gem Industries, Inc.
777 Third Avenue
New York, NY 10017

Dear Mr. Silverman:

Reference is made to the agreement between us dated February 19, 1991
modifying and amending your employment agreement and in particular to the
provisions of paragraph 2 thereof which provides for the amendment of
paragraph 6 of the Agreement (as therein defined) in its entirety.

Paragraph 6B refers to the forgiveness of the annual principal payments
on the Promissory Note held by the Company. The Agreement did not reflect the
intention of the Company to provide for forgiveness of interest on the same
basis as the forgiveness of annual principal payments.

The Board of Directors at its meeting this date confirmed its
understanding that both principal and interest payments were to be forgiven in
the manner set forth in Paragraph 6B of the Agreement with respect to the
Promissory Note dated February 19, 1991 referred to above and to the
Promissory Note dated September 15, 1991.

We acknowledge receipt from you this date of amended Promissory Notes
dated this date replacing the Promissory Note dated September 15, 1991 in the
original principal amount of $1 million, now reduced to $900,000, and the
Promissory Note dated February 19, 1991 in the original principal amount of
$4.9 million, now reduced to $4,410,000.

If this agreement constitutes an understanding of our agreement would you
please sign a copy and return it to us.

Very truly yours,

PLY GEM INDUSTRIES, INC.

By: (Signature Appears Here)
----------------------------
Executive Vice President

AGREED TO:

By: /s/ Jeffrey S. Silverman
-------------------------
JEFFREY S. SILVERMAN

<PAGE>

February 19, 1991

Mr. Jeffrey S. silverman
983 Park Avenue
Apt. 12B
New York, New York 10028

Dear Mr. Silverman:

Reference is made to your Employment Agreement dated July 17, 1986 and to
certain subsequent modifications the last of which was dated June 2, 1990 (the
"Agreement"). In accordance with certain discussions that we have recently had
we have mutually deemed that it is in our respective best interests to modify
in certain respects provisions of the Agreement in particular those set forth
in paragraph 6 which relate to the payment of salary and bonus to you.

We desire to modify the salary and bonus provisions of the Agreement on
an ongoing basis to provide to you salary and bonus payments of a nature which
continue to provide significant performance incentives. In addition, in
consideration of your agreement to modify the provisions for salary and bonus
payments as presently set forth in the Agreement, we have agreed to provide to
you periodic incentive compensation payments. We have also agreed to provide
to you a one time loan to be repaid in periodic installments any one of which
or all of which will be forgiven by Ply Gem in the event that Ply Gem meets
certain profit milestones in the future.

1. The provisions of Paragraph 5 of the Agreement shall be modified to
provide that your annual salary for each year beginning in 1992 shall be not
less than the salary in effect during the prior year of employment increased
by the greater of:

(i) ten (10%) percent; or
<PAGE>

Mr. Jeffery S. Silverman
Page 2 February 19, 1991

(ii) the increase in the cost of living reflected by the Cost of Living
Index of the Bureau of Labor Statistics for the New York, New Jersey
Metropolitan region from January 1 of the preceding year to January 1 of the
year during which the salary is to be effective.

It is agreed that your salary in effect during 1991 shall be $1,248,746.

2. Paragraph 6 of the Agreement shall be amended in its entirety as
follows:

"6. A. The Company shall award to you an annual bonus reflective of the
performance of the Company during each year. For purposes of this paragraph,
the Base Bonus is deemed to be the average of the bonus paid to you in the
years 1987, 1988 and 1989 ($365,000) which is the amount of the minimum
bonus to be paid to you in 1991. On or prior to February 1 or each year
commencing with February 1, 1992, the Board of Directors shall determine the
bonus to be paid to you at that time which shall be based in part upon the
Company's operating results from the prior year. The bonus payment to be
awarded to you for each year commencing in 1992 shall be adjusted
proportionately to reflect increases or decreases in net income of the
Company for the prior year as compared with the next preceding year subject
to a maximum payment (with respect to this formula) of $1 Million per year
which maximum shall be increased by the greater of the increase in the cost
of living during the prior year or 10%. As an example, assuming net income
in 1991 and 1992 is $10 Million and $15 Million, respectively, and the bonus
paid in 1992 was $365,000, then the bonus to be paid in 1993 will be
$547,500 (a 50% increase measured by the 50% increase in net income). As
long as the Company has net income, the bonus to be paid shall be at least
equal to the Base Bonus. Notwithstanding the aforesaid, the bonus to be paid
in 1992 shall reflect the percentage increase as compared with the Base
Bonus subject to the maximum payment as above. In the event that the Board
of Directors cannot determine with sufficient accuracy the bonus to be
awarded to you in any year, then an estimate of such bonus shall be awarded
to you to be adjusted as soon as is practicable and possible at such time as
the results of operations for the year are available. The bonus as
determined by the Company shall be the basis for the next subsequent year's
<PAGE>

Jeffrey S. Silverman
Page 3 February 19, 1991

bonus computation. In the event the Company sustains a loss in any one year,
then the basis shall be the Bonus received during the next preceding year in
which the Company had a net income. No bonus shall be paid to you in the
event that the Company has a net loss. The bonus, as determined as aforesaid,
shall be paid to you at such times as you may reasonably request. Notwith-
standing the aforesaid, you may request and receive from time to time
advances of the anticipated bonus.

"For purposes of clarification, the bonus awarded in accordance with
this Paragraph is awarded not only in recognition of increases in net income
but in recognition of the overall performance of the Company which, as an
example, may include the completion of acquisitions or additional financing,
evaluation of future prospects of the Company and all other matters which
reflect on performance and prospects. The formula set forth above for
payment of the bonus is intended to reflect the Company's obligation for
payment of a minimum bonus to be paid and may be increased beyond the formula
at the sole discretion of the Board of Directors in recognition of factors
which the Board of Directors may deem important in awarding compensation to
you.

"B. The Company shall lend to you on this date $4.9 million, which
amount shall be evidenced by a promissory note and shall be repaid in ten
equal annual installments commencing April 30, 1992, together with interest
at the rate of (8.36%) per annum. Interest on the unpaid principal balance
shall be paid annually commencing April 30, 1992. The proceeds of the loan
shall be used by you to repay prior advances by the Company to you.

"Anything herein contained to the contrary notwithstanding, the
Board of Directors of the Company may, by action prior to any principal
payment date, forgive the repayment of any principal payment. The
determination of the Board of Directors of the Company with respect to
forgiveness shall be based upon such factors as the growth of the Company,
increase in profitability and such other factors which may be determined
from time to time by the Board of Directors.

<PAGE>

Mr. Jeffrey S. Silverman
Page 4 February 19, 1991

"Notwithstanding the aforesaid, any payment due on April 30 of any
year shall be forgiven if the net income of the Company during the prior year
shall have increased by at least 20% in excess of the net income of the
Company during the next preceding year thereto. The loan shall be forgiven
prior to its maturity (i) upon your death or permanent disability, or (ii)
upon an involuntary termination of your employment (except for "Cause") or
upon a termination of employment initiated by you which occurs (a) with a
"Change in Employment Status" or (b) with "Good Reason" subsequent to a
"Change in Control Event" or "Potential Change in Control Event".

