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
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 20, 2004
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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 20, 2004 at 9:00 A.M., for
the following purposes:
(1) To elect a Board of eight Directors;
(2) To approve an amendment to the Company's Restated Certificate of
Incorporation to increase the authorized number of shares of Common Stock
from 20,000,000 shares to 30,000,000 shares;
(3) To ratify the selection of KPMG LLP as independent auditors for
the Company for the year ending December 31, 2004; and
(4) To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
Holders of record of the Company's Common Stock at the close of business on
the 2nd day of April, 2004 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 12, 2004
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.
DREW INDUSTRIES INCORPORATED
200 MAMARONECK AVENUE
WHITE PLAINS, NEW YORK 10601
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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 20, 2004 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 2, 2004 (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
12, 2004.
The Annual Report to Stockholders of the Company for the year ended
December 31, 2003 is being mailed herewith to each stockholder of record.
THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31,
2003 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 10,244,288 shares of Common
Stock.
On December 11, 2003, the Company's stock began trading on the New York
Stock Exchange (NYSE) under the symbol "DW." Concurrent with the NYSE listing,
the Company's shares were withdrawn from the American Stock Exchange. The
Company believes that listing its stock on the NYSE will result in greater
exposure to the investment community, while also providing a more liquid trading
environment for the Company's stockholders.
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.
Proposals Nos. 2, 3 and 4 require 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), FOR the amendment to the Restated
Certificate of Incorporation increasing the authorized shares (Proposal No. 2),
and FOR ratification of the appointment of KMPG LLP as Drew's independent
auditors for the fiscal year ending December 31, 2004 (Proposal No. 3).
PRINCIPAL HOLDERS OF VOTING SECURITIES
Set forth below is information with respect to each person known to the
Company on March 19, 2004 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) ....................... 1,700,500(2) 15.2%
500 Crescent Court
Dallas, Texas 75201
L. Douglas Lippert(1) ........................ 679,937(2) 6.1%
2375 Tamiami Trail
Suite 110
Naples, Florida 34103
FMR Corp.(1) ................................. 959,000(3) 9.4%
82 Devonshire Street
Boston, Massachusetts 02108
Wellington Management Company(1) ............. 592,400(3) 5.8%
75 State Street
Boston, Massachusetts 02109
(FOOTNOTES ON NEXT PAGE)
2
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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, 2003.
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 19, 2004 of the Common Stock (including options) by each Director, each of
whom is a nominee for election, 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) ....................................... 239,908(2) 2.1%
200 Mamaroneck Avenue
White Plains, New York 10601
Edward W. Rose, III(1) ................................... 1,700,500(3) 15.2%
500 Crescent Court
Dallas, Texas 75201
David L. Webster(1) ...................................... 222,840(4) 2.0%
4381 Green Oaks Blvd.
Arlington, Texas 76016
L. Douglas Lippert ....................................... 679,937(5) 6.1%
2375 Tamiami Trail
Suite 110
Naples, Florida 34103
James F. Gero(1) ......................................... 143,574(6) 1.3%
11900 North Anna Cade Road
Rockwall, Texas 75087
Gene H. Bishop(1) ........................................ 117,600(7) 1.1%
1601 Elm Street, 47th Floor
Dallas, Texas 75201
Frederick B. Hegi, Jr. ................................... 31,927(8) 0.3%
750 North St. Paul
Dallas, Texas 75201
David A. Reed ............................................ 6,544(9) 0.1%
1909 Cottonwod Valley Circle
Irving, TX 75038
All Directors and Executive Officers as a group
(12 persons including the above-named) ................. 3,394,849(10) 30.3%
-----------------
(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.
(FOOTNOTES CONTINUED ON NEXT PAGE)
3
(FOOTNOTES CONTINUED FROM PREVIOUS PAGE)
(2) Mr. Abrams has sole voting and dispositive power with respect to the shares
owned by him. Includes 4,002 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 pursuant to the Company's Stock Option
Plan 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 7,720 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 100,700
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, on December 15, 2002 and
December 15, 2003, Mr. Rose was granted options to purchase, respectively,
5,000 shares of Common Stock at $15.75 per share and 5,000 shares of Common
Stock at $27.60 per share. Although no part of such options has been
exercised, all shares subject to such options are included in the above
table as beneficially owned.
