EXHIBIT 10.3
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GOVERNANCE RIGHTS AGREEMENT
GOVERNANCE RIGHTS AGREEMENT, dated as of January 31, 2005 ("Agreement"), among
Schawk, Inc. (the "Company"), Clarence W. Schawk, Marilyn G. Schawk, David A.
Schawk, A. Alex Sarkisian, as Trustee of the David A. Schawk Family Trust dated
11/30/88 F/B/O Colleen Teryl Schawk, as Trustee of the David A. Schawk Family
Trust dated 11/30/88 F/B/O Kara Elizabeth Schawk and as Trustee of the David A.
Schawk Family Trust dated 11/30/88 F/B/O Kelly Lynn Schawk (the "Principal
Schawk Stockholders") and Kohlberg Investors IV, L.P., Kohlberg TE Investors IV,
L.P, Kohlberg Offshore Investors IV, L.P., Kohlberg Partners IV, L.P., KOCO
Investors IV, L.P., Silver Point Capital Fund, L.P., Silver Point Capital
Offshore Fund, Limited, Hudson River Co-Investment Fund, L.P. and VO III, LLC
(the "KAGT Stockholders").
WITNESSETH:
WHEREAS, the Company desires to purchase all the outstanding shares of
KAGT Holdings, Inc. ("Holdings") from the KAGT Stockholders;
WHEREAS, the KAGT Stockholders wish to sell all the outstanding shares
of Holdings to the Company for a purchase price consisting of cash and 4,000,000
shares (the "Purchase Price Shares") of Class A Common Stock, $0.08 par value
per share (the "Common Stock");
WHEREAS, in connection with the sale of all of the outstanding shares
of Holdings by the KAGT Stockholders, as more fully described in the Stock
Purchase Agreement dated December 17, 2004 (the "Stock Purchase Agreement"), the
Company, the Principal Schawk Stockholders and the KAGT Stockholders wish to
document their mutual understanding and agreement of the ability of the KAGT
Stockholders to designate a director to the board of directors (the "Board of
Directors") of the Company;
THEREFORE, in order to induce the parties to enter into the Stock
Purchase Agreement and for other good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the Company, the Principal Schawk
Stockholders and the KAGT Stockholders hereby agree to take or cause to be taken
such corporate actions as may be reasonably required to cause the following:
1. Board Seat.
(a) For so long as the KAGT Stockholders own more than 10% of the
outstanding Common Stock, the holders of a majority of the Purchase Price Shares
held by the KAGT Stockholders shall have the right to designate one director of
the Company (the "KAGT Director"). The Company and the Principal Schawk
Stockholders shall take all necessary action to elect Christopher Lacovara (or
such other individual as the KAGT Stockholders may designate) as the initial
KAGT Director effective as of the Closing date (as defined in the Stock Purchase
Agreement).
(b) If a vacancy of a position held by a KAGT Director occurs or exists
on the Board of Directors at any time and for any reason, including but not
limited to a vacancy because of the death, disability, retirement, resignation
or removal of any director for cause or otherwise, then the KAGT Stockholders
shall have the sole right to designate an individual to fill such vacancy, and
the Company and the Principal Schawk Stockholders shall take all available steps
to elect such nominee to fill such vacancy.
(c) To the extent permitted by law, the Company shall use all
reasonable efforts to solicit from the stockholders of the Company eligible to
vote for the election of directors proxies in favor of the nominee designated by
the KAGT Stockholders.
(d) At the request of holders of a majority of the Purchase Price
Shares held by KAGT Stockholders, the Company shall (x) use all reasonable
efforts to (i) seek action by written consent as promptly as practicable
following such request to remove the KAGT Director, and the Principal Schawk
Stockholders shall join in executing any such consent as promptly as practicable
following such request, or (ii) if action by written consent of stockholders is
not then permitted by the certificate of incorporation and bylaws of the
Company, cause a special meeting of stockholders to be held proposing the
removal of the KAGT Director, provided that if in the reasonable good faith
determination of the Board of Directors it is materially detrimental to do so,
then the Company may delay calling such special meeting; provided that the
Company will cause such meeting to be held within 135 days of such request by
the KAGT Stockholders (and will permit an observer selected by the KAGT
Stockholders to attend all meetings of the Board of Directors held during such
135 day period) and (y) to the extent permitted by law, use all reasonable
efforts to solicit from stockholders of the Company eligible to vote for the
election of directors proxies to remove such KAGT Director, and the Principal
Schawk Stockholders shall vote for such removal.
(e) In the event that the KAGT Stockholders cease to own more than 10%
of the outstanding Common Stock, then immediately prior to the next annual
meeting of the stockholders of the Company at which the KAGT Director would
otherwise be entitled to seek reelection, the KAGT Director shall be subject to
removal. In such event, the KAGT Stockholders shall cause the KAGT Director to
tender, immediately prior to such annual meeting, his or her resignation from
the Board of Directors. In the event that the KAGT Director fails to deliver his
or her resignation, the Company and the Principal Schawk Stockholders shall be
entitled to take all necessary and appropriate action to cause such KAGT
Director to be removed.
(f) For so long as the KAGT Stockholders are entitled to designate a
KAGT Director, the KAGT Director shall be entitled to serve on each committee of
the Board of Directors to which such KAGT Director has agreed to serve, provided
that the KAGT Director shall serve on such committees only to the extent
permitted by applicable listing standards.