"C. The Company shall pay to you as incentive compensation $495,000
per annum on March 15 of each year commencing March 15, 1991 and continuing
until March 15, 2001. Commencing with the payment due on March 15, 2001.
Commencing with the payment due on March 15, 1992, these incentive
compensation payments are subject to (i) your continued employment (as an
employee or consultant) by the Company at such time as the payments are due to
you except in the event of involuntary termination by the Company (except for
"Cause") or in the event of your resignation (a) as a result of a "Change in
Employment Status" or (b) for "Good Reason" subsequent to a "Change in Control
Event" or "Potential Change in Control Event" and (ii) the Company having net
income in the year prior to payment of the deferred compensation payment at
least equal to 75% of the net income of the Company for the year ended
December 31, 1990. In the event the earnings standard set forth above has
not been met, the deferred compensation payment can be made in any
subsequent year up to 2001 if the average earnings for all years from 1991
through such subsequent year are at least 75% of the net income for the year
ended December 31, 1990. In the event of your death or total disability, all
of the then unpaid payments shall forthwith become due and payable to you or
your estate, as the case may be.

As used in this agreement, "Cause", "Change in Control Event",
"Potential Change in Control Event", "Change in Employment Status" and "Good
Reason" shall have the definitions attached to this agreement."

<PAGE>

Mr. Jeffrey S. Silverman
Page 5 February 19, 1991

3. Except as modified herein, the Agreement is hereby ratified and
confirmed in all respects as heretofore.

Very truly yours,

PLY GEM INDUSTRIES, INC.

By: (Signature Appears Here)
--------------------------
Executive Vice President

AGREED TO:

By: /s/ Jeffrey S. Silverman
------------------------
Jeffrey S. Silverman

<PAGE>

Schedule A

CERTAIN DEFINITIONS

As used in this Employment Agreement, and unless the context requires a
different meaning, the following terms have the meanings indicated:

"Change of Control Event" means the happening of any one of the
-----------------------
following: (a) any "person", as defined in Section 3(a)(9) of the Exchange
Act and as used in Sections 13(d) and 14(d) thereof, including a "group" as
defined in Section 13(d) of the Securities Exchange Act of 1934 (the "Exchange
Act") but excluding Ply Gem Industries, Inc. and any employee benefit plan
sponsored or maintained by Ply Gem Industries, Inc. (including any trustee of
such plan acting as trustee), directly or indirectly, becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act, as amended from time
to time), of securities of Ply Gem Industries, Inc. representing 20 percent or
more of the combined voting power of Ply Gem's then outstanding securities;
(b) during any period of 24 consecutive months during the existence of this
Employment Agreement, the individuals who, at the beginning of such period,
constitute the Board (the "Incumbent Directors") cease for any reason other
than death to constitute at least a majority thereof, provided, however, that
a director who was not a director at the beginning of such 24-month period
shall be deemed to have satisfied such 24-month requirement (and be an
Incumbent Director) if such director was elected by, or on the recommendation
of or with the approval of, at least two-thirds of the directors who then
qualified as Incumbent Directors either actually (because they were directors
at the beginning of such 24-month period) or by prior operation of this
subsection; or (c) the occurrence of a transaction requiring shareholder
approval for the acquisition of Ply Gem by an entity other than Ply Gem or a
subsidiary or affiliated company through purchase of assets, or by merger, or
otherwise.

"Good Reason" means (a) without Silverman's express written consent to
-----------
(A) the assignment to Silverman of any duties, or any limitation of
Silverman's responsibilities, inconsistent with Silverman's positions, duties,
responsibilities and status with Ply Gem immediately prior to the date of the
Potential Change of Control or the Change of Control Event, or (B) any removal
of Silverman from, or any failure to re-elect Silverman to, any of Silverman's
positions with Ply Gem immediately prior to the Potential Change of Control or
the Change of Control Event; (b) any failure by Ply Gem to provide, or any
reduction by Ply Gem of, Silverman's Compensation in effect immediately prior
to the Potential Change

<PAGE>

in Control or the Change of Control Event; (c) without Silverman's express
written consent, the relocation of the principal place of Silverman's
employment to a location that is more than ten (10) miles further from
Silverman's principal residence than such principal place of employment
immediately prior to the Potential Change of Control or the Change of Control
Event; or (d) any breach of Paragraph 9 of this Employment Agreement.

"Potential Change of Control Event" means the happening of any of the
---------------------------------
following: (a) the approval by shareholders of an agreement by Ply Gem, the
consummation of which would result in a Change of Control Event; or (b) the
acquisition of beneficial ownership, directly or indirectly, by any entity,
person or group (other than Ply Gem or any Ply Gem employee benefit plan
(including any trustee of such plan acting as such trustee) of securities of
Ply Gem representing five percent or more of the combined voting power of Ply
Gem's outstanding securities and the adoption by the Board of Directors of a
resolution to the effect that a Potential Change of Control of Ply Gem has
occurred.

"Cause" means the commission by Silverman of one or more acts for which
-----
Silverman is convicted of a felony under United States Federal, state or local
criminal law after the appeal process has been concluded.

"Change In Employment Status" means that without Silverman's expressed
---------------------------
written consent (a) the decision of the Board of Directors at any time not to
continue to designate Silverman as Chairman and Chief Executive Officer of the
Company or (b) you shall not be elected to serve in that capacity or (c)
despite your election to such office you are not designated as sole Chief
Executive officer or (d) the assignment to Silverman of any duties, or any
limitation of Silverman's responsibility inconsistent with Silverman's
responsibilities and status prior to such change or (e) a breach by the
Company of Silverman's employment agreement.

ii.

<PAGE>

June 2, 1990

Mr. Jeffrey S. Silverman
983 Park Avenue
Apt. 12B
New York, New York 10028

Dear Mr. Silverman:

Reference is made to your Employment Agreement dated July 17, 1986 (the
"Agreement") and to certain subsequent modifications. In accordance with
certain discussion that we have recently had, we have mutually deemed that it
is in our respective best interests to modify in certain respects provisions
of the Agreement with respect to death benefits and with respect to the
payment of life insurance proceeds.

1. For purposes of clarity, the following is a summary of the life
insurance policies on your life, our respective interests therein and certain
modifications with respect thereto:

(a) Paragraph 8(a) of the Agreement relates to a life insurance
policy on your life (New England Mutual Life Insurance Company, Policy No.
U111278, dated November 16, 1987). The Agreement provides that in the event of
your death during the Basic Employment Period or at such other specified
times, $2.5 million of the amount received from the proceeds shall be payable
as a death benefit to your estate or your designee. We have agreed to modify
this provision to provide that from the date hereof, $2.5 million shall
continue to be paid to your estate or designee as a death benefit and so much
of the balance received from the proceeds of the policy as is necessary, even
the remaining balance in its entirety, shall be applied to payment of advances
made to you then outstanding on the books of the Company. All other provisions
and conditions set forth in Paragraph 8(a) shall remain as heretofore.

<PAGE>

Mr. Jeffrey S. Silverman
Page 2 June 2, 1990

(b) On October 16, 1987, we entered into an Agreement with
respect to a Flexible Premium Advance Life Insurance Policy to be issued by
New England Mutual Life Insurance Company in the principal amount of $5
million (Policy No. 0111278). This Agreement relates to the payment of
proceeds and the ownership of the policy benefits. The provisions of this
Agreement shall remain in effect and shall not be modified at this time.

2. In order to provide an additional benefit to your estate in the
event of your death, we have agreed that a new subparagraph (c) shall be added
to paragraph 8 of the Agreement as follows:

"(c) In the event of your death during the Basic Employment
Agreement, the Consulting Period or during such period as you are mentally
or physically disabled, and payments are being made to you in the manner set
forth in Paragraph 3 above, the Company agrees that upon your death any
amounts due to the Company from you as a result of advances or otherwise
shall be forgiven and no requests for payments or demands thereof shall be
made against the legal representatives of your estate."

Except as modified herein the Agreement shall remain in full force and
effect.

Very truly yours,

PLY GEM INDUSTRIES, INC.

