SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Soliciting Material Pursuant to
[_] Confidential, For Use of the Section 240.14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
[_] Definitive Consent Statement
[X] Definitive Proxy Materials
DREW INDUSTRIES INCORPORATED
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
________________________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
________________________________________________________________________________
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
________________________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
________________________________________________________________________________
(5) Total fee paid:
________________________________________________________________________________
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
________________________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
________________________________________________________________________________
(3) Filing Party:
________________________________________________________________________________
(4) Date Filed:
________________________________________________________________________________
DREW INDUSTRIES INCORPORATED
200 MAMARONECK AVENUE
WHITE PLAINS, NEW YORK 10601
--------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 18, 2005
--------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of DREW
INDUSTRIES INCORPORATED (the "Company") will be held at The Crescent Club, 17th
Floor, 200 Crescent Court, Dallas, Texas 75201 on May 18, 2005 at 9:00 A.M., for
the following purposes:
(1) To elect a Board of eight Directors;
(2) To ratify the selection of KPMG LLP as independent auditors for
the Company for the year ending December 31, 2005; and
(3) 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 11th day of April, 2005 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 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 13, 2005
White Plains, N.Y.
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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.
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DREW INDUSTRIES INCORPORATED
200 MAMARONECK AVENUE
WHITE PLAINS, NEW YORK 10601
--------------------
PROXY STATEMENT
--------------------
The accompanying Proxy is solicited by the Board of Directors of Drew
Industries Incorporated, a Delaware corporation (the "Company"), for use at the
Annual Meeting of Stockholders to be held at The Crescent Club, 17th Floor, 200
Crescent Court, Dallas, Texas 75201 on May 18, 2005 at 9:00 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 11, 2005 (the "Record Date") shall be entitled to vote on all
matters considered at the meeting.
The cost of solicitation by the Company, 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 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
13, 2004.
The Annual Report to Stockholders of the Company for the year ended
December 31, 2004 is being mailed herewith to each stockholder of record.
THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31,
2004 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; website: www.drewindustries.com; e-mail: drew@drewindustries.com. NOTE
THAT THE INFORMATION LOCATED ON OUR WEBSITE, WHETHER OR NOT REFERRED TO IN THIS
PROXY STATEMENT, IS NOT INCORPORATED BY REFERENCE INTO THIS PROXY STATEMENT.
VOTING SECURITIES
The Company had outstanding on the Record Date 10,361,064 shares of Common
Stock. The Company's stock trades on the New York Stock Exchange (NYSE) under
the symbol "DW."
VOTING
Stockholders of record will be entitled to one vote on each matter for each
share of Common Stock held on the Record Date. A majority of the outstanding
shares of Common Stock must be present or represented by proxy at the meeting in
order to have a quorum. Abstentions and broker non-votes will be treated as
shares present for the purpose of determining the presence of a quorum for the
transaction of business at the meeting. In the election of directors, the eight
nominees receiving the highest number of affirmative votes will be elected.
Proposal No. 2 requires the approval of the affirmative vote of a majority of
the shares of Common Stock present or represented by proxy and voting at the
meeting, together with the affirmative vote of a majority of the required
quorum. Abstentions and broker non-votes (which may occur if a beneficial owner
of stock whose shares are held in a brokerage or bank account fails to provide
the broker or bank with voting instructions as to such shares) can have the
effect of preventing approval of a proposal where the number of affirmative
votes, though a majority of the votes cast, does not constitute a majority of
the required quorum. If the persons present or represented by proxy at the
meeting constitute the holders of less than a majority of the outstanding shares
of Common Stock as of the Record Date, the meeting may be adjourned to a
subsequent date for the purpose of obtaining a quorum. Votes will be tabulated
by the inspector of election appointed for the meeting, who will separately
tabulate affirmative and negative votes, abstentions and, if possible, broker
non-votes.
RECOMMENDATIONS OF THE BOARD OF DIRECTORS
Drew's Board of Directors recommends that you vote FOR each of the nominees
of the Board of Directors (Proposal No.1), and FOR ratification of the
appointment of KMPG LLP as Drew's independent auditors for the fiscal year
ending December 31, 2005 (Proposal No. 2).
PRINCIPAL HOLDERS OF VOTING SECURITIES
Set forth below is information with respect to each person known to the
Company on March 18, 2005 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) ............ 1,411,826(2) 12.6%
500 Crescent Court
Dallas, Texas 75201
L. Douglas Lippert(1) ............. 659,937(2) 5.9%
2375 Tamiami Trail
Suite 110
Naples, Florida 34103
FMR Corp.(1) ...................... 1,027,800(3) 9.1%
82 Devonshire Street
Boston, Massachusetts 02108
Royce & Associates, LLC(1) ........ 858,100(3) 7.6%
1414 Avenue of the Americas
New York, NY 10019
(FOOTNOTES ON NEXT PAGE)
2
(FOOTNOTES CONTINUED FROM PREVIOUS PAGE)
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(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, 2004.
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
March 18, 2005 of the Common Stock (including options) by each Director, each of
whom (except Mr. Bishop and Jason D. Lippert) is a nominee for election, one
nominee who is not an incumbent director, and by all Directors 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) ..................... 188,808(2) 1.7%
200 Mamaroneck Avenue
White Plains, New York 10601
Edward W. Rose, III(1) ................. 1,411,826(3) 12.6%
500 Crescent Court
Dallas, Texas 75201
David L. Webster(1) .................... 172,840(4) 1.5%
4381 Green Oaks Blvd.
Arlington, Texas 76016
L. Douglas Lippert ..................... 659,937(5) 5.9%
2375 Tamiami Trail
Suite 110
Naples, Florida 34103
James F. Gero(1) ....................... 150,413(6) 1.3%
11900 North Anna Cade Road
Rockwall, Texas 75087
Gene H. Bishop(1) ...................... 102,600(7) 0.9%
1601 Elm Street, 47th Floor
Dallas, Texas 75201
Frederick B. Hegi, Jr. ................. 38,721(8) 0.3%
750 North St. Paul
Dallas, Texas 75201
David A. Reed .......................... 13,667(9) 0.1%
1909 Cottonwod Valley Circle
Irving, Texas 75038
John B. Lowe, Jr. ...................... -- --
13850 Diplomat Drive
Dallas, Texas 75234
Jason D. Lippert ....................... 125,676(10) 1.1%
2766 College Avenue
Goshen, Indiana 46528
3
All Directors, a nominee who is not an
incumbent director, and Executive
Officers as a group
(15 persons including the above-named.
Persons in this group who are not
directors or nominees and who own
individually less than 1% are
not listed) .......................... 3,017,659(11) 26.8%
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(1) Pursuant to Rules 13-1(f)(1)-(2) of Regulation 13-D of the General Rules
and Regulations under the Securities Exchange Act, on May 31, 1989, the
persons indicated, together with certain other persons, jointly filed a
single Schedule 13-D Statement (as amended) 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 dispositive power with respect to the shares
owned by him. Includes 3,002 shares of Common Stock held by Mr. Abrams as
Custodian under the New York Uniform Gifts to Minors Act for the benefit of
a member of his immediate family. Mr. Abrams disclaims any beneficial
interest in the shares held as Custodian. In November 1999 and November
2003, Mr. Abrams was granted options to purchase, respectively, 50,000
shares of Common Stock at $9.3125 per share and 15,000 shares of Common
Stock at $25.56 per share. Although no part of such options have been
exercised, all shares subject to such options are included in the above
table as beneficially owned.
(3) Mr. Rose has sole voting and dispositive power with respect to the shares
owned by him. Includes deferred stock units representing 9,796 shares
granted to Mr. Rose in lieu of cash compensation in payment of director's
fees. Includes 168,000 shares owned by Cardinal Investment Company, Inc.
Profit Sharing Plan, of which Mr. Rose is Trustee. Also includes 59,950
shares owned by Cardinal Partners, L.P., of which Cardinal Investment
Company, Inc. is the general partner. Mr. Rose is the sole stockholder of
Cardinal Investment Company, Inc. Excludes 100,000 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 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, 1999
at $9.204 per share; on December 31, 2000 at $5.679 per share; and on
December 31, 2001 at $9.25 per share. In addition, in December 2002, 2003
and 2004, Mr. Rose was granted options to purchase 5,000 shares of Common
Stock at $15.75, $27.60 and $32.30 per share, respectively. 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 dispositive power with respect to such
shares. In November 1999 and November 2003, Mr. Webster was granted options
to purchase, respectively, 50,000 shares of Common Stock at $9.3125 per
share and 15,000 shares of Common Stock at $25.56 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.
