<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
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 14c-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
SCHAWK, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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 paid previously 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.:
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(3) Filing Party:
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(4) Date filed:
<PAGE> 2
SCHAWK, INC.
1695 RIVER ROAD
DES PLAINES, ILLINOIS 60018
NOTICE OF 1999 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 26, 1999
-----------------------
To the Stockholders of SCHAWK, INC.:
Notice is hereby given that the 1999 Annual Meeting of the Stockholders of
Schawk, Inc. will be held at 10:00 a.m. (local time), Wednesday, May 26, 1999,
at Schawk, Inc., 1695 River Road, Des Plaines, Illinois, for the following
purposes:
1. Election of the Board of Directors for Schawk, Inc.
2. Approval of the Schawk, Inc. Employee Stock Purchase Plan, a
copy of which is attached as Appendix A to, and described in,
the accompanying Proxy Statement.
3. Ratification of the selection of Ernst & Young LLP as the
independent auditors of Schawk, Inc. for fiscal year 1999.
4. Transaction of such other business as may properly come before
the meeting or any adjournment or adjournments thereof.
The close of business on March 31, 1999, has been fixed as the record date for
the determination of stockholders entitled to receive notice of and to vote at
said meeting and any adjournment or adjournments thereof. The stock transfer
books of Schawk, Inc. will not be closed.
By Order of the Board of Directors,
Des Plaines, Illinois A. ALEX SARKISIAN, Esq.
April 19, 1999 Executive Vice President and
Corporate Secretary
<PAGE> 3
SCHAWK, INC.
1695 RIVER ROAD
DES PLAINES, ILLINOIS 60018
(847) 827-9494
PROXY STATEMENT
---------------
FOR THE 1999 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 26, 1999
INTRODUCTION
This Proxy Statement is being furnished in connection with the
solicitation of proxies by the Board of Directors of Schawk, Inc. ("Schawk" or
the "Company") for use at the 1999 Annual Meeting of Stockholders to be held at
10:00 a.m. (local time), Wednesday, May 26, 1999, at Schawk, Inc., 1695 River
Road, Des Plaines, Illinois, and at any adjournment thereof (the "Annual
Meeting"). This Proxy Statement and the accompanying Proxy are first being
mailed on or about April 19, 1999, to stockholders of record at the close of
business on March 31, 1999.
PROPOSALS
The purpose of the Annual Meeting is to: (i) elect the Board of
Directors of the Company; (ii) approve the Schawk, Inc. Employee Stock Purchase
Plan; (iii) ratify the appointment of Ernst & Young LLP as the independent
auditors of the Company for fiscal year 1999; and (iv) transact such other
business as may properly come before the meeting or any adjournment or
adjournments thereof.
PROXIES AND SOLICITATION
Any person signing and mailing the enclosed proxy may revoke the proxy
at any time prior to its exercise by: (i) executing a subsequent proxy; (ii)
notifying the Corporate Secretary of the Company of such revocation in a written
notice received by him at Schawk, Inc., 1695 River Road, Des Plaines, Illinois
60018, prior to the Annual Meeting; or (iii) attending the Annual Meeting and
voting in person.
The cost of solicitation of proxies will be borne by the Company. In
addition to the use of the mails, proxies may be solicited personally or by
telephone or facsimile by Directors of the Company (each a "Director" and
collectively, the "Director") and executive officers and regular employees of
the Company. The Company does not now expect to pay any compensation for the
solicitation of proxies, but may reimburse brokers and other persons holding
shares in their names or in the names of nominees for their expenses in sending
proxy material to principals and obtaining their proxies. First Chicago Trust
Company of New York, the transfer agent and registrar of the Company's Class A
Common Stock, may aid in the solicitation of proxies and will be reimbursed for
any expenses incurred as a result of any such activity.
Shares of the Company represented by properly executed proxies will,
unless such proxies have been previously revoked, be voted in accordance with
the instructions indicated in the proxies. Unless otherwise instructed in the
proxy, the agent named in the proxy intends to cast the proxy votes in the
following manner: (i) FOR the election of the nominees for Directors of Schawk;
(ii) FOR approval of the Schawk, Inc. Employee Stock Purchase Plan; (iii) FOR
the ratification of Ernst & Young LLP as independent auditors of the Company for
fiscal year 1998; and (iv) in the best judgment of the persons named in the
proxy as agent, upon any other matters which may properly come before the Annual
Meeting.
QUORUM REQUIREMENTS AND VOTING
The presence, in person or by proxy, of the holders of a majority of
the Company's Class A Common Stock outstanding on the record date is required
for a quorum at the Annual Meeting. Abstentions will be treated as shares
present and entitled to vote for purposes of determining whether a quorum is
present, but will not be voted for purposes of determining the approval of any
matter submitted to the stockholders for a vote. If a proxy returned by a broker
indicates that the broker does not have discretionary authority to vote some or
all of the shares covered thereby for any
<PAGE> 4
matter submitted to the stockholders for a vote, such shares will be considered
to be present for purposes of determining whether a quorum is present, but will
not be considered to be present and entitled to vote at the Annual Meeting.
As to all anticipated votes, each share of Class A Common Stock will
have one (1) vote as to each matter to be voted on at the Annual Meeting.
Stockholders entitled to vote or to execute proxies are stockholders of record
at the close of business on March 31, 1999. The Company had 21,643,225 shares of
Class A Common Stock outstanding on such date. The stock transfer books of the
Company will not be closed.
INTERESTS OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
No person being nominated as a director is being proposed for election
pursuant to any agreement or understanding between any such person and the
Company.
PROPOSAL 1: ELECTION OF DIRECTORS
At the meeting, seven Directors are to be elected to the Company's
Board. The size of the Company's Board of Directors has been fixed at eight
members in accordance with the Company's By-laws. The Board intends to fill the
vacancy on the Board, but has not identified any candidate to date. Any person
appointed by the Board to fill such vacancy in accordance with the Company's
By-laws during 1999 will be up for election at the 2000 Annual Meeting.
Each of the Directors elected at the Annual Meeting will hold office
for a term of one year, expiring at the Annual Meeting of Stockholders to be
held in 2000, and thereafter until a successor shall be duly elected and
qualified. Unless authority to vote is withheld, proxies received in response to
this solicitation will be voted FOR the election of the nominees named
hereafter, each of whom presently serves as a Director of the Company. It is not
contemplated that any of the nominees will be unable or will decline to serve;
however, if such a situation arises, the shares represented by the proxies being
solicited will be voted FOR the election of a nominee or nominees designated by
the Board of Directors of the Company. Proxies may not be voted for more than
the seven nominees included in this Proxy Statement.
Assuming a quorum is present, an affirmative vote of the holders of a
plurality of the shares, present and voting at the meeting, is required for a
nominee to be elected as a Director. Therefore, abstentions and shares for which
authority to vote is not given will have no effect on the election of directors.
The Board of Directors is responsible for the overall affairs of the
Company. The Board of Directors had five meetings in 1998. Each member of the
Board of Directors attended at least 75% of the aggregate of: (i) the total
number of meetings of the Board of Directors held; and (ii) the total number of
meetings held by all committees of the Board of Directors on which such Director
served.
The Board of Directors currently has an Executive Committee, an Audit
Committee, a 401(k) Administration Committee and an Option Committee, whose
members are elected by the Board of Directors. The present members of the
Executive Committee are: Clarence W. Schawk, David A. Schawk, A. Alex Sarkisian,
John T. McEnroe and Hollis W. Rademacher. The Executive Committee is authorized
to act on behalf of the Board of Directors in the management of the business and
the affairs of the Company and acts as the Compensation Committee for the Board
of Directors. The Executive Committee met once in 1998.