By: (Signature Appears Here)
----------------------------
Executive Vice President

AGREED TO:

/s/ Jeffrey S. Silverman
- ---------------------------
Jeffrey S. Silverman
<PAGE>

July 17, 1986

Mr. Jeffrey S. Silverman
Ply-Gem Industries, Inc.
919 Third Avenue
New York, New York 10022

Dear Mr. Silverman:

We have had discussions with you for a considerable period of time with
respect to your employment as an executive of Ply-Gem Industries, Inc. (the
"Company"). The Board of Directors of the Company are greatly appreciative of
the results of operations during the past years which success has been in
large part attributable to you. We have acknowledged your leadership of the
Company be electing you Chairman and constituting you Chief Executive Officer.
We are anxious that this very positive relationship shall continue. It is
apparent, therefore, that it is in our best interest for us to enter into a
formal arrangement with you pursuant to which the Company shall have the
benefit of your services for an extended period of time and you agree to
commit yourself to the Company and be obligated to serve as the Chief
Executive Officer of the Company during the foreseeable future.
<PAGE>

This letter shall constitute the agreement between us with respect to
your employment as the Chief Executive Officer of the Company upon the
following terms and conditions:

1. You have agreed to serve as the Chief Executive Officer of the
Company and we have agreed to employ you as such. This agreement shall be
effective as of January 1, 1986 and shall terminate on December 31, 1990 (the
"Basic Employment Period"). As of January 1, 1987 and on each subsequent year
thereafter, this agreement shall be automatically extended for an additional
year subsequent to its then expiration date unless the Board of Directors of
the Company shall decide otherwise and shall deliver to you written notice of
their intent not to extend the contract as aforesaid beyond the then
termination date. Such notice shall be delivered to you not later than the
August 1 prior to the January 1 extension date. This agreement shall be
extended as aforesaid on the same terms and conditions as set forth herein
including without limitation this renewal provision. As an illustration and as
an example, unless written notice is delivered to you by the Board of
Directors on or prior to August 1, 1986, the agreement shall be extended until
December 31, 1991. The Basic Employment Period is therefore extended one
additional year at that time. As of each subsequent January 1, the Basic
Employment Period shall be extended for an additional year unless written
notice is given to you as aforesaid prior to August 1 of the appropriate year.

<PAGE>

2. During the Basic Employment Period, you agree to serve as the Chief
Executive Officer of the Company and to perform such services as may be
indicated from time to time by the Board of Directors. The Board of Directors
has elected you Chairman and has designated you Chief Executive Officer. In
addition, you will continue to act as President. You shall also serve as a
member of the Board of Directors without any additional compensation.

Notwithstanding the aforesaid, however, in the event that the Board of
Directors shall deem it advisable in their sole and unreviewable discretion at
any time not to continue to designate you as Chairman and Chief Executive
Officer of the Company as aforesaid or in the event you shall not be elected
to serve in that capacity or despite your election to such office you are not
designated as sole Chief Executive Officer then at your sole and unreviewable
option and discretion you shall then act in a consultative capacity for the
Company for the balance of the Basic Employment Period (the "Consulting
Term"). During such time as you shall act in such consultative capacity, you
shall receive the salary, bonus, stock options, the right to severance pay and
insurance or death benefits, if any, and all other Company benefits that would
have been paid to you had you continued to serve as Chairman and Chief
Executive Officer in the manner contemplated. As a consultant, you shall make
recommendations to the Company when requested with respect to customer
relations, marketing, new product development, corporate management, mergers,
financing, acquisitions and long-term

<PAGE>

planning. The payments to be made to you for your acting in a consultative
capacity shall be made to you irrespective of whether or not the Company
utilizes your services as a consultant.

It is understood and agreed that services to be rendered by you during
the Consulting Period are not to be deemed full-time employment and that, if
requested, you shall be required to render consultation services on a
reasonable basis at such times as shall be mutually determined and agreeable
to you and the Company. You shall be entitled to reimbursement for all
out-of-pocket expenses incurred by you in the course of rendering services to
us in accordance with this agreement.

In the event that during the Consulting Period you become
incapacitated and, as a result, are unable to perform the consulting services
required to be performed, nevertheless, you shall continue to be entitled to
the compensation as provided for herein. We understand that during the
Consulting Period you may be employed elsewhere on a full-time basis. The
compensation to be paid to you during the Consulting Period shall not be
decreased as a result of your full-time employment elsewhere.

You have agreed that during the term of the Basic Employment Period
you will not voluntarily resign without at least three months advance written
notice to us.

Any amounts to be paid to you in accordance with this agreement for
salary, bonus or otherwise, shall be paid at your option in either cash or
common stock of the Company. If you elect to receive common stock, then the
shares to be received by

4.
<PAGE>

you shall be valued based upon the closing price of the shares on the American
Stock Exchange (or such other exchange or market where the Company's shares
are traded) on the day prior to the date payment is due and payable to you.

3. (a) Anything in this agreement to the contrary notwithstanding, in
the event of your physical or mental disability during the Basic Employment
Period or during the Consulting Period under such circumstances that you are
unable to discharge your responsibilities in accordance with this agreement,
or in the event of your death during the term of the Basic Employment Period
or the Consulting Period, you or your estate (as the case may be) shall
continue to receive all payments of salary (in accordance with Paragraph 5
hereof) and bonus (in accordance with Paragraph 6 hereof) for the balance of
the Basic Employment Period or Consulting Period as the case may be.

(b) In addition to and notwithstanding the foregoing, in the event
of your physical or mental disability during the Basic Employment Period or
during the Consulting Period, subsequent to the termination of payments to be
made to you or your estate (in accordance with Paragraph 3(a) above), you are
to receive during each year for the balance of such period of physical or
mental disability, even to the extent of the balance of your life, an amount
equal to fifty percent of the salary (in accordance with Paragraph 5 hereof)
as in effect during the last year of the Basic Employment Period adjusted
annually to reflect increases in the Cost of Living as measured by the
Consumer Price

5.
<PAGE>

Index published for the New York/New Jersey metropolitan area by the Bureau of
Labor Statistics. Notwithstanding the aforesaid, payments in accordance with
this subparagraph subsequent to the Basic Employment Period or Consulting Term
shall not exceed $500,000 per annum. In addition, all medical insurance for
yourself and your wife shall be kept in force. During the course of such
payments, the Company agrees to continue to provide for you and your wife
hospitalization, medical and major medical expense reimbursement insurance and
to pay all premiums with respect thereto.

You have agreed to submit to such periodic physical examinations as we
deem necessary and which are usual and customary for executives in positions
such as yourself. You further agree to take such physical examinations as may
be required in order for us to obtain, at our option, additional life
insurance on your life.

4. We both recognize the importance of the maintenance of the Company's
presence in New York City and for the Company's principal executive offices to
be located at such place.

During the Basic Employment Period, the executive offices of the Company
and your place of employment shall be maintained in New York, New York. In the
event that the Company shall determine that your place of employment shall be
in a location other than New York, New York, then you shall have the right in
your sole and unreviewable discretion to decline relocation to

<PAGE>

such other site and to immediately assume the duties of consultant in the
manner specified in Paragraph 2 above for the balance of the Basic Employment
Period.

