UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Soliciting Material under §240.14a-12
Drew Industries Incorporated
(Name of Registrant as Specified in its Charter)
 
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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3501 County Road 6 East
Elkhart, IN 46514
(574) 535-1125
INDUSTRIES INCORPORATED
 

 




April 11, 2014





Dear Fellow Stockholders:

You are cordially invited to join us for our 2014 Annual Meeting of Stockholders, which will be held at the Rosewood Crescent Hotel, 400 Crescent Court, Dallas, Texas 75201 on May 22, 2014 at 9:00 A.M.

The Secretary’s Notice of Annual Meeting of Stockholders and the Proxy Statement that follow describe the business to be conducted at the annual meeting.

Your vote is important. Whether or not you attend the meeting, we encourage you to submit your proxy vote by telephone or Internet as described in the following materials or by completing and signing the enclosed proxy card and returning it in the envelope provided. This will ensure that your shares are represented at the meeting. Even if you submit a proxy, you may revoke it at any time before it is voted. If you attend the meeting and wish to vote in person, you will be able to do so even if you have previously returned your proxy card.

We appreciate your support of our Company.

Sincerely,

LEIGH J. ABRAMS

Chairman of the Board


DREW INDUSTRIES INCORPORATED
3501 County Road 6 East
Elkhart, Indiana 46514
 
Notice of Annual Meeting of Stockholders
to be held May 22, 2014
 
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Drew Industries Incorporated (the “Company”) will be held at the Rosewood Crescent Hotel, 400 Crescent Court, Dallas, Texas 75201 on May 22, 2014 at 9:00 A.M., for the following purposes:
(1)
To elect eight Directors to serve until the next Annual Meeting of Stockholders, each as recommended by the Board of Directors;
(2)
To approve an amendment to the Drew Industries Incorporated Equity Award and Incentive Plan, as Amended and Restated;
(3)
An advisory vote to approve the compensation of the Company’s named executive officers as disclosed in the accompanying Proxy Statement;
(4)
To ratify the appointment of KPMG LLP as independent auditor for the Company for the year ending December 31, 2014; and
(5)
To transact such other corporate business as may properly come before the meeting or any adjournment or postponement thereof.
The Board of Directors has fixed March 26, 2014 as the record date for the meeting, and only holders of record of the Company’s Common Stock at the close of business on that date will 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,
 
 
 
 
 
ROBERT A. KUHNS
 
 
Vice President-Chief Legal Officer and Secretary
 
Dated: April 11, 2014
Elkhart, IN
 
NOTICE TO HOLDERS OF COMMON STOCK
YOUR PROXY IS IMPORTANT TO ENSURE A QUORUM AT THE MEETING.
IF YOU DO NOT EXPECT TO ATTEND THE MEETING, PLEASE SIGN AND
RETURN THE ENCLOSED PROXY CARD SO THAT YOU WILL BE REPRESENTED.
A POST-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
IF YOU ARE VOTING OVER THE INTERNET, PLEASE DO NOT RETURN
THE ENCLOSED PROXY CARD.
 
 
 
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF
PROXY MATERIALS FOR THE ANNUAL STOCKHOLDER MEETING
TO BE HELD ON MAY 22, 2014.
 
THIS NOTICE OF ANNUAL MEETING, PROXY STATEMENT AND
OUR 2013 ANNUAL REPORT TO STOCKHOLDERS,
INCLUDING OUR 2013 ANNUAL REPORT ON FORM 10-K, ARE AVAILABLE AT  
HTTP://WWW.PROXYVOTE.COM .
 



TABLE OF CONTENTS
Page
 
 
 
 
 
 
 
 
 
 
 
 

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DREW INDUSTRIES INCORPORATED
3501 County Road 6 East
Elkhart, Indiana 46514
 
PROXY STATEMENT
2014 ANNUAL MEETING OF STOCKHOLDERS
 

General Information
The Board of Directors of Drew Industries Incorporated, a Delaware corporation (the “Company”), is soliciting proxies for use at the Annual Meeting of Stockholders to be held at the Rosewood Crescent Hotel, 400 Crescent Court, Dallas, Texas 75201 on May 22, 2014 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 March 26, 2014 (the “Record Date”) shall be entitled to vote on all matters considered at the meeting.
All validly completed and executed proxies received by the Company (whether by mail or via the Internet) in time for the Annual Meeting will be voted in the manner indicated on the proxies and, if no contrary instructions are indicated, “FOR” the Directors named in Proposal 1, and “FOR” Proposals 2, 3 and 4. If specific instructions are indicated, the proxies will be voted in accordance with such instructions. 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, or by attending the Annual Meeting and voting in person. This Proxy Statement and the accompanying form of proxy card solicited from holders of the Common Stock are expected to be sent or given to stockholders on or about April 11, 2014.
If you hold shares of the Company’s Common Stock in your own name and not through your broker or another nominee, you may choose to vote via the Internet. The website for Internet voting is www.proxyvote.com . Internet voting is available 24 hours a day until 11:59 P.M., Eastern Time, on May 21, 2014. You will be able to confirm that your instructions have been properly recorded. If your shares are held in “street name” (that is, in the name of a bank, broker or other holder of record), you will receive instructions from the holder of record that you must follow in order for your shares to be voted. Internet voting also will be available to stockholders owning shares held in “street name”. If you vote via the Internet, you do not need to return your proxy card.
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.
The Annual Report to Stockholders of the Company for the year ended December 31, 2013, together with this Proxy Statement, is being mailed to each stockholder of record who requested paper copies of these materials.
THE COMPANY’S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2013 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (INCLUDING THE CONSOLIDATED FINANCIAL STATEMENTS) IS PART OF THE ANNUAL REPORT TO STOCKHOLDERS WHICH ACCOMPANIES THIS PROXY STATEMENT. ADDITIONAL COPIES WILL BE FURNISHED TO ANY STOCKHOLDER WITHOUT CHARGE UPON REQUEST TO THE COMPANY AT 3501 COUNTY ROAD 6 EAST, ELKHART, INDIANA 46514, TELEPHONE (574) 535-1125, E-MAIL DREW@DREWINDUSTRIES.COM . THE ANNUAL REPORT ON FORM 10-K IS ALSO AVAILABLE THROUGH LINKS ON THE COMPANY’S WEBSITE AT WWW.DREWINDUSTRIES.COM AND AT WWW.PROXYVOTE.COM .


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THE COMPANY
Drew Industries Incorporated (“Drew” or the “Company”), through its wholly-owned subsidiary Lippert Components, Inc. and its subsidiaries (collectively, “Lippert Components”), supplies a full line of components for the leading manufacturers of recreational vehicles (“RVs”) and manufactured homes, as well as the aftermarket for these industries. To a lesser extent, Drew, through Lippert Components, also manufactures components for adjacent industries including buses; trailers used to haul boats, livestock, equipment and other cargo; truck caps; modular housing; and factory-built mobile office units.
The Company was incorporated under the laws of Delaware on March 20, 1984, and is the successor to Drew National Corporation, which was incorporated under the laws of Delaware in 1962. The Company’s principal executive and administrative offices are located at 3501 County Road 6 East, Elkhart, Indiana 46514; telephone number (574) 535-1125; 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.

Executive Succession and Relocation

On May 10, 2013, Fredric M. Zinn retired as President and Chief Executive Officer of Drew. Jason D. Lippert, Chairman and Chief Executive Officer of Lippert Components, succeeded Mr. Zinn as Chief Executive Officer of Drew. Scott T. Mereness, President of Lippert Components, succeeded Mr. Zinn as President of Drew. This leadership transition was the result of a comprehensive succession process initiated by the Board of Directors in 2011.

In June 2013, the Company also relocated its corporate headquarters from White Plains, New York to Elkhart County, Indiana, the location of the corporate headquarters of Lippert Components, and where more than 80 percent of all RVs produced in the U.S. are manufactured.
VOTING SECURITIES
The Company’s Common Stock trades on the New York Stock Exchange (“NYSE”) under the symbol “DW”.
Stockholders of record will be entitled to one vote on each matter for each share of Common Stock held on the Record Date. At the close of business on the Record Date, there were 23,621,908 shares of our Common Stock outstanding and eligible to vote at the Annual Meeting. 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 for the transaction of business. Abstentions and broker non-votes will be treated as shares present for the purpose of determining the presence of a quorum. “Broker non-votes” means shares held of record by a broker that are not voted on a matter because the broker has not received voting instructions from the beneficial owner of the shares and lacks the authority to vote the shares in its discretion. Broker non-votes are not counted as votes cast for any purpose in determining whether a matter has been approved.
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 Annual 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.
Vote Required on Proposals
Proposal 1–Election of Directors: Directors are elected by a plurality of the votes cast at the meeting. This means that the eight nominees who receive the most votes will be elected. The Company does not have cumulative voting. Under the NYSE rules, your brokerage firm or other nominee that is a member of the NYSE is not permitted to vote your shares with respect to Proposal 1 without specific instructions from you as to how to vote with respect to the election of each of the eight nominees for director, because the election of directors is not considered a “routine” matter under the NYSE rules. Abstentions, and broker non-votes represented by submitted proxies, will not be taken into account in determining the outcome of this proposal.
Proposal 2–Amendment to Equity Plan: To be approved, this proposal requires an affirmative vote of a majority of the votes cast. This means that the votes that our stockholders cast “FOR” this proposal must exceed the votes that our stockholders cast “AGAINST” this proposal at the meeting. Proposal 2 is not considered a “routine” matter under the NYSE rules and, therefore, brokerage firms and nominees that are members of the NYSE will not be able to vote the shares of customers from whom they have not received voting instructions with regard to this proposal. In compliance with NYSE rules, abstentions will be considered votes cast on this proposal, and therefore have the same effect as negative votes. Broker non-votes represented by submitted proxies will not be taken into account in determining the outcome of this proposal.

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Proposal 3–Advisory Vote on Executive Compensation: To be approved, this advisory proposal requires an affirmative vote of a majority of the votes cast. This means that the votes that our stockholders cast “FOR” this proposal must exceed the votes that our stockholders cast “AGAINST” this proposal at the meeting. Because your vote is advisory, it will not be binding on the Board of Directors or the Company. Proposal 3 is not considered a “routine” matter under the NYSE rules and, therefore, brokerage firms and nominees that are members of the NYSE will not be able to vote the shares of customers from whom they have not received voting instructions with regard to this proposal. Abstentions, and broker non-votes represented by submitted proxies, will not be taken into account in determining the outcome of this proposal.
Proposal 4–Appointment of Auditors : To be approved, this proposal requires an affirmative vote of a majority of the votes cast. This means that the votes that our stockholders cast “FOR” this proposal must exceed the votes that our stockholders cast “AGAINST” this proposal at the meeting. Proposal 4 is considered a “routine” matter under the NYSE rules and, therefore, brokerage firms and nominees that are members of the NYSE have the authority under those rules to vote their customers’ shares on Proposal 4 if their customers have not furnished voting instructions within a specified period of time prior to the meeting. Abstentions will not be taken into account in determining the outcome of this proposal.
We are not currently aware of any other business to be acted upon at the Annual Meeting. If, however, other matters are properly brought before the meeting, or any adjournment or postponement of the meeting, your proxy includes discretionary authority on the part of the individuals appointed to vote your Common Stock or act on those matters according to their best judgment, including to adjourn the Annual Meeting.
In order to minimize the number of broker non-votes, the Company encourages you to provide voting instructions to the organization that holds your shares by carefully following the instructions provided in their notice.
Recommendations of the Board of Directors
The Board of Directors recommends that you vote FOR each of the nominees for the Board of Directors (Proposal 1), FOR approval of the amendment to the Drew Industries Incorporated Equity Award and Incentive Plan, as Amended and Restated (Proposal 2), FOR advisory approval of the compensation of the Company’s named executive officers (Proposal 3), and FOR ratification of the appointment of KPMG LLP as the Company’s independent auditor for the fiscal year ending December 31, 2014 (Proposal 4).
Principal Holders of Voting Securities
Set forth below is information with respect to each person known to the Company on March 26, 2014 to be the beneficial owner of more than five percent of any class of the Company’s voting securities. Unless otherwise noted, the stockholders listed in the table have sole voting and investment power with respect to the shares of Common Stock owned by them.
Name and Address of Beneficial Owner
 
Amount and Nature of Beneficial Ownership (1)
 
Approximate Percent of Class (1)
 
 
 
 
 
Columbia Wanger Asset Management, LLC (2)    
 
2,839,500
 
12.0%
227 West Monroe Street, Suite 3000
Chicago, IL 60606
 
 
 
 
 
 
 
 
 
BlackRock, Inc.  (3)    
 
2,039,217
 
8.6%
40 East 52nd Street
New York, NY 10022
 
 
 
 
 
 
 
 
 
T. Rowe Price Associates, Inc.  (4)    
 
1,793,890
 
7.6%
100 E. Pratt Street
Baltimore, MD 21202
 
 
 
 
 
 
 
 
 
The Vanguard Group, Inc.  (5)    
 
1,416,943
 
6.0%
100 Vanguard Boulevard
Malvern, PA 19355
 
 
 
 
 
 
 
 
 
Royce & Associates, LLC (6)    
 
1,254,376
 
5.3%
745 Fifth Avenue
New York, NY 10151

 
 
 
 
 
 
 
 
 
 

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(1)
Beneficial ownership is determined in accordance with rules of the Securities and Exchange Commission (“SEC”), and includes general voting power and/or investment power with respect to securities. Shares of common stock subject to options or deferred stock units (“DSUs”) currently exercisable or exercisable within 60 days of March 26, 2014 are deemed to be outstanding for the purpose of computing the amount of beneficial ownership and percentage of the person holding such options or DSUs, but are not deemed outstanding for computing the percentage of any other person.
(2)
Based on information reported to the SEC in an amended Schedule 13G filed by Columbia Wanger Asset Management, LLC (“CWAM”) on February 6, 2014, reflecting beneficial ownership as of December 31, 2013. CWAM had sole voting power over 2,584,500 shares and sole dispositive power over 2,839,500 shares. CWAM does not directly own any shares of common stock. As the investment advisor of Columbia Acorn Fund and various other investment companies and managed accounts, CWAM may be deemed to beneficially own the shares reported. CWAM disclaims beneficial ownership of any shares reported.
(3)
Based on information reported to the SEC in an amended Schedule 13G filed by BlackRock, Inc. on January 17, 2014, reflecting beneficial ownership as of December 31, 2013. BlackRock had sole voting power over 1,980,688 shares and sole dispositive power over 2,039,217 shares.
(4)
Based on information reported to the SEC in an amended Schedule 13G filed by T. Rowe Price Associates, Inc. (“T. Rowe Price”) on February 14, 2014, reflecting beneficial ownership as of December 31, 2013. T. Rowe Price had sole voting power over 769,290 shares and sole dispositive power over 1,793,890 shares.
(5)
Based on information reported to the SEC in an amended Schedule 13G filed by The Vanguard Group on February 6, 2014, reflecting beneficial ownership as of December 31, 2013. The Vanguard Group had sole voting power over 30,397 shares, sole dispositive power over 1,387,646 shares, and shared dispositive power over 29,297 shares.
(6)
Based on information reported to the SEC in an amended Schedule 13G filed by Royce & Associates, LLC on January 9, 2014, reflecting beneficial ownership as of December 31, 2013.
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 Certain Beneficial Owners and Management
Set forth below is information with respect to beneficial ownership at March 26, 2014 of the Company’s voting securities by each Director, each of whom is a nominee for election, by each of our executive officers named in the Summary Compensation Table herein, and by all Directors and executive officers of the Company as a group. Unless otherwise noted, the stockholders listed in the table have sole voting and investment power with respect to the shares of Common Stock owned by them, and their address is c/o Drew Industries Incorporated, 3501 County Road 6 East, Elkhart, Indiana 46514.
Name of Beneficial Owner
Amount and Nature
of Beneficial Ownership (1)
Approximate
Percent of Class (1)
 
 
 
Edward W. Rose, III, Director (2)    
450,539 (3)
1.9%
 
 
 
James F. Gero, Director (2)    
187,725 (4)
*
 
 
 
Frederick B. Hegi, Jr., Director
165,958 (5)
*
 
 
 
Leigh J. Abrams, Director (2)    
115,636 (6)
*
 
 
 
Scott T. Mereness, Executive Officer
105,696 (7)
*
 
 
 
Jason D. Lippert, Director and Executive Officer
80,167 (8)
*
 
 
 
John B. Lowe, Jr., Director
62,760 (9)
*
 
 
 
David A. Reed, Director
41,697 (10)
*
 
 
 
Joseph S. Giordano III, Executive Officer
23,956 (11)
*
 
 
 
Fredric M. Zinn, Former Director and Executive Officer (2)    
14,233 (12)
*

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Brendan J. Deely, Director
12,356 (13)
*
 
 
 
Robert A. Kuhns, Executive Officer
332 (14)
*
 
 
 
All Directors and executive officers as a group (13 persons including the above-named)
1,261,055 (15)
5.3%
 
*
Represents less than 1 percent of the outstanding shares of Common Stock.
(1)
Beneficial ownership is determined in accordance with rules of the SEC, and includes general voting power and/or investment power with respect to securities. Shares of common stock subject to options or DSUs currently exercisable or exercisable within 60 days of March 26, 2014 are deemed to be outstanding for the purpose of computing the amount of beneficial ownership and percentage of the person holding such options or DSUs, but are not deemed outstanding for computing the percentage of any other person.
(2)
Pursuant to Rules 13-1(f) (1)-(2) of Regulation 13D of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), on May 31, 1989, the persons indicated, together with certain other persons, jointly filed a single Schedule 13D 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.
(3)
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 1,200 shares owned by her of record, which are also excluded. Mr. Rose disclaims any beneficial interest in such shares. Includes options to purchase 12,500 shares at $8.72 per share, 7,500 shares at $15.49 per share and 11,500 shares at $15.67 per share, granted in December 2008, November 2009, and November 2010, respectively. Includes restricted stock representing 2,657 shares granted to Mr. Rose in November 2013.
(4)
Mr. Gero shares voting and dispositive power with respect to such shares with his wife. Includes options to purchase 12,500 shares at $8.72 per share, 7,500 shares at $15.49 per share and 11,500 shares at $15.67 per share, granted in December 2008, November 2009, and November 2010, respectively. Includes restricted stock representing 2,657 shares granted to Mr. Gero in November 2013.
(5)
Includes 69,000 shares owned of record by Hegi Family Holdings, LP, of which Mr. Hegi has sole voting and dispositive power with respect to such shares. Includes options to purchase 7,500 shares at $15.49 per share and 11,500 shares at $15.67 per share, granted in November 2009 and 2010, respectively. Includes restricted stock representing 2,657 shares granted to Mr. Hegi in November 2013.
(6)
Includes options to purchase 20,000 shares at $6.09 per share, 11,400 shares at $15.49 per share and 18,000 shares at $15.67 per share, granted in November 2008, 2009 and 2010, respectively. Includes restricted stock representing 2,657 shares granted to Mr. Abrams in November 2013.
(7)
Excludes DSUs representing 64,662 shares granted to Mr. Mereness, which are not issuable within 60 days. Excludes 96,735 shares subject to stock awards granted to Mr. Mereness, which are not issuable within 60 days. Includes 741 DSUs which are issuable within 60 days. Includes options to purchase 9,200 shares at $6.09 per share, 9,600 shares at $15.49 per share, 13,200 shares at $15.67 per share and 15,400 shares at $19.17 per share, granted in November 2008, 2009, 2010 and 2011, respectively. Excludes options to purchase 2,400 shares at $15.49 per share, 8,800 shares at $15.67 per share and 6,600 shares at $19.17 per share, granted in November 2009, 2010 and 2011, respectively.
(8)
Excludes DSUs representing 53,712 shares granted to Mr. Lippert, which are not issuable within 60 days. Excludes 138,350 shares subject to stock awards granted to Mr. Lippert, which are not issuable within 60 days. Excludes options to purchase 3,200 shares at $15.49 per share, 11,200 shares at $15.67 per share and 8,400 shares at $19.17 per share, granted in November 2009, 2010 and 2011, respectively.
(9)
Excludes DSUs representing 3,105 shares granted to Mr. Lowe, which are not issuable within 60 days. Includes options to purchase 12,500 shares at $8.72 per share, 7,500 shares at $15.49 per share and 11,500 shares at $15.67 per share, granted in December 2008, November 2009 and November 2010, respectively. Includes restricted stock representing 2,657 shares granted to Mr. Lowe in November 2013.

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(10)
Includes options to purchase 3,481 shares at $15.49 per share and 11,500 shares at $15.67 per share, granted in November 2009 and 2010, respectively. Includes restricted stock representing 2,657 shares granted to Mr. Reed in November 2013.
(11)
Excludes DSUs representing 45,084 shares granted to Mr. Giordano, which are not issuable within 60 days. Includes options to purchase 2,000 shares at $6.09 per share, 8,000 shares at $15.49 per share and 9,000 shares at $15.67 per share, granted in November 2008, 2009 and 2010, respectively. Excludes options to purchase 2,000 shares at $15.49 per share and 6,000 shares at $15.67 per share, granted in November 2009 and 2010, respectively.
(12)
Includes 2,718 shares owned of record by Mr. Zinn’s son. Mr. Zinn disclaims any beneficial interest in such shares. Includes 10,800 DSUs which are issuable within 60 days. Excludes DSUs representing 167,769 shares granted to Mr. Zinn, which are not issuable within 60 days.
(13)
Includes restricted stock representing 2,657 shares granted to Mr. Deely in November 2013.
(14)
Excludes DSUs representing 3,783 shares granted to Mr. Kuhns, which are not issuable within 60 days.
(15)
Includes 244,281 shares of Common Stock subject to options and 11,541 DSUs.
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 SEC and the NYSE. Officers, directors and greater than ten-percent stockholders 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 2013 all such filing requirements applicable to its officers and directors (the Company not being aware of any ten-percent stockholders during 2013 other than Columbia Wanger Asset Manager, LLC) were complied with.
Proposal 1. ELECTION OF DIRECTORS
Our business is overseen by our Board of Directors, and our Bylaws provide that the number of directors, not less than three, shall be fixed from time to time by resolution of the Board. The Board of Directors currently consists of eight 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.
Director Qualifications and Selection Process
The Corporate Governance and Nominating Committee of the Board leads the search for individuals qualified to become Directors and selects nominees to be presented for stockholder approval at each Annual Meeting. The Committee considers candidates for Board membership suggested by members of the Committee and other Board members, as well as by 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 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 carry 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 circumstances 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 Committee seeks candidates who have demonstrated exceptional ability and judgment and who can be most effective, in conjunction with other directors, to collectively serve the long-term interests of our stockholders. The particular experience, qualifications and skills of each nominee described on pages 10 and 11 of this Proxy Statement reflect that our Board, taken as a whole, provides a broad diversity of knowledge of our Company and industry, expertise in finance and investment, competence in accounting and financial reporting, and leadership in business and with socially-responsible organizations.
The Corporate Governance and Nominating Committee recommended to the Board each of the nominees for election as directors as set forth herein. No candidates for director nominees were submitted to the Committee by any stockholder in connection with the 2014 Annual Meeting. Stockholders may propose nominees for consideration by the Corporate Governance and Nominating Committee by submitting the names and supporting information, in writing, to Secretary, Drew Industries Incorporated, 3501 County Road 6 East, Elkhart, Indiana 46514. The proposed nominee must meet the qualifications for directors described above. No later than February 20,

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2015, any stockholder who intends to make a nomination at the 2015 Annual Meeting must deliver a notice, in writing, to the Secretary setting forth (i) the name, age, business address and residence address of each nominee proposed in such notice, (ii) the principal occupation or employment of each such nominee, (iii) the number of shares of capital stock of the Corporation which are beneficially owned by each such nominee, (iv) a statement that the nominee is willing to be nominated and (v) such other information concerning each such nominees as would be required, under the rules of the SEC, in a proxy statement soliciting proxies for the election of such nominees.
Our Director Nominees
Following the recommendation of the Corporate Governance and Nominating Committee, the Board of Directors has nominated the eight persons named below for election to the Board of Directors at the Annual Meeting. Each of the following nominees was elected to his present term of office at the Annual Meeting of Stockholders held on May 23, 2013.
Leigh J. Abrams, age 71
Mr. Abrams, Chairman of the Board of Directors, has been a member of our Board of Directors since 1984 and was Chief Executive Officer of the Company from March 1984 to December 2008 and President from March 1984 until May 2008. Since April 2001, Mr. Abrams has also been a director of Impac Mortgage Holdings, Inc., a publicly-owned company engaged in origination of residential mortgages as well as a mortgage services platform providing solutions to the mortgage and real estate markets, and Lead Director of Impac Mortgage Holdings, Inc. since June 2004. Mr. Abrams is a Certified Public Accountant.
Mr. Abrams has particular knowledge of our Company and the industries to which we sell our products, extensive experience with corporate management, acquisitions, governance and strategic planning, accounting and financial acumen, investor relations, and public company board experience.
James F. Gero, age 69
Mr. Gero, Lead Director, has been a member of our Board of Directors since 1992. Mr. Gero is a private investor and served as Chairman of the Board of Orthofix International, N.V., a publicly-owned international supplier of orthopedic devices for bone fixation and stimulation, from 2004 to December 2013, and has also served as a director of Intrusion.com, Inc., a publicly-owned supplier of security software, from 2004.
Mr. Gero has extensive experience with respect to corporate management and leadership, strategic planning, and compensation matters, and has public company board experience.
Edward W. Rose, III, age 73
Mr. Rose has been a member of our Board of Directors since 1984 and was Chairman of the Board of Directors from March 1984 to December 31, 2008 and Lead Director from January 2009 to November 2011. For more than the past five years, Mr. Rose has been President and sole stockholder of Cardinal Investment Company, Inc., an investment firm.
Mr. Rose has extensive knowledge and acumen with respect to financial and investment matters, strategic planning, and stock markets, and has public company board experience.
Jason D. Lippert, age 41
Mr. Lippert has been a member of our Board of Directors since 2007. He became Chief Executive Officer of the Company effective May 10, 2013, succeeding Fredric M. Zinn, and has been Chief Executive Officer of Lippert Components since February 2003. Mr. Lippert has over 15 years of experience with Drew and its subsidiaries, where he has served in a wide range of leadership positions.
Mr. Lippert has particular knowledge of the industries and customers to which we sell our products, as well as extensive experience with strategic planning, acquisitions, marketing, manufacturing, and sale of our products.
Frederick B. Hegi, Jr., age 70
Mr. Hegi has been a member of our Board of Directors since 2002. Mr. Hegi is a founding partner of Wingate Partners, a private equity firm, and the indirect general partner of Wingate Partners II, L.P. Since May 1982, Mr. Hegi has served as President of Valley View Capital Corporation, a private investment firm. Mr. Hegi is a director of Texas Capital Bancshares, Inc., a publicly-owned regional bank. From 1996 until December 2011, Mr. Hegi served as Chairman of the Board of United Stationers, Inc., a publicly-owned wholesale distributor of business products.

