<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Sections 240.14a-11(c) or Section
240.14a-12
LAWSON PRODUCTS, INC.
- -------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- -------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee previously paid with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
-----------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
3) Filing Party:
-----------------------------------------------------------------------
4) Date Filed:
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<PAGE>
[LOGO]
LAWSON PRODUCTS, INC.
1666 EAST TOUHY AVENUE
DES PLAINES, ILLINOIS 60018
- --------------------------
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
May 12, 1998
- ------------------------
TO THE STOCKHOLDERS:
You are cordially invited to attend the annual meeting of stockholders of Lawson
Products, Inc. (the "Company" or "Lawson"), which will be held at the offices of
the Company, 1666 East Touhy Avenue, Des Plaines, Illinois, on Tuesday, May 12,
1998, at 10:00 A.M. (Local Time) for the following purposes:
(1) To elect three directors to serve three years;
(2) To consider and vote upon a stockholder proposal concerning the sale or
merger of the Company;
(3) To consider and vote upon a stockholder proposal concerning the elimination
of a classified Board of Directors; and
(4) To transact such other business as may properly come before the meeting or
any adjournment thereof.
The Board of Directors has fixed the close of business on March 31, 1998, as the
record date for the determination of stockholders entitled to notice of and to
vote at the meeting. Accompanying this notice is a form of proxy, a Proxy
Statement and a copy of the Company's 1997 Annual Report.
EVEN IF YOU EXPECT TO ATTEND THE MEETING IN PERSON, PLEASE SIGN AND RETURN THE
ENCLOSED PROXY IN THE ENVELOPE PROVIDED SO THAT YOUR SHARES MAY BE VOTED AT THE
MEETING. IF YOU EXECUTE A PROXY, YOU STILL MAY ATTEND THE MEETING AND VOTE IN
PERSON.
By Order of the Board of Directors
Robert J. Washlow
SECRETARY
Des Plaines, Illinois
April 10, 1998
<PAGE>
[LOGO]
LAWSON PRODUCTS, INC.
1666 EAST TOUHY AVENUE
DES PLAINES, ILLINOIS 60018
- --------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
May 12, 1998
- ------------------------
This Proxy Statement is being sent to stockholders on or about April 10, 1998,
in connection with the solicitation of the accompanying proxy by the Board of
Directors of the Company. Only stockholders of record at the close of business
on March 31, 1998, are entitled to notice of and to vote at the meeting. The
Company has retained Morrow & Co., Inc., a firm specializing in the solicitation
of proxies, to assist in the solicitation at a fee estimated to be $5,000 plus
expenses. Officers of the Company may make additional solicitations in person or
by telephone. Expenses incurred in the solicitation of proxies will be borne by
the Company. If the accompanying form of proxy is executed and returned in time,
the shares represented thereby will be voted, but the proxy may be revoked at
any time prior to its exercise by execution of a later dated proxy or by voting
in person at the annual meeting.
As of March 31, 1998, the Company had outstanding 11,135,533 shares of the
Company's Common Stock (the "Common Stock") and such shares are the only shares
entitled to vote at the annual meeting. Each holder of Common Stock is entitled
to one vote per share on all matters to come before the meeting. For purposes of
the meeting, a quorum means a majority of the outstanding shares. In determining
whether a quorum exists, all shares represented in person or by proxy will be
counted.
It is intended that the named proxies will vote in favor of the election as
directors of the nominees listed below, except as otherwise indicated on the
proxy form. If any nominee should become unavailable for election as a director
(which is not contemplated), the proxies will have discretionary authority to
vote for a substitute. In the absence of a specific direction from the
stockholders, proxies will be voted for the election of all named director
nominees, against the stockholder proposal concerning the sale or merger of the
Company, and against the stockholder proposal concerning the elimination of a
classified Board of Directors. Proxies relating to "street name" shares that are
voted by brokers on some but not all of the matters will be treated as shares
present for purposes of determining the presence of a quorum on all matters, but
will have no effect on any proposal at this annual meeting for which a vote is
not indicated on the proxies.
ELECTION OF DIRECTORS
Stockholders are entitled to cumulative voting in the election of directors.