5. The salary to be paid to you for your services as the Chief Executive
Officer during the Basic Employment Period as well as amounts to be paid
during the Consulting Period as aforesaid shall be set and paid to you on a
calendar-year basis in installments not less frequently than weekly. The annual
salary in effect as of the date hereof is $429,000. Your salary for each
subsequent year beginning with 1987 shall be not less than the salary in effect
during the prior year of employment increased by the greater of:

(i) ten (10%) percent; or

(ii) the increase in the cost of living reflected by the Cost of
Living Index of the Bureau of Labor Statistics for the New York, New Jersey
Metropolitan region from January 1, 1986 to January 1 of the year during
which the salary is to be effective; or

(iii) the salary in effect as of the preceding year increased by the
percentage increase (limited to 50%) in after-tax profits of the Company
computed from the prior year. In the event the Company's after-tax profits
shall be less than in the prior year ("Prior Year"), then in the subsequent
year's computation for this purpose the percentage increase shall be
measured by the increase in after-tax profits from the Prior Year (as
defined). For example, if in 1987, 1988 and 1989 the after-tax profits were
$3M, $2M and $5M, respectively, then for purposes of this paragraph the
increase in after-tax profits for purposes of setting the 1990 salary shall
be measured by the increase in after-tax profits in 1989 ($5M) as compared
with 1987 ($3M) limited to a 50% increase .

<PAGE>

As an illustration of the aforesaid, the Board of Directors shall set your
salary for the year 1987 as of January 1, 1987; the cost of living has
increased by four (4%) percent during the period from January 1, 1986 through
December 31, 1986; the Company has had an increase of fourteen (14%) percent in
its after-tax profits during 1986 as compared to 1985 then

(a) salary in effect January 1, 1986 -
$429,000 per annum; and

(b)(i) Salary in effect in 1986 increased by
10% - $471,900;

(ii) 1986 salary increased by four (4%) percent (increase in the
cost of living from January 1, 1986 - December 31, 1986) - $446,660;
and

(iii) salary in effect during 1986 increased by fourteen
(14%) percent reflecting increase in net income after taxes - $489,560.

The salary for 1987 shall be $489,560 reflecting the highest of the three
options set forth above.

For purposes of this Paragraph and Paragraph 6 below, "net income after
taxes of the Company" shall be determined by reference to the Company's audited
statements of income and expense prepared by the Company's independent auditors.

6. The Board of Directors of the Company shall award to you an annual
bonus reflective upon the performance of the Company for each year. For
purposes of this paragraph, the initial Base Bonus is deemed to be the bonus
paid to you in 1985. During December of each year commencing with 1986, the
Board of Directors shall determine the bonus to be paid to you based upon

8.
<PAGE>

the performance of the Company during the past year (for example, the bonus to
be determined in 1986 shall be based upon the performance of the Company
during the year 1986). The bonus payment to be awarded to you for each year
commencing in 1986 shall be adjusted proportionately to reflect increases or
decreases in net income after taxes of the Company for the current year as
compared with the prior year. As an example assuming after-tax profits in 1987
and 1988 are $3M and $2M, respectively, and the 1987 bonus was $300,000, then
the bonus to be paid in 1988 will be $200,000 (a 33-1/3% decrease measured by
the 33-1/3% decrease in after-tax profits). In the event that the Board of
Directors cannot determine with sufficient accuracy the bonus to be awarded to
you in any year then an estimate of such bonus shall be awarded to you to be
adjusted as and after the commencement of the next year as soon as is
practicable and possible at such time as the results of operations for the
year are available. The Bonus as determined as aforesaid by the Board of
Directors shall be the "Base Bonus" for the next subsequent year's bonus
computation. In the event the Company sustains a loss in any one year, then
the Base Bonus shall be the Bonus received during the next preceding year in
which the Company had an after-tax profit. Notwithstanding the aforesaid,
however, no bonus shall be paid to you in the event that the Company has a net
after tax loss. The bonus, as determined as aforesaid, shall be paid to you at
such times as you may reasonably request. Notwithstanding the aforesaid, you
may request and receive from time to time advances of the anticipated bonus.

9.
<PAGE>

For purposes of clarification, the bonus awarded in accordance with this
Paragraph is awarded not only in recognition of increases in net income after
taxes but in recognition of the overall performance of the Company which, as
an example, may include the completion of acquisitions or additional
financing, evaluation of future prospects of the Company and all other matters
which reflect on performance and prospects. The formula set forth above for
payment of the bonus is intended to reflect the Company's obligation for
payment of a minimum bonus to be paid and may be increased at the sole
discretion of the Board of Directors in recognition of factors which the Board
of Directors may deem important in awarding compensation to you.

7. The Company recognizes its obligation to continue its practice to
grant to you each year options to purchase shares of Common Stock of the
Company consistent with the grants of such options made to you heretofore. It
is understood that a significant and important consideration in your entering
into this agreement is your objective to increase your shareholdings in the
Company. Therefore, the Company recognizes its obligation to grant to you
options on an annual basis, at least in the amounts heretofore granted, and to
grant increases commensurate with and in proportion to increases in the
profits of the Company.

8. (a) The Company has purchased a life insurance policy in the
principal amount of $5 million on your life. In the event of your death during
the Basic Employment Period, the Consulting Term (as set forth in Paragraph 3)
or

10.

<PAGE>

during such period as you are mentally or physically disabled and payments are
made to you in the manner set forth in Paragraph 3 above, the Company shall
pay to your estate, or to your designee, $2.5 million of the amount received
from the proceeds of the aforementioned policy as a death benefit. The Company
agrees to keep this policy, or a replacement satisfactory to you, in full
force and effect during all of the periods specified above and to pay the
premiums with respect thereto. The death benefit paid to your estate in
accordance with this paragraph is in addition to all other payments (including
the payment of benefits) which the Company is obligated to make to you, your
estate or to your family in accordance with this agreement.

(b) In the event of your death during the Basic Employment
Agreement, the Consulting Period or during such period as you are mentally or
physically disabled and payments are being made to you in the manner set forth
in Paragraph 3 above, the Company agrees to continue to provide your wife with
hospitalization, medical and major medical expense reimbursement insurance
during the balance of her life and to pay all premiums for insurance with
respect thereto.

9. During the Basic Employment Period, the Consulting Term and for two
(2) years subsequent thereto, you have agreed that you will not in your
individual capacity or as an officer or employee of any corporation involve
yourself in business enterprises in competition with the Company or any of its
subsidiaries as presently constituted. In recognition of the importance of the
provisions of this paragraph to the Company,

11.
<PAGE>

the Company shall have the right to immediate and injunctive relief in the
event of your violation of the provisions herein. Notwithstanding the
aforesaid, the provisions of this paragraph shall not be effective in the
event of a change in control or the Company and your employment is terminated
as a result thereof.

For purposes of this paragraph, a change in control of the Company shall
be deemed to have occurred in the manner more particularly defined, described
and set forth (therein referred to as an "Event") in the resolutions of the
Board of Directors of the Company at its meeting on August 7, 1985 relating to
severance pay for certain key executives.

10. It is understood and agreed that your services as Chief Executive
Officer of the Company during the Basic Employment Period (except as may be
provided in Paragraph 2 above) are to be deemed full-time employment and you
shall devote such time as is reasonably necessary in order to discharge your
duties as aforesaid. You shall be entitled to reimbursement of all
out-of-pocket expenses incurred by you in the course of the performance of
your services at all times during the term of your employment and subsequent
thereto including without limitation the reimbursement to you of legal
expenses which you may incur in enforcing the provisions of this agreement. You
shall continue to receive all fringe benefits including but not limited to
medical insurance in the nature of those then being paid to all employees of
the Company.

12.
<PAGE>

Kindly sign a copy of this letter indicating your agreement with the
aforesaid.

Very truly yours,

PLY-GEM INDUSTRIES, INC.

