SEVENTH MODIFICATION OF LOAN DOCUMENTS

 

DATED AS OF DECEMBER 26, 2007

 

by and among

 

Lawson Products, Inc., a Delaware Corporation

 

AND

 

LASALLE BANK NATIONAL ASSOCIATION

 

 

 

 

 

 

 

 

 

 

 

 

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SEVENTH MODIFICATION OF LOAN DOCUMENTS

 

THIS SEVENTH MODIFICATION OF LOAN DOCUMENTS (this "Modification") is made as of
the 26th day of December 2007, by and among Lawson Products, Inc., a Delaware
Corporation (“Lawson”), with its principal place of business and chief executive
office at 1666 E. Touhy Ave., Des Plaines, Illinois, 60018, various Subsidiaries
of Lawson listed on Schedule 6.12 to the Credit Agreement (Lawson and the
Subsidiaries may be referred to herein collectively as the "Borrower") and
LASALLE BANK NATIONAL ASSOCIATION, a national banking association, its
successors and assigns ("Lender").

 

 

R E C I T A L S:

 

A.           Lender has heretofore made a loan ("Loan") to Borrower in the
principal amount of Fifty Million and no/100 Dollars ($50,000,000) pursuant to
the terms and conditions of a Credit Agreement dated as of March 27, 2001
between Borrower and Lender, (the "Credit Agreement", all terms not otherwise
defined herein shall have the meanings set forth in the Credit Agreement, as
amended), and as evidenced by a Promissory Note dated March 27, 2001, in the
principal amount of the Loan made payable by Borrower to the order of Lender
("Note").

 

B.           The Credit Agreement was amended (i) as of August 12, 2002 to,
among other things, add a letter of credit subfacility; (ii) as of July 11, 2003
to, among other things, increase the availability under the letter of credit
subfacility; (iii) as of May 31, 2005 to, among other things, increase the
Maximum Facility, (iv) as of November 30, 2006 to, among other things, modify
the interest rate to be charged on the facility; (v) as of January 31, 2007 to,
among other things, acknowledge Lawson’s liquidation and dissolution Assembly
Component Systems, Limited, a United Kingdom corporation (“ACSL”), a Subsidiary
of Lawson, and therefore release ACSL from the facility; and (vi) as of June 21,
2007 to, among other things, increase the letter of credit subfacility and
modify certain financial covenants.

 

C.           Borrower has requested that the Credit Agreement be further
modified in order to increase certain subfacilities, and the Lender has agreed
modify those subfacilities upon the terms and conditions hereinafter set forth.

 

 

AGREEMENTS:

 

NOW, THEREFORE, in consideration of (i) the facts set forth hereinabove (which
are hereby incorporated into and made a part of this Modification with the
intent that Lender may rely upon the matters therein recited as representations
and warranties of Borrower), (ii) the agreements by Lender to modify the Loan
Documents, as provided herein, (iii) the covenants and agreements contained
herein, and (iv) for other good and valuable consideration, the receipt,
adequacy and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:

 

 

 

 

 

 

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1.            Modification to the Loan Agreement Definitions. Section 1.1 of the
Credit Agreement is hereby amended by amending and restating the definitions of
“Maximum Commercial Card Obligation” and “Maximum Letter of Credit Obligation”:

 

“Maximum Letter of Credit Obligation” shall mean Ten Million and no/100 Dollars
($10,000,000).

 

“Maximum Commercial Card Obligation” shall mean Bank Product Obligations
incurred with respect to purchase cards pursuant to Master Commercial Card
Agreement (as hereinafter defined), not to exceed at any, time Seven Hundred
Thousand and no/100 Dollars ($700,000).

 

2.            Modification certain financial covenants. Borrower has accrued
during Fiscal Year 2007 severance to one or more of the Borrower’s former
management executives in the approximate aggregate amount of $11,071,000 (the
“Severance Obligations”). For purposes of calculating Fixed Charge Coverage
Covenant set forth in Section 8.13(C) of the Agreement, and Total Debt to
consolidated EBITDA set forth in Section 8.13(G) of the Agreement, the Severance
Obligations accrued in any Fiscal Quarter during Fiscal Year 2007 shall not be
classified as a reduction to EBITDA for the applicable measurement period for
such Fiscal Quarter. After all Fiscal Year 2007 Fiscal Quarters have, on a
rolling Fiscal Quarter basis, ceased being a part of the financial covenants
described above, this modification to EBITDA shall be of no force or effect.

