DREW INDUSTRIES INCORPORATED
200 MAMARONECK AVENUE
WHITE PLAINS, NEW YORK 10601
------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 20, 1999
------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of DREW
INDUSTRIES INCORPORATED (the "Company") will be held at the Park Avenue Center
Room, The Waldorf-Astoria Hotel, 301 Park Avenue, New York, N.Y. 10022 on
May 20, 1999 at 9:30 A.M., for the following purposes:
(1) To elect a Board of six Directors;
(2) To consider and act upon a proposal to adopt an amendment to the
Drew Industries Incorporated Stock Option Plan to increase the number of
shares subject to options;
(3) To ratify the selection of KPMG LLP as independent auditors for
the Company for the year ending December 31, 1999; and
(4) To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
Holders of record of the Company's Common Stock at the close of business on
the 15th day of April, 1999 shall be entitled to vote on all matters to be
considered at the meeting or any adjournment or postponement thereof.
A list of all stockholders entitled to vote at the meeting will be
available for inspection for the ten days prior to the meeting at the office of
the Company and at the offices of the Company's transfer agent, ChaseMellon
Shareholder Services, L.L.C., 85 Challenger Rd., Overpeck Center, Ridgefield
Park, New Jersey 07660, and will be available for inspection at the time of the
meeting, at the place thereof.
By Order of the Board of Directors
EDWARD W. ROSE, III
Chairman of the Board of Directors
Dated: April 20, 1999
White Plains, N.Y.
NOTICE TO HOLDERS OF COMMON STOCK
IF YOU DO NOT EXPECT TO ATTEND THE MEETING, PLEASE SIGN AND RETURN THE ENCLOSED
PROXY SO THAT YOU WILL BE REPRESENTED. A POST-PAID ENVELOPE IS ENCLOSED
FOR YOUR CONVENIENCE.
DREW INDUSTRIES INCORPORATED
200 MAMARONECK AVENUE
WHITE PLAINS, NEW YORK 10601
------------------------
PROXY STATEMENT
------------------------
The accompanying Proxy is solicited by Management of Drew Industries
Incorporated, a Delaware corporation (the "Company"), for use at the Annual
Meeting of Stockholders to be held at the Park Avenue Center Room, The
Waldorf-Astoria Hotel, 301 Park Avenue, New York, N.Y. 10022 on May 20, 1999 at
9:30 A.M., or any adjournment or postponement thereof, at which holders of
record of the Company's Common Stock, par value $0.01 per share (the "Common
Stock"), at the close of business on April 15, 1999 shall be entitled to vote on
all matters considered at the meeting.
The cost of solicitation by Management, including postage, printing and
handling, and the expenses incurred by brokerage firms, custodians, nominees and
fiduciaries in forwarding proxy material to beneficial owners will be borne by
the Company. The solicitation is to be made primarily by mail, but may be
supplemented by telephone calls, telegrams and personal solicitation. Management
may also use the services of directors and employees of the Company to solicit
Proxies, without additional compensation.
Each Proxy executed and returned by holders of the Common Stock may be
revoked at any time thereafter, except as to matters upon which, prior to such
revocation, a vote shall have been cast pursuant to the authority conferred by
such Proxy. A Proxy may be revoked by giving written notice of revocation to the
Secretary of the Company or to any of the other persons named as proxies, or by
giving a Proxy with a later date. The Proxies will be voted at the meeting for
the Directors set forth herein in the manner indicated (see "ELECTION OF
DIRECTORS"), and if no contrary instructions are indicated, in favor of the
other matters set forth herein; if specific instructions are indicated, the
Proxies will be voted in accordance therewith. This Statement and the form of
Proxy solicited from holders of the Common Stock are expected to be sent or
given to stockholders on or about April 21, 1999.
The Annual Report to Stockholders of the Company for the year ended
December 31, 1998 is being mailed herewith to each stockholder of record.
THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31,
1998, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (INCLUDING THE
CONSOLIDATED FINANCIAL STATEMENTS AND THE SCHEDULE THERETO) WILL BE FURNISHED TO
ANY STOCKHOLDER WITHOUT CHARGE UPON REQUEST TO THE COMPANY AT 200 MAMARONECK
AVENUE, WHITE PLAINS, NEW YORK 10601, TELEPHONE (914) 428-9098.
THE COMPANY
The Company was incorporated under the laws of Delaware on March 20, 1984.
The Company's principal executive and administrative offices are located at 200
Mamaroneck Avenue, White Plains, New York 10601; telephone number (914)
428-9098.
VOTING SECURITIES
The Company had outstanding on the record date 11,465,895 shares of Common
Stock. Each holder of Common Stock is entitled to one vote for each share of
stock held.
PRINCIPAL HOLDERS OF VOTING SECURITIES
Set forth below is information with respect to each person known to the
Company on April 15, 1999 to be the beneficial owner of more than five percent
of any class of the Company's voting securities, which consists of Common Stock
only (including options):
AMOUNT AND
NATURE OF APPROXIMATE
NAME AND ADDRESS BENEFICIAL PERCENT OF
OF BENEFICIAL OWNER OWNERSHIP CLASS
- ----------------------------------- ---------- -----------
Edward W. Rose, III(1) ............ 1,875,880(2) 15.7%
500 Crescent Court
Dallas, Texas 75201
L. Douglas Lippert(1) ............. 2,041,327(2) 17.1%
2375 Tamiami Trail
Suite 110
Naples, Florida 34103
FMR Corp. ......................... 1,138,000(3) 9.5%
82 Devonshire Street
Boston, Massachusetts 02108
- ------------------
(1) The person named has sole voting and investment power with respect to such
shares.
(2) See "VOTING SECURITIES--Security Ownership of Management."
(3) As of December 31, 1998.
To the knowledge of the Company, other than persons acting as nominees or
custodians for various stock brokerage firms and banks, which persons do not
have beneficial ownership of the Common Stock, no other person owns of record or
beneficially more than five percent of the voting securities of the Company.