(5) Includes 219,622 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 dispositive power. Mr. Lippert disclaims
beneficial ownership of such shares. 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 (as amended) 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. In November 1999 and
November 2003, Mr. Lippert was granted options to
(FOOTNOTES CONTINUED ON NEXT PAGE)
4
(FOOTNOTES CONTINUED FROM PREVIOUS PAGE)
purchase, respectively, 50,000 shares of Common Stock at $9.3125 per share
and 5,000 shares of Common Stock at $25.56. Although no part of such
options has been exercised, all shares subject to such options are included
in the above table as beneficially owned. See "Voting Securities--Principal
Holders of Voting Securities."
(6) Mr. Gero shares voting and dispositive power with respect to such shares
with his wife. Includes deferred stock units representing 6,253 shares
granted to Mr. Gero in lieu of cash compensation in payment of director's
fees. 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, 1999 at $9.204 per share; on December 31,
2000 at $5.679 per share; and on December 31, 2001 at $9.25 per share. In
addition, in December 2002, 2003 and 2004, Mr. Gero was granted options to
purchase 5,000 shares of Common Stock at $15.75, $27.60 and $32.30 per
share, respectively. 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) Includes 2,000 shares owned by Mr. Bishop's children. Mr. Bishop has sole
voting and dispositive 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, 1999 at $9.204 per share; on December 31, 2000 at
$5.679 per share; and on December 31, 2001 at $9.25 per share. In addition,
in December 2002, 2003 and 2004, Mr. Bishop was granted options to purchase
5,000 shares of Common Stock at $15.75, $27.60 and $32.30 per share,
respectively. Although no part of such options has been exercised, all
shares subject to such options are included in the above table as
beneficially owned. Mr. Bishop is not standing for re-election as a
director. See Proposal 1. "Election of Directors."
(8) Mr. Hegi has sole voting and dispositive power with respect to such shares.
Includes deferred stock units representing 6,221 shares granted to Mr. Hegi
in lieu of cash compensation in payment of director's fees. In addition, in
December 2002, 2003 and 2004, Mr. Hegi was granted options to purchase
5,000 shares of Common Stock at $15.75, $27.60 and $32.30 per share,
respectively Although no part of such options has been exercised, all
shares subject to such options are included in the above table as
beneficially owned.
(9) Mr. Reed has sole voting and dispositive power with respect to such shares.
Includes deferred stock units representing 1,167 shares granted to Mr. Reed
in lieu of cash compensation in payment of director's fees. In addition, in
December 2003 and 2004, Mr. Reed was granted options to purchase 5,000
shares of Common Stock at $27.60 and $32.30 per share, respectively.
Although no part of such option has been exercised, all shares subject to
such option are included in the above table as beneficially owned.
(10) Mr. Lippert has sole voting and dispositive power with respect to such
shares. Includes 8,601 restricted shares of Common Stock issued in payment
of incentive compensation in accordance with the Company's 2002 Equity
Award and Incentive Plan. Mr Lippert has the right to vote such shares, but
the disposition of such shares is restricted. See "Equity Award and
Incentive Plan - Restricted and Deferred Stock." In addition, Mr. Lippert
was granted the following options to purchase shares of the Common Stock:
in November 1999, 22,000 shares at $8.8125 per share; in November 2001,
28,000 shares at $9.10 per share; in November 2003, 15,000 shares at $25.56
per share; and in November 2004, 7,500 shares at $32.31 per share.
(11) Includes 494,938 shares subject to options and deferred stock units.
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 ("SEC") 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.
5
Based on its review of the copies of such forms received by it, the Company
believes that during 2004 all such filing requirements applicable to its
officers and directors (the Company not being aware of any ten percent holder
during 2004 other than Edward W. Rose, III, a director).
PROPOSAL 1. ELECTION OF DIRECTORS
It is proposed to elect a Board of eight directors to serve until the next
annual election or until their successors are elected and qualify.
The Board of Directors currently consists of eight directors. Gene H.
Bishop, an incumbent director, has advised the Company that he will not stand
for re-election as a director at the Annual Meeting of Stockholders. Mr.
Bishop's decision was made for personal reasons in connection with his
retirement, and does not involve any disagreement with the Company's operations,
policies or practices. In addition to serving as a director, Mr. Bishop also
served on the Corporate Governance and Nominating Committee and on the
Compensation Committee of the Board of Directors. The Company regrets Mr.
Bishop's departure, and is greatly appreciative of his valuable service since
1995.
The Corporate Governance and Nominating Committee evaluated several
candidates for independent director to fill the vacancy created by Mr. Bishop's
departure from the Board. The Committee recommended John B. Lowe, Jr. for
consideration by the entire Board, and the Board nominated Mr. Lowe to stand for
election as a director.
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 the Board of Directors. The Board of Directors has no
reason to believe that any of the named nominees will be unable or unwilling to
serve.
The following table lists the current directors of the Company, each of
whom is a nominee proposed by the Board of Directors for election by the holders
of the Common Stock, all other positions and offices with 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 62) Officer and Director. 1984
Edward W. Rose, III .... Chairman of the Board of
(Age 64) Directors. 1984
David L. Webster ....... Chairman, President and Chief
(Age 69) Executive Officer of Kinro, Inc.
and Director. 1984
L. Douglas Lippert ..... Chairman of Lippert
(Age 57) Components, Inc., and Director. 1997
James F. Gero .......... Director. 1992
(Age 60)
Frederick B. Hegi, Jr. . Director. 2002
(Age 61)
David A. Reed .......... Director. 2003
(Age 57)
John B. Lowe, Jr. ...... Nominee --
(Age 65)
LEIGH J. ABRAMS, since April 2001, has also been a director of Impac
Mortgage Holdings, Inc., a publicly-owned specialty finance company organized as
a real estate investment trust.
6
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: ACE Cash
Express, Inc., engaged in check cashing services; and, until June 14, 2004,
First Acceptance Corporation (formerly known as Liberte Investors Inc.), engaged
in real estate loans investments. From April 1999 to January 2003, Mr. Rose was
a director of TX C.C., Inc., a privately-owned restaurant chain, against which
an involuntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code
was filed on February 21, 2003 in the U.S. Bankruptcy Court for the Northern
District of Texas. A plan of reorganization was confirmed on January 28, 2004.
Cardinal Investment Company, Inc., of which Mr. Rose is the sole stockholder,
was an indirect General Partner of MJ Designs, L.P., a privately-owned retailer
of arts and crafts products, which filed a petition for relief under Chapter 11
of the U.S. Bankruptcy Code in January 2003 in the U.S. Bankruptcy Court for the
Northern District of Texas.
DAVID L. WEBSTER, since November 1980, has been President and Chief
Executive Officer of Kinro, Inc., a subsidiary of the Company ("Kinro"), and has
been Chairman of Kinro since November 1984.
L. DOUGLAS LIPPERT, from October 1997 until February 2003 was Chairman,
President and Chief Executive Officer of Lippert Components, Inc. Effective
February 5, 2003, Jason D. Lippert, the son of L. Douglas Lippert, was appointed
as President and Chief Executive Officer of Lippert Components, Inc., and L.
Douglas Lippert continues as Chairman.
JAMES F. GERO, Mr. Gero is a private investor. Mr. Gero also serves as
Chairman of the Board of Directors of Orthofix International, N.V., a
publicly-owned international supplier of orthopedic devices for bone fixation
and stimulation, and as a director of Intrusion.com, Inc., a publicly-owned
supplier of security software.
FREDERICK B. HEGI, JR., is a founding partner of Wingate Partners,
including the indirect general partner of each of Wingate Partners L.P. and
Wingate Partners II, L.P. Since May 1982, Mr. Hegi has served as President of
Valley View Capital Corporation, a private investment firm. He is a director of
the following publicly-owned companies: Lone Star Technologies, Inc., a
diversified company engaged in the manufacture of tubular products; Texas
Capital Bancshares, Inc., a regional commercial bank; and is Chairman of the
Board of United Stationers, Inc., a publicly-owned wholesale distributor of
business products. Mr. Hegi was also Chairman, President and Chief Executive
Officer of Kevco, Inc., a publicly-owned distributor of building products to the
manufactured housing and recreational vehicle industries, which filed for
protection under Chapter 11 of the United States Bankruptcy Code on February 5,
2001, later converted to a Chapter 7 liquidation.