Judith W. McCue, Robert F. Meinken and Hollis W. Rademacher have been
appointed as members of the Audit Committee. The Audit Committee recommends the
selection of the Company's independent public accountants, reviews and approves
their fee arrangements, examines their detailed findings and reviews areas of
possible conflicts of interest and sensitive payments. The Audit Committee met
three times in 1998.
The 401(k) Administration Committee is composed of David A. Schawk and
A. Alex Sarkisian. The 401(k) Administration Committee reviews and selects the
agent managing the 401(k) plan and evaluates the participative values. The
401(k) Administration Committee met once in 1998.
The Option Committee members are Judith W. McCue, Robert F. Meinken,
John T. McEnroe and Hollis W. Rademacher. The Option Committee evaluates the
performance of key personnel and makes incentive awards in the form of future
exercisable options. The Option Committee met once in 1998.
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<PAGE> 5
The following is a list of the nominees for election as Directors of
the Company, followed by a brief biographic statement of each nominee:
NOMINEES FOR ELECTION AS DIRECTORS
OF THE COMPANY
----------------------------------
CLARENCE W. SCHAWK
DAVID A. SCHAWK
A. ALEX SARKISIAN, ESQ.
JUDITH W. MCCUE, ESQ.
ROBERT F. MEINKEN
JOHN T. MCENROE, ESQ.
HOLLIS W. RADEMDHER
Clarence W. Schawk has been Chairman of the Board of the Company since
September 1992, when he was also appointed to the Executive Committee. He served
as Chief Executive Officer of Filtertek Inc., the Company's predecessor
("Filtertek"), from September 1992 until February 1993. Clarence W. Schawk also
served as Chairman of the Board of the corporation previously known as Schawk,
Inc. ("Old Schawk") from 1953 until the merger (the "Merger") of Old Schawk and
affiliated companies into Filtertek in 1994 and served as Chief Executive
Officer until June 1994. He is the father of David A. Schawk, President and
Chief Executive Officer of the Company. Clarence W. Schawk previously served as
President and a Director of the International Prepress Association.
Mr. Schawk also served as a Director of Old Schawk until the Merger. Age: 73
David A. Schawk was appointed Chief Operating Officer of the Company in
September 1992 and elected Chief Executive Officer and President in February
1993. He was appointed to the Board of Directors in September 1992. David A.
Schawk served as the President of Old Schawk from 1987 until the Merger. David
A. Schawk serves on the Company's Executive and 401(k) Administration
Committees. David A. Schawk is the son of Clarence W. Schawk. David A. Schawk
currently serves as a Director of the International Prepress Association. Mr.
Schawk also served as a Director of Old Schawk until the Merger. Age: 43
A. Alex Sarkisian, Esq., was appointed Executive Vice President in 1994
and has served on the Company's Board of Directors and as Corporate Secretary
since September 1992. Mr. Sarkisian was the Executive Vice President and
Secretary of Old Schawk from 1988 and 1986, respectively, until the Merger. Mr.
Sarkisian also served as a Director of Old Schawk until the Merger. He is a
member of the Executive and 401(k) Administration Committees. Age: 47
Judith W. McCue has been a partner with McDermott, Will & Emery since
1995. Prior thereto, Ms. McCue was a partner with Keck, Mahin & Cate where she
practiced from 1972 to 1995. Ms. McCue was appointed Director of the Company in
September 1992 and is a member of the Audit and Option Committees. Age: 51
Robert F. Meinken has been a retired private investor and businessman
since 1988, after an extensive career in sales and marketing. Mr. Meinken was
appointed Director of the Company in September 1992 and is a member of the Audit
and Option Committees. Age: 73
John T. McEnroe, Esq., has been a partner with the law firm of Vedder,
Price, Kaufman & Kammholz, counsel to the Company, since May 1992. Prior to this
position, he was a partner with the law firm of Keck, Mahin & Cate where he
practiced from 1976 to 1992. Mr. McEnroe was appointed a Director of the Company
in September 1992 and is a member of the Executive and Option Committees. Age:
47
Hollis W. Rademacher held various positions with Continental Bank,
N.A., Chicago, Illinois, from 1957 to 1993 and was Chief Financial Officer of
Continental Bank Corporation, Chicago, Illinois, from 1988 to 1993. Mr.
Rademacher is currently self-employed in the fields of consulting and
investments in Chicago, Illinois. Mr. Rademacher is a member of the Executive,
Audit and Option Committees. Mr. Rademacher also serves as a Director of
Cityscape Financial Corporation, College Television Network and Wintrust
Financial Corporation. Age: 63
Currently, all Directors of the Company (except for Mr. McEnroe)
receive a $500 fee for attendance at each regularly scheduled or special board
or committee meeting. All Directors are also reimbursed for ordinary and
necessary expenses incurred in attending Board or committee meetings. Directors'
fees are paid to Directors who are compensated
-3-
<PAGE> 6
employees of the Company as part of such employees' overall compensation. All
nonemployee Directors have received options under the Company's 1991 Outside
Directors' Formula Stock Option Plan (the "Outside Directors' Plan"). See
"Executive Compensation - Stock Option Plans - 1991 Outside Directors' Formula
Stock Option Plan."
The following is a brief biographical statement of James J. Patterson,
the Chief Financial Officer of the Company:
James J. Patterson was appointed Senior Vice President and Chief
Financial Officer in December 1997. Prior to joining the Company, Mr. Patterson
was Vice President of IMC Global Inc. from 1996 to September 1997. Mr. Patterson
was Vice President and Chief Financial Officer of The Vigoro Corporation from
1993 until it was acquired by IMC Global Inc. in 1996. From 1990 to 1992, Mr.
Patterson was Vice President and Controller of Great American Management and
Investment, Inc., a diversified holding company, and Vice President and
Controller of Capsure Holdings, Inc., a holding company in the specialty
insurance business. Mr. Patterson is a Certified Public Accountant. Age: 42
Officers are elected by the Board of Directors at the first meeting of
the newly elected Board of Directors held after each Annual Meeting of
Stockholders. Officers hold office for a term of one year and thereafter until a
successor has been duly elected and qualified.
-4-
<PAGE> 7
EXECUTIVE COMPENSATION
The table below sets forth certain information for fiscal years 1998,
1997 and 1996 with respect to the annual and other compensation paid by the
Company to: (i) the Chairman of the Board of Directors; (ii) the President and
Chief Executive Officer; and (iii) the other executive officers of the Company
who were most highly compensated in 1998 (collectively, the "Named Executive
Officers") for services rendered in all capacities to the Company.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
-------------------------------- ------------------------------------
PAYOUTS PAYOUTS
------------------------- -------
RESTRICTED SECURITY
NAME AND OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) AWARDS OPTIONS/SARs PAYOUTS COMPENSATION(2)
------------------- ---- ------ ----- --------------- ---------- ------------ ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Clarence W. Schawk, 1998 $176,014 $447,000 -- -- 36,111 -- $8,000
Chairman 1997 176,014 130,000 -- -- 75,000 6,400
1996 176,014 -- -- -- -- -- 3,000
David A. Schawk, President 1998 408,000 268,000 $ 9,316 -- 59,167 -- 8,000
and CEO 1997 390,625 78,000 10,432 -- 100,000 -- 6,400
1996 325,000 -- 11,401 -- -- -- 3,000
A. Alex Sarkisian, Executive 1998 204,000 200,000 8,686 3,565 20,000 -- 8,000
Vice President and Corporate 1997 191,667 153,345 8,086 -- 10,000 -- 6,400
Secretary 1996 150,000 200,000 8,086 -- 25,000 -- 3,000
James J. Patterson, 1998 163,960 10,000 -- -- -- -- 3,888
Senior Vice President and 1997 6,667 -- 638 -- 15,000 -- --
Chief Financial Officer(3) 1996 -- -- -- -- -- -- --
</TABLE>
- ----------------
(1) Consists primarily of life insurance premiums.
