<PAGE> 1
[PLY GEM MASTHEAD]
April 11, 1997
To our Stockholders:
It is our pleasure to invite you to the 1997 Annual Meeting of
Stockholders, which will be held on Friday, May 9, 1997, at 9:00 a.m., at the
One Valley Bank, 148 South Queen Street, Martinsburg, West Virginia. Our meeting
has been scheduled to coincide with our plan to celebrate the purchase by
Variform, Inc., one of our subsidiaries, of their Martinsburg, West Virginia
manufacturing facility.
I look forward to greeting you at the meeting at which time I plan to
report on the Company's current operations and its future prospects. At the
meeting, stockholders will be asked to consider and vote upon the election of
Directors.
The formal Notice of Annual Meeting and the Proxy Statement follow. It is
important that your shares be represented and voted at the meeting, regardless
of the size of your holdings. Accordingly, please promptly mark, sign and date
the enclosed proxy and return it in the enclosed envelope to assure that your
shares will be represented. I would appreciate a response from you in order to
avoid repeat solicitations which involve additional avoidable expenses to the
Company.
I appreciate your interest in our Company.
Sincerely yours,
/S/ JEFFREY S. SILVERMAN
JEFFREY S. SILVERMAN
LOGO
<PAGE> 2
PLY GEM INDUSTRIES, INC.
------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
------------------
New York, New York
April 11, 1997
To the Stockholders of
PLY GEM INDUSTRIES, INC.:
The Annual Meeting of Stockholders of Ply Gem Industries, Inc. will be held
at the One Valley Bank, 148 South Queen Street, Martinsburg, West Virginia on
May 9, 1997 at 9:00 o'clock in the morning for the following purposes:
(1) To elect directors to serve until the next annual meeting of
stockholders or until their successors are duly elected and qualified;
and
(2) To transact such other business as may properly come before the meeting
and any adjournment or adjournments thereof.
Only stockholders of record at the close of business on March 24, 1997 are
entitled to notice of and to vote at the meeting or any adjournment or
adjournments thereof.
STOCKHOLDERS WHO DO NOT EXPECT TO ATTEND IN PERSON, BUT WISH THEIR STOCK TO
BE VOTED ON MATTERS TO BE PRESENTED TO THE MEETING, ARE URGED TO SIGN, DATE AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE TO WHICH NO POSTAGE NEED
BE AFFIXED IF MAILED WITHIN THE UNITED STATES.
By Order of the Board of Directors,
CHARLES M. MODLIN
Secretary
<PAGE> 3
PLY GEM INDUSTRIES, INC.
777 THIRD AVENUE
NEW YORK, NEW YORK 10017
------------------------
PROXY STATEMENT
------------------------
This statement is furnished with respect to the solicitation of proxies by
the Board of Directors for the Annual Meeting of Stockholders of Ply Gem
Industries, Inc. (the "Company") to be held at 9:00 A.M. on May 9, 1997 or at
any adjournment or adjournments thereof, at the One Valley Bank, 148 South Queen
Street, Martinsburg, West Virginia. The approximate date on which the proxy
statement and form of proxy was first sent or given to stockholders was April
11, 1997.
Proxies in the accompanying form which are properly executed and duly
returned to the Board of Directors will be voted at the meeting. Any proxy may
be revoked by the stockholder at any time prior to its being voted. Such
revocation shall be effective upon receipt of a written notice by the Secretary
of the Company at the address specified above.
The expense of the solicitation of proxies for the meeting, including the
cost of mailing, will be borne by the Company. In addition to mailing copies of
this material to stockholders, the Company may request persons, and reimburse
them for their expenses with respect thereto, who hold stock in their names or
custody or in the names of nominees for others to forward copies of such
material to those persons for whom they hold stock of the Company and to request
authority for the execution of the proxies. In addition to the solicitation of
proxies by mail, it is expected that some of the officers, directors, and
regular employees of the Company, without additional compensation, may solicit
proxies on behalf of the Board of Directors by telephone, telefax, and personal
interview. The Company has retained D.F. King & Co., Inc. to aid in the
solicitation of proxies, at an estimated cost of $8,000 plus reimbursement of
reasonable out-of-pocket expenses.
As of the close of business March 24, 1997, the date for determining the
stockholders of record entitled to notice of and to vote at the meeting or any
adjournment or adjournments thereof, there were issued and outstanding
13,952,928 shares of the Company's Common Stock, the holders thereof being
entitled to one vote per share. The presence at the Annual Meeting of a majority
of such shares, in person or by proxy, are required for a quorum.
ELECTION OF DIRECTORS
The persons named in the accompanying proxy intend to vote for the election
as directors the nominees listed herein. All of the nominees have consented to
serve if elected. All directors will be elected to hold office until the next
annual meeting of stockholders, and, in each case, each director will serve
until his successor is elected and qualified or until his earlier resignation or
removal. If a nominee should be unable to act as a director, the persons named
in the proxy will vote for any nominee who shall be designated by the present
Board of Directors to fill the vacancy. Each of the nominees presently serves as
a director.