(g) For as long as the KAGT Stockholders own more than 2% of the
outstanding Common Stock or until such time as the Stockholders Representative
(as defined in the Stock Purchase Agreement) directs Schawk not to, Schawk shall
provide the Stockholders Representative with the same interim financial and
other information as provided to Schawk's Board of Directors at the same time as
such information is delivered to Schawk's Board of Directors,
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subject to receipt by Schawk of a confidentiality agreement reasonably
acceptable to Schawk.
2. Voting.
So long as the KAGT Stockholders own more than 10% of the outstanding
Common Stock of the Company, the Principal Schawk Stockholders agree to cause
all shares of Common Stock beneficially owned by them to be voted in favor of
(or, if requested by a majority of the KAGT Stockholders and then permitted by
the certificate of incorporation and bylaws of the Company, shall execute a
written consent, as promptly as practicable following such request, in favor of)
the election or removal of, as the case may be, the individual nominated as KAGT
Director.
3. Certain Charter and Bylaw Amendments. During the term of this
Agreement, the Company shall not amend or modify any provision of the
certificate of incorporation or bylaws of the Company in any way that prevents
the KAGT Stockholders from exercising their rights under this Agreement or
prevents the Principal Schawk Stockholders from honoring their obligations under
this Agreement in the manner and within the time periods contemplated by this
Agreement.
4. Miscellaneous.
(a) Further Assurances. Each party hereto shall execute, acknowledge
and deliver, or cause to be executed, acknowledged and delivered, such
instruments and take such other action as may be reasonably necessary or
advisable to carry out their obligations under this Agreement and under any
exhibit, document or other instrument delivered pursuant hereto.
(b) Amendment. This Agreement may be amended, supplemented or
interpreted at any time only by written instrument duly executed by each of the
parties hereto.
(c) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing pursuant to the terms of Section
13.5 of the Stock Purchase Agreement.
(d) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties.
Neither this Agreement nor any right or obligation hereunder is assignable by
any party except with the prior written consent of the other party or parties.
(e) Transfer. No Principal Schawk Stockholder may transfer shares of
Common Stock unless such transferee has duly executed a Joinder Agreement in
which it agrees to assume all of the transferor's obligations pursuant to this
Agreement and be treated as a Principal Schawk Stockholder hereunder (if not
already a Principal Schawk Stockholder party to this Agreement).
(f) Specific Performance. The parties hereto acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were
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not performed in accordance with their specific terms or were otherwise
breached. The parties hereto agree to waive any requirement for the posting of
any bond in connection with such remedy.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to principles
of conflict of laws.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement, and is intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto, in
respect of the subject matter contained herein. This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
(l) Termination. This Agreement shall terminate on the tenth (10th)
anniversary of the date hereof (the "Termination Date").
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IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto on the day and year first above written.
SCHAWK, INC.
By: /s/ David A. Schawk
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Name: David A. Schawk
Title: President and Chief Executive
Officer
PRINCIPAL SCHAWK STOCKHOLDERS:
/s/ Clarence W. Schawk
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Clarence W. Schawk
/s/ Marilyn G. Schawk
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Marilyn G. Schawk
/s/ David A. Schawk
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David A. Schawk
/s/ A. Alex Sarkisian
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A. Alex Sarkisian, as Trustee of the David A.
Schawk Family Trust dated 11/30/88 F/B/O
Colleen Teryl Schawk
/s/ A. Alex Sarkisian
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A. Alex Sarkisian, as Trustee of the David A.
Schawk Family Trust dated 11/30/88 F/B/O Kara
Elizabeth Schawk
/s/ A. Alex Sarkisian
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A. Alex Sarkisian, as Trustee of the David A.
Schawk Family Trust dated 11/30/88 F/B/O Kelly
Lynn Schawk
KOHLBERG INVESTORS IV, L.P.
By: Kohlberg Management IV, L.L.C.,
its general partner
/s/ Christopher Lacovara
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Name: Christopher Lacovara
Title: Vice President
KOHLBERG TE INVESTORS IV, L.P.
By: Kohlberg Management IV, L.L.C.,
its general partner
/s/ Christopher Lacovara
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Name: Christopher Lacovara
Title: Vice President
KOHLBERG OFFSHORE INVESTORS IV, L.P.
By: Kohlberg Management IV, L.L.C.,
its general partner
/s/ Christopher Lacovara
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Name: Christopher Lacovara
Title: Vice President
KOHLBERG PARTNERS IV, L.P.
By: Kohlberg Management IV, L.L.C.,
its general partner
/s/ Christopher Lacovara
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Name: Christopher Lacovara
Title: Vice President
KOCO Investors IV, L.P.
By: Kohlberg Management IV, L.L.C.,
its general partner
/s/ Christopher Lacovara
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Name: Christopher Lacovara
Title: Vice President
SILVER POINT CAPITAL FUND, L.P.
By: /s/ Jeffrey A. Gelfand
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Name: Jeffrey A. Gelfand
Title: Authorized Signatory
SILVER POINT CAPITAL OFFSHORE FUND, LIMITED
By: /s/ Jeffrey A. Gelfand
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Name: Jeffrey A. Gelfand
Title: Authorized Signatory
HUDSON RIVER CO-INVESTMENT FUND, L.P.
By: Hamilton Lane New York Co-Investment,
LLC, its general partner
By: Hamilton Lane Advisors, L.L.C., its
Managing Member
/s/ Mario L. Giannini
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Name: Mario L. Giannini
Title: Chief Executive Officer
VO III, LLC
By: /s/ Basil Vasihiou
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Name: Basil Vasihiou
Title: Manager