UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): December 23, 2004
LAWSON PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-10546 36-2229304
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1666 East Touhy Avenue, Des Plaines, Illinois 60018
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 827-9666
N/A
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
On December 23, 2004, Lawson Products, Inc. (the "Company") executed an
employment agreement with Robert J. Washlow, the current Chairman of the Board
of Directors and Chief Executive Officer of the Company (the "Executive"). The
employment agreement is effective as of January 1, 2004, and contains the terms
described below. The following summary description is qualified in its entirety
by reference to the employment agreement, which is attached to this Form 8-K as
Exhibit 10(c)(10), and is incorporated herein by reference.
The term of the employment agreement is for five years and the employment
agreement is self-renewing from year to year after the initial term unless
terminated by either party. Under the employment agreement, the Executive will
serve as Chief Executive Officer of the Company, or in such other capacity
mutually agreed upon by the Executive and the Company. The employment agreement
provides that the Executive will receive an annual base salary of $650,000,
which will be subject to periodic review and may be increased but not decreased.
The Executive will also be eligible for performance based bonuses as determined
by the Company's compensation committee. The Company may terminate the Executive
for or without cause. The Executive may terminate his employment with the
Company upon sixty days prior written notice. Either the Executive or the
Company may terminate the Executive's employment upon a "change of control" of
the Company, as such term is defined in the employment agreement.
If the Company terminates the Executive "without cause" or the Executive
terminates his employment for "good reason" (as such terms are defined in the
employment agreement), then the Company shall pay the Executive an amount equal
to two times the Executive's then current base salary and most recent annual
bonus; in addition, all previously unvested options and other rights granted to
the Executive shall immediately vest and become fully exercisable as of the date
of termination for a period of one year, and the Executive shall be covered
under the Company's health benefit plans for the later of three years after the
termination of employment or the date that the Executive and his spouse reach
the age of 65.
The employment agreement shall terminate upon the death of the Executive
and in such event, the Executive shall receive an amount equal to two times the
Executive's then current annual base salary and all previously unvested options
and other rights granted to the Executive shall vest and become fully
exercisable for one year after the termination date. In addition, the
Executive's spouse shall be entitled to be covered under the Company's health
benefit plans until she reaches the age of 65.
The employment agreement also terminates upon the "disability" of the
Executive (as the term "disability" is defined in the employment agreement).
Upon the termination due to a disability, all previously unvested options and
other rights granted to the Executive shall immediately vest and become fully
exercisable for one year after the termination date. The Executive and his
spouse shall also be entitled to be covered under the Company's health benefit
plans until they reach the age of 65.
Under certain circumstances after a change of control of the Company, the
Executive shall be entitled to receive a lump sum payment equal to three times
the Executive's then current annual base salary and most recent annual bonus; in
addition, all previously unvested options and rights granted to the Executive
shall immediately vest and become fully exercisable as of the date of
termination for a period of one year and the Executive shall be covered under
the Company's health benefit plans for the later of three years after the
termination of employment or the date that the Executive and his spouse reach
the age of 65. The Company shall also pay any excise taxes imposed by Section
4999 of the Internal Revenue Code of 1986 in connection with any payments made
due to a change of control of the Company, as provided in the employment
agreement.
In the employment agreement, the Executive has agreed not to compete with
the Company during the term of the employment agreement and for two years after
the effective date of the termination of the employment agreement.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits:
Exhibit 10(c)(10) Employment Agreement dated as of January 1, 2004
between the Company and Mr. Washlow.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
LAWSON PRODUCTS, INC.
Date: December 28, 2004 /s/ Thomas J. Neri
---------------------------------------------
Name: Thomas J. Neri
Title: Executive Vice President, Finance,
Planning and Corporate Development; Chief
Financial Officer; and Treasurer
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement") is made and entered into as of
January 1, 2004 (the "Effective Date"), by and between Lawson Products, Inc.
with its principal corporate offices at 1666 East Touhy Ave., Des Plaines, IL
(the "Company") and Robert J. Washlow (the "Executive").
1. Term of Employment. The Company hereby employs the Executive for 5
years, commencing as of the Effective Date, unless sooner terminated by either
party in accordance with the terms of paragraphs 4 and 5 below. The Agreement
will be self renewing from year to year after the initial term unless terminated
by either party in accordance with the terms of paragraphs 4 and 5 below.