Under cumulative voting, each stockholder is entitled to that number of votes
equal to the number of directors to be elected, multiplied by the number of
shares he owns, and he may cast his votes for one nominee or distribute them in
any manner he chooses among any number of nominees. Unless otherwise indicated
on the proxy card, votes may, in the discretion of the proxies, be equally or
unequally allocated among the nominees named below. Directors will be elected by
a plurality of the votes
<PAGE>
cast at the meeting by the holders of shares represented in person or by proxy.
Thus, assuming a quorum is present, the three persons receiving the greatest
number of votes will be elected as directors and votes that are withheld will
have no effect.
The By-Laws of the Company provide that the Board of Directors shall consist of
such number of members, between five and nine, as the Board of Directors
determines from time to time. The size of the Board is currently set at nine
members. The Board is divided into three classes, with one class being elected
each year for a three-year term. At the meeting, three directors are to be
elected to serve until 2001.
The following information has been furnished by the respective nominees and
continuing directors:
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED
NAME AGE PRINCIPAL OCCUPATION DIRECTOR
- --------------------------------------- --- ------------------------------------------------------- ----------
<S> <C> <C> <C>
NOMINEES TO BE ELECTED TO SERVE UNTIL 2001
Bernard Kalish......................... 60 Chairman of the Board and Chief Executive Officer of 1983
the Company
Sidney L. Port......................... 87 Chairman of the Executive Committee of the Company 1953
Robert J. Washlow...................... 53 Partner at the law firm of Vedder, Price, Kaufman & 1997
Kammholz. Also Secretary to the Company.
DIRECTORS WHOSE TERMS EXPIRE IN 2000
James T. Brophy........................ 70 Private Investor 1971
Hugh Allen............................. 62 Senior Executive Vice President -- Sales -- Marketing 1995
of the Company
Jerome Shaffer......................... 70 Vice President and Treasurer of the Company 1989
DIRECTORS WHOSE TERMS EXPIRE IN 1999
Ronald B. Port, M.D.................... 57 Physician 1984
Robert G. Rettig....................... 68 Consultant 1989
Peter G. Smith......................... 59 President and Chief Operating Officer of the Company 1985
</TABLE>
- ------------------------
- - The Executive Committee, the members of which are Sidney L. Port, Bernard
Kalish and Peter G. Smith, has all of the authority of the Board of Directors
between Board meetings, except to declare a dividend, authorize the issuance
of stock, amend the By-Laws or take action relating to certain corporate
changes.
- - The Audit Committee, the members of which are James T. Brophy, Robert G.
Rettig, and Ronald B. Port, M.D., reviews the scope and results of the audit
by the Company's independent auditors and reviews the Company's procedures
for monitoring internal accounting controls.
- - The Compensation Committee, the members of which are James T. Brophy, Robert
G. Rettig and Ronald B. Port, M.D., makes all determinations with respect to
the compensation of the Chairman of the Board and establishes general
compensation policies with respect to all other executive officers of the
Company.
- - The Nominating Committee, the members of which are James T. Brophy, Robert G.
Rettig and Ronald B. Port, M.D., reviews and recommends potential directors
to the Board of Directors.
- - The Incentive Stock Committee, the members of which are Sidney L. Port, James
T. Brophy and Ronald B. Port, M.D., administers the Company's Incentive Stock
Plan.
- - Because of his substantial stockholdings, Sidney L. Port may be deemed to be
a control person of the Company. See "Securities Beneficially Owned by
Principal Stockholders and Management."
2
<PAGE>
- - Ronald B. Port, M.D. is the son of Sidney L. Port.
- - Robert J. Washlow is the son-in-law of Sidney L. Port. Mr. Washlow is a
partner at the law firm of Vedder, Price, Kaufman & Kammholz, which firm
provides legal services to the Company.
- - Each nominee and continuing director has held the indicated position, or an
executive position with the same employer, for at least the past five years.
In 1997, the Board of Directors held four meetings, the Compensation Committee
held one meeting, the Audit Committee held one meeting and the Nominating
Committee held one meeting. During 1997, each director attended at least 75% of
the meetings of the Board. Each director attended at least 75% of the meetings,
during 1997, of the respective committees on which he served except Ronald B.
