##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
 Form 10-K
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2008oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission file
    number: 0-10546
  
 (Exact Name of Registrant as
    Specified in Charter)
  Delaware


36-2229304(State or other jurisdiction
    of


(I.R.S. Employerincorporation or
    organization)


Identification No.
)   1666 East
    Touhy Avenue, Des Plaines, Illinois 60018 (Address
    of principal executive offices)
  Registrants telephone number, including area code:
 (847) 827-9666
 Securities registered pursuant to Section 12(b) of the
    Act:
  Title of Each Class

Name of Each Exchange on Which
    RegisteredCommon Stock, $1.00 par value

The NASDAQ Stock Market LLC   Securities registered pursuant to Section 12(g) of the
    Act:
 None
 (Title of class)
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. þ
  Rule 12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer þ
    Non-accelerated
    filer o
    Smaller
    reporting
    company o   Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K




---



##### 





TABLE OF
    CONTENTS
   
 Page #PART IItem 1.


Business


3Item 1A.


Risk Factors


7Item 1B.


Unresolved Staff Comments


9Item 2.


Properties


9Item 3.


Legal Proceedings


10Item 4.


Submission of Matters to a Vote of Security
    Holders


10PART IIItem 5.


Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


11Item 6.


Selected Financial Data


12Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


13Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


19Item 8.


Financial Statements and Supplementary Data


20Item 9.


Changes in and Disagreements With Accountants on
    Accounting and Financial Disclosure


43Item 9A.


Controls and Procedures


43Item 9B.


Other Information


44PART IIIItem 10.


Directors, Executive Officers and Corporate
    Governance


45Item 11.


Executive Compensation


45Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


45Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


46Item 14.


Principal Accounting Fees and Services


46PART IVItem 15.


Exhibits, Financial Statement Schedules


47Signatures


49EX-10.11EX-10.12EX-10.14EX-10.24EX-21EX-23EX-31.1EX-31.2EX-32    Safe Harbor Statement under the Securities
    Litigation Reform Act of 1995: Form 10-K Form 10-K.
   2




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##### Table of Contents



PART I  ITEM 1.
    BUSINESS.  Overview
  Segment Reporting Form 10-K,
  MRO
    Segment
  Industry
    and competition
      Operations
    on-site
      on-site
 3




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##### Table of Contents



Products
    Product Category

Percent of Total MRO SalesFastening systems


20
%Specialty chemicals


13Cutting tools and abrasives


13Fluid power


11Aftermarket automotive supplies


9Electrical


9Welding and metal repair


6Other


19100
%       Customers
   4




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##### Table of Contents



OEM
    Segment
    just-in-time
    Employees
    and Sales Agents
      Available
    Information
  Form 10-K, Form 10-Q, Form 8-K http://www.sec.gov. www.lawsonproducts.com.
 5




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##### Table of Contents



Executive
    Officers of the Registrant
    Year FirstElected toPresentName

Age

Office

PositionThomas J. Neri


57



2007


Chief Executive Officer and DirectorF. Terrence Blanchard


55



2008


Chief Financial OfficerNeil E. Jenkins


59



2004


Executive Vice President; Secretary and General CounselHarry Dochelli


49



2008


Executive Vice President Sales and MarketingWilliam Holmes


49



2006


Vice President and TreasurerStewart Howley


47



2008


Senior Vice President Strategic Business DevelopmentMichelle Russell


47



2007


Senior Vice President Operations and Supply Chain ManagementMary Ellen Schopp


46



2007


Senior Vice President, Human Resources     Mr. Neri
  Mr. Blanchard
  Mr. Jenkins
  Mr. Dochelli
  Mr. Holmes
  Mr. Howley
  Ms. Russell
  Ms. Schopp
 6




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##### Table of Contents



ITEM 1A.
    RISK
    FACTORS.  Form 10-K
  Our
    results of operations may continue to be adversely impacted by
    the current worldwide economic recession. As a result, demand
    for our products may significantly decline or the market price
    of our common stock may decline.
    Our
    Deferred Prosecution Agreement with the U.S. Attorneys
    Office for the Northern District of Illinois, and any potential
    breach of such agreement, may adversely affect our business,
    financial condition, results of operations and stock
    price.
    A
    significant portion of our inventory may become
    obsolete.
    Work
    stoppages and other disruptions at transportation centers or
    shipping ports may adversely affect our ability to obtain
    inventory and make deliveries to Lawsons
    customers.
   7




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##### Table of Contents



Changes
    in our customers and product mix could cause our gross margin
    percentage to decline in the future.
    Increases
    in energy costs and the cost of raw materials used in our
    products could impact our cost of goods and distribution and
    occupancy expenses, which may result in lower operating
    margins.
    Disruptions
    of our information systems could adversely affect the
    Company.
    A
    limited number of the Companys stockholders can exert
    significant influence over the Company.
    The
    Company operates in highly competitive markets.
    Future
    acquisitions are subject to integration and other
    risks.
   8




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##### Table of Contents



An
    economic or other situation that affects government and
    tax-supported entities could negatively impact our sales and
    earnings.
    ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS.    ITEM 2.
    PROPERTIES.    SquareLocation

