EX-10.24






EXHIBIT 10.24




FIRST AMENDMENT TO FIRST AMENDED

AND RESTATED CREDIT AGREEMENT




     This FIRST AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT, dated as of March 9, 2009
(this “Amendment”), is executed 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 identified on the
signature pages hereto (collectively, the “Borrower”), and BANK OF AMERICA, N.A., successor
by merger to LASALLE BANK NATIONAL ASSOCIATION (together with its successors and assigns, the
“Lender”).



R E C I T A L S:




     A. The Borrower and the Lender are party to a First Amended and Restated Credit Agreement
dated as of November 7, 2008 (as amended, restated, supplemented or otherwise modified from time to
time, the “Credit Agreement”), pursuant to which the Lender agreed to provide to the
Borrower a revolving credit facility in the original maximum principal amount of $75,000,000.



     B. The Borrower has requested that the Lender agree to amend various provisions of the Credit
Agreement and the Lender is willing to agree to such amendments on the terms and subject to the
conditions set forth herein.



     NOW THEREFORE, in consideration of the premises and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, Borrower and Lender hereby agree as follows:



A G R E E M E N T S:




     1. RECITALS. The foregoing Recitals are hereby made a part of this Amendment.



     2. DEFINITIONS. Capitalized words and phrases used herein without definition shall
have the respective meanings ascribed to such words and phrases in the Credit Agreement.



     3. AMENDMENTS.



          3.1. Amendments to Credit Agreement. The Credit Agreement is amended and restated in
its entirety as set forth on Exhibit A hereto.




          3.2. Amendments to Exhibit A1 to Credit Agreement. Exhibit A1 to the Credit Agreement
is amended and restated in its entirety as set forth on Exhibit B hereto.




          3.3. Amendments to Exhibit A2 to Credit Agreement. Exhibit A2 to the Credit Agreement
is amended and restated in its entirety as set forth on Exhibit C hereto.




          3.4. Amendments to Schedule 6.12 to Credit Agreement. Schedule 6.12 to the Credit
Agreement is amended and restated in its entirety as set forth on Exhibit D hereto.




          3.5. Amendments to Schedule 8.2 to Credit Agreement. Schedule 8.2 to the Credit
Agreement is amended and restated in its entirety as set forth on Exhibit E hereto.




 









 








     4. ACKNOWLEDGMENT OF BORROWER. Each Borrower hereby acknowledges and agrees that, to
the best of its knowledge: (a) none of the Borrowers has any defense, offset, or counterclaim with
respect to the payment of any sum owed to the Lender under the Loan Documents, or with respect to
the performance or observance of any warranty or covenant contained in the Loan Documents; and (b)
the Lender has performed all obligations and duties owed to the Borrower through the date of this
Amendment.



     5. REPRESENTATIONS AND WARRANTIES. To induce Lender to enter into this Amendment, the
Borrowers make the following representations and warranties to the Lender on a joint and several
basis, each of which shall survive the execution and delivery of this Amendment:



          5.1. Compliance with Credit Agreement. On the date hereof, no Default or Event of
Default has occurred and is continuing.




          5.2. Representations and Warranties. On the date hereof, and after giving effect to
this Amendment, the representations and warranties of each Borrower in the Loan Documents are true
and correct in all material respects (except to the extent that such representations and warranties
specifically refer to an earlier date, in which case they are true and correct in all material
respects as of such earlier date).




          5.3. Power and Authority. Each Borrower is duly authorized to execute, deliver and
perform this Amendment. The execution, delivery and performance of this Amendment and the Credit
Agreement, as amended hereby, have been duly authorized by all necessary action, and do not (a)
require any consent or approval of any holders of capital stock of, or other equity interest in,
any Borrower, other than those already obtained; (b) contravene the terms of the Borrower’s
Articles of Incorporation and by-laws, Articles of Organization and Operating Agreement, or other
such similar entity formation and operating agreement; (c) contravene any contractual or
governmental restriction binding upon the Borrower; or (d) except in favor of the Lender pursuant
to the Security Documents, result in the imposition of any Lien upon any property of the Borrower
under any existing indenture, mortgage, deed of trust, loan or credit agreement or other material
agreement or instrument to which the Borrower is a party or by which it or any of its property may
be bound or affected.




          5.4. Enforceability. This Amendment and the Credit Agreement, as amended hereby, are
legal, valid and binding obligations of each Borrower, enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency or similar laws affecting the
enforcement of creditors’ rights generally.




     6. CONDITIONS PRECEDENT. This Amendment shall become effective (the “First
Amendment Effective Date”) as of the date above first written after receipt by Lender of the
following:



          6.1. Amendment. This Amendment executed by Borrower and Lender.




          6.2. Replacement Note. A Replacement First Amended and Restated Promissory Note
issued and delivered by the Borrowers to the Lender.




          6.3. Security Documents. A Security Agreement, Patent and Trademark Security
Agreement, and Copyright Security Agreement, each in form and substance satisfactory to the Lender
and executed by each Borrower and Lender.




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          6.4. UCC Matters. Acknowledgments of all filings or recordations necessary to perfect
its Liens in the Collateral, as well as UCC and Lien searches and other evidence satisfactory to
Lender that such Liens are the only Liens upon the Collateral, except Permitted Liens.




          6.5. Company Certificates. A certificate of a duly authorized officer of each
Borrower, certifying (i) that true and complete copies of such Borrower’s Articles of Incorporation
and by-laws, Articles of Organization and Operating Agreement, or other such similar entity
formation and operating agreement and all amendments thereof are attached thereto (or have not been
amended or modified since the Closing Date); (ii) that true, correct and complete copies of the
resolutions adopted by the unanimous written consent of the boards of directors or the written
consent of the sole member of each Borrower authorizing the execution, delivery and performance by
each Borrower of this Amendment and such other ancillary documents, instruments and certificates to
which each Borrower is or is intended to be a party are attached thereto; and (iii) to the title,
name and signature of each Person authorized to sign this Amendment and such other ancillary
documents, instruments and certificates to which each Borrower is or is intended to be a party.




          6.6. Opinion of Counsel. A written opinion of Jenner & Block LLP, counsel to the
Borrowers, in form and substance satisfactory to Agent




          6.7. Insurance Certificates. Agent shall have received copies of policies or
certificates of insurance for the insurance policies carried by Borrower as required by the Loan
Documents.




          6.8. Other Documents. Such other documents, certificates, resolutions, and/or
opinions of counsel as Lender may request.




          6.9. Payment of Amendment Fee. Payment of an amendment fee in the amount of $100,000.




          6.10. Payment of Legal Fees and Expenses. Payment of all legal fees and expenses of
counsel to Lender that are owing in connection with the Credit Agreement and this Amendment and for
which Borrower has received an invoice.




     7. GENERAL.



          7.1. Post-Closing Agreements. Borrower agrees to deliver to the Lender:





          (a) Within ninety (90) days following the First Amendment Effective Date, either (i)
evidence that Borrower has closed its accounts with MB Financial Bank or (ii) duly executed
Qualifying Control Agreements in respect of such accounts.