Port, M.D. The Executive Committee did not meet, as matters typically dealt with
by this Committee were considered by the full Board of Directors. Directors who
are not employees of the Company receive directors' fees of $12,000 annually,
other than Robert J. Washlow. In 1997, each outside director, other than Robert
J. Washlow, was paid an additional $10,000. Mr. Washlow did not receive any
compensation from the Company as a director in 1997.
SECURITIES BENEFICIALLY OWNED BY PRINCIPAL
STOCKHOLDERS AND MANAGEMENT
Set forth below, as of March 1, 1998 (unless otherwise indicated), are the
beneficial holdings of: each person known by the Company to own beneficially
more than 5% of the outstanding shares of Common Stock of the Company, each
director, the executive officers listed on the Summary Compensation Table below,
and all executive officers and directors as a group.
<TABLE>
<CAPTION>
SOLE SHARED
VOTING OR VOTING OR PERCENT
DISPOSITIVE DISPOSITIVE OF CLASS AT
NAME POWER(1)(2) POWER MARCH 1, 1998
- -------------------------------------------------------------------- ----------- ----------- ---------------
<S> <C> <C> <C>
Sidney L. Port ..................................................... 3,407,382 -0- 30.5%
1666 East Touhy Avenue
Des Plaines, Illinois 60018
Bettie (Mrs. Sidney L.) Port ....................................... 1,421,802 -0- 12.7%
1666 East Touhy Avenue
Des Plaines, Illinois 60018
Hugh Allen ......................................................... 6,000 -0- *
James T. Brophy .................................................... 1,150 -0- *
Bernard Kalish ..................................................... 15,350 -0- *
Ronald B. Port, M.D. ............................................... 16,615 -0- *
Robert G. Rettig ................................................... 500 -0- *
Jerome Shaffer ..................................................... 21,533 2,530 *
Peter G. Smith ..................................................... 11,700 10,511 *
Robert J. Washlow .................................................. 26,890 -0- *
All executive officers and directors as a group
(13 persons) ..................................................... 3,524,864 13,041 31.7%
</TABLE>
- ------------------------
* Less than 1%.
(1) Does not include certain shares held by wives and minor children in the case
of Mr. Brophy (725 shares), Mr. Kalish (12,323 shares), Dr. Port (16,615
shares), Mr. Shaffer (2,450 shares), Mr. Smith (1,700 shares) and Mr.
Washlow (49,060) and all executive officers and directors as a group (82,873
shares).
(2) Stockholdings shown include shares issuable upon the exercise of stock
options exercisable within 60 days by Mr. Allen (3,750 shares), Mr. Kalish
(13,750 shares), Mr. Shaffer (6,500 shares), Mr. Smith (10,000 shares) and
all executive officers and directors as a group (44,625 shares).
3
<PAGE>
REMUNERATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The table below sets forth certain information concerning the annual and
long-term compensation for services in all capacities to the Company for the
fiscal years ended December 31, 1997, 1996 and 1995, of those persons who were,
at December 31, 1997 (i) the chief executive officer, and (ii) the other four
most highly compensated executive officers of the Company (the "Named
Officers").
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL ------------
COMPENSATION SECURITIES ALL OTHER
--------------- UNDERLYING COMPENSATION(2)
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(1) ($)
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
Bernard Kalish 1997 $362,068 $48,180 -0- $ 15,200
CHAIRMAN OF THE BOARD AND 1996 343,747 -0- 15,000 13,500
CHIEF EXECUTIVE OFFICER 1995 325,950 -0- -0- 15,000
- -----------------------------------------------------------------------------------------------------
Sidney L. Port 1997 316,101 -0- -0- 15,200
CHAIRMAN OF THE EXECUTIVE 1996 301,952 -0- -0- 13,500
COMMITTEE 1995 288,187 -0- -0- 15,000
- -----------------------------------------------------------------------------------------------------
Peter G. Smith 1997 304,882 9,430 -0- 15,200
PRESIDENT AND CHIEF 1996 290,109 -0- 10,000 13,500
OPERATING OFFICER 1995 274,119 -0- -0- 15,000
- -----------------------------------------------------------------------------------------------------
Hugh Allen 1997 226,358 17,317 -0- 15,200
SENIOR EXECUTIVE VICE-PRESIDENT -- 1996 212,445 -0- 5,000 13,500
SALES -- MARKETING 1995 202,891 -0- -0- 15,000
- -----------------------------------------------------------------------------------------------------
Jerome Shaffer 1997 210,278 5,938 -0- 15,200
VICE PRESIDENT AND 1996 205,967 -0- 6,000 13,500
TREASURER 1995 197,232 -0- -0- 15,000
- -----------------------------------------------------------------------------------------------------
</TABLE>
(1) The Company has not issued stock appreciation rights or restricted stock
awards to the Named Officers and does not have any "long-term incentive
plans" as that term is defined in the applicable rules. The Company issued
options to the named officers as shown.