Segment


Function


Own/Lease


FootageAddison, Illinois


MRO



Distribution



Own



85,800Des Plaines, Illinois


MRO



Administration/Distribution



Own



175,000Des Plaines, Illinois


MRO



Administration



Own



45,000Des Plaines, Illinois


MRO/OEM



Distribution



Lease



135,000Dallas, Texas


MRO



Distribution



Own



44,264Fairfield, New Jersey


MRO



Distribution



Own



30,444Independence, Ohio


MRO



Call Center



Lease



23,096Mississauga, Ontario Canada


MRO



Distribution



Own



78,000Vernon Hills, Illinois


MRO



Distribution



Own



107,061Reno, Nevada


MRO



Distribution



Own



244,280Suwanee, Georgia


MRO



Distribution



Own



91,235Whittier, California


MRO



Administration



Lease



22,023Houston, Texas


MRO



Dist./Warehouse/Showroom



Lease



28,000San Jose, California


MRO



Warehouse/Showroom



Lease



6,425Santa Ana, California


MRO



Warehouse/Showroom



Lease



5,570Phoenix, Arizona


MRO



Warehouse/Showroom



Lease



3,750Chatsworth, California


MRO



Warehouse/Showroom



Lease



11,300City of Industry, California


MRO



Warehouse/Showroom



Lease



20,100Decatur, Alabama


OEM



Manufacturing



Own



65,000Centralia, Missouri


OEM



Warehouse



Lease



26,800Cincinnati, Ohio


OEM



Warehouse



Lease



12,583Dunlap, Tennessee


OEM



Warehouse



Lease



16,569Ettrick, Wisconsin


OEM



Warehouse



Lease



9,000Hopkinsville, Kentucky


OEM



Warehouse



Lease



3,820Johnson City, Tennessee


OEM



Warehouse



Lease



2,000Lenexa, Kansas


OEM



Administration/Warehouse



Lease



48,000Memphis, Tennessee


OEM



Warehouse



Lease



26,250Michigan City, Indiana


OEM



Warehouse



Lease



10,000Reynosa, Mexico


OEM



Warehouse



Lease



13,778Waite Park, Minnesota


OEM



Warehouse



Lease



2,400Stuttgart, Arkansas


OEM



Warehouse



Lease



16,000Willowbrook, Illinois


OEM



Administration



Lease



2,613Nuevo Laredo, Mexico


OEM



Warehouse



Lease



24,220  9




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##### Table of Contents



ITEM 3.
    LEGAL
    PROCEEDINGS.                ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS.   10




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##### Table of Contents



PART II  ITEM 5.
    MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
    AND ISSUER PURCHASES OF EQUITY SECURITIES.    2008


2007Cash Dividends








Cash DividendsHigh


Low


Paid Per Share


High


Low


Paid Per ShareFirst Quarter

$
38.00


$
23.21


$
0.20


$
47.00


$
34.54


$
0.20Second Quarter


29.39



23.77



0.20



39.70



34.99



0.20Third Quarter


38.49



23.90



0.20



39.05



34.81



0.20Fourth Quarter


32.10



11.81



0.20



38.73



29.96



0.20     Stock
    Price Performance Chart
    Comparison
    of 5 Year Cumulative Total Return Among
    Lawson Products, the S&P SmallCap 600 Index and a Peer Group
  
  Indexed Returns Years Ending December 31,Company Name/Index


Base Period 2003


2004


2005


2006


2007


2008Lawson Products



100.00




154.52




118.57




146.33




123.43




76.41S&P Smallcap 600



100.00




122.65




132.07




152.04




151.59




104.48Peer Group



100.00




120.52




151.68




148.38




174.46




140.98  11




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##### Table of Contents



ITEM 6.
    SELECTED
    FINANCIAL DATA.    2008

2007

2006

2005

2004(Dollars in thousands, except per share data)Net Sales(1)

$
485,207


$
512,543


$
514,273


$
443,823


$
402,142(Loss) income from continuing operations before cumulative
    effect of accounting change(2)(3)(4)

$
(27,060
)

$
11,332


$
13,702


$
21,944


$
21,570(Loss) income from discontinued operations(5)


(571
)


(703
)


(729
)


4,794



(145
)(Loss) income before cumulative effect of accounting change


(27,631
)


10,629



12,973



26,738



21,425Cumulative effect of accounting change, net of tax










(361
)






Net (loss) income

$
(27,631
)

$
10,629


$
12,612


$
26,738


$
21,425Basic (loss) income per share of common stock:Continuing operations before cumulative effect of accounting
    change

$
(3.18
)

$
1.33


$
1.54


$
2.42


$
2.29Discontinued operations


(0.06
)


(0.08
)


(0.08
)


0.53



(0.02
)Cumulative effect of accounting change










(0.04
)






Net (loss) income

$
(3.24
)

$
1.25


$
1.42


$
2.94


$
2.28Diluted (loss) income per share of common stock:Continuing operations before cumulative effect of accounting
    change

$
(3.18
)

$
1.33


$
1.54


$
2.41


$
2.29Discontinued operations


(0.06
)


(0.08
)


(0.08
)


0.53



(0.02
)Cumulative effect of accounting change










(0.04
)






Net (loss) income

$
(3.24
)

$
1.25


$
1.42


$
2.94


$
2.27Cash dividends declared per share

$
0.80


$
0.80


$
0.80


$
0.80


$
0.72Total assets

$
270,996


$
299,863


$
281,292


$
279,224


$
260,550Noncurrent liabilities

$
64,660


$
52,660


$
48,320


$
41,256


$
37,271Stockholders equity

$
138,744


$
174,361


$
170,317


$
185,425


$
180,332       (1)
    
    Results include Rutland since the date of acquisition in
    December 2005, accounting for net sales of $46.5 million,
    $54.8 million, $57.7 million and $4.3 million in
    2008, 2007, 2006 and 2005, respectively.(2)
    
    Severance and other charges, of $9.3 million,
    $12.3 million and $1.2 million were recorded in 2008,
    2007 and 2006, respectively.(3)
    
    Settlement and related charges of $31.7 million,
    $5.8 million and $3.2 million related to the
    investigation disclosed in Item 3 Legal
    Proceedingswere recorded in 2008, 2007 and 2006,
    respectively.(4)
    
    The 2008 results include a $2.3 million charge for goodwill
    impairment.(5)
    
    The 2005 results include a $7.5 million after tax loss
    related to discontinuation of the UK business and an after tax
    gain of $12.2 million related to the gain on the sale of
    the Companys investment in real estate. 12




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##### Table of Contents



ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS.  OVERVIEW
    SUMMARY
    OF FINANCIAL PERFORMANCE
  Year Ended December 31,2008


2007


2006Amount


% of Net Sales


Amount


% of Net Sales


Amount


% of Net Sales(Dollars in thousands)Net salesMRO

$
403,584



83.2
%

$
429,508



83.8
%

$
430,815



83.8
%OEM


81,623



16.8



83,035



16.2



83,458



16.2Consolidated total

$
485,207



100.0
%

$
512,543



100.0
%

$
514,273



100.0
%Gross profitMRO

$
266,371



54.9
%

$
284,598



55.5
%

$
286,519



55.7
%OEM


12,627



2.6



19,231



3.8



20,207



3.9Consolidated total


278,998



57.5



303,829



59.3



306,726



59.6Operating expenses:Selling, general and administrative expenses


255,999



52.8



265,267



51.8



278,537



54.2Settlement related costs


31,666



6.5



5,793



1.1



3,224



0.6Severance and other charges


9,313



1.9



12,328



2.4



1,196



0.2Impairment of goodwill


2,251



0.5















Loss on sale of equipment


















806



0.1Operating (loss) income


(20,231
)


(4.2
)