(2) Reflects matching contributions made pursuant to the Company's
401(k) plans to the accounts of such individuals.
(3) Mr. Patterson joined the Company in December 1997.
The table below sets forth certain information with respect to stock
options granted during fiscal year 1998 to the Named Executive Officers.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN 1998
NUMBER OF
SHARES OF PERCENTAGE OF
CLASS A TOTAL POTENTIAL REALIZABLE VALUE
COMMON STOCK OPTIONS/SARs AT ASSUMED ANNUAL RATES OF
UNDERLYING GRANTED TO EXERCISE STOCK PRICE APPRECIATION FOR
OPTIONS/SARs EMPLOYEES IN PRICE EXPIRATION OPTION TERM
FISCAL ($/SH) ----------------------------
NAME GRANTED YEAR DATE 5%($) 10%($)
- ------------------ ------------ ------------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Clarence W. Schawk 36,111 21.5% $11.50 02/24/08 $255,651 $ 653,063
David A. Schawk 59,167 35.2 11.50 02/24/08 418,877 1,070,028
A. Alex Sarkisian 20,000 11.9 11.50 02/24/08 141,592 361,697
James J. Patterson -- -- -- -- -- --
</TABLE>
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<PAGE> 8
The table below sets forth certain information with respect to options
and SARs exercised by the Named Executive Officers during fiscal year 1998 and
with respect to options and SARs held by the Named Executive Officers at the end
of fiscal year 1998. The value of unexercised options and SARs at the end of
fiscal year 1998 is based on the closing price of $13.875 reported on the New
York Stock Exchange ("NYSE") on December 31, 1998.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARs AT OPTIONS/SARs
SHARES DECEMBER 31, 1998 AT DECEMBER 31, 1998
ACQUIRED ON VALUE ---------------------------- ----------------------------
NAME EXERCISE (#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------- ------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Clarence W. Schawk -- -- 121,476 49,965 $582,939 $208,451
David A. Schawk -- -- 145,585 73,642 699,535 295,672
A. Alex Sarkisian -- -- 64,226 16,800 339,339 51,388
James J. Patterson -- -- 9,900 5,100 28,463 14,663
</TABLE>
EMPLOYMENT AGREEMENTS
In January 1991, the Company entered into employment agreements with
Clarence W. Schawk and David A. Schawk to serve as executive officers. These
agreements, upon review of comparable base salaries for executives of similarly
situated companies, have been amended and restated effective October 1, 1994.
Each employment agreement, as amended and restated in October 1994, provides for
an initial term of 10 years (through December 31, 2004), with one-year
extensions thereafter unless terminated by either the Company or the executive.
Each employment agreement provides for payment of a base salary, adjustable
annually by the Board of Directors based upon a merit review and to account for
inflation, as well as an annual bonus consisting of short- and long-term
incentives. Clarence W. Schawk's employment agreement provided for a base salary
of $176,014 for the calendar year 1998, and David A. Schawk's employment
agreement provided for a base salary of $408,000 for the calendar year 1998.
The short-term bonus plan contemplates cash payments of 5.0% and 3.0%
of the excess of "Adjusted net income" over $10.0 million with respect to
Clarence W. Schawk and David A. Schawk, respectively. "Adjusted net income"
means annual net income after taxes but before bonuses to the Chairman and the
President of the Company and amortization of goodwill resulting from
acquisitions of the Company consummated after January 1, 1995. The amounts of
such cash payments are subject to adjustment based upon the Company's financial
performance during the relevant fiscal year. The long-term bonus plan
contemplates a noncash distribution of options calculated to equal 5.0% and 3.0%
of the excess of "Adjusted net income" over $10.0 million for Clarence W. Schawk
and David A. Schawk, respectively.
STOCK OPTION PLANS
1988 Equity Option Plan
On March 25, 1988, the Company adopted the 1988 Equity Option Plan
("Stock Incentive Plan") pursuant to which 2,252,250 shares of Class A Common
Stock reserved for issuance pursuant to options and other benefits which may be
granted to officers, key employees and nonaffiliated directors. The Option
Committee of the Board of Directors administers the Stock Incentive Plan. Under
the Stock Incentive Plan, the Option Committee is authorized to determine the
officers and other key employees to whom, and the times at which, options and
other benefits are to be granted, the number of shares subject to each award,
its term and any applicable vesting provisions.
The Option Committee may award nonqualified stock options ("NSOs") or
incentive stock options ("ISOs") for shares of restricted stock or stock
appreciation rights under the Stock Incentive Plan. The exercise price with
respect to any ISOs may not be less than the fair market value of the Class A
Common Stock on the date of grant and the exercise price with respect to any
NSOs may not be less than eighty-five percent (85%) of the fair market value of
the Class A Common Stock on the date of grant. "Fair market value" will be
determined by averaging the highest and lowest sales prices for the Class A
Common Stock reported on the NYSE on the date of the grant.
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<PAGE> 9
Shares of Class A Common Stock granted as restricted stock under the
Stock Incentive Plan will be restricted as to transfer and subject to forfeiture
prior to the expiration of the restriction period determined by the Option
Committee. The expiration of the restriction period may be tied to the
attainment of certain performance objectives or based upon a period of continued
employment. To the extent that the restriction period expires, the shares of
Class A Common Stock will be released to the award recipient free of all
restrictions. If the performance objectives are not met in the required time
period or if the recipient's employment terminates prior to completing the
required service period, the recipient's right to the shares will be forfeited.
Stock appreciation rights may be granted alone or with respect to
options granted concurrently or previously under the Stock Incentive Plan. Each
stock appreciation right permits the recipient thereof to receive a cash payment
equal to the difference between the fair market value of the Class A Common
Stock on the date the stock appreciation right is exercised and such fair market
value on the date the stock appreciation right was awarded. To the extent that a
stock appreciation right was awarded with respect to an option, exercise of the
stock appreciation right will result in a pro rata extinguishment of such
option.
NSOs or ISOs may be granted to officers and other key employees of the
Company. The right of the recipient to exercise the options will be subject to
such vesting and forfeiture requirements and provisions as determined by the
Option Committee and must be exercised within 10 years of the date of grant.
1991 Outside Directors' Formula Stock Option Plan
The Company's Outside Directors' Plan, as amended, provides that each
"Outside Director" (defined in the Outside Directors' Plan as any Director who
is not a compensated employee of the Company) receive a nonqualified stock
option to purchase 5,000 shares upon his or her election, and subsequent
reelection, to the Board of Directors at an exercise price equal to the fair
value of such shares on the date of election or reelection as a Director. Only
the number of shares specified by such formula is eligible for grant under the
Outside Directors' Plan. Options granted under the Outside Directors' Plan are
exercisable for a term of 10 years from the date of grant and vest in one-third
increments on the date of grant and on the first and second anniversaries of the
date of grant. In 1998, Mr. McEnroe, Ms. McCue, Mr. Meinken and Mr. Rademacher
each received options to purchase 5,000 shares at a per share exercise price of
$14.657.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Decisions regarding the cash compensation paid to Clarence W. Schawk,
David A. Schawk and Mr. Sarkisian were made by the Board of Directors for fiscal
year 1998. Messrs. Clarence W. Schawk, David A. Schawk and Sarkisian are, and
were during all of fiscal 1998, Directors of the Company. All decisions
regarding the cash compensation of the Company's executive officers prior to
1998 were made by the Executive Committee of the Board of Directors. Awards
under the Stock Incentive Plan are administered by the Option Committee. The
members of the Executive Committee are Clarence W. Schawk, David A. Schawk, A.