DAVID A. REED, is Managing Partner of Causeway Capital Partners, L.P., a
privately-owned investment partnership. Mr. Reed retired as Senior Vice Chair
for Ernst & Young LLP in 2000 where he held several senior U.S. and global
operating, administrative and marketing roles in his 26-year tenure with the
firm. He served on Ernst and Young LLP's Management Committee and Global
Executive Council from 1991 to 2000.
JOHN B. LOWE, JR., has been Chairman of TDIndustries, Inc., a national
mechanical/ electrical/plumbing construction and facility service company, since
1981. From January 1981 to January 2005, Mr Lowe also served as Chief Executive
Officer of TDIndustries. Mr. Lowe is a director of Zale Corporation, a
publicly-owned specialty retailer of fine jewelry. Mr. Lowe also serves on the
Board of Trustees of the Dallas Independent School District and on the Board of
Directors of the Texas Business and Education Coalition.
OTHER EXECUTIVE OFFICERS
JASON D. LIPPERT, age 32, not a nominee for election as a director, has
been President and Chief Executive Officer of Lippert Components, Inc., a
subsidiary of the Company, since February 5, 2003. From May 2000, Mr. Lippert
was Executive Vice President and Chief Operating Officer of Lippert Components,
Inc., and from 1998 until 2000, Mr. Lippert served as Regional Director of
Operations of Lippert Components, Inc.
7
FREDRIC M. ZINN, age 54, not a nominee for election as a director, has been
Chief Financial Officer of the Company for more than the past five years, and
Executive Vice President of the Company since February 2001. Mr. Zinn is a
Certified Public Accountant.
SCOTT T. MERENESS, age 33, not a nominee for election as a director, has
been Executive Vice President and Chief Operating Officer of Lippert Components,
Inc. since February 2003. From 2001 to 2003 Mr. Mereness was Vice President of
Operations of Lippert Components, Inc., and from 1999 to 2001 Mr. Mereness was
Regional Vice President for Manufactured Housing for Lippert Components, Inc.
HARVEY F. MILMAN, age 63, not a nominee for election as a director, has
been Vice President-Chief Legal Officer of the Company since March 1, 2005.
Prior thereto, Mr. Milman was a partner of the firm of Phillips Nizer LLP,
counsel to the Company. Mr. Milman has served as Assistant Secretary of the
Company for more than the past five years.
JOHN F. CUPAK, age 55, not a nominee for election as a director, has been
Secretary as well as Director of Taxation and Internal Audit of the Company
since May 2003. For more than the five years prior thereto, Mr. Cupak was
Controller of the Company.
JOSEPH S. GIORDANO III, age 36, not a nominee for election as a director,
has been Corporate Controller and Treasurer of the Company since May 2003. From
July 1998 to August 2002, Mr. Giordano was a Senior Manager at KPMG LLP, and
from August 2002 to April 2003 was a Senior Manager at Deloitte & Touche LLP.
Mr. Giordano 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, except that L. Douglas Lippert, Chairman of Lippert
Components, Inc. is the father of Jason D. Lippert, who was appointed President
and Chief Executive Officer of Lippert Components, Inc. on February 5, 2003.
Each of the nominees named above was elected to his present term of office at
the Annual Meeting of Stockholders held on May 20, 2004.
CORPORATE GOVERNANCE AND RELATED MATTERS
STATEMENT REGARDING CORPORATE GOVERNANCE
The Company regularly monitors developments in the area of corporate
governance, including the Sarbanes-Oxley Act of 2002 and rules proposed by the
SEC and the New York Stock Exchange. The Company complies with all laws and
rules applicable to corporate governance, and has continually implemented "best
practices" as the Company deems appropriate to protect and enhance stockholders'
interests.
The Company received notification in November 2004 from Institutional
Stockholders Services, Inc. ("ISS"), a Rockville, Maryland-based independent
research firm that advises institutional investors, that the Company's corporate
governance policies outranked 98.5 percent of all companies listed in the
Russell 3000 index. The Company has no business relationship with ISS.
BOARD OF DIRECTORS
The Board is elected annually by the Company's stockholders, and each
director is nominated for election every year. The Company does not have
cumulative voting. The Board currently consists of three directors who are
employed by the Company, and five non-employee directors. Gene H. Bishop, a
non-employee director, has advised the Company that, for personal reasons
related to his retirement, he will not stand for re-election at the Annual
Meeting of Stockholders. The Corporate Governance and Nominating Committee
recommended to the Board, and the Board nominated, John B. Lowe, Jr., to stand
for election as a director to fill the vacancy created by Mr. Bishop's
departure. See Proposal 1. "Election of Directors."
None of the non-employee directors, or any members of their immediate
families, have any transactions or relationships with the Company or its
subsidiaries. Accordingly, the Board has determined that each non-employee
director meets the "independence" standards of New York Stock Exchange.
8
In making that determination, the Board applied the following standards, in
addition to other relevant facts and circumstances:
o A Director who is an employee, or whose immediate family member is an
executive of the Company, is not independent until three years after
the end of such employment relationship,
o A Director who receives, or whose immediate family member receives,
more than $100,000 per year in direct compensation from the Company,
other than director and committee fees and pension or other forms of
deferred compensation for prior service (provided such compensation is
not contingent in any way on continued service), generally is not
independent until three years after he ceases to receive more than
$100,000 per year in such compensation.
o A Director is not independent if (i) the director or an immediate
family member is a current partner of a firm that is the Company's
internal or external auditor, (ii) the director is a current employee
of such a firm, (iii) the director has an immediate family member who
is a current employee of such a firm and who participates in the
firm's audit, assurance or tax compliance (but not tax planning)
practice, or (iv) the director or an immediate family member was
within the last three years (but is no longer) a partner or employee
of such a firm and personally worked on the company's audit within
that time.
o A Director who is employed, or whose immediate family member is
employed, as an executive officer of another company where any of the
Company's present executives serves on that company's compensation
committee is not independent until three years after the end of such
service or the employment relationship.
o A Director who is an executive officer or an employee, or whose
immediate family member is an executive officer, of another company
that makes payments to, or receives payments from the Company for
property or services in an amount which, in any single fiscal year,
exceeds the greater of $1 million or 2% of such other company's
consolidated gross revenues, in each case is not independent until
three years after falling below such threshold.
o A Director who is, or whose immediate family member is, an officer,
director or trustee of a not-for-profit organization that received
contributions from the Company during the organization's most recent
fiscal year equal to or greater than the lesser of $50,000 and one
percent of the organization's total annual donations is not
independent.
The non-employee directors have complete access to, and are encouraged to
communicate with, the Company's Chief Executive Officer and any other executives
of the Company. During the year ended December 31, 2004, the Board of Directors
held seven meetings. All directors attended at least 75 percent of the regularly
scheduled and special meetings of the Board and the Board committees on which
they served.
Board members are expected to attend the Company's annual meetings. At the
Company's 2004 annual meeting, all members of the Board, each of whom were
nominees for re-election, were present. It is anticipated that all Board members
who are standing for re-election, and the nominee for election, will be present
at the 2005 annual meeting.
EXECUTIVE SESSIONS
Non-Management Directors, those Directors who are not officers or employees
of the Company, meet regularly in executive sessions without management. An
executive session is held in conjunction with each regularly scheduled Board
meeting and is led by a "Presiding Director." Additional executive sessions may
be called by the Presiding Director in his discretion or at the request of the
Board. Mr. Rose, Chairman of the Board, has been designated as the Presiding
Director.
CONTACTING THE BOARD OF DIRECTORS.
Any stockholder who wishes to communicate with the Board of Directors, or
the Presiding Director or any member of the Board may do so electronically by
sending an e-mail to drew@drewindustries.com or by writing to any director at
the address provided under the director's name in Proposal 1. "Election of
Directors--Security Ownership of Management."
9
BOARD COMMITTEES
The Company has three standing committees of the Board of Directors: the
Audit Committee, the Corporate Governance and Nominating Committee, and the
Compensation Committee. All members of each Committee are non-employee directors
who meet the "independence" and experience standards of the New York Stock
Exchange. The Board annually selects the directors who serve on the Committees.
Each Committee functions pursuant to a written Charter and written Key Practices
adopted by the Board of Directors.