20,441



4.0



22,963



4.5Other, net


(469
)


(0.1
)


(369
)


(0.1
)


2,157



0.4(Loss) income from continuing operations before income tax
    expense


(20,700
)


(4.3
)


20,072



3.9



25,120



4.9Income tax expense


6,360



1.3



8,740



1.7



11,418



2.2(Loss) income from continuing operations

$
(27,060
)


(5.6
)%

$
11,332



2.2
%

$
13,702



2.7
%  13




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##### Table of Contents



RESULTS
    OF OPERATIONS FOR 2008 AS COMPARED TO 2007
  Sales
    and Gross Profit
    Year Ended December 31,


Change2008


2007


Amount


%(Dollars in thousands)Net salesMRO

$
403,584


$
429,508


$
(25,924
)


(6.0
)%OEM


81,623



83,035



(1,412
)


(1.7
)Consolidated

$
485,207


$
512,543


$
(27,336
)


(5.3
)Gross profitMRO

$
266,371


$
284,598


$
(18,227
)


(6.4
)%OEM


12,627



19,231



(6,604
)


(34.3
)Consolidated

$
278,998


$
303,829


$
(24,831
)


(8.2
)Gross profit marginMRO


66.0
%


66.3
%OEM


15.5



23.2Consolidated


57.5



59.3       Selling,
    General and Administrative Expenses
    Settlement
    and Related Costs
   14




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##### Table of Contents



Severance
    and Other Charges
    Impairment
    of Goodwill
    Other
    Expense, Net
    Income
    Tax Expense
    RESULTS
    OF OPERATIONS FOR 2007 AS COMPARED TO 2006
  Sales
    and Gross Profit
    Year Ended December 31,


Change2007


2006


Amount


%(Dollars in thousands)Net salesMRO

$
429,508


$
430,815


$
(1,307
)


(0.3
)%OEM


83,035



83,458



(423
)


(0.5
)Consolidated

$
512,543


$
514,273


$
(1,730
)


(0.3
)Gross profitMRO

$
284,598


$
286,519


$
(1,921
)


(0.7
)%OEM


19,231



20,207



(976
)


(4.8
)Consolidated

$
303,829


$
306,726


$
(2,897
)


(0.9
)Gross profit marginMRO


66.3
%


66.5
%OEM


23.2



24.2Consolidated


59.3



59.6      15




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##### Table of Contents



Selling,
    General and Administrative Expenses
    Settlement
    Related Costs
    Severance
    and Other Charges
    Other
    (Expense) Income, Net
    Income
    Tax Expense
    LIQUIDITY
    AND CAPITAL RESOURCES
     16




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##### Table of Contents



17




---



##### Table of Contents



CONTRACTUAL
    OBLIGATIONS
    Payments Due In Years Ended December 31,Total


2009


2010 - 2011


2012 - 2013


Thereafter(Amounts in thousands)Operating leases

$
6,446


$
2,396


$
3,341


$
709


$
Capital leases


2,904



1,133



1,634



137



Revolving line of credit


7,700







7,700







Deferred compensation


11,301



1,922



3,475



1,789



4,115Security bonus plan*


26,218



906











25,312Severance obligation


6,111



4,889



1,222







Long term incentive plan


6,071



3,090



2,981







Purchase commitments


4,485



4,485











Deferred Prosecution Agreement


20,000



10,000



10,000







Total contractual cash obligations

$
91,236


$
28,821


$
30,353


$
2,635


$
29,427     *
    
    Payments to beneficiaries of the security bonus plan are made on
    a lump sum basis at time of retirement. Payouts for known
    retirement dates have been included in 2009, while payouts for
    unknown retirement dates are reflected in the thereafter column.  OFF-BALANCE
    SHEET ARRANGEMENTS
    CRITICAL
    ACCOUNTING POLICIES
    Allowance for Doubtful Accounts Methodology
  Inventory Reserves
  Income Taxes
 18




---



##### Table of Contents



ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.         19




---



##### Table of Contents



ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA.    Managements Report on Internal Control Over
    Financial Reporting


21Report of Independent Registered Public
    Accounting Firm on Internal Control Over Financial Reporting


22Report of Independent Registered Public
    Accounting Firm on Consolidated Financial Statements


23Consolidated Balance Sheets as of
    December 31, 2008 and 2007


24Consolidated Statements of Operations for the
    Years ended December 31, 2008, 2007 and 2006


25Consolidated Statements of Changes in
    Stockholders Equity for the Years ended December 31,
    2008, 2007 and 2006


26Consolidated Statements of Cash Flows for the
    Years ended December 31, 2008, 2007 and 2006


27Notes to Consolidated Financial Statements


28Schedule II  Valuation and
    Qualifying Accounts


43  20




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##### Table of Contents



Managements
    Report on Internal Control Over Financial Reporting  Rules 13a-15(f) and/or
      Form 10-K
 21




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm
    on Internal Control Over Financial Reporting  To the
    Stockholders and Board of Directors
    Lawson Products, Inc.
              Chicago,
    Illinois
    March 11, 2009
 22




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##### Table of Contents



Report of
    Independent Registered Public Accounting Firm
    on Consolidated Financial Statements  To the
    Stockholders and Board of Directors
    Lawson Products, Inc.
            Chicago,
    Illinois
    March 11, 2009
 23




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##### Table of Contents



Lawson
    Products, Inc.



Consolidated
    Balance Sheets  December 31,2008


2007(Dollars in thousands)ASSETSCurrent assets:Cash and cash equivalents

$
4,300


$
1,671Accounts receivable, less allowance for doubtful accounts of
    $1,680 and $1,376 respectively


48,634



58,882Inventories


86,435



96,785Miscellaneous receivables and prepaid expenses


11,812



10,303Deferred income taxes


6,127



3,226Discontinued current assets


296



1,064Total current assets


157,604



171,931Property, plant and equipment, less accumulated depreciation and
    amortization


47,783



53,031Other assets:Cash value of life insurance


17,970



23,702Deferred income taxes


18,159



21,344Goodwill


25,748



27,999Other


3,732



1,856Total assets

$
270,996


$
299,863LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Revolving line of credit

$



$
11,000Accounts payable


16,334



16,266Settlement payable  current


10,000



Accrued expenses and other liabilities


41,205



45,254Discontinued current liabilities


53



322Total current liabilities


67,592



72,842Noncurrent liabilities and deferred creditsRevolving line of credit


7,700



Security bonus plan


26,218



25,491Deferred compensation


11,301



19,119Settlement payable  noncurrent


10,000



Other


9,441



8,05064,660



52,660Commitments and contingencies  Note LStockholders equity:Preferred stock, $1 par value:Authorized  500,000 shares, Issued and
    outstanding  None






Common stock, $1 par value:Authorized  35,000,000 shares, Issued and
    outstanding  8,522,001 shares


8,522



8,522Capital in excess of par value


4,774



4,774Retained earnings


126,158



160,606Accumulated other comprehensive (loss) income


(710
)


459Stockholders equity:


138,744



174,361Total liabilities and stockholders equity

$
270,966


$
299,863    24




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##### Table of Contents



Lawson
    Products, Inc.