By: (Signature appears here)
---------------------------
Secretary

AGREED TO:

/s/ Jeffrey S. Silverman
- --------------------------------
Jeffrey S. Silverman

13.
<PAGE>

[LETTERHEAD OF GREAT LAKES WINDOW INC. APPEARS HERE]

June 11, 1992

Mr. Ralph Delman
Great Lakes Window, Inc.
30499 Tracy Road
Toledo, Ohio 43603-1896

Dear Ralph:

Reference is made to the Employment Agreement dated as of December 22,
1986 pursuant to which you have been employed as an executive officer of Great
Lakes Window, Inc.

This letter shall constitute our agreement to amend the Agreement as of
January 1, 1992 and to extend the Employment Term (as defined in the
Agreement) from the termination date set forth in Paragraph 2(a) of the
Agreement until June 30, 1993. Thereafter, the Employment Term shall be
automatically extended for additional one (1) year periods unless either
party shall give prior notice at least 75 days in advance of the then
termination date of its intention not to renew.

Except as modified and renewed herein all of the terms and conditions set
forth in the Agreement as originally constituted shall remain in full force
and effect except that compensation shall be in accordance with the provisions
set forth on Exhibit A attached hereto instead of Section 5.

If the aforesaid meets with your approval please sign a copy of this
letter and return it to us.

Very truly yours,

GREAT LAKES WINDOW, INC.

By: /s/
--------------------------

AGREED TO:

/s/
- ---------------------------- [LOGO OF PLY GEM COMPANY APPEARS HERE]
RALPH DELMAN

<PAGE>

EXHIBIT A
---------

(a) Annual Compensation. During calendar year 1992, the Company shall
-------------------
pay the Executive for services rendered by Executive under this Agreement at
an annual rate salary of $385,000. During any extensions of the Employment
Term after December 31, 1992, the salary shall be increased by 3% over the
salary in affect during the previous calendar year.

The foregoing salary shall commence on January 1, 1992 and shall be
payable in equal monthly installments. Such salary shall be subject to all
applicable withholding and other taxes. If the Employment Term is terminated
pursuant to the Agreement, the Company shall pay to the Executive the annual
salary provided for in this Paragraph (a) prorated to the date of termination
of the Employment Term.

(b) For calendar year 1992 the Executive may be paid an Incentive
Compensation based on the Company's and Duo Temp's combined Income Before
Management Fee as it is currently reported in the Company's and Duo Temp's
financial statements, ("PreTax Profit") for the year in accordance with the
following table:

<TABLE>
<CAPTION>
PreTax Profit
(Millions of Dollars) Incentive
(Layer) Compensation
------------------------ ------------
<S> <C>
Less than $3 0%
From $3 to $8 4% of the Layer, plus
From $8 to $10 2% of the Layer, plus
Over $10 3% of the Amount
over $10
</TABLE>

<PAGE>

For the purpose of computing the paragraph (b) Incentive Compensation, if
the PreTax Profit is over $10 Million and the ratio of PreTax Profit to Net
Sales is less than 16% than the Incentive Compensation percent for the over
$10 Million Layer shall be 2%.

Such Incentive Compensation shall be paid on April 1, 1993.

No payment shall be made by Company pursuant to this paragraph (b) after
the expiration or termination of the Employment Term for any reason
whatsoever, other than a prorated portion of the amount, if any, to which
Executive would be entitled pursuant to this Paragraph (b) on account of the
calendar year during which the Employment Term expires or is terminated, which
proration shall be on the basis of the actual period of time of the Employment
Term which accrued prior to expiration or termination during such calendar
year.

<PAGE>

EMPLOYMENT AGREEMENT
--------------------

AGREEMENT, made as of the 22nd day of December, 1986, by and between GLW
ACQUISITION CORP., an Ohio corporation, having an address c/o Ply-Gem
Industries, Inc., 919 Third Avenue, New York, New York 10022 (the "Company"),
and RALPH DELMAN (the "Executive").

W I T N E S S E T H:
- - - - - - - - - -

WHEREAS, the acquisition of certain of the assets of Great Lakes Window
Corporation, an Ohio corporation (the "Seller"), by the Company, which is a
wholly-owned subsidiary of Ply-Gem Industries, Inc. ("Ply-Gem") has become
effective on the date hereof pursuant to a certain Acquisition Agreement dated
as of December 9th, 1986 (the "Acquisition Agreement");

WHEREAS, the Executive is the owner of approximately fifty percent (50%)
of the outstanding shares of the Seller, and had been employed by and served
as President of the Seller since its incorporation;

WHEREAS, in connection with the Acquisition Agreement, the Company and
the Executive desire to enter into an arrangement pursuant to which the
Executive will serve as an executive officer of the Company upon the terms and
conditions set forth in this Agreement; and
<PAGE>

WHEREAS, the Company desires to retain the Executive's knowledge,
experience and abilities, and the Executive is willing to accept employment
with the Company, all upon the terms and conditions hereinafter set forth.

NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants contained in this Agreement, the Company and the Executive hereby
agree as follows:

1. Employment. Subject to the terms and conditions hereinafter set
----------
forth, the Company hereby employs the Executive as an executive officer of the
Company, and the Executive hereby accepts such employment. This Agreement
shall become effective on the date hereof, which is the Closing Date of the
purchase by the Company of the assets of the Seller pursuant to the
Acquisition Agreement.

2. Term. The term of employment of the Executive by the Company
----
pursuant to this Agreement (the "Employment Term") shall commence on the date
hereof and shall terminate upon the earliest of (a) December 31, 1991; (b) the
date of death of the Executive; (c) the date on which the Company shall have
terminated the Employment Term for "cause" pursuant to Paragraph (a) of
Section 8 of this Agreement; or (d) the date on which the Employment Term is
terminated pursuant to any of the other provisions of Section 8 of this
Agreement.

-2-
<PAGE>

4. Employment Services. During the Employment Term, the Executive shall
-------------------
render his services to the Company as of the Company or in
--------------
such other managerial capacities as the Board of Directors of the Company may,
from time to time, designate. The Executive shall hold, without additional
compensation therefor, such offices in the Company and/or any subsidiary or
affiliate of the Company to which, from time to time during the Employment
Term, the Executive may be elected or appointed. During the Employment Term,
the Executive shall devote his full business time, efforts and his entire
energy and skill to the business of the Company and its subsidiaries and
affiliates, will use his best efforts to promote the interests thereof and
will not engage in any other business or business activity; provided, however,
--------- -------
that nothing contained in this Agreement shall restrict the right of the
Executive to manage his private investments, if such investment activities do
not interfere with the performance by the Executive of his duties under this
Agreement. The Executive shall render his services with due regard for the
prompt, efficient and economical operation of the business of the Company and
its subsidiaries and affiliates to the end of maximizing the profitability of
the Company and its subsidiaries and affiliates.

5. Compensation. In consideration of the services to be rendered by the
------------
Executive as an employee of the Company

-3-
<PAGE>

pursuant to this Agreement, including, without limitation, any services which
may be rendered by the Executive as an officer of the Company or any
subsidiary or affiliate of the Company, the Company agrees to pay to the
Executive during the Employment Term, and the Executive agrees to accept,
compensation at the annual rate of Two Hundred Fifty Thousand Dollars
($250,000). During each year commencing on or after January 1, 1988 during the
Employment Term, the compensation payable to the Executive by the Company
pursuant to this Section 5 shall be increased by the greatest of (i) ten
percent (10%); or (ii) the percentage increase in the "Consumer Price Index,
All Items, All Urban Consumers, U.S. City Average, 1967 = 100", as published
by the Bureau of Labor Statistics of the United States Department of Labor,
between the month of December immediately preceding the effective date of
such increase and the month of December twelve months earlier. The foregoing
salary shall commence on the date hereof, and shall be payable in equal
monthly installments at the end of each month during the Employment Term. In
the event of the termination of the Employment Term, the unpaid portion of the
salary payable to the Executive on account of periods prior to the date of
termination shall be computed and paid to the Executive. The Executive's
salary shall be subject to all applicable withholding and other taxes.