(2) These amounts represent the Company's contribution as accrued to the
Company's Profit Sharing Plan.
OPTIONS GRANTED DURING 1997
There were no stock options granted to the Named Officers during fiscal 1997.
4
<PAGE>
AGGREGATE OF OPTIONS EXERCISED IN 1997
AND OPTION VALUES AT DECEMBER 31, 1997
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT DECEMBER AT
31, 1997 DECEMBER 31, 1997(1)
--------------------- --------------------
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE VALUE REALIZED UNEXERCISABLE UNEXERCISABLE
- --------------------------------- --------------- -------------- --------------------- --------------------
<S> <C> <C> <C> <C>
Bernard Kalish................... -- -- 13,750/11,250 $ 37,313/81,563
Sidney L. Port................... -- -- -- --
Peter G. Smith................... -- -- 10,000/7,500 35,000/54,375
Hugh Allen....................... -- -- 3,750/3,750 14,688/27,188
Jerome Shaffer................... -- -- 6,500/4,500 45,375/32,625
</TABLE>
- ------------------------
(1) Based on the closing price of the Company's Common Stock as reported on the
NASDAQ National Market System on December 31, 1997.
STOCK PRICE PERFORMANCE CHART
Set forth below is a line graph comparing the yearly percentage change in the
cumulative total stockholder return on the Company's Common Stock against the
cumulative total return of the Dow Jones Equity Market Index and the Dow Jones
Industrial Diversified Index for the five prior fiscal years.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
LAWSON PRODUCTS DOW JONES INDUSTRIAL DIVERSIFIED DOW JONES EQUITY MARKET INDEX
<S> <C> <C> <C>
12/31/92 $100 $100 $100
12/31/93 116.71 122.19 109.95
12/30/94 106.66 112.07 110.76
12/29/95 102.48 146.76 152.49
12/31/96 94.17 189.89 187.63
12/31/97 130.70 248.91 251.34
</TABLE>
Assumes that the value of the investment in Lawson's Common Stock and each index
was $100 on December 31, 1992 and that all dividends were reinvested.
5
<PAGE>
EMPLOYMENT CONTRACTS
Mr. Kalish is employed under a contract expiring in 2001 pursuant to which he
will receive a minimum salary of $362,163 for 1998. The contract is
automatically renewable for one year terms unless a one year notice is given.
The contract provides for salary increases from time to time and for salary
continuation during incapacity and for two years after death.
Under the terms of a salary continuation agreement, in the event of Mr. Port's
death while employed by the Company, the Company will continue his salary for
two years thereafter.
Mr. Smith is employed under a contract pursuant to which he will receive a
minimum salary of $307,109 for 1998. Upon the expiration of two years prior
written notice, the contract is cancelable by either party. The contract
provides for salary increases from time to time and salary continuation during
incapacity and for one year after death.
Mr. Allen is employed under a contract pursuant to which he will receive a
minimum salary of $225,000 for 1998. Upon the expiration of two years prior
written notice, the contract is cancelable by either party. The contract
provides for salary increases from time to time and salary continuation during
incapacity and for one year after death.
Mr. Shaffer is employed under a contract expiring in 1999 pursuant to which he
will receive a minimum salary of $217,000 for 1998. The contract is
automatically renewable for one year terms unless a one year notice is given.
The contract provides for salary increases from time to time and salary
continuation during incapacity and for one year after death.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Report of the Compensation Committee of the Board of Directors and the Stock
Price Performance Chart shall not be deemed incorporated by reference by any
general statement incorporating by reference this proxy statement into any
filing under the Securities Act of 1933 or under the Securities Exchange Act of
1934, except to the extent that the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.