SECURITY OWNERSHIP OF MANAGEMENT
Set forth below is information with respect to beneficial ownership at
April 15, 1999 of the Common Stock (including options) by each Director and
nominee and by all Directors, nominees and Executive Officers of the Company as
a group.
AMOUNT AND
NATURE OF APPROXIMATE
NAME AND ADDRESS BENEFICIAL PERCENT OF
OF BENEFICIAL OWNER OWNERSHIP CLASS
- ---------------------------------------- ---------- -----------
Leigh J. Abrams(1) ..................... 239,270(2) 2.0%
200 Mamaroneck Avenue
White Plains, New York 10601
Edward W. Rose, III(1) ................. 1,875,880(3) 15.7%
500 Crescent Court
Dallas, Texas 75201
David L. Webster(1) .................... 282,840(4) 2.4%
4381 Green Oaks Blvd.
Arlington, Texas 76016
2
AMOUNT AND
NATURE OF APPROXIMATE
NAME AND ADDRESS BENEFICIAL PERCENT OF
OF BENEFICIAL OWNER OWNERSHIP CLASS
- ---------------------------------------- ---------- -----
L. Douglas Lippert ..................... 2,041,327(5) 17.1%
2375 Tamiami Trail
Suite 110
Naples, Florida 34103
James F. Gero(1) ....................... 104,160(6) 0.9%
11900 North Anna Cade Road
Rockwall, Texas 75087
Gene H. Bishop(1) ...................... 108,600(7) 0.9%
1601 Elm Street, 47th Floor
Dallas, Texas 75201
All Directors and Executive Officers as
a group (8 persons including the
above-named).......................... 4,732,217(8) 39.7%
- ------------------
(1) Pursuant to Rules 13-1 (f)(1)-(2) of Regulation 13-D of the General Rules
and Regulations under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") on March 26, 1997, the persons indicated, together with
certain other persons, jointly filed a single amendment to the Schedule 13-D
Statement, filed on May 31, 1989, with respect to the securities listed in
the foregoing table. Such persons made the single, joint filing because they
may be deemed to constitute a "group" within the meaning of Section 13(d)(3)
of the Exchange Act, although neither the fact of the filing nor anything
contained therein shall be deemed to be an admission by such persons that a
group exists.
(2) Mr. Abrams has sole voting and investment power with respect to the shares
owned by him. Includes 8,004 shares of Common Stock held by Mr. Abrams as
Custodian under the New York Uniform Gifts to Minors Act for the benefit of
his children. Mr. Abrams disclaims any beneficial interest in the shares
held as Custodian. In January 1997, Mr. Abrams was granted an option
pursuant to the Company's Stock Option Plan to purchase 10,000 shares of
Common Stock at $12.125 per share. Although no part of such option has been
exercised, all shares subject to such option are included in the above table
as beneficially owned.
(3) Mr. Rose has sole voting and investment power with respect to the shares
owned by him. Includes 84,000 shares owned by each of Cardinal Investment
Company, Inc. Pension Plan and Cardinal Investment Company, Inc. Profit
Sharing Plan, of each of which Mr. Rose is Trustee. Excludes 172,200 shares
of Common Stock held in trusts for the benefit of members of Mr. Rose's
immediate family. Mr. Rose's wife has sole voting and investment power with
respect to 72,200 of such shares and an additional 13,920 shares owned by
her of record. Mr. Rose disclaims any beneficial interest in such shares. As
a member of the Stock Option Committee, Mr. Rose was automatically awarded
the following options each of which is to purchase 5,000 shares of Common
Stock: on December 31, 1995 at $7.35 per share; on December 31, 1996 at
$10.75 per share; on December 31, 1997 at $12.475 per share; and on
December 31, 1998 at $11.792 per share. Although no part of such options has
been exercised, all shares subject to such options are included in the above
table as beneficially owned.
(4) Mr. Webster has sole voting and investment power with respect to such
shares. In May 1997, Mr. Webster was granted an option pursuant to the
Company's Stock Option Plan to purchase 15,000 shares of Common Stock at
$12.125 per share. Although no part of such option has been exercised, all
shares subject to such option are included in the above table as
beneficially owned.
(5) Includes 607,265 shares held by L. Douglas Lippert as Trustee for trusts for
the benefit of members of Mr. Lippert's immediate family, over which
Mr. Lippert has sole voting and
(Footnotes continued on next page)
3
(Footnotes continued from previous page)
dispositive power. Mr. Lippert disclaims beneficial ownership of such
shares. Also includes 53,846 shares beneficially owned by Mr. Lippert, which
are held in escrow pursuant to agreements with the Company providing for the
delivery of such shares to Mr. Lippert upon the occurrence of certain
contingencies. See "VOTING SECURITIES." Pursuant to Rules 13-1(f)(1)-(2) of
Regulation 13-D of the General Rules and Regulations under the Exchange Act,
on October 17, 1997, Mr. Lippert, together with certain other persons,
jointly filed a single Schedule 13-D Statement with respect to the
securities listed in the foregoing table. Such persons made the single,
joint filing because they may be deemed to constitute a "group" within the
meaning of Section 13(d)(3) of the Exchange Act, although neither the fact
of the filing nor anything contained therein shall be deemed to be an
admission by such persons that a group exists.
(6) Mr. Gero shares voting and investment power with respect to such shares with
his wife. As a member of the Stock Option Committee, Mr. Gero was
automatically awarded the following options each of which is to purchase
5,000 shares of Common Stock: on December 31, 1995 at $7.35 per share; on
December 31, 1996 at $10.75 per share; on December 31, 1997 at $12.475 per
share; and on December 31, 1998 at $11.792 per share. Although no part of
such options has been exercised, all shares subject to such options are
included in the above table as beneficially owned.
(7) Mr. Bishop has sole voting and investment power with respect to such shares.
As a member of the Stock Option Committee, Mr. Bishop was automatically
awarded the following options each of which is to purchase 5,000 shares of
Common Stock: on December 31, 1996 at $10.75 per share; on December 31, 1997
at $12.475 per share; and on December 31, 1998 at $11.792 per share.