10




Mr. Hegi has particular knowledge of the industries to which we sell our products, and extensive experience with respect to corporate management and leadership, strategic planning, governance matters, and has public company board experience.
David A. Reed, age 66
Mr. Reed has been a member of our Board of Directors since 2003. Mr. Reed is President of Causeway Capital Management LLC, manager of a family 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 & Young LLP’s Management Committee and Global Executive Council from 1991-2000. From 2006 until November 2011, Mr. Reed was a director of Penson Worldwide, Inc., a publicly-owned company engaged in providing flexible technology-based processing solutions to the investment industry.
Mr. Reed has accounting and financial acumen, with particular knowledge of financial reporting and taxation, has been determined to be an “audit committee financial expert” under the SEC’s rules and regulations, and has public company board experience.
John B. Lowe, Jr., age 74
Mr. Lowe has been a member of our Board of Directors since 2005. Mr. Lowe has been Chairman of TDIndustries, Inc., a national mechanical/electrical/plumbing construction and facility service company, since 1981. From January 1981 to January 2005, Mr. Lowe also served as Chief Executive Officer of TDIndustries. Mr. Lowe is Chairman of the Board of Zale Corporation, a publicly-owned specialty retailer of fine jewelry, and is a director of KDC Platform, LLC, engaged in real estate development.
Mr. Lowe has extensive experience with respect to corporate management and leadership, management development, strategic planning, compensation and governance matters, has public and private company board experience, and extensive experience with social responsibility organizations.
Brendan J. Deely, age 48
Mr. Deely has been a member of our Board of Directors since 2011. Mr. Deely has been President and Chief Executive Officer of L&W Supply Corporation, a subsidiary of USG Corporation, since 2004, and Senior Vice President of USG Corporation since 2008. USG Corporation, a publicly-owned company, is a manufacturer and distributor of high-performance building systems. L&W Supply branches stock and deliver building materials nationwide. For more than five years prior thereto, Mr. Deely held various executive positions with USG Corporation and its subsidiaries. Mr. Deely also serves on the board of directors of the National Safety Council, and serves on the board of directors of Lincoln Park Community Shelter in Chicago, Illinois.
Mr. Deely has extensive experience with respect to corporate management, operations and compensation matters, and extensive experience with social responsibility organizations. Mr. Deely brings to the Board additional geographic and age diversity.
Unless contrary instructions are indicated, the persons named as proxies in the form of proxy card solicited from holders of the Common Stock will vote for the election of the nominees indicated above. 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.
Directors are elected by a plurality of the votes cast at the meeting. See “Voting Securities – Vote Required on Proposals.”
The Board of Directors recommends a vote FOR election of the eight nominated directors.
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 the Dodd-Frank Wall Street Reform Act of 2010 (the “Dodd-Frank Act”), and rules promulgated by the SEC and the NYSE. The Company complies with all laws and rules applicable to corporate governance, and has continually implemented “best practices” as the Company deems appropriate to protect and enhance stockholders’ interests.

The Company’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, Code of Ethics for Senior Financial Officers, and Whistleblower Policy 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, 3501 County Road 6 East, Elkhart, Indiana 46514. Information on our website is not incorporated by reference into this Proxy Statement.

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Board of Directors and Director Independence
Directors are elected annually by the Company’s stockholders for one year terms. The Board currently consists of one Director, Jason D. Lippert, who is employed by the Company as our Chief Executive Officer and seven independent Directors. The independent Directors are Leigh J. Abrams, James F. Gero, Edward W. Rose, III, Frederick B. Hegi, Jr., David A. Reed, John B. Lowe, Jr., and Brendan J. Deely.
The Board of Directors reviews at least annually the independence of each Director. During these reviews, the Board considers transactions and relationships between each Director (and his immediate family and affiliates) and the Company and Management to determine whether any such transactions or relationships are inconsistent with a determination that the Director is independent. The review is based primarily on responses of the Directors to questions in a directors’ and officers’ questionnaire regarding employment, business, familial, compensation and other relationships. In March 2014, the Board determined that neither Messrs. Abrams, Gero, Rose, Hegi, Reed, Lowe, nor Deely, nor any members of their immediate families, have any transactions or relationships with the Company or its subsidiaries. Accordingly, the Board has determined that each of these seven Directors meets the “independence” standards of the NYSE.
In making the determination of independence, the Board applied the following standards, in addition to other relevant facts and circumstances:
•    A director who is an employee, or whose immediate family member is an executive of the Company, is not independent until three years after the end of such employment relationship.
•    A director who receives, or whose immediate family member receives, more than $120,000 per year in direct compensation from the Company, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service), generally is not independent until three years after he ceases to receive more than $120,000 per year in such compensation.
•    A director is not independent if (i) the director or an immediate family member is a current partner of a firm that is the Company’s internal or external auditor, (ii) the director is a current employee of such a firm, (iii) the director has an immediate family member who is a current employee of such a firm and who participates in the firm’s audit, assurance or tax compliance (but not tax planning) practice, or (iv) the director or an immediate family member was within the last three years (but is no longer) a partner or employee of such a firm and personally worked on the Company’s audit within that time.
•    A director who is employed, or whose immediate family member is employed, as an executive officer of another company where any of the Company’s present executives serve on that company’s compensation committee is not independent until three years after the end of such service or the employment relationship.
•    A director who is an executive officer or an employee, or whose immediate family member is an executive officer, of another company that makes payments to, or receives payments from, the Company for property or services in an amount which, in any single fiscal year, exceeds the greater of $1 million or 2 percent of such other company’s consolidated gross revenues, in each case is not independent until three years after falling below such threshold.
•    A director who is, or whose immediate family member is, an officer, director or trustee of a not-for-profit organization that received contributions from the Company during the organization’s most recent fiscal year equal to or greater than the lesser of $50,000 and 1 percent of the organization’s total annual donations is not independent.
The independent 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, 2013, the Board of Directors held eight 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 2013 Annual Meeting, seven of the eight members of the Board were present.
Leadership Structure
The Company has continuously maintained separate positions for Chairman of the Board and for Chief Executive Officer in order to provide an independent and unbiased level of review and oversight of senior management. Leigh J. Abrams currently serves as Chairman of the Board, and Jason D. Lippert serves as Chief Executive Officer.
Lead Director
The Board of Directors has also elected an independent Director to serve in a lead capacity (Lead Director) to coordinate the activities of the other independent Directors, serve as a liaison on Board-related issues between the independent directors and both the Chairman and the CEO, and to perform any other duties and responsibilities that the Board of Directors may determine. While the Board

12



elects a Lead Director annually, it is generally expected that he or she will serve for more than one year. James F. Gero currently serves as Lead Director.
The role of the Lead Director also includes:
•
presiding at executive sessions, with the authority to call meetings of the independent directors;
•
advising on the selection of Committee chairs;
•
advising Management on the agenda for Board meetings and assuring that there is sufficient time for discussion of all items on Board meeting agendas;
•
providing leadership to the Board if circumstances arise in which the role of the Chairman of the Board may be, or may be perceived to be, in conflict, and otherwise act as chairman of meetings when the Chairman is not available;
•
recommending to the Chairman the retention of outside advisors and consultants who report directly to the Board of Directors; and
•
being available for direct communication from stockholders.
The Board periodically reviews the Company’s board leadership structure to evaluate whether it remains appropriate for the Company.
Executive Sessions
The independent Directors meet regularly in executive sessions without Management. An executive session is held in conjunction with each regularly scheduled Board meeting and is led by the Lead Director. Additional executive sessions may be called by the Lead Director in his discretion or at the request of the Board.
Risk Management Oversight
The Company faces a number of material risks, including financial and operational risks. Accordingly, the Company conducts regular enterprise risk management reviews to identify and assess these risks, and to implement effective plans to manage them. Although the entire Board of Directors is directly involved with risk management oversight, the Audit Committee plays a key role. The Company’s Chief Executive Officer and Chief Financial Officer meet regularly with the Audit Committee to discuss risks facing the Company, the status and effectiveness of plans implemented to manage such risks, and new risks as they arise. The Audit Committee regularly reports to the entire Board to apprise the Directors of Management’s efforts in regard to risk management.
Contacting the Board of Directors
Any stockholder, or other interested party, who wishes to communicate with the Board of Directors, or the Lead Director, or our independent Directors as a group, 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 c/o Drew Industries Incorporated, 3501 County Road 6 East, Elkhart, Indiana 46514. Communications received electronically or in writing will be distributed to the Chairman, Lead Director or the other members of the Board, as appropriate, depending on the facts and circumstances described in communications received. For example, communications regarding accounting, internal accounting, internal accounting controls and auditing matters generally will be forwarded to the Chairman of the Audit Committee.
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 independent Directors who meet the independence and experience standards of the NYSE. The Board annually selects the Directors who serve on the Committees. Each Committee functions pursuant to a written Charter and written Key Practices adopted by the Board of Directors and reviewed annually by each Committee.
Audit Committee
The purpose of the Audit Committee of the Board of Directors is to assist the Board in its oversight of (i) the conduct and integrity of the Company’s financial reporting; (ii) the Company’s compliance with legal and regulatory requirements; (iii) the independence, qualifications and performance of the Company’s independent auditor; and (iv) the adequacy and effectiveness of the Company’s systems of internal control over financial reporting and disclosure controls and procedures, and the performance of the Company’s internal audit function. The Committee also prepares an annual report for inclusion in the Company’s Proxy Statement. The Committee selects the Company’s independent auditor, which selection is submitted to the stockholders for ratification in this Proxy Statement.

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The Audit Committee currently consists of David A. Reed, James F. Gero, Frederick B. Hegi, Jr., John B. Lowe, Jr., and Brendan J. Deely. 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. This Committee held seven meetings during the year ended December 31, 2013.
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 and business guidelines; and (v) evaluating potential candidates for executive positions. The Committee oversees the development of executive succession plans, and coordinates with the Compensation Committee with respect to compensation of Directors. The Committee also reviews and, if necessary, recommends revisions to the Company’s Guidelines for Business Conduct, Code of Ethics for Senior Financial Officers, and other governance policies adopted from time to time.
The Corporate Governance and Nominating Committee currently consists of Frederick B. Hegi, Jr., James F. Gero, Edward W. Rose, III, David A. Reed, John B. Lowe, Jr., and Brendan J. Deely. Mr. Hegi serves as Chairman of the Committee. This Committee held six meetings during the year ended December 31, 2013.
The Corporate Governance and Nominating Committee leads the search for individuals qualified to become Directors and to select nominees to be presented for stockholder approval at each Annual Meeting of Stockholders and to fill vacancies on the Board of Directors. See “Proposal 1. Election of Directors – Director Qualifications and Selection Process.”
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 and a Compensation Discussion and Analysis for inclusion in the Company’s Proxy Statement.
The Compensation Committee currently consists of John B. Lowe, Jr., James F. Gero, Edward W. Rose, III, Frederick B. Hegi, Jr., David A. Reed, and Brendan J. Deely. Mr. Lowe serves as Chairman of the Committee. This Committee held seven meetings during the year ended December 31, 2013.
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, negotiates the compensation terms for the Company’s Chief Executive Officer, administers the Drew Industries Incorporated Equity Award and Incentive Plan, as Amended and Restated (the “Plan”), approves equity awards, and coordinates with the Corporate Governance and Nominating Committee with respect to compensation of Directors. The Compensation Committee ratified the compensation, consisting of salary, incentive bonus, discretionary bonus, equity awards and benefits paid for 2013 to the “named executive officers”. See “Executive Compensation - Compensation Discussion and Analysis”.
Compensation-Related Risk
To identify risks that could be created by our compensation policies and practices, the Compensation Committee reviews enterprise risk management assessments, and evaluates our controls to determine if they adequately mitigate against compensation related risks. If appropriate, controls are modified or supplemented. The Compensation Committee assessed our executive compensation programs, and concluded that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company. The Compensation Committee believes that our executive compensation programs, including the design of long-term incentive plans, oversight by the Compensation Committee, and sufficiency of control features, prevent unintentional material risk. In addition, stock ownership guidelines, the long-term nature of equity awards, share retention, and incentive compensation forfeiture, taken together, motivate Management to carefully consider risk in making business decisions and evaluating growth opportunities, and mitigate against excessive risk-taking to achieve short-term results.
Compensation Recoupment Policy
The Board of Directors has approved a compensation recoupment policy for executive officers that allows for the recovery of performance-based compensation amounts paid under an incentive compensation plan, including any discretionary bonus amounts and equity awards under the Plan, or any successor plan, the amount, payment and/or vesting of which was calculated based wholly, or in part, on the application of financial performance criteria. The policy applies in the event there is a required financial restatement due to material noncompliance with any financial reporting requirements under the securities laws, as determined by the Board of Directors, which results in performance-based compensation that would have been a lower amount if such compensation had been calculated based on such restated results. The policy will be administered by the Compensation Committee, as more fully described in the policy which is included in the Compensation Committee Key Practices.

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Stock Options, Deferred Stock Units and Restricted Stock
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. The Company’s existing equity-based compensation plan was approved by stockholders on May 18, 2011. A proposal to amend the Plan is included in this Proxy Statement. See “Proposal 2. Amendment to Drew Industries Incorporated Equity Award and Incentive Plan.”
Director Stock Ownership Requirements
To help align the personal interests of non-employee Directors with the interests of stockholders, all non-employee Directors are required to hold Company stock or DSUs equivalent to 4.5x each non-employee Director’s annual cash retainer (base cash retainer plus any cash retainer for serving as a Committee chair). Equity interests that count toward satisfaction of the guidelines include shares owned outright by, or held in trust for the benefit of, the individual and his or her immediate family members residing in the same household, plus DSUs or stock awards (whether vested or unvested). Stock options (whether vested or unvested) would not count toward satisfaction of the guidelines. Non-employee Directors are required to achieve ownership in accordance with the guidelines within three years of the later of (i) November 20, 2013, or (ii) the date they assume their position. As of the date of this Proxy Statement, all non-employee Directors satisfy the stock ownership requirements.
Employees and Directors Guidelines for Business Conduct
The Company has Guidelines for Business Conduct which all management employees and Directors are required to annually sign and to follow in conducting the Company’s business, and a Code of Ethics for Senior Financial Officers governing the conduct of its Chief Executive Officer, President, Chief Financial Officer, and the financial officers of the Company and its subsidiaries.
Management and Board Succession
The Board periodically reviews with the Chief Executive Officer and maintains a succession plan for executive officers, after considering recommendations from the Corporate Governance and Nominating Committee. The plan is designed to ensure an effective transition of management of our operations to qualified executives upon the retirement of senior executives. The Board is also responsible for maintaining an emergency succession plan that is reviewed periodically with Management.
See “The Company” for details regarding the most recent succession of Management.
Disclosure Committee
The Company has a Disclosure Committee which holds regular quarterly meetings, comprised of executive, financial, operating and legal management personnel. The function of the Disclosure Committee is to participate in developing and implementing 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. The Disclosure Committee helps to identify issues and developments which may arise during the quarter that may require disclosure, and reviews certain public disclosure documents prepared by Management. In addition, each quarter, the Company’s key management personnel are required to certify in writing whether or not any matters arose that should be considered for disclosure.
Whistleblower Policy
The Company has a Whistleblower Policy which establishes policies and procedures for reporting of complaints by Directors, officers, employees, and other stakeholders of the Company, on a confidential and anonymous basis, regarding questionable accounting or auditing matters, internal controls, illegal practices, or violations of adopted policies of the Company.

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DIRECTOR COMPENSATION
The following table summarizes compensation paid to non-employee Directors during 2013:

Name
Fees Earned or
Paid in Cash
 
Stock Awards (2)
 
Total
 
 
 
 
 
 
Leigh J. Abrams
$
127,250

 
$
130,024

 
$
257,274

Edward W. Rose, III
$
66,700

(1)  
$
130,024

 
$
196,724

James F. Gero
$
131,675

(1)  
$
130,024

 
$
261,699

Fredrick B. Hegi, Jr.
$
116,725

(1)  
$
130,024

 
$
246,749

David A. Reed
$
115,000

(1)  
$
130,024

 
$
245,024

John B. Lowe, Jr.
$
116,725

(1)  
$
130,024

 
$
246,749

Brendan J. Deely
$
78,500

 
$
130,024

 
$
208,524

 
$
752,575

 
$
910,168

 
$
1,662,743

 
(1)
Represents the value, as of the date earned, of DSUs issued in lieu of cash compensation in payment of Directors’ fees. To encourage our Directors’ long-term ownership of the Common Stock of the Company, non-employee Directors may elect to accept DSUs in lieu of cash compensation in payment of Directors’ fees. The number of DSUs, credited at the fair market value of the stock on the date earned, is equivalent to 115 percent of the earned fee. The DSUs are distributed in the form of shares of Common Stock of the Company at the end of the deferral period selected by the Director, subject to earlier distribution upon death, disability, or certain changes-in-control of the Company. Until shares representing the DSUs are distributed, the Director does not have any rights of a stockholder of the Company with respect to such shares, other than to receive dividend equivalents in DSUs if dividends are issued to stockholders.
(2)
In November 2013, each non-employee Director was granted 2,555 restricted shares of the Company’s Common Stock, having a value of $130,024. The fair value was $50.89 per share, the closing price on the day before the grant. The closing price on the grant date was $50.71. Shares of restricted stock are not transferable until the first anniversary of the grant date. Shares of restricted stock entitle the holder to all rights of a stockholder, including the right to vote and to receive any dividends. In November 2012, each independent Director was granted 4,263 restricted shares of the Company’s Common Stock, also having a value of $130,024.
Discussion of Director Compensation
Directors who are employees of the Company do not receive additional fees or other compensation for serving as Directors. The following table sets forth the annual retainers and meeting fees for the independent Directors during 2013:
 
Chairman of
the Board
Lead Director
or Committee
Chairman
Other
Directors
Annual Retainer (1) :
 
 
 
Board of Directors
$
115,000

$
57,500

$
32,500

Audit Committee
$
—

$
15,000

$
—

Compensation Committee
$
—

$
15,000

$
—

Corporate Governance and Nominating Committee
$
—

$
15,000

$
—

 
 
 
 
Meeting Fees (2) :
 
 
 
Board of Directors
$
1,750

$
2,500

$
1,500

Audit Committee
$
—

$
3,000

$
2,500

Compensation Committee
$
—

$
2,000

$
1,500

Corporate Governance and Nominating Committee
$
—

$
2,000

$
1,500

 
(1)
Annual retainers in 2013 were unchanged from 2012. Annual retainers in 2014 are the same as 2013.
(2)
The meeting fees in 2013 were unchanged from 2012. Meeting fees in 2014 are the same as 2013.


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EXECUTIVE COMPENSATION

This section provides information relating to our executive compensation programs and the compensation paid to or accrued for our former and current Chief Executive Officer, our Chief Financial Officer, and each of our other most highly compensated executive officers who were serving as executive officers at the end of 2013 (collectively, our “named executive officers”, or “NEOs”).
Named Executive Officers

Our named executive officers are determined by the Board of Directors in accordance with the rules of the Securities and Exchange Commission. For 2013, our named executive officers include: Fredric M. Zinn, our former Chief Executive Officer and President; Jason D. Lippert, our Chief Executive Officer; Scott T. Mereness, our President; Joseph S. Giordano III, our Chief Financial Officer and Treasurer; and Robert A. Kuhns, our Vice President – Chief Legal Officer and Secretary. Officers are elected annually by the Board of Directors.

FREDRIC M. ZINN was a Director and President of the Company from May 2008 to May 2013, and CEO from January 2009 to May 2013. Mr. Zinn was Executive Vice President from February 2001 to May 2008 and Chief Financial Officer from March 1984 to May 2008. Mr. Zinn retired effective May 10, 2013.

JASON D. LIPPERT became Chief Executive Officer of the Company effective May 10, 2013, succeeding Fredric M. Zinn, and has been Chief Executive Officer of Lippert Components since February 2003. Mr. Lippert has over 15 years of experience with Drew and its subsidiaries, where he has served in a wide range of leadership positions.

SCOTT T. MERENESS became President of the Company effective May 10, 2013, succeeding to a position also previously held by Fredric M. Zinn, and has been President of Lippert Components since July 2010. Mr. Mereness has over 15 years of experience with Drew and its subsidiaries, where he has served in a wide range of leadership positions.

JOSEPH S. GIORDANO III has been Chief Financial Officer of the Company since May 2008, and Treasurer since May 2003. Prior to that, he was Corporate Controller from May 2003 to May 2008. Prior to joining the Company, from July 1998 to August 2002, Mr. Giordano was a Senior Manager at KPMG LLP, and from August 2002 to April 2003, Mr. Giordano was a Senior Manager at Deloitte & Touche LLP. Mr. Giordano is a Certified Public Accountant.

ROBERT A. KUHNS joined the Company in March 2013, and has been Vice President – Chief Legal Officer and Secretary since July 31, 2013. Prior to joining the Company, he was a partner in the Corporate Group at the Minneapolis office of Dorsey & Whitney LLP, a full-service global law firm, for 13 years.
Other Officers

BRIAN M. HALL joined the Company in March 2013, and has been Corporate Controller since July 31, 2013. Prior to joining the Company, he was a Senior Manager at Crowe Horwath LLP for 8 years. Mr. Hall is a Certified Public Accountant.
Compensation Discussion and Analysis
This Compensation Discussion and Analysis (“CD&A”) describes the major elements of our compensation programs for the executive officers named in the Summary Compensation Table in this proxy statement. This CD&A also discusses the objectives, philosophy, process and decisions underlying the compensation of the named executive officers. The CD&A should be read together with the executive compensation tables and related footnotes found later in this Proxy Statement.
Compensation Philosophy
Our executive compensation policy is designed to enable the Company to attract, motivate and retain highly-qualified senior executives capable of superior performance, by providing a competitive compensation opportunity based significantly on performance. Our intent is to provide fair and equitable compensation in a way that rewards these executives for achieving specified financial goals. Our performance-related awards are structured to link a substantial portion of these executives’ total potential compensation to the Company’s performance on both a long-term and short-term basis, to recognize individual contribution as well as overall business results, and to align executive and stockholder interests. A significant portion of the total compensation paid to our NEOs is in the form of long-term equity.
Our compensation policy has demonstrated over time that sound business decisions by these executives are in the best interests of the Company and our stockholders, as well as the executives. Accordingly, we reward performance in excess of pre-established targets of earnings, return on assets, and earnings growth, and we avoid establishing goals that could divert our executives’ attention from the fundamentals of effective and efficient operations.

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At the Annual Meeting of Stockholders held on May 23, 2013, our stockholders approved, in an advisory vote, the compensation paid to our NEOs for 2012. In the advisory vote, 86 percent of the votes cast voted in favor of the 2012 compensation. In addition, the Proxy Statement for the 2013 Meeting contained a detailed description of the compensation plans adopted by the Company for the three-year period 2012-2014 for each of Messrs. Zinn, Lippert, Mereness and Giordano. The compensation paid to these executives for 2013 was paid in accordance with such plans. Mr. Kuhns joined the Company in March 2013, and his 2013 compensation was established by the Compensation Committee during the hiring process.
2013 Business Highlights
Net sales for the year ended December 31, 2013 increased by $114 million, to a record $1.02 billion. The Company’s RV Segment net sales increased 14 percent, compared to the 10 percent increase in industry-wide wholesale shipments of travel trailer and fifth-wheel RVs, the Company's primary RV market. Sales growth in new markets and new products continued to be key factors in enabling the Company’s sales to exceed RV industry growth rates. Additionally in 2013, the Company continued to grow outside its core RV and manufactured housing markets, with aggregate net sales of components for adjacent industries increasing 20 percent to $121 million, and aftermarket net sales increasing 21 percent to $39 million. Together, these markets now account for 16 percent of consolidated net sales, an increase from 9 percent of consolidated net sales in 2010. Acquisitions did not have a significant impact on the increase in net sales for 2013.
For 2013, the Company’s net income increased to $50.1 million, or $2.11 per diluted share, up from net income of $37.3 million, or $1.64 per diluted share, in 2012. Excluding charges related to executive succession, net income would have been $51.3 million in 2013, or $2.16 per diluted share, up from net income of $38.3 million, or $1.68 per diluted share, in 2012. The Company’s operating profit margin in 2013 improved to 7.7 percent, compared to 6.5 percent in 2012, primarily due to efficiency improvements implemented by management.
For 2013, the Company achieved a 16.0 percent return on equity, an improvement from the 12.7 percent return on equity in 2012. At December 31, 2013, the Company had $66 million in cash and no debt, and had almost $200 million in unused credit lines. In January 2014, the Company paid a special dividend of $2.00 per share, aggregating $47 million.
Our results of operations are discussed in detail in the accompanying Annual Report.
Impact of Business Results on Compensation
As intended by our pay-for-performance compensation policy, the increase in our 2013 operating profit, net income and return on assets, resulted in a 98 percent increase in annual NEO performance-based incentive compensation of $4.1 million compared to $2.1 million for 2012.
Governance Practices Related to Compensation
In accordance with our governance practices, we have established stock ownership requirements for our Chief Executive Officer, President and Chief Financial Officer, and we also prohibit our executives from pledging or selling short any shares of the Company’s Common Stock owned by them. See “Executive Stock Ownership Requirements” on page 21 of this Proxy Statement.

We do not provide or reimburse our executives for personal use of an airplane, or for financial planning, tax preparation, or home security.

In furtherance of our commitment to pay a significant portion of our equity awards for performance, and for transparency in executive compensation, we have implemented the following:

•
At least 50 percent of the equity awards (in terms of the number of shares) to be granted to these executive officers will be performance-based, which are earned based on the achievement of pre-established performance targets;
•
The performance incentives for such equity awards in 2013 were based on (i) earnings, (ii) earnings growth, (iii) return on net assets or return on invested capital, depending on the executive’s responsibilities, and (iv) obtaining and utilizing Federal, state and local tax credits and incentives. For 2014, the performance-based incentives for such equity awards will be based on earnings growth and return on net assets; and
•
The performance metrics for equity awards for subsequent years will be disclosed in the proxy statement for each annual meeting of stockholders during the measurement period in accordance with applicable SEC regulations.

The Dodd-Frank Act requires companies to adopt a policy that will recapture excess incentive compensation that was paid to certain executives if based on erroneous financial statements (“clawback”). The SEC, however, has not yet issued rules implementing the clawback requirements. Rather than continue to wait for such rules, the Board of Directors determined it was prudent to adopt a compensation recoupment policy for executive officers that allows for the recovery of performance-based compensation amounts paid under an incentive compensation plan, including any discretionary bonus amounts and equity awards under the Company’s Equity Award and Incentive Plan, as Amended and Restated (the “Plan”), or any successor plan, the amount, payment and/or vesting of which was

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calculated based wholly, or in part, on the application of financial performance criteria. The policy applies in the event there is a required financial restatement due to material noncompliance with any financial reporting requirements under the securities laws, as determined by the Board of Directors, which results in performance-based compensation that would have been a lower amount if such compensation had been calculated based on such restated results. The policy will be administered by the Compensation Committee, as more fully described in the policy. The Company may amend its policy when the SEC promulgates the final rules. Additionally, all awards of incentive compensation are granted subject to the Plan, which provides that the Compensation Committee may review any equity award if the amount, payment or vesting of such award was based on an entry in the financial statements that is the subject of a restatement, and cancel all or any portion of such awards and require the participant to repay to the Company all or any portion of the gain realized on the exercise of equity awards and the value realized on other awards.