Set forth below is biographical information for each of the nominees.
Unless otherwise indicated, each has served in the stated capacity with the
Company for the last five years.
<PAGE> 4
Herbert P. Dooskin, age 55, joined the Company in 1986 as Executive Vice
President at which time he also became a Director.
Joseph M. Goldenberg, age 71, a co-founder of Goldenberg Group, Inc., a
wholly owned subsidiary of the Company, served as its Chairman from 1983 through
1994 and currently serves as a consultant. He has been a Director of the Company
since 1983.
Albert Hersh, age 81, a co-founder of the Company, has been a Director of
the Company since 1954. He presently provides consulting services to the
Company.
William Lilley III, age 59, became a Director in October 1994. He is
President of Policy Communications, Inc., a business consulting firm based in
Washington, D.C.
Elihu H. Modlin, age 69, has been a Director of the Company since 1992 and
general counsel to the Company since 1960. He is a partner in the law firm of
Messrs. Elihu H. Modlin and Charles M. Modlin.
Dana R. Snyder, age 50, has been President, Chief Operating Officer and a
Director since joining the Company in June, 1995. Prior thereto, Mr. Snyder was
President of Alcoa Construction Products Group, a division of Stolle
Corporation, a subsidiary of Aluminum Company of America.
Jeffrey S. Silverman, age 51, joined the Company and became a Director in
1981. He has served as Chief Executive Officer of the Company since 1984 and
Chairman of the Board since 1985.
Shares represented by proxies solicited by the Board of Directors will,
unless contrary instructions are given, be voted in favor of the election as
Directors of the nominees named above. If a stockholder wishes to withhold
authority to vote for any nominee, such stockholder can do so by following the
directions set forth on the form of proxy solicited by the Board of Directors or
on the ballot distributed at the Annual Meeting if such stockholder wishes to
vote in person. Directors shall be elected by an affirmative vote of the votes
of the shares of Common Stock present in person or represented by proxy at the
meeting.
During 1996, the Board of Directors held eight meetings. Members of the
Compensation Committee of the Board of Directors during 1996 included Messrs.
Hersh, Lilley and Modlin. The Compensation Committee makes recommendations to
the Board of Directors with respect to compensation to be paid to the Company's
principal executive officers. Messrs. Hersh, Lilley and Modlin served as members
of the Audit Committee of the Board of Directors during 1996. The Audit
Committee reviews the audit plan with the Company's independent accountants, the
scope and results of their audit and other related audit and accounting issues.
During 1996, the Audit Committee and the Compensation Committee each held two
meetings. The Executive Committee of the Board of Directors, which is comprised
of Messrs. Dooskin, Goldenberg, Modlin and Silverman, held four meetings during
1996. The Board of Directors as a whole functions as a nominating committee to
propose nominees for director to the Board of Directors.
2
<PAGE> 5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of March 20, 1997 (December 31, 1996 with
respect to Dimensional Fund Advisors, Inc.) by all stockholders known to the
Company to have been beneficial owners of more than five percent of its Common
Stock, by each nominee for Director, by each of the executive officers included
in the Summary Compensation Table below, and by all directors and executive
officers as a group.
<TABLE>
<CAPTION>
AMOUNT
BENEFICIALLY PERCENT OF
NAME OF BENEFICIAL OWNER(1) OWNED(2)(3) CLASS
------------------------------------------------------------- ----------- ----------
<S> <C> <C>
Jeffrey S. Silverman......................................... 4,203,488 24.9%
Jeffrey S. Silverman, Herbert P. Dooskin, and Stanford Zeisel
as trustees of the Ply Gem Industries, Inc. Group Pension
and Profit Sharing Trusts (the "Trusts")(4)................ 1,050,423 7.5
Dana R. Snyder............................................... 919,711 6.2
Herbert P. Dooskin........................................... 488,468 3.4
Joseph M. Goldenberg......................................... 119,699 *
Albert Hersh................................................. 35,291 *
Donald Kruse................................................. 60,000 *
William Lilley II............................................ 8,500 *
Elihu H. Modlin.............................................. 29,500 *
Michael Vagedes.............................................. 7,500 *
ALL DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP(4)........... 6,922,580 37.8
Dimensional Fund Advisors, Inc.(5)........................... 736,300 5.3
Pioneering Management Corporation(6)......................... 818,000 5.9
</TABLE>
- ---------------
* Indicates holdings of less than 1%.
(1) The ages for each of the executive officers named above are as follows:
Jeffrey S. Silverman -- 51; Dana R. Snyder -- 50; Herbert P. Dooskin -- 55;
Donald Kruse -- 61; and, Michael Vagedes -- 40. The address for each of such
executive officers, the other individuals named above and the Trusts is c/o
Ply Gem Industries, Inc., 777 Third Avenue, New York, New York 10017.
(2) Directly and indirectly. The inclusion of securities owned by others as
beneficially owned by the respective nominees and officers does not
constitute an admission that such securities are beneficially owned by them.