Although no part of such options has been exercised, all shares subject to
such options are included in the above table as beneficially owned.
(8) Includes 94,500 shares subject to options.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's executive officers
and directors, and persons who beneficially own more than ten percent of the
Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission and the exchange on which
the securities are traded. Officers, directors and greater than ten-percent
shareholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file.
Based on its review of the copies of such forms received by it, the Company
believes that during 1998 all such filing requirements applicable to its
officers and directors (the Company not being aware of any ten percent holder
other than Edward W. Rose, III and L. Douglas Lippert, directors) were complied
with.
I. ELECTION OF DIRECTORS
It is proposed to elect a Board of six directors to serve until the next
annual election or until their successors are elected and qualify.
Unless contrary instructions are indicated, the persons named as proxies in
the form of Proxy solicited from holders of the Common Stock will vote for the
election of the nominees indicated below. All such nominees are presently
directors of the Company. If any such nominees should be unable or unwilling to
serve, the persons named as proxies will vote for such other person or persons
as may be proposed by Management. Management has no reason to believe that any
of the named nominees will be unable or unwilling to serve. Election of
directors by holders of the Common Stock will be by a plurality of the votes
cast at the meeting, in person or by proxy, by holders of the Common Stock
entitled to vote at the meeting.
The following table lists the current directors of the Company and the
nominees proposed by Management for election by the holders of the Common Stock,
all other positions and offices with
4
the Company presently held by them and their principal occupations, in each case
as furnished by them to the Company.
NAME AND AGE DIRECTOR
OF NOMINEE POSITION SINCE
- ---------------------- -------------------------------------------- --------
Leigh J. Abrams ...... President, Chief Executive
(Age 56) Officer and Director. 1984
Edward W. Rose, Chairman of the Board of
III ................ Directors. 1984
(Age 58)
David L. Webster ..... President and Chief Executive Officer of
(Age 63) Kinro, Inc. and Shoals Supply, Inc. and
Director. 1984
L. Douglas Lippert ... President and Chief Executive Officer of
(Age 51) Lippert Components, Inc. and Coil Clip, Inc.
and Director. 1997
James F. Gero ........ Director. 1992
(Age 54)
Gene H. Bishop ....... Director. 1995
(Age 69)
LEIGH J. ABRAMS, since July 1994, has also been President, Chief Executive
Officer and a Director of LBP, Inc. ("LBP"). See Summary Compensation Table,
footnote 1.
EDWARD W. ROSE, III, for more than the past five years, has been President
and sole stockholder of Cardinal Investment Company, Inc., an investment firm.
Mr. Rose also serves as a director of the following public companies: Liberte
Investors Inc., engaged in real estate loans and investments; and ACE Cash
Express, Inc., engaged in check cashing services. Since July 1994, Mr. Rose has
also been Chairman of the Board of LBP.
DAVID L. WEBSTER, since November 1980, has been President of Kinro, Inc., a
subsidiary of the Company ("Kinro"), and has been Chairman of Kinro since
November 1984. Mr. Webster has also been President and Chief Executive Officer
of Shoals Supply, Inc., a subsidiary of the Company ("Shoals"), since its
acquisition by the Company in February 1996.
L. DOUGLAS LIPPERT, since October 1997, has been President and Chief
Executive Officer of Lippert Components, Inc., a subsidiary of the Company, and
President of the predecessor of Lippert Components, Inc. since 1978. Mr. Lippert
has also been President of Coil Clip, Inc., a subsidiary of the Company, since
its acquisition in December 1998.
JAMES F. GERO, since March 1992, has been Chairman and Chief Executive
Officer of Sierra Technologies, Inc., a manufacturer of defense systems
technologies. From July 1987 to October 1989, Mr. Gero was Chairman and Chief
Executive Officer of Varo, Inc., a manufacturer of defense electronics, and from
1985 to 1987, Mr. Gero was President and Chief Executive Officer of Varo, Inc.
Mr. Gero also serves as a director of the following public companies: Orthofix
International NV, an international supplier of orthopedic devices for bone
fixation and stimulation; and Spar Aerospace Ltd., engaged in space robotics,
communications equipment and aerospace products and services. Since July 1994,
Mr. Gero has also been a director of LBP.
GENE H. BISHOP, from March 1975 until July 1990, was Chief Executive
Officer of MCorp, a bank holding company, and from October 1990 to November
1991, was Vice Chairman and Chief Financial Officer of Lomas Financial
Corporation, a financial services company. From November 1991 until his
retirement in October 1994, Mr. Bishop served as Chairman and Chief Executive
Officer of Life Partners Group, Inc., a life insurance holding company. Mr.
Bishop also serves as a director of the following publicly-owned companies:
Paymentech, Inc., a credit card payment processor; Liberte Investors Inc.,
engaged in real estate loans and investments and Southwest Airlines Co., a
regional airline.
5
FREDRIC M. ZINN, not a nominee for election as a director, has been Chief
Financial Officer of the Company for more than the past five years, and has also
been Chief Financial Officer of LBP since July 1994. Mr. Zinn is a Certified
Public Accountant.
HARVEY J. KAPLAN, not a nominee for election as a director, has been
Secretary and Treasurer of the Company for more than the past five years, and
has also been Secretary and Treasurer of LBP since July 1994. Mr. Kaplan is a
Certified Public Accountant.
Directors of the Company serve until the Company's next annual meeting of
stockholders, and until their successors are elected and qualified. Executive
officers serve at the discretion of the Board of Directors. To the knowledge of
the Company, no executive officer or director is related by blood, marriage or
adoption to any other. Each of the nominees named above was elected to his
present term of office at the Annual Meeting of Stockholders held on May 21,
1998. During the year ended December 31, 1998, the Board of Directors held five
meetings. All directors attended all meetings of the Board of Directors, except
that Gene H. Bishop, did not attend one meeting.