2. Position and Duties. During the term of this Agreement, the Executive
will serve as Chief Executive Officer of the Company, or in such other capacity
mutually agreed between the Executive and the Company by written amendment of
this Agreement. The Executive's duties and authorities will consist of all
duties and authority customarily performed and held by persons holding
equivalent positions in companies similar in nature and size to the Company as
such duties and authority are reasonably defined, modified and delegated from
time to time by the Board of Directors of the Company (the "Board"). Executive
will report solely to the Board.
3. Compensation.
(a) Base Salary. The Executive will receive a base salary of $650,000
per annum, payable in accordance with the Company's payroll schedule as may be
in effect from time to time during the term of this Agreement. The base salary
will be subject to periodic review, and may be increased, but not decreased by
the Company at any time.
(b) Bonuses. The Executive will also be eligible for additional
performance based compensation based upon Executive's ability to meet or exceed
the targeted expectations applicable to his position, as a reward for his
performance and contributions, as the Compensation Committee of the Board in its
sole discretion may determine is appropriate.
(c) Business Expenses. The Company will reimburse the Executive for
authorized business expenses necessarily and reasonably incurred on behalf of
the Company and which are documented in accordance with Company policy.
Executive will cause a summary of such expenses to be submitted to the Audit
Committee of the Board annually.
(d) Stock Options. The Executive will be eligible for stock options,
stock awards or other such equity-based compensation opportunities from time to
time during his employment in the sole discretion of the Compensation Committee
of the Board.
(e) Benefits. The Executive may participate at his election from time
to time in group health, dental, disability, life insurance, profit sharing,
401(k), "executive deferral" plan, flexible spending and other benefit plans
offered by the Company from time to time, subject to the terms, conditions and
eligibility restrictions of the plans in effect from time to time and upon
payment of any required employee contribution to the cost of coverage.
4. Termination.
(a) Termination for Cause. The Company may terminate the Executive's
employment by the Company for "Cause." Termination for "Cause" by the Company
will mean: (1) the Executive's theft or embezzlement of the Company's money,
equipment or securities, provided, however, good faith disagreements concerning
the Executive's business expenses will not constitute theft or embezzlement; (2)
the Executive being found guilty of a felony (other than a traffic violation);
(3) the Executive's willful and deliberate act or omission or gross negligence
which results in material injury to the Company; (4) material breach of any of
the Executive's obligations under the Agreement, which has not been cured within
30 days of written notice thereof to the Executive; or (5) the Company receives
from the Executive notice of voluntary termination by the Executive without
"Good Reason" pursuant to paragraph 4(f).
(b) Termination for Good Reason by Executive. The Executive may
terminate his employment by the Company for "Good Reason," Termination for "Good
Reason" by the Executive will mean the occurrence or failure to cause the
occurrence, without the Executive's express written consent, of any of the
following circumstances unless such circumstances are fully corrected within 30
days of the Executive giving written notice thereof: (1) any demotion of the
Executive or any reduction in the Executive's authority or responsibility,
except in connection with the termination of the Executive's employment for
Cause, as a result of the Executive's Disability or death, or temporarily as a
result of the Executive's illness; (2) relocation of the principal employment
location of more than 25 miles from the Company's current principal place of
business without the consent of the Executive; or (3) reduction of then current
annual base compensation, material modification to any of Company's incentive
plans which modification results in a material reduction in Executive's
incentive compensation under such plan or plans, or reduction in benefits by
Company other than amendments or modifications by Company to any of its benefit
plans in the ordinary course of business,
(c) Termination Due to Death. The Agreement will terminate upon the
death of Executive, except as to payments due hereunder or under any benefit
plan of Company in which the Executive was then participating through the date
of Executive's death, to Executive's estate or to his beneficiaries which
obligations shall survive.
(d) Termination Due to Disability. The Agreement will terminate upon
the "Disability" of the Executive. "Disability" will mean the Executive's
inability, as a result of physical or mental incapacity, to substantially
perform the essential functions of his position hereunder for a period of either
6 consecutive months or 180 business days within a consecutive 12 month period.
In the event of a dispute regarding whether the Executive is disabled, the
dispute shall be resolved through arbitration as provided in paragraph 9 below,
provided, however, that the arbitrator shall be a duly licensed medical doctor.
