Ply Gem Prime Holdings, Inc.
Ply
Gem Prime Holdings, Inc.
000
Xxxx Xxxxx Xxxxxx
Xxxxxxx,
Xxxxxxxx 00000
September
25, 2006
Xxx
X.
Xxxxx
000
Xxxxxx Xxxxx
Xxxxxxx,
XX 00000
Dear
Xx.
Xxxxx:
As
you
know, the Board of Directors (the “Board”) of Ply Gem Prime Holdings, Inc. (the
“Company”) has determined that it is desirable to amend and shorten the lifespan
of the nonqualified deferred compensation arrangement represented by your
Phantom Additional Unit Award under the Ply Gem Prime Holdings, Inc. Amended
and
Restated Phantom Stock Plan (the “Phantom Plan”). The primary reason for this
determination is the significant uncertainty regarding the proper application
of
new Internal Revenue Code Section 409A, particularly as applied to phantom
equity arrangements of private companies. Any Section 409A compliance mistake
can result in phantom equity holders having to pay substantial penalty taxes
in
addition to regular income taxes. (Capitalized terms used but not defined
in
this letter shall have the meaning ascribed to such terms in the Phantom
Plan,
or, if not defined therein, in your Phantom Additional Unit Award
Agreement.)
Phantom
Common Equity Converted to Dollars and Paid Out on January 31,
2007.
On the
date of this letter, the portion of your Account that is represented by the
portion of the Phantom Additional Units credited to your Account as of the
date
of this letter that represents shares of Common Stock (“Common Strip Units”),
and not the portion that represents shares of Preferred Stock (“Preferred Strip
Units”), shall be assigned a cash value, calculated by multiplying $10.00 by the
number of Common Strip Units credited to your Account on the date of this
letter. Such portion of your Account is referred to herein as the “Common
Account.” After the date of this letter, the Common Account shall be denominated
in U.S. dollars rather than in Common Stock or any other form of real or
phantom
equity, and, until January 31, 2007, the value of the Common Account shall
be
updated as if interest was credited on the value of the Common Account, and
compounded at December 31, 2006, at a rate equal to the applicable federal
rate
for short-term loans.
On
January 31, 2007, the Company shall pay you a one-time, lump-sum cash payment
equal to the value of your Common Account on such date, calculated as described
in the preceding paragraph, even if your employment is terminated
earlier.
Phantom
Preferred Equity Converted to Dollars and Paid Out Over
Time.
On the
date of this letter, the portion of your Account that is represented by
Preferred Strip Units shall be assigned a cash value equal to the face amount
of
the shares of Preferred Stock represented by such Preferred Strip Units and
shall be credited with deemed earnings, as if with interest, at an annual
rate
of 10%, compounded semi-annually as of each June 30 and December 31, from
the
date of issuance of the Phantom Additional Unit Award through the date of
payment. This portion of your Account shall be paid to you, in cash, in
accordance with the following schedule: one-third of the original face amount
shall be paid on each of August 31, 2009, 2010, and 2011, in each case together
with deemed earnings (accrued to the date of payment) on the portion of the
Account then being paid; provided, that the full unpaid amount of the account
including deemed earnings thereon accrued to the date of payment shall be
payable upon the earliest of your (i) death, (ii) Disability (as defined
in the
Plan) and (iii) the occurrence of an event which is both a Realization Event
(as
defined in the Plan) and a Change of Control as defined in section 409A of
the
Internal Revenue Code.
Despite
any reference in this letter or in the Phantom Plan to any “Account”, the
arrangement represented by your Award, as modified by this letter, remains
a
nonqualified deferred compensation arrangement. To the extent that any
provisions of the Phantom Plan or your Phantom Additional Unit Award Agreement
are inconsistent with the terms of this letter, including, without limitation,
any provision regarding the payment of your Account in the form of, or valuation
of your Account by reference to Preferred Stock or any provision regarding
the
payment of your Account following termination of employment or any IPO or
Realization Event, such provisions shall be deemed amended to the extent
necessary to be consistent with this letter and, if they cannot be read to
be
consistent with this letter, then they shall be void and of no further force
and
effect as applied to your Award.
*
*
*
By
signing this letter in the space below, you indicate your consent to the
amendments to your Phantom Additional Unit Award on the terms set forth in
this
letter.
Ply
Gem
Prime Holdings, Inc.
By:
___________________________
Name:
Xxxxx X. Xxx
Title:
Chief Financial Officer
Accepted
and Agreed to:
By:
__________________________
Xxx
X.
Xxxxx