The Company has an Audit Committee of the Board of Directors consisting of
Messrs. Rose, Gero and Bishop. The functions of the Audit Committee are to
review the Company's annual and quarterly reports, review the independence of
and ratify the selection of the independent auditors for the Company, conduct
pre-audit and post-audit reviews with both financial management and the
independent auditors, and assist in the development of the Company's annual
business plan. The Audit Committee held one meeting during the year ended
December 31, 1998.
The Company has a Stock Option Committee, consisting of Messrs. Rose, Gero
and Bishop, to determine and designate employees and directors of the Company
who are to be granted options, the number of shares subject to options, the
nature and terms of the options to be granted, and to otherwise administer the
Stock Option Plan. See "ELECTION OF DIRECTORS--Executive Compensation." The
Stock Option Committee held one meeting during the year ended December 31, 1998.
The Company has a Compensation Committee of the Board of Directors
consisting of Messrs. Rose, Gero and Bishop. The functions of the Compensation
Committee are to develop compensation policies with respect to the Company's
executive officers based, in part, on performance-related criteria, and to make
recommendations to the Board of Directors regarding compensation of executive
officers in accordance with such policies. The Compensation Committee held one
meeting during the year ended December 31, 1998.
EXECUTIVE COMPENSATION
Summary Compensation
The following table sets forth the annual and long-term cash and noncash
compensation for each of the last three calendar years awarded to or earned by
the President and Chief Executive Officer of the Company and the Company's five
other most highly compensated executive officers (such six executive officers
collectively, the "named executive officers") during the year ended December 31,
1998.
A portion of the cash and noncash compensation set forth in the table paid
to Messrs. Leigh J. Abrams, Edward W. Rose, III, Fredric M. Zinn and Harvey J.
Kaplan during the year ended December 31, 1998 was charged to LBP pursuant to
the Shared Services Agreement. See Summary Compensation Table, footnote 1 below.
6
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION(1) COMPENSATION
------------------------------------ ---------------
NAME AND CALENDAR OTHER ANNUAL NUMBER OF STOCK ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS (2) COMPENSATION OPTIONS AWARDED COMPENSATION
- ------------------------- -------- -------- ---------- ------------ --------------- ------------
Leigh J. Abrams(3) ...... 1998(4) $300,000 $ 323,930 $ 5,639 10,000 $5,000
President and Chief 1997(4) 300,000 264,530 5,396 4,750
Executive Officer 1996(4) 300,000 354,478 5,451 4,620
David L. Webster(5) ..... 1998 $400,000 $1,088,200 $ 2,603 15,000 $5,000
President of Kinro, 1997 400,000 930,800 3,655 4,750
Inc. and Shoals Supply, 1996 400,000 1,174,670 3,285 4,620
Inc.
L. Douglas Lippert(6) ... 1998 $300,000 0 $ 12,000 $5,875
President and Chief 1997 73,731 0 3,000 917
Executive Officer of
Lippert Components,
Inc. and Coil Clip,
Inc.
Edward W. Rose, III ..... 1998(4) $ 30,000 $ 29,150(7) 5,000
Chairman of the 1997(4) 30,000 31,115(7) 5,000
Board of Directors 1996(4) 30,000 29,084(7) 5,000
Fredric M. Zinn ......... 1998(4) $135,000 $ 155,344 $ 10,237 5,000 $5,000
Chief Financial Officer 1997(4) 125,000 127,743 10,145 4,750
1996(4) 125,000 129,950 9,091 4,620
Harvey J. Kaplan ........ 1998(4) $107,500 $ 90,296 $ 7,823 3,500 $5,000
Secretary and Treasurer 1997(4) 100,000 75,296 7,941 4,750
1996(4) 100,000 75,296 3,736 4,620
- ------------------
(1) In connection with the July 29, 1994 spin-off of Leslie Building Products,
Inc. (now known as LBP, Inc.) by the Company (the "Spin-off "), the Company
and LBP entered into a Shared Services Agreement. Pursuant to the Shared
Services Agreement, following the Spin-off, the Company and LBP share
certain administrative functions and employee services, such as management
overview and planning, tax preparation, financial reporting, coordination of
independent audit, stockholder relations, and regulatory matters. The
Company is reimbursed by LBP for the fair market value of such services. The
agreement was extended to December 31, 1999. For the year ended
December 31, 1998, the Company was reimbursed $512,000 by LBP for such
services.
(2) Messrs. Abrams, Webster, Rose, Zinn and Kaplan, receive payments pursuant to
a discretionary retirement bonus program. These bonuses must be used to
purchase specified tax deferred annuities and/or cash value life insurance.
For 1998, Mr. Abrams received $30,000, Mr. Webster received $50,000, Mr.
Rose received $30,000, Mr. Zinn received $20,344 and Mr. Kaplan received
$13,296 pursuant to the discretionary retirement bonus program.
(3) For 1998, 1997 and 1996, Mr. Abrams received incentive compensation equal to
2 1/2% of the Company's income before income taxes and extraordinary items,
subject to certain adjustments, in excess of $12,975,000 in 1998, $8,190,000
in 1997, and $8,075,000 in 1996.