(e) Termination Without Cause by the Company. The Company may
terminate the Executive's employment without cause upon written notice to
Executive.
(f) Voluntary Termination by Executive Without Good Reason. The
Executive may voluntarily terminate his employment by the Company upon 60 days
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written notice to the Company. The Company may then terminate the Executive on
or after the date it receives such notification.
(g) Termination by the Company or the Executive Due to Change in
Control. The Executive may terminate his employment by the Company or the
Company may terminate the Executive's employment due to a Change in Control, all
under the circumstances provided in Section 5(e) below. For purposes hereof, a
"Change in Control" shall be deemed to have occurred if:
(i) any "person" or "group" of "persons" (as such terms are used
in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended, and the rules promulgated thereunder), other than Sidney L.
Port, Ronald B. Port, Roberta Washlow and Sandra Errant, or any of
them and/or their respective spouses, children, heirs, assigns or
affiliates (the `Port Group"), is or becomes the beneficial owner,
directly or indirectly, of securities of the Company representing
voting power of the then outstanding voting securities of the Company
greater than the voting power of the Port Group; or
(ii) there is a merger, consolidation or reorganization involving
the Company, or any direct or indirect subsidiary of the Company,
unless:
(A) the stockholders of the Company immediately before such
merger, consolidation or reorganization will own, directly
or indirectly, immediately following such merger,
consolidation or reorganization, at least fifty percent
(50%) of the combined voting power of the outstanding voting
securities of the corporation resulting from such merger,
consolidation or reorganization (the "Surviving
Corporation") or any parent thereof in substantially the
same proportion as their ownership of the voting securities
of the Company immediately before such merger, consolidation
or reorganization; and
(B) the individuals who were members of the Board
immediately prior to the execution of the agreement
providing for such merger, consolidation or reorganization
constitute a majority of the members of the board of
directors of the Surviving Corporation (or parent thereof);
and
(C) no "person" or "group" of "persons" as defined above,
other than the Port Group, is the beneficial owner of twenty
percent (20%) or more of the combined voting power of the
then outstanding voting securities of the Surviving
Corporation (or parent thereof); or
(iii) there is a complete liquidation or dissolution of the
Company without a successor; or
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(iv) there is a sale or other disposition of all or substantially
all of the assets of the Company to an entity other than an entity:
(A) of which at least fifty percent (50%) of the combined
voting power of the outstanding voting securities are owned,
directly or indirectly, by stockholders of the Company in
substantially the same proportion as their then current
ownership of the voting securities of the Company; and
(B) of which a majority of the board of directors is
comprised of the individuals who were members of the Board
of the Company immediately prior to the execution of the
agreement providing for such sale or disposition; and
(C) of which no "person" or "group" of "persons" as defined
above, other than the Port Group, is the beneficial owner of
twenty percent (20%) or more of the combined voting power of
the then outstanding voting securities of the Surviving
Corporation (or parent thereof); or
(v) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board"), cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming
a director subsequent to the effective date hereof whose election, or
nomination for election by Company stockholders, was approved by a
vote of at least four-fifths (4/5) of the directors then comprising
the Incumbent Board shall be considered as though such individual were
a member of the Incumbent Board, unless any such individual's initial
assumption of office occurs as a result of either an actual or
threatened election contest (including, but not limited to, a consent
solicitation).
5. Payments Due Upon Termination.
(a) Payments Due Upon Termination for Cause by the Company or by
Voluntary Termination Without Good Reason by Executive. If the Company
terminates Executive for "Cause" pursuant to paragraph 4(a) above or Executive
terminates his employment voluntarily without "Good Reason" pursuant to
paragraph 4(f) above, the Company shall have no obligation to Executive except:
(i) the Company shall pay Executive any accrued and unpaid Base Salary and any
accrued and unused vacation pay through the effective date of Executive's
termination, and any other monies owed to or accrued for the benefit of
Executive by the Company, including monies owed pursuant to any plan or benefits
provided by or through the Company in which Executive was then participating at
that time; (ii) Executive shall be entitled to exercise any vested stock
options, stock appreciation rights and stock performance rights; and (iii)
Executive shall be entitled to all post-employment benefits required under
applicable law.