All of the named individuals have, except for unexercised options, voting
powers with respect to the aforesaid shares.
(3) Includes shares which may be acquired pursuant to existing stock options
which are exercisable through May 23, 1997 and restricted stock holdings.
(4) Includes shares owned of record by the Trusts.
(5) The address for Dimensional Fund Advisors, Inc. ("Dimensional") is 1299
Ocean Avenue, 11th floor, Santa Monica, California 90401. All of the shares
of which Dimensional, a registered investment advisor, is deemed to have
beneficial ownership of, are held in portfolios of DFA Investment Dimensions
Group, Inc. (the "Fund"), a registered open-end investment company, in
series of the DFA Investment Trust Company (the "Trust"), a Delaware
business trust, or the DFA Group Trust and DFA Participation Group Trust,
investment vehicles for qualified employee benefit plans, for each of which
Dimensional
3
<PAGE> 6
serves as investment manager. Dimensional has sole voting power for 496,700
shares. In addition, officers of Dimensional are also officers of the Fund
and the Trust, and in such capacities, these persons have sole voting power
to 85,800 and 153,800 additional shares, respectively. Dimensional has sole
dispositive power for 736,300 shares. Dimensional disclaims beneficial
ownership of all such shares.
(6) The address for Pioneering Management Corporation ("Pioneering") is 60 State
Street, Boston, Massachusetts 02109. Pioneering has sole voting power for
818,000 shares, sole dispositive power for 27,000 shares, and shared
dispositive power for 791,000 shares.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for the fiscal years ending December 31, 1994,
1995 and 1996, the cash compensation paid by the Company and its subsidiaries,
to the Company s Chief Executive Officer and each of the four most highly
compensated executive officers of the Company and its subsidiaries at the end of
1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS(3)
------------
ANNUAL COMPENSATION(2) SECURITIES ALL OTHER
-------------------------- UNDERLYING COMPENSA-
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) TION($)(4)
- ------------------------------------------ ---- ------------ ----------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Jeffrey S. Silverman(1)................... 1996 2,493,795 2,105,510 750,000 22,963
Chairman of the Board and 1995 2,267,087 1,478,017 -- 6,917
Chief Executive Officer 1994 1,295,741 1,488,543 750,000 14,088
of the Company
Dana R. Snyder(5)......................... 1996 446,250 899,000 366,842 6,654
President and Chief Operating Officer of
the 1995 237,019 150,000 550,000 4,374
Company
Herbert P. Dooskin........................ 1996 424,750 212,500 -- 6,624
Executive Vice President 1995 404,750 87,500 -- 9,594
of the Company 1994 404,750 262,500 50,000 13,536
Donald Kruse(6)........................... 1996 176,000 227,238 4,000 7,757
Chairman, Sagebrush 1995 171,000 29,040 4,000 5,377
Sales, Inc., a wholly-owned subsidiary
of the 1994 171,000 272,375 6,000 9,681
Company
Michael Vagedes........................... 1996 90,000 252,111 1,500 9,281
President, Richwood 1995 85,000 139,928 1,500 4,015
Building Products, Inc., a 1994 80,000 139,440 1,000 8,350
wholly-owned subsidiary of the Company
</TABLE>
4
<PAGE> 7
- ---------------
(1) Mr. Silverman's compensation is determined in accordance with the provisions
of an employment agreement entered into with the Company in 1986. In a
continuing effort to enhance shareholder value, Mr. Silverman voluntarily
initiated a modification to his compensation arrangement for 1997 by
providing that 25% of the salary and bonus due to him during 1997 under his
employment agreement shall be deferred until the price of Ply Gem's shares
equals 150% of the closing price of Ply Gem's shares on the New York Stock
Exchange on December 31, 1996. In addition, any options granted to Mr.
Silverman in 1997 pursuant to his employment agreement shall not be
exercisable until the market price of Ply Gem's shares equals 150% of the
closing price of Ply Gem's shares on the New York Stock Exchange on December
31, 1996.
(2) Includes salary and bonus payable pursuant to employment agreements with the
named executives. See "Employment Contracts and Termination of Employment
and Change in Control Arrangements" below. For Mr. Silverman, bonus also
reflects $1,113,017 in 1995 and $1,488,543 in 1994 for principal and accrued
interest waived for 1994 and 1993, respectively, in accordance with the
terms of interest bearing promissory notes delivered by Mr. Silverman to the
Company.
(3) As of December 31, 1996, Mr. Silverman's aggregate restricted stock holdings
totaled 150,000 shares with a value, based on the market price of the
Company's Common Stock on December 31, 1996 ($12.375), of $1,856,250. These
shares of restricted stock vest in installments of 25,000 shares per year
subject to the Company achieving performance-based goals. Dividends are paid
by the Company on restricted stock holdings.