          (b) Within sixty (60) days following the First Amendment Effective Date, duly executed
landlord waivers in respect of the following locations of Borrower following locations:




          (i) Des Plaines, IL




          (ii) Centralia, MO




          (iii) Memphis, TN




          (iv) Lenexa, KS




          (v) Stuttgart, AZ



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          (c) Within forty-five (45) days following the First Amendment Effective Date,
appropriate endorsements for the insurance certificates delivered on the First Amendment
Effective Date.




          (d) Within thirty (30) days to obtain good standing certificate for Lawson Products,
Inc., a Georgia corporation.



          7.2. Governing Law. THIS AMENDMENT SHALL BE DEEMED TO BE EXECUTED AND HAS BEEN
DELIVERED AND ACCEPTED IN CHICAGO, ILLINOIS BY SIGNING AND DELIVERING IT THERE. ANY DISPUTE
BETWEEN THE PARTIES HERETO ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT, AND WHETHER ARISING IN
CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS AND
NOT THE CONFLICTS OF LAW PROVISIONS OF THE STATE OF ILLINOIS.




          7.3. Severability. WHEREVER POSSIBLE, EACH PROVISION OF THIS AMENDMENT SHALL BE
INTERPRETED IN SUCH MANNER AS TO BE EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT IF ANY PROVISION
OF THIS AMENDMENT SHALL BE PROHIBITED BY OR INVALID UNDER APPLICABLE LAW, SUCH PROVISION SHALL BE
INEFFECTIVE ONLY TO THE EXTENT OF SUCH LAW, SUCH PROVISION SHALL BE INEFFECTIVE ONLY TO THE EXTENT
OF SUCH PROHIBITION OR INVALIDITY, WITHOUT INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE
REMAINING PROVISIONS OF THIS AMENDMENT.




          7.4. Successors and Assigns. Whenever in this Amendment there is reference made to
any of the parties hereto, such reference shall be deemed to include, wherever applicable, a
reference to the successors and assigns of Borrower and the successors and assigns of Lender, and
the provisions of this Amendment shall be binding upon and shall inure to the benefit of said
successors and assigns. Notwithstanding anything herein to the contrary, the Borrower may not
assign or otherwise transfer its rights or obligations under this Amendment without the prior
written consent of Lender.




          7.5. Continuing Force and Effect of Loan Agreement, Other Agreements, and Guaranty.
Except as specifically modified or amended by the terms of this Amendment, all other terms and
provisions of the Credit Agreement and the other Loan Documents are incorporated by reference
herein, and in all respects, shall continue in full force and effect. Each Borrower, by execution
of this Amendment, hereby reaffirms, assumes and binds itself to all of the obligations, duties,
rights, covenants, terms and conditions that are contained in the Credit Agreement and the other
Loan Documents.




          7.6. References to Loan Agreement. Each reference in the Credit Agreement to “this
Agreement”, “hereunder”, “hereof”, or words of like import, and each reference to the Credit
Agreement in any and all instruments or documents delivered in connection therewith, shall be
deemed to refer to the Credit Agreement, as previously amended and as amended hereby.




          7.7. Expenses. Borrower shall pay all costs and expenses in connection with the
preparation of this Amendment and other related loan documents, including, without limitation,
reasonable attorneys’ fees and time charges of attorneys who may be employees of Lender. Borrower
shall pay any and all stamp and other taxes, UCC search fees, filing fees, and other costs and
expenses in connection with the execution and delivery of this Amendment and the other instruments
and documents to be delivered hereunder, and agrees to save Lender harmless from and against any
and all liabilities with respect to or resulting from any delay in paying or omission to pay such
costs and expenses.




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          7.8. Release of Claims Against Bank. In consideration of the Lender executing and
delivering this Amendment, each of the Borrowers does each hereby release and discharge the Lender
of and from any and all claims, harm, injury, and damage of any and every kind, known or unknown,
legal or equitable, which any Borrower may have against the Lender from the date of their
respective first contact with the Lender until the date of this Amendment, including any claim
arising from any reports (environmental reports, surveys, appraisals, etc.) prepared by any parties
hired or recommended by the Lender. Each of the Borrowers confirms to the Lender that they have
reviewed the effect of this release with competent legal counsel of their choice, or have been
afforded the opportunity to do so, prior to execution of this Amendment and do each acknowledge and
agree that the Lender is relying upon this release in executing and delivering this Amendment.




          7.9. Counterparts. This Amendment may be executed in any number of counterparts each
of which when so executed and delivered shall be deemed an original, and it shall not be necessary
in making proof of this Amendment to produce or account for more than one such counterpart executed
by the Borrower against whom enforcement is sought.





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     IN WITNESS WHEREOF, the parties hereto have executed this First Amendment to First Amended and
Restated Credit Agreement as of the date first above written.



	 	 	 	 	 	 	 
	 	 	BORROWERS:	 	 
	 
	 	 	 	 	 	 
	 	 	LAWSON PRODUCTS, INC., a Delaware	 	 
	 	 	corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Thomas Neri	 	 
	 

	 	Name:
	 	 

Thomas Neri
	 	 
	 

	 	Title:
	 	President	 	 
	 
	 	 	 	 	 	 
	 	 	LAWSON PRODUCTS, INC., a Georgia	 	 
	 	 	corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Thomas Neri	 	 
	 

	 	Name:
	 	 

Thomas Neri
	 	 
	 

	 	Title:
	 	President	 	 
	 
	 	 	 	 	 	 
	 	 	LAWSON PRODUCTS, INC., a New Jersey	 	 
	 	 	corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Thomas Neri	 	 
	 

	 	Name:
	 	 

Thomas Neri
	 	 
	 

	 	Title:
	 	President	 	 
	 
	 	 	 	 	 	 
	 	 	LAWSON PRODUCTS, INC., a Nevada	 	 
	 	 	corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Thomas Neri	 	 
	 

	 	Name:
	 	 

Thomas Neri
	 	 
	 

	 	Title:
	 	President	 	 
	 
	 	 	 	 	 	 
	 	 	LAWSON PRODUCTS, INC., a Texas	 	 
	 	 	corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Thomas Neri
 

	 	 
	 

	 	Name:
	 	Thomas Neri	 	 
	 

	 	Title:
	 	President	 	 






Signature page to First Amendment




 









 





	 	 	 	 	 	 	 
	 	 	LP SERVICE CO., an Illinois corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Thomas Neri	 	 
	 

	 	Name:
	 	 

Thomas Neri
	 	 
	 

	 	Title:
	 	President	 	 
	 
	 	 	 	 	 	 
	 	 	LPI HOLDINGS, INC., an Illinois corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Thomas Neri	 	 
	 

	 	Name:
	 	 

Thomas Neri
	 	 
	 

	 	Title:
	 	President	 	 
	 
	 	 	 	 	 	 
	 	 	CRONATRON WELDING SYSTEMS, LLC, a	 	 
	 	 	North Carolina limited liability company	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Thomas Neri	 	 
	 

	 	Name:
	 	 

Thomas Neri
	 	 
	 

	 	Title:
	 	President	 	 
	 
	 	 	 	 	 	 
	 	 	DRUMMOND AMERICAN LLC, an Illinois	 	 
	 	 	limited liability company	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Thomas Neri	 	 
	 

	 	Name:
	 	 