(b) Payments Due Upon Termination for Good Reason by Executive or
Without Cause by the Company. If Executive terminates his employment with the
Company for "Good Reason" pursuant to paragraph 4(b) above or the Company
terminates Executive Without "Cause" pursuant to paragraph 4(e) above, the
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Company shall have no obligation to Executive except: (i) the Company shall pay
Executive a lump sum payment equal to two times the Executive's then current
annual base salary and most recent annual bonus; (ii) the Company shall pay
Executive any accrued and unpaid Base Salary, any accrued and unpaid bonus, and
accrued and unused vacation pay through the effective date of Executive's
termination, and any other monies owed to or accrued for the benefit of
Executive by the Company, including monies owed pursuant to any plans or
benefits provided by or through the Company in which Executive was then
participating at that time; (iii) all previously unvested stock options, stock
appreciation rights and stock performance rights then owned by Executive shall
immediately vest and become fully exercisable as of the date of termination for
a period of one year; (iv) Executive shall continue to be covered (or to have
the right to maintain his own coverage), at the Company's expense for health,
medical and term life insurance as provided in paragraph 3(e) above, on the same
basis as prior to the termination, including any dependant coverage, to the
later of the third anniversary date of the effective date of termination of
Executive, and the date on which Executive and Executive's spouse have both
attained age 65; and (v) Executive shall be entitled to all post-employment
benefits required under applicable law.
(c) Payments Due Upon Termination Due to Death. If the Agreement is
terminated due to death pursuant to paragraph 4(c) above, the Company shall have
no obligation to Executive, except the Company shall pay Executive's estate or
his beneficiaries: (i) a lump sum payment equal to two times Executive's then
current annual base salary; (ii) any accrued and unpaid Base Salary and accrued
and unused vacation pay through the date of Executive's death, and any other
monies owed to or accrued for the benefit of Executive by the Company, including
monies owed pursuant to any plans or benefits provided by or through the Company
in which Executive was then participating at the time of death; and (iii) all
previously unvested stock options, stock appreciation tights and stock
performance rights then owned by Executive shall immediately vest and become
fully exercisable as of the date of termination for a period of one year.
Notwithstanding the foregoing, in the event of termination of the Agreement due
to Executive's death, Executive's spouse shall be entitled to continue to be
covered (or have the right to maintain her own coverage) at the Company's
expense for health and medical insurance on the same basis as prior to the
termination until Executive's spouse attains age 65.
(d) Payments Due Upon Termination Due to Disability. If the Agreement
is terminated due to "Disability" pursuant to paragraph 4(d) above, the Company
shall have no obligation to Executive, except the Company shall pay Executive:
(i) continued then current annual base salary for 36 months, provided, however,
while the Company is making such payments, the Company will be entitled to
receive in money or by credit against such payments a sum equal to any long-term
disability insurance benefits paid to or for the benefit of Executive for such
period; (ii) any accrued and unpaid Base Salary and accrued and unused vacation
pay through the date of Executive's termination due to Disability, and any other
monies owed to or accrued for the benefit of Executive by the Company, including
monies owed pursuant to any plans or benefits provided by or through the Company
in which Executive was then participating at the time of disability; (iii) all
previously unvested stock options, stock appreciation tights and stock
performance rights then owned by Executive shall immediately vest and become
fully exercisable as of the date of termination for a period of one year; and
(iv) Executive shall be entitled to all post-employment benefits required under
applicable law. Notwithstanding the foregoing, in the event of termination of
the Agreement due to Executive's disability, Executive and Executive's spouse
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shall be entitled to continue to be covered (or have the right to maintain their
own coverage) at the Company's expense for health and medical insurance on the
same basis as prior to the termination until Executive and Executive's spouse
each attains age 65.