(4) Of the aggregate compensation paid to Messrs. Abrams, Zinn and Kaplan for
1998, an aggregate of $213,100 was charged to LBP pursuant to the Shared
Services Agreement, of which $120,300 was applicable to Mr. Abrams, $60,500
was applicable to Mr. Zinn, and $32,300 was applicable to Mr. Kaplan. Of the
aggregate compensation paid to Messrs. Abrams, Zinn and Kaplan for 1997, an
aggregate of $256,231 was charged to LBP pursuant to the Shared Services
Agreement, of which $129,600 was applicable to Mr. Abrams, $68,353 was
applicable to Mr. Zinn, and $58,278 was applicable to Mr. Kaplan. Of the
aggregate compensation paid to
(Footnotes continued on next page)
7
(Footnotes continued from previous page)
Messrs. Abrams, Zinn and Kaplan for 1996, an aggregate of $264,914 was
charged to LBP pursuant to the Shared Services Agreement, of which $122,954
was applicable to Mr. Abrams, $71,358 was applicable to Mr. Zinn, and
$70,602 was applicable to Mr. Kaplan. Messrs. Abrams, Zinn and Kaplan also
received from LBP, which is not reflected in the Summary Compensation Table,
$267,726, $50,000, and $12,500, respectively, representing incentive bonuses
applicable to the gain on disposal of assets of LBP's subsidiary. In
addition, Mr. Abrams received an incentive bonus of $57,052, which is not
reflected in the Summary Compensation Table, equal to 2 1/2% of LBP's income
from operations and investments. Pursuant to the Shared Services Agreement,
$14,000, $15,000 and $15,000 of the discretionary retirement bonuses paid to
Mr. Rose were charged to LBP in each of 1998, 1997, 1996.
(5) Effective March 31, 1996, Kinro extended its employment agreement with
Mr. Webster which provides for Mr. Webster's employment through
December 31, 2001 at a salary of not less than $400,000 per annum. For 1998,
1997 and 1996, Mr. Webster received performance-based incentive
compensation, as adopted by the Company's stockholders on April 18, 1996,
equal to 7.3% of the amount by which the aggregate earnings before interest
and taxes (without deduction for costs of corporate administration or
amortization of goodwill) of Kinro and of Shoals exceeded $10,856,000 in
1998, $10,571,000 in 1997 and $10,000,000 in 1996.
(6) On October 7, 1997, Mr. Lippert entered into an Employment and
Non-Competition Agreement with Lippert Components, Inc. providing for
Mr. Lippert to serve as President and Chief Executive Officer of Lippert
Components, Inc. Mr. Lippert receives annual salary of $300,000 plus,
subject to certain conditions, performance-based incentive compensation
equal to 5% of the excess of operating profits of Lippert Components, Inc.
(as defined in the Agreement) over $9.5 million. For 1998, Mr. Lippert
received no performance-based incentive compensation.
(7) See "ELECTION OF DIRECTORS -- Compensation of Directors."
STOCK OPTION PLAN
On June 13, 1995, stockholders approved the amended and restated Drew
Industries Incorporated Stock Option Plan (the "Plan").
Under the Plan, since 1995 the Stock Option Committee has granted
non-qualified options to purchase 577,140 shares of Common Stock, and is
authorized to grant options to purchase up to an additional 253,666 shares. The
253,666 shares available for grant have been allocated 30,000 shares to
Non-Employee Directors and members of the Committee and 223,666 shares to
eligible employees. No grantee, whether or not now a participant in the Plan,
can be granted options to purchase more than an aggregate of 50,000 shares under
the Plan. All options granted to date are non-qualified options.
The Stock Option Committee has sole and complete authority to determine the
individuals eligible to receive stock options under the Plan, and to determine
the number of stock options to be granted to eligible individuals, as well as
the terms and conditions under which grants will be made (including limitations,
restrictions or prohibitions upon the exercise of stock options), except that
Non-Employee Directors are not eligible for incentive stock options ("ISOs").
The Stock Option Committee determines the period for which each stock option may
be exercisable, but in no event may a stock option be exercisable more than 10
years from the date of grant thereof. The number of shares available under the
Plan, and the exercise price of options granted under the Plan, are subject to
adjustments that may be made by the Stock Option Committee to reflect stock
splits, stock dividends, recapitalizations, mergers, or other major corporate
action.
The exercise price for options granted under the Plan is determined by the
Stock Option Committee in its sole discretion, provided that the exercise price
is at least equal to 100% of the fair market value of the Common Stock subject
to such option on the date of grant. The exercise price may be paid in cash or
in shares of Common Stock. Options granted under the Plan become exercisable in
annual installments determined by the Stock Option Committee and may be subject
8
to performance criteria. An ISO may not be granted to an individual who is
treated as a "10% Shareholder" of the Company under Section 422 of the Internal
Revenue Code of 1986, as amended, unless the exercise price is 110% of fair
market value on the date of grant and the ISO is exercisable for a period not
longer than five years from the date of grant.
The Board of Directors is authorized to terminate, suspend or amend the
Plan; provided that the amendment or termination cannot affect the validity of
any then outstanding stock option previously granted under the Plan, and
provided further that the Board of Directors cannot without stockholder
approval: (a) increase the maximum number of shares covered by the Plan or
change the class of employees eligible to receive stock options; (b) reduce the
option price below the fair market value of the Common Stock on the date of the
grant of such option; or (c) extend beyond l0 years from the date of the grant
the period within which an option may be exercised. The Plan will terminate on
December 31, 2007 and no option may be granted after such termination date.
Options granted prior to the termination date may be exercised in accordance
with their terms beyond the termination date.
Each member of the Stock Option Committee is automatically awarded an
option ("Formula Option") to purchase 5,000 shares of Common Stock on the
December 31st of each year in which such Stock Option Committee member has
served not less than twelve consecutive months as a Director of the Company.
Such Formula Options vest immediately and are exercisable during the five-year
period following the date of grant. The purchase price of the Common Stock
subject to the Formula Options is not less than 100% of the fair market value of
the Common Stock on the date such Formula Option is granted, subject to
adjustment as provided in the Plan.
OPTION GRANTS IN 1998
The following table summarizes stock options granted during 1998 to the named
executive officers.
POTENTIAL
REALIZABLE VALUE
AT ASSUMED ANNUAL
RATES OF PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
------------------------------------------------- -----------------
NUMBER OF % OF TOTAL
SHARES OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION
NAME GRANTED 1998 PRICE DATE 5% 10%
- ---------------------- ------ ---- -------- -------- ------- -------
Edward W. Rose, III... 5,000(1) 14.7% $ 11.792 12/31/03 $16,290 $35,990
- ------------------
(1) Represents a Formula Option
OPTION EXERCISES IN 1998 AND YEAR-END VALUES
The following table presents the value of unexercised options held by the
named executive officers at December 31, 1998.