Consolidated
    Statements of Operations  Year Ended December 31,2008


2007


2006(Dollars in thousands, except per share data)Net sales

$
485,207


$
512,543


$
514,273Cost of goods sold


206,209



208,714



207,547Gross profit


278,998



303,829



306,726Operating expenses:Selling, general and administrative expenses


255,999



265,267



278,537Settlement and related costs


31,666



5,793



3,224Severance and other charges


9,313



12,328



1,196Impairment of goodwill


2,251







Loss on sale of equipment










806Operating (loss) income


(20,231
)


20,441



22,963Interest and dividend income


47



255



513Interest expense


(789
)


(910
)


(150
)Other income, net


273



286



1,794(Loss) income from continuing operations before income taxes and
    cumulative effect of accounting change


(20,700
)


20,072



25,120Income tax expense


6,360



8,740



11,418(Loss) income from continuing operations before cumulative
    effect of accounting change


(27,060
)


11,332



13,702Discontinued operations, net


(571
)


(703
)


(729
)(Loss) income before cumulative effect of accounting change


(27,631
)


10,629



12,973Cumulative effect of accounting change, net of tax










(361
)Net (loss) income

$
(27,631
)

$
10,629


$
12,612Basic (loss) income per share of common stock:Continuing operations before cumulative effect of accounting
    change

$
(3.18
)

$
1.33


$
1.54Discontinued operations


(0.06
)


(0.08
)


(0.08
)Cumulative effect of accounting change










(0.04
)Net (loss) income

$
(3.24
)

$
1.25


$
1.42Diluted (loss) income per share of common stock:Continuing operations before cumulative effect of accounting
    change

$
(3.18
)

$
1.33


$
1.54Discontinued operations


(0.06
)


(0.08
)


(0.08
)Cumulative effect of accounting change










(0.04
)Net (loss) income

$
(3.24
)

$
1.25


$
1.42    25




---



##### Table of Contents



Lawson
    Products, Inc.



Consolidated
    Statements of Changes in Stockholders Equity  AccumulatedCommon


Capital in





OtherStock,


Excess of


Retained


Comprehensive


Comprehensive$1 Par Value


Par Value


Earnings


(Loss) Income


Income (Loss)(Dollars in thousands)Balance at January 1, 2006

$
8,972


$
4,137


$
172,668


$
(352
)Net income










12,612






$
12,612Other comprehensive income, net of tax:Adjustment for foreign currency translation














(609
)


(609
)Comprehensive income for the year

















$
12,003Cash dividends declared










(7,098
)


Stock issued under employee stock plans


35



870







Purchase and retirement of common stock


(486
)


(258
)


(20,174
)


Balance at December 31, 2006


8,521



4,749



158,008



(961
)Net income










10,629






$
10,629Other comprehensive income, net of tax:Cumulative translation adjustment related to closure of Mexico
    operations














403



403Adjustment for foreign currency translation














1,017



1,017Comprehensive income for the year

















$
12,049Adjustment for FIN 48 adoption










(1,213
)


Cash dividends declared










(6,818
)


Stock issued under employee stock plans


1



25







Balance at December 31, 2007


8,522



4,774



160,606



459Net loss










(27,631
)





$
(27,631
)Other comprehensive loss, net of tax:Adjustment for foreign currency translation














(1,169
)


(1,169
)Comprehensive loss for the year

















$
(28,800
)Cash dividends declared










(6,817
)


Balance at December 31, 2008

$
8,522


$
4,774


$
126,158


$
(710
)    26




---



##### Table of Contents



Lawson
    Products, Inc.



Consolidated
    Statements of Cash Flows  Year Ended December 31,2008


2007


2006(Dollars in thousands)Operating activitiesNet (loss) income

$
(27,631
)

$
10,629


$
12,612Adjustments to reconcile net (loss) income to net cash provided
    by operating activities:Depreciation and amortization


8,282



7,435



7,544Provision for allowance for doubtful accounts


1,481



954



594Deferred income taxes


912



(1,456
)


(4,309
)Deferred compensation and security bonus plans


(526
)


5,000



6,593Payments under deferred compensation and security bonus plans


(6,255
)


(4,922
)


(3,285
)Stock based compensation


(843
)


(427
)


2,482Provision for settlement


30,000







Settlement payment


(10,000
)






Impairment of goodwill


2,251







Loss on sale of equipment


56







806Changes in operating assets and liabilities:Accounts receivable


7,956



1,120



(991
)Inventories


9,368



(5,955
)


(11,723
)Prepaid expenses and other assets


2,276



(5,732
)


(357
)Accounts payable and accrued expenses


(3,101
)


(387
)


7,664Other


1,512



5,289



2,255Net cash provided by operating activities


15,738



11,548



19,885Investing activitiesPurchases of property, plant and equipment


(3,549
)


(17,694
)


(5,291
)Other


36



90



631Net cash used for investing activities


(3,513
)


(17,604
)


(4,660
)Financing activitiesNet (payments on ) proceeds from revolving line of credit


(3,300
)


11,000



Dividends paid


(6,817
)


(6,817
)


(7,189
)Purchases of common stock










(20,919
)Proceeds from other common stock transactions






26



906Net cash (used for) provided by financing activities


(10,117
)


4,209



(27,202
)Increase (decrease) in cash and cash equivalents


2,108



(1,847
)


(11,977
)Cash and cash equivalents at beginning of year


2,473



4,320



16,297Cash and cash equivalents at end of year


4,581



2,473



4,320Cash held by discontinued operations


(281
)


(802
)


(929
)Cash and cash equivalents held by continuing operations at end
    of year

$
4,300


$
1,671


$
3,391    27




---



##### Table of Contents



Lawson
    Products, Inc.