(4) Mr. Webster has sole voting and dispositive power with respect to such
shares. In November 1999 and November 2003, Mr. Webster was granted options
pursuant to the Company's Stock Option Plan 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 239,622 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 pursuant to the Company's
Stock Option Plan to 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 4,414 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, on December 15, 2002 and
(FOOTNOTES CONTINUED ON NEXT PAGE)
4
(FOOTNOTES CONTINUED FROM PREVIOUS PAGE)
December 15, 2003, Mr. Gero was granted options to purchase, respectively,
5,000 shares of Common Stock at $15.75 per share and 5,000 shares of Common
Stock at $27.60 per share. Although no part of such options has been
exercised, all shares subject to such options are included in the above
table as beneficially owned.
(7) 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,
on December 15, 2002, and December 15, 2003, Mr. Bishop was granted options
to purchase, respectively, 5,000 shares at $15.75 per share and 5,000
shares at $27.60 per share. Although no part of such options has been
exercised, all shares subject to such options are included in the above
table as beneficially owned.
(8) Mr. Hegi has sole voting and dispositive power with respect to such shares.
Includes deferred stock units representing 4,426 shares granted to Mr. Hegi
in lieu of cash compensation in payment of director's fees. On December 15,
2002 and December 15, 2003, Mr. Hegi was granted options to purchase,
respectively, 5,000 shares at $15.75 per share and 5,000 shares of Common
Stock at $27.60 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.
(9) Mr. Reed has sole voting and dispositive power with respect to such shares.
Includes deferred stock units representing 544 shares granted to Mr. Reed
in lieu of cash compensation in payment of director's fees. On December 15,
2003, Mr. Reed was awarded an option to purchase 5,000 shares of Common
Stock at $27.60 per share. Although no part of such option has been
exercised, all shares subject to such option are included in the above
table as beneficially owned.
(10) Includes 423,104 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.
Based on its review of the copies of such forms received by it, the Company
believes that during 2003 all such filing requirements applicable to its
officers and directors (the Company not being aware of any ten percent holder
during 2003 other than Edward W. Rose, III, and L. Douglas Lippert, directors)
were complied with.
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.
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.
5
The following table lists the current directors of the Company, each of
whom is a nominee proposed by Management 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 61) Officer and Director. 1984
Edward W. Rose, III ......................... Chairman of the Board of
(Age 63) Directors. 1984
David L. Webster ............................ Chairman, President and Chief
(Age 68) Executive Officer of Kinro, Inc.
and Director. 1984
L. Douglas Lippert .......................... Chairman of Lippert
(Age 56) Components, Inc., and Director. 1997
James F. Gero ............................... Director. 1992
(Age 59)
Gene H. Bishop .............................. Director. 1995
(Age 74)
Frederick B. Hegi, Jr. ...................... Director. 2002
(Age 60)
David A. Reed ............................... Director. 2003
(Age 56)
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.
EDWARD W. ROSE, III, for more than the past five years, has been President
and sole stockholder of Cardinal Investment Company, Inc., an investment firm.
Mr. Rose also serves as a director of the following public companies: Liberte
Investors Inc., engaged in real estate loans and investments; and ACE Cash
Express, Inc., engaged in check cashing services. 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, since March 1992, has been Chairman and Chief Executive
Officer of Sierra Technologies, Inc., a manufacturer of defense systems
technologies, and a director of its affiliates. Mr. Gero also serves as a
director 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.
6
GENE H. BISHOP, from March 1975 until July 1990, was Chief Executive
Officer of MCorp, a bank holding company, and from October 1990 to November
1991, was Vice Chairman and Chief Financial Officer of Lomas Financial
Corporation, a financial services company. From November 1991 until his
retirement in October 1994, Mr. Bishop served as Chairman and Chief Executive
Officer of Life Partners Group, Inc., a life insurance holding company. Mr.
