UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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/ / 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 Section240.14a-11(c) or
Section240.14a-12
LAWSON PRODUCTS, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
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and 0-11.
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[LAWSON PRODUCTS LOGO]
LAWSON PRODUCTS, INC.
1666 East Touhy Avenue
Des Plaines, Illinois 60018
- --------------------------
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
May 15, 2001
- ------------------------
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 15,
2001, at 10:00 A.M. (Local Time) for the following purposes:
(1) To elect three directors to serve three years; and
(2) 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 30, 2001, 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 2000 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. YOU MAY ALSO VOTE YOUR SHARES BY TELEPHONE OR VIA THE INTERNET AS SET
FORTH IN THE ENCLOSED PROXY. IF YOU EXECUTE A PROXY, YOU STILL MAY ATTEND THE
MEETING AND VOTE IN PERSON.
By Order of the Board of Directors
Neil E. Jenkins
SECRETARY
Des Plaines, Illinois
April 11, 2001
[LAWSON PRODUCTS LOGO]
LAWSON PRODUCTS, INC.
1666 East Touhy Avenue
Des Plaines, Illinois 60018
- --------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
May 15, 2001
- ------------------------
This Proxy Statement is being sent to stockholders on or about April 11, 2001,
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 30, 2001, 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 $4,000 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
or you vote your shares by telephone or via the Internet as set forth in the
enclosed proxy pursuant to Section 212(c) of the Delaware General Corporation
Law, 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 30, 2001, the Company had outstanding 9,711,804 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. 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 such stockholder owns, and such stockholder may cast its votes for one
nominee or distribute them in any manner it 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 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 2004.
The following information has been furnished by the respective nominees and
continuing directors:
YEAR FIRST
ELECTED
NAME AGE PRINCIPAL OCCUPATION DIRECTOR
- ---- -------- -------------------- ----------
NOMINEES TO BE ELECTED TO SERVE UNTIL 2004
Bernard Kalish......................... 63 Retired Chairman of the Board and Chief 1983
Executive Officer of the Company
Sidney L. Port......................... 90 Chairman of the Executive Committee of the 1953
Company
Robert J. Washlow...................... 56 Chairman of the Board and Chief Executive 1997
Officer. In 1998 and 1999, Mr. Washlow was
Executive Vice President--Corporate
Affairs and participated in the Office of
the President from January 1, 1999 until
he became the Chairman in August of 1999.
Mr. Washlow was also Corporate Secretary
from 1985 until May of 1999.
DIRECTORS WHOSE TERMS EXPIRE IN 2003
James T. Brophy........................ 73 Private Investor 1971
Mitchell H. Saranow.................... 55 Chairman of the Saranow Group, a family 1998
investment firm, with predecessor since
October 1984. Chairman of the Board and
co-chief executive officer of Navigant
Consulting, Inc. from November 1999 to May
2000. Prior thereto, Mr. Saranow was
Chairman of Fluid Management, L.P., a
machinery manufacturer, for more than five
years.
Jerome Shaffer......................... 73 Vice President and Treasurer of the Company 1989
DIRECTORS WHOSE TERMS EXPIRE IN 2002
Ronald B. Port, M.D.................... 60 Retired Physician 1984
Robert G. Rettig....................... 71 Consultant 1989
Robert M. Melzer....................... 61 Consultant 2000
- ------------------------
- - The Executive Committee, the members of which are Sidney L. Port and Robert
J. Washlow, 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.
2
- - The Audit Committee, the members of which are James T. Brophy, Robert G.
Rettig and Mitchell H. Saranow, 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. A copy of the Company's Audit
Committee Charter is attached hereto as Appendix A. Each of the members of
the Audit Committee satisfies the independence requirements of the Nasdaq
National Market.
- - The Compensation Committee, the members of which are James T. Brophy, Robert
G. Rettig, Ronald B. Port, M.D., Sidney L. Port and Mitchell H. Saranow,
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, Sidney L.
