9. Commitments and Contingencies

Contingent Consideration Related to Acquisitions

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 June 30, 2013, based on the present value of the expected future cash flows using a market participant's weighted average cost of capital of 15.0 percent.

The following table summarizes the contingent consideration liability as of June 30, 2013 (in thousands):


					Fair Value
		Estimated			of Estimated
		Remaining			Remaining
Acquisition		Payments			Payments
Schwintek products	$	7,692	^(a)	$	6,290
Level-Up^®six-point leveling system		3,919	^(b)		2,968
Other acquired products		528	^(c)		477
Total	$	12,139		$	9,735

(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 $6.7 million, of which the Company estimates $4.6 million will be paid. Other than expiration of the contingent consideration period, the remaining product has no maximum contingent consideration.

(b) Other than expiration of the contingent consideration period in February 2016, this product has no maximum contingent consideration.

(c) Contingent consideration expires at various dates through October 2025. Certain of these products have a combined remaining maximum contingent consideration 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.

In the first six months of 2013 and 2012, the net impact of the quarterly fair value adjustments and accretion of the liability was an expense of $1.0 million and $0.8 million, respectively, recorded in selling, general and administrative expenses.

The following table provides a reconciliation of the Company's contingent consideration liability for the six months ended June 30, (in thousands):


		2013			2012
Balance at beginning of period	$	11,519		$	14,561
Acquisitions		-			67
Payments		(2,813	)		(1,550	)
Accretion		686			920
Fair value adjustments		343			(122	)
Balance at end of the period		9,735			13,876
Less current portion in accrued expenses and other current liabilities		(4,806	)		(4,668	)
Total long-term portion in other long-term liabilities	$	4,929		$	9,208

Executive Succession and Severance

On May 10, 2013, as previously announced, Fredric M. Zinn retired as President and Chief Executive Officer of Drew. Jason D. Lippert, Chairman and Chief Executive Officer of Lippert Components and Kinro, succeeded Mr. Zinn as Chief Executive Officer of Drew. Scott T. Mereness, President of Lippert Components and Kinro, succeeded Mr. Zinn as President of Drew. 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 Kinro.

In connection with the Company's executive succession and corporate relocation, the Company recorded pre-tax charges of $1.5 million in the fourth quarter of 2012 and $1.8 million in the first six months of 2013, including $0.7 million in the second quarter of 2013, related to contractual obligations for severance and the acceleration of equity awards held by certain employees whose employment terminated as a result of the executive succession and relocation to Indiana. No other related charges are expected. The liability for executive succession and severance obligations will be paid through 2015. Once the transition and corporate office relocation are completed during the latter half of 2013, the Company expects to save an estimated $2 million annually in general and administrative costs.