NUMBER OF VALUE OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AT OPTIONS AT
SHARES DECEMBER 31, 1998 DECEMBER 31, 1998(1)
ACQUIRED VALUE EXERCISABLE (E) EXERCISABLE (E)
NAME ON EXERCISE REALIZED UNEXERCISABLE (U) UNEXERCISABLE (U)
- -------------------- ----------- -------------- ---------------------- ----------------------
Leigh J. Abrams..... 36,740(E) $ 276,339(E)
8,000(U) $ 0(U)
David L. Webster.... 72,476(E) $ 511,413(E)
12,000(U) $ 0(U)
Edward W. Rose,
III............... 20,000(E) $ 25,750(E)
Fredric M. Zinn..... 35,740(E) $ 276,339(E)
4,000(U) $ 0(U)
Harvey J. Kaplan.... 5,580 $ 41,074 6,700(E) $ 44,166(E)
2,800(U) $ 0(U)
9
(Footnotes from previous page)
- ------------------
(1) Market value of Common Stock at December 31, 1998 ($11.625) minus the
exercise price.
See II. "AMENDMENT TO STOCK OPTION PLAN" for a discussion of the proposal
to amend the Plan to increase the number of shares subject to options.
COMPENSATION OF DIRECTORS
Edward W. Rose, III, Chairman of the Board of Directors, receives an annual
director's fee of $24,000, payable $2,000 per month, plus $1,000 for attendance
at each meeting of the Board of Directors and $500 for attendance at each
Committee meeting. In 1998, Mr. Rose received a $30,000 payment pursuant to a
discretionary retirement bonus program intended to provide retirement income.
Messrs. James F. Gero and Gene H. Bishop each receive an annual director's fee
of $9,000, payable $750 per month, plus $500 for attendance at each meeting of
the Board of Directors and $500 for attendance at each Committee meeting.
EMPLOYMENT CONTRACTS
See footnotes 4 and 5 to the Summary Compensation Table for a description
of the employment agreements between (i) Kinro, a subsidiary of the Company, and
David L. Webster, President and Chief Executive Officer of Kinro and a director
of the Company, and (ii) Lippert Components, Inc., a subsidiary of the Company,
and L. Douglas Lippert, President and Chief Executive Officer of Lippert
Components, Inc. and a director of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No executive officer of the Company serves on the Compensation Committee,
and there are no "interlocks," as defined by the Securities and Exchange
Commission.
10
REPORT OF THE COMPENSATION COMMITTEE
COMPENSATION POLICY
The Compensation Committee of the Board of Directors (the "Committee")
consists of three non-employee directors, Edward W. Rose, III, James F. Gero and
Gene H. Bishop. The Committee has the responsibility of developing the policies
which govern compensation for executive officers, and making recommendations to
the Board of Directors regarding compensation of executive officers in
accordance with such policies.
The Company's executive compensation policy is designed to enable the
Company to attract, motivate and retain senior management by providing a
competitive compensation opportunity based significantly on performance. The
objective is to provide fair and equitable compensation to senior management in
a way that rewards management for reaching and exceeding objectives. The
compensation policy links a significant portion of executive compensation to the
Company's performance, recognizes individual contribution as well as overall
business results, and aligns executive and stockholder interests. The primary
components of the Company's executive compensation are base salary,
performance-related incentive compensation, stock options and discretionary
bonuses. While the components of compensation are considered separately in this
report, the Committee takes into account the full compensation package provided
by the Company to each of its executives, including pension benefits, severance
obligations, insurance and other benefits.
Each year the Committee will review the Company's compensation policy
utilizing both internal and external sources of information and analysis
relating to corporate performance, total return to stockholders of comparable
companies, and compensation afforded to executives by competitors of the
Company. If appropriate, changes will be recommended.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER IN 1998
The compensation policy applied by the Company in establishing the
compensation for Leigh J. Abrams, the Company's President and Chief Executive
Officer, is essentially the same as for other senior executives of the
Company--to provide a competitive compensation opportunity that rewards
performance and recognizes individual contribution.
For 1998, Mr. Abrams received base compensation of $300,000, plus incentive
compensation of $293,930, equal to 2 1/2% of the Company's income before income
taxes and extraordinary items, subject to certain adjustments, in excess of
$12,975,000. Mr. Abrams receives medical and life insurance, and certain other
benefits. In 1998, Mr. Abrams was also awarded an additional payment of $30,000
pursuant to a discretionary retirement bonus program intended to provide
retirement income. This bonus must be used to purchase specified tax deferred
annuities or cash value life insurance contracts.
Pursuant to the Shared Services Agreement entered into between the Company
and LBP in connection with the Spin-off, a portion of Mr. Abrams' salary for
1998 in the amount of $120,300, representing 36% of his salary (excluding
incentive bonus) for that period, was charged to LBP as the fair market value of
services rendered by Mr. Abrams to LBP.
COMPENSATION OF EXECUTIVE OFFICERS IN 1998
As with the Chief Executive Officer, compensation of other executive
officers is intended to reward performance and recognize individual
contribution. Accordingly, the chief executive officers of the Company's
subsidiaries receive compensation based upon the results of operations of such
subsidiaries.
On April 18, 1996, effective as of January 1, 1996, the stockholders of the
Company approved the adoption of a performance-based incentive compensation plan
applicable to David L. Webster,
11
President of Kinro and Shoals. In accordance with the incentive compensation
plan, for 1998, in addition to annual base salary of $400,000, Mr. Webster
received 7.3% of the amount by which the aggregate earnings before interest and
taxes (without deduction for costs of corporate administration or amortization
of goodwill) of Kinro and Shoals exceeded $10,856,000.
For calendar 1998, Mr. Webster received base salary of $400,000, and,
performance-based incentive compensation of $1,038,200. For 1998, Mr. Webster
also received a payment of $50,000 pursuant to a discretionary retirement bonus
program intended to provide retirement income. This bonus must be used to
purchase specified tax deferred annuities or cash value life insurance
contracts.