Port, Robert G. Rettig and Ronald B. Port, M.D., reviews and recommends
potential directors to the Board of Directors. The Nominating Committee will
consider director nominees recommended by stockholders if such
recommendations are submitted in writing to the Secretary of the Company.
- - 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."
- - 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 was a
partner at the law firm of Vedder, Price, Kaufman & Kammholz until
December 31, 1998, 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,
unless otherwise indicated above. Mr. Washlow was a partner with the law firm
of Vedder, Price, Kaufman & Kammholz for more than five years prior to 1998,
the date Mr. Washlow became Executive Vice President--Corporate Affairs of
the Company.
- - Mr. Melzer served as President and Chief Executive Officer of Property
Capital Trust, a publicly-traded real estate investment trust ("REIT"), from
1992 until May 1999 when the company completed its plan to dispose of its
investments and distributed the proceeds to its shareholders. Since
May 1999, Mr. Melzer has devoted his business activities to consulting and to
serving as a director or trustee of various business and charitable
organizations. Mr. Melzer serves as director of Genesee & Wyoming, Inc., a
short line railroad holding company; a director of Beacon Capital
Partners, Inc., a REIT; a trustee of MGI Properties Liquidating Trust, which
was formed to complete the liquidation of MGI Properties, a REIT; a director
of The Cronos Group, a lessor of Intermodal Marine Containers; and chairman
of the board of trustees of Beth Israel Deaconess Medical Center in Boston,
Massachusetts.
- - Mr. Rettig is a director of Evergreen Network.com Inc.
In 2000, the Board of Directors held four meetings, the Compensation Committee
held two meetings, the Audit Committee held two meetings and the Nominating
Committee held one meeting. During 2000, each director attended at least 75% of
the meetings of the Board and of the respective committees on which he served.
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 or retired officers of the Company received directors' fees of $30,000
in 2000. Mr. Melzer received $20,250 in 2000 for serving as director of the
Company for a portion of the year beginning June 2000.
3
SECURITIES BENEFICIALLY OWNED BY PRINCIPAL STOCKHOLDERS AND MANAGEMENT
Set forth below, as of March 1, 2001 (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.
SOLE SHARED PERCENT OF
VOTING OR VOTING OR CLASS AT
DISPOSITIVE DISPOSITIVE MARCH 1,
NAME POWER(1)(2) POWER 2001
- ---- ----------- ----------- ----------
Sidney L. Port ............................................. 4,661,964(3) -0- 47.8%
1666 East Touhy Avenue
Des Plaines, Illinois 60018
Dimensional Fund Advisors .................................. 672,050 -0- 6.9%
1299 Ocean Floor
11th Floor
Santa Monica, CA 90401
Jeffrey B. Belford.......................................... 5,100 -0- *
James T. Brophy............................................. 1,400 -0- *
Roger F. Cannon............................................. 5,584 -0- *
Bernard Kalish.............................................. 15,000 -0- *
Robert M. Melzer............................................ 2,000 -0- *
Ronald B. Port, M.D......................................... 16,865 -0- *
Robert G. Rettig............................................ 750 -0- *
Mitchell H. Saranow (4)..................................... 8,250 -0- *
Jerome Shaffer.............................................. 21,033 2,530 *
Robert J. Washlow........................................... 29,827 0 *
All executive officers and directors as a group (14 4,780,816 2,530 49.1%
persons)..................................................
- ------------------------
* 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 (10,523 shares), Dr. Port (16,615
shares), Mr. Shaffer (2,450 shares) and Mr. Washlow (24,283) and all
executive officers and directors as a group (54,596 shares).