Incentive Compensation Criteria and Practices
The following table outlines our principal incentive compensation criteria and practices which were in effect for 2013, and the reasons for our compensation decisions:
Our performance criteria
 
Reasons for this compensation decision
 
 
 
Annual
 


Return on assets in excess of a pre-established threshold applicable to each year in a multi-year contract period.

 
Motivates optimizing asset utilization and annual earnings; and promotes investments in opportunities likely to yield high returns.

Current-year earnings compared to prior-year earnings.
 
Rewards increases in earnings, which benefits the Company and its stockholders.
 
 
 
Earnings in excess of a pre-established threshold applicable to each year in a multi-year contract period.
 
Provides goal for exceeding a fixed level of earnings.

 
 
 
Performance compared to performance of the two industries to which we sell our products.
 
Rewards superior performance in achieving profitability in excess of expectation based on business conditions in the industries we serve.
Long-term
 
 
 
 
 
Long-term return on invested capital in excess of a pre-established threshold, payable in long-term DSUs.

Growth in earnings per share or operating profit for a multi-year period in excess of a pre-established threshold, payable in equity.
 
Incentive for effective execution of long-term strategic plans, and long-term management of assets.

Incentive for effective execution of long-term strategic plans, and aligns executives’ and stockholders’ long-term interests.
 
 
 
Our payment practices
 
Reason for this payment practice
 
 
 
Portion of executives’ annual incentive compensation in excess of pre-established amounts payable in DSUs.
 
Increases equity ownership to align executive and stockholder long-term interests.
 
 
 
Portion of former CEO’s annual compensation payable in DSUs which are subject to forfeiture to the extent that pre-established objectives for return on invested capital are not achieved.
 
Former CEO is penalized for failing to reach a pre-established goal.
 
 
 
Annual awards of DSUs that vest over five years or are performance-based.
 
Ensures that executives have a continuing personal interest in the long-term success of the Company, and creates a culture of ownership.


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What We Did Not Reward
•
We did not reward sales growth because we believe that growth in sales alone, without consideration of the impact of growth on both short and long-term earnings, could be achieved in a manner that does not benefit our business and operations.
•
We did not grant bonuses for increases in the price of our stock because we believe that stock price is frequently the result of market factors beyond executives’ control.
•
We excluded the pre-existing earnings of acquired companies at the date of acquisition from the calculation of the annual incentive awards paid to our former CEO by increasing the threshold levels of base earnings which are not subject to incentive awards.

Principal Elements of Compensation of Named Executive Officers
The principal components of our executive compensation program are base salary, annual and long-term performance-based incentive compensation, annual equity-based awards consisting of DSUs, and other personal benefits. While the components of compensation are considered separately in this discussion, we take into account the full compensation package provided to each of the NEOs.
- Base Salaries
Based on a review of the salaries paid to executives with similar responsibilities at comparable companies and on their business experience, the Compensation Committee established levels of base salary for our executives as a fixed component of a market-competitive total compensation opportunity. The level of base salary is a function of the executive’s experience, skills, responsibilities and leadership role within the Company.
- Annual Incentive Compensation
Consistent with our emphasis on pay-for-performance compensation programs, in 2011 our Board of Directors adopted, and our stockholders approved, the Drew Industries Incorporated Equity Award and Incentive Plan, as Amended and Restated. The Plan authorizes performance-based awards in cash or equity, based on the pre-established performance criteria, and we pay a portion of the performance-based awards in excess of a pre-established amount in DSUs.
- Long-term Incentive Compensation
To motivate effective strategic planning, a substantial portion of our executives’ compensation consists of long-term performance-based awards granted in equity to align the interests of our executives and stockholders over a multi-year period.
- Annual Equity-Based Awards
To encourage our executives’ long-term ownership of our Common Stock, in accordance with the Plan the Company grants annual awards of DSUs. The DSUs provide for vesting and distribution of shares of our Common Stock, at least 50 percent based on achieving pre-established performance goals, and the balance at the end of specified periods, subject to earlier distribution upon death, disability, change-in-control of the Company leading to the termination of employment, or involuntary termination of employment without cause. Until shares represented by the DSUs are distributed, the executive does not have any rights of a stockholder of the Company with respect to such shares, other than to receive additional DSUs equivalent in value to any dividends issued to stockholders.
We do not consider as a limiting factor the level of equity ownership of our NEOs or the unvested portion of their prior awards in granting DSUs. On the contrary, we believe that the greater the extent of their equity interest in the Company, the more closely aligned their personal interests become with the interests of our stockholders.
Other Compensation Programs
In order to be competitive with market employment and compensation practices, we maintain the following benefit programs:
- 401(k) Plan
We do not maintain any defined benefit retirement plans or other pension or profit-sharing plans. To provide retirement benefits for executives, the Company maintains a discretionary 401(k) plan, covering all eligible employees, pursuant to which the Company matched a portion of contributions up to the 2013 statutory maximum of $10,200 per employee. The aggregate amount of the Company’s contributions with respect to the NEOs was $40,800 for 2013. Although our 401(k) plan permits profit-sharing contributions, the Company has not made any such contributions to the plan.

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- Deferred Compensation Plan
To provide a means for deferral of taxation on compensation, the Company maintains an Executive Non-Qualified Deferred Compensation Plan (“Deferral Plan”) for certain executives, including the NEOs. The Company does not make any contributions to the Deferral Plan but is responsible for certain costs of Deferral Plan administration, which are not significant. Pursuant to the Deferral Plan, the NEOs are eligible to defer all or a portion of their earned base salary and incentive compensation. Each participant is fully vested in all deferred compensation and earnings on investments credited to his or her account because the Deferral Plan participant has made all the contributions. Pursuant to the Deferral Plan, payments to the participants will be made from our general unrestricted assets, and the obligations pursuant to the Deferral Plan are unfunded and unsecured.
Perquisites and All Other Benefits
As a competitive employee benefit, we provide employee health insurance in which certain of the NEOs participate, the aggregate cost of which for the NEOs was $29,200 for 2013. In connection with the relocation of the corporate headquarters from White Plains, New York to Elkhart, Indiana, we reimbursed the Company’s Chief Financial Officer for expenses incurred in connection with his personal relocation to Indiana of $70,300. We also provided other employee benefits in which the NEOs participate, including life and disability insurance, and either an automobile together with related expenses or an automobile allowance. The aggregate amount of other perquisites for all the NEOs for 2013 was $64,100, and for any individual recipient these perquisites did not exceed $21,000.

Change-in-Control; Severance
The Company has change-in-control agreements with its NEOs that provide for severance benefits in the event of a change-in-control of the Company leading to a qualifying termination of employment, as well as agreements that provide for severance benefits in the event of termination of employment for other than “cause”, as defined.
The Company believes that the agreements serve as appropriate retention tools for these executives by providing security in the event of an unplanned termination of employment in connection with a change-in-control of the Company, or termination for other than cause. Furthermore, from time to time, we examine various strategic alternatives, and the provisions of the agreements are important to retain these key people whose continued employment might be at risk for reasons other than cause. The specific terms of the change-in-control and severance agreements are summarized in “Potential Payments on Termination or Change-in-Control”.

Executive Stock Ownership Requirements
To further align the personal interests of senior executives with the interests of our stockholders, we have established guidelines for ownership of the Company’s Common Stock by our Chief Executive Officer, President and Chief Financial Officer (each, a “Restricted Executive”) as a multiple of the executive’s cash salary as of December 31, 2013 as set forth in the following table:

Named Executive Office
Multiple of Salary
Cash Equivalent

Jason D. Lippert,
Chief Executive Officer
5.00
$4,000,000
Scott T. Mereness,
President

4.00
$2,200,000
Joseph S. Giordano III,
Chief Financial Officer
and Treasurer
3.00
$1,080,000

Equity interests that count toward satisfaction of the guidelines include shares owned outright by, or held in trust for the benefit of, a Restricted Executive and his or her immediate family members residing in the same household, plus deferred stock units or stock awards (whether vested or unvested). Stock options (whether vested or unvested) would not count toward satisfaction of the guidelines. Restricted Executives are required to achieve ownership in accordance with the guidelines within three years of the later of (i) November 20, 2013, or (ii) the date they assume their position. At December 31, 2013, all the Restricted Executives were in compliance with the guidelines.


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Tax Deductibility of Compensation
Section 162(m) of the Internal Revenue Code (the “Code”) disallows a Federal income tax deduction to publicly-held companies for certain compensation paid to their CEO and the three other most highly compensated NEOs employed at the end of the year (other than the CFO), 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 Plan is structured so that performance-based incentive compensation, whether paid in cash or DSUs, or the exercise of options granted under the Plan, will qualify as performance-based compensation which will not be subject to the $1 million limitation, resulting in favorable tax treatment to the Company.

2013 Executive Performance and Compensation

We entered into compensation arrangements with our former Chief Executive Officer and President, and current Chief Executive Officer, President and Chief Financial Officer for the period January 1, 2012 through December 31, 2014 (the “Term”). These arrangements continue our policy of pay-for-performance, and implement compensation practices designed to align executive and stockholder interests.
In developing the applicable compensation metrics, the Compensation Committee designed compensation programs for these executives which motivate them to achieve specified annual and long-term financial goals, emphasizing earnings, earnings growth, and the returns achieved on invested capital or net assets. In “Incentive Compensation Criteria and Practices,” on page 19 of this Proxy Statement, we describe the performance criteria that were applied to determine the compensation of these executives, and the reasons for utilizing those criteria.
Separately, Mr. Kuhns joined the Company in March 2013, and became Vice President—Chief Legal Officer and Secretary effective July 31, 2013. Mr. Kuhns’ compensation for 2013 was established through the hiring process, with compensation for future periods to be determined at a later date. The Board determined Mr. Kuhns to be an NEO in November 2013.

- Fredric M. Zinn, Former President and CEO

As stated earlier in this Proxy Statement, Fredric M. Zinn retired as President and Chief Executive Officer of the Company effective May 10, 2013. Prior to that event, on February 8, 2012, the Company and Mr. Zinn had entered into an Executive Compensation and Non-Competition Agreement (his “Agreement”) providing compensation and benefits for the Term in consideration for Mr. Zinn’s services as President and Chief Executive Officer of the Company. Mr. Zinn, an employee at-will, would receive the following annual and long-term compensation during the Term:

(A)    Annual base salary consisting of $590,000. For 2013, Mr. Zinn received $229,193 for the period prior to his retirement in May 2013;

(B)    DSUs representing shares equivalent in value to $150,000 annually (the “Incentive DSUs”); provided, however, that if the average annual return on invested capital (as defined, “ROIC”) for any year during the Term is less than 18 percent, Incentive DSUs issued for that year would be forfeited at the rate of 250 DSUs for each 0.1 percent that the Company’s ROIC for that year is below 18 percent. For 2013, Mr. Zinn received DSUs in an equivalent value of $56,250 for the period prior to his retirement in May 2013;

(C)    Annual performance-based incentive compensation consisting of the following:

(i)
$4,000 for each $0.01 that the Company’s adjusted earnings per diluted share (as defined) (“Adjusted EPS”) for each year during the Term exceed the Company’s Adjusted EPS for the prior year;

(ii)
$4,000 for each $0.01 that the Company’s Adjusted EPS for each year during the Term exceeds $1.53;

(iii)
$10,000, plus or minus, for each 1 percent that the increase or decrease in the Company’s Adjusted EPS for each year during the Term is above or below 1.75 times the Index of Number of Industry Units Sold (as defined); provided, however, that the amount added or subtracted would not exceed 0.6 percent of the Company’s pre-tax income for the subject year;

(iv)
For any year during the Term, the first $590,000 of the aggregate annual performance-based incentive compensation will be paid in cash; 50 percent of such compensation in excess of $590,000 (the “Excess Amount”) will be paid in DSUs, and 50 percent of the Excess Amount will be paid in cash. Election by Mr. Zinn to defer receipt of the shares of stock deliverable pursuant to the DSUs must be for a period of not less than three years.


22



Based on these pre-established performance targets, for 2013 Mr. Zinn received annual performance-based incentive compensation of $201,767 for the period prior to his retirement in May 2013.

(D)    Long-term performance-based incentive compensation. Upon expiration of the three-year Term, Mr. Zinn would be entitled to receive 750 DSUs for each 0.1 percent that the Company’s ROIC for the Term exceeds 18 percent; provided, however, that the total number of DSUs could not exceed 50,000. Election by Mr. Zinn to defer receipt of the shares of stock deliverable pursuant to the DSUs must be for a period of not less than one year. Mr. Zinn received 25,113 DSUs, including dividends thereon, for the portion of the Term prior to his retirement in May 2013;

(E)    During the Term, Mr. Zinn was entitled to receive certain benefits and perquisites, including 401(K) matching contribution, life insurance, disability insurance, and an automobile. Such benefits and perquisites associated with Mr. Zinn’s employment terminated as a result of his retirement in May 2013;

(F)    Annual DSUs or other equity awards as the Compensation Committee determines. For 2013, Mr. Zinn received no additional DSUs.

As a result of the termination of Mr. Zinn’s employment, in accordance with Mr. Zinn’s Agreement, Mr. Zinn will continue to receive a severance amount equivalent to his base salary for two years following termination of employment, and all equity awards previously issued to him, other than long term incentive compensation awards, vested on termination of employment. Mr. Zinn is also entitled to receive certain benefits and perquisites consistent with those he received under his Agreement during his severance period.

- Jason D. Lippert, Chief Executive Officer

On April 9, 2012, the Company and Jason D. Lippert entered into an Executive Employment and Non-Competition Agreement (his “Agreement”) providing compensation and benefits for the Term in consideration for Mr. Lippert’s services as Chief Executive Officer of Lippert Components. In accordance with the executive succession plan, Mr. Lippert was appointed Chief Executive Officer of the Company effective May 10, 2013. Mr. Lippert’s compensation arrangement with the Company remains substantially unchanged following his appointment as Chief Executive Officer of the Company.

Mr. Lippert receives the following compensation during the Term:
(A) Annual base salary consisting of $800,000;

(B) Annual performance-based incentive compensation (the “Annual RONA Bonus”) consisting of the following:

(i)
3 percent of the Operating Profits (as defined) in excess of 18 percent of Net Assets (as defined) and up to 21 percent of Net Assets;

(ii)
4 percent of the Operating Profits in excess of 21 percent of Net Assets and up to 24 percent of Net Assets;

(iii)
5 percent of the Operating Profits in excess of 24 percent of Net Assets;

(iv)
For any year during the Term, the first $800,000 of the Annual RONA Bonus will be paid in cash; 50 percent of Annual RONA Bonus in excess of $800,000 (the “Excess Bonus”) will be paid in DSUs, and 50 percent of the Excess Bonus will be paid in cash. Election by Mr. Lippert to defer receipt of the shares of stock deliverable pursuant to the DSUs must be for a period of not less than three years.

Based on these pre-established performance targets, for 2013 Mr. Lippert received annual performance-based incentive compensation of $1,823,862.


23



(C) Each year Mr. Lippert is granted long-term performance-based incentive compensation pursuant to which he can earn up to 50,000 shares of Common Stock (the “LTI Shares”) for the subsequent three-year Applicable Measurement Period (as defined) as follows:

(i)
If Adjusted EPS for the second year of the Applicable Measurement Period exceeds the Benchmark EPS (as defined) by more than 12.5 percent, then Mr. Lippert is entitled to receive up to 17,000 LTI Shares, in proportion to the percentage increase in such Adjusted EPS over 12.5 percent up to a percentage increase of 25 percent;

(ii)
If Adjusted EPS for the third year of the Applicable Measurement Period exceeds the Benchmark EPS by more than 20 percent, then Mr. Lippert is entitled to receive LTI Shares in proportion to the percentage increase in such Adjusted EPS over 20 percent up to a percentage increase of 40 percent, less the number of LTI Shares received with respect to the second year of the Applicable Measurement Period;

(iii)
Any LTI Shares received by Mr. Lippert with respect to the second year of the Applicable Measurement Period cannot be disposed of until the expiration of one year from the date of issue; and all or any LTI Shares received by Mr. Lippert with respect to the third year of the Applicable Measurement Period can be disposed of at any time after issue, provided that Mr. Lippert is in compliance with the Company’s stock ownership requirements following such disposition.

(D) Each year that the Agreement remains in effect, the Compensation Committee will grant to Mr. Lippert 11,200 DSUs. One-half of such DSUs will vest at the rate of 20 percent each year commencing one year from the date of grant. One-half of such DSUs will vest commencing the January 1 immediately following the date of grant at the rate of 2 percent for each $0.01 increase in Adjusted EPS for any year during the five years following the year in which such DSUs were granted (the “Vesting Period”) over Adjusted EPS for the year in which such DSUs were granted, provided that (i) no DSUs will vest for any year for which Adjusted EPS is less than the highest Adjusted EPS for any prior year in the Vesting Period, and (ii) DSUs will vest only to the extent that Adjusted EPS for any year in the Vesting Period exceeds the highest Adjusted EPS for any prior year in the Vesting Period;

(E) During the Term, Mr. Lippert is entitled to receive certain benefits and perquisites, including 401(k) matching contribution, health insurance, disability insurance, and an automobile, the aggregate cost of which for the Term is estimated to be approximately $32,000 annually.

As additional incentive to realize the potential provided by the significant investments in the 2011 acquisitions, new product lines, and expansion into adjacent markets, at the time the Agreement was entered into Mr. Lippert was awarded performance-based DSUs representing 25,000 shares. These DSUs will begin to vest when the annual profits of Lippert Components exceed $67 million and will vest proportionately until annual combined profits reach $87 million, at which point all such DSUs will have vested. The DSUs must be held for at least one year after vesting. In 2013, the remaining 23,247 of such DSUs, including dividends thereon, vested.
- Scott T. Mereness, President
On April 9, 2012, the Company and Scott T. Mereness entered into an Executive Employment and Non-Competition Agreement (his “Agreement”) providing compensation and benefits for the Term in consideration for Mr. Mereness’ services as President of Lippert Components. In accordance with the executive succession plan, Mr. Mereness was appointed President of the Company effective May 10, 2013. Mr. Mereness’ compensation arrangement with the Company remains substantially unchanged following his appointment as President of the Company.

Mr. Mereness receives the following compensation during the Term:

(A) Annual base salary consisting of $550,000;

(B) Annual performance-based incentive compensation (the “Annual RONA Bonus”) consisting of the following:

(i)
2 percent of the Operating Profits in excess of 18 percent of Net Assets (as defined) and up to 21 percent of Net Assets;


24



(ii)
3 percent of the Operating Profits in excess of 21 percent of Net Assets and up to 24 percent of Net Assets;

(iii)
4 percent of the Operating Profits in excess of 24 percent of Net Assets;

(iv)
For any year during the Term, the first $550,000 of the Annual RONA Bonus will be paid in cash; 50 percent of Annual RONA Bonus in excess of $550,000 (the “Excess Bonus”) will be paid in DSUs, and 50 percent of the Excess Bonus will be paid in cash. Election by Mr. Mereness to defer receipt of the shares of stock deliverable pursuant to the DSUs must be for a period of not less than three years.

Based on these pre-established performance targets, for 2013 Mr. Mereness received annual performance-based incentive compensation of $1,410,188.

(C) Each year Mr. Mereness is granted long-term performance-based incentive compensation pursuant to which he can earn up to 35,000 shares of Common Stock (the “LTI Shares”) for the subsequent three-year Applicable Measurement Period (as defined) as follows:

(i)
If Adjusted EPS for the second year of the Applicable Measurement Period exceeds the Benchmark EPS by more than 12.5 percent, then Mr. Mereness will be entitled to receive up to 12,000 LTI Shares, in proportion to the percentage increase in such Adjusted EPS over 12.5 percent up to a percentage increase of 25 percent;

(ii)
If Adjusted EPS for the third year of the Applicable Measurement Period exceeds the Benchmark EPS by more than 20 percent, then Mr. Mereness will be entitled to receive LTI Shares in proportion to the percentage increase in such Adjusted EPS over 20 percent up to a percentage increase of 40 percent, less the number of LTI Shares received with respect to the second year of the Applicable Measurement Period;

(iii)
Any LTI Shares received by Mr. Mereness with respect to the second year of the Applicable Measurement Period cannot be disposed of until the expiration of one year from the date of issue; and all or any LTI Shares received by Mr. Mereness with respect to the third year of the Applicable Measurement Period can be disposed of at any time after issue, provided that Mr. Mereness is in compliance with the Company’s stock ownership requirements following such disposition.

(D) Each year that the Agreement remains in effect, the Compensation Committee will grant to Mr. Mereness 8,800 DSUs. One-half of such DSUs will vest at the rate of 20 percent each year commencing one year from the date of grant. One-half of such DSUs will vest commencing the January 1 immediately following the date of grant at the rate of 2 percent for each $0.01 increase in Adjusted EPS for any year during the five years following the year in which such DSUs were granted (the “Vesting Period”) over Adjusted EPS for the year in which such DSUs are granted, provided that (i) no DSUs will vest for any year for which Adjusted EPS is less than the highest Adjusted EPS for any prior year in the Vesting Period, and (ii) DSUs will vest only to the extent that Adjusted EPS for any year in the Vesting Period exceeds the highest Adjusted EPS for any prior year in the Vesting Period;

(E) During the Term, Mr. Mereness is entitled to receive certain benefits and perquisites, including 401(k) matching contribution, health insurance, disability insurance, and an automobile, the aggregate cost of which for the Term is estimated to be approximately $24,000 annually.

As additional incentive to realize the potential provided by the significant investments in the 2011 acquisitions, new product lines, and expansion into adjacent markets, at the time the Agreement was entered into Mr. Mereness was awarded performance-based DSUs representing 15,000 shares. These DSUs will begin to vest when the annual profits of Lippert Components exceed $67 million and will vest proportionately until annual combined profits reach $87 million, at which point all such DSUs will have vested. The DSUs must be held for at least one year after vesting. In 2013, the remaining 13,948 of such DSUs, including dividends thereon, vested.
- Joseph S. Giordano III, CFO and Treasurer

On February 10, 2012, the Company and Joseph S. Giordano III entered into an Executive Compensation and Non-Competition Agreement (his “Agreement”) providing compensation and benefits for the Term in consideration for Mr. Giordano’s services as Chief Financial Officer and Treasurer of the Company. In April, 2013, in connection with the executive succession and the assumption by Mr. Giordano of additional functions and responsibilities, the agreement was amended for 2013-2014.

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As amended, Mr. Giordano receives the following compensation for 2013 and 2014 during the Term:

(A)
Annual base salary at the rate of $300,000 to May 10, 2013, and at the rate of $360,000 for the balance of the Term;

(B)
Annual performance-based incentive compensation (the “Annual RONA Bonus”) consisting of the following:
(i)
0.80 percent of the Operating Profits in excess of 18 percent of Net Assets (as defined) and up to 21 percent of Net Assets;

(ii)
0.85 percent of the Operating Profits in excess of 21 percent of Net Assets and up to 24 percent of Net Assets;

(iii)
0.90 percent of the Operating Profits in excess of 24 percent of Net Assets.

In addition, Mr. Giordano will receive the following:

(iv)
1 percent of the entitlement, special refund, reduction to, or credit against, any income or property tax otherwise due to Federal, state or local taxing authorities (each or, collectively, “Savings”) obtained as a result of initiatives taken by or under the direction of Mr. Giordano and granted during 2013 by the taxing authority, which Savings are reasonably likely to be realized by the Company within five (5) years of the date granted;

(v)
5 percent of any Savings granted since January 1, 2009 which is utilized by the Company during 2013;

(vi)
The first $300,000 of the aggregate amount payable pursuant to clauses (i) through (v) will be paid in cash; 50 percent of such amount in excess of $300,000 (the “Excess Bonus”) will be paid in DSUs, and 50 percent of the Excess Bonus will be paid in cash. Election by Mr. Giordano to defer receipt of the shares of stock deliverable pursuant to the DSUs must be for a period of not less than three years;

(C) Long-term performance-based incentive compensation. Upon expiration of the three-year Term, Mr. Giordano will be entitled to receive 300 DSUs for each 0.1 percent that the Company’s ROIC for the Term exceeds 18 percent; provided, however, that the total number of DSUs will not exceed 15,000. Election by Mr. Giordano to defer receipt of the shares of stock deliverable pursuant to the DSUs must be for a period of not less than one year;

(D) Each year that the Agreement remains in effect, the Compensation Committee will grant to Mr. Giordano 7,200 DSUs. One-half of such DSUs will vest at the rate of 20 percent each year commencing one year from the date of grant. One-half of such DSUS will vest commencing the January 1 immediately following the date of grant at the rate of 2 percent for each $0.01 increase in Adjusted EPS for any year during the five years following the year in which such DSUs were granted (the “Vesting Period”) over Adjusted EPS for the year in which such DSUs are granted, provided that (i) no DSUs will vest for any year for which Adjusted EPS is less than the highest Adjusted EPS for any prior year in the Vesting Period, and (ii) DSUs will vest only to the extent that Adjusted EPS for any year in the Vesting Period exceeds the highest Adjusted EPS for any prior year in the Vesting Period.

(E) During the Term, Mr. Giordano is entitled to receive certain benefits and perquisites, including 401(K) matching contribution, health insurance, disability insurance, and an automobile, the aggregate cost of which for the Term is estimated to be approximately $53,000 annually;

In connection with the executive succession, to provide an inducement for Mr. Giordano to relocate to Indiana and waive his contractual right to severance pay as a result of the relocation, the Company sought to provide a relocation package for Mr. Giordano generally consistent with levels at other companies with which we compete for executive talent. To determine the nature and extent of a competitive relocation package, the Company relied on data collected and analyzed by Pay Governance, LLC, an independent compensation consultant engaged by the Compensation Committee for this matter. Pay Governance, LLC provided practices regarding relocation benefits based on third-party surveys of a broad range of companies. Based on such information, we provided Mr. Giordano a relocation package in 2013 consisting of a relocation bonus of $120,000 plus reimbursement of all expenses incurred in selling his current home, finding a new home, and moving. If Mr. Giordano terminates his employment before June 30, 2014, and provided that he has given the Company notice of termination at least 120 days prior to the termination date, Mr. Giordano will be provided reimbursement of all expenses incurred in selling his then current home, finding a new home, and moving.

26



- Robert A. Kuhns, Vice President—Chief Legal Officer and Secretary
Mr. Kuhns joined the Company in March 2013, and became Vice President—Chief Legal Officer and Secretary effective July 31, 2013. Mr. Kuhns’ compensation for 2013 was established through the hiring process. As initial compensation, the Board established an annual base salary of $300,000, $35,000 of which was paid in the form of DSUs vesting over a three year period. Mr. Kuhns’ bonus compensation for 2013 was discretionary.

Additionally, for calendar year 2014 the Compensation Committee established, beginning in March 2014, an annual base salary of $325,000, 2014 discretionary bonus compensation of at least $50,000, and an annual grant of 3,300 DSUs which will vest at the rate of 20 percent each year commencing one year from the date of the grant. During 2014, Mr. Kuhns is also entitled to receive certain benefits and perquisites, including 401(k) matching contribution, health insurance, and an automobile allowance, the aggregate cost of which for 2014 is estimated to be approximately $24,000.  