REPORT OF THE COMPENSATION COMMITTEE
AS TO COMPENSATION MATTERS
OVERVIEW
The objectives of the Compensation Committee in establishing executive
compensation are to provide compensation that will both attract and retain
superior talent and align the interests of the Company's executive officers with
the financial success of the Company. The criteria used to determine the
compensation of the Chief Executive Officer are also used in determining
compensation for the other executive officers.
EXECUTIVE OFFICER COMPENSATION PROGRAM
The Company's executive officer compensation program is comprised of base
salary, short-term incentive compensation, long-term incentive compensation (in
the form of stock options) and various benefits, including medical and profit
sharing plans, generally available to employees of the Company.
BASE SALARY. Base salary for the executive officers was set pursuant to
employment agreements described elsewhere in this proxy statement. In setting
these compensation levels, the Compensation Committee considered a variety of
factors, including competitive market levels, levels of responsibility as well
as the unique abilities and individual experience and performance of each
6
<PAGE>
officer. In addition, certain of the employment agreements provide for
discretionary increases in base salary. Generally, these salary increases are
determined annually and correspond to increases in the consumer price index.
INCENTIVE COMPENSATION PROGRAM. In 1995, the Board of Directors adopted the
Lawson Products, Inc. Annual Incentive Compensation Program (the "Program").
Under the Program the Compensation Committee establishes annual corporate, team
and individual target performance levels for each of the participating employees
(which will include each of the Named Officers). Each participant will then be
granted an annual incentive award based upon the market median base salary for
that participant's position and the degree to which the participant's
predetermined targets were achieved during the year.
STOCK OPTION PROGRAM. The Company's long-term incentive based compensation
program is achieved principally through the Lawson Products, Inc. Incentive
Stock Plan under which stock options (both nonqualified and incentive), stock
appreciation rights, stock purchase agreements and stock awards may be issued to
officers and key employees. The objectives of the Plan are to align executive
and stockholder long-term interests by creating a link between executive
compensation and stockholder return and to enable executives and other key
employees to develop and maintain a long-term stock ownership position in the
Company. Under the Company's plan, the Incentive Stock Committee determines the
identity of recipients and the amount of benefits to be received by each
recipient. Generally, options are granted at an exercise price equal to the fair
market value of the Company's Common Stock on the date of grant and have ten
year terms.
OTHER BENEFITS. The Company maintains an Executive Deferral Plan and also
provides a variety of other benefits including a Profit Sharing Plan, which are
generally available to Company employees.
James T. Brophy
Robert G. Rettig
Ronald B. Port, M.D.
STOCKHOLDER PROPOSAL REGARDING THE SALE OR
MERGER OF THE COMPANY
The Company has been advised that Charles Miller, 23 Park Circle, Great Neck,
New York 11024, who holds 200 shares of Lawson Common Stock, intends to submit
the following proposal at the Annual Meeting:
"MAXIMIZE VALUE RESOLUTION
Resolved that the shareholders of Lawson Products, Inc. Corporation urge the
Lawson Products, Inc. Board of Directors to arrange for the prompt sale of
Lawson Products, Inc. to the highest bidder.
The purpose of the Maximize Value Resolution is to give all Lawson Products,
Inc. shareholders the opportunity to send a message to the Lawson Products, Inc.
Board that they support the prompt sale of Lawson Products, Inc. to the highest
bidder. A strong and/or majority vote by the shareholders would indicate to the
board the displeasure felt by the shareholders of the financial performance of
the company over many years and the drastic action that should be taken. Even if
it is approved by the majority of the Lawson Products, Inc. shares represented
and entitled to vote at the annual meeting, the Maximize Value Resolution will
not be binding on the Lawson Products, Inc. Board. The proponent however
believes that if this resolution receives substantial support from the
shareholders, the board may choose to carry out the request set forth in the
resolution.
7
<PAGE>
The prompt auction of Lawson Products, Inc. should be accomplished by any
appropriate process the board chooses to adopt including a sale to the highest
bidder whether in cash, stock, or a combination of both. It is expected that the
board will uphold its fiduciary duties to the utmost during the process.