(2) Stockholdings shown include shares issuable upon the exercise of stock
options exercisable within 60 days by Mr. Belford (5,000 shares),
Mr. Brophy (250 shares), Mr. Cannon (2,500 shares), Mr. Kalish (15,000
shares), Dr. Port (250 shares), Mr. Rettig (250 shares), Mr. Saranow (250
shares), Mr. Shaffer (6,000 shares), Mr. Washlow (1,250 shares) and all
executive officers and directors as a group (37,750 shares).
(3) Includes 1,200,000 shares held by a family limited partnership.
(4) 8,000 shares are owned by Saranow Investments, L.L.C., which is owned by
Mr. Saranow and his family.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and certain
executive officers, and persons who own more than 10% of the Company's Common
Shares (collectively, "Reporting Persons") to file reports of ownership and
changes in ownership with the SEC. Reporting Persons are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file.
4
Based solely on its review of the copies of such forms received or written
representations from the Reporting Persons, the Company believes that with
respect to the year ended December 31, 2000, all the Reporting Persons complied
with all applicable filing requirements, except that Mr. Galvez failed to
file a timely Form 3.
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
years ended December 31, 2000, 1999 and 1998, of those persons who were, at
December 31, 2000 (i) the chief executive officer, and (ii) the other four most
highly compensated executive officers of the Company (the "Named Officers").
LONG-TERM
COMPENSATION
---------------
ANNUAL COMPENSATION SECURITIES ALL OTHER
-------------------- UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS/SARS(1) ($)(2)
- -----------------------------------------------------------------------------------------------------------
Robert Washlow 2000 447,945 279,000 35,000 16,575
CHAIRMAN OF THE BOARD AND CHIEF 1999 360,715 135,000 5,000 15,600
EXECUTIVE OFFICER 1998 88,462 -- -- --
- -----------------------------------------------------------------------------------------------------------
Sidney L. Port 2000 354,957 0 0 16,575
CHAIRMAN OF THE EXECUTIVE COMMITTEE 1999 343,080 0 0 15,600
1998 329,156 0 0 15,200
- -----------------------------------------------------------------------------------------------------------
Jeffrey B. Belford 2000 274,262 4,721 5,000 16,575
OFFICE OF THE PRESIDENT AND CHIEF 1999 246,253 40,794 0 15,600
OPERATING OFFICER 1998 189,236 0 0 15,200
- -----------------------------------------------------------------------------------------------------------
Roger F. Cannon 2000 268,775 0 5,000 16,575
OFFICE OF THE PRESIDENT AND CHIEF 1999 241,311 15,000 0 15,600
SALES OFFICER 1998 214,525 0 0 15,200
- -----------------------------------------------------------------------------------------------------------
Jerome Shaffer 2000 236,097 23,420 0 16,575
VICE PRESIDENT AND TREASURER 1999 234,293 0 0 15,600
1998 219,362 0 0 15,200
- -----------------------------------------------------------------------------------------------------------
(1) The Company has not issued 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 and stock appreciation rights
at fair market value to the named officers as shown.
(2) These amounts represent the Company's contribution as accrued to the
Company's Profit Sharing Plan.
5
The following table presents the number of stock options and stock appreciation
rights granted to the Named Executive Officers during 2000.
OPTIONS/SARS GRANTED DURING 2000
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE
APPRECIATION FOR OPTION/SAR
INDIVIDUAL GRANTS TERM
- ------------------------------------------------------------------------------------------- ---------------------------
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO
OPTIONS/SAR EMPLOYEES EXERCISE OR BASE
NAME GRANTED (#) IN FISCAL YEAR PRICE ($/SH) EXPIRATION DATE 5% 10%
- ---- ----------- ---------------- ---------------- --------------- ------------ ------------
Robert J. Washlow..... 5,000 100% 23.56 5/16/10 $ 191,884 $ 305,543
30,000 42% 26.50 12/13/10 $1,294,971 $2,062,025
Sidney L. Port........ 0 -- -- -- -- --
Jeffrey B. Belford.... 5,000 7% 26.50 12/13/10 $ 215,829 $ 343,671
Roger F. Cannon....... 5,000 7% 26.50 12/13/10 $ 215,829 $ 343,671
Jerome Shaffer........ 0 -- -- -- -- --
The following table summarizes option exercises during the year by the Named
Officers and the value of the options held by such persons at the end of such
year.