-4-

<PAGE>

6. Employment Benefits. During the Employment Term the Executive shall
-------------------
be entitled to the following employment benefits:

(a) During the Employment Term the Executive shall be entitled to
such vacations and sick leaves which are generally comparable to those
afforded to other executive officers of other operating subsidiaries of
Ply-Gem, but in no event shall the aggregate of the vacations and sick leaves
afforded to the Executive during any calendar year be less than three (3)
weeks.

(b) During the Employment Term the Executive shall be entitled to
participate, subject to qualification requirements, in such medical, life or
other insurance or hospitalization plans as are instituted and maintained by
the Company for officers and employees of the Company generally.

(c) During the Employment Term the Executive shall also be entitled,
subject to qualification requirements, to participate in any pension,
retirement or insurance plan maintained by the Company.

(d) The Executive, in his sole discretion, shall have the option to
purchase an amount not to exceed 50,000 shares in the aggregate of common
stock of Ply-Gem in accordance with the terms and conditions of the Option
Agreement annexed hereto as Exhibit A.

-5-
<PAGE>

(e) During the Employment Term the Executive shall be entitled to
the use of an automobile owned or leased by the Company, which automobile
shall be used by the Executive primarily in connection with the performance by
the Executive of the duties of the Executive under this Agreement and
primarily for the benefit of the Company but which may nevertheless be
incidentally used by the Executive for personal purposes.

(f) The Executive shall cooperate with the Company in obtaining any
insurance on the life of the Executive which the Company may desire to obtain
for its own benefit and shall undergo such physical and other examinations as
the Company may request in connection with the issuance of one or more of such
policies of insurance.

7. Expenses.
--------

During the Employment Term the Company will reimburse the Executive,
upon presentation of proper vouchers, for all actual travel, entertainment and
other out-of-pocket expenses which are reasonably and necessarily incurred by
the Executive in the performance of his duties hereunder.

8. Termination.
-----------

(a) The Company may at any time, at its option, immediately
terminate this Agreement and the Employment Term for cause by written notice
to the Executive specifying the

-6-
<PAGE>

nature of such cause. For purposes of this Agreement, "cause" shall include,
without limitation, breach of any of the terms of this Agreement (including,
without limitation, the provisions of Section 11 of this Agreement), fraud,
conviction of a felony, habitual drunkenness, use of illegal substances, gross
incompetence, malfeasance, misappropriation, dishonesty, embezzlement or
similar misconduct by the Executive, willful failure of the Executive to
perform the duties of his employment, failure of the Executive to follow the
directions of the Board of Directors of the Company, or other willful
misconduct, repeated unexcused absence, or similar conduct or activities by or
on the part of the Executive.

(b) In the event that at any time during the Employment Term, the
Executive, due to physical or mental injury, illness, disability or
incapacity, shall fail to render the services to be performed by the Executive
pursuant to this Agreement either for a consecutive period of three (3) months
or for a non-consecutive period of five (5) months within any twelve month
period, the Company may, at its option, place the Executive on disability
leave at a salary equal to one-half of the fixed salary which the Executive is
receiving pursuant to Section 5 at the time of the occurrence of such injury,
illness, disability or incapacity for a period of six (6) months and, after
the expiration of such six month period, the Company shall have the option to
terminate this Agreement and

-7-
<PAGE>

the Employment Term upon not less than thirty (30) days' written notice to the
Executive. Any payments which are made to or for the benefit of the Executive
under any group or individual policy of disability insurance maintained or
paid for by the Company shall reduce the amounts payable by the Company to the
Executive pursuant to this Paragraph (b).

(c) If the Executive shall die during Employment Term, the Employment
Term shall terminate immediately upon the death of the Executive.

(d) In the event that the Company terminates this Agreement for any
reason, the Executive shall use his best efforts to obtain substitute
employment which entails duties which are reasonably comparable to the duties
of the Executive hereunder and to mitigate any damages which may be payable by
the Company to the Executive by reason of such termination.

9. Conflicting Agreements. The Executive hereby represents and warrants
----------------------
to the Company that (a) neither the execution of this Agreement by the
Executive nor the performance by the Executive of any of the obligations or
duties of the Executive under this Agreement will conflict with or violate or
constitute a breach of the terms of any employment or other agreement to which
the Executive is a party or by which the Executive is bound, and (b) the
Executive is not required to obtain the consent of any person, firm,
corporation or other entity in order to enter into this

-8-
<PAGE>

Agreement or to perform any of the obligations or duties of the Executive
hereunder.

10. Inventions, Discoveries, Etc. The Executive hereby assigns and
----------------------------
shall promptly and fully disclose and assign to the Company any and all
inventions, discoveries, improvements, developments, concepts and ideas which
relate to any activities of the Company or any of the subsidiaries or
affiliates of the Company, whether or not patentable and whether or not
conceived, developed or reduced to practice by the Executive alone or by
himself and others, or both, during the period of this employments with the
Company or with any affiliate or subsidiary of the Company.

11. Non-Disclosure of Confidential Information and
----------------------------------------------
Non-Competition.
---------------

(a) The Executive acknowledges that it is the policy of the Company
to maintain as secret and confidential all valuable and unique information
heretofore or hereafter acquired, developed or used by the Company or any
affiliate or subsidiary of the Company relating to the business, operations,
employees, suppliers and customers of the Company and of the subsidiaries and
affiliates of the Company, which gives the Company or its subsidiaries or
affiliates a competitive advantage in their industries (all such information
is hereinafter referred to as "Confidential Information"). The parties
recognize that the services to be performed by the

-9-
<PAGE>

Executive pursuant to this Agreement are special and unique, and that by
reason of his employment by the Seller prior to the date hereof and by the
Company after the date hereof, the Executive has acquired and will acquire
Confidential Information. The Executive recognizes that all such Confidential
Information is the property of the Company and its subsidiaries and
affiliates. In consideration of the Executive's employment with the Company
pursuant to this Agreement, the Executive agrees that:

(i) except as required by the duties of his employment, without the
prior written consent of the Board of Directors of the Company acting
independently, the Executive shall never, directly or indirectly,
either during or after the Employment Term, use, publish, disseminate
or otherwise disclosure any Confidential Information obtained during
his employment with the Company or any affiliate or subsidiary of the
Company;

(ii) both during and after the Employment Term, the Executive
shall exercise all due and diligent precautions to protect the
integrity of the business plans, customer lists, statistical data
and compilations, agreements, contracts, manuals or other documents
of the Company and its subsidiaries and affiliates which embody any
Confidential Information,

-10-
<PAGE>

and upon the expiration or termination of the Employment Term, the
Executive shall return to the Company and its subsidiaries and
affiliates all such documents (and copies thereof) which are in the
possession or under the control of the Executive.

The Executive agrees that the provisions of this Paragraph (a) are reasonably
necessary to protect the proprietary rights of the Company and the
subsidiaries and affiliates of the Company in the Confidential Information and
their trade secrets, goodwill and reputation.