Alex Sarkisian, John T. McEnroe and Hollis W. Rademacher. Mr. McEnroe does not
receive cash compensation from the Company. The Option Committee is comprised of
the Company's Outside Directors. Messrs. Clarence W. Schawk, David A. Schawk and
Sarkisian participated in the deliberations of the Executive Committee with
regard to the compensation of executive officers other than themselves.
JOINT REPORT ON EXECUTIVE COMPENSATION
Under the supervision of the Executive Committee and the Option
Committee, the Company has developed and implemented compensation policies,
plans and programs which seek to enhance the profitability of the Company, and
thus stockholder value, by aligning the financial interests of the Company's
executive officers with those of its stockholders. In furtherance of these
goals, annual base salaries are generally set at or below competitive levels.
The Company relies to a large degree on annual bonus, if any, and stock option
incentives to attract and retain executive officers and other key employees of
outstanding ability, and to motivate them to perform to the full extent of their
abilities. Both types of incentive compensation are closely tied to the
performance of the Company and the individual in a manner that encourages a
sharp and continuing focus on building profitability and stockholder value.
During 1993, the Executive Committee reviewed, reevaluated and approved
an annual salary plan for the Company. This salary plan was developed based on
industry, peer group and market surveys and performance judgments as to the past
and expected future contributions of each individual executive officer,
targeting the salaries to the median level of comparable companies. The plan was
reviewed and updated in 1997.
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<PAGE> 10
Individual bonus arrangements can be established for certain key
executive officers to attain a particular or group of particular goals or levels
of performance.
The cash compensation paid to Clarence W. Schawk, David A. Schawk and
Mr. Sarkisian was determined by the Executive Committee and approved by the
Board of Directors of the Company for fiscal year 1998. The Executive Committee
considered the Directors' fees paid to Clarence W. Schawk, David A. Schawk and
Mr. Sarkisian as part of their overall compensation.
In January 1991, the Company entered into employment contracts with
Clarence W. Schawk and David A. Schawk, respectively, after approval by the
Board of Directors (Clarence W. Schawk and David A. Schawk abstaining from such
vote). These agreements were amended and restated effective October 1, 1994,
after a review of comparable base salaries for executives of similarly situated
companies. The agreements provide for base salary, and annual bonuses based on
formula performance measures. The Board of Directors can adjust the base salary
annually based upon merit review. See "Executive Compensation - Employment
Agreements."
During each fiscal year the Option Committee considers the desirability
of granting executive officers and other key employees of the Company stock
options under the 1988 Equity Option Plan. The granting of stock options is
based upon the overall performance of the Company and the performance of each
particular employee. The Option Committee considers such performance and the
recommendations of management in determining the amounts recommended to be
granted. The Option Committee believes its pattern of grants has successfully
focused the Company's executive officers and other key employees on building
profitability and stockholder value. For fiscal 1998, options were granted to
executive officers in furtherance of this philosophy. The number of options
granted to the respective executive officers reflects the Option Committee's
assessment of the particular officer's level of responsibility and its desire to
match the award level with the executive's responsibility level. The purpose of
these awards is to reward such officers for their performance with respect to
the Company and to give such officers a stake in the Company's future, which is
directly aligned with the creation of stockholder value.
The Executive Committee does not believe that the provisions of the
Revenue Reconciliation Act of 1993 will limit the deductibility of compensation
expected to be paid by the Company; however, the Executive Committee will
continue to evaluate the impact of such provisions and take such actions as it
deems appropriate.
This report is submitted by the members of the Company's Executive
Committee and Option Committee.
Executive Committee: Option Committee:
Clarence W. Schawk Judith W. McCue
David A. Schawk Robert F. Meinken
A. Alex Sarkisian John T. McEnroe
John T. McEnroe Hollis W. Rademacher
Hollis W. Rademacher
-8-
<PAGE> 11
PERFORMANCE GRAPH
The graph below sets forth a comparison of the yearly percentage change
in the cumulative total return for the five-year period beginning December 31,
1993, on the Company's Class A Common Stock, the RUSSELL 2000 Small Stock Index
("RUSSELL 2000"), a broad-based market index, and a peer group of common stocks
of five companies (the "Peer Group"), which the Company selected based on the
comparable businesses of these companies.
The relative performance of the Company's Class A Common Stock, the
RUSSELL 2000 and the Peer Group is as follows:
<TABLE>
<CAPTION>
NAME 1993 1994 1995 1996 1997 1998
- ------------------ ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Schawk, Inc. 100.00 118.00 76.25 104.12 137.56 172.91
RUSSELL 2000 Index 100.00 98.02 125.89 146.59 179.13 174.23
Peer Group 100.00 100.00 100.81 119.00 176.70 137.00
</TABLE>
The Joint Report on Executive Compensation and the Performance Graph
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 (the "Securities Act") or under the Securities Exchange
Act of 1934 (the "Exchange Act"), except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under such Acts.
-9-
<PAGE> 12
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the shares
beneficially owned as of March 31, 1999: (i) by each person who is known by the
Company to own beneficially more than 5% of the outstanding shares of Class A
Common Stock; (ii) by each Director of the Company, including the nominees for
reelection as Directors; and (iii) by all Directors and executive officers of
the Company as a group. All information with respect to beneficial ownership has
been furnished to the Company by the respective stockholders.
<TABLE>
<CAPTION>
AMOUNT OF PERCENTAGE OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) CLASS OUTSTANDING
- ------------------------ ----------------------- -----------------
<S> <C> <C>
Clarence W. Schawk(2)..................................... 10,396,195(3) 46.6%
David A. Schawk(2)........................................ 1,577,532(4) 7.1
A. Alex Sarkisian......................................... 1,359,650(5)(6) 6.1
James J. Patterson........................................ 18,900(7) *
John T. McEnroe........................................... 43,687(8) *
Judith W. McCue........................................... 34,960(9) *
Robert F. Meinken......................................... 15,160(10) *
Hollis W. Rademacher...................................... 20,950(11) *
Cathy Ann Schawk(2)(12)................................... 1,098,871(13) 4.9
Judith Lynn Gallo(2)(14).................................. 904,262(15) 4.1
Lisa Beth Stearns(2)(16).................................. 863,760(17) 3.9
Executive Officers and Directors as a group
(10 persons).......................................... 12,212,140(18) 54.7
</TABLE>
- -------------------
* Less than 1%
(1) Unless otherwise indicated, beneficial ownership is direct and the
person indicated has sole voting and investment power.
(2) Each is a member of Clarence W. Schawk's immediate family (the "Schawk
Family"). The address for each of the Schawk Family members is 1695
River Road, Des Plaines, Illinois 60018.
(3) Includes currently exercisable options to purchase 158,893 shares;
630,313 shares held directly by Mr. Schawk's wife; and 8,017,524 shares
held by SGK Investments Limited Partnership (the "Schawk Family
Partnership"), a family limited partnership, with respect to which Mr.
Schawk or his wife has voting power. Clarence W. Schawk is the managing
general partner of the Schawk Family Partnership and has investment
power with respect to all of the 9,194,822 shares of Class A Common
Stock held by the Schawk Family Partnership. Does not include 1,177,298
shares held by the Schawk Family Partnership for which Clarence W.