Compensation Process
The Compensation Committee is responsible for reviewing the performance of our executive officers in achieving our long-term business objectives, and ensuring that such executives are compensated consistent with the objectives, as well as competitive practices. The Committee provides oversight and guidance in the development of compensation and benefit programs for our senior executives, and confirms that compensation paid to those NEOs who have employment agreements is in compliance with the agreements.
Compensation “tally sheets” for each of the NEOs were reviewed by the Compensation Committee. The tally sheets reflected dollar amounts of all components of the NEOs’ 2013 compensation, including base salary, annual and long-term performance-based incentive awards, annual equity-based awards, personal benefits, perquisites and, where applicable, potential change-in-control severance payments. Based on the Compensation Committee’s review of the tally sheets, the Compensation Committee determined that the amounts of compensation paid to our NEOs for 2013 were reasonable, and were appropriate based on our financial results of operations and the individual performance of each of the executives. The Compensation Committee intends to review compensation tally sheets on an annual basis.
Pay Governance, LLC, an independent compensation consultant, assisted the Compensation Committee in developing the compensation programs for Messrs. Zinn, Lippert, Mereness and Giordano for the period 2012-2014, and the revised program and relocation package for Mr. Giordano for 2013-2014. See “2013 Executive Performance and Compensation” on page 22 of this Proxy Statement. Pay Governance, LLC provided no services or advice to any executive or employee of the Company, and provided no other services to the Company for 2013. In July 2013, the Committee engaged Exequity LLP, an independent consultant that reports directly to the Committee. Exequity’s role is to provide the Committee with ongoing general advisory services, which may include assistance with review of executive pay proposals and program designs, various data analyses, support with respect to relevant legal and regulatory considerations impacting executive compensation and benefit programs, and updates on market trends. A representative of Exequity regularly attends the Committee meetings and provides data and advice to the Committee throughout the year. Exequity LLP provides no services or advice to any executive or employee of the Company, and provided no other services to the Company for 2013. The Committee is empowered to retain or replace Exequity LLP or to hire additional consultants at any time.
The Compensation Committee periodically reviews our compensation policy utilizing both internal and external sources of information and analysis relating to financial results of operations, individual performance, long-term return to stockholders, compensation related risk assessment, and compensation afforded by other employers to comparable-level executives. If appropriate, changes are recommended. Our pay-for-performance incentive compensation programs have over many years effectively linked executive compensation to our long-term and short-term performance.

27



Compensation Committee Report
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with Management. Based on this review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference into the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.
 
COMPENSATION COMMITTEE
 
John B. Lowe, Jr., Chairman
 
Edward W. Rose, III
James F. Gero
 
Frederick B. Hegi, Jr.
 
David A. Reed
 
Brendan J. Deely
The foregoing Compensation Committee Report 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.

28



Summary Compensation Table
The following table sets forth the annual compensation awarded to or earned by our named executive officers for the years ended December 31, 2013, 2012 and 2011:
SUMMARY COMPENSATION TABLE
Name and
Principal Position
Year
 
Salary
 
Bonus

 
Stock
Awards
 
Option
Awards (1)
 
Non-Equity
Incentive
Plan
Compen-
sation
 
Long-Term
Incentive
Compen-
sation
 
All Other
Compen-
sation (7)
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fredric M. Zinn (2)    
2013
 
$229,193
 
$
—

 
$
56,250

 
$
—

 
$
201,767

 
$
—

 
$
392,005

 
$
879,215

Former President and Chief
2012
 
$590,000
 
$
—

 
$
491,600

 
$
—

 
$
138,813

 
$
1,349,000

 
$
35,232

 
$
2,604,645

Executive Officer
2011
 
$500,000
 
$
—

 
$
524,380

 
$
—

 
$
—

 
$
—

 
$
75,000

 
$
1,099,380

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Jason D. Lippert (3)    
2013
 
$800,000
 
$
—

 
$
1,081,899

 
$
—

 
$
1,311,931

 
$
1,612,500

 
$
30,196

 
$
4,836,526

Chief Executive Officer
2012
 
$800,000
 
$
—

 
$
1,076,648

 
$
—

 
$
863,048

 
$
1,344,000

 
$
32,391

 
$
4,116,087

 
2011
 
$700,000
 
$
—

 
$
—

 
$
204,932

 
$
882,337

 
$
—

 
$
73,883

 
$
1,861,152

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Scott T. Mereness (4)    
2013
 
$550,000
 
$
—

 
$
877,926

 
$
—

 
$
980,094

 
$
1,128,750

 
$
22,299

 
$
3,559,069

President
2012
 
$550,000
 
$
—

 
$
743,887

 
$
—

 
$
622,287

 
$
940,800

 
$
23,857

 
$
2,880,831

 
2011
 
$420,000
 
$
—

 
$
141,703

 
$
161,018

 
$
387,700

 
$
—

 
$
54,281

 
$
1,164,702

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Joseph S. Giordano III (5)    
2013
 
$340,000
 
$
120,000

 
$
477,871

 
$
—

 
$
411,463

 
$
—

 
$
119,271

 
$
1,468,605

Chief Financial Officer and
2012
 
$300,000
 
$
—

 
$
219,600

 
$
—

 
$
156,723

 
$
398,100

 
$
52,663

 
$
1,127,086

Treasurer
2011
 
$250,000
 
$
55,000

 
$
232,384

 
$
—

 
$
53,609

 
$
—

 
$
69,667

 
$
660,660

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Robert A. Kuhns (6)    
2013
 
$255,833
 
$
50,000

 
$
152,670

 
$
—

 
$
—

 
$
—

 
$
1,455

 
$
459,958

Vice President-Chief Legal Officer and Secretary
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
Amounts shown do not reflect compensation actually received. Amounts shown include the aggregate fair value of stock options granted during the year.
See Note 12 of Notes to Consolidated Financial Statements included in our 2013 Annual Report on Form 10-K for the assumptions used in determining the fair value based on the Black-Scholes option-pricing model.
(2)
Salary – includes $50,000 of salary, paid $12,500 quarterly in DSUs for 2011. For 2013, Mr. Zinn received $229,193 for the period prior to his retirement in May 2013.
Stock Awards – excludes $50,000 of salary, paid $12,500 quarterly in DSUs for 2011. Includes performance-based incentive compensation of $200,000 paid in DSUs for 2011, subject to forfeiture. Based on the Company’s performance, no such DSUs were forfeited. Includes performance-based incentive compensation of $150,000 paid in DSUs for 2013 and 2012, subject to forfeiture if the average annual return on invested capital (as defined) for each respective year was less than 18 percent. Based on the Company’s performance, no such DSUs were forfeited in either year. However, due to Mr. Zinn’s retirement in May 2013, Mr. Zinn only received DSUs in an equivalent value of $56,250 in 2013 for the period prior to his retirement. In addition, 2011 and 2012 include 14,000 and 11,200 performance-based DSUs awarded having a value of $324,380 and $341,600, respectively, on the date of grant. See “Executive Compensation – Grants of Plan-Based Awards Table.”
Long-Term Incentive Compensation – upon expiration of the three-year period January 1, 2012 through December 31, 2014 (the “Measurement Period”), Mr. Zinn would be entitled to receive 750 DSUs for each 0.1 percent that the Company’s average return on invested capital (“ROIC”) for the Measurement Period exceeds 18 percent; provided, however, that the total number of DSUs could not exceed 50,000 for the three-year Measurement Period. See “Executive Compensation – Compensation Discussion and Analysis – 2013 Executive Performance and Compensation.” Amount shown represents the three-year aggregate grant date fair value. See “Executive Compensation – Grants of Plan-Based Awards Table.” In connection with the executive succession plan, Mr. Zinn received 25,113 DSUs, including dividends thereon, for the portion of the Measurement Period prior to his retirement in May 2013.
(3)
Stock Awards – the 2012 amount is comprised of 11,200 DSUs, 50 percent of which are performance-based, having a value of $341,600 on the date of grant, and performance-based incentive compensation of $63,048 paid in DSUs. In addition, in 2012, at the time Mr. Lippert entered into his current employment agreement, Mr. Lippert was awarded performance-based DSUs

29



representing 25,000 shares having a value of $672,000 on the date of grant. These DSUs will begin to vest when the annual profits of Lippert Components exceed $67 million and will vest proportionately until annual profits reach $87 million, at which point all such DSUs will have vested. The DSUs must be held for at least one year after vesting. The 2013 amount is comprised of 11,200 DSUs, 50 percent of which are performance-based, having a value of $569,968 on the date of grant, and performance-based incentive compensation of $511,931 paid in DSUs. See “Executive Compensation – Grants of Plan-Based Awards Table.”
Long-Term Incentive Compensation – each year during his Agreement, Mr. Lippert is granted long-term performance-based incentive compensation pursuant to which he can earn up to 50,000 shares of Common Stock (the “LTI Shares”) for the subsequent three-year period (the “Applicable Measurement Period”). If Adjusted EPS (as defined) for the third year of the Applicable Measurement Period exceeds the Benchmark EPS (as defined) by more than 20 percent, then Mr. Lippert is entitled to receive LTI Shares in proportion to the percentage increase in such Adjusted EPS over 20 percent up to a percentage increase of 40 percent. See “Executive Compensation – Compensation Discussion and Analysis – 2013 Executive Performance and Compensation.” Amount shown represents the three-year aggregate grant date fair value. See “Executive Compensation – Grants of Plan-Based Awards Table.”
(4)
Salary – includes $60,000, paid $15,000 quarterly in DSUs for 2011. See “Executive Compensation – Grants of Plan-Based Awards Table.”
Stock Awards – excludes $60,000 of salary, paid $15,000 quarterly in DSUs for 2011. The 2012 amount is comprised of 8,800 DSUs, 50 percent of which are performance-based, having a value of $268,400 on the date of grant, and performance-based incentive compensation of $72,287 paid in DSUs. In addition, in 2012, at the time Mr. Mereness entered into his current employment agreement, Mr. Mereness was awarded performance-based DSUs representing 15,000 shares having a value of $403,200 on the date of grant. These DSUs will begin to vest when the annual profits of Lippert Components exceed $67 million and will vest proportionately until annual profits reach $87 million, at which point all such DSUs will have vested. The DSUs must be held for at least one year after vesting. The 2013 amount is comprised of 8,800 DSUs, 50 percent of which are performance-based, having a value of $447,832 on the date of grant, and performance-based incentive compensation of $430,094 paid in DSUs. See “Executive Compensation – Grants of Plan-Based Awards Table.”
Long-Term Incentive Compensation – each year during his Agreement, Mr. Mereness is granted long-term performance-based incentive compensation pursuant to which he can earn up to 35,000 shares of Common Stock (the “LTI Shares”) for the subsequent three-year period (the “Applicable Measurement Period”). If Adjusted EPS (as defined) for the third year of the Applicable Measurement Period exceeds the Benchmark EPS (as defined) by more than 20 percent, then Mr. Mereness is entitled to receive LTI Shares in proportion to the percentage increase in such Adjusted EPS over 20 percent up to a percentage increase of 40 percent. See “Executive Compensation – Compensation Discussion and Analysis – 2013 Executive Performance and Compensation.” Amount shown represents the three-year aggregate grant date fair value. See “Executive Compensation – Grants of Plan-Based Awards Table.”
(5)
Salary – annual base salary of $300,000 through April 2013, and $360,000 for the balance of 2013.     

Stock Awards – the 2011 amount is comprised of 7,500 DSUs, 50 percent of which are performance-based, having a value of $173,775 on the date of grant, and performance-based incentive compensation of $58,609 paid in DSUs. The 2012 amount is comprised of 7,200 DSUs, 50 percent of which are performance-based, having a value of $219,600 on the date of grant. The 2013 amount is comprised of 7,200 DSUs, 50 percent of which are performance-based, having a value of $368,000 on the date of grant, and performance-based incentive compensation of $111,000 paid in DSUs. See “Executive Compensation – Grants of Plan-Based Awards Table.”
Long-Term Incentive Compensation – upon expiration of the three-year period January 1, 2012 through December 31, 2014 (the “Measurement Period”), Mr. Giordano is entitled to receive 225 DSUs for each 0.1 percent that the Company’s average return on invested capital (“ROIC”) for the Measurement Period exceeds 18 percent; provided, however, that the total number of DSUs cannot exceed 15,000 for the three-year Measurement Period. See “Executive Compensation – Compensation Discussion and Analysis – 2013 Executive Performance and Compensation.” Amount shown represents the three-year aggregate grant date fair value. See “Executive Compensation – Grants of Plan-Based Awards Table.”    
(6)
Salary – annual base salary of $300,000 from the beginning of Mr. Kuhns’ employment in March 2013. Includes $35,000 of salary, paid in DSUs for 2013 on Mr. Kuhns’ date of employment, which vest over three years. See “Executive Compensation – Grants of Plan-Based Awards Table.”     

Stock Awards – comprised of 3,000 DSUs having a value of $152,670 on the date of grant. Excludes $35,000 of salary paid in DSUs in lieu of cash compensation on Mr. Kuhns’ date of employment. See “Executive Compensation – Grants of Plan-Based Awards Table.”
(7)
Includes the following payments the Company made to or on behalf of our NEOs:

30



Name
 
Year
 
401(k)
Matching
Contribution
 
Supplemental
Restricted
Bonus (A)
 
Health
Insurance
Other
Perquisites (B)
 
 
Total All
Other
Compensation
 
 
 
 
 
 
 
 
 
 
 
 
 
Fredric M. Zinn
 
2013
 
$
10,200

 
$
—

 
$
—

$
381,805

(C)  
 
$392,005
 
 
2012
 
$
10,000

 
$
—

 
$
—

$
25,232

 
 
$35,232
 
 
2011
 
$
9,800

 
$
24,600

 
$
—

$
40,600

 
 
$75,000
 
 
 
 
 
 
 
 
 
 
 
 
 
Jason D. Lippert
 
2013
 
$
10,200

 
$
—

 
$
1,746

$
18,250

 
 
$30,196
 
 
2012
 
$
10,000

 
$
—

 
$
1,473

$
20,918

 
 
$32,391
 
 
2011
 
$
9,800

 
$
40,000

 
$
2,238

$
21,845

 
 
$73,883
 
 
 
 
 
 
 
 
 
 
 
 
 
Scott T. Mereness
 
2013
 
$
10,200

 
$
—

 
$
1,746

$
10,353

 
 
$22,299
 
 
2012
 
$
10,000

 
$
—

 
$
1,473

$
12,384

 
 
$23,857
 
 
2011
 
$
9,800

 
$
25,000

 
$
2,042

$
17,439

 
 
$54,281
 
 
 
 
 
 
 
 
 
 
 
 
 
Joseph S. Giordano III
 
2013
 
$
10,200

 
$
—

 
$
24,243

$
84,828

(D)  
 
$119,271
 
 
2012
 
$
10,000

 
$
—

 
$
27,087

$
15,576

 
 
$52,663
 
 
2011
 
$
9,800

 
$
15,000

 
$
29,331

$
15,536

 
 
$69,667
 
 
 
 
 
 
 
 
 
 
 
 
 
Robert A. Kuhns
 
2013
 
$
—

 
$
—

 
$
1,455

$
—

 
 
$1,455
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(A)
In 2011, our NEOs received a taxable bonus payment which they were required to invest in tax deferred annuities or cash value life insurance intended to provide retirement income.
(B)
Other perquisites included personal use of a company car or auto allowance, spousal travel for Company events, reimbursement for relocation expenses, severance for our former Chief Executive Officer, and long-term care, life, and long-term disability insurance.
(C)
As a result of the termination of Mr. Zinn’s employment, and in accordance with his Agreement, Mr. Zinn received a severance amount equivalent to his base salary from the date of termination, and certain benefits and perquisites consistent with those he received under his Agreement of $360,807 in 2013. The aggregate severance and benefits remaining due to Mr. Zinn under his Agreement is approximately $0.9 million, subject to his continued compliance with a covenant not to compete during the remainder of the two year severance period from the date of his termination.
(D)
In connection with the relocation of the corporate headquarters from White Plains, New York to Elkhart, Indiana, the Company reimbursed Mr. Giordano for expenses incurred in connection with his personal relocation to Indiana of $70,282.

31



Grants of Plan-Based Awards Table
The following table summarizes the DSUs and stock awards granted to the NEOs in 2013, or earned by the NEOs in 2013 based on the achievement of specified annual performance criteria:
GRANTS OF PLAN-BASED AWARDS
 
 
 
 
 
 
 
 
 
 
All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
 
Grant Date
Fair Value of
Stock and
Option
Awards
 
 
 
 


Estimated Future Payouts Under
Equity Incentive Plan Awards
 
Name
 
Grant
Date
 
Threshold
 
Target
 
Maximum
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fredric M. Zinn (1)    
 
2/11/2014
 
—

 
—

 
—

 
1,223

(2)  
 
 
$
56,250

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Jason D. Lippert (1)    
 
2/11/2014
 
—

 
—

 
—

 
11,134

(3)  
 
 
$
511,931

 
 
11/20/2013
 
—

(4)  
—

(4)  
5,600

(4)  
5,600

(5)  
 
 
$
569,968

 
 
1/1/2013
 
—

(4)  
—

(4)  
50,000

(4)  
—

 
 
 
$
1,612,500

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Scott T. Mereness (1)    
 
2/11/2014
 
—

 
—

 
—

 
9,354

(3)  
 
 
$
430,094

 
 
11/20/2013
 
—

(4)  
—

(4)  
4,400

(4)  
4,400

(5)  
 
 
$
447,832

 
 
1/1/2013
 
—

(4)  
—

(4)  
35,000

(4)  
—

 
 
 
$
1,128,750

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Joseph S. Giordano III (1)    
 
2/11/2014
 
—

 
—

 
—

 
2,425

(3)  
 
 
$
111,463

 
 
11/20/2013
 
—

(4)  
—

(4)  
3,600

(4)  
3,600

(5)  
 
 
$
366,408

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Robert A. Kuhns
 
11/20/2013
 
—

 
—

 
—

 
3,000

(5)  
 
 
$
152,670

 
 
3/4/2013
 
—

 
—

 
—

 
957

(6)  
 
 
$
35,000

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
Does not include the cash component of annual performance-based incentive compensation earned in 2013, which is calculated based on a formula as described in “Executive Compensation – Compensation Discussion and Analysis – 2013 Executive Performance and Compensation.” There is no threshold, target or maximum amount that could be earned with respect to such compensation. The amount paid for 2013 is disclosed in the Summary Compensation Table.
(2)
Performance-based incentive compensation of $150,000 paid in DSUs, subject to forfeiture if the average annual return on invested capital (as defined) for 2013 was less than 18 percent. Based on the Company’s performance, no such DSUs were forfeited; however, due to Mr. Zinn’s retirement in May 2013, Mr. Zinn only received DSUs in an equivalent value of $56,250.
(3)
Performance-based incentive compensation earned in 2013, paid in DSUs in lieu of cash compensation.
(4)
DSUs or stock awards that vest based on achievement of specified performance conditions. See “Executive Compensation - Compensation Discussion and Analysis - 2013 Executive Performance and Compensation”.
(5)
DSU awards that vest ratably each year on the first through the fifth anniversaries of the respective grant date.
(6)
DSU award that vests ratably each year on the first through the third anniversaries of the respective grant date, paid in lieu of cash compensation and included as salary in the Summary Compensation Table.

Grants of Plan-Based Awards
In addition to equity awards granted as part of salary and performance-based incentive compensation, DSUs were awarded to employees in November 2013 (collectively, the “November 2013 DSUs”). The Company’s practice is to grant equity awards to employees every year at our regular Board and Compensation Committee meetings in November. We believe that the November 2013 DSUs granted to our executives and employees constitute an effective incentive to achieving long-term success of the Company, and are an important compensation component to our executives and employees. The number of DSUs is determined based upon the fair market value of the stock on the date granted. DSUs provide for the distribution of shares of our Common Stock, subject to earlier distribution upon death, disability, certain instances of termination of employment without cause, or certain changes-in-control of the Company. Our regular November meeting date is scheduled almost a year in advance. Accordingly, the granting of the November 2013 DSUs, as well as the

32



applicable stock price, were determined independent of any general market conditions at that time or intervening Company events which could have affected the market price of our stock on that date.
The number of the November 2013 DSUs granted to each of our NEOs for 2013 was a function of both (i) specific pre-established measures of corporate operating performance utilized to determine incentive awards pursuant to compensation arrangements, and (ii) consideration by the Compensation Committee of factors and events relative to the Company’s performance, the expense related to the November 2013 DSUs, resulting dilution, the element of motivation that equity awards provide, and other factors.
Prior to granting the November 2013 DSUs, the Compensation Committee determined the total number of shares that would be subject to the awards and the related value which would result in a reasonable expense to the Company relative to our operating results. The Committee then allocated the November 2013 DSUs for a portion of those shares to the Company’s NEOs. Mr. Lippert then allocated the remaining November 2013 DSUs among the other employees of Lippert Components, subject to approval of the Committee.
The 139,504 shares subject to the November 2013 DSUs which were granted to employees in 2013 represented 0.6 percent of the Company’s outstanding shares on the grant date. In November 2013, four NEOs received aggregate awards for 30,200 shares representing 22 percent of the total shares granted to all employees in 2013. The aggregate expense to the Company applicable to the November 2013 DSUs to the NEOs is $1,536,878, which will be expensed over the vesting term of the November 2013 DSUs. At least 50 percent of the November 2013 DSUs granted to each of the Chief Executive Officer, President and Chief Financial Officer was performance-based.

Equity Award and Incentive Plan

On May 18, 2011, stockholders approved the Drew Industries Incorporated Equity Award and Incentive Plan, as Amended and Restated. See “Proposal 2. Amendment of Drew Industries Incorporated Equity Award and Incentive Plan” for a summary of the terms of the Plan.

33



Outstanding Equity Awards at Fiscal Year-End
The following table summarizes the number of shares of Common Stock underlying outstanding options, and unvested DSUs and stock awards, held by each NEO as of December 31, 2013:

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
 
Option Awards
 
Stock Awards
Name
Number of Securities Underlying Unexercised Options Exercisable
 
Number of Securities Underlying Unexercised Options Unexercisable (1)
 
Option Exercise Price
 
Option Expiration Date
 
Number of Shares or Units of Stock That Have Not Vested
 
Market Value of Shares or Units That Have Not Vested (4)
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested
 
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (4)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fredric M. Zinn
—

 
—

 
$
—

 
—
 
—

 
$
—

—

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Jason D. Lippert
6,000

 
—

 
$
6.09

 
11/12/14
 
—

 
$
—

—

 
$
—

 
3,200

 
3,200

 
$
15.49

 
11/18/15
 
—

 
$
—

—

 
$
—

 
5,600

 
11,200

 
$
15.67

 
11/29/16
 
—

 
$
—

—

 
$
—

 
11,480

 
8,400

 
$
19.17

 
11/15/17
 
—

 
$
—

—

 
$
—

 
—

 
—

 
$
—

 
—
 
4,749

(1)  
$
243,144

—

 
$
—

 
—

 
—

 
$
—

 
—
 
5,600

(1)  
$
286,720

5,600

(2)  
$
286,720

 
—

 
—

 
$
—

 
—
 
—

 
$
—

50,000

(2)  
$
2,560,000

 
—

 
—

 
$
—

 
—
 
—

 
$
—

34,981

(2)  
$
1,791,027

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Scott T. Mereness
9,200

 
—

 
$
6.09

 
11/12/14
 
—

 
$
—

—

 
$
—

 
9,600

 
2,400

 
$
15.49

 
11/18/15
 
—

 
$
—

—

 
$
—

 
13,200

 
8,800

 
$
15.67

 
11/29/16
 
—

 
$
—

—

 
$
—

 
15,400

 
6,600

 
$
19.17

 
11/15/17
 
—

 
$
—

—

 
$
—

 
—

 
—

 
$
—

 
—
 
3,732

(1)  
$
191,093

—

 
$
—

 
—

 
—

 
$
—

 
—
 
4,400

(1)  
$
225,280

4,400

(2)  
$
225,280

 
—

 
—

 
$
—

 
—
 
—

 
$
—

35,000

(2)  
$
1,792,000

 
—

 
—

 
$
—

 
—
 
—

 
$
—

24,381

(2)  
$
1,248,307

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Joseph S. Giordano III
2,000

 
—

 
$
6.09

 
11/12/14
 
—

 
$
—

—

 
$
—

 
8,000

 
2,000

 
$
15.49

 
11/18/15
 
—

 
$
—

—

 
$
—

 
9,000

 
6,000

 
$
15.67

 
11/29/16
 
—

 
$
—

—

 
$
—

 
—

 
—

 
$
—

 
—
 
2,386

(1)  
$
122,166

—

 
$
—

 
—

 
—

 
$
—

 
—
 
3,053

(1)  
$
156,307

—

 
$
—

 
—

 
—

 
$
—

 
—
 
3,600

(1)  
$
184,320

3,600

(2)  
$
184,320

 
—

 
—

 
$
—

 
—
 
—

 
$
—

15,900

(2)  
$
814,098

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Robert A. Kuhns
—

 
—

 
$
—

 
—
 
957

(3)  
$
48,998

—

 
$
—

 
—

 
—

 
$
—

 
—
 
3,000

(1)  
$
153,600

—

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
Option and DSU awards or stock awards, including dividends thereon, where applicable, that vest ratably each year on the first through the fifth anniversaries of the respective grant date, and options expire six years after grant.
(2)
DSUs or stock awards, including dividends thereon, where applicable, that vest based on achievement of specified performance conditions. See “Executive Compensation – Compensation Discussion and Analysis - 2013 Executive Performance and Compensation”.
(3)
DSU award that vests ratably each year on the first through the third anniversaries of the respective grant date.
(4)
Market value determined based on the closing market price of our Common Stock on December 31, 2013 of $51.20 per share, multiplied by the number of underlying shares not yet vested.

34



Option Exercises and Stock Vested
The following table presents the value realized by the NEOs on exercise of options and vesting of DSUs and stock awards in 2013:

OPTION EXERCISES AND STOCK VESTED
 
Option Awards
 
Stock Awards
 
 
 
 
 
 
 
 
Name
Number of Shares Acquired On Exercise
 
Value
Realized on
Exercise (1)
 
Number of Shares Acquired On Vesting
 
Value Realized
on Vesting (2)

Fredric M. Zinn
59,000 (3)
 
$
1,003,580

 
44,633 (3)
 
$
2,073,246

 
 
 
 
 
 
 
 

Jason D. Lippert
25,320
 
$
222,452

 
59,527 (4)
 
$
2,989,305

 
 
 
 
 
 
 
 

Scott T. Mereness
20,000
 
$
261,125

 
41,621 (5)
 
$
2,081,890

 
 
 
 
 
 
 
 

Joseph S. Giordano III
12,000
 
$
94,680

 
10,267 (6)
 
$
512,490

 
 
 
 
 
 
 
 

Robert A. Kuhns
—
 
$
—

 
—
 
$
—

 
 
 
 
 
 
 
 
 
(1)
Value realized calculated by multiplying the number of shares exercised by the difference between (a) either (i) the actual sales price of such shares acquired or exercised if such shares were sold simultaneously or (ii) the average of the high and low price of our Common Stock on the date of the option exercise as reported by the NYSE, if such shares acquired on exercise were not sold simultaneously, and (b) the exercise price of the stock option.
(2)
Value realized calculated by multiplying the number of shares vested by the closing price of our Common Stock as reported by the NYSE on the vesting date.
(3)
In connection with the executive succession and transition described in “The Company – Executive Succession and Relocation”, and in accordance with Mr. Zinn’s Executive Compensation Agreement, all equity awards, other than long-term incentive compensation awards, vested upon termination of employment. Receipt of 32,761 shares have been deferred for a period of one year or greater.
(4)
Includes time-based DSUs and performance-based DSUs and stock awards which vested in 2013. Receipt of 34,381 shares have been deferred for a period of one year or greater.
(5)
Includes time-based DSUs and performance-based DSUs and stock awards which vested in 2013. Receipt of 23,302 shares have been deferred for a period of one year or greater.
(6)
Includes time-based DSUs and performance-based DSUs which vested in 2013. Receipt of 4,890 shares have been deferred for a period of one year or greater.
To enhance the retention value of the Company’s executives, the Committee requires NEOs to hold for at least one year stock received upon exercise of vested stock options, unless the NEO already owns a number of shares at least equivalent to the shares to be sold by the NEO on exercise of options.