Thomas Neri
	 	 
	 

	 	Title:
	 	President	 	 
	 
	 	 	 	 	 	 
	 	 	ASSEMBLY COMPONENT SYSTEMS, INC., an	 	 
	 	 	Illinois corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Thomas Neri	 	 
	 

	 	Name:
	 	 

Thomas Neri
	 	 
	 

	 	Title:
	 	Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	AUTOMATIC SCREW MACHINE PRODUCTS	 	 
	 	 	COMPANY, INC., an Alabama corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Thomas Neri	 	 
	 

	 	Name:
	 	 

Thomas Neri
	 	 
	 

	 	Title:
	 	Chief Executive Officer	 	 






Signature page to First Amendment




 









 





	 	 	 	 	 	 	 
	 	 	C. B. LYNN COMPANY, an Illinois corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Thomas Neri	 	 
	 

	 	Name:
	 	 

Thomas Neri
	 	 
	 

	 	Title:
	 	President	 	 
	 
	 	 	 	 	 	 
	 	 	RUTLAND TOOL & SUPPLY CO., A Nevada	 	 
	 	 	corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Thomas Neri	 	 
	 

	 	Name:
	 	 

Thomas Neri
	 	 
	 

	 	Title:
	 	Chief Executive Officer	 	 






Signature page to First Amendment




 









 





	 	 	 	 	 	 	 
	 	 	LENDER:	 	 
	 
	 	 	 	 	 	 
	 	 	BANK OF AMERICA, N.A., a national banking	 	 
	 	 	association	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ David Bacon	 	 
	 

	 	Name:
	 	 

David Bacon
	 	 
	 

	 	Title:
	 	Vice President	 	 







 











 




 

EXHIBIT A

(FIRST AMENDMENT CONFORMED VERSION)




FIRST AMENDED AND RESTATED CREDIT AGREEMENT




BY AND BETWEEN




BANK OF AMERICA, N.A., SUCCESSOR BY MERGER TO LASALLE BANK

NATIONAL ASSOCIATION




AND




LAWSON PRODUCTS, INC.,

AND CERTAIN OF ITS SUBSIDIARIES






 









 








FIRST AMENDED AND RESTATED CREDIT AGREEMENT




     This First Amended and Restated Credit Agreement together with all Exhibits and Schedules
attached hereto and hereby made a part hereof (“Agreement”) is made as of the 7th day of
November, 2008, by and between 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 hereof (Lawson and the
Subsidiaries other than Lawson Canada may be referred to herein collectively as the
“Borrower”), and BANK OF AMERICA, N.A., successor by merger to LASALLE BANK NATIONAL
ASSOCIATION (the “Lender”), its successors and/or assigns.



PRELIMINARY STATEMENTS:




     A. Lender has heretofore made a loan (“Original Loan”) to Borrower in the maximum
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
“Existing Credit Agreement”), and as evidenced by a Promissory Note dated as March 27,
2001, in the principal amount of the Loan made payable by Borrower to the order of Lender
(“Existing Note”).



     B. The Existing Credit Agreement has been 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 to $75,000,000, (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; (vi) as of June 21, 2007 to, among other things, increase
the letter of credit subfacility and modify certain financial covenants; (vii) as of December 26,
2007 to, among other things, increase certain subfacilities and to modify certain financial
covenants; and (viii) as of August 1, 2008, to, among other things, modify certain covenants to
provide for the accounting of the Federal Settlement Amount, and waive certain Events of Defaults
resulting from the Federal Settlement Amount. The Existing Credit Agreement, as amended by the
aforedescribed modifications may be hereinafter referred to as the “Original Credit
Agreement.”



     C. The Borrower and the Lender now desire to amend and restate the Original Credit Agreement,
by entering into this Agreement to set forth the terms and conditions governing the Loans (as
hereinafter defined).



     D. Each Subsidiary has determined that its joint and several liabilities under this Agreement
are in furtherance of its corporate or other organizational purposes and in its best interest and
that it will derive substantial benefit, whether directly or indirectly, from entering into such
obligations by, among other things, enabling (i) each Subsidiary to receive proceeds from the Loan
to be used as working capital, (ii) each Subsidiary to directly receive proceeds for capital
expenditures or indirectly receive capital assets from capital expenditures made with the



 









 







proceeds received by other Subsidiary and (iii) each Subsidiary to obtain additional capital
in the future by direct borrowing or from the proceeds of borrowings of a Subsidiary or Affiliate.



     NOW THEREFORE, in consideration of the premises, and the mutual covenants and agreements set
forth herein, the Borrower agrees to amend and restate the Original Credit Agreement in its
entirety subject to and upon the following terms and conditions:



AGREEMENT




     For and in consideration of the foregoing, which is made a part hereof, the mutual promises,
covenants and conditions contained herein, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties agree as follows:



1. DEFINITIONS.




     1.1 General Terms. When used herein, the following terms shall have the following
meanings:




“Accounting Systems Letter” shall have the meaning set forth in subsection
7.1(G).




“Accounts” shall mean all present and future rights of the Borrower to payment for
goods sold or leased or for services rendered, which are not evidenced by instruments or
chattel paper, and whether or not they have been earned by performance.




“Affiliate” shall mean any Person (a) that directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common control with, the
Borrower, (b) that directly or beneficially owns or holds 25% or more of any class of the
voting stock of the Borrower, or (c) 25% or more of the voting stock (or in the case of a
Person which is not a corporation, 25% or more of the equity interest) of which is owned
directly or beneficially or held by the Borrower. As used in this definition, “control”
(including with correlative meanings the terms “controlled by” and “under common control
with”) means the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the ownership of
voting securities, by contract or otherwise. Unless the context otherwise clearly requires,
any reference to an “Affiliate” is a reference to an Affiliate of the Borrower.




“Applicable Margin” shall mean the rate per annum added to the BBA LIBOR Daily
Floating Rate to determine the interest rate for BBA LIBOR Daily Floating Rate LIBOR Loans
and added to the BBA LIBOR Rate (Adjusted Periodically) to determine the interest rate for
BBA LIBOR Rate (Adjusted Periodically) LIBOR Loans, in each case as set forth on the Pricing
Grid set forth on Grid A attached hereto and made a part hereof.




“Assets” shall mean the total of all assets appearing on a balance sheet of the
Borrower prepared in accordance with GAAP (with Inventory being valued at the lower of cost
or market).




“Authorized Officer” shall mean, at any time, an individual whose signature has been
certified to Lender on behalf of Borrower pursuant to a Signature Authorization



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Certificate actually received by Lender at such time and whose authority has not been revoked prior to
such time in the manner prescribed in such Signature Authorization Certificate.




“BBA LIBOR Daily Floating Rate” shall mean a fluctuating rate of interest equal to
the rate per annum equal to the British Bankers Association LIBOR Rate (“BBA
LIBOR”), as published by Reuters (or other commercially available source providing
quotations of BBA LIBOR as selected by Lender from time to time) as determined for each
banking day at approximately 11:00 a.m. London time two (2) Business Days prior to the date
in question, for U.S. Dollar deposits (for delivery on the first day of such interest
period) with a one month term, as adjusted from time to time in Lender’s sole discretion for
reserve requirements, deposit insurance assessment rates and other regulatory costs. If
such rate is not available at such time for any reason, then the rate for that interest
period will be determined by such alternate method as reasonably selected by Lender.