Bishop also serves as a director of Liberte Investors Inc., engaged in real
estate loans and investments.
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 and Internet 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 1991-2000. Mr. Reed also serves as a director of Texas
Industries, Inc., a publicly-owned company that supplies construction materials.
OTHER EXECUTIVE OFFICERS
FREDRIC M. ZINN, not a nominee for election as a director, has been Chief
Financial Officer of the Company for more than the past five years, and
Executive Vice President of the Company since February 2001. Mr. Zinn is a
Certified Public Accountant.
JASON D. LIPPERT, 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.
JOHN F. CUPAK, 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, 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 21, 2003, except that Mr. Reed
was appointed as a director by the Board of Directors following the Annual
Meeting of Stockholders.
7
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 new 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 2003 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 99.9 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. 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,
each non-employee director meets the "independence" standards of New York Stock
Exchange. 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, 2003, the Board of
Directors held ten 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 2003 annual meeting, all members of the Board, each of whom were
nominees for re-election, were present. It is anticipated that all Board members
will be present at the 2004 annual meeting.
Any stockholder who wishes to communicate with the Board of Directors 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."
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. 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, Suite 301, 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.
8
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 six meetings during the year ended December 31,
2003.
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 six meetings
during the year ended December 31, 2003.
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 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 2003 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, Suite 301, White Plains, New
York 10601. Recommendations must be received by February 2, 2005 in order for a
candidate to be considered for election at the 2005 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.
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, including salary, bonus, incentive
compensation and equity awards, administers the Company's 2002 Equity Award and
Incentive Plan, approves equity awards, and
9
determines the compensation of directors. This Committee held three meetings
during the year ended December 31, 2003. During 2003, the Committee retained an
independent executive compensation firm to advise it in respect of compensation
of the Company's executive officers.
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 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 and operating management personnel and the Company's legal counsel.
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.
10
-----------------------------
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.
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 the consolidated financial statements with management
and the independent auditors. 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, 2003, 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, 2003 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.
11
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,
2003.
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) 2003 $400,000 $401,315 $ 9,307 -- 15,000 -- $8,000
President and Chief 2002 400,000 252,058 9,596 -- -- -- 8,000
Executive Officer 2001 400,000 32,022 9,567 -- -- -- 5,250
David L. Webster(3) 2003 $400,000 $657,200 $11,492 -- 15,000 -- $8,000
Chairman, President and 2002 400,000 849,400 11,185 -- -- -- 8,000
CEO of Kinro, Inc. 2001 400,000 623,000 11,009 -- -- -- 5,250
L. Douglas Lippert(4)(5) 2003 $400,000 $455,900 $12,000 -- 5,000 -- $8,000
Chairman, and until 2002 400,000 0 12,000 -- -- -- 8,000
February 5, 2003 2001 400,000 0 12,000 -- -- -- 6,800
President and CEO of
Lippert Components, Inc.
Jason D. Lippert(5) 2003 $300,000 $542,800 $9,000 -- 15,000 -- $7,729
President and Chief 2002 202,500 200,000 9,000 -- -- -- 8,000
Executive Officer of
Lippert Components, Inc.,
since February 5, 2003
Fredric M. Zinn(6) 2003 $200,000 $198,779 $13,888 -- 15,000 -- $8,000
Executive Vice President 2002 180,000 172,877 14,074 -- -- -- 8,000
and Chief Financial Officer 2001 160,000 161,583 14,030 -- 12,000 -- 5,250
---------------
(1) Messrs. Abrams, Webster, Zinn and Jason D. 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 2003, Mr. Abrams received $30,000, Mr. Webster received
$50,000, Mr. Zinn received $23,779 and Jason D. Lippert received $10,000
pursuant to the discretionary retirement bonus program.
(2) For 2003, Mr. Abrams was entitled to receive performance-based incentive
compensation equal to 2 1/2% of the amount by which the Company's income
before income taxes and extraordinary items, subject to certain
adjustments, exceeded the threshold of $16,463,000. Based on this formula,
for 2003, Mr. Abrams was entitled to receive performance-based incentive
compensation of $371,315. For 2002 and 2001, the thresholds were
$16,463,000 and $14,714,000, respectively, and Mr. Abrams received $222,058
and $2,022, respectively.