(4) "All Other Compensation" includes for the named executives, the following:
(i) a contribution in the amount of $8,100 in 1994, $3,750 in 1995 and
$6,000 in 1996 ($9,000 in 1996 for Mr. Vagedes) made by the Company to the
Ply Gem Industries Group Profit Sharing Plan; (ii) the following life
insurance premiums or economic benefit calculated pursuant to P.S.-58 in
1994: Mr. Silverman -- $5,988; Mr. Dooskin -- $5,436; Mr. Kruse -- $1,581;
and, Mr. Vagedes -- $250; (iii) the following life insurance premiums or
economic benefit calculated pursuant to P.S.-58 in 1995: Mr.
Silverman -- $3,167; Mr. Dooskin -- $5,844; Mr. Kruse -- $1,627; Mr.
Snyder -- $624; and, Mr. Vagedes -- $265; and (iv) the following life
insurance premiums or economic benefit calculated pursuant to P.S.-58 or
P.S.-38 in 1996: Mr. Silverman -- $16,963; Mr.Dooskin -- $624; Mr.
Kruse -- $1,757; Mr. Snyder -- $654; and, Mr. Vagedes -- $281.
(5) Mr. Snyder became President, Chief Operating Officer and a Director of the
Company in June 1995. See "Employment Contracts and Termination of
Employment and Change in Control Arrangements" below.
(6) Mr. Kruse, formerly President and Chief Executive Officer of Sagebrush
Sales, Inc., became Chairman effective January 1, 1997. See "Employment
Contracts and Termination of Employment and Change in Control Arrangements"
below.
5
<PAGE> 8
STOCK OPTIONS
The following table contains information concerning the grant of stock
options during 1996 under the Company's 1989 Employee Incentive Stock Plan and
1994 Employee Incentive Stock Plan to the Company's executives listed in the
Summary Compensation Table above.
The table also illustrates the Grant Date Present Value of those stock
options based upon the Black-Scholes Model of Valuation, without giving effect
to the non-transferability of the options.
Irrespective of the theoretical value placed on a stock option on the date
of grant, its ultimate value will depend on the market value of the Company's
Common Stock at a future date. If the price of the Company's Common Stock
increases, all stockholders will benefit commensurately with the optionees.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------------
PERCENT OF
NUMBER OF TOTAL
SECURITIES OPTIONS GRANTED
UNDERLYING TO EMPLOYEES EXERCISE OR GRANT DATE
OPTIONS GRANTED IN FISCAL BASE PRICE EXPIRATION PRESENT
NAME (#)(1) YEAR(%) ($/SH)(2) DATE VALUE ($)(3)
- --------------------------- --------------- --------------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Jeffrey S. Silverman....... 750,000 54.8 12.50 8/20/06 2,962,500
Dana R. Snyder............. 216,842 15.9 16.50 1/02/01 1,088,547
150,000 11.0 12.50 8/20/06 592,500
Donald Kruse............... 4,000 0.3 12.50 8/20/06 15,800
Michael Vagedes............ 1,500 0.1 12.50 8/20/06 5,925
</TABLE>
- ---------------
(1) All options were granted at market value at the date of grant and are
subject to earlier termination in certain instances related to termination
of employment. The options granted to Mr. Snyder and Mr. Silverman are fully
exercisable; all other options are exercisable one year subsequent to grant.
(2) The required tax withholding obligations related to exercise of certain
options may be paid by delivery of already owned shares or by offset of the
underlying shares, subject to certain conditions.
(3) The amounts shown assume a rate of return based on the Black-Scholes Model
of Valuation. The assumptions used were as follows: volatility -- 35%;
risk-free rate of return (semi-annual basis) -- 5.38% as of January 2, 1996
for the options granted on such date, and 6.41% as of August 20, 1996 for
the options granted on such date; dividend rate -- $.12 per annum; and,
assumed time of exercise -- 6 years, except for the options granted on
January 2, 1996, 5 years. No adjustments were made for non-transferability.
There can be no assurance that the rate of appreciation assumed for purposes
of this table will be achieved. The stock options will have no value to the
executives named above or other optionees if the price of the Company's
Common Stock does not increase above the exercise price of the option.
6
<PAGE> 9
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to the Company's
executives listed in the Summary Compensation Table above, concerning the
exercise of options during the last fiscal year and unexercised options held as
of the end of the fiscal year:
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FY-END(#) AT FY-END($)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ------------------------------- ----------- ----------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Jeffrey S. Silverman........... 101,626 736,789 2,947,500/0 1,426,187/0
Dana R. Snyder................. 0 0 910,782/6,060 0/0
Herbert P. Dooskin............. 65,000 326,875 385,000/0 377,000/0
Donald Kruse................... 0 0 36,000/4,000 31,375/0
Michael Vagedes................ 0 0 2,500/1,500 0/0
</TABLE>
PENSION PLANS
The officers named above are covered by the Company's tax qualified Group
Pension Plan which provides pension benefits to certain employees not covered by
collective bargaining agreements.