 

3.            Representations and Warranties of Borrower. Borrower hereby
represents, covenants and warrants to Lender as follows:

 

(a)          The representations and warranties in the Credit Agreement, and the
other Loan Documents are true and correct as of the date hereof.

 

(b)          There is currently no Default under the Note, the Credit Agreement
or the other Loan Documents and Borrower does not know of any event or
circumstance which would constitute a Default under the Note, the Credit
Agreement or the other Loan Documents.

 

(c)          The Loan Documents are in full force and effect and, following the
execution and delivery of this Modification, they continue to be the legal,
valid and binding obligations of Borrower enforceable in accordance with their
respective terms, subject to limitations imposed by general principles of
equity.

 

(d)          There has been no material adverse change in the financial
condition of Borrower or any other party whose financial statement has been
delivered to Lender in connection with the Loan from the date of the most recent
financial statement received by Lender.

 

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(e)          As of the date hereof, Borrower has no claims, counterclaims,
defenses, or set-offs with respect to the Loan or the Loan Documents as modified
herein.

 

(f)           Borrower is validly existing under the laws of the State of its
formation or organization and has the requisite power and authority to execute
and deliver this Modification and to perform the Loan Documents as modified
herein. The execution and delivery of this Modification and the performance of
the Loan Documents as modified herein have been duly authorized by all requisite
action by or on behalf of Borrower. This Modification has been duly executed and
delivered on behalf of Borrower.

 

4.           Conditions Precedent. The agreement of Lender to amend the Loan
Documents as set forth herein is subject to the following conditions precedent:

 

(a)          Lender shall have received this Modification duly executed by an
authorized individual for each entity that is a party hereto.

 

(b)          Lender shall have received resolutions of each Borrower approving
the execution of this Modification in form and content acceptable to Lender.

 

(c)          Borrower shall pay all out-of-pocket costs and expenses incurred by
Lender in connection with this Modification, including, without limitation,
title charges, recording fees, appraisal fees and attorneys' fees and expenses.

 

(d)          Lender shall have received such other documents as may be
reasonably requested by Lender or its counsel.

 

 

5.

Miscellaneous.

 

(a)          This Modification shall be governed by and construed in accordance
with the laws of the State of Illinois.

 

(b)          This Modification shall not be construed more strictly against
Lender than against Borrower merely by virtue of the fact that the same has been
prepared by counsel for Lender, it being recognized that Borrower and Lender
have contributed substantially and materially to the preparation of this
Modification, and Borrower and Lender each acknowledges and waives any claim
contesting the existence and the adequacy of the consideration given by the
other in entering into this Modification. Each of the parties to this
Modification represents that it has been advised by its respective counsel of
the legal and practical effect of this Modification, and recognizes that it is
executing and delivering this Modification, intending thereby to be legally
bound by the terms and provisions thereof, of its own free will, without
promises or threats or the exertion of duress upon it. The signatories hereto
state that they have read and understand this Modification, that they intend to
be legally bound by it and that they expressly warrant and represent that they
are duly authorized and empowered to execute it.

 

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(c)          Notwithstanding the execution of this Modification by Lender, the
same shall not be deemed to constitute Lender a venturer or partner of or in any
way associated with Borrower nor shall privity of contract be presumed to have
been established with any third party.

 

(d)          Borrower and Lender each acknowledges that there are no other
understandings, agreements or representations, either oral or written, express
or implied, that are not embodied in the Loan Documents and this Modification,
which collectively represent a complete integration of all prior and
contemporaneous agreements and understandings of Borrower and Lender; and that
all such prior understandings, agreements and representations are hereby
modified as set forth in this Modification. Except as expressly modified hereby,
the terms of the Loan Documents are and remain unmodified and in full force and
effect.

 

(e)          This Modification shall bind and inure to the benefit of the
parties hereto and their respective heirs, executors, administrators, successors
and assigns.