(3) Effective September 1, 1999, Kinro extended and amended its employment
agreement with Mr. Webster which provides for Mr. Webster's employment
through December 31, 2004. For 2003, 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 2003, Mr.
Webster's performance-based incentive compensation was $607,200. Based on
this formula and a threshold of $7,522,000, for 2002, Mr. Webster's
performance-based incentive compensation was $799,400. For 2001, the
formula was based on a threshold of $7,325,000,
(FOOTNOTES CONTINUED ON NEXT PAGE)
12
(FOOTNOTES CONTINUED FROM PREVIOUS PAGE)
and Mr. Webster received performance-based incentive compensation of
$573,000.
(4) On October 7, 1997, Mr. Lippert entered into an Employment and
Non-Competition Agreement with Lippert Components, Inc. ("LCI"), as
amended, providing for Mr. Lippert to serve, through December 31, 2003, as
President and Chief Executive Officer of Lippert Components, Inc. Mr.
Lippert receives annual salary of $400,000 plus, subject to certain
conditions, performance-based incentive compensation equal to 5% of the
amount by which the operating profits of LCI and its subsidiaries (as
defined in the Agreement) exceeds $10.1 million. In accordance with this
formula, for 2003 Mr. Lippert's performance-based incentive compensation
was $455,900. Mr. Lippert did not receive performance-based incentive
compensation for prior years because LCI did not achieve the threshold
operating profits.
(5) On February 5, 2003, Jason D. Lippert was appointed President and Chief
Executive Officer of LCI and its affiliates, and L. Douglas Lippert
continued as Chairman. On December 31, 2003 L. Douglas Lippert's employment
agreement with LCI expired. On January 2, 2004, the Company entered into an
Employment Agreement with L. Douglas Lippert for a period of three years,
upon terms providing for him to continue as Chairman with a declining
amount of services in exchange for a declining amount of salary over the
term of the agreement, together with certain benefits, but without
incentive compensation.
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 2003, Jason Lippert received base salary of $300,000, and will
be entitled to base salary of $400,000 for 2004 and 2005. In addition, for
2003, Jason 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, Jason 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. Jason Lippert elected to
receive $132,800 or 100% of this amount in restricted shares of the
Company's stock.
(6) 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, 2003
13
under the 2002 Plan is 1,494,486 shares (of which 1,001,427 shares are subject
to outstanding options and 493,059 shares are available for future grant) or
14.6% of the Company's shares outstanding on December 31, 2003, 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-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
14
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 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.
15
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 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 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, 2003
NUMBER OF SECURITIES
REMAINING AVAILABLE FOR
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 (a) AND RIGHTS (b) COLUMN (a))
-------------- ----------------------- ----------------- -----------------------
Equity compensation
plans approved by
shareholders ....................... 1,001,427(1) $15.61(1) 493,059
Equity compensation
plans not approved by
shareholders ....................... 0 0 0
-------------- -------------- --------------
Total ............................... 1,001,427(1) $15.61(1) 493,059
============== ============== ==============
---------------
(1) Includes 17,107 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 2003
The following table summarizes stock options granted during 2003 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 2003 PRICE DATE 5% 10%
------- ---------- ---------- ---------- ---------- ---------- ----------
Edward W. Rose, III .............. 5,000 1.3% $27.60 12/15/09 $ 46,933 $106,475
Leigh J. Abrams .................. 15,000 3.8% $25.56 11/13/09 130,393 295,816
David L. Webster ................. 15,000 3.8% $25.56 11/13/09 130,393 295,816
L. Douglas Lippert ............... 5,000 1.3% $25.56 11/13/09 43,464 98,605
Jason D. Lippert ................. 15,000 3.8% $25.56 11/13/09 130,393 295,816
Fredric M. Zinn .................. 15,000 3.8% $25.56 11/13/09 130,393 295,816
16
YEAR-END OPTION VALUES
The following table presents the value of unexercised options held by the
named executive officers at December 31, 2003.