Eligible employees retiring at age 65 with twenty or more years of service
are entitled to an annual pension benefit in an amount equal to their highest 5
year average compensation earned during the last 10 years of employment times
(1) 15% of said amount up to a social security integration level and (2) 30% of
said amount in excess of that level to a maximum of $100,000. The Group Pension
Plan recognizes total compensation to a maximum of $100,000 for each calendar
year for each employee. The benefits listed are not subject to any deduction for
Social Security or other offset amounts. All employees are fully vested after 5
years of service.
The following table shows the estimated pension benefits payable to a
covered participant at normal retirement age under the Company's qualified Group
Pension Plan:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
------------------------------------------------
ANNUAL REMUNERATION 15 20 25 30 35
----------------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$100,000 or more......................... $17,910 $23,880 $23,880 $23,880 $23,880
</TABLE>
Presently credited years of service, if any, for the officers named in the
Summary Compensation Table above are as follows: Herbert P. Dooskin -- ten
years; Jeffrey S. Silverman -- fourteen years; Dana R. Snyder -- one year;
Donald Kruse -- eight years; and, Michael Vagedes -- four years. Messrs. Dooskin
and Silverman have minimum benefits in excess of those shown in the table
attributable to their prior participation in the Company's pension plan and a
minimum benefit provision contained in the Group Pension Plan which
7
<PAGE> 10
grandfathers the level of benefits in effect under the terms of the plan on
September 30, 1987. The annual excess for Messrs. Dooskin and Silverman is
$12,830 and $58,330, respectively.
DIRECTOR COMPENSATION
Each nonemployee Director receives compensation of $25,000 per year in
addition to $500 for each committee meeting attended. No fees are payable to
officers and employees of the Company who serve as Directors. During 1996,
Messrs. Hersh, Lilley and Modlin each were granted 12,500 options at an exercise
price of $12.50 per share, the market price of the Common Stock of the Company
on the date of grant. The options are exercisable commencing one year from the
date of grant.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Hersh, a Director of the Company and a member of its Compensation
Committee in 1996, is a co-founder and former president of the Company and
currently serves as a consultant. Mr. Goldenberg, a Director of the Company, is
a co-founder of Goldenberg Group, Inc., a wholly owned subsidiary of the
Company, and currently serves as a consultant. During 1996, the Company paid
$91,000 to Mr. Hersh for consulting services and Goldenberg Group, Inc. paid
$287,397 to Mr. Goldenberg for consulting services. During 1996, the Company
paid $25,000 to Policy Communications, Inc., a Washington, D.C.-based consulting
firm, of which Mr. Lilley, a Director of the Company and a member of its
Compensation Committee in 1996, is President. The Company also paid $975,000 for
professional services rendered in 1996 by the law firm in which Mr. Modlin, a
Director of the Company and a member of its Compensation Committee in 1996, is a
partner. Mr. Charles Modlin, Secretary of the Company, is also a partner of said
law firm.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
The Company has employment agreements with Messrs. Dooskin, Snyder,
Silverman, Kruse and Vagedes. These agreements provide for continued service in
their present positions until April 15, 2000 with respect to Mr. Dooskin, until
June 5, 1999 with respect to Mr. Snyder, until April 30, 2007 with respect to
Mr. Silverman, until January 1, 2000 with respect to Mr. Kruse, and until
December 31, 1998 with respect to Mr. Vagedes. The agreements with Messrs.
Dooskin and Silverman are automatically renewed on an annual basis unless
otherwise terminated. The agreement with Mr. Snyder is automatically extended
for an additional one year, unless either party provides six months prior
written notice. Mr. Kruse, formerly President and Chief Executive Officer of
Sagebrush Sales, Inc., a wholly owned subsidiary of the Company, became Chairman
effective January 1, 1997.
In the case of Mr. Kruse and Mr. Vagedes, annual compensation is determined
by contractual arrangement with a bonus based upon an established performance
criteria. In the case of Mr. Snyder, increases in salary are determined by the
Compensation Committee of the Board of Directors, subject to minimum increases
of 5%, and bonuses are awarded in accordance with his employment agreement and
pursuant to the Company's Incentive Compensation Plan. Upon a change of control
and if his employment is terminated, Mr. Snyder is entitled to payments in lieu
of future performance benefits. In the case of Mr. Dooskin, increases in salary
and bonus are determined annually by the Board of Directors. Reference is
8
<PAGE> 11
made to "Executive Compensation Committee Report" below for a description of the
terms and conditions of Mr. Silverman's employment agreement, as amended, not
otherwise described herein.
Certain of the agreements provide for continued payments in the event of
physical or mental incapacity. In the case of Mr. Silverman, these payments
continue for the balance of the employment term and thereafter for an
indeterminate period at a rate equal to 50% of salary and bonus received during
the last year prior to mental or physical incapacity, plus increases based upon
increases in the cost of living. The payments continue so long as such mental or
physical disability continues. In the case of Mr. Dooskin, payments of salary
and bonus continue for a period of one year. With respect to Mr. Kruse, payments
amounting to one-half of his base salary continue for six months.