Schawk does not have voting power, shares beneficially owned by
Clarence W. Schawk's son, David A. Schawk, or shares beneficially owned
by Clarence W. Schawk's daughters, Cathy Ann Schawk, Judith Lynn Gallo
and Lisa Beth Stearns, or held in family trusts for the benefit of
certain of his grandchildren. Clarence W. Schawk does not share voting
power over shares of the Company held by or on behalf of his children
or grandchildren.
(4) Includes currently exercisable options to purchase 199,110 shares and
91,673 shares held by the Schawk Family Partnership with respect to
which Mr. Schawk has voting power. Mr. Schawk is a general partner of
the Schawk Family Partnership. Does not include shares beneficially
owned by David A. Schawk's father, Clarence W. Schawk, or shares
beneficially owned by or held in family trusts for the benefit of David
A. Schawk's sisters, Cathy Ann Schawk, Judith Lynn Gallo and Lisa Beth
Stearns, and certain of Clarence W. Schawk's grandchildren. Includes
475 shares held in joint tenancy and as custodian for minors gifted to
David A. Schawk's friends.
(5) Includes currently exercisable options to purchase 74,226 shares.
-10-
<PAGE> 13
(6) Includes 812,967 shares held by various Schawk Family trusts for the
benefit of certain of Clarence W. Schawk's grandchildren and 465,777
shares held by the Schawk Family Partnership with respect to which Mr.
Sarkisian has voting power as trustee for Clarence W. Schawk's
grandchildren.
(7) Includes currently exercisable options to purchase 9,900 shares.
(8) Includes currently exercisable options to purchase 24,960 shares and
18,226 shares owned indirectly by his spouse.
(9) Includes currently exercisable options to purchase 24,960 shares and
the indirect ownership of 4,501 shares held in retirement trust
accounts.
(10) Includes currently exercisable options to purchase 14,960 shares.
(11) Includes currently exercisable options to purchase 19,950 shares.
(12) Ms. Schawk is the daughter of Clarence W. Schawk and sister of David A.
Schawk, Judith Lynn Gallo and Lisa Beth Stearns.
(13) Includes 289,500 shares held by the Schawk Family Partnership with
respect to which Ms. Schawk has voting power.
(14) Ms. Gallo is the daughter of Clarence W. Schawk and the sister of David
A. Schawk, Cathy Ann Schawk and Lisa Beth Stearns.
(15) Includes 156,000 shares held by the Schawk Family Partnership with
respect to which Ms. Gallo has voting power. Does not include shares
held in trust for the benefit of Ms. Gallo's child.
(16) Ms. Stearns is the daughter of Clarence W. Schawk and the sister of
David A. Schawk, Cathy Ann Schawk and Judith Lynn Gallo.
(17) Includes 174,348 shares held by the Schawk Family Partnership with
respect to which Ms. Stearns has voting power. Does not include shares
held in trusts for the benefit of Ms. Stearns' children.
(18) Includes currently exercisable options to purchase an aggregate of
546,409 shares held by certain executive officers and Directors.
CERTAIN TRANSACTIONS
Clarence W. Schawk owns Geneva Waterfront, Inc., a Wisconsin
corporation that owns The Geneva Inn, a hotel in Geneva, Wisconsin. Geneva
Waterfront, Inc. employees are eligible to participate in the Company's health
plan. Schawk believes that this arrangement benefits the Company because it
enhances the Company's bargaining power with its health insurance providers. The
arrangement is beneficial to Geneva Waterfront, Inc. because it enables Geneva
Waterfront, Inc. to purchase health insurance for its employees at a lower cost
than it would be able to obtain independently. In 1996, 1997 and 1998, the
Company received $223,591, $220,101 and 266,754, respectively, in insurance
premium reimbursements from Geneva Waterfront, Inc. The amount due from Geneva
Waterfront, Inc. at December 31, 1998 was $368,641. Interest on the balance due
is charged at prime.
Pursuant to a lease entered into on January 1, 1991, the Company's
facilities at 1200 West Monroe Street, Chicago, Illinois are leased from The
Clarence W. Schawk 1979 Children's Trust, a trust established for the benefit of
the children of Clarence W. Schawk, including David A. Schawk. Based on
third-party appraisals, management believes that the gross rent and other terms
and conditions of this lease are comparable to those that would have been
obtained in an arm's-length transaction. The amount paid by the Company in 1996,
1997 and 1998 under this lease was $380,355 per year.
The Company's facility at 1600 East Sherwin Avenue, Des Plaines,
Illinois is leased from C.W. Properties, Chicago, a group consisting of a
Missouri corporation and certain individuals, all of whom are unrelated to the
Schawk Family. The lease provides for an option to purchase the building and the
adjoining property at 70% of the fair market value. The option is held by
Graphics IV, Ltd., an Illinois limited partnership ("Graphics IV"). The limited
partners
-11-
<PAGE> 14
of Graphics IV are David A. Schawk and the daughters of Clarence W. Schawk.
Based on third-party appraisals, management believes that the gross rent and
other terms and conditions of this lease are comparable to those that would have
been obtained in an arm's-length transaction. The amount paid by the Company in
1996, 1997 and 1998 under this lease was $679,347 in each year.
As part of the final settlement of certain stockholders' litigation
against the Company and its directors relating to the Merger, Clarence W. Schawk
and David A. Schawk transferred 159,521 shares of Class A Common Stock to a
settlement fund for the benefit of settlement class members. The shares are
subject to a put agreement whereby the class members may require the Company to
purchase the shares at a price ranging from $7.00 to $9.50 per share. The actual
price depends upon the time of exercise over the exercise period which began
when the shares were distributed to class members on February 10, 1999 and ends
on August 9, 1999.
PROPOSAL 2: APPROVAL OF THE SCHAWK, INC. EMPLOYEE
STOCK PURCHASE PLAN
Subject to approval by the stockholders, the Board of Directors has
adopted the Schawk, Inc. Employee Stock Purchase Plan (the "Plan") pursuant to
which employees of the Company have the opportunity to acquire shares of Class A
Common Stock of the Company. The full text of the Plan is attached as Appendix A
to this Proxy Statement. Stockholders are encouraged to read the Plan in its
entirety. The following is a summary.
PURPOSE
The purpose of the Plan is to encourage greater stock ownership among
employees, thereby enhancing employee commitment to the Company and providing
employees an opportunity to share in the Company's success.
RESERVATION OF SHARES
There are reserved for issuance under the Plan a maximum of 1,000,000
shares of Class A Common Stock of the Company. Authorized but unissued shares
and treasury shares may be made available for issuance under the Plan.
ADMINISTRATION
The Plan will be administered, construed and interpreted by the
Compensation Committee of the Board of Directors of the Company (the
"Committee") or such other persons to whom the Committee may delegate its
functions. Consistent with the terms of the Plan, the Committee will adopt rules
and regulations concerning the operation of the Plan, decide questions of
construction and interpretation regarding the Plan and determine an employee's
eligibility to participate in the Plan.
AMENDMENT AND TERMINATION OF THE PLAN
The Board of Directors may at any time amend, modify, suspend,
discontinue or terminate the Plan. However, any amendment or termination will
not adversely affect any outstanding options.
ELIGIBILITY
All employees of the Company are eligible to participate in the Plan
six months after their first day of employment, except that employees whose
customary employment is for not more than 20 hours per week or 5 months in any
calendar year are not eligible to participate. In addition, employees owning 5%
or more of the total combined voting power or value of all classes of stock of
the Company or a subsidiary (as defined in the Plan) shall not be eligible to
participate in the Plan.