35



Nonqualified Deferred Compensation
The Company maintains an Executive Non-Qualified Deferred Compensation Plan (the “Deferral Plan”). The Company does not make any contributions to the Deferral Plan, but is responsible for certain costs of administration, which are not significant. Pursuant to the Deferral Plan, the NEOs are eligible to defer all or a portion of their earned base salary and incentive compensation. The Deferral Plan participant is fully vested in all deferred compensation and earnings credited to the participant’s account because the participant has made all the contributions. Pursuant to the Deferral Plan, payments to the participants will be made from the Company’s general unrestricted assets, and the obligations pursuant to the Deferral Plan are unfunded and unsecured.
The Deferral Plan participant’s account is deemed invested (not actually invested) among various deemed investment alternatives selected by the participant. The Company has elected to invest a portion of the compensation deferred by the participant in life insurance policies for the benefit of the Company. The investments within these life insurance policies track the deemed investments selected by the participant in order to generate the funds needed to make payments to the participants. The deemed investments selected by the participant determine the amount of earnings and losses that are credited to the participant’s account.
The following table summarizes activity in the Deferral Plan by those NEOs who participated:
NONQUALIFIED DEFERRED COMPENSATION
Name
 
Executive
Contributions in
2013 (1)
 
Aggregate
Earnings in
2013 (2)
 
Aggregate
Withdrawals/
Distributions in 2013
 
Aggregate
Balance at
December 31, 2013
 
 
 
 
 
 
 
 
 
 
 
Fredric M. Zinn
 
$
—

 
$
30,651

 
$
49,989

 
$
104,928

(3)  
 
 
 
 
 
 
 
 
 
 
Jason D. Lippert
 
$
345,219

 
$
340,186

 
$
—

 
$
2,789,163

(4)  
 
 
 
 
 
 
 
 
 
 
Scott T. Mereness
 
$
43,560

 
$
18,632

 
$
—

 
$
127,712

(5)  
 
 
 
 
 
 
 
 
 
 
 
(1)
These amounts have been included as Non-Equity Incentive Plan Compensation in the Summary Compensation Table.
(2)
Amounts represent earnings or losses on the executives’ contributions, and have not been included the Summary Compensation Table.
(3)
Includes cumulative contributions by the participant of $106,400, as well as cumulative earnings of $48,517, and cumulative withdrawals of $49,989.
(4)
Includes cumulative contributions by the participant of $2,468,433, as well as cumulative earnings of $320,730.
(5)
Includes cumulative contributions by the participant of $427,951, as well as cumulative losses of $87,499, and cumulative withdrawals of $212,740.

Potential Payments on Termination or Change-In-Control

Acceleration of Equity Awards
Pursuant to the Drew Industries Incorporated Equity Award and Incentive Plan, as Amended and Restated, in the event of a change-in-control (as defined in the Plan) resulting in termination (other than for cause) within two years of the change-in-control, or in the event of death or disability, all unexercisable equity awards, including those held by the NEOs, will become fully exercisable and vested, except to the extent granted pursuant to long-term incentive plans which would vest pro-rata. See “Proposal 2. Amendment to Drew Industries Incorporated Equity Award and Incentive Plan – Information About the Plan – Vesting, Forfeitures and Acceleration”.
Termination of Employment
•
Fredric M. Zinn, Former President and CEO
•
Jason D. Lippert, CEO

36



•
Scott T. Mereness, President
•
Joseph S. Giordano III, CFO and Treasurer
•
Robert A. Kuhns, CLO and Secretary

The Company has entered into separate “double-trigger” Change-in-Control Agreements (the “CIC Agreements”) with each of Messrs. Zinn, Lippert, Mereness, Giordano and Kuhns (individually, the “Executive”). The CIC Agreements provide for severance payable upon a Company-initiated termination or a voluntary termination, within one year following, or 120 days prior to, a change-in-control, or a termination initiated by the Executive with good reason (defined as a reduction in the Executive’s compensation or a material change in the Executive’s authority and duty) within six months following a change-in-control. Change-in-control includes acquisition of 30 percent or more of the Company’s voting securities, or a merger resulting in a change in voting control of more than 50 percent of the voting power of the Company’s existing securities, or liquidation of the Company. The CIC Agreements provide that the Executive will receive his then effective salary, plus the average bonuses and long-term incentive compensation paid for the prior three years, for a period of two years if he is involuntarily terminated or voluntarily terminates for good reason, or one year if he voluntarily terminates without good reason, subject to certain adjustments, and certain other benefits. During the period for which the Executive would receive such severance payments, the payments will be reduced by any compensation and benefits received by the Executive from other employment or consulting activities for or on behalf of the person or entity, or their affiliates, who consummated the change in control.
In accordance with the employment and compensation arrangements with the Chief Executive Officer, President, Chief Financial Officer and Chief Legal Officer:
(i)
If on account of physical or mental disability the Executive does not perform his duties for a continuous period of six months, the Company may, upon 30 days’ notice, terminate the Executive’s employment. For one year after termination, the Executive will receive the difference between the sum of his base salary over the amount of disability payments received, and other benefits in accordance with the Agreement. The Executive will also receive annual and long-term incentive compensation, proportionately with respect to the period prior to the date of termination.
(ii)
In the event of the Executive’s death, the Executive’s heir or designee will be entitled to the base salary and benefits which the Executive would have received for the period ending one year from the date of death, and annual and long-term incentive compensation, proportionately with respect to the period prior to the date of death.
(iii)
In accordance with the employment and compensation arrangements with Messrs. Lippert and Mereness, in the event the Company terminates their employment at any time during the last two years of the three-year term for other than “cause”, they will receive their base salary and benefits for two years from the date of termination, all unvested stock-based awards shall become fully vested, except for long-term performance-based awards, and they will receive annual and long-term incentive compensation proportionately with respect to the period prior to the date of termination.
(iv)
In the event the Company terminates Mr. Giordano’s or Mr. Kuhns’ employment for other than “cause”, or the Company relocates its corporate office and Mr. Giordano or Mr. Kuhns terminates his employment, Mr. Giordano or Mr. Kuhns will receive his base salary and the benefits for one year from the date of termination, all unvested stock-based awards will become fully vested, except long-term performance-based awards, and he will receive annual and long-term incentive compensation, proportionately with respect to the period prior to the date of termination.
In connection with the executive succession, to provide an inducement for Mr. Giordano to relocate to Indiana and waive his contractual right to severance pay as a result of the relocation, if Mr. Giordano terminates his employment before June 30, 2014, and provided that he has given the Company notice of termination at least 120 days prior to the termination date, Mr. Giordano will receive his base salary for a period of one year from the termination date, less an amount equal to the Relocation Bonus, and all unvested stock-based awards, except for long-term performance-based awards, outstanding on June 30, 2013 will become fully vested.
Based on the employment and compensation arrangements in effect as of December 31, 2013, and assuming a hypothetical termination date of December 31, 2013, including the price of the Company’s Common Stock on that date, the benefits on termination or change-in-control for our NEOs would have been as follows:



37



Name / Benefit
 
Change-in-Control Involuntary Termination
Change-in-Control Voluntary
Termination
Involuntary Termination Due  
to Disability (2)
Involuntary Termination Due
to Death
Involuntary Termination
Without Cause
Jason D. Lippert
 
 
 
 
 
 
Base salary
 
$
1,600,000

$
800,000

$
800,000

$
800,000

$
1,600,000

Annual bonus
 
2,421,530

1,210,765

—

—

—

Long-term incentive bonus
 
1,706,666

853,333

—

—

—

Other benefits
 
22,032

11,016

20,380

20,380

42,432

Acceleration of unvested equity
 
1,589,144

1,589,144

1,589,144

1,589,144

1,589,144

Total Benefits (1)
 
$
7,339,372

$
4,464,258

$
2,409,524

$
2,409,524

$
3,231,576

 
 
 
 
 
 
 
Scott T. Mereness
 
 
 
 
 
 
Base salary
 
$
1,100,000

$
550,000

$
550,000

$
550,000

$
1,100,000

Annual bonus
 
1,756,110

878,055

—

—

—

Long-term incentive bonus
 
1,194,666

597,333

—

—

—

Other benefits
 
21,860

10,930

20,294

20,294

42,260

Acceleration of unvested equity
 
1,469,864

1,469,864

1,469,864

1,469,864

1,469,864

Total Benefits (1)
 
$
5,542,500

$
3,506,182

$
2,040,158

$
2,040,158

$
2,612,124

 
 
 
 
 
 
 
Joseph S. Giordano III
 
 
 
 
 
 
Base salary
 
$
720,000

$
360,000

$
360,000

$
360,000

$
360,000

Annual bonus
 
564,578

282,289

—

—

—

Long-term incentive bonus
 
339,388

169,694

—

—

—

Other benefits
 
77,578

38,789

47,627

47,627

48,989

Acceleration of unvested equity
 
931,713

931,713

931,713

931,713

931,713

Total Benefits
 
$
2,633,257

$
1,782,485

$
1,339,340

$
1,339,340

$
1,340,702

 
 
 
 
 
 
 
Robert A. Kuhns
 
 
 
 
 
 
Base Salary
 
$
600,000

$
300,000

$
300,000

$
300,000

$
300,000

Annual Bonus
 
100,000

50,000

50,000

50,000

50,000

Other benefits
 
3,492

1,746

1,746

1,746

1,746

Acceleration of unvested equity
 
202,598

202,598

202,598

202,598

202,598

Total Benefits
 
$
906,090

$
554,344

$
554,344

$
554,344

$
554,344

 
 
 
 
 
 
 
 
(1)
Deferred compensation balances are not included above as the Deferral Plan participant is fully vested in all deferred compensation and earnings credited to the participant’s account because the participant has made all the contributions.
(2)
Amounts payable by the Company will be reduced by the disability payments received by the Executive.

As a result of the termination of Mr. Zinn’s employment, and in accordance with Mr. Zinn’s Agreement, Mr. Zinn will continue to receive a severance amount equivalent to his base salary for two years following termination of employment, and all equity awards previously issued to him, other than long term incentive compensation awards, vested on termination of employment. Mr. Zinn is also entitled to receive certain benefits and perquisites consistent with those he received under his Agreement during the severance period. The aggregate severance and benefits remaining due to Mr. Zinn as of December 31, 2013 was approximately $0.9 million, subject to his continued compliance with a covenant not to compete during the remainder of the two year severance period from the date of his termination.
TRANSACTIONS WITH RELATED PERSONS
The Company currently has over 5,000 employees and seeks to employ the most qualified candidates. Consequently, the Company does not preclude the hiring of family members of incumbent Directors and executive officers. The compensation of each of the following employees was established in accordance with the Company’s employment and compensation practices applicable to employees with equivalent qualifications, experience and responsibilities.
During 2013, the Company employed Jason D. Lippert, as Chief Executive Officer of the Company, who received total salary and incentive compensation of $4,836,526 (see “Executive Compensation – Summary Compensation Table”), and at Lippert Components Jarod Lippert, Director of Marketing and Media, who received salary and bonus of $172,481. Jason D. Lippert and Jarod Lippert, brothers, have been employed by Lippert Components in excess of twenty and twelve years, respectively.
Review, Approval or Ratification of Transactions with Related Persons
The Company’s written Guidelines for Business Conduct, applicable to all Directors, officers and management-level employees, provide that any interests or activities of a Director, officer or applicable employee that could, or could appear to, create a conflict of

38



interest must be disclosed to the Chief Legal Officer of the Company. A conflict of interest exists if the Director, officer or applicable employee has any interests or activities outside the Company that he or she could benefit from to the detriment of the Company, or that could, or could appear to, influence his or her actions on behalf of the Company. The Company’s Governance Principles provide that if an actual or potential conflict of interest arises for a Director, the Director must promptly inform the Chief Executive Officer and the Chairman of the Board, or the Lead Director. The Audit Committee shall resolve any such conflicts. If a significant conflict exists and cannot be resolved, the Director should resign. All Directors must recuse themselves from any discussion or decision affecting their personal, business or professional interests. The Audit Committee shall resolve any conflict of interest question involving the Chief Executive Officer, President, Chief Financial Officer, or any other executive officer of the Company. The Chief Executive Officer is charged with resolving any conflict of interest issue involving any other officer or employee of the Company or its subsidiaries, and reports such conflicts of interest, if any, and the resolution thereof to the Audit Committee chair on a quarterly basis.
Indemnification
In accordance with Section 102(b)(7) of the Delaware General Corporate Law, the Company’s restated Certificate of Incorporation provides that 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.
Additionally, 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 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, the Company has Indemnification Agreements with each of its Directors and executive officers. The agreements incorporate into contract the Company’s existing obligations for indemnification and advancement of indemnifiable expenses which currently are included in the Company’s Restated Certificate of Incorporation and Amended By-laws, and as provided by Section 145 of the Delaware General Corporation Law. Management believes that it is in the best interests of the Company to make service to the Company more attractive to existing and prospective Directors and executive officers by virtue of the security afforded by contract.
Compensation Committee Interlocks and Insider Participation
During fiscal 2013, the Compensation Committee of our Board of Directors was comprised of Messrs. Lowe, Gero, Rose, Hegi, Reed and Deely, all of whom are independent, outside directors. No member of this Committee has had any relationship with our Company requiring disclosure in this Proxy Statement other than service as a director. No executive officer of the Company serves as a member of the board of directors or compensation committee, or other committee serving an equivalent function, of any other entity that has one or more of its executive officers serving as a member of our Board of Directors or Compensation Committee, and there are no “interlocks”, as defined by the SEC.
Proposal 2. AMENDMENT TO DREW INDUSTRIES INCORPORATED
EQUITY AWARD AND INCENTIVE PLAN
Introduction
The Drew Industries Incorporated Equity Award and Incentive Plan, as Amended and Restated (the “Plan”) became effective on May 18, 2011 upon its approval by our stockholders. As originally adopted, the Plan authorized the issuance of up to 1,530,000 shares of our Common Stock. As of December 31, 2013, there were 246,368 shares of our Common Stock remaining available for awards under the Plan, which is the only plan under which equity awards can currently be made to our executive officers and other employees of the Company and any of its subsidiaries, non-employee Directors, and others who provide substantial services to the Company and its subsidiaries.
Management believes that the Company’s long-term success is dependent upon the ability of the Company to attract and retain qualified employees and non-employee Directors and to motivate their best efforts on behalf of the Company’s interests. Thus, equity awards under the Plan constitute an important part of the Company’s compensation of its officers and other employees, and also makes service on the Board of Directors more attractive by providing an incentive to increase participation in the Company’s success. Equity-based awards under the Plan also reward our executives and non-employee Directors for long-term return to stockholders.

39



At the Annual Meeting there will be presented to stockholders a proposal to approve the adoption of an amendment to the Plan to increase the number of shares authorized for issuance under the Plan. Because of the importance we attach to providing competitive levels of equity-based compensation to our eligible employees and non-employee Directors, and because the number of eligible recipients of equity awards has increased as the Company has grown, we believe that the shares remaining under the Plan will likely be insufficient to continue making awards under the Plan beyond 2014. As a result, our Compensation Committee recommended, and our Board of Directors has adopted, subject to stockholder approval, an amendment of the Plan to increase the number of shares of our Common Stock authorized for issuance under the Plan by 1,678,632 shares. No other changes to the Plan are contemplated through this proposal. See “Information about the Plan” below for a more detailed description of the Plan.
Stockholder Approval
Stockholder approval of the amendment of the Plan is being sought in order to meet the stockholder approval requirements of the NYSE. If the amendment is approved, the additional shares will be registered under the Securities Act in accordance with an amendment to our existing amended Registration Statements on Form S-8.
Determination of Share Increase
In determining the amount of the increase in the Plan share reserve for which stockholder approval is being sought as part of the amendment, our Compensation Committee considered a number of factors, including the following:
•
Importance of long-term equity incentives . Long-term equity incentives play a critical role in our executive compensation programs, motivating executives to make decisions that focus on long-term stockholder value creation, aligning executives’ interests with the interests of stockholders and serving as an effective retention device. Our ability to continue to provide a competitive level of long-term equity incentives is considered to be of utmost importance to our Company’s success.

•
Increased numbers of eligible employees . When the Plan was originally approved, approximately 80 employees out of a pool of about 3,000 eligible recipients had received long-term equity awards. Reflecting the Company’s growth, we currently have approximately 150 employees out of a pool of about 5,000 eligible recipients who have received long-term equity incentive awards.

•
Historical amounts of equity awards . Our three-year annual number of shares granted was as follows:
Year
Options Granted
Full-Value Shares Granted (1)
Total Granted (2)
Weighted Average Number of Common Shares Outstanding

Burn Rate (3)
2013
-
190,808
477,020
23,321,000
2.05
%
2012
-
372,838
932,095
22,558,000
4.13
%
2011
345,000
169,424
768,560
22,267,000
3.45
%
(1)
Amounts include DSUs issued and granted, and restricted stock granted in each respective year. Amounts exclude stock awards from the year of grant because they are long-term performance-based awards.

(2)
Total Granted = Options + (Full-Value Shares Granted x 2.5).

(3)
Burn Rate = Total Granted/Weighted Average Number of Common Shares Outstanding.

These amounts are not necessarily indicative of the shares that might be awarded in the future under the Plan.

•
Historical equity award burn rate . Our three-year average annual equity grant rate, or “burn rate,” for the 2011-2013 period, based on the table as set forth above, was 3.21 percent, which was lower than the maximum burn rate guidance of 3.81 percent put forth by the Proxy Advisory Services division of Institutional Shareholder Services, Inc. (“ISS”) for our industry classification.

•
Current and projected overhang percentage . As of December 31, 2013, we had 1,856,592 shares of our Common Stock subject to outstanding equity awards or available for future equity awards under our Plan, which represented approximately 7.4 percent of fully diluted shares of Common Stock outstanding. The 1,678,632 new shares proposed to be included in the amended Plan share reserve would increase the overhang percentage by an additional 6.2 percent to approximately 13.1 percent.


40



•
Anticipated duration . If we continue making equity awards consistent with our practices over the past three years as set forth above, we estimate that the shares available for future awards, including the 1,678,632 additional shares if the amended Plan is approved, will be sufficient for Plan awards for at least three years.
Principal Changes to the Plan
The only change to the Plan is that the aggregate number of shares that may be issued under the Plan will increase by 1,678,632 shares, from a total of 1,530,000 shares to 3,208,632 shares, of which 1,925,000 will be available for future issuance.
Compensation Best Practices
The Plan, both as it currently exists and as it is proposed to be amended, incorporates a range of compensation best practices, including the following key features:
•
No Repricing or Replacement of Options or Stock Appreciation Rights . The Plan prohibits, without stockholder approval, actions to reprice, replace or repurchase options or stock appreciation rights (“SARs”).

•
No In-the-Money Option or SAR Grants . The Plan prohibits the grant of options or SARs with an exercise price less than the fair market value of our Common Stock on the date of grant.

•
Double Trigger Accelerated Vesting/Payment Following a Change in Control . The Plan provides that if outstanding awards are assumed or substituted in connection with a change in control, accelerated vesting or payment of an award will occur only if employment is terminated involuntarily (other than for “cause”) within two years of the change in control.

•
Dividend Equivalents Subject to Performance Conditions . Dividends and dividend equivalents payable with respect to the unvested portion of awards whose vesting is subject to the satisfaction of performance conditions will be subject to the same restrictions as the underlying shares or units.

•
No Liberal Share Counting . Shares delivered or withheld to pay the exercise price or satisfy a tax withholding obligation in connection with awards of options and SARs, shares repurchased by the Company using option exercise proceeds and any shares subject to an SAR that are not issued in connection with the stock settlement of the SAR upon its exercise may not be used again for new grants.

•
No Liberal Definition of “Change in Control .” No change in control would be triggered by stockholder approval of a business combination transaction.
Information about the Plan
The material features of the Plan as proposed to be amended are summarized below, and references to the “Plan” in the following discussion refer to the Plan as proposed to be amended unless otherwise stated. The following description of the material features of the Plan is qualified in its entirety by reference to the full text of the Plan, a copy of which may be obtained from the Company. A copy of the Plan has also been filed electronically with the SEC as an appendix to this Proxy Statement, and is available through the SEC’s website at http://www.sec.gov.
Shares Available . Subject to adjustment in the event of stock splits, stock dividends, and other extraordinary events, the maximum number of shares available under the Plan is 3,208,632, reduced by shares subject to awards granted under the Plan, and granted under the previous 2002 Plan after December 31, 2010, by (i) 1.60 shares for each share subject to awards other than stock options and stock appreciation rights “(SARs)” and (ii) one share for each share subject to awards of stock options and SARs. Shares subject to awards under the Plan, and after December 31, 2010 under the 2002 Plan, that are cancelled, expired, forfeited, settled in cash, or otherwise terminated without delivery of shares to a participant, and shares tendered or withheld for tax withholding for awards other than stock options and SARs, will be added back to the shares available under the Plan as 1.60 shares for each share that is cancelled, expires, forfeited, settled in cash, otherwise terminated, or tendered or withheld.
The following shares will not be added to the shares available under the Plan: (i) shares subject to awards under the Plan, and shares subject to awards after December 31, 2010 under the 2002 Plan, that are tendered or withheld by us in payment of the exercise price of stock options and SARs, (ii) shares subject to awards under the Plan, and shares subject to awards after December 31, 2010 under the 2002 Plan, that are tendered or withheld by us for tax withholding with respect to stock options and SARs, (iii) shares subject to SARs under the Plan, and shares subject to awards after December 31, 2010 under the 2002 Plan, that are not issued in connection with the stock settlement of SARs, and (iv) shares reacquired by us after December 31, 2010 using cash proceeds from the exercise of stock options.

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Shares subject to awards granted in substitution for awards of a company or business acquired by the Company or a subsidiary or affiliate will not count against the number of shares available under the Plan. In addition, shares remaining available under a plan approved by stockholders of a company acquired by the Company or a subsidiary or affiliate (adjusted to reflect the exchange or valuation ratio in the acquisition or combination) may be used for awards to employees of the acquired company under the Plan and will not reduce the shares available under the Plan. Shares delivered under the Plan may be either newly issued or treasury shares.
Limitation on Awards. The Plan includes limitations on awards to any one participant in order to qualify awards as performance-based compensation that is not subject to the limitation on deductibility under Code Section 162(m). Under this per-person limitation, no Participant may (i) be granted more than 1,000,000 shares subject to stock options or SARs in any 12-month period, (ii) earn for each 12 months in the vesting or performance period more than 500,000 shares for awards other than stock options and SARs that are intended to satisfy the performance-based compensation exception and are denominated in shares, and (iii) earn for each 12 months in the vesting or performance period more than $5,000,000 for awards other than stock options and SARs that are intended to satisfy the performance-based compensation exception and are denominated in cash. The share limitations are subject to adjustment for splits and other extraordinary corporate events.
The Plan is not subject to the provisions of the Employee Retirement Income Security Act of 1974.
Eligibility . Executive officers and other employees of the Company and its subsidiaries and affiliates, and independent Directors, consultants and others who provide substantial services to the Company and its subsidiaries and affiliates, are eligible to be granted awards under the Plan. In addition, any person who has been offered employment by the Company or a subsidiary or affiliate may be granted awards, but such prospective employee may not receive any payment or exercise any right relating to the award until he or she has commenced employment.
Administration . The Plan is administered by the Compensation Committee, except that the Board of Directors (“Board”) may appoint any other committee to administer the Plan and may itself act to administer the Plan. The Board must perform the functions of the Committee for purposes of granting awards to independent Directors. (References to the “Committee” in this discussion mean the Committee or the full Board exercising authority with respect to a given award.) Subject to the terms and conditions of the 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 Plan.
The Committee may delegate to officers or managers of the Company or a subsidiary or affiliates (or committees thereof) the authority to take action on behalf of the Committee pursuant to the Plan, to the extent that the delegation will not result in loss of the exemptions under Section 16 of the Exchange Act and Code Section 162(m). Nothing in the Plan precludes the Committee from authorizing payment of other compensation, including bonuses based upon performance, to officers and employees, including the executive officers. The 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 Plan.
Stock Options and SARs . The Committee is authorized to grant stock options, including both incentive stock options, which can result in potentially favorable tax treatment to the participant, and non-qualified stock options (“Non-Qualified Stock Option”), 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 a stock option and the grant price of an SAR are determined by the Committee, but may not be less than the fair market value of the shares on the date of grant. The maximum term of each stock option or SAR, the times at which each option or SAR will be exercisable, and provisions requiring forfeiture of unexercised options or SARs at or following termination of employment or upon the occurrence of other events, are fixed by the Committee, subject to a restriction that no stock option or SAR may have a term exceeding ten years. At the discretion of the Committee, stock options may be exercised by payment of the exercise price in cash, shares or broker-assisted cashless exercise procedures. Methods of exercise and settlement and other terms of SARs will be determined by the Committee.
No Repricing. The Plan prohibits the repricing of stock options and SARs (other than to reflect stock splits, stock dividends, large, special and non-recurring dividends or other distributions, and other extraordinary events, or in connection with a change-in-control of the Company) unless stockholder approval is obtained. For purposes of the Plan, a “repricing” means a reduction in the exercise price of a stock option or the grant price of a SAR, the cancellation of a stock option or SAR in exchange for cash or another award, or any other action with respect to a stock option or SAR that could be characterized as a repricing under NYSE rules.