The Company's Governance Principles, as well as the Charters and Key
Practices of the Audit Committee, the Corporate Governance and Nominating
Committee, and the Compensation Committee, in addition to the Company's
Guidelines for Business Conduct and Code of Ethics for Senior Financial
Officers, can be accessed on the Company's website at www.drewindustries.com. A
copy of any corporate governance document will be furnished, without charge,
upon written request to Secretary, Drew Industries Incorporated, 200 Mamaroneck
Avenue, White Plains, New York 10601. Information on our website is not
incorporated by referenced into this Proxy Statement.
AUDIT COMMITTEE. The purpose of the Audit Committee of the Board of
Directors is to assist the Board in its oversight of (i) the integrity of the
financial statements of the Company, (ii) the Company's compliance with legal
and regulatory requirements, (iii) the independence and qualifications of the
independent auditor, and (iv) the performance of the Company's internal audit
function, and the independent auditor. The Committee also prepares an annual
report for inclusion in the Company's Proxy Statement. The Committee recommends
to the Board of Directors, subject to stockholder ratification, the selection of
the Company's independent auditor.
The Audit Committee of the Board of Directors currently consists of David
A. Reed, James F. Gero, and Frederick B. Hegi, Jr. Mr. Reed serves as Chairman
of the Committee and has been determined by the Board of Directors to be an
"audit committee financial expert" as defined by the Securities and Exchange
Commission. This Committee held ten meetings during the year ended December 31,
2004.
CORPORATE GOVERNANCE AND NOMINATING COMMITTEE. The purpose of the Corporate
Governance and Nominating Committee of the Board of Directors is to assist the
Board in (i) identifying qualified individuals to become Board members, (ii)
determining the composition of the Board of Directors and its Committees, (iii)
monitoring a process to assess Board effectiveness, (iv) developing and
implementing the Company's corporate governance principles, (v) evaluating
potential candidates for executive positions, and (vi) overseeing the
development of executive succession plans.
The Corporate Governance and Nominating Committee currently consists of
Frederick B. Hegi, Jr., Gene H. Bishop, James F. Gero, and David A. Reed. Mr.
Hegi serves as Chairman of the Committee. This Committee held four meetings
during the year ended December 31, 2004. Mr. Bishop has advised the Company that
he will not stand for re-election as a director at the Annual Meeting of
Stockholders. See Proposal 1. "Election of Directors."
The Corporate Governance and Nominating Committee considers candidates for
Board membership suggested by members of the Committee and other Board members,
as well as management and stockholders. In this connection, the Committee
considers the composition of the Board with respect to experience, balance of
professional interests, required expertise and other factors. The Committee uses
the same criteria for evaluating candidates nominated by stockholders as it does
for those proposed by other Board members or management. To be considered for
membership on the Board, a candidate must meet the following criteria, which are
also set forth in the Company's Governance Principles: (a) should possess the
highest personal and professional ethics, integrity and values, and be committed
to representing the long-term interests of the stockholders; (b) should have an
inquisitive and objective perspective, practical wisdom and mature judgment; (c)
must be willing to devote sufficient time to carrying out his or her duties and
responsibilities effectively; (d) should be committed to serving on the Board
for an extended period of time; (e) should be prepared to resign in the event of
any significant change in his or her personal circumstance which may impair his
or her ability to effectively serve on the Board; (f) directors who also serve
as CEOs or in equivalent positions should not serve on more than two Boards of
public
10
companies in addition to the Company's Board; and (g) directors who are not CEOs
or equivalent should not serve on more than four Boards of public companies in
addition to the Company's Board.
The Corporate Governance and Nominating Committee met subsequent to the end
of 2004 to recommend to the Board each of the nominees for election as directors
as set forth herein. Stockholders may recommend a prospective nominee for
consideration by the Corporate Governance and Nominating Committee by sending
the candidate's name and qualifications, in writing, to the Secretary at Drew
Industries Incorporated, 200 Mamaroneck Avenue, White Plains, New York 10601.
Recommendations must be received by February 9, 2006 in order for a candidate to
be considered for election at the 2006 annual meeting.
COMPENSATION COMMITTEE. The purpose of the Compensation Committee of the
Board of Directors is: (i) to assist the Board in discharging its
responsibilities in respect of compensation of the Company's executive officers;
and (ii) to prepare an annual report on executive compensation for inclusion in
the Company's Proxy Statement.
The Compensation Committee currently consists of James F. Gero, Edward W.
Rose, III and Gene H. Bishop. Mr. Gero serves as Chairman of the Committee. Mr.
Bishop has advised the Company that he will not stand for re-election as a
director at the Annual Meeting of Stockholders. See Proposal 1. "Election of
Directors".
The Compensation Committee is responsible for reviewing the performance and
development of the Company's management in achieving corporate goals, and to
ensure that the Company's senior executives are compensated consistent with the
long-term objectives of the Company as well as competitive practices. This
Committee provides oversight and guidance in the development of compensation and
benefit programs for senior executives of the Company, reviews and sets the
compensation of the Company's Chief Executive Officer, recommends to the Board
compensation of other senior executives, based on the recommendations of the
Company's Chief Executive Officer, including salary, bonus, incentive
compensation and equity awards, administers the Company's 2002 Equity Award and
Incentive Plan, approves equity awards, and determines the compensation of
directors. This Committee held three meetings during the year ended December 31,
2004.
STOCK OPTIONS
It has been, and will continue to be, the Company's policy to obtain
stockholder approval for any equity-based compensation plans for directors,
officers and employees. Moreover, the Company does not re-price stock options.
Commencing January 1, 2002, the Company expenses the fair value of stock options
and other stock compensation granted after January 1, 2002 over the vesting
period.
EMPLOYEES AND DIRECTORS GUIDELINES FOR BUSINESS CONDUCT
The Company has Guidelines for Business Conduct which all management
employees and directors are required to follow in conducting the Company's
business, and a Code of Ethics for Senior Financial Officers governing the
conduct of its Chief Executive Officer, the chief executive officers of its
subsidiaries and its financial officers. The Company has established a method,
included in its Guidelines for Business Conduct, by which employees can make
anonymous and confidential reports about the Company's accounting practices,
internal controls, auditing matters, or any other concerns they may have.
DISCLOSURE COMMITTEE
The Company has established a Disclosure Committee comprised of executive,
financial, operating and legal management personnel. The function of the
Disclosure Committee is to develop and implement disclosure controls and
procedures intended to ensure that information required to be disclosed by the
Company in public reports is made available to management and reported within
the specified time periods. Each quarter, the Company's management personnel are
required to certify in writing whether or not any matters arose that should be
considered for disclosure.
11
-----------------------------
REPORT OF THE AUDIT COMMITTEE
-----------------------------
The Audit Committee of the Board of Directors currently consists of David
A. Reed, James F. Gero, and Frederick B. Hegi, Jr. (the "Committee"). Mr. Reed
serves as Chairman of the Committee and has been determined by the Board of
Directors to be an "audit committee financial expert" as defined by the SEC. The
Committee is responsible for providing independent, objective oversight of the
Company's accounting functions and internal controls.
Management is responsible for the Company's internal controls and the
financial reporting process. The independent auditors are responsible for
performing an independent audit of the Company's consolidated financial
statements in accordance with auditing standards generally accepted in the
United States of America, and to issue a report thereon. As set forth in its
Charter, the Committee acts only in an oversight capacity and relies on the work
and assurances of management as well as the independent auditors and other
advisors retained by the Company.
The Committee has met and held discussions with management and the
independent auditors. Management represented to the Committee that the Company's
consolidated financial statements were prepared in accordance with accounting
principles generally accepted in the United States of America, and the Committee
has reviewed and discussed with management and the independent auditors the
consolidated financial statements, management's assessment of the effectiveness
of the Company's internal controls over financial reporting, and the independent
auditors' evaluation of the Company's internal controls over financial
reporting. The Committee discussed with the independent auditors the matters
required to be discussed by Statement on Auditing Standards No. 61
(Communication with Audit Committees).
The Company's independent auditors also provided to the Committee the
written disclosures required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and the Committee discussed
with the independent auditors that firm's independence.
The Committee considered whether non-audit services provided by the
independent auditors are compatible with maintaining the auditor's independence.
The Committee concluded that non-audit services provided by KPMG LLP during the
year ended December 31, 2004, which consisted of tax planning and compliance,
and other audit-related services, were compatible with KPMG LLP's independence.
Based on the Committee's discussion with management and the independent
auditors, the Committee's review of the representations of management and the
report of the independent auditors to the Committee, the Committee recommended
that the Board of Directors include the audited consolidated financial
statements in the Company's Annual Report on Form 10-K for the year ended
December 31, 2004 filed with the SEC.