In the event of Mr. Silverman's death during the term of the agreement, his
estate would continue to receive salary and bonus payments during the balance of
the term. In the event of Mr. Dooskin's death, his estate would continue to
receive payments for one year.
The Company maintains key man life insurance policies on the life of Mr.
Silverman and Mr. Snyder having aggregate death benefits payable to the Company
of $34,500,000 and $10,000,000 respectively. Life insurance policies in the
principal amount of $800,000 are maintained with respect to Mr. Kruse, $500,000
of the proceeds of which are payable to the Company.
The Company has entered into split-dollar life insurance agreements with
certain of its principal executive officers. Pursuant to each of the agreements,
the Company pays the annual premiums on specified life insurance policies owned
by each, net of the amount of the "economic benefit" attributable to them. The
amount of the premiums paid by the Company constitutes indebtedness to the
Company and is secured by collateral assignments of each of the insurance
policies.
The agreements with each of the aforementioned individuals provide for
non-competitive commitments during the term of the agreement and for periods
subsequent thereto. The employee stock options granted to each of the aforesaid
individuals provide for a "cash out" (as defined) in the event of a change in
control.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of
its Common Stock to file reports of ownership and changes in ownership with the
Securities and Exchange Commission (the "Commission"). Officers, directors and
greater than ten percent stockholders are required by the Commission to furnish
the Company with copies of all Section 16(a) forms they file.
The Company believes that, based solely on its review of the copies of such
forms received by it, or written representations from certain reporting persons
that no reports on Form 5 were required for those persons, during 1996 all
filing requirements applicable to its officers, directors and greater than ten
percent stockholders were complied with.
9
<PAGE> 12
PERFORMANCE GRAPH
The following performance graph assumes $100 invested in Ply Gem
Industries, Inc. Common Stock, the American Stock Exchange Market Index and Dow
Jones Building Materials Index on December 31, 1991 and provides for a
comparison of five year cumulative total return. It also assumes reinvestment of
dividends.
<TABLE>
<CAPTION>
American Stock Dow Jones
Measurement Period Ply Gem Exchange Market Building
(Fiscal Year Covered) Industries, Inc. Index Materials Index
<S> <C> <C> <C>
12/91 100 100 100
12/92 140 101 127
12/93 193 121 158
12/94 209 110 125
12/95 179 139 170
12/96 140 148 203
</TABLE>
EXECUTIVE COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors (the "Committee")
during 1996 was comprised of William Lilley III, Albert Hersh and Elihu H.
Modlin. The Committee is charged with reviewing and approving compensation of
the Company's senior executives. The Company's executive compensation program
consists of three main components: base salary, potential for an annual bonus
based on performance, and the opportunity to earn stock-based incentives
designed to encourage the achievement of superior results over time and
ownership of Common Stock of the Company. The Stock Option Committee ("Stock
Option Committee") of the Board of Directors is charged with the responsibility
of granting stock options and restricted stock awards to executive employees.
The Stock Option Committee during 1996 was comprised of Messrs. Hersh and
Lilley.
The Company has previously entered into employment agreements with each of
the named executives covered in the Summary Compensation Table above. The
employment agreements with Michael Vagedes and Donald Kruse were initially
entered into at the time of the acquisition of the businesses owned and operated
by such executives. In general, executives receive a base salary with fixed
annual increases according to the terms of their respective employment
agreements and are eligible to receive a bonus in accordance with such contracts
based on the performance of the Company or the subsidiary employing the senior
executive. Accordingly, the amount of such bonuses vary for each executive
depending on the performance of the Company or their respective subsidiary. In
the case of Mr. Dooskin, salary and bonus are determined annually by the Board
of Directors. In the case of Mr. Snyder, increases in salary are determined by
the Committee,
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subject to minimum increases of 5% and bonuses are awarded in accordance with
his employment agreement and pursuant to the Company's Incentive Compensation
Plan. The Committee adopted a policy effective January 1, 1994 with respect to
all new executive employment arrangements to maintain executive compensation
within the deduction cap of Section 162(m) of the Internal Revenue Code of 1986,
as amended (the "Code"). Reference is made to "Employment Contracts and
Termination of Employment and Change in Control Arrangements" for a discussion
of the Company's employment and other agreements with its senior executives.
The Company's senior executives are eligible to receive stock options
and/or restricted stock in accordance with the Company's stock plans. The
objectives of such participation are to align executive and stockholder
long-term interests and to enable executives to develop and maintain a
significant, long-term stock ownership position in the Company. The Company's
Stock Option Committee has the responsibility for granting stock options and
restricted stock awards to executive and management employees. In granting stock
options, the Stock Option Committee takes into account Company performance,
subsidiary performance and individual performance. Company and subsidiary
performance is measured by increases in earnings and, to a lesser extent,
increases in sales. Individual performance is measured by the individual's
contributions to such enhanced performance. In the case of Mr. Silverman, the
non-qualified stock option grants awarded to him are based upon provisions of
his employment agreement which provides for increases or decreases in the number
of options to be granted each year in proportion to the increases or decreases
in net income. All of the stock options granted to senior executives in 1996
were exempt from the deduction cap of Section 162(m) of the Code in accordance
with the regulations promulgated thereunder.
