1. Base
Salary - $249,600 per annum, payable at the rate of $9,600 per biweekly
period.
2. In
addition to the Base Salary, you will be entitled to receive performance-based
incentive compensation (the “Bonus”), equal to 3.0% of (i) the excess of
Operating Profits of the LCI Entities for the period August 1, 2007 through
December 31, 2007 over (ii) $8,155,000 (the “Base”); provided, however, that if
any of the LCI Entities acquire additional business operations, the Base
will be
increased by the profits of the acquired business(es). The
Bonus
will be paid from, and will be applied against, the LCI Entities bonus
accrual.
3. In
addition to the Base Salary and Bonus, you will be entitled to receive
additional incentive compensation in the amount of Thirty Seven Thousand
Five
Hundred ($37,500) Dollars if the LCI Entities achieve an annualized return
on
assets (“ROA”) for the period from August 1, 2007 through December 31, 2007 of
twenty and seven tenths (20.7%) percent, which additional incentive compensation
will increase at the pro-rata rate of Seven Thousand Five Hundred ($7,500)
Dollars per one (1%) percent increase in ROA in excess of 20.7% (the “ROA
Bonus”); provided, however, that the aggregate Bonus and ROA Bonus shall not
exceed six (6%) percent of the “Operating Profits of the LCI Entities” for the
same period.
4. The
term
“Operating Profits of the LCI Entities” means the consolidated income of the LCI
Entities (A) before (i) interest expense, (ii) interest or dividend income,
(iii) impairment of goodwill, (iv) intercompany administrative fees charged
to
any of the LCI Entities by Drew Industries Incorporated (“Drew”), (v) taxes
based upon income, (vi) extraordinary items determined in accordance with
generally accepted accounting principles, and (vii) the cumulative effect
of a
change in accounting principles, and (B) after giving effect (positive or
negative) to a capital charge equal to 6% of the increase or decrease in
(i) the
average net assets employed by the LCI Entities (the “Net Asset Base”) during
the period for which the Bonus is being determined over (ii) $ 167,400,000.
The
term “net assets” means: (a) total assets, excluding cash and investment in
wholly-owned subsidiaries, minus (b) total liabilities, excluding (i) current
and long-term debt, (ii) intercompany balances, and (iii) income taxes payable
or deferred, all as reflected on the monthly Balance Sheet of the LCI Entities
as in the included Consolidating Balance Sheet of Drew and its subsidiaries.
If
any of the LCI Entities acquire additional business operations, the Net Asset
Base will
be
increased by the assets acquired. The term “return on assets” means the
Operating Profit of the LCI Entities for the subject period divided by the
average “net assets” employed by the LCI Entities during such
period.
5. The
amount of Bonus in excess of five times the Base Salary for the subject period
will be paid in shares of Drew Deferred Stock. The number of shares of Deferred
Stock will be determined based on the closing market price of Drew common
stock
on the day preceding the date on which Drew releases its year-end results
of
operations, and issuance of Deferred Stock will be made as soon as practicable
thereafter.
6. All
compensation, in whatever form, payable in accordance with this arrangement
is
subject in all respects to the terms, provisions and conditions of the Drew
Industries Incorporated 2002 Equity Award and Incentive Plan, as amended
from
time to time, and any Bonus, payable in cash or stock, will be paid on or
between February 15, 2008 and March 15, 2008.
7. It
is
intended that the compensation arrangement described above will comply in
all
respects with the requirements of section 409A of the Internal Revenue Code
of
1986, as amended (the “Code). Accordingly, all elections to defer, all
distributions, and all other aspects of such compensation will be made in
compliance with Section 409A of the Code and any regulations or other guidance
thereunder. To the extent required, this arrangement will be modified in
order
to comply with the provisions of Section 409A of the Code and any regulations
or
guidance thereunder.
8. This
memorandum is solely for the purpose of confirming our compensation arrangement
and does not constitute an obligation of you or the LCI Entities to continue
your employment for any period, and you remain an
employee-at-will.