AUDIT COMMITTEE
David A. Reed, Chairman
James F Gero
Frederick B. Hegi, Jr.
THE FOREGOING REPORT OF THE AUDIT COMMITTEE SHALL NOT BE DEEMED TO BE
"SOLICITING MATERIAL" OR TO BE "FILED" WITH THE SEC NOR SHALL THIS INFORMATION
BE INCORPORATED BY REFERENCE INTO ANY FUTURE FILING UNDER THE SECURITIES ACT OF
1933 OR THE SECURITIES EXCHANGE ACT OF 1934, EACH AS AMENDED, EXCEPT TO THE
EXTENT THAT THE COMPANY SPECIFICALLY INCORPORATES IT BY REFERENCE INTO A FILING.
12
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 four
other most highly compensated executive officers (such five executive officers
collectively, the "named executive officers") during the year ended December 31,
2004.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARDS
-------------------------------------------------------------
AWARDS PAYOUTS
---------- -------
OTHER
ANNUAL RESTRICTED SECURITIES ALL OTHER
NAME AND COMPEN- STOCK UNDERLYING LTIP COMPEN-
PRINCIPAL POSITION YEAR SALARY BONUS(1) SATION AWARDS OPTIONS PAYOUTS SATION
- ----------------- ---- -------- -------- -------- ---------- --------- -------- ----------
Leigh J. Abrams(2) .......... 2004 $400,000 $649,716 $10,940 -- -- -- $8,200
President and Chief ........ 2003 400,000 401,315 9,307 -- 15,000 -- 8,000
Executive Officer .......... 2002 400,000 252,058 9,596 -- -- -- 8,000
David L. Webster(3) ......... 2004 $400,000 $896,000 $11,984 -- -- -- $8,200
Chairman, President and .... 2003 400,000 657,200 11,492 -- 15,000 -- 8,000
CEO of Kinro, Inc. ......... 2002 400,000 849,400 11,185 -- -- -- 8,000
Jason D. Lippert(4) ......... 2004 $400,000 $661,400 $11,497 -- 7,500 -- $7,895
President and Chief ........ 2003 300,000 542,800 9,000 -- 15,000 -- 7,729
Executive Officer of ....... 2002 202,500 200,000 9,000 -- -- -- 8,000
Lippert Components, Inc.
Scott T. Mereness ........... 2004 $205,000 $477,000 $9,000 -- -- -- $8,200
Executive Vice President
and Chief Operating Officer
of Lippert Components, Inc.
Fredric M. Zinn(5) .......... 2004 $225,000 $224,545 $13,408 -- -- -- $8,200
Executive Vice President ... 2003 200,000 198,779 13,888 -- 15,000 -- 8,000
and Chief Financial Officer 2002 180,000 172,877 14,074 -- -- -- 8,000
- ------------
(1) Messrs. Abrams, Webster, Zinn and Lippert 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 2004, Mr. Abrams received $30,000, Mr. Webster received $50,000, Mr.
Zinn received $24,545 and Mr. Lippert received $10,000 pursuant to the
discretionary retirement bonus program.
(2) For 2004, Mr. Abrams was entitled to receive performance-based incentive
compensation equal to 21/2% of the amount by which the Company's income
before income taxes and extraordinary items exceeded the threshold of
$16,068,000. Based on this formula, for 2004, Mr. Abrams was entitled to
receive performance-based incentive compensation of $619,716. For 2003 and
2002, the thresholds were $16,463,000 and $14,714,000, respectively, and
Mr. Abrams received $371,315 and $222,058, respectively.
(3) Effective September 1, 1999, Kinro extended and amended its employment
agreement with Mr. Webster which provided for Mr. Webster's employment
through December 31, 2004. For 2004, Mr. Webster was entitled to receive
5.0% of the amount by which the Operating Profit of Kinro (as defined)
exceeded the threshold of $7,522,000. Based on this formula, for 2004, Mr.
Webster's performance-based incentive compensation was $846,000. Based on
this formula and a threshold of $7,522,000, for 2003, Mr. Webster's
performance-based incentive compensation was $607,200. For 2002, based on
the same formula and threshold, Mr. Webster received performance-based
incentive compensation of $799,400. On February 17, 2005, effective as of
January 1, 2005, Kinro and its
(FOOTNOTES CONTINUED ON NEXT PAGE)
13
(FOOTNOTES CONTINUED FROM PREVIOUS PAGE)
affiliates entered into an Amended and Restated Employment Agreement with
Mr. Webster. The Agreement renews and extends until December 31, 2007 Mr.
Webster's previous agreement. After the initial term and each renewal term,
the agreement automatically renews for additional one-year terms unless
terminated by either party on 120 days notice. Pursuant to the Agreement,
Mr. Webster receives base salary of $400,000 and performance-based
incentive compensation equal to 5% of the amount by which the operating
profit of Kinro exceeds $7,522,000. See "Report of the Compensation
Committee."
(4) Effective February 5, 2003, LCI and its affiliates entered into an
employment agreement with Jason D. Lippert to serve as President and Chief
Executive Officer for a period of three years. Pursuant to the agreement,
for 2004, Mr. Lippert received base salary of $400,000. In addition, for
2004, Mr. Lippert was entitled to receive 5.0% of the amount by which the
operating profit of the LCI Entities (as defined) exceeded $10.1 million,
after giving effect to a capital charge as provided in the employment
agreement. In accordance with this formula, for 2004, Mr. Lippert's
performance-based incentive compensation was $651,400. For calendar 2003,
Mr. Lippert received base salary of $300,000. In addition, for 2003, Mr.
Lippert was entitled to receive 5.0% of the amount by which the operating
profit of the LCI Entities (as defined) exceeded $8.0 million. In
accordance with this formula, for 2003, Mr. Lippert's performance-based
incentive compensation was $532,800, after giving effect to a capital
charge as provided in the employment agreement. At least 60% of the amount
of the incentive compensation in excess of $400,000 is required to be paid
in restricted shares of the Company's stock. For 2003, Mr. Lippert elected
to receive $132,800 or 100% of this amount in restricted shares of the
Company's stock. For 2004, Mr.Lippert elected to receive $150,840 or 60% of
this amount in restricted shares of the Company's stock.
(5) On September 12, 2003, the Company entered into a Change of Control
Agreement with Mr. Zinn, Chief Financial Officer and Executive Vice
President of the Company, who has been an officer of the Company since
1986. The agreement provides for severance payable upon a Company-initiated
termination within one year following, or 120 days prior to, a change of
control, or a termination initiated by Mr. Zinn with good reason (defined
as a reduction in Mr. Zinn's compensation or a material change in Mr.
Zinn's authority and duty) within six months following a change of control.
Change of control includes acquisition of 30% or more of the Company's
voting securities, or stockholder approval of a merger resulting in a
change in voting control of more than 50% of the voting power of the
Company's existing securities, or if Edward W. Rose, III ceases to own at
least 10% of the Company's voting securities, or liquidation of the
Company. The agreement provides that Mr. Zinn will receive his then
effective compensation for a period of two years if he is involuntary
terminated, or one year if he voluntarily terminates for good reason,
subject to certain adjustments, and certain other benefits.
EQUITY AWARD AND INCENTIVE PLAN
On May 16, 2002, stockholders approved the Drew Industries Incorporated
2002 Equity Award and Incentive Plan (the "2002 Plan") which replaced the
Amended and Restated Stock Option Plan initially approved by stockholders in
1995.
The following is a brief description of the material features of the 2002
Plan. This description is qualified in its entirety by reference to the full
text of the Plan.
SHARES AVAILABLE AND AWARD LIMITATIONS. Subject to adjustment in the event
of stock splits, stock dividends, and other extraordinary events, the total
shares available at December 31, 2004 under the 2002 Plan was 1,387,801 shares
(of which 931,165 shares are subject to outstanding options and deferred stock
units and 456,636 shares are available for future grant) or 11.9% of the
Company's shares outstanding on December 31, 2004, assuming exercise of all
options and awards outstanding and available. Shares delivered under the 2002
Plan may be either newly issued or treasury shares.