OPERATION OF THE PLAN
Eligible employees participating in the Plan may elect to contribute on
an after-tax basis from 1% to 15% of their base pay (including overtime and
bonuses) to purchase Class A Common Stock of the Company. Each employee will be
entitled to purchase up to the number of full and fractional shares (rounded to
3 decimal places) as their accumulated payroll deductions during any calendar
quarter permit. However, during any calendar year an employee may not purchase
Class A Common stock through the Plan with an aggregate value (determined as of
the date each option is granted) that exceeds $15,000.
-12-
<PAGE> 15
Options will be granted on the first trading day of January, April,
July and October. Shares will be purchased on the last trading day of each
calender quarter on the open market, and the purchase price per share will be
the lesser of 85% of the fair market value per share of the Class A Common Stock
on the day the options are granted or 85% of the fair market value per share of
the Class A Common Stock on the purchase date.
Payroll deductions will be held in a purchase account with First
Chicago Trust Company of New York, the Plan's third party administrator. As
noted above, the funds credited to an employee's account on the last trading day
of each quarter are applied to the purchase of full and fractional shares of
Class A Common Stock.
Once options have been granted, an employee may not change the amount
of their payroll deductions until the next set of options are granted (i.e.,
until the next January 1, April 1, July 1 or October 1). If an employee
terminates his or her employment before the last trading day of a quarter,
amounts credited to his or her purchase account will be paid in cash, and will
not be used to purchase his or her Class A Common Stock at the end of the
quarter.
LIMITED TRANSFERABILITY OF OPTIONS
Options granted under the Plan and the related purchase account are not
assignable or transferable except by will or the laws of descent and
distribution.
FEDERAL INCOME TAX CONSEQUENCES
The Plan is intended to be a qualified employee stock purchase plan
under Section 423 of the Internal Revenue Code (the "Code"). It is not, however,
intended to be a tax qualified retirement plan. Employees pay no tax when they
enroll in the Plan, when they purchase shares of Class A Common Stock pursuant
to the Plan or when they receive shares of Class A Common Stock after the
applicable holding period described below.
Employees will have a taxable gain or loss when any shares of Class A
Common Stock purchased through the Plan are sold. If an employee sells shares
within two years after a particular set of options are granted (the "holding
period"), then the difference between the purchase price and market value of the
shares on the purchase date will be taxed as ordinary income. Any difference
between the market value of the shares on the purchase date and the sale price
will be capital gains or losses for income tax purposes. In addition, if an
employee withdraws shares from his or her account that are still subject to the
holding period, the Company will treat such a withdrawal as a sale of shares for
federal income tax reporting purposes. Any dividends that are paid with respect
to shares of Class A Common Stock purchased through the Plan will be taxable as
ordinary income.
If an employee sells stock after the holding period described above,
then the difference between the market price on the grant date and the actual
purchase price will be taxed as ordinary income (to the extent of gain) and the
balance of his or her gain, if any, will be capital gain.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL
OF THIS PLAN.
PROPOSAL 3: RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors, based upon the recommendation of the Audit
Committee, has selected Ernst & Young LLP as the independent auditors for the
Company for fiscal year 1999, subject to ratification of such selection by the
stockholders. The affirmative vote of a majority of the holders of the
outstanding shares of the Class A Common Stock of the Company present or
represented and entitled to vote at the Annual Meeting is required to ratify the
selection of Ernst & Young LLP. Abstentions will have the effect of voting
against Proposal 3.
Representatives of Ernst & Young LLP are expected to be present at the
Annual Meeting and will be available to respond to any appropriate questions
raised at the meeting and to make a statement if such representatives so wish.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 3 TO RATIFY THE
SELECTION OF THE INDEPENDENT AUDITORS.
-13-
<PAGE> 16
OTHER MATTERS
The Board of Directors knows of no matters other than those described
above that may come before the Annual Meeting. As to other matters, if any, that
properly may come before the Annual Meeting, the Board of Directors intends that
proxies in the accompanying form will be voted in respect thereof in accordance
with the judgment of the person voting the proxies.
STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Stockholder proposals for inclusion in the Company's Proxy Statement
for the 2000 Annual Meeting of Stockholders must be received by the Company not
later than December 21, 1999. The person submitting the proposal must have been
a record or beneficial owner of shares of Class A Common Stock for at least one
year, and the securities so held must have a market value of at least $1,000.
Additionally, if a proponent of a stockholder proposal at the 2000
Annual Meeting of Stockholders fails to provide notice of the intent to make
such proposal by personal delivery or mail to the Company on or before March 5,
2000 (or by an earlier or later date, if such date is established by amendment
to the Company's By-laws), then any proxy solicited by management may confer
discretionary authority to vote on such proposal.
By Order of the Board of Directors,
Des Plaines, Illinois A. ALEX SARKISIAN, Esq.
April 19, 1999 Executive Vice President and
Corporate Secretary
THE COMPANY'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998 (EXCLUDING
EXHIBITS UNLESS SPECIFICALLY INCORPORATED THEREIN) IS AVAILABLE WITHOUT CHARGE
UPON REQUEST TO A. ALEX SARKISIAN, ESQ., CORPORATE SECRETARY, AT SCHAWK, INC.,
1695 RIVER ROAD, DES PLAINES, ILLINOIS 60018, (847) 827-9494.
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<PAGE> 17
APPENDIX A
SCHAWK, INC.
EMPLOYEE STOCK PURCHASE PLAN
(EFFECTIVE JANUARY 1, 1999)
1. PURPOSE. The purpose of the Schawk, Inc. Employee Stock Purchase
Plan (the "Plan"), is to provide employees of Schawk, Inc. ("Schawk") and
Participating Subsidiaries (Schawk and the Participating Subsidiaries being
collectively referred to as the "Company") an opportunity to own an equity
interest in Schawk and, through such ownership, to promote their identification
with the interests of shareholders of Schawk, to stimulate their commitment to
the business objectives of Schawk and to maintain their motivation through the
opportunity to share in the growth of Schawk. It is intended that options issued
pursuant to the Plan shall constitute options issued pursuant to an "employee
stock purchase plan" within the meaning of Section 423 of the Internal Revenue
Code of 1986, as amended.
2. DEFINITIONS. As used herein, the terms set forth below have the
meanings assigned to them in this Section 2 and shall include the plural as well
as the singular.
Administrator means the brokerage firm or financial institution (if
any) retained to perform administrative services described in Section
6(b).
Board of Directors means the board of directors of Schawk, Inc.
Brokerage "Account means the account in which the Deposited Shares
are held.
Code means the Internal Revenue Code of 1986, as amended.
Committee means the committee that administers the Plan and which is
appointed pursuant to Section 6.
Company means Schawk and any Participating Subsidiaries.
Compensation means the Participant's base pay while a Participant in
the Plan, including overtime and bonuses, but excluding stock option
awards or stock grants and other forms of compensation.
Deposited Shares means the full and fractional Shares that have been
purchased for or issued on behalf of a Participant pursuant to the
exercise of Options under the Plan and which are held for the
Participant in a Brokerage Account.
Elected Percentage means the percentage of Compensation that the
Participant elects to contribute toward the purchase of Shares pursuant
to this Plan.
Entry Date means the first day of January, April, July and October.
Fair Market Value means for a Trading Day the closing price for
Shares as reported by the New York Stock Exchange ("NYSE") as reported
in the Wall Street Journal or, if the Shares are no longer listed on
the NYSE, as reported on such other exchange on which the Shares are
listed.
Grant Date means the first Trading Day of January, April, July and
October.
Option means an option granted under this Plan that will entitle a
Participant to purchase Shares.
Participating Subsidiary means a Subsidiary listed in Appendix A
whose employees are eligible to be granted Options under the Plan.
Plan means the Schawk, Inc. Employee Stock Purchase Plan.