“BBA LIBOR Daily Floating Rate LIBOR Loan” or “BBA LIBOR Daily Floating Rate
LIBOR Loans” shall mean that portion, and collectively those portions, of the aggregate
outstanding principal balance of the Loans that bear interest at the BBA LIBOR Daily
Floating Rate plus the Applicable Margin.




“BBA LIBOR Rate (Adjusted Periodically)” shall mean a rate of interest equal to the
rate per annum equal to the BBA LIBOR, as published by Reuters (or other commercially
available source providing quotations of BBA LIBOR as selected by Lender from time to time)
as determined for each Adjustment Date at approximately 11:00 a.m. London time two (2)
Business Days prior to the Adjustment Date, for U.S. Dollar deposits (for delivery on the
first day of such Interest Period) for the applicable Interest Period, as adjusted from time
to time in Lender’s sole discretion for reserve requirements, deposit insurance assessment
rates and other regulatory costs. If such rate is not available at such time for any
reason, then the rate for that Interest Period will be determined by such alternate method
as reasonably selected by Lender. The BBA LIBOR Rate (Adjusted Periodically) will be
adjusted on the last day of every Interest Period (the “Adjustment Date”) and remain
fixed until the next Adjustment Date. If the Adjustment Date in any particular month would
otherwise fall on a day that is not a Business Day then, at Lender’s option, the Adjustment
Date for that particular month will be the first Business Day immediately following
thereafter.




“BBA LIBOR Rate (Adjusted Periodically) LIBOR Loan” or “BBA LIBOR Rate (Adjusted
Periodically) LIBOR Loans” shall mean that portion, and collectively those portions, of
the aggregate outstanding principal balance of the Loans that bear interest at the BBA LIBOR
Rate (Adjusted Periodically) plus the Applicable Margin.




“BBA LIBOR Request” shall mean a request by Lawson, on behalf of Borrower, for an
advance, continuation, or conversion of a portion of a Revolving Loan pursuant to Section
2.6(H).




“Bank Products” shall mean any service or facility extended to the Borrower or any
Subsidiary by the Lender or any Affiliate of the Lender, including: (a) credit cards, (b)



8









 






credit card processing services, (c) debit cards, (d) purchase cards, (e) ACH Transactions,
(f) cash management, including controlled disbursement, accounts or services, or (g) Hedging
Agreements.




“Bank Product Agreements” shall mean those certain agreements entered into from time
to time by the Borrower with the Lender or any Affiliate of the Lender concerning Bank
Products.




“Bank Product Obligations” shall mean all obligations, liabilities, contingent
reimbursement obligations, fees, and expenses owing by the Borrower to the Lender or any
Affiliate of the Lender pursuant to or evidenced by the Lender Product Agreements and
irrespective of whether for the payment of money, whether direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising.




“Bankruptcy Code” shall have the meaning set forth in subsection 6.6 hereof.




“Borrower” shall mean Lawson and the Subsidiaries of Lawson identified on
Schedule 6.12 hereof with the exclusion of Lawson Canada.




“Business Day” shall mean a day other than Saturday or Sunday on which banks in
Chicago are open for the transaction of banking business and if such day relates to BBA
LIBOR, any such day on which dealings in Dollar deposits are conducted between banks in the
London interbank Eurodollar market.




“Capital Expenditure” shall mean, as to any Person, any and all expenditures of such
Person for fixed or capital assets, including, without limitation, the incurrence of
capitalized lease obligations, all as determined in accordance with GAAP, except that
capital expenditures shall not include expenditures for fixed or capital assets to the
extent such expenditures are paid or reimbursed from the proceeds of insurance.




“Capitalized Lease” shall mean, as to any Person, at any time, any lease which, in
accordance with GAAP, is required to be capitalized on the consolidated balance sheet of
such Person at such time, and “capitalized lease obligations” of such Person at any time
shall mean the aggregate amount which, in accordance with GAAP, is required to be reported
as a liability on the consolidated balance sheet of such Person at such time as lessee under
Capitalized Leases.




“Change in Control” shall mean the failure of Sidney L. Port or his Immediate
Family to own individually, or through a trust or other entity for their benefit, including
but not limited to Port Investments LLP, a Delaware Limited Liability Partnership, twenty
percent (20%) or more of the shares of stock of Lawson.




“Closing Date” shall mean November 7, 2008, the closing of the Loans pursuant to the
Agreement.




“Code ” shall have the meaning set forth in subsection 1.3 hereof.



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“Collateral” shall mean all property described in any Loan Documents as security for
any Liabilities.




“Collateral Assignment” shall mean the Collateral Assignment of Debt Instruments,
dated as of the Closing Date, by Borrower to and for the benefit of the Lender.




“Commercial Card Obligations” shall mean Bank Product Obligations owing by the
Borrower to Lender or any Affiliate of the Lender for purchase cards pursuant to the Master
Commercial Card Agreement (as hereinafter defined).




“Contingent Liability” and “Contingent Liabilities” shall mean,
respectively, each obligation and liability of the Borrower and all such obligations and
liabilities of the Borrower incurred pursuant to any agreement, undertaking or arrangement
by which the Borrower: (a) guarantees, endorses or otherwise becomes or is contingently
liable upon (by direct or indirect agreement, contingent or otherwise, to provide funds for
payment, to supply funds to, or otherwise to invest in, a debtor, or otherwise to assure a
creditor against loss) the indebtedness, dividend, obligation or other liability of any
other Person in any manner (other than by endorsement of instruments in the course of
collection), including without limitation, any indebtedness, dividend or other obligation
which may be issued or incurred at some future time; (b) guarantees the payment of dividends
or other distributions upon the shares or ownership interest of any other Person; (c)
undertakes or agrees (whether contingently or otherwise): (i) to purchase, repurchase, or
otherwise acquire any indebtedness, obligation or liability of any other Person or any
property or assets constituting security therefor, (ii) to advance or provide funds for the
payment or discharge of any indebtedness, obligation or liability of any other Person
(whether in the form of loans, advances, stock purchases, capital contributions or
otherwise), or to maintain solvency, assets, level of income, working capital or other
financial condition of any other Person, or (iii) to make payment to any other Person other
than for value received; (d) agrees to lease property or to purchase securities, property or
services from such other Person with the purpose or intent of assuring the owner of such
indebtedness or obligation of the ability of such other Person to make payment of the
indebtedness or obligation; (e) to induce the issuance of, or in connection with the
issuance of, any letter of credit for the benefit of such other Person; or (f) undertakes or
agrees otherwise to assure a creditor against loss. The amount of any Contingent Liability
shall (subject to any limitation set forth herein) be deemed to be the outstanding principal
amount (or maximum permitted principal amount, if larger) of the indebtedness, obligation or
other liability guaranteed or supported thereby.




“Current Assets” and “Current Liabilities” — “Current Assets” shall mean the
amount of all current assets (exclusive of prepaid expenses) which would be classified as
such on a balance sheet prepared in accordance with GAAP. “Current Liabilities” shall mean
the amount of all current liabilities which would be classified as such on a balance sheet
prepared in accordance with GAAP, and which include, without limitation, trade debt, all
accrued liabilities, the current portions of long-term debt and Capitalized Lease
obligations.