(e) Payments Due Upon Termination Due To Change in Control. In the
event of a "Change in Control" (as defined in paragraph 4(g) above), if: (x)
Executive remains employed by the Company for a one year period after the
"Change in Control" occurs or for such shorter period as the Company requests,
and Executive voluntarily terminates his employment within 3 months thereafter,
or (y) the Company or its successor terminates the Executive Without "Cause"
within 24 months after the "Change of Control" occurs, or (z) Executive
terminates his employment for "Good Reason" within 12 months after the "Change
of Control" occurs, then: (I) the Company shall pay Executive a lump sum payment
equal to 3 times the Executive's then current annual base salary and most recent
annual bonus; (ii) the Company shall pay Executive any accrued and unpaid Base
Salary and accrued and unused vacation pay through the effective date of
Executive's termination, and any other monies owed Executive by the Company at
that time; (iii) all previously unvested stock options, stock appreciation
rights and stock performance tights then owned by Executive shall immediately
vest and become fully exercisable as of the date of termination for a period of
one year; (iv) Executive shall continue to be covered (or to have the right to
maintain his own coverage), at the Company's expense for health, medical and
term life insurance as provided in paragraph 3(e) above, on the same basis as
prior to the termination, including any dependant coverage, to the later of the
third anniversary date of the effective date of termination of Executive and the
date on which Executive and Executive's spouse both have attained age 65; and
(v) Executive shall be entitled to all post-employment benefits required under
applicable law.
(f) Release. As a condition of receiving all payments due to Executive
pursuant to this Agreement and any other plan or agreement in existence at the
time of termination pursuant to which Executive is entitled to receive a payment
or payments from the Company, the Executive or a representative of his estate or
his beneficiaries shall execute and deliver to the Company a general release
(with other similar standard provisions) of the Company and its directors and
employees from all claims of any kind whatsoever arising out of Executive's
employment or termination thereof (including without limitation, all applicable
federal, state and local civil tights' and discrimination claims, but excluding
rights under this Agreement or such other plan or agreement entitling Executive
to payment) in such form as requested by the Company.
6. Indemnification.
(a) During the term of this Agreement and thereafter throughout all
applicable limitation periods, the Company shall provide the Executive
(including his heirs, personal representatives, executors and administrators)
with such coverage, as will be generally available to senior officers of the
Company under the Company's then current directors and officers liability
insurance policy at the Company's sole expense.
(b) In addition to the insurance coverage provided for in paragraph
6(a) above, the Company shall defend., hold harmless and indemnify the Executive
(and his heirs, personal representatives, executors and administrators) to the
fullest extent permitted under applicable law, against all expenses and
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liabilities reasonably incurred by him in connection with or arising out of any
action, suit or proceeding in which the Executive may be involved by reason of
his having been an officer, director or employee of the Company (whether or not
he continues to be an officer, director or employee of the Company at the time
such expenses or liabilities are incurred), such expenses and liabilities to
include, but not be limited to, judgments, court costs, attorneys' fees and the
cost of reasonable settlements. The Company shall maintain bylaws authorizing
such indemnification of the Executive to the fullest extent permitted by law.
(c) In the event the Executive becomes a party, or is threatened to be
made a party, to any action, suit or proceeding for which the Company has agreed
to provide insurance coverage or indemnification under this paragraph, the
Company shall, to the fullest extent permitted under applicable law, advance all
expenses (including the reasonable attorneys' fees, related fees and expenses,
judgments, fines and amounts paid in settlement (collectively "Expenses")
incurred by the Executive in connection with the investigation, defense,
settlement or appeal of any threatened, pending or completed action, suit or
proceeding. Executive agrees to reimburse the Company for the amount of all of
the expenses actually paid by the Company to or on behalf of the Executive in
the event a court or arbitrator, as applicable to the case, ultimately
determines that the Executive is not entitled to indemnification by the Company
for such expenses. The Executive also agrees to assign to the Company all tights
of the Executive to insurance proceeds under any policy of directors and
officers liability insurance to the extent of the amount of the expenses
actually paid by the Company to or on behalf of the Executive.