NUMBER OF VALUE OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AT OPTIONS AT
SHARES DECEMBER 31, 2003 DECEMBER 31, 2003(1)
ACQUIRED VALUE EXERCISABLE (E) EXERCISABLE (E)
NAME ON EXERCISE REALIZED UNEXERCISABLE (U) UNEXERCISABLE (U)
----- ----------- -------- ---------------------- ---------------------
Leigh J. Abrams ................. 10,000 $31,250 40,000(E) $739,500(E)
-- -- 25,000(U) $218,475(U)
David L. Webster ................ 15,000 $46,875 40,000(E) $739,500(E)
-- -- 25,000(U) $218,475(U)
L. Douglas Lippert .............. -- -- 40,000(E) $739,500(E)
-- -- 15,000(U) $196,075(U)
Jason D. Lippert ................ 1,800 $10,755 28,800(E) $543,620(E)
-- -- 36,200(U) $431,305(U)
Fredric M. Zinn ................. 10,000 $100,663 11,800(E) $222,673(E)
-- -- 25,200(U) $225,203(U)
---------------
(1) Market value of Common Stock at December 31, 2003 ($27.80) 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 2003.
BOARD OR
COMMITTEE CHAIRMAN OTHER DIRECTORS
------------------ -------------
Director Annual Fee ........................................... $48,000(1) $24,000
Director Fee Per Board Meeting ................................ $ 2,000 $ 1,000
Audit Committee Annual Fee .................................... $ 5,000(2) --
Audit Committee Fee per Meeting ............................... $ 2,000 $ 1,500
Compensation Committee Annual Fee ............................. $ 2,500(3) --
Compensation Committee Fee per Meeting ........................ $ 1,500 $ 1,000
Corporate Governance and Nominating
Committee Annual Fee ......................................... $ 2,500(3) --
Corporate Governance and Nominating
Committee Fee per Meeting .................................... $ 1,500 $ 1,000
---------------
(1) In addition, in 2003, 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.
(2) In 2004, the annual fee for the Chairman of the Audit Committee was
increased to $10,000 from $5,000 in 2003.
(3) In 2004, the annual fee to be paid to the Chairmen of both the Compensation
Committee and the Corporate Governance and Nominating Committee will be
increased to $5,000.
17
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 each year, by notice
one year before expiration of the deferral period, to extend the deferral for an
additional one year. 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
17,107 deferred stock units outstanding at December 31, 2003.
EMPLOYMENT AND CHANGE OF CONTROL CONTRACTS
See footnotes 3 through 6 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., a
subsidiary of the Company, and L. Douglas Lippert, Chairman of Lippert
Components, Inc. and a director of the Company, (c) 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.
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.
18
------------------------------------
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.
The Committee has the responsibility of developing the policies which
govern compensation for executive officers, and making recommendations to the
Board of Directors regarding compensation of executive officers in accordance
with such policies.
The Company's executive compensation policy is designed to enable the
Company to attract, motivate and retain senior management by providing a
competitive compensation opportunity based significantly on performance. The
objective is to provide fair and equitable compensation to senior management in
a way that rewards management for reaching and exceeding objectives. The
compensation policy links a significant portion of executive compensation to the
Company's performance, recognizes individual contribution as well as overall
business results, and aligns executive and stockholder interests. The primary
components of the Company's executive compensation are base salary,
performance-related incentive compensation, 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 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 2003
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 2003, Mr. Abrams received base compensation of $400,000 plus
performance-based incentive compensation of $371,315 equal to 2 1/2% of the
Company's income before income taxes and extraordinary items, subject to certain
adjustments, in excess of $16,463,000. Mr. Abrams receives medical, long-term
care, disability and life insurance, and certain other benefits. In 2003, Mr.
Abrams was also awarded an additional payment of $30,000 pursuant to a
discretionary retirement bonus program intended to provide retirement income.
This bonus must be used to purchase specified tax deferred annuities or cash
value life insurance contracts.