On October 7, 1997, L. Douglas Lippert entered into an Employment and
Non-Competition Agreement with Lippert Components, Inc. providing for
Mr. Lippert to serve as President and Chief Executive Officer of Lippert
Components, Inc. For 1998, Mr. Lippert received a salary of $300,000. Mr.
Lippert is also entitled to receive, subject to certain conditions,
performance-based incentive compensation equal to 5% of the excess of operating
profits of Lippert Components, Inc. (as defined in the Agreement) over
$9.5 million. For 1998, Mr. Lippert received no performance-based incentive
compensation.
Other Executive Officers of the Company and its subsidiaries receive
bonuses based upon their respective levels of organizational responsibility and
the performance of the Company or the subsidiary by which they are employed.
STOCK OPTIONS
The Company's Stock Option Plan provides for the grant of options to
employees of the Company and its subsidiaries, and to directors of the Company,
to purchase the Company's Common Stock. See "Election of Directors--Stock Option
Plan." A Stock Option Committee consisting of Edward W. Rose, III, James F.
Gero, and Gene H. Bishop administers the Stock Option Plan and determines and
designates employees and directors who are to be granted options. The Stock
Option Plan provides for automatic awards of options to members of the Stock
Option Committee under certain circumstances.
Because all options which have been granted under the Stock Option Plan
have been granted at fair market value, any value which is ultimately realized
by Executive Officers through stock options is based entirely on the Company's
performance, as perceived by investors in the Company's Common Stock who
establish the price for the Common Stock on the open market.
BENEFITS
The Company maintains certain broad-based employee benefit plans in which
Executive Officers participate, including an employee retirement savings plan
(401(k) Plan) and other retirement, life, disability and health insurance plans.
The Company also provides an automobile or automobile allowance to its Executive
Officers. The incremental cost to the Company of these benefits is less than 10%
of the Executive Officers' 1998 base salaries.
CONCLUSION
A significant portion of the Company's executive compensation is linked
directly to individual performance and Company earnings. The Committee intends
to continue to determine compensation based upon these factors.
COMPENSATION COMMITTEE
Edward W. Rose, III
James F. Gero
Gene H. Bishop
12
EMPLOYEE STOCK PURCHASE PLAN
A total of 500,000 shares of Common Stock of the Company may be made
available for purchase by regular full-time employees of the Company under the
1995 Employee Stock Purchase Plan. No shares have been made available for
purchase under the Stock Purchase Plan.
COMPARATIVE STOCK PERFORMANCE
The following graph compares, for the last five calendar years, the
cumulative stockholder return on the Common Stock of the Company with the
cumulative return on the common stocks of the companies included in the Russell
2000 Index and on the common stocks of a representative peer group of companies
engaged in similar businesses as the Company.
The graph assumes investment of $100 on December 31, 1993 in the Company's
Common Stock, the Russell 2000 Index, and the common stocks of the peer group
companies, and assumes that any dividends were reinvested.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG DREW INDUSTRIES INCORPORATED, THE RUSSELL 2000 INDEX
AND A PEER GROUP
Cumulative Total Return
----------------------------------------
12/93 12/94 12/95 12/96 12/97 12/98
Drew Industries Incorporated 100 113 189 297 345 314
Peer Group 100 63 94 126 133 149
Russell 2000 100 98 126 147 180 179
* $100 INVESTED ON 12/31/93 IN STOCK OR INDEX-
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING DECEMBER 31.
INDEMNIFICATION
Section 145 of the Delaware General Corporation Law empowers a domestic
corporation to indemnify any of its officers, directors, employees or agents
against expenses, including reasonable attorney's fees, judgments, fines and
amounts paid in settlement which were actually and reasonably incurred by such
person in connection with any action, suit or similar proceeding brought against
them because of their status as officers, directors, employees or agents of the
Company if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
Company. If the claim was brought against any such person by or in the right of
the Company, the Company may indemnify such person for such expenses if such
person acted in good faith and in a manner reasonably believed by such person to
13
be in or not opposed to the best interests of the Company, except no indemnity
shall be paid if such person shall be adjudged to be liable for negligence or
misconduct unless a court of competent jurisdiction, upon application,
nevertheless permits such indemnity (to all or part of such expenses) in view of
all the circumstances.
The Company's Restated Certificate of Incorporation provides that the
Company may indemnify its officers, directors, employees or agents to the full
extent permitted by Section 145 of the Delaware General Corporation Law.
Accordingly, no director of the Company is liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, or (iv) for any transaction
from which the director derived an improper personal benefit.
II. AMENDMENT TO STOCK OPTION PLAN
INTRODUCTION
At the Annual Meeting there will be presented to stockholders a proposal to
approve the adoption of an amendment to the Drew Industries Incorporated Stock
Option Plan (the "Plan") which was approved by stockholders on June 13, 1995.
The full text of the proposed amendment appears on Exhibit "A" to this Proxy
Statement.
The Plan provides for the grant of options to employees of the Company and
any of its subsidiaries and to Directors of the Company to purchase the
Company's Common Stock. The Plan provides for the grant of stock options that
qualify either as incentive stock options ("ISOs") under Section 422 of the Code
or non-qualified ("NQSOs"). The exercise price of the options is determined by
the Stock Option Committee in its sole discretion, provided that the exercise
price is at least equal to 100% of the fair market value of the Common Stock
subject to such option on the date of grant.
Since 1995, options to purchase 577,140 shares of Common Stock,
representing 4.7% of the agggregate Common Stock outstanding, including shares
reserved for issuance, were granted to approximately 95 employees and Directors
at exercise prices ranging from $6.94 to $12.50 per share, of which options to
purchase 449,046 shares are outstanding. In addition, options to purchase 4,730
shares of Common Stock which were granted pursuant to the Company's predecessor
stock option plan were outstanding on April 15, 1999. The aggregate shares
issuable (453,776) upon exercise of all outstanding options represented, on
April 15, 1999, 3.7% of the aggregate Common Stock outstanding including shares
reserved for issuance.