AGGREGATE OF OPTIONS/SARS EXERCISED IN 2000
AND OPTION/SAR VALUES AT DECEMBER 31, 2000
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
DECEMBER 31, DECEMBER 31,
2000 (#) 2000($)(1)
--------------------- --------------------
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE VALUE REALIZED UNEXERCISABLE UNEXERCISABLE
- ---- --------------- -------------- --------------------- --------------------
Robert J. Washlow......... -- -- 1,250/38,750 5,938/56,663
Sidney L. Port............ -- -- -- --
Jeffrey B. Belford........ -- -- 5,000/5,000 23,450/3,450
Roger Cannon.............. -- -- 2,500/5,000 11,725/3,450
Jerome Shaffer............ -- -- 6,000/0 28,140/0
- ------------------------
(1) Based on the closing price of the Company's Common Stock as reported on the
NASDAQ National Market System on December 31, 2000.
EMPLOYMENT CONTRACTS
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. Belford is employed under a contract pursuant to which he will receive a
minimum salary of $305,000 for 2001. 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. Cannon is employed under a contract pursuant to which he will receive a
minimum salary of $300,000 for 2001. Upon the expiration of two years prior
written notice, the contract is cancelable
6
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 pursuant to which he will receive a
minimum salary of $237,000 for 2001. 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.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In November 2000, the Company sold its limited partnership interest in Fireside
West, F.L.P. (the "Partnership") in equal amounts to each of (i) Mr. Washlow, a
general partner of the Partnership and the Chairman of the Board and Chief
Executive Officer of the Company, and (ii) the other general partner of the
Partnership. The Partnership owns and operates the Hilton Lisle/Naperville Hotel
in Lisle, Illinois. The Company sold its interest in the Partnership for
$7,400,000 in cash. In connection with the transaction, the Company recorded an
after-tax gain of approximately $2,136,000.
Prior to its approval of the transaction, the Board of Directors appointed a
special committee ("Committee") consisting of Messrs. Brophy and Rettig to
consider the disposition of the Company's interest in the Partnership. The
Committee was advised by independent legal counsel and retained an independent
accounting firm to appraise the hotel property and evaluate the proposed
transaction. After receiving an opinion from the independent accounting firm
that the proposed transaction was fair from a financial point of view and in the
best interest of the Company, the Committee recommended approval of the
transaction to the Board of Directors. The Board of Directors then approved the
sale of the Company's interest in the Partnership with Mr. Washlow abstaining
from participation in the consideration of and voting upon the matter. The
Company believes that the disposition of its interest in the Partnership was at
least as favorable to the Company as any such disposition that could have been
consummated with an unrelated third party.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The Audit Committee oversees the Company's financial reporting process on behalf
of the Board of Directors. Management has the primary responsibility for the
financial statements and the reporting process including the systems of internal
controls. In fulfilling its oversight responsibilities, the Committee reviewed
the audited financial statements in the Annual Report with management including
a discussion of the quality, not just the acceptability, of the accounting
principles, the reasonableness of significant judgments, and the clarity of
disclosures in the financial statements.
The Committee reviewed with independent auditors, who are responsible for
expressing an opinion on the conformity of those financial statements with
generally accepted accounting principles, their judgments as to the quality, not
just the acceptability, of the Company's accounting principles and such other
matters as are required to be discussed with the Committee under generally
accepted auditing standards. In addition, the Committee has discussed with the
independent auditors the auditors' independence from management and the Company
including the matters in the written disclosures required by the Independence
Standards Board.