19
COMPENSATION OF CHIEF EXECUTIVE OFFICERS OF SUBSIDIARIES IN 2003
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 2003, David L. Webster, Chairman, President and Chief
Executive Officer of Kinro, received base salary of $400,000. In addition, for
2003, 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 2003 Mr. Webster's performance-based incentive compensation
was $607,200. For 2003, Mr. Webster also received a payment of $50,000 pursuant
to a discretionary retirement bonus program intended to provide retirement
income. This bonus must be used to purchase specified tax deferred annuities or
cash value life insurance contracts.
L. Douglas Lippert was Chairman, President and Chief Executive Officer of
Lippert Components, Inc. ("LCI") through February 5, 2003 and Chairman only of
LCI for the balance of 2003. For 2003, Mr. Lippert received base salary of
$400,000 and was also entitled to receive, in accordance with his employment
agreement which expired on December 31, 2003, subject to certain conditions,
performance-based incentive compensation equal to 5% of the excess of operating
profit of LCI and its subsidiaries (as defined) over $10.1 million. In
accordance with this formula, for 2003, Mr. Lippert's performance-based
incentive compensation was $455,900.
On February 5, 2003, Jason D. Lippert was appointed President and Chief
Executive Officer of LCI and its affiliates, and L. Douglas Lippert continued as
Chairman. On December 31, 2003 L. Douglas Lippert's employment agreement with
LCI expired. On January 2, 2004, the Company entered into an employment
agreement with L. Douglas Lippert for a period of three years upon terms
providing for Mr. Lippert to continue as Chairman with a declining amount of
services in exchange for a declining amount of salary over the term of the
agreement, together with certain benefits, but without incentive compensation.
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 2003, Mr. Lippert received base salary of $300,000. In addition, for
2003, Jason 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, Jason 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 was required to be paid in
restricted shares of the Company's stock. Mr. Lippert elected to receive $132,
800 or 100% of this amount in restricted shares of the Company's stock. Mr.
Lippert also received a payment of $10,000 pursuant to a discretionary
retirement bonus program intended to provided retirement income. This bonus must
be used to purchase specified tax deferred annuities or cash value life
insurance contracts. The Committee retained an independent executive
compensation firm to advise it in connection with the negotiation of Mr.
Lippert's employment agreement.
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 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, and will not reprice stock options or cancel outstanding
options and replace them with new options.
20
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
Company's 2002 Equity Award and Incentive 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 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 an employee retirement savings plan
(401(k) Plan) 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.
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.
21
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, 1998 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
[LINE GRAPH OMITTED]
* $100 INVESTED ON 12/31/98 IN STOCK OR INDEX-
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING DECEMBER 31.
INDEMNIFICATION
Section 145 of the Delaware General Corporation Law empowers a domestic
corporation to indemnify any of its officers, directors, employees or agents
against expenses, including reasonable attorney's fees, judgments, fines and
amounts paid in settlement which were actually and reasonably incurred by such
person in connection with any action, suit or similar proceeding brought against
them because of their status as officers, directors, employees or agents of the
Company if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
Company. If the claim was brought against any such person by or in the right of
the Company, the Company may indemnify such person for such expenses if such
person acted in good faith and in a manner reasonably believed by such person to
be in or not opposed to
22
the best interests of the Company, except no indemnity shall be paid if such
person shall be adjudged to be liable for negligence or misconduct unless a
court of competent jurisdiction, upon application, nevertheless permits such
indemnity (to all or part of such expenses) in view of all the circumstances.
The Company's Restated Certificate of Incorporation provides that the
Company may indemnify its officers, directors, employees or agents to the full
extent permitted by Section 145 of the Delaware General Corporation Law.
Accordingly, no director of the Company is liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, or (iv) for any transaction
from which the director derived an improper personal benefit.
PROPOSAL 2. AMENDMENT TO CERTIFICATE OF INCORPORATION
INTRODUCTION
The Company's Restated Certificate of Incorporation currently authorizes
the issuance of 20,000,000 shares of Common Stock, par value $0.01 per share. In
February, 2004, the Board of Directors adopted a resolution proposing that the
Restated Certificate of Incorporation be amended to increase the authorized
number of shares of Common Stock to 30,000,000, subject to stockholder approval
of the amendment.