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Restricted Stock and Deferred Stock Units . The Committee is authorized to make awards of restricted stock and deferred stock units. Prior to the end of the restricted period, shares received as restricted stock may not be sold or disposed of by participants, and may be forfeited in the event of termination of employment or failure to achieve performance goals. The restricted period is established by the Committee but may not be less than one year. 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 (except if the award vests based on the achievement of performance goals; see “Dividends and Dividend Equivalents” below), unless otherwise determined by the Committee.
Deferred stock units give 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). Awards of deferred stock units shall be made in a manner consistent with Code Section 409A. An award of deferred stock units will specify (1) permissible payment events, i.e., separation from service, death, disability, a specified time or pursuant to a fixed schedule; a change-in-control of the Company or an unforeseeable emergency, (2) the date on which payment shall be made or begin and (3) the form of payment (i.e. in a lump-sum or installments). If the Committee determines that the participant is a “specified employee” (within the meaning of Code Section 409A(a)(2)(B)(i)(D)), payments or deliveries of shares or other consideration in satisfaction of an award of deferred stock units may not be made until six months after the participant’s separation from service from the Company and all subsidiaries.
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.
Performance-Based Awards . The Committee may grant performance awards denominated as a cash amount, a number of shares or other awards that may be earned based on achievement of performance goals consisting of one or more business criteria and a targeted performance level with respect to such criteria. The Committee may also require satisfaction of performance goals as a condition of other awards being granted or becoming exercisable or settleable under the Plan. If so determined by the Committee, to satisfy the limitations on deductibility under Code Section 162(m), the business criteria used by the Committee in establishing performance goals applicable to performance awards to named executives will be selected from among the following: (1) revenues; (2) operating profit, earnings from operations, earnings before or after taxes, earnings before or after interest, depreciation, amortization, non-cash stock-based compensation or extraordinary or special items; (3) net income or net income per common share (basic or diluted); (4) return on assets, return on net assets, return on investment, return on capital, return on invested capital, or return on equity; (5) cash flow, free cash flow, cash flow per share, cash flow return on investment, or net cash provided by operations; (6) interest expense after taxes; (7) economic profit or economic value added models or equivalent metrics; (8) operating margin or gross margin; (9) stock price, comparisons with various stock market indices, or total stockholder return; (10) financial ratios, including those measuring liquidity, activity, profitability or leverage; (11) financing and other capital raising transactions; (12) working capital levels (or components thereof); and (13) strategic business criteria, consisting of one or more objectives such as market penetration, market share, geographic business expansion goals, cost targets, expense targets, customer satisfaction, employee satisfaction, management of employment practices and employee benefits, supervision of litigation and information technology, in-licensing and out-licensing of intellectual properties, and goals relating to acquisitions, strategic partnerships, or divestitures.
The Committee may specify that any such criteria will be measured before or after extraordinary or nonrecurring items, before or after service fees, or before or after payments of awards under the Plan. The Committee may set the levels of performance required in connection with performance awards as fixed amounts, goals relative to performance in prior periods, goals compared to the performance of one or more comparable companies or an index covering multiple companies, or compared to industry statistics.
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 is authorized to place cash, shares or other property in trusts or make other arrangements to provide for payment of the Company’s obligations under the Plan. The Committee may condition awards on the payment of taxes such as in cash or by withholding a portion of the shares or other property to be distributed or by receiving previously acquired shares or other property surrendered by the participant in order to satisfy tax obligations.
Dividends; Dividend Equivalents . Dividends on restricted stock that vests based on the achievement of performance goals must either not be paid, or be accumulated subject to the same restrictions and forfeiture risk as the restricted stock to which they relate and be paid when the restrictions and forfeitures lapse. Awards of deferred stock units may provide for dividend equivalents with respect to dividends on the shares subject to the award (either payable on a current basis, deferred, or credited as additional deferred stock units), provided that dividend equivalents on awards that vest based on the achievement of performance goals must either not be paid, or be accumulated subject to the same restrictions and forfeiture risk as the deferred stock units to which they relate and be paid when the restrictions and forfeitures lapse.

43



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 stock options and SARs, 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 Plan provides that, in the event of a change-in-control, outstanding non-performance based awards that are assumed or substituted for by the successor company (or continued by the Company if it is the ultimate parent corporation) will immediately vest and be fully exercisable, any restrictions, deferral of settlement and forfeiture conditions of such awards will lapse if the participant’s employment terminates within 24 months following the change-in-control (or such other period set forth in the award agreement), unless otherwise provided by the Committee. If outstanding non-performance based awards are not assumed, substituted for or continued, on the change-in-control date the awards will immediately vest and be fully exercisable, any restrictions, deferral of settlement and forfeiture conditions of such awards will lapse. In the event of a change-in-control, to the extent specified in the award agreement, either (i) the goals under outstanding performance-based awards will be deemed to be met (in full or pro rata), or (ii) the awards will be converted into restricted stock or deferred stock units, based on achievement of the goals through the change-in-control date or based on target performance (full or pro rata) and vest based on continued service with the Company and as provided in the prior two sentences.
The Committee may in the event of a change-in-control (i) permit participants to elect to receive a cash payment in lieu of the shares subject to the award equal to (x) for stock options and SARs, the difference between the Change-in-Control Price and the exercise or grant price of the award, and (y) for other share awards the Change-in-Control Price, multiplied by the shares subject to the award; and (ii) cancel stock options and SARs in exchange for a payment in cash, stock or other property equal to the difference between the Change-in-Control Price and the exercise or grant price of the award multiplied by the shares subject to the award, including mandatory cancellation without payment if the exercise or grant price is less than the Change-in-Control Price (unless otherwise provided in the award agreement).
A change-in-control means (except as otherwise provided in an award agreement) (i) a change in ownership of the Company where any person or group acquires more than 50 percent of the voting power or fair market value of the Company’s securities; (ii) a change in the effective control of the Company which results from the acquisition by one or more persons acting as a group of 30 percent or more of the total voting power of the Company’s voting securities or replacement of a majority of the Board’s membership during any 12-month period by directors not endorsed by a majority of the Board before appointment or election; or (iii) a change in the ownership of a substantial portion of the assets of the Company which results from the acquisition by one or more persons acting as a group of all or substantially all of the Company’s assets.
Nontransferability of Awards . Awards under the Plan generally may not be pledged or otherwise encumbered and are not transferable except by will or the laws of descent and distribution, or to a designated beneficiary on the participant's death. The Committee may provide that a participant may transfer an award to certain family members, family trusts, or other family-owned entities, or for charitable donations under such terms and conditions determined by the Committee.
Clawback. The Committee may cancel outstanding awards and require the participant to repay to the Company all or a portion of the gain realized on the exercise of stock options or SARs and the value of other awards in the event of a restatement of the Company’s financial statements, or if the participant provides services to a business that competes with the Company’s business, discloses confidential information, engages in activity resulting in termination of service for cause or engages in other conduct that is determined to be injurious, detrimental or prejudicial to the Company.
Amendment and Termination of the Plan . The Board may amend, alter, suspend, discontinue, or terminate the 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 Plan. 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 to receive awards under the Plan; (b) reduce the exercise price or grant price for stock options or SARs below the fair market value of the shares on the date of the grant of such stock options or SARs, or cancel any stock options or SARs in exchange for cash or another award; (c) extend beyond 10 years from the date of the grant the period within which any award may be exercised; (d) extend the period beyond the termination date of the Plan during which awards may be granted; or (e) increase the limits on awards to a participant that are intended to qualify as performance-based compensation under Code section 162(m).
It should be noted that the Board may at any time and from time to time, without approval of stockholders, unless required by applicable law, rule or regulation, amend the Plan including but not limited to, any amendments necessary to comply with Section 409A of the Code and any regulations or other guidance thereunder. Except as set forth in any award agreement or as necessary to comply with applicable law or avoid adverse tax consequences to some or all award recipients, no amendment of the Plan may materially and adversely affect any outstanding award under the Plan without the award recipient’s consent.

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No awards may be made after the tenth anniversary of the effective date of the Plan, which was May 18, 2011. Unless earlier terminated, the Plan will terminate at such time that no shares reserved under the Plan remain available and the Company has no further rights or obligations with respect to any outstanding award.
Federal Income Tax Implications of the Plan
The following is a brief description of the federal income tax consequences generally arising with respect to awards that may be granted under the Plan.
In general, an employee to whom a Non-Qualified Stock Option is granted will recognize no income at the time of the grant of such option. Upon exercise of a Non-Qualified Stock Option, an employee will recognize ordinary income in an amount equal to the amount by which the fair market value of the shares on the date of exercise exceeds the exercise price of the Option. (Special rules may apply in the case of an employee who is subject to Section 16(b) of the Exchange Act.) The tax basis of such shares to such employee will be equal to the Option Price paid plus the amount includable in the employee‘s gross income, and the employee’s holding period for tax treatment for such shares will commence on the day on which the employee recognizes taxable income in respect of such shares. Subject to applicable provisions of the Code, and regulations thereunder, including those under Section 162(m) of the Code, the Company will generally be entitled to federal income tax deduction in respect of Non-Qualified Stock Options in an amount equal to ordinary income recognized by the employee. Any compensation includable in the gross income of an employee in respect of a Non-Qualified Stock Option will be subject to appropriate withholding of federal income and employment taxes.
In general, an employee to whom DSUs are granted will recognize no income at the time of the grant of such DSUs. Upon conversion of DSUs to Common Stock, an employee will recognize ordinary income in an amount equal to the fair market value of the shares on the date of conversion. (Special rules may apply in the case of an employee who is subject to Section 16(b) of the Exchange Act.) The tax basis of such shares to such employee will be equal to the fair market value of the shares on the date of conversion and the employee’s holding period for tax treatment for such shares will commence on the day on which the employee recognizes taxable income in respect of such shares. Subject to applicable provisions of the Code, and regulations thereunder, including those under Section 162(m) of the Code, the Company will generally be entitled to federal income tax deduction in respect of DSUs in an amount equal to ordinary income recognized by the employee. Any compensation includable in the gross income of an employee in respect of DSUs will be subject to appropriate withholding of federal income and employment taxes.
Under certain circumstances, the accelerated vesting or the cashout of Non-Qualified Stock Options or DSUs in connection with a change-in-control of the Company might be deemed an “excess parachute payment” for purposes of the golden parachute tax provisions of Section 280G of the Code. To the extent it is so considered, the employee may be subject to a 20 percent excise tax and the Company may be denied a tax deduction.
Section 162(m) of the Code limits the Company’s tax deduction to $1 million per year for compensation paid in a given year to the Chief Executive Officer and the three highest compensated executive officers other than the Chief Executive Officer at the end of the Company’s fiscal year (other than the Chief Financial Officer). According to the Code and corresponding regulations, compensation that is based on attainment of pre-established, objective performance goals and complies with certain other requirements will be excluded from the $1 million dollar deduction limitation. The Company’s policy is to structure compensation awards for covered executives that will be fully deductible where doing so will further the purposes of the Company’s executive compensation programs. However, the Committee also considers it important to retain flexibility to design compensation programs that recognize a full range of performance criteria important to the Company’s success, even where compensation payable under such programs may not be fully deductible. In 2013, all cash compensation paid to our NEOs was deductible.
As a condition to the grant, the Compensation Committee may require each employee to whom Non-Qualified Stock Options or DSUs have been granted to agree to pay to the Company, or make arrangements satisfactory to the Company, regarding the payment of Federal, state or local taxes of any kind required to be withheld. The Company also has the right, to the extent permitted or required by law, to deduct from any payment of any kind otherwise due the employee, Federal, state or local taxes of any kind required by law to be withheld.
The discussion set forth above does not purport to be a complete analysis of all potential tax consequences relevant to recipients of Non-Qualified Stock Options, DSUs or the Company or to describe tax consequences based on particular circumstances, and does not address the tax consequences of awards other than Non-Qualified Stock Options or DSUs, or state or local tax consequences. It is based on current federal income tax law and other authorities, which are subject to change at any time.
Equity Compensation Plan Information

The following table sets forth aggregated information about the Company’s compensation plan (the Plan) under which equity securities of the Company are authorized for issuance as of December 31, 2013:


45



Plan category
Number of securities
to be issued upon
exercise of outstanding
options, warrants
and rights
(a)
Weighted average
exercise price of outstanding options, warrants and rights

(b)
Number of securities
remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
(c)
Equity compensation plans approved by security holders
1,610,224
$6.95
246,368
Equity compensation plans not approved by security holders
N/A
N/A
N/A
Total

1,610,224
$6.95
246,368

As of December 31, 2013, there were 1,610,224 shares reserved for issuance under the Plan, including (i) 723,661 outstanding stock options (with a weighted average exercise price of $15.46 and a weighted average remaining term of 2.7 years), (ii) 692,961 shares to be issued pursuant to DSUs, and (iii) 193,602 shares to be issued pursuant to long-term incentive compensation. 246,368 shares remained available for future issuance.
Incentive Awards Under the Plan

As of the date of this Proxy Statement, the Committee has not approved any awards under the Plan from the additional shares if the Plan is amended as proposed. Because awards under the Plan are discretionary with the Committee, neither the number nor types of future Plan awards to be received by or allocated to particular participants or groups of participants is presently determinable, except as provided in the executive employment agreements currently in effect for our named executive officers as described in this Proxy Statement under the caption “Executive Compensation – Compensation Discussion and Analysis – 2013 Executive Performance and Compensation.” Information regarding awards made under the pre-existing version of the Plan during 2013 to the Company’s named executive officers is provided in this Proxy Statement under the caption “Executive Compensation – Grants of Plan-Based Awards Table.”
Vote Necessary to Approve the Amendment
The affirmative vote of a majority of votes cast at the Annual Meeting is required to approve the adoption of the foregoing amendment to the Plan. See “Voting Securities – Vote Required on Proposals.” If the amendment of the Plan is not approved by the stockholders, the Plan will remain in effect as it existed immediately prior to the proposed amendment, and we would remain subject to the existing pool of shares available for issuance.
The Board of Directors recommends that you vote FOR the amendment increasing the number of shares available for issuance under the Plan by 1,678,632 shares.
Proposal 3. ADVISORY VOTE ON EXECUTIVE COMPENSATION
SEC rules require that the Company seek a non-binding advisory vote from its stockholders to approve the compensation of our NEOs as disclosed in this Proxy Statement in accordance with SEC rules.
Our executive compensation policy is designed to enable the Company to attract, motivate and retain highly-qualified senior executives by providing a competitive compensation opportunity based significantly on performance. Our intent is to provide fair and equitable compensation in a way that rewards executives for achieving specified financial goals. Our performance-related awards are structured to link a substantial portion of our executives’ total potential compensation to the Company’s performance on both a long-term and short-term basis, to recognize individual contribution, as well as overall business results, and to align executive and stockholder interests. Accordingly, we rewarded performance in excess of pre-established targets of earnings, return on assets, and profit growth in excess of a multiple of industry growth, and we avoided establishing goals that could divert our executives’ attention from the fundamentals of effective and efficient operations. A significant portion of the total compensation paid to our NEOs is in the form of long-term equity.
At the Annual Meeting of Stockholders held on May 23, 2013, our stockholders approved, in an advisory vote, the compensation paid to our NEOs for 2012. In the advisory vote, 86 percent of the votes cast voted in favor of the 2012 compensation. In addition, the Proxy Statement for the 2013 Annual Meeting contained a detailed description of the compensation plans adopted by the Company for the three-year period 2012-2014. The compensation paid to our NEOs for 2013 was paid in accordance with such plans.

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We are requesting stockholder advisory approval of the compensation paid to our NEOs as disclosed in this Proxy Statement, including the disclosures under “Executive Compensation – Compensation Discussion and Analysis,” the compensation tables, and the related information and discussion. The vote is intended to address the overall compensation paid to our NEOs and the policies and practices described in this Proxy Statement.
The vote is advisory and therefore not binding on the Company or the Compensation Committee or the Board of Directors. However, we value the opinions of our stockholders, and we will carefully consider the outcome of the advisory vote on executive compensation when making future compensation decisions.
For the reasons stated, the Board of Directors recommends a vote FOR the following non-binding resolution:
“RESOLVED, that the compensation paid to the Company’s NEOs, as disclosed in this Proxy Statement pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, compensation tables, and related information and discussion, is hereby APPROVED.”
The affirmative vote of a majority of the votes cast at the Annual Meeting is required for advisory approval of the foregoing non-binding resolution. See “Voting Securities – Vote Required on Proposals”.
In light of the voting results with respect to the frequency of stockholder votes on executive compensation, the Company will hold an annual advisory vote on compensation of NEOs until the next stockholder advisory vote on frequency of stockholder votes on compensation of executives.
Proposal 4. APPOINTMENT OF AUDITORS
It is proposed that the stockholders ratify the appointment by the Board of Directors of KPMG LLP (“KPMG”) as independent auditors for the purpose of auditing and reporting on the consolidated financial statements and internal control over financial reporting of the Company for the year ending December 31, 2014. KPMG is an independent registered public accounting firm. It is expected that a representative of that firm will be present at the Annual Meeting of Stockholders to be held on May 22, 2014 and will be afforded the opportunity to make a statement and respond to appropriate questions from stockholders present at the Meeting.
The affirmative vote of a majority of the votes cast at the Annual Meeting is required to ratify the appointment of KPMG. See “Voting Securities – Vote Required on Proposals”.
The Board of Directors recommends that you vote FOR ratification of the appointment of KPMG LLP as independent auditors for the year ending December 31, 2014.
Fees for Independent Auditors
The following is a summary of the fees billed to the Company by KPMG for professional services rendered for the fiscal years ended December 31, 2013 and 2012:
 
2013
 
2012
Audit Fees:
 
 
 
Consists of fees billed for professional services rendered for the annual audit of the Company’s financial statements and for the reviews of the interim financial statements included in the Company’s Quarterly Reports
$
960,400

 
$
907,000

 
 
 
 
Audit-Related Fees:
 
 
 
Consists primarily of fees billed for assistance with regulatory filings and other audit related services and filings
$
—

 
$
18,500

 
 
 
 
Tax Fees:
 
 
 
Consists of fees billed for tax planning and compliance, assistance with the preparation of tax returns, tax services rendered in connection with acquisitions made by the Company and advice on other tax related matters
$
16,800

 
$
17,000

 
 
 
 
All Other Fees:
 
 
 
Other Services
$
—

 
$
—

 
 
 
 
Total All Fees
$
977,200

 
$
942,500


47



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 year ending December 31, 2014, the Audit Committee has determined that the non-audit services provided by KPMG are compatible with maintaining the independence of KPMG LLP.


REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board of Directors currently consists of David A. Reed, James F. Gero, Frederick B. Hegi, Jr., John B. Lowe, Jr., and Brendan J. Deely. 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. KPMG LLP, the Company’s independent registered public accounting firm, is responsible for performing an audit of the Company’s consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board, and to issue a report thereon. KPMG is also responsible for issuing a report on the effectiveness of the Company’s internal control over financial reporting. As set forth in its Charter, the Committee acts only in an oversight capacity and relies on the work and assurances of Management and other advisors retained by the Company, and KPMG’s opinion on the Company’s consolidated financial statements.
The Committee has met and held discussions with Management and KPMG. Management represented to the Committee that the Company’s consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America, and the Committee has reviewed and discussed with Management their assessment of the effectiveness of the Company’s internal controls over financial reporting. The Committee reviewed and discussed with KPMG the consolidated financial statements, and KPMG’s evaluation of the Company’s internal controls over financial reporting. The Committee also discussed with KPMG the matters required to be discussed by Statement on Auditing Standards No. 61 (Communication with Audit Committees), as amended.
The Committee has received the written disclosures and the letter from KPMG required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent auditor’s communications with the Committee concerning independence, and has discussed with KPMG their independence.
The Committee considered whether non-audit services provided by KPMG are compatible with maintaining their independence. The Committee concluded that non-audit services provided by KPMG during the year ended December 31, 2013, which consisted of tax planning and compliance, and other accounting and audit-related services, were compatible with KPMG’s independence.
Based on the Committee’s discussion with Management and KPMG and the Committee’s review of the representations of Management and the report of KPMG 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, 2013 filed with the SEC.

AUDIT COMMITTEE
David A. Reed, Chairman
James F. Gero
Frederick B. Hegi, Jr.
John B. Lowe, Jr.
Brendan J. Deely
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.

48



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, subject to NYSE rules.
STOCKHOLDER PROPOSALS
In order for a stockholder proposal to be considered for inclusion in the Company’s proxy statement for the Annual Meeting to be held in May 2015, the Company must receive the written proposal at its principal executive offices on or before December 12, 2014. The proposal must comply with SEC regulations regarding the inclusion of shareholder proposals in company-sponsored proxy materials. Additionally, in order for notice of a stockholder proposal to be considered timely for purposes of the Annual Meeting to be held in May 2015, all proposals which stockholders of the Company desire to have presented at the Annual Meeting to be held in May 2015 must be received by the Company at its principal executive offices on or before February 25, 2015.
Additional requirements relating to a notice of director nomination are described in this Proxy Statement under the caption “Proposal 1. Election of Directors – Director Qualifications and Selection Process.”

 
By Order of the Board of Directors
 
 
 
ROBERT A. KUHNS
 
 
 
Vice President-Chief Legal Officer and Secretary
 
 
April 11, 2014
 


49

Appendix A






    









DREW INDUSTRIES INCORPORATED


Equity Award and Incentive Plan
(as Amended and Restated,
to be effective as of May 22, 2014)








A-1





1.
Purpose
3
2.
Definitions
3
3.
Administration
4
4.
Stock Subject to Plan
5
5.
Eligibility; Per-Person Award Limitations
6
6.
Specific Terms of Awards
6
7.
Performance Awards, Including Annual Incentive Awards
9
8.
Certain Provisions Applicable to Awards
11
9.
Change in Control
11
10.
General Provisions
13



A-2




DREW INDUSTRIES INCORPORATED Equity Award and Incentive Plan,
as Amended and Restated
1. Purpose. The purpose of this Equity Award and Incentive Plan (the “Plan”) is to aid Drew Industries Incorporated, a Delaware corporation (the “Corporation”), in attracting, retaining, motivating and rewarding employees, non-employee directors, and other persons who provide substantial services to the Corporation or its subsidiaries or affiliates, to provide for equitable and competitive compensation opportunities, to recognize individual contributions and reward achievement of Corporation goals, and promote the creation of long-term value for stockholders by closely aligning the interests of Participants with those of stockholders. The Plan authorizes stock-based and cash-based incentives for Participants. The Plan, which was originally adopted by the Corporation and approved by its stockholders effective May 16, 2002, amended effective December 1, 2008, and amended and restated effective May 18, 2011, is hereby amended effective May 22, 2014.
2. Definitions. In addition to the terms defined in Section 1 above and elsewhere in the Plan, the following capitalized terms used in the Plan have the respective meanings set forth in this Section:
(a) “Annual Incentive Award” means a type of Performance Award granted to a Participant under Section 7(c) representing a conditional right to receive cash, Stock or other Awards or payments, as determined by the Committee, based on performance in a performance period of one fiscal year or a portion thereof.
(b) “Award” means any Option, SAR, Restricted Stock, Deferred Stock, or Stock granted as a bonus or in lieu of another award, Performance Award or Annual Incentive Award, together with any related right or interest, granted to a Participant under the Plan.
(c) “Beneficiary” means the legal representatives of the Participant’s estate entitled by will or the laws of descent and distribution to receive the benefits under a Participant’s Award upon a Participant’s death, provided that, if and to the extent authorized by the Committee, a Participant may be permitted to designate a Beneficiary, in which case the “Beneficiary” instead will be the person, persons, trust or trusts (if any are then surviving) which have been designated by the Participant in his or her most recent written beneficiary designation filed with the Committee to receive the benefits specified under the Participant’s Award upon such Participant’s death.
(d) “Board” means the Corporation’s Board of Directors.
(e) “Change in Control” and related terms have the meanings specified in Section 9.
(f) “Code” means the Internal Revenue Code of 1986, as amended. References to any provision of the Code or regulation (including a proposed regulation) thereunder shall include any successor provisions and regulations.
(g) “Committee” means the Compensation Committee of the Board or such other committee of two or more directors designated by the Board to administer the Plan; provided, however, that directors appointed or serving as members of a Board committee designated as the Committee shall not be employees of the Corporation or any subsidiary or affiliate. In appointing members of the Committee, the Board will consider whether a member is or will be a Qualified Member, but such members are not required to be Qualified Members at the time of appointment or during their term of service on the Committee. The full Board may perform any function of the Committee hereunder, in which case the term “Committee” shall refer to the Board.
(h) “Covered Employee” means an Eligible Person who is a Covered Employee as specified in Section 10(j).
(i) “Deferred Stock” means a right, granted to a Participant under Section 6(f), to receive Stock or other Awards or a combination thereof at the end of a specified deferral period that may be subject to certain restrictions and to a risk of forfeiture.
(j) “Eligible Person” has the meaning specified in Section 5.
(k) “Exchange Act” means the Securities Exchange Act of 1934, as amended. References to any provision of the Exchange Act or rule (including a proposed rule) thereunder shall include any successor provisions and rules.


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(l) “Fair Market Value” of the Stock shall be determined in good faith by the Committee in accordance with the provisions of Treasury Department regulations 1.409A-1(b)(5)(iv)(A) and can be based upon the last sale before or first sale after the date of determination, the closing price on the trading day before or the trading day after the determination date, the arithmetic mean of the high and low prices on the trading date of determination, or any other reasonable method using actual transactions of the Stock as reported for composite transactions in the New York Stock Exchange. Notwithstanding the foregoing, unless otherwise determined by the Committee, “Fair Market Value” of the Stock as of any date shall mean the closing price of the Stock as reported for composite transactions in the New York Stock Exchange on the date immediately prior to such date or, if there is no closing price on that date, then on the last preceding date on which such a closing price was reported.
(m) “Incentive Stock Option” or “ISO” means any Option designated as an incentive stock option within the meaning of Code Section 422 or any successor provision thereto and qualifying thereunder.
(n) “Option” means a right, granted to a Participant under Section 6(b), to purchase Stock or other Awards at a specified price during specified time periods.
(o) “Participant” means a person who has been granted an Award under the Plan which remains outstanding, including a person who is no longer an Eligible Person.
(p) “Performance Award” means a right, granted to a Participant under Sections 6(g) and 7, to receive Awards or payments based upon performance criteria specified by the Committee.
(q) “Preexisting Plan” means the Drew Industries Incorporated Stock Option Plan Amended and Restated June 1, 1999.
(r) “Qualified Member” means a member of the Committee who is a “Non-Employee Director” within the meaning of Rule 16b-3(b)(3), an “outside director” within the meaning of Regulation 1.162-27 under Code Section 162(m) and an “independent director” for purpose of the rules of the New York Stock Exchange.
(s) “Restatement Effective Date” has the meaning specified in Section 10(q).
(t) “Restricted Stock” means Stock granted to a Participant under Section 6(e) that may be subject to certain restrictions and to a risk of forfeiture.
(u) “Rule 16b-3” means Rule 16b-3, as from time to time in effect and applicable to Participants, promulgated by the Securities and Exchange Commission under Section 16 of the Exchange Act.
(v) “Stock” means the Corporation’s Common Stock, par value $.01 per share, and any other equity securities of the Corporation that may be substituted or resubstituted for Stock pursuant to Section 10(c).
(w) “Stock Appreciation Rights” or “SAR” means a right granted to a Participant under Section 6(c).
(x) “Substitute Award” has the meaning specified in Section 4(b).
3. Administration.