The Committee discussed with the Company's independent auditors the overall
scope and plans for their respective audit. The Committee meets with the
independent auditors, with and without management present, to discuss the
results of their examinations, their evaluations of the Company's internal
controls, and the overall quality of the Company's financial reporting. The
Committee held two meetings during 2000.
In reliance on the reviews and discussions referred to above, the Committee
recommended to the Board of Directors (and the Board has approved) that the
audited financial statements be included in the Annual Report on Form 10-K for
the year ended December 31, 2000 for filing with the
7
Securities and Exchange Commission. The Committee and the Board have also
recommended the selection of the Company's independent auditors to audit the
financial statements of the Company for 2001.
It is not the duty of the Audit Committee to plan or conduct audits or to
determine that the Company's financial statements are complete and accurate and
in accordance with generally accepted accounting principles. That is the
responsibility of management and the Company's independent auditors. In giving
the recommendation to the Board of Directors, the Committee relied on
(i) management's representation that such financial statements were prepared
with integrity and objectivity and in conformity with generally accepted
accounting principals, and (ii) the report of the Company's independent auditors
with respect to such financial statements.
James T. Brophy
Robert G. Rettig
Mitchell H. Saranow
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 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 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.
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.
Section 162(m) of the Internal Revenue Code limits the deductibility of certain
items of compensation paid to the CEO and other executive officers to
$1 million annually. The Committee does not expect that Section 162(m) will
limit the deductibility of compensation expected to be paid by the Company in
the foreseeable future. In the event the proposed compensation for any of the
Company's executive officers is expected to exceed the $1 million limitation,
the Committee will balance the benefits of tax deductibility with its
responsibility to hire, retain and motivate executive officers with competitive
compensation programs.
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 stock appreciation rights) and various benefits,
including medical and profit sharing plans, generally available to employees of
the Company.
BASE SALARY. Base salary for the executive officers, other than the Chief
Executive Officer, was set pursuant to employment agreements described elsewhere
in this Proxy Statement. The chief executive officer's base salary and bonus, if
any, are established annually by the Compensation Committee. In setting these
compensation levels, the Compensation Committee considered a variety of factors,
including competitive market levels, levels of responsibility, and the unique
abilities and individual experience and performance of each officer. In
addition, certain of the employment agreements provide for discretionary
increases in base salary. Generally, these salary
8
increases are determined annually by the Chairman of the Board with the consent
of the Compensation Committee based on performance and general market factors.
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,
company and individual target performance levels for each of the participating
employees (which includes each of the Named Officers except Sidney L. Port and
Robert J. Washlow). Each participant is then granted an annual incentive award
based upon the base salary at the beginning of the year for that participant and
the degree to which the participant's predetermined targets are 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 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 Compensation 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.
STOCK PERFORMANCE PLAN. In 2000, the Board of Directors adopted the Lawson
Products, Inc. Stock Performance Plan under which the Compensation Committee may
grant key management employees stock performance rights which will entitle the
holders to receive, in cash, the appreciation in the fair market value of the
Company's Common stock from the date of the initial grants up to the date the
rights are exercised.
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.
Sidney L. Port
Mitchell H. Saranow
9
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 S&P Small Capitalization Index and a peer group
(the "Peer Group") of the Company for the five prior years. The Peer Group
consists of Barnes Group Inc., Strategic Distribution, Inc., SunSource Inc.,
Premier Farnell PLC and NCH Corporation. Vallen Corporation, which was included
in the Peer Group in last year's Proxy Statement, ceased to be a public company
when it was acquired in November 2000.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
LAWSON PRODUCTS, INC. S&P SMALL CAP PEERS
12/31/95 $100.00 $100.00 $100.00
12/31/96 $91.40 $121.32 $118.54
12/31/97 $126.82 $152.36 $90.48
12/31/98 $100.37 $150.37 $58.08
12/31/99 $102.83 $169.02 $84.82
12/31/00 $123.95 $188.96 $75.65
LAWSON PRODUCTS, INC. S&P SMALL CAP PEERS
---------------------- --------------- --------
12/31/95.................................................... $100.00 $100.00 $100.00
12/31/96.................................................... $ 91.40 $121.32 $118.54
12/31/97.................................................... $126.82 $152.36 $ 90.48
12/31/98.................................................... $100.37 $150.37 $ 58.08
12/31/99.................................................... $102.83 $169.02 $ 84.82
12/31/00.................................................... $123.95 $188.96 $ 75.65
Assumes that the value of the investment in Lawson's Common Stock and in each
index was $100 on December 31, 1995 and that all dividends were reinvested.