 

(f)           Any references to the "Note", the “Credit Agreement,” or the "Loan
Documents" contained in any of the Loan Documents shall be deemed to refer to
the Note, Credit Agreement and the other Loan Documents as amended hereby. The
paragraph and section headings used herein are for convenience only and shall
not limit the substantive provisions hereof. All words herein which are
expressed in the neuter gender shall be deemed to include the masculine,
feminine and neuter genders. Any word herein which is expressed in the singular
or plural shall be deemed, whenever appropriate in the context, to include the
plural and the singular.

 

(g)          This Modification may be executed in one or more counterparts, all
of which, when taken together, shall constitute one original Agreement.

 

(h)          Time is of the essence of each of Borrower's obligations under this
Modification.

 

(i)           Customer Identification - USA Patriot Act Notice. The Lender
hereby notifies the Borrower that pursuant to the requirements of the USA
Patriot Act (Title III of Pub. L. 107-56, signed into law October 26, 2001) (the
“Act”), and the Lender’s policies and practices, the Lender is required to
obtain, verify and record certain information and documentation that identifies
the Borrower, which information includes the name and address of the Borrower
and such other information that will allow the Lender to identify the Borrower
in accordance with the Act.

 

(Signature Page Follows)

 

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IN WITNESS WHEREOF, the parties hereto have executed this Modification dated as
of the day and year first above written

LASALLE BANK NATIONAL ASSOCIATION (as Lender)

 

By: /s/ Michael Vrchota

Michael Vrchota

Its:

Senior Vice President

 

LAWSON PRODUCTS, INC., a Delaware Corporation (as Borrower)

 

By: /s/ Thomas Neri

Thomas Neri

Its:

Chief Executive Officer

 

LAWSON PRODUCTS, INC., a Georgia Corporation (as Borrower)

 

By: /s/ Thomas Neri

Thomas Neri

Its:

Chief Executive Officer

 

LAWSON PRODUCTS, INC., a New Jersey Corporation (as Borrower)

 

By: /s/ Thomas Neri

Thomas Neri

Its:

Chief Executive Officer

 

LAWSON PRODUCTS, INC., a Nevada Corporation (as Borrower)

 

By: /s/ Thomas Neri

Thomas Neri

Its:

Chief Executive Officer

 

 

 

LAWSON PRODUCTS, INC., a Texas corporation (as Borrower)

 

By: /s/ Thomas Neri

Thomas Neri

Its:

Chief Executive Officer

 

LAWSON PRODUCTS, INC., a Canadian Corporation (as Borrower)

 

By: /s/ Thomas Neri

Thomas Neri

Its:

Chief Executive Officer

 

LP SERVICE CO., an Illinois Corporation (as Borrower)

 

By: /s/ Thomas Neri

Thomas Neri

Its:

Chief Executive Officer

 

LPI HOLDINGS, INC., an Illinois Corporation (as Borrower)

 

By: /s/ Thomas Neri

Thomas Neri

Its:

Chief Executive Officer

 

CRONATRON WELDING SYSTEMS, INC., a North Carolina Corporation (as Borrower)

 

By: /s/ Thomas Neri

Thomas Neri

Its:

Chief Executive Officer

 

 

 

Signature Page to Seventh Modification of Loan Documents

 

 

 

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DRUMMOND AMERICAN Corporation, an Illinois Corporation (as Borrower)

 

By: /s/ Thomas Neri

Thomas Neri

Its:

Chief Executive Officer

 

ASSEMBLY COMPONENT SYSTEMS, INC., an Illinois Corporation (as Borrower)

 

By: /s/ Thomas Neri

Thomas Neri

Its:

Chief Executive Officer

 

AUTOMATIC SCREW MACHINE PRODUCTS COMPANY, INC., an Alabama Corporation (as
Borrower)

 

By: /s/ Thomas Neri

Thomas Neri

Its:

Chief Executive Officer

 

C.B. LYNN COMPANY, an Illinois Corporation (as Borrower)

 

By: /s/ Thomas Neri

Thomas Neri

Its:

Chief Executive Officer

 

LP INDUSTRIAL PRODUCTS COMPANY, an Illinois Corporation (as Borrower)

 

By: /s/ Thomas Neri

Thomas Neri

Its:

Chief Executive Officer

 

 

 

 

LAWSON PRODUCTS DE MEXICO, S.A. DE C.V. (as Borrower)

 

By: /s/ Thomas Neri

Thomas Neri

Its:

Chief Executive Officer

 

 

 

 

 

Signature Page to Seventh Modification of Loan Documents