Notes to
    Consolidated Financial Statements

(Dollars
    in thousands, except per share data)  Note A 
    Description
    of Business    Note B 
    Summary
    of Significant Accounting Policies  Principles of Consolidation
  Revenue Recognition Revenue Recognition When Right of Return
    Exists
  Shipping and Handling Fees and Costs
  Cash Equivalents
  Allowance for Doubtful Accounts Methodology
  Inventories (first-in,
  Property, Plant and Equipment
  Stock-Based Compensation Share-Based Payment
 28




---



##### Table of Contents



Lawson
    Products, Inc.
  Notes to
    Consolidated Financial Statements
 (Dollars
    in thousands, except per share
    data)  (Continued)
    Goodwill and Other Intangibles
  Income Taxes
  Accounting for
    Income Taxes
  Accounting for Uncertainty in Income Taxes
  Earnings Per Share
  Foreign Currency
 29




---



##### Table of Contents



Lawson
    Products, Inc.
  Notes to
    Consolidated Financial Statements
 (Dollars
    in thousands, except per share
    data)  (Continued)
  Use of Estimates
  Reclassifications
  ReclassificationsAs Originally

Billed

SettlementReported

Freight

Charges

As Adjusted2007Net sales

$
509,695


$
2,848






$
512,543Gross profit


300,981



2,848







303,829Selling, general and administrative expenses


268,212



2,848



(5,793
)


265,267Settlement and related costs










5,793



5,7932006Net sales

$
511,377


$
2,896






$
514,273Gross profit


303,830



2,896







306,726Selling, general and administrative expenses


278,780



2,896



(3,139
)


278,537Settlement and related costs










3,224



3,224Severance and other charges


1,281







(85
)


1,196   Recent
    Accounting Pronouncements
  Fair Value Measurements,
  Business
    Combinations.
  Noncontrolling Interests in Consolidated Financial Statements
    (an amendment of ARB No. 51)
  Disclosures about Derivative Instruments and Hedging
    Activities
 30




---



##### Table of Contents



Lawson
    Products, Inc.
  Notes to
    Consolidated Financial Statements
 (Dollars
    in thousands, except per share
    data)  (Continued)
  Note C 
    Inventories    December 31,2008


2007Finished goods

$
92,565


$
102,410Work in progress


1,791



1,885Raw materials


2,146



2,514Total


96,502



106,809Reserve for obsolete and excess inventory


(10,067
)


(10,024
)$
86,435


$
96,785   Note D 
    Property,
    Plant and Equipment    December 31,2008


2007Land

$
9,197


$
9,444Buildings and improvements


54,069



54,333Machinery and equipment


32,754



32,142Furniture and fixtures


6,708



6,384Vehicles


354



414Capitalized software


13,246



14,563Capital leases


3,736



3,342Construction in progress


1,014



924121,078



121,546Accumulated depreciation and amortization


(73,295
)


(68,515
)$
47,783


$
53,031   Note E 
    Goodwill  Accounting for Goodwill and Other
    Intangible
    MRO


OEM


TotalBalance at December 31, 2007 and 2006

$
25,748


$
2,251


$
27,999Impairment loss






(2,251
)


(2,251
)Balance at December 31, 2008

$
25,748


$



$
25,748  31




---



##### Table of Contents



Lawson
    Products, Inc.
  Notes to
    Consolidated Financial Statements
 (Dollars
    in thousands, except per share
    data)  (Continued)
  Note F 
    Other
    Intangibles    December 31, 2008


December 31, 2007Net








NetGross


Accumulated


Carrying


Gross


Accumulated


CarryingBalance


Amortization


Amount


Balance


Amortization


AmountTrademarks and tradenames

$
1,400


$
787


$
613


$
1,400


$
737


$
663Non-compete covenant


1,000



600



400



1,000



400



600$
2,400


$
1,387


$
1,013


$
2,400


$
1,137


$
1,263     Note G 
    Income
    Taxes    Year Ended December 31,2008


2007


2006United States

$
(23,901
)

$
15,741


$
20,446Canada


3,201



4,331



4,674$
(20,700
)

$
20,072


$
25,120     Year Ended December 31,2008


2007


2006Current income tax:U.S. Federal

$
2,920


$
6,485


$
11,438U.S. State


666



1,960



3,025Canada


915



1,544



1,264Total

$
4,501



9,989



15,727Deferred income tax (benefit):U.S. Federal

$
1,874


$
(1,500
)

$
(4,281
)U.S. State


21



177



(489
)Canada


(36
)


74



461Total

$
1,859


$
(1,249
)

$
(4,309
)Total income tax:U.S. Federal

$
4,794


$
4,985


$
7,157U.S. State


687



2,137



2,536Canada


879



1,618



1,725Total

$
6,360


$
8,740


$
11,418  32




---



##### Table of Contents



Lawson
    Products, Inc.
  Notes to
    Consolidated Financial Statements
 (Dollars
    in thousands, except per share
    data)  (Continued)
    Year Ended December 31,2008


2007


2006Statutory federal rate


35.0
%


35.0
%


35.0
%Increase (decrease) resulting from:State income taxes, net of federal income tax benefit


(3.7
)


7.4



7.8Settlement penalty


(49.3
)






Canadian subsidiaries


0.2



0.2



0.4Executive life insurance


(10.3
)


(3.4
)


(3.0
)Non-deductible promotion expense










7.7Other items, net


(2.6
)


4.3



(2.4
)Provision for income taxes


(30.7
)%


43.5
%


45.5
%         December 31,2008


2007Deferred tax assets:Compensation and benefits

$
20,879


$
25,075Inventories


6,142



4,122Capital loss


2,854



3,337Accounts receivable


594



503Property, plant & equipment


260



230Other


903



Total deferred tax assets


31,632



33,267Valuation allowance for deferred tax assets


(2,854
)


(3,337
)Net deferred tax assets


28,778



29,930Deferred tax liabilities:Goodwill


3,687



3,259Other


805



2,101Total deferred liabilities


4,492



5,360Total net deferred assets

$
24,286


$
24,570Net deferred tax assets:Net current deferred income taxes


6,127



3,226Net noncurrent deferred income taxes


18,159



21,344$
24,286


$
24,570  33




---



##### Table of Contents



Lawson
    Products, Inc.
  Notes to
    Consolidated Financial Statements
 (Dollars
    in thousands, except per share
    data)  (Continued)
      December 31,2008