10
INDEPENDENT AUDITORS
The Board of Directors has reappointed Ernst & Young LLP as independent auditors
to audit the financial statements of the Company for 2001. 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.
AUDIT FEES. The aggregate fees billed by The Company's independent auditors
for professional services rendered in connection with (i) the audit of the
Company's annual financial statements set forth in the Company's Annual Report
on Form 10-K for the year ended December 31, 2000, and (ii) the review of the
Company's quarterly financial statements set forth in the Company's Quarterly
Reports on Form 10-Q for the quarters ended March 31, 2000, June 30, 2000 and
September 30, 2000, were approximately $249,900.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES. There were no
fees billed by the Company's independent auditors for the Company's most recent
year in this category.
ALL OTHER FEES. The aggregate fees for all other services rendered by its
independent auditors for the Company's most recent year were approximately
$155,200, of which $51,500 were for audit related services and $103,700 were for
nonaudit related services. Audit related services generally include fees for
pension and statutory audits, business acquisitions and accounting
consultations. Nonaudit related services include fees for income tax
consultation and compliance.
The Audit Committee has advised the Company that it has determined that the
non-audit services rendered by the Company's independent auditors during the
Company's most recent year are compatible with maintaining the independence of
such auditors.
PROPOSALS OF SECURITY HOLDERS
A stockholder proposal to be presented at the annual meeting to be held in 2002
must be received at the Company's executive offices, 1666 East Touhy Avenue, Des
Plaines, Illinois 60018, by no later than December 12, 2001, for evaluation as
to inclusion in the Proxy Statement in connection with such meeting.
Stockholders wishing to present proposals at the Annual Meeting (but not include
them in the Proxy Statement) are required to notify the Secretary of the Company
in writing no less than 90 days nor more than 110 days prior to the first
anniversary of the prior year's meeting unless the date of the annual meeting is
advanced by more than 30 days or delayed by more than 60 days from such
anniversary date, in which case notice of such proposal must be received by the
Company no later than 10 days following the date on which public announcement of
the date of such meeting is first made.
OTHER MATTERS
The Board of Directors knows of no other proposals which may be presented for
action at the meeting. However, in accordance with the By-laws of the Company,
if any other proposal 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 or to vote your shares by telephone or via the
Internet.
By Order of the Board of Directors
Neil E. Jenkins
SECRETARY
April 11, 2001
11
APPENDIX A
LAWSON PRODUCTS, INC.
AUDIT COMMITTEE CHARTER
The Audit Committee is appointed by the Board of Directors for the primary
purposes of
- - Assisting the Board of Directors in fulfilling its oversight responsibilities
as they relate to the Company's accounting policies and internal controls,
financial reporting practices and legal and regulatory compliance, and
- - Maintaining, through regularly scheduled meetings, a line of communications
between the Board of Directors and the Company's financial management and
independent accountants.
The Audit Committee shall be appointed by the Board of Directors and shall be
comprised of three or more Directors (as determined from time to time by the
Board), each of whom shall meet the independence requirements of the Nasdaq
Stock Market, Inc. Each member of the Audit Committee shall have the ability to
understand fundamental financial statements. In addition, at least one member of
the Audit Committee shall have past employment experience in finance or
accounting, professional certification in accounting, or any other comparable
experience or background which results in the individual's financial
sophistication, including being or having been a chief executive officer or
other senior officer with financial oversight responsibilities.