Purchase Account means the account used to purchase Shares through
the exercise of Options under the Plan.
Purchase Date means the last Trading Day of March, June, September
and December, or such other date as shall be established by the
Committee.
Purchased Shares means the full and fractional Shares purchased or
issued pursuant to the exercise of Options under the Plan.
Restricted Period means the period of time during which Shares are
held in the Deposit Account pursuant to Section 11(d).
A-1
<PAGE> 18
Shares means the Class A common stock of Schawk, Inc., par value
$.01 per share.
Statutory Limitation is defined in Section 7.
Subsidiary means any corporation of which stock possessing at least
50% of the total combined voting power of all classes of stock entitled
to vote is owned by Schawk or any other Subsidiary or Subsidiaries.
Trading Day means any day on which Shares are traded on the NYSE or,
if the Shares are no longer listed on the NYSE, such other exchange on
which the Shares are listed.
3. STOCK TO BE ISSUED UNDER THE PLAN.
a. SCHAWK SHARES. The stock subject to Options shall be the Class A
common stock of Schawk (the "Shares"), as traded on the NYSE or on such other
exchange as the Shares shall be listed.
b. LIMITS UPON NUMBER OF SHARES ISSUABLE. Subject to adjustment
pursuant to Section 12, the maximum number of Shares issuable upon the exercise
of Options shall not exceed 1,000,000. Shares granted under the Plan may be
either authorized but unissued shares or shares now or hereafter held in the
treasury of Schawk. In the event that any Option granted pursuant to this Plan
expires or is terminated, surrendered or canceled without being exercised, in
whole or in part, for any reason, the Shares which were subject to such Option
shall again be available for grant as an Option under this Plan and shall not
reduce the aggregate number of Shares available for grant under this Plan.
4. APPROVAL BY SHAREHOLDERS. Continuance of the Plan shall be subject
to approval by the shareholders of Schawk within twelve months before or after
the date the Plan is adopted by the Board of Directors. If such shareholder
approval is obtained at a duly held shareholders' meeting, it may be obtained by
the affirmative vote of the holders of a majority of the Shares of Schawk
present at the meeting or represented and entitled to vote thereon.
5. ADMINISTRATION.
a. POWERS AND DUTIES OF COMMITTEE. The Plan shall be administered,
in accordance with the provisions hereof, by a duly authorized committee the
members of which shall be appointed by the Board of Directors (the "Committee").
Subject to the provisions of the Plan and Section 423 of the Code, the Committee
shall have the discretionary authority to determine the time and frequency of
granting Options, the terms and conditions of the Options and the number of
Shares subject to each Option. The Committee shall also have the discretionary
authority to do everything necessary and appropriate to administer the Plan,
including, without limitation, interpreting the provisions of the Plan (but any
such interpretation shall not be inconsistent with the provisions of Section 423
of the Code). All actions, decisions and determinations of, and interpretations
by the Committee with respect to the Plan shall be final and binding upon all
Participants and upon their executors, administrators, personal representatives,
heirs and legatees. No member of the Board of Directors or the Committee shall
be liable for any action, decision, determination or interpretation made in good
faith with respect to the Plan or any Option granted hereunder.
b. ADMINISTRATOR. Schawk, any Participating Subsidiary or the
Committee may engage the services of a brokerage firm or financial institution
(the "Administrator") to perform certain ministerial and procedural duties under
the Plan including, but not limited to, mailing and receiving notices
contemplated under the Plan, determining the number of Purchased Shares for each
Participant, maintaining or causing to be maintained the Purchase Account and
the Brokerage Account, disbursing funds maintained in the Purchase Account or
proceeds from the sale of Shares through the Brokerage Account, and filing with
the appropriate tax authorities proper tax returns and forms (including
information returns) and providing to each Participant statements as required by
law or regulation.
6. ELIGIBILITY.
a. EMPLOYEES ONLY; NON-DISCRIMINATION. Only employees of the Company
shall be eligible to be granted Options under the Plan. Every employee of the
Company shall be eligible to participate on the first Entry Date that occurs six
months after such employee's first day of employment; provided, that such
employee completes and submits an election form by the deadline prescribed by
the Committee. Notwithstanding anything in the foregoing to the contrary,
employees whose customary employment is for not more than 20 hours per week or 5
months in any calendar year shall not be eligible to participate. An employee
who does not become a Participant on the first Entry Date on which he/she is
eligible may thereafter become a Participant on any subsequent Entry Date by
completing and submitting an election form by the deadline prescribed by the
Committee. All employees eligible to be granted Options under the Plan shall
have the same rights and privileges with respect to Options granted at the same
time.
b. 5% SHAREHOLDERS EXCLUDED. Notwithstanding the foregoing, in no
event may an employee be granted an Option if such employee, immediately after
the Option is granted, owns stock possessing 5% or more of the total combined
voting power or value of all classes of stock of Schawk or a Subsidiary. For
purposes of determining such stock ownership, the rules of Section 424(d) of the
Code shall apply, and stock which the employee may purchase under outstanding
options (whether issued pursuant to this Plan or otherwise) shall be treated as
stock owned by the employee.
A-2
<PAGE> 19
7. LIMITATIONS ON NUMBER OF SHARES TO BE PURCHASED. In no event shall
a Participant be granted an Option which would permit his/her rights to purchase
Shares under all employee stock purchase plans (within the meaning of Section
423 of the Code) of his/her employing Participating Subsidiary and its parent
and subsidiary corporations (as defined in Section 424 of the Code) to accrue at
a rate which exceeds $15,000 in value of such Shares (determined at the Grant
Date relating to such Option) for each calendar year in which any such Option is
outstanding at any time (such limitation is referred to herein as the "Statutory
Limitation"). The Statutory Limitation applies only to Options granted under
"employee stock purchase plans" within the meaning of Section 423 of the Code
and does not limit the amount of Shares or other stock of Schawk which an
employee may purchase outright or under any other stock or bonus plans then in
effect.
8. PURCHASE ACCOUNT. A non-interest-bearing account shall be
established with the Administrator (the "Purchase Account") for the purpose of
purchasing Shares by Participants under the Plan. Shares purchased under the
Plan shall be purchased with funds credited to the Purchase Account in
accordance with the Participant's election under Section 9.
9. PAYROLL DEDUCTIONS.
a. A Participant who elects to purchase Shares under this Plan
shall be deemed to have authorized his/her employer to withhold 1% to 15% (in
whole percentages) from the periodic payment of his/her Compensation (the
"Elected Percentages"). The Participant's employer shall withhold the Elected
Percentage from each payment of Compensation, commencing on the Entry Date on
which the employee becomes a Participant and continuing until such election is
changed or terminated. Such Participant shall be deemed to have given
instruction to his/her employer to credit the amount so deducted to the Purchase
Account. The amounts so credited in the Purchase Account during each calendar
quarter may only be applied toward the purchase of Shares pursuant to Options
granted on the immediately preceding Grant Date.
b. CHANGING THE ELECTION. A Participant may change his/her Elected
Percentage or terminate the election under subsection (a) above as of a
subsequent Entry Date by completing and submitting a change in election form by
the deadline prescribed by the Committee.
10. GRANT AND EXERCISE OF OPTIONS.
a. GRANT. Options to purchase up to the number of Shares equal to
15% of each Participant's Compensation for the current calendar quarter divided
by the Purchase Price (subject to the Statutory Limitation) shall be deemed to
have been granted on the first Trading Day of January, April, July and October
(the "Grant Date").
b. EXERCISE. The Options shall be exercised and full and
fractional Shares shall be purchased or issued using amounts credited to each
Participant's Purchase Account as of the last Trading Day of the calendar
quarter containing the Grant Date, or such other date(s) as shall be established
by the Committee (each such date being a "Purchase Date").
c. TERMINATION OF EMPLOYMENT. If a Participant terminates
employment with the Company prior to a Purchase Date, any amounts in his/her
Purchase Account shall be paid to the Participant and shall not be used to
exercise Options.