The Chairman of the Board and Chief Executive Officer of the Company is
Jeffrey S. Silverman. Mr Silverman has expressed to the Commitee his personal
disappointment with the Company's stock price performance in recent years and
his ongoing commitment to take positive steps to enhance shareholder value. As
evidence of this commitment and at the request of Mr. Silverman, the Committee
and Mr. Silverman have modified Mr. Silverman's compensation arrangement for
1997 by providing that 25% of the salary and bonus due to him during 1997 under
his employment agreement shall be deferred until the price of Ply Gem's shares
equals 150% of the closing price of Ply Gem's shares on the New York Stock
Exchange on December 31, 1996. In addition, any options granted to Mr. Silverman
in 1997 pursuant to his employment agreement shall not be exercisable until the
market price of Ply Gem's shares equals 150% of the closing price of Ply Gem's
shares on the New York Stock Exchange on December 31, 1996. At Mr. Silverman's
request, he and the Committee are exploring additional modifications to Mr.
Silverman's compensation arrangements to further contribute to the enhancement
of shareholder value.
Mr. Silverman's 1996 compensation was determined in accordance with the
provisions of his employment agreement entered into with the Company in 1986.
The base salary paid to him was paid in accordance with the provisions of his
employment agreement. From the time Mr. Silverman joined the Company, the
Company's market capitalization increased from approximately $10 million to
approximately $173 million as of December 31, 1996. A modification of Mr.
Silverman's employment agreement originally entered into in 1986 became
effective January 1, 1991. Based upon the provisions of the 1986 employment
agreement, Mr. Silverman would have been entitled to additional payments of
salary and bonus during the years 1986-1990 of approximately $5,000,000 in
excess of the salary and bonus actually paid to him. In light of Mr. Silverman's
substantial contributions to the Company and its stockholders since joining the
Company in 1982, and in consideration for the modification of his employment
agreement, the Company in 1991 extended
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<PAGE> 14
a loan to Mr. Silverman in the amount of $5,900,000, bearing interest at 7% per
annum repayable in annual installments of $590,000. The amendment to his
employment agreement provides for increases in base salary each year of 10% or
increases in the cost of living, whichever is greater. Future cash bonus
payments are determined in accordance with certain criteria related to the
performance of the Company during the prior year. A further modification of Mr.
Silverman's employment agreement effective December 23, 1992 provided for, among
other things, an extension of the term of the agreement and an increase in base
salary. In consideration for the modification and the additional contributions
made to the Company by Mr. Silverman, the Company extended a loan to Mr.
Silverman of $3,500,000 bearing interest at the rate of 7.3% per annum,
repayable in annual installments of $350,000. Repayment of principal and
interest for the above referred to loans may be waived at the discretion of the
Board of Directors and waiver is mandated in the event net income standards, as
defined, are met. The present principal balances of the aforesaid loans are
$2,950,000 and $2,450,000, respectively. In further consideration for the 1991
modification to his 1986 employment agreement, Mr. Silverman is entitled to
receive an additional annual $495,000 bonus as an incentive compensation
payment. These payments are subject to Mr. Silverman's continued employment and
to the Company having net income as defined therein. To reemphasize his
commitment to the Company's future growth, Mr. Silverman initiated a reduction
of 30% of his salary for 1994. Additionally, Mr. Silverman agreed that his 1994
bonus of $1,331,000 and incentive compensation payment of $495,000 would not be
paid. In consideration thereof, the Company agreed to provide additional
incentive compensation to enable him to increase his compensation by $913,000
(50% of the 1994 bonus and incentive compensation not paid) in each of two of
the next four years if the Company's net income exceeds its historical high or
if the price of the Company's Common Stock exceeds its historic high and
extended an interest bearing loan in the amount of $3,500,000. Principal
payments of $250,000 and interest are due on December 31st of each year. The
entire remaining principal balance and accrued interest thereon are due and
payable on December 31, 1998. The present principal balance of said loan is
$3,000,000. Based upon Mr. Silverman's employment agreement, he would have been
entitled to a grant of 750,000 stock options in 1995. In consideration of Mr.
Silverman's agreement to waive receipt of such options, the Company, in December
1995, extended a loan to Mr. Silverman in the amount of $5,000,000. Principal
payments of $250,000 are due on April 30 of each year. Accrued interest is
payable on December 31 of each year. The entire remaining principal balance and
accrued interest are due and payable on April 30, 2001. Mr. Silverman secured
the loan with certain employee stock options held by him. For each of the 1994
and 1995 notes, interest is calculated annually at the higher of a floating rate
adjusted annually based upon the average rate paid by the Company pursuant to
its principal bank credit agreement, or the applicable Federal rate (as defined
in the note) in effect for the subject period.