CURRENT USE OF SHARES
As of March 19, 2004, the Company had 10,238,183 shares of Common Stock
outstanding and 1,494,486 shares reserved for future issuance under the
Company's 2002 Equity Award and Incentive Plan and the Company's prior Stock
Option Plan (collectively, the "Plans"), of which 1,001,427 shares are covered
by outstanding options and 493,059 shares are available for grant or purchase.
Based upon the foregoing number of outstanding and reserved shares of Common
Stock, the Company currently has 8,267,331 shares remaining available for other
purposes.
PROPOSED AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION
The Board of Directors has adopted resolutions setting forth (i) the
proposed amendment to Article FOURTH of the Company's Restated Certificate of
Incorporation; (ii) the advisability of the amendment; and (iii) a call for
submission of the amendment for approval by the Company's stockholders at the
annual meeting.
The following is the text of Section A of Article FOURTH of the Restated
Certificate of Incorporation of the Company, as proposed to be amended:
The total number of shares of all classes of stock which the Corporation
shall have the authority to issue is thirty million (30,000,000) shares of
Common Stock, par value $0.01 per share.
PURPOSE AND EFFECT OF THE PROPOSED AMENDMENT
The Board of Directors believes that the availability of additional
authorized but unissued shares will provide the Company with the flexibility to
issue Common Stock for a variety of corporate purposes, such as to effect future
stock splits and stock dividends or to reserve additional shares for issuance
under employee benefit plans. The Company could also use the additional shares
of Common Stock to raise equity capital and to make acquisitions through the use
of Common Stock but it does not currently plan to do so.
Increasing the number of shares of Common Stock that the Company is
authorized to issue would give the Company additional flexibility to maintain a
reasonable stock price with future stock splits and stock dividends. Other than
as permitted or required under the 2002 Plan and under outstanding options, the
Board of Directors has no immediate plans, understanding, agreements or
commitments to issue additional Common Stock for any purposes. No additional
action or authorization by the Company's stockholders would be necessary prior
to the issuance of such
23
additional authorized shares, unless required by applicable law or the rules of
any stock exchange or national securities association trading system on which
the Common Stock is then listed or quoted. The Company may seek a further
increase in authorized shares from time to time in the future as considered
appropriate by the Board of Directors.
Under the Company's Restated Certificate of Incorporation, the Company's
stockholders do not have preemptive rights with respect to Common Stock. Thus,
should the Board of Directors elect to issue additional shares of Common Stock,
existing stockholders would not have any preferential rights to purchase such
shares. In addition, if the Board of Directors elects to issue additional shares
of Common Stock, such issuance could have a dilutive effect on voting power and
shareholdings of current stockholders.
The issuance of the additional shares of Common Stock could have the effect
of diluting earnings per share and book value per share, which could adversely
affect the Company's existing stockholders. Issuing additional shares of Common
Stock may also have the effect of delaying or preventing a change of control of
the Company. The Company's authorized but unissued Common Stock could be issued
in one or more transactions that would make it more difficult or costly, and
less likely, to affect a takeover of the Company. The proposed amendment to the
Restated Certificate of Incorporation is not being recommended in response to
any specific effort of which the Company is aware to obtain control of the
Company, and the Board of Directors has no present intention to use the
additional shares of Common Stock in order to impede a takeover attempt.
If the proposed amendment is adopted, it will become effective upon filing
of a Certificate of Amendment to the Company's Restated Certificate of
Incorporation with the Delaware Secretary of State. However, if the Company's
stockholders approve the proposed amendment to the Company's Restated
Certificate of Incorporation, the Board retains discretion under Delaware law
not to implement the proposed amendment. If the Board exercised such discretion,
the number of authorized shares would remain at the current level.
VOTE NECESSARY TO APPROVE THE AMENDMENT
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock entitled to vote at the annual meeting, assuming a quorum is
present, is necessary for approval of the amendment. Therefore, abstentions and
broker non-votes effectively count as votes against the amendment.