10









 






“Debt” shall mean, as to any Person, without duplication, (a) all indebtedness of
such Person; (b) all borrowed money of such Person (including principal, interest, fees and
charges), whether or not evidenced by bonds, debentures, notes or similar instruments; (c)
all obligations to pay the deferred purchase price of property or services; (d) all
obligations, contingent or otherwise, with respect to the maximum face amount of all letters
of credit (whether or not drawn), bankers’ acceptances and similar obligations issued for
the account of such Person (including the Letters of Credit), and all unpaid drawings in
respect of such letters of credit, bankers’ acceptances and similar obligations; (e) all
indebtedness secured by any Lien on any property owned by such Person, whether or not such
indebtedness has been assumed by such Person (provided, however, if such Person has not
assumed or otherwise become liable in respect of such indebtedness, such indebtedness shall
be deemed to be in an amount equal to the fair market value of the property subject to such
Lien at the time of determination); (f) the aggregate amount of all Capitalized Lease
Obligations of such Person; (g) all Contingent Liabilities of such Person, whether or not
reflected on its balance sheet; (h) all Hedging Obligations of such Person; (i) all Debt of
any partnership of which such Person is a general partner; and (j) all monetary obligations
of such Person under (i) a so-called synthetic, off-balance sheet or tax retention lease, or
(ii) an agreement for the use or possession of property creating obligations that do not
appear on the balance sheet of such Person but which, upon the insolvency or bankruptcy of
such Person, would be characterized as the indebtedness of such Person (without regard to
accounting treatment). Notwithstanding the foregoing, Debt shall not include trade payables
and accrued expenses incurred by such Person in accordance with customary practices and in
the ordinary course of business of such Person.




“Deposit Inventory System” shall have the meaning set forth in Schedule 3.4
hereof.




“Default” shall mean the occurrence or existence of any one or more of the events
described in subsection 9.l hereof.




“Distribution” shall mean any declaration or payment of a distribution, interest or
dividend on any equity interest (other than payment-in-kind); any distribution, advance or
repayment of Indebtedness to a holder of equity interests; or any purchase, redemption, or
other acquisition or retirement for value of any equity interest.




“EBITDA” for any period, shall mean the Borrower’s pretax net income (determined on
a consolidated basis in accordance with GAAP) before interest, tax distributions, dividends,
state replacement tax expense, depreciation, amortization expense (of intangibles,
including, without limitation, capitalized fees and goodwill) and other noncash expenses
determined in accordance with GAAP (including, without limitation, charge-offs of goodwill
and write-downs of key man life insurance), plus, to the extent included in determining net
income, severance costs expensed in 2009.




“Environmental Lien” shall mean a Lien in favor of any governmental entity for (a)
any liability under federal or state environmental laws or regulations, or (b) damages
arising from costs incurred by such governmental entity in response to a release of a
hazardous or toxic waste, substance or constituent, or other substance into the environment.



11









 






“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended
from time to time, any successor statute, and any regulations promulgated thereunder.




“ERISA Affiliate” shall mean with respect to Lawson (i) any corporation which is a
member of the same controlled group of corporations (within the meaning of Section 414(b) of
the Internal Revenue Code) as Lawson; (ii) a trade or business under common control (within
the meaning of Section 4 14(c) of the Internal Revenue Code) with Lawson; or (iii) a member
of the same affiliated service group (within the meaning of Section 4 14(m) of the Internal
Revenue Code) as Lawson.




“Event of Default” shall mean any event that, if it continues uncured, will, with
lapse of time or notice or both, constitute a Default.




“Federal Settlement” shall mean that certain agreement between the Borrower and the
United States of America dated on August 11, 2008 whereby the Borrower reached a settlement
with the United States of America resulting from an ongoing investigation of certain
“gifting” practices of employees of the Borrower made to United States federal
government employees.




“Federal Settlement Amount” shall mean the payment of the aggregate principal amount
of $30,000,000 to settle all claims of the United States of America relating to the
“gifting” practices, payable by the Borrower in three (3) annual installments with
the first payment made in August, 2008.




“Financials” shall have the meaning set forth in subsection 6.4 hereof.




“First Amendment” shall mean the First Amendment to First Amended and Restated
Credit Agreement, dated as of March [10], 2009, by and between Lender and Borrower.




“First Amendment Effective Date” shall have the meaning set forth for that term in
the First Amendment.




“Fiscal Quarter” shall mean a period, three (3) months in duration, beginning on
January 1, April 1, July 1, or October 1 of any Fiscal Year.




“Fiscal Year” shall mean a period, twelve (12) months in duration commencing on
January 1 and ending on December 31.




“Funded Debt” shall mean, as to any Person, all Debt of such Person that matures
more than one year from the date of its creation (or is renewable or extendible, at the
option of such Person, to a date more than one year from such date).




“GAAP” shall mean generally accepted accounting principles as in effect on the date
hereof in accordance with the rules, regulations, pronouncements and opinions of the
Financial Accounting Standards Board and the American Institute of Certified Public
Accountants (or their successors), and as applied in a manner consistent with preparation of
the Financials, subject to the provisions of subsection 1.2.



12









 






“Good Faith” shall have the meaning set forth for that term in Section 1-201(19) of
the Code, provided that Good Faith shall also mean the absence of malice or capriciousness
on the part of Lender.




“Guaranteed Indebtedness” of any Person means all Indebtedness referred to in the
definition of “Indebtedness” in this Section guaranteed directly or indirectly in any manner
by such Person, or in effect guaranteed directly or indirectly by such Person (or secured by
any assets of such Person) regardless of whether the liability of such Person is limited to
such assets or otherwise nonrecourse through an agreement (i) to pay or purchase such
Indebtedness or to advance or supply funds for the payment or purchase of such Indebtedness;
(ii) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell
services, primarily for the purpose of enabling the debtor to make payment of such
Indebtedness or to assure the holder of such Indebtedness against loss; (iii) to supply
funds to, or in any other manner invest in, the debtor (including any agreement to pay for
property or services irrespective of whether such property is received or such services are
rendered); or (iv) otherwise to assure a creditor against loss or to grant a security
interest in property for the benefit of any such creditor.




“Hedging Agreement” shall mean any interest rate, currency or commodity swap
agreement, cap agreement or collar agreement, and any other agreement or arrangement
designed to protect a Person against fluctuations in interest rates, currency exchange rates
or commodity prices.




“Hedging Obligation” shall mean, with respect to any Person, any liability of such
Person under any Hedging Agreement.




“Immediate Family” shall mean the spouse, former spouse, children, grandchildren,
parents or grandparents of a Person.