2007Balance at beginning of year

$
923


$
4,059Additions for tax positions of current year


248



Additions for tax positions of prior years


1,799



1,029Reductions for tax positions of prior years






(2,010
)Settlements






(2,155
)Balance at end of year

$
2,970


$
923         Note H 
    Accrued
    Expenses and Other Liabilities    December 31,2008


2007Salaries, commissions and other compensation

$
15,498


$
18,386Accrued severance


4,889



4,344Accrued and withheld taxes, other than income taxes


2,774



3,101Accrued profit sharing contributions


2,372



3,952Accrued stock performance rights


1,206



2,098Accrued self-insured health benefits


2,630



2,548Cash dividends payable


1,704



1,704Other


10,132



9,121$
41,205


$
45,254   Note I 
    Revolving
    Line of Credit   34




---



##### Table of Contents



Lawson
    Products, Inc.
  Notes to
    Consolidated Financial Statements
 (Dollars
    in thousands, except per share
    data)  (Continued)
        Note J 
    Reserve
    for Severance    Year Ended December 31,2008


2007


2006Beginning balance

$
7,058


$
962


$
216Charged to earnings


5,378



10,886



1,196Cash paid


(6,264
)


(4,670
)


(297
)Adjustment to reserves


(61
)


(120
)


(153
)Ending balance

$
6,111


$
7,058


$
962     December 31,2008


2007Accrued severance included in:Accrued expenses and other liabilities

$
4,889


$
4,344Noncurrent other


1,222



2,714Total accrued severance

$
6,111


$
7,058    35




---



##### Table of Contents



Lawson
    Products, Inc.
  Notes to
    Consolidated Financial Statements
 (Dollars
    in thousands, except per share
    data)  (Continued)
  Note K 
    Retirement
    and Security Bonus Plans        Note L 
    Commitments
    and Contingencies  Lease
    Commitments
    Year Ended December 31,

Operating Leases


Capital Leases2009

$
2,396


$
1,1332010


2,055



9332011


1,286



7012012


709



1372013 and thereafter






Total

$
6,446


$
2,904   Litigation
       36




---



##### Table of Contents



Lawson
    Products, Inc.
  Notes to
    Consolidated Financial Statements
 (Dollars
    in thousands, except per share
    data)  (Continued)
      Other
    Note M 
    Stock
    Performance Plan    Stock
    Performance Rights
        Expected volatility

51.0% to 88.8%Risk-free interest rate

0.4% to 1.6%Expected term (in years)

1.0 to 5.4Expected annual dividend

$0.80      37




---



##### Table of Contents



Lawson
    Products, Inc.
  Notes to
    Consolidated Financial Statements
 (Dollars
    in thousands, except per share
    data)  (Continued)
    Number


Averageof SPRs


Exercise PriceOutstanding on December 31, 2007


209,250


$
34.17Granted


151,500



25.82Exercised


(28,250
)


27.10Cancelled


(24,900
)


25.57Outstanding on December 31, 2008


307,600



31.40Exercisable on December 31, 2008


180,270


$
33.95     Stock
    Options
   38




---



##### Table of Contents



Lawson
    Products, Inc.
  Notes to
    Consolidated Financial Statements
 (Dollars
    in thousands, except per share
    data)  (Continued)
  Note N 
    (Loss)
    Earnings Per Share    Year Ended December 31,2008


2007


2006Weighted average sharesBasic weighted average shares outstanding


8,522



8,522



8,878Dilutive stock options outstanding






2



2Diluted weighted average shares outstanding


8,522



8,524



8,880(Loss) Earnings(Loss) income from continuing operations before cumulative
    effect of accounting change

$
(27,060
)

$
11,332


$
13,702Loss from discontinued operations


(571
)


(703
)


(729
)Cumulative effect of accounting change, net of tax










(361
)Net (loss) income

$
(27,631
)

$
10,629


$
12,612Basic (loss) earnings per share of common stock(Loss) income from continuing operations before cumulative
    effect of accounting change

$
(3.18
)

$
1.33


$
1.54Loss from discontinued operations


(0.06
)


(0.08
)


(0.08
)Cumulative effect of accounting change, net of tax










(0.04
)Net (loss) income

$
(3.24
)

$
1.25


$
1.42Diluted (loss) earnings per share of common stock(Loss) income from continuing operations before cumulative
    effect of accounting change

$
(3.18
)

$
1.33


$
1.54Loss from discontinued operations


(0.06
)


(0.08
)


(0.08
)Cumulative effect of accounting change, net of tax










(0.04
)Net (loss) income

$
(3.24
)

$
1.25


$
1.42     Note O 
    Segment
    Reporting  The Company has two reportable segments:
 39




---



##### Table of Contents



Lawson
    Products, Inc.
  Notes to
    Consolidated Financial Statements
 (Dollars
    in thousands, except per share
    data)  (Continued)
    Year Ended December 31,2008


2007


2006Net salesMRO

$
403,584


$
429,508


$
430,815OEM


81,623



83,035



83,458Consolidated total

$
485,207


$
512,543


$
514,273Operating income (loss)MRO

$
26,174


$
34,366


$
22,962OEM


(3,175
)


4,196



5,227Settlement and related costs


(31,666
)


(5,793
)


(3,224
)Severance and other charges


(9,313
)


(12,328
)


(1,196
)Impairment of goodwill


(2,251
)






Loss on sale of equipment










(806
)Consolidated total


(20,231
)


20,441



22,963Interest and dividend income


47



255



513Interest expense


(789
)


(910
)


(150
)Other, net


273



286



1,794(Loss) income from continuing operations before income taxes and
    cumulative effect of accounting change

$
(20,700
)

$
20,072


$
25,120Capital expendituresMRO

$
2,809


$
16,943


$
4,710OEM


740



751



581Consolidated total

$
3,549


$
17,694


$
5,291Depreciation and amortizationMRO

$
7,509


$
6,692


$
6,782OEM


773



743



762Consolidated total

$
8,282


$
7,435


$
7,544Total assetsMRO

$
202,413


$
221,274


$
204,852OEM


44,000



52,955



50,408Segment total


246,413



274,229



255,260Corporate


24,287



24,570



23,879Consolidated total

$
270,700


$
298,799


$
279,139  40




---



##### Table of Contents



Lawson
    Products, Inc.
  Notes to
    Consolidated Financial Statements
 (Dollars
    in thousands, except per share
    data)  (Continued)
    Year Ended December 31,2008