A-4



(a)     Authority of the Committee . The Plan shall be administered by the Committee, which shall have full and final authority, in each case subject to and consistent with the provisions of the Plan, to select Eligible Persons to become Participants; to grant Awards; to determine the type and number of Awards, the dates on which Awards may be exercised and on which the risk of forfeiture or deferral period relating to Awards shall lapse or terminate, the acceleration of any such dates, the expiration date of any Award, whether, to what extent, and under what circumstances an Award may be settled, or the exercise price of an Award may be paid, in cash, Stock, other Awards, or other property, and other terms and conditions of, and all other matters relating to, Awards; to prescribe documents evidencing or setting terms of Awards (such Award documents need not be identical for each Participant), amendments thereto, and rules and regulations for the administration of the Plan and amendments thereto; to construe and interpret the Plan and Award documents and correct defects, supply omissions or reconcile inconsistencies therein; and to make all other decisions and determinations as the Committee may deem necessary or advisable for the administration of the Plan. Decisions of the Committee with respect to the administration and interpretation of the Plan shall be final, conclusive, and binding upon all persons interested in the Plan, including Participants, Beneficiaries, transferees under Section 10(b) and other persons claiming rights from or through a Participant, and stockholders. The foregoing notwithstanding, the Board shall perform the functions of the Committee for purposes of granting Awards under the Plan to non-employee directors (authority with respect to other aspects of non-employee director awards is not exclusive to the Board, however). The foregoing notwithstanding, the Committee shall not have authority to accelerate or otherwise provide for the times at which any Award is paid or delivered if any Award is subject to Section 409A of the Code in a manner that would result in the imposition upon any Participant of an additional tax under Section 409A of the Code, and provided further, in the event that it is reasonably determined by the Committee that, as a result of Section 409A of the Code, a Participant is deemed to be a “specified employee” (within the meaning of Section 409A(a)(2)(B)(i) of the Code), payments and/or deliveries in respect of any Award subject to Section 409A of the Code that are made on account of such Participant’s separation from service from the Corporation and all subsidiaries shall not be made prior to the date which is six (6) months after the date of such Participant’s separation from service (other than by death), determined in accordance with Section 409A of the Code and the regulations promulgated thereunder. The Committee, to minimize or avoid any sanction or damages to a Participant or Beneficiary, or to any other person resulting from a violation of Code Section 409A under the Plan, may undertake correction of any violation or participate in any available correction program, as described in Notice 2008-113 or other Treasury or IRS guidance.
(b)     Manner of Exercise of Committee Authority . At any time that a member of the Committee is not a Qualified Member, (i) any action of the Committee relating to an Award intended by the Committee to qualify as “performance-based compensation” within the meaning of Code Section 162(m) and regulations thereunder may be taken by a subcommittee, designated by the Committee or the Board, composed solely of two or more Qualified Members, and (ii) any action relating to an Award granted or to be granted to a Participant who is then subject to Section 16 of the Exchange Act in respect of the Corporation may be taken either by such a subcommittee or by the Committee but with each such member who is not a Qualified Member abstaining or recusing himself or herself from such action, provided that, upon such abstention or recusal, the Committee remains composed of two or more Qualified Members. Such action, authorized by such a subcommittee or by the Committee upon the abstention or recusal of such non-Qualified Member(s), shall be the action of the Committee for purposes of the Plan. The express grant of any specific power to the Committee, and the taking of any action by the Committee, shall not be construed as limiting any power or authority of the Committee. The Committee may delegate to officers or managers of the Corporation or any subsidiary or affiliate, or committees thereof, the authority, subject to such terms as the Committee shall determine, to perform such functions, including administrative functions, as the Committee may determine, to the extent that such delegation will not result in the loss of an exemption under Rule 16b-3(d) for Awards granted to Participants subject to Section 16 of the Exchange Act in respect of the Corporation and will not cause Awards intended to qualify as “performance-based compensation” under Code Section 162(m) to fail to so qualify.


A-5



(c)     Limitation of Liability . The Committee and each member thereof, and any person acting pursuant to authority delegated by the Committee, shall be entitled, in good faith, to rely or act upon any report or other information furnished by any executive officer, other officer or employee of the Corporation or a subsidiary or affiliate, the Corporation’s independent auditors, consultants or any other agents assisting in the administration of the Plan. Members of the Committee, any person acting pursuant to authority delegated by the Committee, and any officer or employee of the Corporation or a subsidiary or affiliate acting at the direction or on behalf of the Committee or a delegee shall not be personally liable for any action or determination taken or made in good faith with respect to the Plan, and shall, to the extent permitted by law, be fully indemnified and protected by the Corporation with respect to any such action or determination.
4.     Stock Subject to Plan.
(a)     Overall Number of Shares Available for Delivery. Subject to adjustment as provided in Section 10(c), the total number of shares of Stock reserved and available for delivery in connection with Awards under the Plan as of the Restatement Effective Date shall be (i) 3,208,632, (ii) reduced by one (1) share of Stock for each share of Stock subject to an Option or SAR granted under the Plan after December 31, 2010 and 1.60 shares of Stock for each share of Stock subject to an Award other than an Option or SAR granted under the Plan after December 31, 2010 . Any shares of Stock delivered under the Plan shall consist of authorized and unissued shares or treasury shares.
(b)     Share Counting Rules. Shares subject to an Award or an award under the Preexisting Plan that after December 31, 2010 is canceled, expired, forfeited, settled in cash or otherwise terminated without a delivery of shares to the Participant will again be available for Awards, and shares withheld after December 31, 2010 in payment of taxes relating to an Award other than an Option or SAR or Preexisting Plan awards other than stock options or stock appreciation rights and shares equal to the number surrendered after December 31, 2010 in payment of any taxes relating to an Award other than an Option or SAR or Preexisting Plan awards other than stock options or stock appreciation rights shall be deemed to constitute shares not delivered to the Participant and shall be deemed to again be available for Awards under the Plan. Notwithstanding anything to the contrary contained herein, the following shares of Stock shall not be added to the shares available for Awards: (i) shares tendered by the Participant or withheld by the Company after December 31, 2010 in payment of the exercise price of an Option or an option granted under the Preexisting Plan, or to satisfy any tax withholding obligation with respect to Options or SARs and options or stock appreciation rights granted under the Preexisting Plan, and (ii) shares subject to a SAR or a stock appreciation right granted under the Preexisting Plan that are not issued in connection with its stock settlement on exercise thereof after December 31, 2010 and (iii) Shares reacquired by the Company after December 31, 2010 on the open market or otherwise using cash proceeds from the exercise of Options or options granted under the Preexisting Plan. In addition, in the case of any Award granted in substitution for an award of a company or business acquired by the Corporation or a subsidiary or affiliate (“Substitute Award”), shares issued or issuable in connection with such substitute Award shall not be counted against the number of shares reserved under the Plan, but shall be available under the Plan by virtue of the Corporation’s assumption of the plan or arrangement of the acquired company or business. Furthermore, in the event that a company acquired by the Corporation or a subsidiary or affiliate or with which the Corporation or a subsidiary or affiliate combines has shares available under a pre-existing plan approved by stockholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not be counted against the number of shares reserved under the Plan; provided that Awards using such shares shall not be made after the date awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and shall only be made to individuals who were not employees or directors of the Corporation or a subsidiary or affiliate prior to such acquisition or combination. This Section 4(b) shall apply to the number of shares reserved and available for ISOs only to the extent consistent with applicable regulations relating to ISOs under the Code.
(c)     No Repricings . Unless otherwise approved by the Corporation’s stockholders and except as provided in Section 10(c) or in connection with a Change in Control, in no event may an Option or SAR be cancelled in exchange for cash or other action be taken with respect to an Option or SAR that could be characterized as a “repricing” under the rules of the New York Stock Exchange, including a reduction of the exercise price of an Option or the grant price of an SAR or the exchange of an Option or SAR for another Award.


A-6



1.     Eligibility; Per-Person Award Limitations. Awards may be granted under the Plan only to Eligible Persons. For purposes of the Plan, an “Eligible Person” means an employee of the Corporation or any subsidiary or affiliate, including any executive officer, a non-employee director of the Corporation, a consultant or other person who provides substantial services to the Corporation or a subsidiary or affiliate, and any person who has been offered employment by the Corporation or a subsidiary or affiliate, provided that such prospective employee may not receive any payment or exercise any right relating to an Award until such person has commenced employment with the Corporation or a subsidiary or affiliate. An employee on leave of absence may be considered as still in the employ of the Corporation or a subsidiary or affiliate for purposes of eligibility for participation in the Plan. Subject to adjustment as provided in Section 10(c), no Participant may (i) be granted Options or SARs during any 12-month period with respect to more than 1,000,000 shares and (ii) earn more than 500,000 shares for each twelve (12) months in the vesting period or performance period with respect to other Awards that are intended to comply with the performance-based exception under Code Section 162(m) and are denominated in shares. In addition to the foregoing, the maximum dollar value that may be earned by any Participant for each twelve (12) months in a Performance Period with respect to each Award (other than an Option or SAR) that is intended to comply with the performance-based exception under Code Section 162(m) and are denominated in cash is $5,000,000.
2.     Specific Terms of Awards.
(a)     General . Awards may be granted on the terms and conditions set forth in this Section 6. In addition, the Committee may impose on any Award or the exercise thereof, at the date of grant or thereafter (subject to Section 10(e)), such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall determine, including terms requiring forfeiture of Awards in the event of termination of employment or service by the Participant and terms permitting a Participant to make elections relating to his or her Award. The Committee shall retain full power and discretion with respect to any term or condition of an Award that is not mandatory under the Plan. The Committee shall require the payment of lawful consideration for an Award to the extent necessary to satisfy the requirements of the Delaware General Corporation Law, and may otherwise require payment of consideration for an Award except as limited by the Plan.
(b)     Options . The Committee is authorized to grant Options to Eligible Persons on the following terms and conditions:
(i)     Exercise Price . The exercise price per share of Stock purchasable under an Option (including both ISOs and non-qualified Options) shall be determined by the Committee, provided that other than with respect to a Substitute Award such exercise price shall be not less than the Fair Market Value of a share of Stock on the date of grant of such Option.
(ii)     Option Term; Time and Method of Exercise . The Committee shall determine the term of each Option, (provided that no term of any Option will exceed ten years from the grant date), the circumstances under which on Option may be exercised, the methods by which such exercise price may be paid, the form of such payment (subject to Section 10(k)), (including through “cashless exercise” arrangements, to the extent permitted by applicable law), and the methods by or forms in which Stock will be delivered in satisfaction of Options to Participants.
(iii)     ISOs. The terms of any ISO granted under the Plan shall comply in all respects with the provisions of Code Section 422.
(c)     Stock Appreciation Rights . The Committee is authorized to grant SARs to Eligible Persons on the following terms and conditions:
(i)     Right to Payment . An SAR shall confer on the Participant to whom it is granted a right to receive, upon exercise thereof, the excess of (A) the Fair Market Value of one share of Stock on the date of exercise over (B) the grant price of the SAR as determined by the Committee. The grant price per share of Stock subject to an SAR, other than with respect to a Substitute Award, shall be not less than the Fair Market Value of a share of Stock on the date of grant of such SAR or, if applicable, on the date of grant of an Option with respect to an SAR granted in exchange for or in tandem with, but subsequent to, the Option (subject to the requirements of Section 409A of the Code).


A-7



(ii)     Other Terms . The Committee shall determine at the date of grant or thereafter the time or times at which and the circumstances under which an SAR may be exercised (provided that no term of any SAR will exceed ten years from the grant date), the method of exercise and settlement, form of consideration payable in settlement, forms in which Stock will be delivered to Participants, and whether or not an SAR shall be free-standing or in tandem or combination with another Award.
(d)     Bonus Stock and Awards in Lieu of Obligations . The Committee is authorized to grant Stock as a bonus, or to grant Stock or other Awards in lieu of obligations of the Corporation or a subsidiary or affiliate to pay cash or deliver other property under the Plan or under other plans or compensatory arrangements, subject to such terms as shall be determined by the Committee.
(e)     Restricted Stock . The Committee is authorized to grant Restricted Stock to Eligible Persons on the following terms and conditions:
(i)     Grant and Restrictions . Restricted Stock shall be subject to such restrictions on transferability, risk of forfeiture and any other restrictions the Committee may impose, which restrictions may lapse separately or in combination at such times, under such circumstances (including based on achievement of performance goals and/or future service requirements), in such installments or otherwise and under such other circumstances as the Committee may determine at the date of grant or thereafter; provided, however, that, subject to Section 9, Restricted Stock shall not be transferable prior to the first anniversary of the grant thereof. Except to the extent restricted under the terms of the Plan and any Award document relating to the Restricted Stock, a Participant granted Restricted Stock shall have all of the rights of a stockholder, including the right to vote the Restricted Stock and the right to receive dividends thereon (subject to any mandatory reinvestment or other requirement imposed by the Committee).
(ii)     Forfeiture . Except as otherwise determined by the Committee, upon termination of employment or service during the applicable restriction period, Restricted Stock that is at that time subject to restrictions shall be forfeited and reacquired by the Corporation; provided that the Committee may provide, by rule or regulation or in any Award document, or may determine in any individual case, that restrictions or forfeiture conditions relating to Restricted Stock will lapse in whole or in part, including in the event of terminations resulting from specified causes.
(iii)     Certificates for Stock . Restricted Stock granted under the Plan may be evidenced in such manner as the Committee shall determine. If certificates representing Restricted Stock are registered in the name of the Participant, the Committee may require that such certificates bear an appropriate legend referring to the terms, conditions and restrictions applicable to such Restricted Stock, that the Corporation retain physical possession of the certificates, and that the Participant deliver a stock power to the Corporation, endorsed in blank, relating to the Restricted Stock.
(iv)     Dividends and Splits . As a condition to the grant of an Award of Restricted Stock, the Committee shall require that any dividends paid on a share of Restricted Stock shall be either (A) paid with respect to such Restricted Stock at the dividend payment date in cash, in kind, or in a number of shares of unrestricted Stock having a Fair Market Value equal to the amount of such dividends, or (B) automatically reinvested in additional Restricted Stock or held in kind, which shall be subject to the same terms as applied to the original Restricted Stock to which it relates, or (C) deferred as to payment, either as a cash deferral or with the amount or value thereof automatically deemed reinvested in shares of Deferred Stock, other Awards or other investment vehicles, subject to such terms as the Committee shall determine or permit a Participant to elect. Unless otherwise determined by the Committee, Stock distributed in connection with a Stock split or Stock dividend, and other property distributed as a dividend, shall be subject to restrictions and a risk of forfeiture to the same extent as the Restricted Stock with respect to which such Stock or other property has been distributed. Notwithstanding anything to the contrary in this Section 6(e), cash dividends, Stock and any other property distributed as a dividend or otherwise with respect to any Award of Restricted Stock that vests based on achievement of performance goals shall either (i) not be paid or credited or (ii) be accumulated, be subject to restrictions and a risk of forfeiture to the same extent as the Restricted Stock with respect to which such cash, Stock or other property has been distributed and be paid at the time such restrictions and risk of forfeiture lapse.
(f)     Deferred Stock. The Committee is authorized to grant Deferred Stock to Eligible Persons, which are rights to receive Stock, other Awards, or a combination thereof at the end of a specified deferral period, subject to the following terms and conditions:


A-8



(i)     Award and Restrictions . Issuance of Stock will occur upon expiration of the deferral period specified for an Award of Deferred Stock by the Committee or, if permitted by the Committee, as elected by the Participant. If Participant is permitted to elect a deferral period for an Award of Deferred Stock, the Participant shall submit an irrevocable deferral election (in a form provided by the Committee) no later than December 31 of the year prior to the year in which the Award of Deferred Stock is earned (or, if provided by the Committee, such later date permitted by Section 409A of the Code). The deferral election will specify (A) permissible payment events as some or all of the following affecting the Participant (i) separation from service; (ii) death; (iii) disability, a specified time or pursuant to a fixed schedule; (iv) Change in Control or (v) unforeseeable emergency, (B) the date on which payment shall be made or begin and (C) the form of payment (i.e., in a lump-sum or installments). All deferrals hereunder shall be accomplished in a manner consistent with the requirements of Section 409A of the Code and the regulations promulgated thereunder. In addition, Deferred Stock shall be subject to such restrictions on transferability, risk of forfeiture and other restrictions, if any, as the Committee may impose, which restrictions may lapse at the expiration of the deferral period or at earlier specified times (including based on achievement of performance goals and/or future service requirements), separately or in combination, in installments or otherwise, and under such other circumstances as the Committee may determine at the date of grant or thereafter. Deferred Stock may be satisfied by delivery of Stock, other Awards, or a combination thereof (subject to Section 10(k)), as determined by the Committee at the date of grant or thereafter. The foregoing notwithstanding, in the event that it is reasonably determined by the Committee that the Participant is a “specified employee” (within the meaning of Section 409A(a)(2)(B)(i) of the Code, payments or deliveries of Stock or other Awards in satisfaction of Deferred Stock subject to Section 409A of the Code that are made on account of such Participant’s separation from service from the Corporation and all subsidiaries shall not be made prior to the date which is six (6) months after the date of such Participant’s separation from service (other than by death), determined in accordance with Section 409A of the Code and the regulations promulgated thereunder.
(ii)     Forfeiture . Except as otherwise determined by the Committee, upon termination of employment or service during the applicable deferral period or portion thereof to which forfeiture conditions apply (as provided in the Award document evidencing the Deferred Stock), all Deferred Stock that is at that time subject to such forfeiture conditions shall be forfeited; provided that the Committee may provide, by rule or regulation or in any Award document, or may determine in any individual case, that restrictions or forfeiture conditions relating to Deferred Stock will lapse in whole or in part, including in the event of terminations resulting from specified causes.
(iii)     Subsequent Changes in Awards of Deferred Stock. Any election to change the time of payment or method of distribution of Stock specified in a deferral election or in an Award of Deferred Stock (a “Subsequent Election”) may only be made by the Participant in writing, in a form provided by the Committee, provided, however, that (A) such change may not take effect until at least 12 months after the date on which such election is made, (B) in the case of any distribution to be made at a specified time or on a fixed schedule or on events other than death or Disability, the first payment subject to the change must be deferred for a period of not less than five (5) years from the date such payment would otherwise have been made, (C) any change related to a payment to be made at a specified time or pursuant to a fixed schedule may not be made less than 12 months prior to the date of the first scheduled payment and (D) no such election may be changed in a way that is considered to be an acceleration of the time or schedule of payments except as provided in §409A of the Code and Treasury regulations thereunder. A Subsequent Election may be changed at any time before the last permissible date for making such Subsequent Election after which such Subsequent Election shall become irrevocable.


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(iv)    The Committee may provide, in its sole discretion, that a Participant holding Deferred Stock will be entitled to amounts equivalent to cash, or other dividends on the Stock (“Dividend Equivalents”), with respect to the number of shares of Stock covered by the Award, and that the Dividend Equivalents shall be either (A) paid at the dividend payment date in cash, in kind, or in a number of shares of unrestricted Stock having a Fair Market Value equal to the amount of such Dividend Equivalents, or (B) automatically credited in additional Deferred Stock, which shall be subject to the same terms as applied to the original Deferred Stock to which they relate, or (C) deferred as to payment, either as a cash amount or with the amount or value thereof automatically credited in additional Deferred Stock, subject to such terms as the Committee shall determine or permit a Participant to elect. Unless otherwise determined by the Committee, Dividend Equivalents with respect to Stock distributed in connection with a Stock split or Stock dividend, and other property distributed as a dividend, shall be subject to restrictions and a risk of forfeiture to the same extent as the Deferred Stock with respect to which such Dividend Equivalents are credited. Notwithstanding anything to the contrary in this Section 6(f), Dividend Equivalents with respect to any Award of Deferred Stock that vests based on achievement of performance goals shall either (i) not be paid or credited or (ii) be accumulated, be subject to restrictions and a risk of forfeiture to the same extent as the with respect to which such Dividend Equivalents are credited and be paid at the time as such Deferred Stock is settled.
(g)     Performance Awards. Performance Awards, denominated in cash or in Stock or other Awards, may be granted by the Committee in accordance with Section 7.
3.     Performance Awards, Including Annual Incentive Awards.
(d)     Performance Awards Generally . The Committee is authorized to grant Performance Awards on the terms and conditions specified in this Section 7. Performance Awards may be denominated as a cash amount, number of shares of Stock, or specified number of other Awards (or a combination) that may be earned upon achievement or satisfaction of performance conditions specified by the Committee. In addition, the Committee may specify that any other Award shall constitute a Performance Award by conditioning the right of a Participant to exercise the Award or have it settled, and the timing thereof, upon achievement or satisfaction of such performance conditions as may be specified by the Committee. The Committee may use such business criteria and other measures of performance as it may deem appropriate in establishing any performance conditions, and may exercise its discretion to reduce or increase the amounts payable under any Award subject to performance conditions, except as limited under Sections 7(b) and 7(c) in the case of a Performance Award intended to qualify as “performance-based compensation” under Code Section 162(m).
(e)     Performance Awards Granted to Covered Employees . If the Committee determines that a Performance Award to be granted to an Eligible Person who is designated by the Committee as likely to be a Covered Employee should qualify as “performance-based compensation” for purposes of Code Section 162(m), the grant, exercise and/or settlement of such Performance Award shall be contingent upon achievement of a pre-established performance goal and other terms set forth in this Section 7(b).
(v)     Performance Goal Generally . The performance goal for such Performance Awards shall consist of one or more business criteria and a targeted level or levels of performance with respect to each of such criteria, as specified by the Committee consistent with this Section 7(b). The performance goal shall be objective and shall otherwise meet the requirements of Code Section 162(m) and regulations thereunder (including Regulation 1.162-27 and successor regulations thereto), including the requirement that the level or levels of performance targeted by the Committee result in the achievement of performance goals being “substantially uncertain.” The Committee may determine that such Performance Awards shall be granted, exercised and/or settled upon achievement of one or more performance goals. Performance goals may differ for Performance Awards granted to any one Participant or to different Participants.


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(vi)     Business Criteria . One or more of the following business criteria for the Corporation, on a consolidated basis, and/or for specified subsidiaries or affiliates or other business units of the Corporation shall be used by the Committee in establishing performance goals for such Performance Awards: (1) revenues; (2) operating profit, earnings from operations, earnings before or after taxes, earnings before or after interest, depreciation, amortization, non-cash stock based compensation, extraordinary items, or special items; (3) net income or net income per common share (basic or diluted), before or after special items or extraordinary items; (4) return on assets, return on net assets, return on investment, return on capital, return on invested capital, or return on equity; (5) cash flow, free cash flow, cash flow per share, cash flow return on investment, or net cash provided by operations; (6) interest expense after taxes; (7) economic profit or economic value added models or equivalent metrics; (8) operating margin or gross margin; (9) stock price, comparisons with various stock market indices, or total stockholder return; (10) financial ratios, including those measuring liquidity, activity, profitability, or leverage; (11) financing and other capital raising transactions; (12) working capital levels or components thereof; and (13) strategic business criteria, consisting of one or more objectives such as market penetration, market share, geographic business expansion goals , cost targets, expense targets, customer or employee satisfaction, management of employment practices and employee benefits, supervision of litigation and information technology, in-licensing and out-licensing of intellectual properties, and goals relating to acquisitions, strategic partnerships, or divestitures. The targeted level of performance with respect to such business criteria may be established at such levels and in such terms as the Committee may determine, in its discretion, including in absolute terms, as a goal relative to performance in prior periods, or as a goal compared to the performance of one or more comparable companies or an index covering multiple companies or compared to industry statistics.
(vii)     Performance Period; Timing for Establishing Performance Goals . Achievement of performance goals in respect of such Performance Awards shall be measured over a performance period of at least 12 consecutive months in which the Participant performs services, as specified by the Committee. A performance goal shall be established in writing, not later than the earlier of (A) 90 days after the beginning of any performance period applicable to such Performance Award or (B) the time 25% of such performance period has elapsed, provided that the outcome must be substantially uncertain at the time that the Committee establishes the performance goals. Notwithstanding anything herein to the contrary, a performance period may be for a period of less than 12 consecutive months (a “Short Performance Period”) provided that the payment or settlement of a Performance Award which relates to a Short Performance Period shall (i) be made within the 2 ½ months following the end of the taxable year of the Corporation which contains the last month of the Short Performance Period and (ii) constitute a “short term deferral” within the meaning of Regulation 1.409A-1(b)(4) under Code Section 409A.
(viii)     Settlement of Performance Awards; Other Terms . Settlement of such Performance Awards shall be in cash, Stock, other Awards or other property, in the discretion of the Committee. Any settlement which changes the form of payment from that originally specified shall be implemented in a manner such that the Performance Award and other related Awards do not, solely for that reason, fail to qualify as “performance-based compensation” for purposes of Code Section 162(m). The Committee shall specify the circumstances in which such Performance Awards shall be paid or forfeited in the event of termination of employment by the Participant or other event (including a Change in Control) prior to the end of a performance period or settlement of such Performance Awards.
(f)     Annual Incentive Awards Granted to Designated Covered Employees . The Committee may grant an Annual Incentive Award to an Eligible Person who is designated by the Committee as likely to be a Covered Employee. Such Annual Incentive Award will be intended to qualify as “performance-based compensation” for purposes of Code Section 162(m), and therefore its grant, exercise and/or settlement shall be contingent upon achievement of pre-established performance goals and other terms set forth in this Section 7(c).
(i)     Grant of Annual Incentive Awards. Not later than the earlier of 90 days after the beginning of any performance period applicable to such Annual Incentive Award or the time 25% of such performance period has elapsed, the Committee shall determine the Covered Employees who will potentially receive Annual Incentive Awards, and the amount(s) potentially payable thereunder, for that performance period. The amount(s) potentially payable shall be based upon the achievement of a performance goal or goals based on one or more of the business criteria set forth in Section 7(b)(ii) in the given performance period, as specified by the Committee. In all cases, the maximum Annual Incentive Award of any Participant shall be subject to the limitation set forth in Section 5.


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(ii)     Payout of Annual Incentive Awards . After the end of each performance period, the Committee shall determine the amount, if any, of the Annual Incentive Award for that performance period payable to each Participant. The Committee may, in its discretion, determine that the amount payable to any Participant as a final Annual Incentive Award shall be reduced from the amount of his or her potential Annual Incentive Award, including a determination to make no final Award whatsoever, but may not exercise discretion to increase any such amount. The Committee shall specify the circumstances in which an Annual Incentive Award shall be paid or forfeited in the event of termination of employment by the Participant or other event (including a Change in Control) prior to the end of a performance period or settlement of such Annual Incentive Award.
(g)     Written Determinations . Determinations by the Committee as to the establishment of performance goals, the amount potentially payable in respect of Performance Awards and Annual Incentive Awards, the level of actual achievement of the specified performance goals relating to Performance Awards and Annual Incentive Awards, and the amount of any final Performance Award and Annual Incentive Award shall be recorded in writing in the case of Performance Awards intended to qualify under Section 162(m). Specifically, the Committee shall certify in writing, in a manner conforming to applicable, regulations under Section 162(m), prior to settlement of each such Award granted to a Covered Employee, that the performance objective relating to the Performance Award and other material terms of the Award upon which settlement of the Award was conditioned have been satisfied.
4.     Certain Provisions Applicable to Awards .