“Indebtedness” of any Person means (without duplication), as of any specified date,
the aggregate amount outstanding or owing under (a) all indebtedness of such Person for
borrowed money or for the deferred purchase price of property or services (including,
without limitation, all obligations in respect of principal, premium, if any, and interest
payable on such indebtedness and all other obligations, contingent or otherwise, of such
Person and in connection with any agreement to purchase, redeem, exchange, convert or
otherwise acquire for value any capital stock of, or other equity interest in, such Person
or any other Person), but excluding current liabilities for trade payables and other current
liabilities other than for money borrowed, incurred in the ordinary course of business; (b)
all obligations of such Person evidenced by bonds, notes, debentures or other similar
instruments; (c) all indebtedness created or arising under any conditional sale or other
title retention agreement with respect to property acquired by such Person (even though the
rights and remedies of the seller or Lender under such agreement in the event of default are
limited to repossession or sale of such property); (d) all obligations of such Person under
Capitalized Leases; (e) all Indebtedness referred to in clause (a), (b), (c) or (d) above
secured by (or for which the holder of such Indebtedness has an existing right, contingent
or otherwise, to be secured by) any Lien upon or in property (including, without limitation,
accounts and contract rights) owned by such Person, even though such



13









 







Person has not assumed
or become liable for the payment of such Indebtedness; (f) all Guaranteed Indebtedness of
such Person; (g) all liabilities incurred by such Person or any ERISA Affiliate to the PBGC
upon the termination under Section 4041 or Section 4042 of ERISA of any Pension Plan; (h)
all Withdrawal Liabilities of such Person or any of its ERISA Affiliates; and (i) all
increase in the amount of contributions required to be made by such Person and its ERISA
Affiliates in each fiscal year of such Person to Multiemployer Plans, due to the
reorganization or termination of any such Multiemployer Plan within the meaning of Title IV
of ERISA, over the average annual amount of such contributions required to be made during
the last three (3) years preceding such reorganization or termination.




“Interest Charges” shall mean, for any period, the sum of: (a) all interest, charges
and related expenses payable with respect to that fiscal period to a lender in connection
with borrowed money or the deferred purchase price of assets that are treated as interest in
accordance with GAAP, plus (b) the portion of Capitalized Lease obligations with
respect to that fiscal period that should be treated as interest in accordance with GAAP,
plus (c) all charges paid or payable (without duplication) during that period with respect
to any Hedging Agreements.




“Interest Period” shall mean a period of 30, 60, 90 or 180 days, as selected by
Lawson, commencing on a Business Day selected by Lawson pursuant to this Agreement. All
Interest Periods shall be subject to the following additional conditions: (i) each selection
of an Interest Period shall be irrevocable for the period so selected; (ii) each Interest
Period shall be selected in such a way that no Interest Period shall extend beyond the
Maturity Date; and (iii) if any Interest Period ends on a day other than a Business Day,
such Interest Period shall be extended to the next succeeding day which is a Business Day
unless such succeeding day would fall in the next calendar month, in which event such
Interest Period shall end on the immediately preceding Business Day.




“Internal Revenue Code” shall mean the Internal Revenue Code of 1986, as amended
from time to time, and any successor statute.




“Inventory” shall mean any and all goods including, without limitation, goods in
transit, wheresoever located, whether now owned or hereafter acquired by the Borrower, which
are held for sale or lease, furnished under any contract of service or held as raw
materials, work-in-process or supplies, and all materials used or consumed in the Borrower’s
business, and shall include such property the sale or other disposition of which has given
rise to Accounts and which has been returned to or repossessed or stopped in transit by the
Borrower.




“Lawson Canada” shall mean Lawson Products, Inc., a Canadian corporation.




“Legal Requirement” shall mean any requirement imposed upon Lender by any law of the
United States of America or the United Kingdom or by any regulation, order, interpretation,
ruling of official directive (whether or not having the force of law) of the Bank of England
or any other board, central bank or governmental or administrative



14









 







agency, institution or
authority of the United States of America, the United Kingdom or any political subdivision
of either thereof.




“Lending Affiliate” means (a) each office and branch of the Lender, and (b) each
entity which, directly or indirectly, is controlled by or under common control with the
Lender or which controls the Lender and each office and branch thereof.




“Letter of Credit” and “Letters of Credit” shall mean, respectively, a
letter of credit and all such letters of credit issued by the Lender, in its sole
discretion, upon the execution and delivery by the Borrower and the acceptance by the Lender
of a Master Letter of Credit Agreement and a Letter of Credit Application, as set forth in
Section 2.1(B) of this Agreement.




“Letter of Credit Obligations” shall mean, at any time, an amount equal to the
aggregate of the original face amounts of all Letters of Credit minus the sum of (i) the
amount of any reductions in the original face amount of any Letter of Credit which did not
result from a draw thereunder, (ii) the amount of any payments made by the Lender with
respect to any draws made under a Letter of Credit for which the Borrower has reimbursed the
Lender, (iii) the amount of any payments made by the Lender with respect to any draws made
under a Letter of Credit which have been converted to a Loan as set forth in Section
2.1(B), and (iv) the portion of any issued but expired Letter of Credit which has not
been drawn by the beneficiary thereunder. For purposes of determining the outstanding
Letter of Credit Obligations at any time, the Lender’s acceptance of a draft drawn on the
Lender pursuant to a Letter of Credit shall constitute a draw on the applicable Letter of
Credit at the time of such acceptance.




“Liabilities” shall mean all of the Borrower’s liabilities, obligations, and
indebtedness to the Lender of any and every kind and nature, whether heretofore, now or
hereafter owing, arising, due or payable and howsoever evidenced, created, incurred,
acquired, or owing, whether primary, secondary, direct, contingent, fixed or otherwise
(including obligations of performance) and whether arising or existing under written
agreement, oral agreement or operation of law, and all of the Borrower’s other indebtedness
and obligations to the Lender under this Agreement and the other Loan Documents.




“Lien” shall mean any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or
other security interest or preferential arrangement in the nature of a security interest of
any kind or nature whatsoever (including any conditional sale or other title retention
agreement, any easement, right of way or other encumbrance on title to real property, and
any financing lease having substantially the same economic effect as any of the foregoing).




“Loan(s)” shall mean, collectively, all Revolving Loans, the Letter of Credit
Obligations, the Maximum Corporate Commercial Card Obligation, and the Maximum Hedging
Obligation, under and pursuant to this Agreement.



15









 






“Loan Account” shall mean the loan account established on the books of the Lender
established pursuant to Section 2.4 hereof.




“Loan Documents” shall mean, collectively, all agreements, instruments and
documents, including, without limitation, this Agreement, the Note, the Security Documents,
and all other written matter whether heretofore, now or hereafter executed by or on behalf
of the Borrower and delivered to the Lender, in any case in connection with the Revolving
Loans made hereunder, together with all agreements, documents or instruments referred to
therein or contemplated thereby.




“Management Letter” shall have the meaning set forth in subsection 7.1(G)
hereof.




“Maturity Date” shall mean November 7, 2011.




“Maximum Facility” shall mean the maximum amount which the Lender has agreed to
consider as a ceiling on the Loans, including the outstanding principal balance of the
revolving loans advanced and letters of credits issued hereunder, and the obligations for
commercial cards and hedging, to be made to or for the account of the Borrower. The Maximum
Facility shall be Fifty-Five Million and no/100 Dollars ($55,000,000) United States
currency, unless permanently reduced at Lawson’s election pursuant to Section 2.3.




“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 Two Million and no/100 Dollars ($2,000,000).