The Audit Committee is responsible for securing from the outside auditors a
formal written statement delineating all relationships between the auditor and
the Company, consistent with Independence Standards Board Standard 1. The
Committee is responsible for actively engaging in a dialogue with the auditor
with respect to any disclosed relationships or services that may impact the
objectivity and independence of the auditor and for taking, or recommending that
the full Board take, appropriate action to oversee the independence of the
outside auditor.
The outside auditor is ultimately accountable to the Board of Directors and the
Audit Committee, as representatives of the shareholders. These shareholder
representatives have ultimate authority and responsibility to select, evaluate,
and, where appropriate, replace the outside auditor.
- --------------------------------------------------------------------------------
P
R
O
X
Y
[LAWSON PRODUCTS LOGO]
LAWSON PRODUCTS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING ON MAY 15, 2001
The undersigned hereby makes, constitutes and appoints Sidney L. Port and Robert
J. Washlow and each of them, proxies for the undersigned, with full power of
substitution, to vote on behalf of the undersigned at the Annual Meeting of
Stockholders of Lawson Products, Inc., to be held at the offices of the Company,
1666 East Touhy Avenue, Des Plaines, Illinois, on May 15, 2001, 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.
(continued and to be signed on other side)
- --------------------------------------------------------------------------------
o FOLD AND DETACH HERE IF YOU ARE RETURNING YOUR VOTED PROXY BY MAIL o
PLEASE SEE REVERSE SIDE FOR
INFORMATION ON VOTING YOUR
PROXY BY TELEPHONE OR INTERNET.
- --------------------------------------------------------------------------------
/X/ PLEASE MARK YOUR 5302
VOTES AS IN THIS
EXAMPLE.
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 BELOW.
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1.
- --------------------------------------------------------------------------------
1. ELECTION OF DIRECTORS: FOR WITHHELD Nominees:
01 Bernard Kalish
/ / / / 02 Sidney L. Port
03 Robert J. Washlow
FOR, except vote withheld from the following numbered nominee(s):
- --------------------------------------------------------------------------------
2. In their discretion, the proxy is authorized to vote on any other matter
that may properly come before the meeting or any adjournment thereof.
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 IN WHICH THEY SIGN. IF THE SIGNER IS A
CORPORATION, PLEASE SIGN FULL CORPORATION NAME BY DULY AUTHORIZED OFFICER. IF A
PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSON.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SIGNATURES(S) DATE
- --------------------------------------------------------------------------------
o FOLD AND DETACH HERE IF YOU ARE RETURNING YOUR VOTED PROXY BY MAIL o
[LAWSON PRODUCTS LOGO]
Dear Stockholder:
We encourage you to vote your shares electronically this year either by
telephone or via the Internet. This will eliminate the need to return your proxy
card. You will need your proxy card and Social Security number (where
applicable) when voting your shares electronically. The Voter Control Number
that appears in the box above, just below the perforation, must be used in order
to vote by telephone or via the Internet.
The EquiServe Vote by Telephone and Vote by Internet systems can be accessed
24-hours a day, seven days a week up until the day prior to the meeting.
TO VOTE BY TELEPHONE:
Using a touch-tone phone call Toll-free: 1-877-PRX-VOTE (1-877-779-8683)
TO VOTE BY INTERNET:
Log on to the Internet and go to the website:
HTTP://WWW.EPROXYVOTE.COM/LAWS
NOTE: IF YOU VOTE OVER THE INTERNET, YOU MAY INCUR COSTS SUCH AS
TELECOMMUNICATION AND INTERNET ACCESS CHARGES FOR WHICH YOU WILL BE
RESPONSIBLE.
THANK YOU FOR VOTING YOUR SHARES
YOUR VOTE IS IMPORTANT!
DO NOT RETURN THIS PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR THE INTERNET.