11. TERMS AND CONDITIONS OF OPTIONS. Options granted hereunder shall
be subject to the following terms and conditions:
a. PURCHASE PRICE. The purchase price of each Share subject to an
Option under the Plan shall be the lesser of 85 percent of the Fair Market Value
of a Share on the applicable Grant Date or 85 percent of the Fair Market Value
of a Share on the applicable Purchase Date.
b. TERM OF OPTIONS. An Option granted hereunder shall expire after
the applicable Purchase Date next following the Grant Date.
c. ASSIGNABILITY OF OPTIONS. No Option granted hereunder shall be
assignable or transferable except by will or by the laws of descent and
distribution, and shall be exercisable, during the lifetime of the Participant,
only by the Participant.
d. RESTRICTED PERIOD. Upon exercise of an Option, and subject to
subsection (e) below, the Participant shall be deemed to have consented to the
deposit of all of the full and fractional Shares purchased pursuant to such
exercise (the "Deposited Shares") in a designated brokerage account maintained
by the Administrator for such benefit (the "Brokerage Account") for the greater
of a two year period after the relevant Grant Date or a one year period after
the relevant Purchase Date (the "Restricted Period"). The Deposited Shares will
be held in book-entry form in the name of the Administrator as nominee.
e. WITHDRAWAL AND SALE OF DEPOSITED SHARES. A Participant (or if
the Participant has died, his/her executor or personal representative) may
instruct the Administrator (either in writing or in accordance with such
procedures as established by the Committee) to (i) sell his/her Deposited Shares
through the Brokerage Account at any time and (ii) pay over to such Participant
the proceeds (less any expenses and withholding taxes, including, without
limitation, wage and employment
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withholding taxes) of such sale. In addition, a Participant (or if the
Participant has died, his/her executor or personal representative) may withdraw
the Participant's Deposited Shares at any time at his/her own expense. Such
withdrawal shall be contingent on the Participant satisfying all Federal income
tax obligations. If the employment of a Participant is terminated (for any
reason) and such termination occurs subsequent to the Restricted Period with
respect to any Deposited Shares or subsequent to such termination the Restricted
Period lapses, the Administrator may require the Participant to withdraw such
Deposited Shares from the Brokerage Account at the Participant's own expense.
12. ADJUSTMENT OF NUMBER OF SHARES SUBJECT TO OPTIONS. The aggregate
number of Shares with respect to which Options may be granted, the aggregate
number of Shares subject to each outstanding Option, and the Option price per
Share may all be appropriately adjusted as the Board of Directors may determine
for any increase or decrease in the number of issued and outstanding Shares
resulting from a subdivision or consolidation of Shares, whether through
reorganization, recapitalization, stock split-up, stock distribution or
combination of Shares, or the payment of a Share dividend or other increase or
decrease in the number of such Shares outstanding effected without receipt of
consideration by Schawk. Adjustments under this Section 12 shall be made
according to the sole discretion of the Board of Directors, and its decision
shall be binding and conclusive; provided, however, that Options granted
pursuant to the Plan shall not be adjusted in a manner that causes the Options
to fail to qualify as options issued pursuant to an employee stock purchase
plan" within the meaning of Section 423.
13. RIGHTS AS A SHAREHOLDER. A Participant shall have rights as a
shareholder of Schawk with respect to each Deposited Share under the Plan.
14. OTHER REGULATORY ACTIONS. Prior to the offering of any Shares under
the Plan, Schawk shall effect a registration of the offering of the Shares of
Schawk reserved under the Plan in accordance with the requirements of the
Securities Act of 1933 and the rules and regulations thereunder.
15. AMENDMENTS; TERMINATION OF THE PLAN. The Board of Directors may
from time to time amend, modify, suspend, discontinue or terminate the Plan at
any time without notice; provided that no Participant's existing rights in
respect of existing Options are adversely affected thereby; provided, further,
upon any such amendment or modification, all Participants shall continue to have
the same rights and privileges in respect of existing Options; provided,
further, that no such amendment of the Plan shall, except as provided in Section
13 hereof: (i) increase the total number of Shares issuable under the Plan; (ii)
increase the maximum number of Shares which any Participant may purchase under
the Plan; or (iii) increase, enlarge or improve the rights of existing or future
Participants under the Plan unless such amendment shall have been approved by
shareholders of Schawk within the twelve month period either before or after the
adoption of such amendment.
16. NO OTHER OBLIGATIONS. The receipt of an Option pursuant to the Plan
shall impose no obligation upon the Participant to purchase any Shares covered
by such Option. Nor shall the granting of an Option pursuant to the Plan
constitute an agreement or an understanding, express or implied, on the part of
Schawk or any Participating Subsidiary to employ the Participant for any
specified period.
17. NOTICES. Any notice which the Company or any Participant may be
required or permitted to give to the other shall be in writing and may be
delivered personally or by mail, postage prepaid, addressed: if to the Company
(or to the Administrator), to such address as the Company, by notice to such
Participant, may designate in writing from time to time; and, if to the
Participant, at his/her address as shown on the payroll records of the Company.
18. GOVERNING LAW. The Plan and all Options granted hereunder shall be
construed in accordance with and governed by the laws of the State of Illinois
without reference to choice of law principles and subject in all cases to the
Code and the regulations thereunder.
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APPENDIX A
PARTICIPATING SUBSIDIARIES
Schawk-Asia, Inc.
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SCHAWK, INC.
SCHAWK, INC.
1695 RIVER ROAD, DES PLAINES, ILLINOIS 60018
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The
undersigned hereby appoints each of David A. Schawk and A. Alex Sarkisian, Esq.
as Proxy, with the power to appoint his substitute and hereby authorizes each of
them to represent and to vote as designated below, all the shares of Schawk,
Inc. Class A Common Stock held on record by the undersigned on March 31, 1999,
at the Annual Meeting of Stockholders to be held on May 26, 1999, or any
adjournment thereof.
1. FOR the election of the nominees for Director of Schawk.
FOR all nominees listed below (except as withheld in the space provided)
WITHHOLD AUTHORITY to vote for all nominees listed below
Clarence W. Schawk Robert F. Meinken
David A. Schawk John T. McEnroe, Esq.
A. Alex Sarkisian, Esq Hollis W. Rademacher
Judith W. McCue, Esq.
________ FOR _________ WITHHELD FOR ALL
Instruction: To withhold authority to vote for any individual nominee,
write that nominee's name on the lines provided below.
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2. For approval of the Schawk, Inc. Employee Stock Purchase Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. FOR ratification of the selection of Ernst & Young LLP as
independent auditors of Schawk, Inc. for fiscal year 1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In his discretion, the Proxy is authorized to vote upon such
other business as may properly come before the meeting.
THE PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1, 2 AND 3.
THE BOARD OF DIRECTORS OF SCHAWK, INC. RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND
3. Please mark, sign, date, and return your proxy without delay in the return
envelope provided for that purpose, which requires no postage if mailed within
the United States or Puerto Rico.
Dated ____________________, 1999 _________________________________________
Signature
_________________________________________
Signature if held jointly
Please sign exactly as name appears
hereon; joint owners should each sign.
When signing as Attorney, Executor,
Administrator, or Guardian, please give
full title as such. If signer is a
corporation, please sign with the full
corporation name by duly authorized
officer or director.