“Maximum Hedging Obligation” shall mean any liability of a Person under any Hedging
Agreement not to exceed at any time One Million and no/100 Dollars ($1,000,000).




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




“Multiemployer Plan” shall mean, with respect to any Person, an employee benefit
plan defined in Section 4001(a) (3) of ERISA which is, or within the immediately preceding
six (6) years was, contributed to by such Person or an ERISA Affiliate of such Person.




“Net Income” shall have the meaning provided, and shall be calculated provided in
accordance with GAAP.




“Net Worth” shall mean at any time the total of Assets minus Liabilities.




“Note” shall have the meaning set forth in subsection 2.1 hereof.




“PBGC” shall mean the Pension Benefit Guaranty Corporation.




“Pension Plan” shall mean any employee pension benefit plan as defined in Section
3(2) of ERISA in respect of which Lawson or any ERISA Affiliate is, or at any time during



16









 







the immediately preceding five (5) years was, an “employer” as defined in Section 3(5) of
ERISA.




“Permitted Liens” shall have the meaning set forth in Section 8.1.




“Person” shall mean any individual, sole proprietorship, partnership, limited
liability company, joint venture, trust, unincorporated organization, association,
corporation, institution, entity, party, or government (whether national, federal, state,
provincial, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).




“Pledge Agreement” shall mean the Securities Pledge Agreement, dated as of the
Closing Date, by Lawson in favor of the Lender.




“Property” shall have the meaning set forth in subsection 10.8(B).




“Real Property” means all of the Borrower’s right, title, and interest in all of
those plots, pieces or parcels of land now owned, leased or hereafter acquired by the
Borrower (the “Land”), including, without limitation, those more particularly
described on Exhibit A1 as to properties owned by the Borrower, and Exhibit
A2 with respect to properties leased or otherwise occupied, in whole or in part, by the
Borrower, together with the right, title and interest of the Borrower in and to the
following: the streets, the land lying in the bed of any streets, roads or avenues, opened
or proposed, in front of, adjoining, or abutting the Land to the center line thereof, the
air space and development rights pertaining to the Land and right to use such air space and
development rights, all rights of way, privileges, liberties, tenements, hereditaments and
appurtenances belonging or in any way appertaining thereto, all easements now or hereafter
benefiting the Land and all royalties and all rights appertaining to the use and enjoyment
of the Land, including, without limitation, all alley, vault, drainage, mineral, water, oil,
and gas rights, timber, sewers, pipes, conduits, wires, and other facilities furnishing
utility or other services to the Land and other similar rights, together with all of the
buildings and other improvements and fixtures now or hereafter erected on the Land.




“Responsible Officer” shall mean (i) any one or more of the officers of Borrower
listed on Exhibit D, (ii) an officer elected or appointed by the Board of Directors
of a Borrower to replace an officer listed on Exhibit D, or (iii) an officer not
listed on Exhibit D but having substantially the same or similar responsibilities as
an officer so listed on Exhibit D, including, but not limited to, officers of newly
created or acquired subsidiaries.




“Revolving Loan” and “Revolving Loans” shall mean, respectively, each direct
advance and the aggregate of all such direct advances made by the Lender to the Borrower
under and pursuant to this Agreement, as set forth in Section 2.1 of this Agreement.




“Revolving Loan Availability” shall mean at any time, the Maximum Facility less the
aggregate of (a) the Letter of Credit Obligations, (b) Maximum Corporate Commercial Card
Obligation, and (c) the Maximum Hedging Obligation.




“Sarbanes-Oxley” means the Sarbanes-Oxley Act of 2002.



17









 






“Securities Laws” means the Securities Act of 1933, the Securities Exchange Act of
1934, Sarbanes-Oxley and the applicable accounting and auditing principles, rules, standards
and practices promulgated, approved or incorporated by the Securities Exchange Commission or
the Public Company Accounting Oversight Board, as each of the foregoing may be amended and
in effect on any applicable date hereunder.




“Security Agreement” shall mean the Security Agreement dated as of the First
Amendment Effective Date by and among the Borrowers and the Lender.




“Security Documents” shall mean the Security Agreement, the Pledge Agreement, the
Collateral Assignment, and all other agreements, instruments and documents now or hereafter
executed and delivered in connection with this Agreement pursuant to which Liens are granted
or perfected or purported to be granted or perfected in Collateral securing all or part of
the Liabilities.




“Signature Authorization Certificate” shall mean a certificate, substantially in the
form attached hereto as Exhibit B, now or hereafter executed on behalf of Lawson and
delivered to Lender.




“Subsidiary” shall mean, with respect to any Borrower, any corporation or other
entity of which more than fifty percent (50%) of the outstanding capital stock or other
membership interest having ordinary voting power to elect a majority of the board of
directors or controlling body of such corporation or entity (irrespective of whether at the
time stock of any other class or classes of such corporation shall have or might have voting
power by reason of the happening of any contingency) is at the time, directly or indirectly,
owned by such Borrower.




“Term” shall mean the period from the Closing Date to the Maturity Date.




“Termination Event” shall mean (i) with respect to any Pension Plan, the occurrence
of a reportable event described in Section 4043 of ERISA and the regulations issued
thereunder; or (ii) the withdrawal of the Borrower or any ERISA Affiliate from a Pension
Plan during a plan year in which it is a “substantial employer” as defined in Section 400
1(a) (2) of ERISA; or (iii) the occurrence of an obligation of the Borrower or any ERISA
Affiliate arising under Section 4041 of ERISA to provide participants in a Pension Plan and
other affected parties with a written notice of intent to terminate the Pension Plan; or
(iv) the institution of proceedings to terminate a Pension Plan by the Pension Benefit
Guaranty Corporation; or (v) any other event or condition which might constitute grounds
under Section 404 1(A) or 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Pension Plan; or (vi) the partial or complete withdrawal of the
Borrower or any ERISA Affiliate from a “Multiemployer Plan” (as defined in subsection
6.18 hereof).




“Third Party Goods” shall mean all raw materials, work-in-process and finished goods
owned by Persons other than the Borrower and in Borrower’s possession.



18









 






“Total Debt” shall mean (a) all Debt of the Borrower, determined on a consolidated
basis, excluding (i) Contingent Liabilities (except to the extent constituting Contingent
Liabilities in respect of the Debt of a Person other than the Borrower or any Subsidiaries),
(ii) Hedging Obligations, and (iii) Debt of the Borrower to Subsidiaries and Debt of
Subsidiaries to the Borrower or to other Subsidiaries, plus (b) in the case of
Borrower, any unpaid portion of the Federal Settlement Amount.




“UFCA” shall mean the Uniform Fraudulent Conveyances Act.




“UFTA” shall mean the Uniform Fraudulent Transfers Act.




“Upstream Payment” shall mean a Distribution by a Subsidiary of a Borrower to such
Borrower.




“Withdrawal Liability” shall have the meaning given to such term under Part I of the
Subtitle E of Title IV of ERISA.