The 2002 Plan includes a limitation on the amount of Awards that may be
granted to any one Participant in a given year to qualify Awards as
"performance-based" compensation not subject to the limitation on deductibility
under Internal Revenue Code Section 162(m). Under this annual per-
14
person limitation, no Participant may in any year be granted share-denominated
Awards under the 2002 Plan relating to more than his or her "Annual Limit" for
each type of Award. The Annual Limit is 50,000 shares plus the amount of the
Participant's unused Annual Limit relating to the same type of Award as of the
close of the previous year, subject to adjustment for splits and other
extraordinary corporate events. Options, stock appreciation rights ("SARs"),
restricted stock, deferred stock and bonus stock, are separate types of awards
subject to a separate limitation. In the case of Awards not relating to shares
in a way in which the share limitation can apply, no Participant may be granted
Awards authorizing the earning during any year of an amount that exceeds the
Participant's Annual Limit, which is $1,200,000, plus the amount of the
Participant's unused cash Annual Limit as of the close of the previous year. The
Annual Limit for non-stock-based Awards of $1,200,000 is separate from the
Annual Limit of 50,000 shares for each type of stock-based Award.
No shares authorized under the 2002 Plan will be used for any award which
could be characterized as a "repricing" of outstanding options.
ELIGIBILITY. Executive officers and other employees of the Company and its
subsidiaries, and non-employee directors, consultants and others who provide
substantial services to the Company and its subsidiaries, are eligible to be
granted Awards under the 2002 Plan.
ADMINISTRATION. The 2002 Plan is administered by the Compensation Committee
(the "Committee"), except that the Board of Directors ("Board") may appoint any
other committee to administer the 2002 Plan and may itself act to administer the
Plan. The Board performs the functions of the Committee for purposes of granting
Awards to non-employee directors. Subject to the terms and conditions of the
2002 Plan, the Committee is authorized to select Participants, determine the
type and number of Awards to be granted and the number of shares to which Awards
will relate or the amount of a performance award, specify times at which Awards
will be exercisable or settled, including performance conditions that may be
required as a condition thereof, set other terms and conditions of such Awards,
prescribe forms of Award agreements, interpret and specify rules and regulations
relating to the Plan, and make all other determinations which may be necessary
or advisable for the administration of the 2002 Plan. Nothing in the 2002 Plan
precludes the Committee from authorizing payment of other compensation,
including bonuses based upon performance, to officers and employees, including
the executive officers. The 2002 Plan provides that Committee members shall not
be personally liable, and shall be fully indemnified, in connection with any
action, determination, or interpretation taken or made in good faith under the
2002 Plan.
STOCK OPTIONS AND SARS. The Committee is authorized to grant stock options,
including both incentive stock options ("ISOs"), which can result in potentially
favorable tax treatment to the Participant, and non-qualified stock options, and
SARs entitling the Participant to receive the excess of the fair market value of
a share on the date of exercise or other specified date over the grant price of
the SAR. The exercise price of an option and the grant price of an SAR are
determined by the Committee, but generally may not be less than the fair market
value of the shares on the date of grant (except as described below). At the
discretion of the Committee, options may be exercised by payment of the exercise
price in cash, shares or other property (including broker-assisted cashless
exercise procedures) or by surrender of other outstanding awards having a fair
market value equal to the exercise price. Methods of exercise and settlement and
other terms of SARs will be determined by the Committee.
RESTRICTED AND DEFERRED STOCK. The Committee is authorized to make Awards
of restricted stock and deferred stock. Prior to the end of the restricted
period, shares received as restricted stock may not be sold or disposed of by
Participants, and may be forfeited in the event of termination of employment.
The restricted period generally is established by the Committee. An Award of
restricted stock entitles the Participant to all of the rights of a stockholder
of the Company, including the right to vote the shares and the right to receive
any dividends thereon, unless otherwise determined by the Committee. Except in
the event of a change of control (as defined in the 2002 Plan), restricted stock
may not be transferred prior to the first anniversary of the grant thereof.
Deferred stock gives Participants the right to receive shares at the end of a
specified deferral period, subject to forfeiture of the Award in the event of
termination of employment under
15
certain circumstances prior to the end of a specified period (which need not be
the same as the deferral period). Prior to settlement, deferred stock Awards
carry no voting or dividend rights or other rights associated with stock
ownership.
BONUS SHARES, AND AWARDS IN LIEU OF CASH OBLIGATIONS. The Committee is
authorized to grant shares as a bonus free of restrictions, or to grant shares
or other Awards in lieu of the Company's obligations under other plans or
compensatory arrangements, subject to such terms as the Committee may specify.
The number of shares granted to an executive officer or non-employee director in
place of salary, fees or other cash compensation must be reasonable, as
determined by the Committee.
PERFORMANCE-BASED AWARDS. To avoid the limitations on deductibility under
Internal Revenue Code Section 162(m), the Committee may require satisfaction of
pre-established performance goals, consisting of one or more business criteria
and a targeted performance level with respect to such criteria, as a condition
of Awards being granted or becoming exercisable or settleable under the 2002
Plan, or as a condition to accelerating the timing of such events. The Committee
may specify that any such criteria will be measured before or after
extraordinary or non-recurring items, before or after service fees, or before or
after payments of Awards under the 2002 Plan.
OTHER TERMS OF AWARDS. Awards may be settled in cash, shares, other Awards
or other property, in the discretion of the Committee. The Committee may require
or permit Participants to defer the settlement of all or part of an Award in
accordance with such terms and conditions as the Committee may establish,
including payment or crediting of interest on any deferred amounts. The
Committee may condition Awards on the payment of taxes such as by withholding a
portion of the shares or other property to be distributed (or receiving
previously acquired shares or other property surrendered by the Participant) in
order to satisfy tax obligations. Awards granted under the 2002 Plan generally
may not be pledged or otherwise encumbered and are not transferable except by
will or by the laws of descent and distribution, or to a designated beneficiary
upon the Participant's death, except that the Committee may permit transfers in
individual cases, including for estate planning purposes.
VESTING, FORFEITURES, AND ACCELERATION. The Committee may, in its
discretion determine the vesting schedule of options and other Awards, the
circumstances that will result in forfeiture of the Awards, the post-termination
exercise periods of options and similar Awards, and the events that will result
in acceleration of the ability to exercise and the lapse of restrictions, or the
expiration of any deferral period, on any Award. In addition, the 2002 Plan
provides that, in the event of a Change in Control of the Company, outstanding
Awards will immediately vest and be fully exercisable, any restrictions,
deferral of settlement and forfeiture conditions of such Awards will lapse, and
goals relating to performance-based awards will be deemed met or exceeded to the
extent specified in the performance-award documents. A Change in Control means
generally (i) any person or group becomes a beneficial owner of 30% or more of
the voting power of the Company's voting securities, (ii) a change in the
Board's membership such that the current members, or those elected or nominated
by vote of a majority of the current members and successors elected or nominated
by them, cease to represent a majority of the Board in any period of less than
two years, (iii) certain mergers or consolidations reducing the percentage of
voting power held by stockholders prior to such transactions to under 51%, (iv)
stockholder approval of a sale or liquidation of all or substantially all of the
assets of the Company and (v) upon the sale of all or substantially all of the
Company's assets.
AMENDMENT AND TERMINATION OF THE 2002 PLAN. The Board may amend, alter,
suspend, discontinue, or terminate the 2002 Plan or the Committee's authority to
grant awards thereunder without stockholder approval unless stockholder approval
is required by law, regulation, or stock exchange rule. Under these provisions,
stockholder approval will not necessarily be required for amendments that might
increase the cost of the 2002 Plan. However, stockholder approval is required
for any amendment which may (a) increase the maximum number of shares of stock
covered by the Plan or change the class of employees who are Eligible Persons;
(b) reduce the exercise price for any stock options below the fair market value
of the Common Stock on the date
16
of the grant of such option; (c) extend beyond 10 years from the date of the
grant the period within which any Award may be exercised; (d) extend the period
beyond the termination date of the Plan during which Awards may be granted; or
(e) increase the Annual Limit. No awards may be made after the tenth anniversary
of the effective date of the plan. Unless earlier terminated, the 2002 Plan will
terminate at such time that no shares reserved under the 2002 Plan remain
available and the Company has no further rights or obligations with respect to
any outstanding Award.
