12. COMMITMENTS AND CONTINGENCIES

Leases

The Company's lease commitments are primarily for real estate, machinery and equipment, and vehicles. The significant real estate leases provide for renewal options and require the Company to pay for property taxes and all other costs associated with the leased property.

Future minimum lease payments under operating leases at December 31, 2012 are as follows (in thousands):


2013	$	3,424
2014		2,279
2015		1,723
2016		1,321
2017		1,074
Thereafter		1,915
Total minimum lease payments	$	11,736

In February 2013, the Company entered into a 10-year operating lease with aggregate minimum lease payments of $4.4 million to consolidate certain of its corporate functions and to expand capacity for certain manufacturing operations.

Rent expense for operating leases was $5.6 million, $5.4 million and $5.7 million for the years ended December 31, 2012, 2011 and 2010, respectively.

Contingent Consideration

In connection with several business acquisitions, if certain sales targets for the acquired products are achieved, the Company would pay additional cash consideration. The Company has recorded a liability for the fair value of this contingent consideration at December 31, 2012 and 2011, based on the present value of the expected future cash flows using a market participant's weighted average cost of capital of 14.9 percent.

The following table summarizes the contingent consideration liability as of December 31, 2012 (in thousands):


					Fair Value
		Estimated			of Estimated
		Remaining			Remaining
Acquisition		Payments			Payments
Schwintek products	$	9,795	^(a)	$	8,158
Level-Up^®six-point leveling system		3,551	^(b)		2,736
Other acquired products		725	^(c)		625
Total	$	14,071		$	11,519

(a) The remaining contingent consideration for two of the three products expires in March 2014. Contingent consideration for the remaining product will cease five years after the product is first sold to customers. Two of the three products acquired have a combined remaining maximum contingent consideration of $8.7 million, of which the Company estimates $6.7 million will be paid. Other than expiration of the contingent consideration period, the remaining products have no maximum contingent consideration.

(b) Other than expiration of the contingent consideration period in February 2016, these products have no maximum contingent consideration.

(c) Contingent consideration expires at various dates through October 2025. Certain of these products have a combined remaining maximum of $3.0 million, while the remaining products have no maximum contingent consideration.

As required, the liability for this contingent consideration is measured at fair value quarterly, considering actual sales of the acquired products, updated sales projections, and the updated market participant weighted average cost of capital. Depending upon the weighted average costs of capital and future sales of the products which are subject to contingent consideration, the Company could record adjustments in future periods.

The following table provides a reconciliation of the Company's contingent consideration liability for the years ended December 31, (in thousands):


		2012			2011			2010
Beginning balance	$	14,561		$	12,104		$	1,370
Acquisitions		67			1,090			10,333
Payments		(4,315	)		(398	)		(8	)
Accretion^(a)		1,756			1,886			1,582
Fair value adjustments^(a)		(550	)		(121	)		(1,173	)
Total ending balance		11,519			14,561			12,104
Less current portion in accrued expenses and other
current liabilities		(5,429	)		(3,292	)		(1,827	)
Total long-term portion in other long-term liabilities	$	6,090		$	11,269		$	10,277

(a) Recorded in selling, general and administrative expense in the Consolidated Statements of Income.

Litigation

On or about January 3, 2007, an action was commenced in the United States District Court, Central District of California, entitled, as amended, Gonzalez and Royalty vs. Drew Industries Incorporated, Kinro, Inc., Kinro Texas Limited Partnership d/b/a Better Bath Components; Skyline Corporation, and Skyline Homes Inc. (Case No. CV06-08233).

The case purported to be a product liability class action related to a certain line of products manufactured by Kinro. After a comprehensive investigation, Kinro concluded that plaintiffs' claims were without merit. In the course of the proceedings during 2010, the District Court dismissed each of the seven claims asserted by the plaintiffs. The plaintiffs appealed to the United States Court of Appeals for the Ninth Circuit. On June 7, 2012, the Court of Appeals unanimously affirmed the decision of the District Court dismissing all claims against Kinro. Consequently, the litigation was terminated.

In the normal course of business, the Company is subject to proceedings, lawsuits and other claims. All such matters are subject to uncertainties and outcomes that are not predictable with assurance. While these matters could materially affect operating results when resolved in future periods, it is management's opinion that after final disposition, including anticipated insurance recoveries in certain cases, any monetary liability or financial impact to the Company beyond that provided in the Consolidated Balance Sheet as of December 31, 2012, would not be material to the Company's financial position or annual results of operations.

Executive Succession and Severance

On February 12, 2013, the Company announced that Fredric M. Zinn, President and Chief Executive Officer, will retire effective May 10, 2013. Jason D. Lippert, Chairman and Chief Executive Officer of Lippert Components and Kinro, has been named to succeed Mr. Zinn as Chief Executive Officer of Drew. Scott T. Mereness, President of Lippert Components and Kinro, has been named to succeed Mr. Zinn as President of Drew. Both of these appointments will be effective May 10, 2013. The Company also announced the relocation of its corporate headquarters from White Plains, New York to Elkhart County, Indiana, the location of the corporate headquarters of Lippert Components and Kinro.

As a result of the Company's executive succession and corporate relocation, the Company recorded a pre-tax charge of $1.5 million in the fourth quarter of 2012 related to the contractual obligations for severance and the acceleration of equity awards for certain employees whose employment will terminate as a result of the relocation to Indiana. The Company will record an additional pre-tax charge of $1.8 million related to the contractual obligations in the first and second quarters of 2013. Upon completion of the transition, the Company expects to save an estimated $2 million annually in general and administrative costs.

Unrelated to the executive succession, the Company incurred severance and relocation costs of $0.2 million, $0.1 million, and $1.7 million during the years ended December 31, 2012, 2011 and 2010, respectively, which were recorded in selling, general and administrative expenses in the Consolidated Statements of Income.

The liability for executive succession and severance obligations, which will be paid through 2015, was recorded as follows at December 31, (in thousands):


		2012		2011		2010
Other accrued expenses and current liabilities	$	1,778	$	449	$	726
Other long-term liabilities		671		1,028		1,504
Total executive succession and
severance liability	$	2,449	$	1,477	$	2,230