7. Gross-Up Payment.
(a) In the event that any payment received by the Executive or paid by
the Company on behalf of the Executive under this Agreement or under any other
plan, arrangement or agreement with the Company or any person whose actions
result in a Change in Control (collectively, the "Total Payments") will be
subject to the excise tax (the "Excise Tax") imposed by Section 4999 (or any
successor provision) of the Internal Revenue Code of 1986, as amended (the
"Code"), the Company shall pay to the Executive an additional amount (the
"Gross-Up Payment") as computed under Section 7(f) hereof,
(b) For purposes of determining whether any of the Total Payments will
be subject to the Excise Tax and the amount of such Excise Tax, (i) the Total
Payments shall be treated as "parachute payments" within the meaning of Section
280G(b)(2) of the Code, and all "excess parachute payments" within the meaning
of Section 280G(b)(l) of the Code, shall be treated as subject to the Excise
Tax, unless in the written opinion of tax counsel selected by mutual agreement
of Executive and Company such other payments or benefits (in whole or in part)
do not constitute parachute payments, including by reason of Section
280G(b)(4)(A) of the Code, or such excess parachute payments (in whole or in
part) represent reasonable compensation for services actually rendered, within
the meaning of Section 280G(b)(4)(B) of the Code, in excess of the base amount,
as defined in Section 280G(b)(3)(A) of the Code (the "Base Amount") allocable to
such reasonable compensation, or are otherwise not subject to the Excise Tax,
and (ii) the value of any non-cash benefits of any deferred payment or benefit
shall be determined by the Company's independent auditors in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code.
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(c) For purposes of determining the amount of the Gross-Up Payment,
the Executive shall be deemed to pay federal income and other taxes at the
highest applicable marginal rate of taxation in the calendar year in which the
Gross-Up Payment is to be made and state and local income and other taxes at the
highest applicable marginal rate of taxation in the state and locality of the
Executive's residence on the date the Gross-Up Payment is to be made, net of the
maximum reduction in federal income taxes which could be obtained from deduction
of such state and local taxes and any other taxes. In the event that the Excise
Tax is subsequently determined to be less than the amount taken into account
hereunder, the Executive shall repay to the Company, at the time that the amount
of such reduction in Excise Tax is finally determined or upon the Executive's
receipt of a refund from the taxing authorities of the amount attributable to
the reduction in the excise tax, whichever is later, the portion of the Gross-Up
Payment attributable to such reduction (plus that portion of the Gross-Up
Payment attributable to the Excise Tax and federal, state and local income and
other taxes imposed on the Gross-Up Payment being repaid by the Executive to the
extent that such repayment results in a reduction in Excise Tax and/or a
federal, state or local income tax deduction) plus interest on the amount of
such repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the
event that the Excise Tax is determined to exceed the amount taken into account
hereunder (including by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment), the Company shall
make an additional Gross-Up Payment in respect of such excess (plus any
interest, penalties or additions payable by the Executive with respect to such
excess) at the time that the amount of such excess is finally determined. The
Executive and the Company shall each reasonably cooperate with the other in
connection with any administrative or judicial proceedings concerning the
existence or amount of liability for Excise Tax with respect to the Total
Payments.
(d) The Gross-Up Payment payable under this Agreement shall be payable
on the earlier of (i) the date the Company is required to withhold the Excise
Tax pursuant to Section 4999 of the Code, or (ii) five (5) business days prior
to the date the Executive is required to pay the Excise Tax.
(e) Executive shall notify the Company in writing of any audit or
review by the Internal Revenue Service of the Executive's federal income tax
return relating to any payment under this Agreement within ten (10) days of the
Executive's receipt of notice of such audit or review. In addition, the
Executive shall notify the Company in writing of the final resolution of such
audit or review within ten (10) days of such resolution.
(f) The parties hereto intend that the gross-up contemplated by this
Section 7 shall not apply to amounts received by the Executive under the Lawson
Products, Inc. Long-Term Capital Accumulation Plan (the "CAP"). The parties
further intend that the Gross-Up Payment shall be computed such that the net
amount retained by the Executive with respect to all amounts other than the CAP
(the "Non-CAP Compensation"), after deduction of any Excise Tax on the Non-CAP
Compensation and of any federal, state and local income, excise or other taxes
upon the Gross-Up Payment shall be equal to the Non-CAP Compensation. For
purposes of such computation: (i) the Total Payments shall be taken into account
in determining whether Excise Tax is due, and (ii) the Base Amount shall be
deemed to be allocated first to amounts received under the CAP.
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8. Protection of Company Assets.