EQUITY COMPENSATION PLAN INFORMATION AS OF DECEMBER 31, 2004
(c)
NUMBER OF SECURITIES
(b) REMAINING AVAILABLE FOR
(a) WEIGHTED-AVERAGE FUTURE ISSUANCE UNDER
NUMBER OF SECURITIES TO EXERCISE PRICE OF EQUITY COMPENSATION
BE ISSUED UPON EXERCISE OUTSTANDING PLANS (EXCLUDING
OF OUTSTANDING OPTIONS, OPTIONS, WARRANTS SECURITIES REFLECTED IN
PLAN CATEGORY WARRANTS AND RIGHTS AND RIGHTS COLUMN(A))
- -------------- ----------------------- ----------------- -----------------------
Equity compensation
plans approved by
shareholders .................... 931,165(1) $16.58(1) 456,636
Equity compensation
plans not approved by
shareholders .................... 0 0 0
-------------- ----------- --------------
Total ............................. 931,165(1) $16.58(1) 456,636
============== =========== ==============
- -------------
(1) Includes 23,525 deferred stock units issued in lieu of cash compensation in
payment of directors' fees. For purposes of the Weighted-Average Exercise
Price computation, such deferred stock units have a zero exercise price.
OPTION GRANTS IN 2004
The following table summarizes stock options granted during 2004 to the
named executive officers.
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
-------------------------------------------------- -----------------------
NUMBER OF % OF TOTAL
SHARES OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES EXERCISE EXPIRATION
NAME GRANTED IN 2004 PRICE DATE 5% 10%
- ------- ---------- ---------- ---------- ---------- ---------- ----------
Edward W. Rose, III .... 5,000 15.4% $32.30 12/15/10 $54,925 $124,607
Jason D. Lippert ....... 7,500 23.1% $32.31 11/18/10 $82,414 $186,969
17
YEAR-END OPTION VALUES
The following table presents the value of unexercised options held by the
named executive officers at December 31, 2004.
NUMBER OF VALUE OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AT OPTIONS AT
SHARES DECEMBER 31, 2004 DECEMBER 31, 2004(1)
ACQUIRED VALUE EXERCISABLE (E) EXERCISABLE (E)
NAME ON EXERCISE REALIZED UNEXERCISABLE (U) UNEXERCISABLE (U)
- ---- ----------- -------- ---------------------- ---------------------
Leigh J. Abrams -- $-- 53,000(E) $1,374,705(E)
-- -- 12,000(U) $127,320(U)
David L. Webster -- -- 53,000(E) $1,374,705(E)
-- -- 12,000(U) $127,320(U)
Jason D. Lippert -- -- 41,800(E) $1,088,471(E)
-- -- 30,700(U) $459,454(U)
Scott T. Mereness -- -- 21,500(E) $510,235(E)
-- -- 24,000(U) $353,400(U)
Fredric M. Zinn -- -- 20,200(E) $500,309(E)
-- -- 16,800(U) $257,256(U)
- ---------------
(1) Market value of Common Stock at December 31, 2004 ($36.17) minus the
exercise price.
COMPENSATION OF DIRECTORS
Directors who are employees of the Company do not receive additional or
special compensation for serving as directors.
The following table sets forth the cash compensation paid to non-employee
directors during 2004 and the cash compensation to be paid for 2005.
2004 2005
------------------ ------------------
BOARD OR BOARD OR
COMMITTEE OTHER COMMITTEE OTHER
CHAIRMAN DIRECTORS CHAIRMAN DIRECTORS
---------- ---------- ----------- ---------
Director Annual Fee .................... $48,000(1) $24,000 $54,000 $30,000
Director Fee Per Board Meeting ......... $ 2,000 $ 1,000 $ 2,000 $ 1,000
Audit Committee Annual Fee ............. $10,000 -- $15,000 --
Audit Committee Fee per Meeting ........ $ 2,000 $ 1,500 $ 2,500 $ 2,000
Compensation Committee Annual Fee ...... $ 5,000 -- $ 5,000 --
Compensation Committee Fee per Meeting . $ 1,500 $ 1,000 $ 1,500 $ 1,000
Corporate Governance and Nominating
Committee Annual Fee .................. $ 5,000 -- $ 5,000 --
Corporate Governance and Nominating
Committee Fee per Meeting ............. $ 1,500 $ 1,000 $ 1,500 $ 1,000
- ---------------
(1) In addition, in 2004, Edward W. Rose, III, Chairman of the Board of
Directors, received $30,000 pursuant to a discretionary retirement bonus
program intended to provide retirement income.
18
To encourage directors' long-term ownership of the Common Stock of the
Company, the 2002 Plan provides that directors may elect to accept deferred
stock units in lieu of cash compensation in payment of directors' fees. The
number of stock units, credited at the fair market value of the stock on the
date credited, is equivalent to 115% of the deferred fee. The deferred stock
units are distributed in the form of shares of the Common Stock of the Company
after a period of two years from the date credited, subject to earlier death,
disability or termination of service as a director without cause. After the
initial two-year deferral period, the director may elect, by notice one year
before expiration of the deferral period, to extend the deferral for an
additional five years. Until shares representing the deferred stock are
distributed, the director does not have any rights of a stockholder of the
Company with respect to such shares. To date, three directors have elected to
receive 100% of their fees in deferred stock units and one director has elected
to receive 30% of his fees in deferred stock units resulting in an aggregate of
23,525 deferred stock units outstanding at December 31, 2004.
EMPLOYMENT AND CHANGE OF CONTROL CONTRACTS
See footnotes 3 through 5 to the Summary Compensation Table for information
regarding (i) employment agreements between (a) Kinro, Inc., a subsidiary of the
Company, and David L. Webster, Chairman, President and Chief Executive Officer
of Kinro and a director of the Company, (b) Lippert Components, Inc. and Jason
D. Lippert, President and Chief Executive Officer of Lippert Components, Inc.,
and (ii) a change of control agreement between the Company and Fredric M. Zinn,
Chief Financial Officer and Executive Vice President of the Company. Effective
March 1, 2005, the Company entered into a Change of Control Agreement with
Harvey F. Milman, Vice President-Chief Legal Officer of the Company. The
agreement provides for severance payable upon a Company-initiated termination
within one year following, or 120 days prior to, a change of control, or a
termination initiated by Mr. Milman with good reason (defined as a reduction in
Mr. Milman's compensation or a material change in Mr. Milman's authority and
duty) within six months following a change of control. Change of control
includes acquisition of 30% or more of the Company's voting securities, or
stockholder approval of a merger resulting in a change in voting control of more
than 50% of the voting power of the Company's existing securities, or if Edward
W. Rose, III ceases to own at least 10% of the Company's voting securities, or
liquidation of the Company. The agreement provides that Mr. Milman will receive
his then effective compensation for a period of two years if he is involuntary
terminated, or one year if he voluntarily terminates for good reason, subject to
certain adjustments, and certain other benefits.
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.
19
------------------------------------
REPORT OF THE COMPENSATION COMMITTEE
------------------------------------
COMPENSATION POLICY
The Compensation Committee of the Board of Directors currently consists of
three non-employee directors, James F. Gero, Edward W. Rose III and Gene H.
Bishop (the "Committee"). Mr. Gero serves as Chairman of the Committee. All
members of the Committee meet the independence requirements of the New York
Stock Exchange and qualify as "outside directors" under Section 162(m) of the
Internal Revenue Code. Mr. Bishop has advised the Company that he will not stand
for re-election at the Annual Meeting of Stockholders. See Proposal 1. "Election
of Directors".
The Committee has the responsibility for developing the policies which
govern compensation for executive officers, determining the annual compensation
of the Chief Executive Officer, and making recommendations to the Board of
Directors, based on the recommendations of the Company's Chief Executive
Officer, regarding compensation of other 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, equity-based awards consisting
principally of stock options and restricted stock units, 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.
It is the policy of the Board of Directors not to include earnings of
acquired companies in computing compensation pursuant to performance-based
incentive compensation plans in effect prior to the acquisition. Accordingly,
with respect to those executives who receive performance-based incentive
compensation, subsequent to an acquisition the Board of Directors will modify
existing performance-based incentive compensation plans to raise the level of
base earnings that are not subject to incentive bonus.
To help align the personal interests of senior management with the
interests of the Company's stockholders, the Committee has established
guidelines for ownership of the Company's stock by executives, as a multiple of
the executive's base salary; and to enhance the retention value of the Company's
executives, the Committee requires that under certain conditions the Company's
senior management hold for at least one year stock received upon exercise of
stock options.