The proponent further believes that if the resolution is adopted, the management
and the board will interpret such adoption as a message from the company's
stockholders that it is no longer acceptable for the board to continue with its
current management plan and strategies."
THE BOARD OF DIRECTORS OF THE COMPANY OPPOSES AND UNANIMOUSLY RECOMMENDS A VOTE
"AGAINST" THIS PROPOSAL FOR THE FOLLOWING REASONS:
An essentially identical proposal was submitted to the Company for the 1997
annual meeting. That proposal received the affirmative vote of less than 6% of
the then outstanding shares of Lawson Common Stock.
The Board continues to believe, like the overwhelming majority of the
stockholders who voted against the proposal in 1997, that efforts seeking to
force a sale of the Company are not in the best interests of the Company or its
stockholders and that such efforts could seriously prejudice stockholders'
financial interests.
The Board seeks to maximize stockholder value through increased growth, improved
efficiencies, expansion and better penetration of markets, acquisitions and
alliances complimentary to the Company's business. These efforts are reflected
in the performance of the Company during 1997, a period in which the Company
realized growth and increases in profitability and enjoyed an increased share
price. For 1997, the Company achieved sales growth of 11.1% and an increase of
net income of 6.8%, both compared to 1996. Over the five years ending December
31, 1997, net income totaled $101,106,000 and the Company delivered consistent
profitability ranging from 7.7% to 9.6% of net sales, with return on equity
ranging from 13.4% to 16.9%. The closing price of the Company's Common Stock was
21 7/8 at December 31, 1996 and 29 3/4 at December 31, 1997, a 36% increase in
one year.
The Board believes that continued focus on the Company's sales and acquisition
strategies, improved operating efficiencies and ongoing internal and external
organizational modifications will continue to enhance stockholder value. The
Board believes that the proposal could seriously prejudice and jeopardize the
financial interests of stockholders. Although the proposal only requests and
does not obligate the Board to take certain action, the Board believes that an
announcement that such proposal has been adopted could severely damage the
Company's relationships with its customers, independent sales agents and
employees. Such results could have an adverse impact on the Company's ability to
effectively compete in the short and long term, leading to a potential decline
in revenues, profits and, in turn, stockholder value.
The Board notes that according to information supplied to the Company by Mr.
Miller, as of November 3, 1997, the date Mr. Miller submitted his proposal, Mr.
Miller held 200 shares of Lawson Common Stock with a market value of $5,600. As
of March 1, 1998, the Board, in the aggregate, held approximately 31% of the
outstanding Lawson Common Stock, worth $96,379,080.
The Company intends to continue its efforts to increase stockholder value
through increased growth, improved efficiencies, increased expansion and
penetration of markets and through acquisitions and alliances complimenting the
Company's business.
FOR THE REASONS STATED ABOVE, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE "AGAINST" THIS PROPOSAL.
The affirmative vote of the holders of a majority of the shares represented and
entitled to vote at the annual meeting is required for approval of the
stockholder proposal. Abstentions will count as a vote against the proposal, but
broker non-votes will have no effect.
8
<PAGE>
STOCKHOLDER PROPOSAL REGARDING THE ELIMINATION OF
A CLASSIFIED BOARD OF DIRECTORS
The Company has been advised that William Steiner, 4 Radcliffe Drive, Great
Neck, New York 11024, who holds 1,550 shares of Lawson Common Stock, intends to
submit the following proposal at the Annual Meeting:
"ELIMINATE CLASSIFIED BOARD OF DIRECTORS RESOLUTION
"RESOLVED, that the stockholders of the Company request that the Board of
Directors take the necessary steps, in accordance with state law, to declassify
the Board of Directors so that all directors are elected annually, such
declassification to be effected in a manner that does not affect the unexpired
terms of directors previously elected."
SUPPORTING STATEMENT
The election of directors is the primary avenue for stockholders to influence
corporate governance policies and to hold management accountable for it's (sic)
implementation of those policies. I believe that the classification of the Board
of Directors, which results in only a portion of the Board being elected
annually, is not in the best interests of the Company and it's (sic)
stockholders.
