Drew Industries (DW)

Intellectual Property

                The Company manufactures and sells certain of its slide-out mechanisms pursuant to a non-exclusive license granted by the exclusive licensee and owner of three patents until October 24, 2017, the date of the last to expire of the patents. In connection with the license, the Company made an initial payment to the licensor of $1 million representing royalties for 2002 and prior years. Pursuant to the license, royalties are payable by the Company on an annual declining percentage (3% for 2003 and 2004; 1.5% for 2005 and 2006; and 1% from 2007 to expiration of the patents) of sales of certain slide-out mechanisms produced by the Company with annual minimum royalties of $1,250,000 for the years 2003 through 2006. For 2004, the Company paid a royalty of approximately $1,300,000 on sales of applicable slide-out systems of approximately $42 million. Aggregate royalties for the period from 2007 through the expiration of the patents are limited to $5 million.

                The Company holds several United States patents that relate to various products sold by the Company. While the Company believes that its patents are valuable and patent protection is important, none of these patents is essential to the Company or its business segments.

                From time to time the Company has received notices that it may be infringing certain patent rights of others, and the Company has given notices to others that they may be infringing certain patent rights of the Company. No material litigation or claims are pending as a result of these notices.