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(a)     Form and Timing of Payment under Awards; Deferrals . Subject to the terms of the Plan and any applicable Award document, payments to be made by the Corporation or a subsidiary or affiliate upon the exercise of an Option or other Award or settlement of an Award may be made in such forms as the Committee shall determine, and may be made in a single payment, in installments, or on a deferred basis. The settlement of any Award may be accelerated (unless the Award is subject to Section 409A of the Code and the acceleration would result in the imposition upon the Participant of an additional tax under Section 409A of the Code), and cash paid in lieu of Stock in connection with such settlement, in the discretion of the Committee or upon occurrence of one or more specified events (subject to Section 10(k)). Installment or deferred payments may be required by the Committee (subject to Section 10(e)) or permitted at the election of the Participant on terms and conditions established by the Committee. Payments may include, without limitation, provisions for the payment or crediting of reasonable interest on installment or deferred payments.
(b)     Exemptions from Section 16(b) Liability . With respect to a Participant who is then subject to the reporting requirements of Section 16(a) of the Exchange Act in respect of the Corporation, transactions under the Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the Exchange Act. To the extent that compliance with any Plan provision applicable solely to such Participants is not required in order to bring a transaction by such Participants into compliance with Rule 16b-3, it shall be deemed null and void as to such transaction, to the extent permitted by law and deemed advisable by the Committee. To the extent any provision of the Plan or action by the Committee involving such Participants is deemed not to comply with an applicable condition of Rule 16b-3, it shall be deemed null and void as to such Participants, to the extent permitted by law and deemed advisable by the Committee.
5.     Change in Control.
(a)     Effect of “Change in Control” on Assumed or Substituted Non-Performance Based Awards . In the event of a “Change in Control,” the following provisions shall apply to non-performance based Awards that are assumed or substituted for by the successor company (or are continued by the Corporation if it is the ultimate parent corporation), including Awards as to which performance conditions previously have been satisfied or are deemed satisfied under Section 9(c) if a Participant’s employment with the successor company (or the Corporation) or a subsidiary or affiliate terminates within 24 months following such Change in Control (or such other period set forth in the Award document, including prior thereto if applicable) and under the circumstances specified in the Award document, unless otherwise provided by the Committee:
(i)    All deferral of settlement, forfeiture conditions and other restrictions applicable to Awards granted under the Plan shall lapse and such Awards shall be fully payable without regard to deferral and vesting conditions, except to the extent of any waiver by the Participant or other express election to defer beyond a Change in Control and subject to applicable restrictions set forth in Section 10(a);
(ii)    Any Award carrying a right to exercise that was not previously exercisable and vested shall become fully exercisable and vested and shall remain exercisable and vested for the balance of the stated term of such Award without regard to any termination of employment or service by the Participant other than a termination for “cause” (as defined in any employment or severance agreement between the Corporation or a subsidiary or affiliate and the Participant then in effect or, if none, as defined in the Award document), subject only to applicable restrictions set forth in Section 10(a); and
(iii)    The Committee may, in its discretion, determine to extend to any Participant who holds an Option or SAR the right to elect, during the 60-day period immediately following the Change in Control, in lieu of acquiring the shares of Stock covered by such Option or SAR, to receive in cash the excess of the Change in Control Price over the exercise price of such Option or SAR, multiplied by the number of shares of Stock covered by such Option or SAR, and to extend to any Participant who holds other types of Awards denominated in shares the right to elect, during the 60-day period immediately following the Change in Control, in lieu of receiving the shares of Stock covered by such Award, to receive in cash the Change in Control Price multiplied by the number of shares of Stock covered by such Award.


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(b)     Effect of “Change in Control” on Non-Assumed or Substituted Non-Performance Based Awards . In the event of a “Change in Control,” the following provisions shall apply to non-performance based Awards that are not assumed or substituted for by the successor company (or are not continued by the Corporation if it is the ultimate parent corporation), including Awards as to which performance conditions previously have been satisfied or are deemed satisfied under Section 9(c), unless otherwise provided by the Committee in the Award document:
(v)    All deferral of settlement, forfeiture conditions and other restrictions applicable to Awards granted under the Plan shall lapse and such Awards shall be fully payable as of the time of the Change in Control without regard to deferral and vesting conditions, except to the extent of any waiver by the Participant or other express election to defer beyond a Change in Control and subject to applicable restrictions set forth in Section 10(a);
(vi)    Any Award carrying a right to exercise that was not previously exercisable and vested shall become fully exercisable and vested as of the time of the Change in Control and shall remain exercisable and vested for the balance of the stated term of such Award without regard to any termination of employment or service by the Participant other than a termination for “cause” (as defined in any employment or severance agreement between the Corporation or a subsidiary or affiliate and the Participant then in effect or, if none, as defined by the Committee and in effect at the time of the Change in Control), subject only to applicable restrictions set forth in Section 10(a); and
(vii)    The Committee may, in its discretion, determine to extend to any Participant who holds an Option or SAR the right to elect, during the 60-day period immediately following the Change in Control, in lieu of acquiring the shares of Stock covered by such Option or SAR, to receive in cash the excess of the Change in Control Price over the exercise price of such Option or SAR, multiplied by the number of shares of Stock covered by such Option or SAR, and to extend to any Participant who holds other types of Awards denominated in shares the right to elect, during the 60-day period immediately following the Change in Control, in lieu of receiving the shares of Stock covered by such Award, to receive in cash the Change in Control Price multiplied by the number of shares of Stock covered by such Award.
(c)     Effect of “Change in Control” on Performance-Based Awards. In the event of a “Change in Control,” with respect to an outstanding Award subject to achievement of performance goals and conditions, if and to the extent so provided by the Committee in the Award document governing such Award or other agreement with the Participant (i) such performance goals and conditions will be deemed to be met (either in full or pro rata based on the portion of Performance Period completed as of the date of the Change in Control) or (ii) the Award will be converted, based on achievement of performance goals through the date of the Change in Control or based on target performance (either in full or pro rata based on the portion of Performance Period completed as of the date of the Change in Control), into Restricted Stock or Deferred Stock that vests solely on continued service with the Company through a period of time that ends no later than the last day of the Performance Period; the converted Award will be subject to the provisions of paragraph (a) or (b) of this Section, depending on whether the Award is assumed or substituted for by the successor company (or is continued by the Corporation if it is the ultimate parent corporation).
(d)     Cancellation of Stock Options and SARs. The Committee, in its discretion, may determine that, upon the occurrence of a Change in Control, each outstanding Option and SAR shall terminate within a specified number of days after notice to the Participant, and/or that each Participant shall receive, with respect to each share of Stock subject to such Option or SAR, an amount equal to the excess of the Change in Control Price over the exercise price per share of Stock of such Option and/or SAR; such amount to be payable in cash, in one or more kinds of stock or property (including the stock or property, if any, payable in the transaction) or in a combination thereof, as the Committee, in its discretion, shall determine. In addition, unless otherwise provided in the Award document, Options and SARs outstanding as of the date of the Change in Control shall be cancelled and terminated without payment if the Change in Control Price is less than the per share of Stock Option exercise price or Stock Appreciation Right grant price.


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(e)     Definition of “Change in Control.” A “Change in Control” means, except as otherwise provided in an Award document, a change (i) in the ownership of the Corporation (which shall occur when a “person” or “group” (as determined for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934), except any majority-owned subsidiary of the Corporation or any employee benefit plan of the Corporation or any trust thereunder, acquires more than 50% of the voting power or fair market value of the Stock of the Corporation); (ii) in the effective control of the Corporation (which shall result from the acquisition, or acquisition during the 12-month period ending on the date of the latest acquisition, by one or more persons acting as a group of 30% or more of the total voting power of the Stock of the Corporation or replacement of a majority of the directors of the Corporation during any 12-month period by directors not endorsed by a majority of the board of directors of the Corporation before appointment or election; or (iii) in the ownership of a substantial portion of the assets of the Corporation (which shall result from the acquisition, or acquisition during a 12-month period ending on the date of the latest acquisition, by one or more persons (other than related persons described in Treasury Regulation § 1.409A-3(i)(5)(vii)(B)) acting as a group of all or substantially all of the assets of the Corporation), each within the meaning of Treasury Regulation § 1.409A-3(i)(5).
An event constituting a Change in Control must be objectively determinable and any certification thereof by the Committee may not be subject to the discretion of the Committee. The foregoing definition of Change in Control is intended to comply with Section 409A of the Code and the guidance issued thereunder and shall be interpreted by the Committee in a manner consistent therewith.



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(f)     Definition of “Change in Control Price.” The “Change in Control Price” means an amount in cash equal to the Fair Market Value of one share of Stock immediately prior to the occurrence of the Change in Control.
6.     General Provisions.
(a)     Compliance with Legal and Other Requirements.
(viii)    The Corporation may, to the extent deemed necessary or advisable by the Committee, postpone the issuance or delivery of Stock or payment of other benefits under any Award until completion of such registration or qualification of such Stock or other required action under any federal or state law, rule or regulation, listing or other required action with respect to any stock exchange or automated quotation system upon which the Stock or other securities of the Corporation are listed or quoted, or compliance with any other obligation of the Corporation, as the Committee may consider appropriate, and may require any Participant to make such representations, furnish such information and comply with or be subject to such other conditions as it may consider appropriate in connection with the issuance or delivery of Stock or payment of other benefits in compliance with applicable laws, rules, and regulations, listing requirements, or other obligations. The foregoing notwithstanding, in connection with a Change in Control, the Corporation shall take or cause to be taken no action, and shall undertake or permit to arise no legal or contractual obligation, that results or would result in any postponement of the issuance or delivery of Stock or payment of benefits under any Award or the imposition of any other conditions on such issuance, delivery or payment, to the extent that such postponement or other condition would represent a greater burden on a Participant than existed on the 90th day preceding the Change in Control, provided however, that with respect to any Awards that are subject to Section 409A of the Code, the Stock, cash or other consideration payable with respect to the Award shall be payable immediately following (and in no event no more than 90 days following) the Participant’s “separation from service” (as defined in Section 409A of the Code), except that to the extent that such Awards are held by a Participant who was a “specified employee” (within the meaning of Section 409A(a)(2)(B)(i) of the Code), the delivery of the Stock, cash or other consideration payable with respect to such Awards shall be delayed to the date that is 6 months and one day following the Participant’s “separation from service” solely to the extent necessary to avoid the additional taxes imposed by Section 409A(a)(i)(B) of the Code.
(ix)    Except to the extent an Award agreement provides for a different result (in which case the Award agreement will govern and this Section 10(a)(ii) shall not be applicable), in the event that the vesting of Awards together with all other payments and the value of any benefits received or to be received by a Participant (the “Total Payments”) would result in all or a portion of such Total Payments being subject to the excise tax under Section 4999 of the Code (the “Excise Tax”), then the Participant’s Total Payments shall be either (i) the full amount of such payments and benefits or (ii) such lesser amount that would result in no portion of the Total Payments being subject to excise tax under Section 4999 of the Code, whichever of the foregoing amounts, taking into account the applicable Federal, state, and local employment taxes, income taxes and the Excise Tax, results in the receipt by the Participant, on an after-tax basis, of the greatest amount of payments and benefits notwithstanding that all or some portion of such payments and benefits may be taxable under Section 4999 of the Code. Solely to the extent that the Participant is better off on an after-tax basis as a result of the reduction of Total Payments, such payments and benefits shall be reduced or eliminated, as determined by the Corporation, in the following order: (i) any cash payments, (ii) any taxable benefits, (iii) any nontaxable benefits, and (iv) any vesting or accelerated delivery of equity awards in each case in reverse order beginning with the payments or benefits that would have been paid, in the ordinary course, the farthest in time from the date that triggers the applicable Excise Tax.
All determinations required to be made under this Section 10(a)(ii) shall be made by a nationally recognized accounting firm (the “Accounting Firm”). The Corporation shall cause the Accounting Firm to provide detailed supporting calculations of its determinations to the Corporation and the Participant. All fees and expenses of the Accounting Firm shall be borne solely by the Corporation. The Accounting Firm’s determinations must be made with substantial authority (within the meaning of Section 6662 of the Code). For the purposes of all calculations under Section 280G of the Code and the application of this Section 10(a)(ii), all determinations as to the present value shall be made in accordance with the regulations promulgated under Section 280G of the Code.


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(b)     Limits on Transferability; Beneficiaries. No Award or other right or interest of a Participant under the Plan shall be pledged, hypothecated or otherwise encumbered or subject to any lien, obligation or liability of such Participant to any party (other than the Corporation or a subsidiary or affiliate thereof), or assigned or transferred by such Participant otherwise than by will or the laws of descent and distribution or to a Beneficiary upon the death of a Participant, and such Awards or rights that may be exercisable shall be exercised during the lifetime of the Participant only by the Participant or his or her guardian or legal representative, except that Awards and other rights (other than ISOs and SARs in tandem therewith) may be transferred to one or more transferees during the lifetime of the Participant, and may be exercised by such transferees in accordance with the terms of such Award, but only if and to the extent such transfers are permitted by the Committee, subject to any terms and conditions which the Committee may impose thereon (including limitations the Committee may deem appropriate in order that offers and sales under the Plan will meet applicable requirements of registration forms under the Securities Act of 1933 specified by the SEC). Notwithstanding the foregoing, transfers shall only be permitted (i) to the Participant’s spouse, children or grandchildren (including any adopted and step children or grandchildren), parents, grandparents or siblings, (ii) to a trust for the benefit of one or more of the Participant or the persons referred to in clause (i), (iii) to a partnership, limited liability company or corporation in which the Participant or the persons referred to in clause (i) are the only partners, members or shareholders or (iv) for charitable donations. A Beneficiary, transferee, or other person claiming any rights under the Plan from or through any Participant shall be subject to all terms and conditions of the Plan and any Award document applicable to such Participant, except as otherwise determined by the Committee, and to any additional terms and conditions deemed necessary or appropriate by the Committee.
(c)     Adjustments . In the event that any large, special and non-recurring dividend or other distribution (whether in the form of cash or property other than Stock), recapitalization, forward or reverse split, Stock dividend, reorganization, merger, consolidation, spin-off, combination, repurchase, share exchange, liquidation, dissolution or other similar corporate transaction or event affects the Stock, then the Committee shall, in such manner as it may deem equitable or appropriate, adjust any or all of (i) the number and kind of shares of Stock which may be delivered in connection with Awards granted thereafter, (ii) the number and kind of shares of Stock by which annual per-person Award limitations are measured under Section 5, (iii) the number and kind of shares of Stock (including without limitation whether such stock is restricted) subject to or deliverable in respect of outstanding Awards and (iv) the exercise price, grant price or purchase price relating to any Award or, if deemed appropriate, the Committee may make provision for a payment of cash or property to the holder of an outstanding Option (subject to Section 10(k)). In addition, the Committee is authorized to make adjustments in the terms, conditions and criteria included in any Awards in recognition of unusual or nonrecurring events affecting the Corporation or for any other reason deemed relevant by the Committee acting in good faith.
(d)     Tax Provisions .
(i)     Withholding . The Corporation and any subsidiary or affiliate is authorized to withhold from any Award granted, any payment relating to an Award under the Plan, including from a distribution of Stock, or any payroll or other payment to any employee Participant, amounts of withholding and other taxes due or potentially payable in connection with any transaction involving an Award, and to take such other action as the Committee may deem advisable to enable the Corporation and employee Participants to satisfy obligations for the payment of withholding taxes and other tax obligations relating to any Award. This authority shall include authority to withhold or receive Stock or other property and to make cash payments in respect thereof in satisfaction of an employee Participant’s withholding obligations, either on a mandatory or elective basis in the discretion of the Committee. Other provisions of the Plan notwithstanding, only the minimum amount of Stock deliverable in connection with an Award necessary to satisfy statutory withholding requirements will be withheld.
(ii)     Requirement of Notification of Code Section 83(b) Election. If any Participant shall make an election under Section 83(b) of the Code (to include in gross income in the year of transfer the amounts specified in Code Section 83(b)) or under a similar provision of the laws of a jurisdiction outside the United States, such Participant shall notify the Corporation of such election within ten days of filing notice of the election with the Internal Revenue Service or other governmental authority, in addition to any filing and notification required pursuant to regulations issued under Code Section 83(b) or other applicable provision.


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(iii)     Requirement of Notification Upon Disqualifying Disposition Under Code Section 421(b). If any Participant shall make any disposition of shares of Stock delivered pursuant to the exercise of an Incentive Stock Option under the circumstances described in Code Section 421(b) (relating to certain disqualifying dispositions), such Participant shall notify the Corporation of such disposition within ten days thereof.
(e)     Changes to the Plan . The Board may suspend, terminate or amend the Plan (subject to the provisions of 10(q)), or the Committee’s authority to grant Awards under the Plan, without the consent of stockholders or Participants; provided, however, that no such action, except with the consent of stockholders, 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 or SARs below the Fair Market Value of the Common Stock on the date of the grant of such option, or cancel any stock options or SARs in exchange for cash or another Award (other than in connection with a Change in Control); (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; provided, further, however, that any amendment to the Plan shall be submitted to the Corporation’s stockholders for approval not later than the earliest annual meeting for which the record date is after the date of such Board action if such stockholder approval is required by any federal or state law or regulation or the rules of any stock exchange or automated quotation system on which the Stock may then be listed or quoted.
To the extent applicable, it is intended that the Plan and all Awards hereunder comply with the requirements of Section 409A of the Code, and the Plan and all Award agreements shall be interpreted and applied by the Committee in a manner consistent with this intent in order to avoid the imposition of any additional tax under Section 409A of the Code. The Board may amend the Plan at any time to comply with Section 409A of the Code regulations promulgated thereunder and other Treasury or IRS guidance regarding or affecting Code Section 409A, provided that such amendment will not result in taxation to any Participant under Code Section 409A.


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(f)     Right of Setoff . The Corporation or any subsidiary or affiliate may, to the extent permitted by applicable law, deduct from and set off against any amounts the Corporation or a subsidiary or affiliate may owe to the Participant from time to time, including amounts payable in connection with any Award, owed as wages, fringe benefits, or other compensation owed to the Participant, such amounts as may be owed by the Participant to the Corporation, although the Participant shall remain liable for any part of the Participant’s payment obligation not satisfied through such deduction and setoff. By accepting any Award granted hereunder, the Participant agrees to any deduction or setoff under this Section 10(f).
(g)     Unfunded Status of Awards; Creation of Trusts . The Plan is intended to constitute an “unfunded” plan for incentive and deferred compensation. With respect to any payments not yet made to a Participant or obligation to deliver Stock pursuant to an Award, nothing contained in the Plan or any Award shall give any such Participant any rights that are greater than those of a general creditor of the Corporation; provided that the Committee may authorize the creation of trusts and deposit therein cash, Stock, other Awards or other property, or make other arrangements to meet the Corporation’s obligations under the Plan. Such trusts or other arrangements shall be consistent with the “unfunded” status of the Plan unless the Committee otherwise determines with the consent of each affected Participant.
(h)     Nonexclusivity of the Plan . Neither the adoption of the Plan by the Board nor its submission to the stockholders of the Corporation for approval shall be construed as creating any limitations on the power of the Board or a committee thereof to adopt such other incentive arrangements, apart from the Plan, as it may deem desirable, including incentive arrangements and awards which do not qualify under Code Section 162(m), and such other arrangements may be either applicable generally or only in specific cases.
(i)     Payments in the Event of Forfeitures; Fractional Shares. Unless otherwise determined by the Committee, in the event of a forfeiture of an Award with respect to which a Participant paid cash consideration, the Participant shall be repaid the amount of such cash consideration. No fractional shares of Stock shall be issued or delivered pursuant to the Plan or any Award. The Committee shall determine whether cash, other Awards or other property shall be issued or paid in lieu of such fractional shares or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated.
(j)     Cancellation of Award; Forfeiture of Gain. Notwithstanding anything to the contrary contained herein, an Award Agreement may provide that:
(i)    In the event of a restatement of the Company’s financial statements, the Committee shall have the right to review any Award, the amount, payment or vesting of which was based on an entry in the financial statements that are the subject of the restatement. If the Committee determines, based on the results of the restatement, that a lesser amount or portion of an Award should have been paid or vested, it may (x) cancel all or any portion of any outstanding Awards and (y) require the Participant or other person to whom any payment has been made or shares or other property have been transferred in connection with the Award to forfeit and pay over to the Company, on demand, all or any portion of the gain (whether or not taxable) realized upon the exercise of any Option or SAR and the value realized (whether or not taxable) on the vesting or payment of any other Award.
(ii)    If the Participant, during the time period specified in the Award Agreement, engages in any prohibited activity or conduct described in subsection (iii) below the exercise or vesting of the Award may be rescinded within one (1) year after the Company becomes aware of such activity or conduct, and the Company shall notify the Participant in writing of any such rescission within such one-year period. Within ten (10) days after receiving such notice of rescission, the Participant shall (x) return to the Company the number of shares of Common Stock that the Participant received upon exercise or vesting of the Award which have not been sold, and (y) pay to the Company the amount of any gain realized as a result of the sale of any Common Stock that the Participant received upon exercise or vesting of the Award, in such manner and on such terms and conditions as may be required by the Company. The Company also shall be entitled to set-off against the amount of any such gain any amount owed to the Participant by the Company.


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(iii)    The prohibited activity or conduct is (w) the unauthorized rendering of services for any organization or engaging, directly or indirectly, in any business which is competitive with the business of the Company; (x) the disclosure to any person or entity outside the Company, or use in other than the Company’s business, without prior written authorization from the Company, of any Confidential Information or material relating to the business of the Company; (y) activity that results in termination of the Participant’s employment or services as a director of the Company for cause; or (z) any other conduct or act reasonably determined by the Company to be injurious, detrimental or prejudicial to any interest of the Company.
(k)     Compliance with Code Section 162(m) . It is the intent of the Corporation that Options and SARs granted to Covered Employees and other Awards designated as Awards to Covered Employees subject to Section 7 shall constitute qualified “performance-based compensation” within the meaning of Code Section 162(m) and regulations thereunder, unless otherwise determined by the Committee at the time of allocation of an Award. Accordingly, the terms of Sections 7(b), (c), and (d), including the definitions of Covered Employee and other terms used therein, shall be interpreted in a manner consistent with Code Section 162(m) and regulations thereunder. The foregoing notwithstanding, because the Committee cannot determine with certainty whether a given Participant will be a Covered Employee with respect to a fiscal year that has not yet been completed, the term Covered Employee as used herein shall mean only a person designated by the Committee as likely to be a Covered Employee with respect to a specified fiscal year. If any provision of the Plan or any Award document relating to a Performance Award that is designated as intended to comply with Code Section 162(m) does not comply or is inconsistent with the requirements of Code Section 162(m) or regulations thereunder, such provision shall be construed or deemed amended to the extent necessary to conform to such requirements, and no provision shall be deemed to confer upon the Committee or any other person discretion to increase the amount of compensation otherwise payable in connection with any such Award upon attainment of the applicable performance objectives.
(l)     Governing Law . The validity, construction, and effect of the Plan, any rules and regulations relating to the Plan and any Award document shall be determined in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of laws, and applicable provisions of federal law.
(m)     Awards to Participants Outside the United States . The Committee may modify the terms of any Award under the Plan made to or held by a Participant who is then resident or primarily employed outside of the United States in any manner deemed by the Committee to be necessary or appropriate in order that such Award shall conform to laws, regulations, and customs of the country in which the Participant is then resident or primarily employed, or so that the value and other benefits of the Award to the Participant, as affected by foreign tax laws and other restrictions applicable as a result of the Participant’s residence or employment abroad, shall be comparable to the value of such an Award to a Participant who is resident or primarily employed in the United States. An Award may be modified under this Section 10(m) in a manner that is inconsistent with the express terms of the Plan, so long as such modifications will not contravene any applicable law or regulation or result in actual liability under Section 16(b) of the Exchange Act for the Participant whose Award is modified.
(n)     Limitation on Rights Conferred under Plan . Neither the Plan nor any action taken hereunder shall be construed as (i) giving any Eligible Person or Participant the right to continue as an Eligible Person or Participant or in the employ or service of the Corporation or a subsidiary or affiliate, (ii) interfering in any way with the right of the Corporation or a subsidiary or affiliate to terminate any Eligible Person’s or Participant’s employment or service at any time, (iii) giving an Eligible Person or Participant any claim to be granted any Award under the Plan or to be treated uniformly with other Participants and employees, or (iv) conferring on a Participant any of the rights of a stockholder of the Corporation unless and until the Participant is duly issued or transferred shares of Stock in accordance with the terms of an Award or an Option is duly exercised. Except as expressly provided in the Plan and an Award document, neither the Plan nor any Award document shall confer on any person other than the Corporation and the Participant any rights or remedies thereunder.


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(o)     Severability; Entire Agreement . If any of the provisions of this Plan or any Award document is finally held to be invalid, illegal or unenforceable (whether in whole or in part), such provision shall be deemed modified to the extent, but only to the extent, of such invalidity, illegality or unenforceability, and the remaining provisions shall not be affected thereby; provided, that, if any of such provisions is finally held to be invalid, illegal, or unenforceable because it exceeds the maximum scope determined to be acceptable to permit such provision to be enforceable, such provision shall be deemed to be modified to the minimum extent necessary to modify such scope in order to make such provision enforceable hereunder. The Plan and any Award documents contain the entire agreement of the parties with respect to the subject matter thereof and supersede all prior agreements, promises, covenants, arrangements, communications, representations and warranties between them, whether written or oral with respect to the subject matter thereof.
(p)     Awards Under Preexisting Plan . Upon approval of the Plan by stockholders of the Corporation as required under Section 10(q) hereof, no further awards shall be granted under the Preexisting Plan.
(q)     Effective Date of Amendment and Restatement; Termination . This amendment and restatement of the Plan shall become effective if, and at such time as, the stockholders of the Corporation have approved it by the affirmative votes of the holders of a majority of the voting securities of the Corporation present, or represented, and entitled to vote on the subject matter at a duly held meeting of stockholders (the “Restatement Effective Date”). This amendment and restatement of the Plan shall be null and void and of no effect if the foregoing condition is not fulfilled and in such event the Plan shall continue in effect without regard to this amendment and restatement. Unless the Plan is earlier terminated by action of the Board, Awards may be granted under the Plan at any time and from time to time on or prior to the tenth anniversary of the Restatement Effective Date, on which date this Plan will terminate except as to Awards then outstanding under this Plan. Such outstanding Awards shall remain in effect until they have been exercised or terminated, or have expired.
The Board may terminate the Plan in accordance with the provisions of this Section 10(q) subject to the restrictions imposed by Section 409A of the Code. In order for the provisions of this Section 10(q) to apply, the Board must designate in writing that the Plan is being terminated in accordance with this Section.
The Plan may be terminated within twelve (12) months of a corporate dissolution taxed under Section 331 of the Code, or with the approval of the bankruptcy court pursuant to 11 U.S.C. §503(b)(1)(A). In such event, distributions must be paid to Participants no later than the latest of: (A) the last day of the calendar year in which the Plan termination occurs, (B) the first calendar year in which the amount is no longer subject to a substantial risk of forfeiture, or (C) the first calendar year in which payment is administratively practicable.
The Plan may be terminated at any other time, provided that if the Plan is then subject to the requirements of Section 409A of the Code, such termination does not occur proximate to a downturn in the financial health of the Corporation or an “Affiliate” (as such term is defined in Rule 12b-2 of the Exchange Act), and all other plans required to be aggregated with this Plan under Section 409A of the Code and Treasury regulations thereunder are also terminated and liquidated. In such event, distributions to Participants shall be paid no earlier than twelve (12)-months (and no later than twenty-four (24) months) after the date of termination. Notwithstanding the foregoing, any payment that would otherwise be paid during the twelve (12)-month period beginning on the Plan termination date pursuant to the terms of the Plan shall be paid in accordance with such terms. In addition, the Corporation or any Affiliate shall be prohibited from adopting a similar arrangement within three (3) years following the date of the Plan’s termination, unless such arrangement would be permissible under Section 409A of the Code and the Treasury regulations thereunder.





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