I believe that the Company's classified Board of Directors maintains the
incumbency of the current Board and therefore of current management, which in
turn limits management's accountability to stockholders.
The elimination of the Company's classified Board would require each new
director to stand for election annually and allow stockholders an opportunity to
register their views on the performance of the Board collectively and each
director individually. I believe this is one of the best methods available to
stockholders to insure that the Company will be managed in a manner that is in
the best interests of the stockholders.
I believe that concerns expressed by companies with classified boards that the
annual election of all directors could leave companies without experienced
directors in the event that all incumbents are voted out by stockholders, are
unfounded. In my view, in the unlikely event that stockholders vote to replace
all directors, this decision would express stockholder dissatisfaction with the
incumbent directors and reflect the need for change.
I URGE YOUR SUPPORT, VOTE FOR THIS RESOLUTION"
THE BOARD OF DIRECTORS OF THE COMPANY OPPOSES AND UNANIMOUSLY RECOMMENDS A VOTE
"AGAINST" THIS PROPOSAL FOR THE FOLLOWING REASONS:
In 1982, the Board of Directors recommended that the Company elect directors to
serve staggered terms so that no more than one-third of the directors are
elected each year. The stockholders adopted that recommendation at the 1983
meeting by an overwhelming majority vote and Article Ninth of the Certificate of
Incorporation and Section 3.2 of the By-Laws of the Company were adopted.
Under Delaware law, the action recommended in the proposal can be taken only if
the Board recommends an amendment of the Company's Certificate of Incorporation
and directs that the amendment be submitted to a vote of stockholders. In
accordance with the Company's By-Laws, an affirmative vote of 75% of the
outstanding shares of Common Stock entitled to vote would be required at a
future meeting of the Company's stockholders in order to amend the provision for
the staggered election of directors. The Board of Directors has not recommended
and does not recommend such an amendment and deems the proposal to be
detrimental to the interests of stockholders.
9
<PAGE>
The classification of directors has the effect of making it more difficult to
change the composition of the Board at other than a moderate pace and requires
that at least two-thirds of the directors serving will have had prior experience
on the Board. Preventing precipitous changes in control strengthens the Board's
ability, in the exercise of its fiduciary duties, to maximize the value of the
stockholders' investment in the Company and serves to provide informed oversight
of corporate policies, orderly development of business strategies and
operations, and long-term strategic planning. It also serves as an obstacle to
sudden and disruptive attempts to obtain control of the Company.
A person seeking to acquire control of the Company will be required to initiate
such action through arms-length negotiations with members of the Board who are
in the best position to negotiate a transaction to maximize stockholder value
and yield the highest price for the Company's stockholders. By virtue of
staggered terms, at least two meetings of stockholders would be required to
change control of the Board unless the existing Board consented to such change
of control. The consent of the Board to a change of control, in turn, could be a
condition to obtaining a higher price for the stockholders. Thus, having a
staggered Board enhances the ability to negotiate favorable terms for all
stockholders and does not necessarily discourage takeover offers.
The staggered Board notwithstanding, the stockholders retain their ability to
replace incumbent directors or to propose alternative nominees for the class of
directors to be elected at an annual meeting and thereby stockholders can
properly and effectively express their views and influence Company policies.
Those directors who remain in office will be influenced by any such stockholder
action. The Board does not believe that directors elected for staggered terms
are any less accountable to stockholders than if they would be elected annually.
The same standards of performance apply regardless of the term of service.
The Board notes that according to information supplied to the Company by Mr.
Steiner, he held 900 shares of Common Stock on October 16, 1996, with a market
value of $19,688. Thereafter, Mr. Steiner reported increased holdings of 1,550
shares of Common Stock as of November 6, 1997, with a market value of $47,663.
Between October 16, 1996 and November 6, 1997, the per share value of Lawson
Common Stock increased 41%.
The Board continues to believe as it did in 1982, that maintaining staggered
terms for directors is in the best interests of the Company and its
stockholders. Maintaining staggered terms represents a reasonable and
appropriate means of protecting against potentially abusive and coercive tactics
associated with unsolicited efforts to obtain control of the Company and to
provide informed oversight in the development of policies, business strategies
and operations.
FOR THE REASONS STATED ABOVE, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE "AGAINST" THIS PROPOSAL.