INCREASE IN NUMBER OF SHARES
Management believes that the Company's long-term success is dependent upon
the ability of the Company to attract and retain qualified employees and
Directors and to motivate their best efforts on behalf of the Company's
interests. It is the view of Management that the Plan constitutes an important
part of the Company's compensation of its officers and other employees, and will
make service on the Board of Directors more attractive, by providing an
incentive to increase participation in the Company's long-term success.
Because options to purchase all but 291,666 shares have been granted, on
February 18, 1999, the Board of Directors adopted an amendment to the Plan,
subject to stockholders' approval, increasing the number of shares subject to
options to be granted by 500,000 shares, representing, on April 15, 1999, 4% of
the aggregate Common Stock outstanding, including shares reserved for issuance
under the Plan and assuming approval of the amendment.
VOTE
The favorable vote of a majority of the votes cast at the Annual Meeting is
required to approve the adoption of the foregoing amendment to the Plan.
Management recommends that you vote FOR approval of the adoption of the
amendment to the Plan.
14
III. APPOINTMENT OF AUDITORS
It is proposed that the stockholders ratify the appointment by the Board of
Directors of KPMG LLP as independent auditors for the purpose of auditing and
reporting upon the consolidated financial statements of the Company for the year
ending December 31, 1999. It is expected that a representative of that firm will
be present at the Annual Meeting of Stockholders to be held on May 20, 1999 and
will be afforded the opportunity to make a statement and respond to appropriate
questions from stockholders present at the meeting.
Management recommends that you vote FOR ratification of the appointment of
KPMG LLP as independent auditors for the year ending December 31, 1999.
IV. TRANSACTION OF OTHER BUSINESS
As of the date of this Proxy Statement, the only business which Management
intends to present or knows that others will present at the meeting is that set
forth herein. If any other matter or matters are properly brought before the
meeting, or any adjournment or postponement thereof, it is the intention of the
persons named in the form of Proxy solicited from holders of the Common Stock to
vote the Proxy on such matters in accordance with their judgment.
STOCKHOLDER PROPOSALS
All proposals which stockholders of the Company desire to have presented at
the Annual Meeting of Stockholders to be held in May 2000 must be received by
the Company at its principal executive offices on or before February 1, 2000.
By Order of the Board of Directors
EDWARD W. ROSE, III
Chairman of the Board of
Directors
April 20, 1999
15
[This page intentionally left blank]
EXHIBIT A
AMENDMENT TO
DREW INDUSTRIES INCORPORATED
STOCK OPTION PLAN
The Drew Industries Incorporated Stock Option Plan is amended in the
following respects effective May 20, 1999:
1. The first two sentences of paragraph (b) of Section 2. Scope and
Duration are amended to read as follows:
"(b) The maximum aggregate number of shares of Common Stock as to which
awards of options may be made from time to time under the Plan is 2,460,000
shares of which 753,666 shares are available for grant as of the date hereof,
which shall be allocated (i) 60,000 shares to "Non-Employee Directors" (as
defined herein), and to members ("Committee Member") of the Committee (as
defined in Section 3(a)) only in accordance with Section 4(e), and (ii) 693,666
shares to eligible employees. The maximum number of shares of Common Stock with
respect to which options may be hereafter granted to any existing or future
participant during the remaining term of the Plan shall not exceed 50,000
shares."
DREW INDUSTRIES INCORPORATED
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS--MAY 20, 1999
THIS PROXY IS SOLICITED ON BEHALF OF MANAGEMENT
The undersigned, revoking any proxy heretofore given, hereby appoints
LEIGH J. ABRAMS and FREDRIC M. ZINN, or either of them, proxies of the
undersigned, with full power of substitution, with respect to all the shares of
the Common Stock which the undersigned is entitled to vote at the Annual Meeting
of Stockholders of Drew Industries Incorporated, to be held at the Park Avenue
Center Room, The Waldorf-Astoria Hotel, 301 Park Avenue, New York, N.Y. 10022 on
May 20, 1999 at 9:30 A.M. and at any adjournment or postponement thereof, upon
the following items as set forth in the Notice of Annual Meeting and Proxy
Statement, and in their discretion on any other matter that may properly come
before the meeting or any adjournment or postponement thereof.
(Continued and to be signed on the reverse side)
- --------------------------------------------------------------------------------
^ FOLD AND DETACH HERE^
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR AUTHORITY TO VOTE FOR
DIRECTORS AND FOR PROPOSITIONS "2" AND "3."
Please mark
your votes as
indicated in /X/
this example
1. ELECTION OF DIRECTORS FOR all named nominees WITHHOLD 3. TO RATIFY THE APPOINTMENT
NOMINEES: EDWARD W. ROSE, III, (except as indicated AUTHORITY OF KPMG LLP
LEIGH J. ABRAMS, DAVID L. WEBSTER, L. to the contrary below) from AS INDEPENDENT AUDITORS.
DOUGLAS LIPPERT, JAMES F. GERO, / / nominees
GENE H. BISHOP. nominees FOR AGAINST ABSTAIN
/ / / / / / / /
(INSTRUCTION: To withhold authority to vote for any individual nominee write that
nominee's name on the space provided below.)
-----------------------------------------------------------
2. TO APPROVE THE FOR AGAINST ABSTAIN
AMENDMENT TO THE / / / / / /
STOCK OPTION PLAN.
Please sign exactly as name appears hereon.
If the stock is registered in the names of
two or more persons each should sign.
Executors, Administrators, Trustees,
Guardians, Attorneys, and corporate
officers should add their titles. Please
check if you plan to attend the meeting
/ /
Dated , 1999
- --------------------------------- ------------------------------------- --------------------------------------
SIGNATURE OF SHAREHOLDER SIGNATURE OF SHAREHOLDER
- --------------------------------------------------------------------------------
^ FOLD AND DETACH HERE^