The Committee reviews 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 2004
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 2004, Mr. Abrams received base compensation of $400,000 plus incentive
compensation of $619,716 equal to 21/2% of the Company's income before income
taxes and extraordinary items, in excess of $16,068,000. The threshold
applicable to Mr. Abrams' incentive compensation was
20
modified by the Board of Directors to give effect to three acquisitions and a
disposition of assets during 2003 and 2004. Mr. Abrams receives medical, dental,
long-term care, disability and life insurance, an automobile together with
related expenses, and a Company contribution to a 401(K) plan, the combined
value of which benefits does not exceed $60,000. In 2004, Mr. Abrams was also
awarded an additional payment of $30,000 pursuant to a discretionary retirement
bonus program required to provide retirement income, with which Mr. Abrams
elected to purchase specified tax deferred annuities and cash value life
insurance contracts.
COMPENSATION OF CHIEF EXECUTIVE OFFICERS OF SUBSIDIARIES IN 2004
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.
For calendar 2004, David L. Webster, Chairman, President and Chief
Executive Officer of Kinro, received base salary of $400,000. In addition, for
2004, Mr. Webster was entitled to receive 5.0% of the amount by which the
operating profit of Kinro (as defined) exceeded $7,522,000. In accordance with
this formula, for 2004 Mr. Webster's performance-based incentive compensation
was $846,000. Mr. Webster receives medical, dental, long-term care, disability
and life insurance, an automobile together with related expenses, and a Company
contribution to a 401(K) plan, the combined value of which benefits does not
exceed $45,000. In 2004, Mr. Webster was also awarded an additional payment of
$50,000 pursuant to a discretionary retirement bonus program required to provide
retirement income, with which Mr. Webster elected to purchase specified tax
deferred annuities. Mr. Webster's employment agreement with Kinro expired on
December 31, 2004, and was renewed for the three-year term ending December 31,
2007 with the same compensation terms as the prior agreement. After the initial
term and each renewal term, unless terminated by either party on 120 days
notice, the agreement automatically renews for additional one-year terms.
Effective February 5, 2003, LCI and its affiliates entered into an
employment agreement with Jason D. Lippert to serve as President and Chief
Executive Officer for a period of three years. Pursuant to the agreement, for
calendar 2004, Mr. Lippert received base salary of $400,000. In addition, for
2004, Mr. Lippert was entitled to receive 5.0% of the amount by which the
operating profit of the LCI Entities (as defined) exceeded $10.1 million after
giving effect to a capital charge as provided in the employment agreement. The
threshold applicable to Mr. Lippert's incentive compensation was modified by the
Board of Directors to give effect to three acquisitions during 2003 and 2004. In
accordance with this formula, for 2004, Mr. Lippert's performance-based
incentive compensation was $651,400. At least 60% of the amount of the incentive
compensation in excess of $400,000 was required to be paid in restricted shares
of the Company's stock. Mr. Lippert receives medical, dental, disability and
life insurance, an automobile allowance, and a Company contribution to a 401(K)
plan, the combined value of which benefits does not exceed $30,000. Mr. Lippert
also received a payment of $10,000 pursuant to a discretionary retirement bonus
program required to provide retirement income, with which Mr. Lippert elected to
purchase specified tax deferred annuities and cash value life insurance
contracts.
Other executive officers of the Company and its subsidiaries receive
formula and discretionary 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 2002 Equity Award and Incentive Plan (the "2002 Plan")
provides for the grant of options as well as restricted and deferred stock,
bonus stock, performance awards, and stock appreciation rights to employees of
the Company and its subsidiaries, and to directors of the Company. See "Equity
Award and Incentive Plan." The Compensation Committee administers the 2002 Plan
and determines and designates employees and directors who are to be granted
options.
The Company expenses the compensation related to stock options granted
after January 1, 2002. The Company will not reprice stock options or cancel
outstanding options and replace them with new options.
21
Because all options which have been granted under the 2002 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.
TAX DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the Internal Revenue Code disallows a Federal income tax
deduction to publicly held companies for certain compensation paid to certain of
their executive officers, to the extent that compensation exceeds $1 million per
covered officer in any fiscal year. This limitation applies only to compensation
which is not considered performance-based under the Section 162(m) rules. The
2002 Plan has been structured so that any compensation deemed paid in connection
with formula-based incentive compensation or the exercise of option grants made
under the 2002 Plan will qualify as performance-based compensation which will
not be subject to the $1 million limitation.
BENEFITS
The Company maintains certain broad-based employee benefit plans in which
executive officers participate, including employee retirement savings plans
(401(k) Plans) and other retirement, life, disability, health insurance plans
and long-term care policies. The Company also provides an automobile or
automobile allowance to its executive officers together with related expenses.
The Company does not maintain any defined benefit plans.
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
James F Gero, Chairman
Edward W. Rose, III
Gene H. Bishop
THE FOREGOING REPORT OF THE COMPENSATION COMMITTEE SHALL NOT BE DEEMED TO
BE "SOLICITING MATERIAL" OR TO BE "FILED" WITH THE SEC NOR SHALL THIS
INFORMATION BE INCORPORATED BY REFERENCE INTO ANY FUTURE FILING UNDER THE
SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934, EACH AS AMENDED,
EXCEPT TO THE EXTENT THAT THE COMPANY SPECIFICALLY INCORPORATES IT BY REFERENCE
INTO A FILING.
22
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, 1999 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
[the following data represents a graph in the printed piece]
DREW INDUSTRIES INCORPORATED RUSSELL 2000 NEW PEER GROUP
12/99 100 100 100
12/00 63.89 96.98 78.89
12/01 119.44 99.39 133.35
12/02 178.33 79.03 150.03
12/03 308.89 116.38 203.39
12/04 401.89 137.71 267.24
* $100 INVESTED ON 12/31/99 IN STOCK OR INDEX-
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING DECEMBER 31.
INDEMNIFICATION
Section 145 of the Delaware General Corporation Law ("DGCL") 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
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
23
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.
In 2004 and 2005, the Company entered into Indemnification Agreements with
each of its directors and executive officers (and the executive officers of its
subsidiaries, Kinro, Inc. and Lippert Components, Inc.). In doing so, the
Company incorporated into contract its existing obligations for indemnification
and advancement of indemnifiable expenses which currently are included in the
Company's Restated Certificate of Incorporation and Amended By-laws, and as
provided by Section 145 of the Delaware General Corporation Law. Management
believes that it is in the best interests of the Company to make service to the
Company more attractive to existing and prospective directors and executive
officers by virtue of the security afforded by contract.
PROPOSAL 2. 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 and internal control over
financial reporting of the Company for the year ending December 31, 2005. KPMG
is a registered public accounting firm. It is expected that a representative of
that firm will be present at the Annual Meeting of Stockholders to be held on
May 18, 2005 and will be afforded the opportunity to make a statement and
respond to appropriate questions from stockholders present at the meeting.
FEES FOR INDEPENDENT AUDITORS
The following is a summary of the fees billed to the Company by KPMG LLP
for professional services rendered for the fiscal years ended December 31, 2004
and 2003:
2004 2003
-------- --------
AUDIT FEES:
Consists of fees billed for professional services rendered for the
annual audit of the Company's financial statements and for the reviews
of the interim financial statements included in the Company's
Quarterly Reports ........................................................ $1,269,405 $322,000
AUDIT-RELATED FEES:
Consists primarily of fees billed for assistance with regulatory
filings, audit of employee benefit plans and other audit related services
filingS .................................................................. $ 15,000 $ 23,700
TAX FEES:
Tax Planning and Compliance:
Consists of fees billed for tax planning and compliance, assistance
with the preparation of tax returns, services rendered in connection
with acquisitions made by the Company and advice on other tax
related matters ....................................................... $ 27,546 $ 14,950
ALL OTHER FEES:
Other Services ........................................................... -- --
---------- ---------
TOTAL ALL FEES .............................................................. $1,311,951 $360,650
========== =========
24
Approximately $850,000 of the increase in fees paid to the independent
auditors for 2004 was due to compliance with the requirements of Section 404 of
the Sarbanes-Oxley Act of 2002.
As part of its duties, the Audit Committee is required to pre-approve audit
and non-audit services performed by the independent auditors in order to assure
that the provision of such services does not impair the auditors' independence.
The Audit Committee does not delegate to management its responsibilities to
pre-approve services performed by the independent auditors.
In making its recommendation to ratify the appointment of KPMG LLP as the
Company's independent auditors for the fiscal year ending December 31, 2005, the
Audit Committee has determined that the non-audit services provided by KPMG LLP
are compatible with maintaining the independence of KPMG LLP.
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 2006 must be received by
the Company at its principal executive offices on or before December 14, 2005.
By Order of the Board of Directors
EDWARD W. ROSE, III
CHAIRMAN OF THE BOARD OF DIRECTORS
April 13, 2005
25