The affirmative vote of the holders of a majority of the shares represented and
entitled to vote at the annual meeting is required for approval of the
stockholder proposal. Abstentions will count as a vote against the proposal, but
broker non-votes will have no effect.
INDEPENDENT AUDITORS
The Board of Directors has reappointed Ernst & Young LLP as independent auditors
to audit the financial statements of the Company for 1998. Representatives of
Ernst & Young LLP are expected to be present at the annual meeting and will be
given the opportunity to make a statement if they desire to do so and will be
available to respond to appropriate questions.
PROPOSALS OF SECURITY HOLDERS
A stockholder proposal to be presented at the 1999 annual meeting must be
received at the Company's executive offices, 1666 East Touhy Avenue, Des
Plaines, Illinois 60018, by no later than
10
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December 11, 1998, for evaluation as to inclusion in the Proxy Statement in
connection with such meeting.
OTHER MATTERS
The Board of Directors knows of no other matters which may be presented for
action at the meeting. However, if any other matter properly comes before the
meeting, the persons named in the proxy form enclosed will vote in accordance
with their judgment upon such matter.
Stockholders are urged to execute and return promptly the enclosed form of proxy
in the envelope provided.
By Order of the Board of Directors
Robert J. Washlow
SECRETARY
April 10, 1998
11
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LAWSON PRODUCTS, INC.
P THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING ON MAY 12, 1998.
R
The undersigned hereby makes, constitutes and appoints Sidney L. Port
O and Bernard Kalish, and each of them, proxies for the undersigned, with
full power of substitution, to vote on behalf of the undersigned at the
X Annual Meeting of Stockholders of Lawson Products, Inc., to be held at
the offices of the Company, 1666 East Touhy Avenue, Des Plaines,
Y Illinois, on May 12, 1998, at 10:00 A.M. (Local Time), or any
adjournment thereof.
The withholding of authority to vote for any nominee will allow the
proxies to distribute, in their discretion, the withheld votes
equally or unequally to or among the remaining nominees. The
nomination of any additional person or persons by any stockholder
will allow the proxies to distribute, in their discretion, votes in
respect of all proxies they hold equally or unequally to or among the
Board of Directors' nominees.
FOLD AND DETACH HERE
<PAGE>
/ X / PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1 AND AGAINST
PROPOSALS 2 AND 3.
1. ELECTION OF DIRECTORS
Nominees: Bernard Kalish, Sidney L. Port, and
Robert J. Washlow
FOR WITHHOLD AUTHORITY
/ / all the nominees / / to vote for all the
listed below nominees listed below:
(Instruction: To withhold authority to vote for any individual nominee, mark
the "FOR" box and write the name of each such nominee in the space provided
below.)
___________________________________________________________________________
2. Stockholder proposal concerning the sale or merger of the Company. THE
BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST.
/ / FOR / / AGAINST / / ABSTAIN
3. Stockholder proposal concerning elimination of a classified Board of
Directors. THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST.
/ / FOR / / AGAINST / / ABSTAIN
4. In their discretion on any other matter that may properly come before
the meeting or any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
"FOR" THE ELECTION AS DIRECTORS OF THE NOMINEES LISTED ABOVE AND "AGAINST"
EACH OF THE STOCKHOLDER PROPOSALS.
The undersigned hereby revokes any proxy heretofore given and confirms all
that said proxies, or any of them, or any substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
NOTE: PLEASE DATE AND SIGN AS NAME APPEARS HEREON. IF SHARES ARE HELD JOINTLY
OR BY TWO OR MORE PERSONS, EACH STOCKHOLDER NAMED SHOULD SIGN.
ATTORNEYS, EXECUTORS, ADMINISTRATORS, TRUSTEES, GUARDIANS AND OTHERS
SIGNING IN A REPRESENTATIVE CAPACITY SHOULD INDICATE THE CAPACITY IN
WHICH THEY SIGN. IF THE SIGNER IS A CORPORATION, PLEASE SIGN FULL
CORPORATE NAME BY DULY AUTHORIZED OFFICER. IF A PARTNERSHIP, PLEASE
SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSON.
SIGNATURE ________________________________
DATE _____________________________________