(b) During his employment with the Company and for a period of five
(5) years after the expiration or termination of the Employment Term for any
reason whatsoever; the Executive shall not, in any manner, be engaged,
directly or indirectly, within the United States of America (its territories
and possessions) or Canada (or for such lesser period of time or for such
lesser geographical area as may be determined by a court of law or equity to
be a reasonable limitation on the competitive activities of the Executive) as
an employee, partner, officer, director, representative, consultant, agent or
stockholder of any corporation, partnership, proprietorship or other form of
business entity (1) which is engaged in any business which is or was
competitive with any business conducted by the Company or by any subsidiary or
affiliate of the Company by which the Executive

-11-
<PAGE>

as employed or for which the Executive had executive or managerial
responsibility at any time during the Employment Term; or (2) which
manufactures or distributes any products similar to those which were
manufactured or distributed at any time during the Employment Term either by
the Company or by any subsidiary or affiliate of the Company by which the
Executive was employed or for which the Executive had executive or managerial
responsibility at any time during the Employment Term. The Executive shall
not, either during or subsequent to the Employment Term (i) seek to persuade
any director, officer or employee of the Company or any subsidiary or
affiliate of the Company to discontinue that individual's status or
employment with the Company or any such subsidiary or affiliate of the Company
or to become employed in any activity similar to or competitive with the
activities of the Company or any subsidiary of affiliate of the Company; (ii)
hire or retain any such person at any time within twelve (12) months following
the date of cessation of employment or such person with the Company or any
subsidiary or affiliate of the Company; or (iii) solicit (or cause or
authorize), directly or indirectly, to be solicited, for or on behalf of
himself or any third party, any business from others who were, at any time
within five (5) years prior to the expiration or termination of the
Employment Term, customers of the Company or any subsidiary or affiliate of
the Company.

-12-
<PAGE>

12. The Company's Right to Injunctive Relief. The Executive
----------------------------------------
acknowledges that the services to be rendered by the Executive to the Company
are of a unique character which gives them a special value to the Company and
its subsidiaries and affiliates. The Executive further acknowledges that any
breach or threatened breach by the Executive of any of the provisions of
Section 10 or Section 11 hereof will result in irreparable and continuing harm
to the Company and its subsidiaries and affiliates for which the Company and
its subsidiaries and affiliates would have no adequate remedy at law.
Therefore, in addition to any other remedy which the Company and its
subsidiaries and affiliates may have at law or in equity, the Company and its
subsidiaries and affiliates shall be entitled to injunctive relief for a breach
of this Agreement by the Executive.

13. Notices. Any notice, request, information or other document to be
-------
given under this Agreement to any party hereunder by any other party hereunder
shall be in writing and delivered personally, or sent by registered or
certified mail, postage prepaid to the following addresses:

-13-
<PAGE>

If to the Company:

GLW Acquisition Corp.
c/o Ply-Gem Industries, Inc.
919 Third Avenue
New York, New York 10019
Attention: Herbert P. Dooskin
Vice President

with a copy to:

Ply-Gem Industries, Inc.
919 Third Avenue
New York, New York 10022
Attention: Jeffrey S. Silverman
Chairman and President

If to the Executive:

Mr. Ralph Delman
21 Exmoor
Toledo, Ohio 43615

or to such other address as a party hereto may hereafter designate in writing
to the other party, provided that any notice of a change of address shall
become effective only upon receipt thereof.

14. Benefit; Assignment.
-------------------

(a) This Agreement shall be binding upon and shall inure to the
benefit of the Company and the Executive and their respective heirs, legal
representatives, successors and permitted assigns.

(b) This Agreement is personal to the Executive and the Executive
may not assign any of his rights or delegate any of his duties under this
Agreement.

-14-

<PAGE>

15. Certain Definitions. For purposes of this Agreement, (a) a
-------------------
"subsidiary" of a corporation, person or entity shall mean any corporation,
partnership, firm or other entity in which such corporation, person or entity
holds an equity ownership interest of fifty percent (50%) or more; and (b) an
"affiliate" of a corporation, person or entity shall mean any corporation,
partnership, firm or other entity which controls, is controlled by, or is
under common control with, such corporation, person or entity.

16. Entire Agreement; Amendment. This Agreement contains the entire
---------------------------
understanding between the Company and the Executive with respect to the
employment of the Executive and supersedes all prior negotiations and
understandings between the Company and the Executive with respect to the
employment of the Executive by the Company. This Agreement may not be amended
or modified except by a written instrument signed by both the Company and the
Executive.

17. Severability. In the event any one or more provisions of this
------------
Agreement is held to be invalid or unenforceable, such illegality or
unenforceability shall not affect the validity or enforceability of the other
provisions hereof and such other provisions shall remain in full force and
effect unaffected by such invalidity or unenforceability.

-15-
<PAGE>

18. Execution in Counterparts. This Agreement may be executed in any
-------------------------
number of counterparts, each of which shall be deemed to be an original, but
all of which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.

ATTEST: GLW ACQUISITION CORP.

By: /s/
----------------------------

WITNESS:

/s/ Ralph Delman
- ------------------------------ ------------------------------
RALPH DELMAN

Ply-Gem Industries, Inc. agrees to be bound by the provisions of Paragraph (d)
of Section 6 of the foregoing Employment Agreement as of the date set forth
above.

PLY-GEM INDUSTRIES, INC.

By: /s/
---------------------------

-16-
<PAGE>

PLY-GEM INDUSTRIES, INC.

STOCK OPTION

OPTION AGREEMENT, made as of the day of December, 1986, between
Ply-Gem Industries, Inc., a New York corporation (hereinafter referred to as
the "Company") and Ralph Delman, a Senior executive of a division or
subsidiary of the Company (hereinafter referred to a "Delman").

The Board of Directors of the Company has resolved that it is in the
Company's best interest to grant stock options to Delman.

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration, the parties hereto have
agreed and do hereby agree as follows:

1. GRANT OF OPTIONS. The Company hereby grants to Delman the right and
----------------
option (hereinafter referred to as the "Option") to purchase all or any part
of an aggregate of 50,000 shares of the common stock, of the Company, 25 cents
par value (hereinafter referred to as "Common Stock"), on the terms and
conditions hereinafter set forth in this option agreement, such number of
shares of Common Stock being subject to adjustment as provided in paragraph 5
hereof.
<PAGE>

2. PURCHASE PRICE. The per share purchase price (hereinafter referred
---------------
to as the "Option Price") of the shares of Common Stock covered by the Option
shall be the lowest of (i) $10.75 per share, (ii) the closing price of a share
of common stock of the Company on the American Stock Exchange on December 9,
1986, or (iii) the closing price of a share of common stock of the Company on
the American Stock Exchange on the last business day preceding the date of
this Agreement.

3. DURATION OF OPTION. The Option granted hereunder shall be for a
-------------------
period of ten (10) years form the date hereof. Subject to the provisions of
this agreement, the Option may be exercised at any time or from time to time
subsequent to two (2) years from the date hereof, as to any part of or all of
the shares covered thereby. The purchase price of the shares as to which the
Option shall be exercised shall be paid in full in current funds at the time
of exercise. The holder of the Option shall not have any rights of a
stockholder with respect to the shares covered by the Option unless and until
the certificate or certificates for such shares shall have been issued and
delivered to him.

Anything herein to the contrary notwithstanding, this Option shall be
cancelled and be deemed null and void one (1) month subsequent to the
termination of employment of Delman as a senior executive of a division or
subsidiary of the Company unless such termination results from the physical or
mental disability of Delman.

<PAGE>

4. CONTINUATION AS EMPLOYEE. Nothing in the Option granted hereunder or
------------------------
by reason of the granting of the Option shall confer upon Delman any right to
be continued as a director, officer or employee of the Company or any
subsidiary or division of the Company.