(a) Non-Competition. During Executive's employment by the Company and
for two years after the effective date of termination of Executive's employment
with the Company, whether voluntary or involuntary and regardless of the reason,
or if for no reason, Executive will not, without the prior written consent of
the Company, engage in "Competition" with the Company. For purposes of this
paragraph 8, Company shall mean Lawson Products, Inc. and each of its
subsidiaries and affiliates. For purposes of this Agreement, "Competition" shall
mean: participating, directly or indirectly, as an advisor, principal, agent,
partner, officer, director, employee, stockholder, member, owner, associate,
consultant or in any capacity whatsoever in a business in competition, as
determined by the Company in its reasonable discretion, with any business
conducted by the Company as of the effective date of termination, The
prohibition against being a stockholder in a competing company shall not apply
to any publicly traded company in which the Executive has less than a one
percent ownership interest,
(b) Trade Secrets, Confidential Information anti Customer
Relationships. Executive acknowledges that: (1) the Company has developed and
will continue to develop at great expense confidential information and trade
secrets, including without limitation, identities of the Company's clients,
customers, manner and methods of doing business, pricing, financial information,
the Company's plans, activities and systems under development, and all other
nonpublic information about the Company's business ("Confidential Information");
(2) the Company has developed and will continue to develop at great expense near
permanent relationships with its clients and customers; (3) in the course of his
employment for the Company, the Executive will learn Confidential Information,
and will have contact with and access to the Company's clients and customers;
(4) competitors of the Company could utilize the Company's Confidential
Information to the Company's detriment; and (5) the Company would suffer
irreparable harm if the Executive was to make Confidential Information known to
others and/or use the Executive's access to the Company's clients, customers,
and/or referral sources to impair the Company's near permanent relationships
with them,
(c) Confidentiality. The Executive agrees that the Executive will not
divulge to any person, or use for any purpose other than the performance of his
duties for the Company, the Confidential Information. Notwithstanding the
foregoing, the Executive is not restricted from using any information that has
become public, or any knowledge acquired during the course of his employment
with the Company that is generally known to persons of the Executive's
experience at other companies in the industry.
(d) Non-Solicitation. During the Executive's employment by the Company
and two years after the date Executive receives the final payment of monies due
under this Agreement, whether Executive's termination was voluntary or
involuntary and regardless of the reason, if any, the Executive agrees that the
Executive will not: (1) solicit business which is competitive with the business
of the Company, directly or indirectly, from any client or customer of the
Company with whom the Executive had any contact or about whom the Executive
acquired any Confidential Information during his employment by the Company, or
encourage any such client or customer to cease doing business with the Company;
or (2) recruit, solicit or encourage any employee to leave the employ of the
Company, or recruit, solicit or encourage any independent agent to terminate the
agent's relationship with Company.
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(e) Return of Property. Upon termination of the Executive's employment
by the Company, whether voluntary or involuntary and regardless of the reason if
any, the Executive will return to the Company all Confidential Information and
all other originals and copies of all materials of any type which the Executive
obtained in the course of his employment with the Company, including without
limitation, lists of clients, customers, pricing or other financial information,
keys, computer equipment and discs and office equipment.
(f) Assignment of Intellectual Property Rights. The Executive agrees
to assign to the Company any and all intellectual property rights including
patents, trademarks, copyright arid business plans or systems developed,
authored or conceived by the Executive, whether alone or jointly, while employed
by and relating to the business of the Company. The Executive agrees to
cooperate with the Company to perfect ownership rights thereof in the Company.
This agreement does not apply to an invention for which no equipment, supplies,
facility or Confidential Information of Company was used1 and which was
developed entirely on the Executive1s own time, unless: (1) the invention
relates to the business of the Company or to actual or anticipated research or
development of the Company; or (2) the invention results from any work performed
by the Executive for the Company.
(g) Remedies. The Executive acknowledges that the Company would be
irreparably injured if the Executive violated any of the provisions of paragraph
8 of this Agreement, and that actual damages due to any such breach may be
difficult to ascertain and would be inadequate. The Executive agrees that if the
Executive breaches any of the provisions of paragraph 8 of this Agreement, the
Company will be entitled, in addition to any other remedies and damages
available, to an injunction and/or temporary restraining order to restrain any
violation or threatened violation by the Executive and all persons acting with
or for the Executive.
9. Disputes. The Company and the Executive agree to attempt to resolve any
employment related dispute between them quickly and fairly, and in good faith.
Should such a dispute remain unresolved, the Company and the Executive
irrevocably and unconditionally agree to submit to the exclusive jurisdiction of
the courts of the State of Illinois and of the United States located in Chicago,
Illinois over any suit, action or proceeding arising out of or relating to this
Agreement. The Company and the Executive irrevocably and unconditionally agree
to personal jurisdiction and venue of any such suit, action or proceeding in the
courts of the State of Illinois or of the United States located in Chicago,
Illinois.