PROPOSAL 3. APPOINTMENT OF AUDITORS
It is proposed that the stockholders ratify the appointment by the Board of
Directors of KPMG LLP as independent auditors for the purpose of auditing and
reporting upon the consolidated financial statements of the Company for the year
ending December 31, 2004. It is expected that a representative of that firm will
be present at the Annual Meeting of Stockholders to be held on May 20, 2004 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, 2003
and 2002:
2003 2002
-------- --------
AUDIT FEES
Consists of fees billed for professional services rendered for the audit
of the Company's financial statements and the reviews of the interim
financial statements included in the
Company's Quarterly Reports ................................................ $322,000 $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 ....................................... $ 23,700 $ 19,500
24
TAX FEES:
Tax Planning and Compliance
Consists of fees billed for tax planning, assistance with the
preparation of tax returns, services rendered in connection with
acquisitions made by the Company and
advice on other tax related matters ................................. $ 14,950 $ 7,075
ALL OTHER FEES:
Other Services ......................................................... 0 0
-------- --------
TOTAL ALL FEES ............................................................ $360,650 $348,575
======== ========
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, 2004, 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 2005 must be received by
the Company at its principal executive offices on or before February 2, 2005.
By Order of the Board of Directors
EDWARD W. ROSE, III
April 12, 2004 CHAIRMAN OF THE BOARD OF DIRECTORS
25
DREW INDUSTRIES INCORPORATED
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS - MAY 20, 2004
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking any proxy heretofore given, hereby appoints LEIGH J.
ABRAMS and FREDRIC M. ZINN, or either of them, proxies of the undersigned, with
full power of substitution, with respect to all the shares of the Common Stock
which the undersigned is entitled to vote at the Annual Meeting of Stockholders
of Drew Industries Incorporated, to be held at The Crescent Club, 17th Floor,
200 Crescent Court, Dallas, Texas 75201 on May 20, 2004 at 9:00 A.M., and at any
adjournment or postponement thereof, upon the following items as set forth in
the Notice of Annual Meeting and Proxy Statement, and in their discretion on any
other matters that may properly come before the meeting or any adjournment or
postponement thereof.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
14475
ANNUAL MEETING OF STOCKHOLDERS OF
DREW INDUSTRIES INCORPORATED
MAY 20, 2004
Please date, sign and mail your
proxy card in the
envelope provided as soon
as possible.
Please detach along perforated line and mail in the envelope provided.
--------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION
OF DIRECTORS AND "FOR" PROPOSALS 2 AND 3.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE [X]
1. To elect a board of eight directors. FOR AGAINST ABSTAIN
2. TO APPROVE AN AMENDMENT TO THE [ ] [ ] [ ]
CERTIFICATE OF INCORPORATION
NOMINEES:
[ ] FOR ALL NOMINEES O Edward W. Rose, III 3. TO RATIFY THE APPOINTMENT OF KPMG LLP AS [ ] [ ] [ ]
O Leigh J. Abrams INDEPENDENT AUDITORS.
[ ] WITHHOLD AUTHORITY O David L. Webster
FOR ALL NOMINEES O L. Douglas Lippert
O James F. Gero
[ ] FOR ALL EXCEPT O Gene H. Bishop
(See instructions O Frederick B. Hegi, Jr.
below) O David A. Reed
INSTRUCTION: To withhold authority to vote for any individual nominee(s), mark
"FOR ALL EXCEPT" and fill in the circle next to each nominee you wish to
withhold, as shown here:
--------------------------------------------------------------------------------
To change the address on your account, please check the box at right and
indicate your new address in the address space above. Please note that
changes to the registered name(s) on the account may not be submitted
via this method. [ ]
PLEASE CHECK HERE IF YOU PLAN TO ATTEND THE MEETING. [ ]
Signature of Stockholder___________________________Date:____________
Signature of Stockholder___________________________Date:____________
NOTE: Please sign exactly as your name or names appear on this Proxy. When
shares are held jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee or guardian, please give full title as such. If
the signer is a corporation, please sign full corporate name by duly authorized
officer, giving full title as such. If signer is a partnership, please sign in
partnership name by authorized person.