5. ADJUSTMENTS. In the event of any change in the Common Stock of the
-----------
Company by reason of any merger, consolidation, recapitalization,
reclassification, stock split-up, combination of shares or dividend payable in
Common Stock of the Company (in excess of five (5%) percent thereon), after the
date hereof, then appropriate adjustment shall be made in the number and kind
of shares subject to the Option, and/or to the price of the Option, provided,
however, that no fractional share shall be issued upon any such exercise, and
the aggregate price paid shall be appropriately reduced on account of any
fractional share not issued. Any such adjustment made by the Board of
Directors of the Company as provided in this paragraph 5 shall be conclusive.

6. EXERCISE OF OPTION. Subject to the terms and conditions of this
------------------
Option Agreement, the Option may be exercised by Delman, his heirs or assigns
by delivery of written notice to the Company at its principle office which is
now located at 919 Third Avenue, New York, New York. Such notice shall state
the election to exercise the Option and the number of shares in respect of
which it shall be exercised and shall be signed by the person or persons so
exercising the Option. Such notice shall be

<PAGE>

accompanied by payment of the full purchase price of such shares in cash.
Payment of such purchase price shall be made by check payable to the Company.
The certificate or certificates for the shares as to which the Option shall
have been so exercised shall be registered in the name of the person or persons
so exercising the Option and shall be delivered, as provided above, to or
upon the written order of the person or persons exercising the Option within
(15) days (except as otherwise provided below in this paragraph 6) after the
due and proper exercise of this Option.

It is expressly understood that it shall be a condition of the issuance
and delivery of the stock upon the due and proper exercise of the Option or
any part thereof that prior to the delivery of the certificate or certificates
as to which the Option shall have been so exercised as aforesaid Delman (or
anyone acting under him or his heirs or assigns, as the case may be) shall
deliver to the Company a warranty and representation that it is the present
intention to acquire the shares being purchased for investment only and not for
distribution or resale and that an offer or sale by him of any such shares
will not be made or offered in violation of the provisions of the Securities
Act of 1933, as amended, or any rules and regulations thereunder. The time of
the delivery of such certificate or certificates of stock may be postponed by
the Company for such period as may be

4.
<PAGE>

required by the Company to comply with any listing requirements of any
national securities exchange or to comply with any applicable state or federal
law.

All shares that shall be purchased upon the exercise of the Option as
provided herein shall be fully paid and non-assessable.

Delman acknowledges that he is acquiring the options herein for investment
and not with a view towards distribution and that he will not sell, assign or
transfer this option, or the shares acquired upon exercise thereof without an
opinion of the counsel of the Company that the options or shares, as the case
may be, are exempt from registration under the Securities Act of 1933 or if
such shares or options are required to be registered, then such shares,
assignment or sale shall not be effective prior to such registration.

Anything herein to the contrary notwithstanding, this Option or the
rights with respect thereto may not be transferred, assigned or collateralized
in any manner whatsoever it being the intent of the parties hereto that this
Option is personal and may

5.
<PAGE>

be exercised only by Delman, or in the event of his death, by the legal
representatives of his estate not later than three (3) months from the date of
his death or two (2) months after the appointment of said legal
representatives whichever date is later.

Certificates for all Shares aquired upon the Sale shall be inscribed with
a legend giving notice of all restrictions with respect to such Shares
including but not limited to restrictions imposed on the transferability
thereof contained in this agreement and in any other agreement between the
Participant and the Company with respect thereto.

IN WITNESS WHEREOF, the Company has caused this option agreement to be
duly executed by an officer thereof thereunto duly authorized, and Delman has
hereunto set his hand and seal; all as of the day and year first above
written.

PLY-GEM INDUSTRIES, INC.

By:
--------------------------
Chairman

-------------------------- (L.S.)
RALPH DELMAN

ATTEST:

- ---------------------------
STANFORD ZEISEL
Secretary

<PAGE>

EXHIBIT 11

PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE OF COMPUTATION OF NET INCOME PER SHARE
YEAR ENDED DECEMBER 31,

<TABLE>
<CAPTION>
1993 1992
----------------------- -----------------------
FULLY FULLY
PRIMARY DILUTED PRIMARY DILUTED
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Weighted average number of com-
mon shares outstanding during
year.......................... 10,814,000 10,814,000 10,562,483 10,562,483
Excess of weighted average
number of shares issuable upon
exercise of employee stock
options over 20% of shares
outstanding at end of year.... 3,403,000 3,403,000 2,502,741 2,502,741
----------- ----------- ----------- -----------
Weighted average number of
shares........................ 14,217,000 14,217,000 13,065,224 13,065,224
----------- ----------- ----------- -----------
Proceeds available to repay
debt:
From exercise of options,
including tax benefits, at
average market price........ $31,541,000 $22,046,854
From exercise of options,
including tax benefits, at
year-end market price....... $28,379,000 $20,230,728
Other........................ 1,360,000 1,360,000 1,538,000 1,538,000
----------- ----------- ----------- -----------
32,901,000 29,739,000 23,584,854 21,768,728
----------- ----------- ----------- -----------
Interest saved................. 1,513,000 1,368,000 1,347,335 1,258,344
Other.......................... 198,000 187,000 187,119 184,298
----------- ----------- ----------- -----------
1,711,000 1,555,000 1,534,454 1,442,642
----------- ----------- ----------- -----------
Increase to income, net of tax-
es............................ 1,112,000 1,011,000 1,012,740 952,144
Net income as reported......... 9,650,000 9,650,000 6,305,756 6,305,756
----------- ----------- ----------- -----------
Adjusted net income............ $10,762,000 $10,661,000 $ 7,318,496 $ 7,257,900
----------- ----------- ----------- -----------
Per share...................... $.76 $.75 $.56 $.56
</TABLE>

<PAGE>

EXHIBIT 12

PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Income before income taxes............. $17,481 $11,374 $ 7,759 $ 5,522 $16,882
Add -- Fixed charges:
Interest on indebtedness........... 10,056 9,644 14,099 15,806 15,708
Portion of rent (33 1/3%)
representative of interest factor. 7,075 6,715 5,898 4,708 3,026
------- ------- ------- ------- -------
Total fixed charges.................... 17,131 16,359 19,997 20,514 18,734
------- ------- ------- ------- -------
Income before income taxes and fixed
charges............................... $34,612 $27,733 $27,756 $26,036 $35,616
------- ------- ------- ------- -------
Ratio of earnings to fixed charges..... 2.02 1.70 1.39 1.27 1.90
------- ------- ------- ------- -------
</TABLE>

<PAGE>

EXHIBIT 21

PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES

(SUBSIDIARIES)

<TABLE>
<CAPTION>
PARENT CORPORATION SUBSIDIARY AND STATE OF INCORPORATION
------------------ -------------------------------------
<S> <C>
Ply Gem Industries, Inc. Allied Plywood Corporation (Delaware)
Continental Wood Preservers, Inc. (Michigan)
Great Lakes Window, Inc. (Ohio)
Goldenberg Group, Inc. (California)
Hoover Treated Wood Products, Inc. (Delaware)
Richwood Building Products, Inc. (Delaware)
Sagebrush Sales, Inc. (New Mexico)
SNE Enterprises, Inc. (Delaware)
Studley Products, Inc. (New York)
Variform, Inc. (Missouri)
</TABLE>

<PAGE>

EXHIBIT 23

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We have issued our report dated February 24, 1994 (except for Note 8 as to
which the date is March 23, 1994), accompanying the consolidated financial
statements included in the Annual Report of Ply Gem Industries, Inc. on Form
10-K for the year ended December 31, 1993. We hereby consent to the
incorporation by reference of said report in the Registration Statements of
Ply-Gem Industries, Inc. on Form S-8 (Registration Nos. 33-28753; 33-52514; 33-
28752; 2-84279; and 33-52516).

Grant Thornton

New York, New York
March 28, 1994