<TABLE>
<CAPTION>
COMPENSATION COMMITTEE STOCK OPTION COMMITTEE
------------------------------------- ----------------------
<S> <C>
Albert Hersh Albert Hersh
William Lilley III William Lilley III
Elihu H. Modlin
</TABLE>
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Grant Thornton LLP as the independent
public accountants who will make an examination of the financial statements of
the Company for the year ending December 31, 1997. A
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<PAGE> 15
representative from Grant Thornton LLP is expected to be present at the annual
meeting to respond to appropriate questions and to make a statement if that
representative so desires.
PROPOSALS BY STOCKHOLDERS -- 1998 ANNUAL MEETING
All proposals by stockholders intended to be presented at the next annual
meeting of stockholders (to be held in May 1998) must be received by the Company
at its office 777 Third Avenue, New York, New York 10017, no later than November
30, 1997 in order to be included in the proxy statement and form of proxy
relating to such meeting. All such proposals must comply with applicable
Securities and Exchange Commission rules and regulations.
OTHER BUSINESS
Management is not aware of any matters to be presented at the meeting other
than those set forth in this Proxy Statement. However, should any other business
properly come before the meeting, or any adjournment or adjournments thereof,
the enclosed Proxy confers upon the persons entitled to vote the shares
represented by such Proxies, discretionary authority to vote the same in respect
to any such other business in accordance with their best judgment in the
interest of the Company.
MANAGEMENT UNDERTAKES TO PROVIDE ITS STOCKHOLDERS WITHOUT CHARGE, UPON
WRITTEN OR ORAL REQUEST BY ANY SUCH STOCKHOLDER, BY FIRST CLASS MAIL WITHIN ONE
BUSINESS DAY OF RECEIPT OF SUCH REQUEST, A COPY OF THE COMPANY'S ANNUAL REPORT
ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS AND SCHEDULES FILED THEREWITH.
WRITTEN REQUEST FOR SUCH REPORT SHOULD BE ADDRESSED TO PAUL BOGUTSKY, TREASURER,
PLY GEM INDUSTRIES, INC., 777 THIRD AVENUE, NEW YORK, NEW YORK 10017. ORAL
REQUESTS SHOULD BE MADE BY TELEPHONE TO SUCH PERSON AT (212) 832-1550.
The form of proxy solicited by the Board of Directors affords stockholders
the ability to specify a choice among approval of, disapproval of, or abstention
with respect to each matter to be acted upon at the Annual Meeting. Shares
represented by the proxy will be voted and, where the solicited stockholder
indicates a choice on the form of proxy with respect to any matter to be acted
upon, the shares will be voted as specified. Abstentions and broker non-votes
will not have the effect of votes in opposition to a Director.
Stockholders are urged to sign the enclosed proxy, solicited on behalf of
the Board of Directors, and return it at once in the envelope enclosed for that
purpose. Unless a contrary direction is indicated, Proxies will be voted for the
election as directors of the nominees listed in this Proxy Statement. The Proxy
does not affect the right to vote in person at the meeting and may be revoked by
the stockholder who executed it any time prior to its being voted.
By Order of the Board of Directors
CHARLES M. MODLIN
Secretary
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THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
OF PLY GEM INDUSTRIES, INC.
PROXY-ANNUAL MEETING OF STOCKHOLDERS, MAY 10, 1996
THE UNDERSIGNED HEREBY APPOINTS JEFFREY S. SILVERMAN, HERBERT P. DOOSKIN AND
ELIHU H. MODLIN, AND EACH OF THEM, PROXIES AND ATTORNEYS-IN-FACT OF THE
UNDERSIGNED, WITH THE POWER TO APPOINT HIS SUBSTITUTE, AND HEREBY AUTHORIZES
THEM TO REPRESENT AND TO VOTE, AS DESIGNATED BELOW, ALL THE SHARES OF COMMON
STOCK OF PLY GEM INDUSTRIES, INC. HELD OF RECORD BY THE UNDERSIGNED ON APRIL 5,
1996 AT THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 10, 1996 OR ANY
ADJOURNMENT THEREOF.
(CONTINUED AND TO BE DATED AND SIGNED ON THE REVERSE SIDE)
PLY GEM INDUSTRIES, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
FOR ALL
Except as
FOR WITHHELD listed at left
1. Election of Directors--
Herbert P. Dooskin, Joseph Goldenberg, / / / / / /
P Albert Hersh, William Lilley III,
Elihu H. Modlin, Jeffrey S. Silverman
R and Dana R. Snyder.
O
X INSTRUCTION: To withhold authority to vote for any individual nominee write
that nominees name in the blank space below.
Y
----------------------------------------------------------------------------
In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR PROPOSAL "1" ABOVE.
Date , 1996
---------------------------------
--------------------------------------------
--------------------------------------------
Signature of Stockholder(s)
Please sign exactly as your name or names
appear to the left hereof. When shares are
held by joint tenants, both should sign.
When signing as attorney, as executor,
administrator, trustee or guardian, please
give full title as such. If a corporation,
please sign in full corporate name by
President or other authorized officer. If a
partnership, please sign in partnership name
by authorized person.