10. Cooperation After Termination of Agreement. Following termination of
this Agreement, regardless of the reason for termination, the Executive will
reasonably cooperate with the Company in the prosecution or defense of any
claims, controversies, suits, arbitrations or proceedings involving events
occurring prior to the termination of this Agreement. Executive acknowledges
that in light of his position as Chief Executive Officer of the Company, he is
in the possession of confidential information that may be privileged under the
attorney-client and/or work product privileges. Executive agrees to maintain the
confidences and privileges of the Company and acknowledges that any such
confidences and privileges belong solely to the Company and can only be waived
by the Company, not Executive. In the event Executive is subpoenaed to testify
or otherwise requested to provide information in any matter, including without
limitation, any court action, administrative proceeding or government audit or
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investigation, relating to the Company, Executive agrees that: (a) he will
promptly notify the Company of any subpoena, summons or other request to testify
or to provide information of any kind no later than three days after receipt of
such subpoena, summons or request and, in any event, prior to the date set for
him to provide such testimony or information; (b) he will cooperate with the
Company with respect to such subpoena, summons or request for information; (c)
he will not voluntarily provide any testimony or information without permission
of the Company unless required by law; (d) he will permit the Company to be
represented by an attorney of the Company's choosing at any such testimony or
with respect to any such information to be provided; and (e) he will follow the
instructions of the attorney designated by the Company with respect to whether
testimony or information is privileged by the attorney-client and/or work
product privileges of the Company. The parties agree that the Company shall be
responsible for all expenses of Executive incurred in connection with the
fulfillment of Executive's obligations under this paragraph 10.
11. Miscellaneous.
(a) The Agreement supersedes any prior agreements, and expresses the
entire agreement between the parties with respect to the Executive's employment
by the Company, provided, however, the terms of any benefit plan will remain
applicable to the particular benefit plan and the terms of the CAP will remain
applicable to the CAP. The parties agree and acknowledge that the definitions of
terms applicable to this Agreement are different than the definitions of those
same terms of the CAP, and may result in seemingly contradictory results. For
example, a change in control under this Agreement may not constitute a change in
control under the CAP. The parties agree and acknowledge that such seemingly
contradictory results are intended, and that this Agreement shall be governed
solely by the terms and definitions set forth herein and that the CAP shall be
governed solely by the terms and definitions set forth in the CAP.
(b) Any modification of the Agreement must be in writing and signed by
both parties.
(c) If any provision of the Agreement is found by a court to be
unenforceable in whole or in part for any reason, the remaining provisions of
the Agreement will remain in effect and shall be enforceable to the fullest
extent permitted by law.
(d) The Agreement is binding upon and shall inure to the benefit of
the Executive's heirs, executors, administrators or other legal representatives,
and upon the successors of, or any company into which, the Company merges or
consolidates. The Agreement, as being one for personal services, is not
assignable by either party, without the written consent of the other party.
(e) The Agreement shall be governed by and construed in accordance
with the Jaws of the State of Illinois without regard to the choice of law or
conflict of law principles thereof.
(f) Any notice by any party to the other party must be mailed by
registered or certified mail, postage prepaid, to the address specified below,
or to any change of address indicated by either party upon receipt of written
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notice of same. Notice will be deemed received on the third business day
following the day on which it was mailed, postage prepaid.
AGREED: AGREED:
LAWSON PRODUCTS, INC. ROBERT J. WASHLOW
By: /s/ Jeffrey B. Belford /s/ Robert J. Washlow
--------------------------------------- ---------------------
Name: Jeffrey B. Belford
Title: President & Chief Operating Officer
Date: December 21, 2004 Date: December 21, 2004
NOTICE ADDRESS: NOTICE ADDRESS:
Lawson Products, Inc. 700 North Green Bay Road
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1666 East Touhy Avenue Lake Forest, IL 60014
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Des Plaines, IL 60018
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Acknowledged and approved this 23rd day of December, 2004, by the Compensation
Committee of the Board of Directors of Lawson Products, Inc.
By: /s/ Robert G. Rettig
--------------------------------
Chairman
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