2007


2006Net salesUnited States

$
455,028


$
482,491


$
485,591Canada


30,179



30,052



28,682Consolidated total

$
485,207


$
512,543


$
514,273Long lived assetsUnited States

$
67,076


$
73,971


$
64,233Canada


7,468



8,322



7,943Consolidated total

$
74,544


$
82,293


$
72,176     Note P 
    Discontinued
    Operations    Note Q 
    Loss on
    Sale of Equipment    Note R 
    Summary
    of Unaudited Quarterly Results of Operations    Net Sales


Gross ProfitOriginally Reported


Adjustment


Reclassified


Originally Reported


Adjustment


ReclassifiedQuarter ended:September 30, 2008

$
124,567


$
797


$
125,364


$
70,292


$
797


$
71,089June 30, 2008


126,310



838



127,148



72,606



838



73,444March 31, 2008


125,004



866



125,870



73,262



866



74,128December 31, 2007


122,935



651



123,586



72,000



651



72,651September 30, 2007


127,913



725



128,638



76,457



725



77,182June 30, 2007


129,178



731



129,909



76,697



731



77,428March 31, 2007


129,669



741



130,410



75,827



741



76,568  41




---



##### Table of Contents



Lawson
    Products, Inc.
  Notes to
    Consolidated Financial Statements
 (Dollars
    in thousands, except per share
    data)  (Continued)
    2008 Quarter EndedDec. 31


Sep. 30


Jun. 30


Mar. 31Net sales

$
106,825


$
125,364


$
127,148


$
125,870Gross profit


60,337



71,089



73,444



74,128(Loss) income from continuing operations

$
(5,417
)

$
3,068


$
(29,235
)

$
4,524(Loss) income from discontinued operations


(8
)


10



(418
)


(155
)Net (loss) income

$
(5,425
)

$
3,078


$
(29,653
)

$
4,369Basic (loss) income per share of common stock:Continuing operations

$
(0.64
)

$
0.36


$
(3.43
)

$
0.53Discontinued operations










(0.05
)


(0.02
)Net (loss) income

$
(0.64
)

$
0.36


$
(3.48
)

$
0.51Diluted (loss) income per share of common stock:Continuing operations

$
(0.64
)

$
0.36


$
(3.43
)

$
0.53Discontinued operations










(0.05
)


(0.02
)Net (loss) income

$
(0.64
)

$
0.36


$
(3.48
)

$
0.51   2007 Quarter EndedDec. 31


Sep. 30


Jun. 30


Mar. 31Net sales

$
123,586


$
128,638


$
129,909


$
130,410Gross profit


72,651



77,182



77,428



76,568Income (loss) from continuing operations

$
4,216


$
2,410


$
(20
)

$
4,726Loss from discontinued operations


(207
)


(11
)


(329
)


(156
)Net income (loss)

$
4,009


$
2,399


$
(349
)

$
4,570Basic income (loss) per share of common stock:Continuing operations

$
0.49


$
0.28


$



$
0.55Discontinued operations


(0.02
)






(0.04
)


(0.02
)Net income (loss)

$
0.47


$
0.28


$
(0.04
)

$
0.54Diluted income (loss) per share of common stock:Continuing operations

$
0.49


$
0.28


$



$
0.55Discontinued operations


(0.02
)






(0.04
)


(0.02
)Net income (loss)

$
0.47


$
0.28


$
(0.04
)

$
0.54  42




---



##### Table of Contents



Lawson
    Products, Inc. and Subsidiaries
    Schedule II  Valuation and Qualifying
    Accounts  Balance at


Charged to





Balance atBeginning of


Costs and





End ofDescription

Period


Expenses


Deductions


PeriodAllowance for doubtful accounts:Year ended December 31, 2008

$
1,376


$
1,461


$
(1,157
)(1)

$
1,680Year ended December 31, 2007


1,332



928



(884
)(1)


1,376Year ended December 31, 2006


1,483



605



(756
)(1)


1,332Allowance for excess and obsolete inventory:Year ended December 31, 2008

$
10,024


$
2,486


$
(2,443
)(2)

$
10,067Year ended December 31, 2007


9,233



2,455



(1,664
)(2)


10,024Year ended December 31, 2006


9,348



521



(636
)(2)


9,233Valuation allowance for deferred tax assets:Year ended December 31, 2008

$
3,337


$
(483
)

$



$
2,854Year ended December 31, 2007


1,318



2,763



(744
)(3)


3,337Year ended December 31, 2006


1,318











1,318     (1)
    
    Uncollected receivables written off, net of recoveries and
    translation adjustment.(2)
    
    Disposal of excess and obsolete inventory and translation
    adjustment.(3)
    
    Net operating loss carryforward written off.  ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE.    ITEM 9A.
    CONTROLS
    AND PROCEDURES.  Evaluation
    of Disclosure Controls and Procedures
  Rules 13a-15(e) 15d-15(e))
  Managements
    Report on Internal Control over Financial Reporting
  Form 10-K
  Changes
    in Internal Controls
   43




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##### Table of Contents



Report of
    Independent Registered Public Accounting Firm on Internal
    Control Over Financial Reporting
  Form 10-K
  ITEM 9B.
    OTHER
    INFORMATION.   44




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##### Table of Contents



PART III  ITEM 10.
    DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.  a.
    Directors    b.
    Executive
    Officers    c.
    Audit
    Committee    Regulation S-K,
  d.
    Code
    of Business Conduct  www.lawsonproducts.com
  ITEM 11.
    EXECUTIVE
    COMPENSATION.    ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS.   45




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##### Table of Contents



Equity
    Compensation Plan Information
    Number of SecuritiesNumber of Securities


Weighted-Average


Remaining Available for Futureto be Issued Upon


Exercises Price of


Issuance Under EquityExercise of


Outstanding


Compensation PlansOutstanding Options,


Options, Warrants


(Excluding Securities ReflectedPlan category

Warrants and Rights


and Rights


In The First Column)Equity compensation plans approved by security holders


5,000


$
23.11



Equity compensation plans not approved by security holders










Total


5,000


$
23.11



   ITEM 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
    INDEPENDENCE.    ITEM 14.
    PRINCIPAL
    ACCOUNTING FEES AND SERVICES.   46




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##### Table of Contents



PART IV  ITEM 15.
    EXHIBITS AND
    FINANCIAL STATEMENT SCHEDULES.      EXHIBIT INDEX
  ExhibitNumber

Description of Exhibit3
.1

Certificate of Incorporation of the Company, as amended,
    incorporated herein by reference to Exhibit 3(a) to the
    Companys Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 1988.3
.2

Amended and Restated By-laws of the Company, incorporated herein
    by reference to the Companys Current Report on
    Form 8-K
    dated September 15, 2008.10
.1*

Lawson Products, Inc. Incentive Stock Plan, incorporated herein
    by reference to Appendix A to the Companys Proxy
    Statement for the Annual Meeting of Stockholders held on
    May 11, 1999.10
.2*

Amended and Restated Executive Deferral Plan, incorporated
    herein by reference from Exhibit 10(c)(7) to the
    Companys Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 1995.10
.3*

Lawson Products, Inc. Stock Performance Plan, incorporated
    herein by reference from Exhibit 10(c)(8) to the
    Companys Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2000.10
.4*

Lawson Products, Inc. 2002 Stock Equivalents Plan for Non
    Employee Directors, incorporated herein by reference from
    Exhibit 10(c)(9) to the Companys Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2002.10
.5*

Lawson Products, Inc. Long-Term Capital Accumulation Plan,
    incorporated herein by reference from Exhibit 10(c)(10) to
    the Companys Current Report on
    Form 8-K
    dated October 21, 2004.10
.6*

Form of Shareholder Value Appreciation Rights Award Agreement,
    incorporated by reference to Exhibit 10(c)(14) to the
    Companys Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2004.10
.7*

Form of Restricted Stock Award and Acknowledgment, incorporated
    by reference to Exhibit 10(c)(15) to the Companys
    Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2004.10
.8*

Form Letter regarding Stock Performance Rights,
    incorporated by reference to Exhibit 10(c)(16) to the
    Companys Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2004.10
.9*

Employment Agreement dated April 16, 2007 between the
    Company and Mr. Thomas Neri, incorporated herein by
    reference to Exhibit 10.1 to the Companys Current
    Report on
    Form 8-K
    dated October 9, 2007.10
.10*

Employment Agreement dated October 1, 2007 between the
    Company and Mr. Neil Jenkins, incorporated herein by
    reference to Exhibit 10.3 to the Companys Current
    Report on
    Form 8-K
    dated October 9, 2007.10
.11*

Executive Employment Agreement dated December 5, 2005
    between the Company and Stewart Howley.10
.12*

Employment Agreement dated February 29, 2008 between the
    Company and Harry Dochelli.10
.13*

Lawson Products, Inc. Long-Term Incentive Plan, incorporated
    herein by reference to Exhibit 10.1 to the Companys
    Current Report on
    Form 8-K
    dated May 13, 2008.10
.14*

Executive Services Agreement dated June 23, 2008 between
    the Company and Tatum, LLC.10
.15

Deferred Prosecution Agreement, dated August 11, 2008
    between the Company and the United States District Court,
    Northern District of Illinois Eastern Division, incorporated by
    reference to Exhibit 10.1 to the Companys
    Form 10-Q
    for the quarter ended June 30, 2008.10
.16*

Form of Indemnification Agreement for Directors and Officers
    incorporated herein by reference to the Companys Current
    Report on
    Form 8-K
    dated September 15, 2008.10
.17

First Amended and Restated Credit Agreement dated
    November 7, 2008 between the Company and Bank of America,
    N.A. Successor by Merger to LaSalle Bank National Association,
    incorporated by reference to Exhibit 10.1 to the
    Companys Current Report on
    Form 8-K
    dated November 7, 2008.10
.18*

Amendment No. 1 to Lawson Products, Inc. Long-Term Capital
    Accumulation Plan, incorporated by reference to
    Exhibit 10.1 to the Companys Current Report on
    Form 8-K
    dated February 12, 2009. 47




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##### Table of Contents



ExhibitNumber

Description of Exhibit10
.19*

Form of Amended and Restated Award Agreement, incorporated by
    reference to Exhibit 10.2 to the Companys Current
    Report on
    Form 8-K
    dated February 12, 2009.10
.20*

Amended and Restated Employment Agreement dated as of
    February 12, 2009 by and between the Company and Thomas
    Neri, incorporated by reference to Exhibit 10.3 to the
    Companys Current Report on
    Form 8-K
    dated February 12, 2009.10
.21*

Amended and Restated Employment Agreement dated as of
    February 12, 2009 by and between the Company and Neil E.
    Jenkins, incorporated by reference to Exhibit 10.4 to the
    Companys Current Report on
    Form 8-K
    dated February 12, 2009.10
.22*

Change in Control Agreement dated as of February 12, 2009
    by and between the Company and Harry Dochelli, incorporated by
    reference to Exhibit 10.5 to the Companys Current
    Report on
    Form 8-K
    dated February 12, 2009.10
.23*

Change in Control Agreement dated as of February 12, 2009
    by and between the Company and Stewart Howley, incorporated by
    reference to Exhibit 10.6 to the Companys Current
    Report on
    Form 8-K
    dated February 12, 2009.10
.24

First Amendment to First Amended and Restated Credit Agreement
    and Security Agreement dated March 9, 2009 between the
    Company and Bank of America, N.A. Successor by Merger to LaSalle
    Bank National Association.21


Subsidiaries of the Company.23


Consent of Ernst & Young LLP.31
.1

Certification of Chief Executive Officer pursuant to
    18 U.S.C. Section 1350 as adopted pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.31
.2

Certification of Chief Financial Officer pursuant to
    18 U.S.C. Section 1350 as adopted pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.32


Certification of Chief Executive Officer and Chief Financial
    Officer pursuant to 18 U.S.C. Section 1350 as adopted
    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.     *
    
    Indicates management employment contracts or compensatory plans
    or arrangements. 48




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##### Table of Contents



SIGNATURES      By:
    /s/  Thomas
    J. Neri 
      Signature

Title/s/  Thomas
    J. NeriThomas
    J. Neri

Chief Executive Officer and Director
    (principal executive officer)/s/  F.
    Terrence BlanchardF.
    Terrence Blanchard

Chief Financial Officer
    (principal financial and accounting officer)/s/  Ronald
    B. PortRonald
    B. Port

Chairman of the Board/s/  James
    T. BrophyJames
    T. Brophy

Director/s/  James
    S. ErrantJames
    S. Errant

Director/s/  Lee
    S. HillmanLee
    S. Hillman

Director/s/  Thomas
    S. PostekThomas
    S. Postek

Director/s/  Robert
    G. RettigRobert
    G. Rettig

Director/s/  Mitchell
    H. SaranowMitchell
    H. Saranow

Director/s/  Wilma
    J. SmelcerWilma
    J. Smelcer

Director  49