     1.2 Accounting Terms. Calculations and determinations of financial and accounting
terms used and not otherwise specifically defined hereunder shall be made and determined, both as
to classification of items and as to amount, in accordance with GAAP. If any changes in accounting
principles or practices from GAAP are occasioned by the promulgation of rules, regulations,
pronouncements and opinions by or required by the Financial Accounting Standards Board or the
American Institute of Certified Public Accountants (or any successor thereto or agencies with
similar functions), which result in a change in the method of accounting in the calculation of
financial covenants, standards or terms contained in this Agreement or any other Financing
Agreement, the parties hereto agree to enter into negotiations to amend such provisions so as
equitably to reflect such changes to the end that the criteria for evaluating Borrower’s financial
condition and performance will be the same after such changes as they were before such changes, and
if the parties fail to agree on the amendment of such provisions, Borrower shall continue to
provide calculations for all financial covenants, perform all financial covenants and otherwise
observe all financial standards and terms in accordance with applicable accounting principles and
practices in effect immediately prior to such changes. Calculations with respect to financial
covenants required to be stated in accordance with applicable accounting principles and practices
in effect immediately prior to such changes shall be reviewed and certified by Borrower’s
independent certified public accountants.



     1.3 Other Terms Defined in Illinois Uniform Commercial Code. All other terms
contained in this Agreement (and which are not otherwise specifically defined herein) shall have
the meanings provided in the Uniform Commercial Code of the State of Illinois (the “Code”) to the
extent the same are used or defined therein.



     1.4 Other Definitional Provisions. Whenever the context so requires, the neuter
gender includes the masculine and feminine, the singular number includes the plural, and vice
versa.



2. CREDIT.




     2.1 Loan, Purpose, etc.



19









 





     (A) Loan. Provided there does not then exist a Default or an Event of Default,
subject to the provisions of Section 4 below, and subject to the other provisions and
conditions of this Agreement, the Lender agrees, following the Borrower’s execution of this
Agreement and all agreements and documents contemplated hereby, to advance to the Borrower on a
revolving credit basis (collectively, the “Revolving Loan”) at such times as the Borrower may from
time to time request, until, but not including, the Maturity Date, and in such amounts as the
Borrower may from time to time request, provided, however that the aggregate principal balance of
all Revolving Loans outstanding at any time shall not exceed the Revolving Loan Availability. Each
advance to the Borrower under this subsection 2.1 shall be in multiples of Two Hundred
Fifty Thousand Dollars ($250,000.00) and shall, on the day of such advance, be deposited, in
immediately available funds, in Lawson’s demand deposit account with the Lender, or in such other
account with the Lender as Lawson may, from time to time, designate. The Revolving Loans made by
the Lender to the Borrower under this subsection 2.1 shall be evidenced, in part, by the
promissory note of even date herewith in the form attached hereto as Exhibit C (the “Note”)
with the blanks appropriately filled. The Liabilities evidenced by the Note shall become
immediately due and payable, (i) as provided in subsection 9.1 hereof; (ii) without notice
or demand upon the Maturity Date pursuant to subsection 2.8(A) hereof; or (iii) without
notice or demand upon termination of this Agreement pursuant to subsection 2.8 hereof.



     (B) Letters of Credit. Subject to the terms and conditions of this Agreement and upon
(i) the execution by the Borrower and the Lender of a Master Letter of Credit Agreement in form and
substance acceptable to the Lender (together with all amendments, modifications and restatements
thereof, the “Master Letter of Credit Agreement”), and (ii) the execution and delivery by
the Borrower, and the acceptance by the Lender, in its sole and absolute discretion, of a Letter of
Credit Application, the Lender agrees to issue for the account of the Borrower out of the Maximum
Facility, such standby and/or trade Letters of Credit in the standard form of the Lender and
otherwise in form and substance acceptable to the Lender, from time to time during the term of this
Agreement, provided that the Letter of Credit Obligations may not at any time exceed the Maximum
Letter of Credit Obligation and provided further, that no Letter of Credit shall have an expiration
date later than the Letter of Credit Maturity Date. The Letter of Credit Obligations shall also be
evidenced by the Note. The amount of any payments made by the Lender with respect to draws made by
a beneficiary under a Letter of Credit for which the Borrower has failed to reimburse the Lender
upon the earlier of (i) the Lender’s demand for
repayment, or (ii) five (5) days from the date of such payment to such beneficiary by the
Lender, shall be deemed to have been converted to a Loan as of the date such payment was made by
the Lender to such beneficiary. Upon the occurrence of an Event of a Default and at the option of
the Lender, all Letter of Credit Obligations shall be converted to Loans, all without demand,
presentment, protest or notice of any kind, all of which are hereby waived by the Borrower. To the
extent the provisions of the Master Letter of Credit Agreement differ from, or are inconsistent
with, the terms of this Agreement, the provisions of this Agreement shall govern.



     (C) Corporate Commercial Card Facility. Subject to the terms and conditions of this
Agreement and upon the execution by the Borrower of a Commercial Card Agreement in form and
substance acceptable to the Lender (together with all amendments, modifications and restatements
thereof, the “Master Commercial Card Agreement”), the Lender agrees to issue for the account of the
Borrower out of the Maximum Facility, such purchase cards in the standard form of the Lender and
otherwise in form and substance acceptable to the Lender, from time to



20









 







time during the term of this
Agreement, provided that the Lender Product Obligations represented by purchase cards may not at
any time exceed the Maximum Commercial Card Obligation. To the extent the provisions of the Master
Commercial Card Agreement differ from, or are inconsistent with, the terms of this Agreement, the
provisions of this Agreement shall govern.



     (D) Interest Rate Protection. The Borrower may, but is not obligated to enter into
one or more Hedging Agreements on an ISDA standard form with a qualified counter party to hedge the
interest rate, in form and substance reasonably satisfactory to the Lender. Such Hedging Agreement
obligation shall be issued for the account of the Borrower out of the Maximum Facility. The
Hedging Agreement Obligations may not at any time exceed the Maximum Hedging Agreement Obligation.



     (E) Purpose. The proceeds of the Revolving Loan shall be used by Borrower for working
capital requirements and general corporate purposes and for future acquisitions.



     (F) Limits. The aggregate outstanding principal balance of the Revolving Loan, Letter
of Credit Obligations, Commercial Card Obligations and Hedging Agreement Obligations shall not at
any time exceed the Maximum Facility. In the event the aggregate outstanding principal balance of
all Revolving Loans, Letter of Credit Obligations, Commercial Card Obligations and Hedging
Agreement Obligations hereunder exceed the Maximum Facility, the Borrower shall, without notice or
demand of any kind, immediately make such repayments of the Revolving Loan or take such other
actions as shall be necessary to eliminate such excess.



     2.2 Prepayments. Borrower shall at any time and from time to time have the right to
prepay, in whole or in part, the principal amount of the Revolving Loan outstanding or interest due
without any penalty or premium. Such prepayment shall be applied in the following order of
priority: (1) amounts (other than principal and interest) due and payable to Lender under this
Agreement, the Note, or the other Loan Documents; (2) accrued but unpaid interest on the
outstanding principal balance of the Revolving Loan; and (3) the outstanding principal balance of
the Revolving Loan.



     2.3 Facility Reduction. Borrower may, at any time during the Term, elect to
permanently reduce the Maximum Facility upon the following terms and conditions: (i) Lawson shall
provide Lender an irrevocable written notice no less than thirty (30) days prior to the intended
effective date of the permanent reduction to the Maximum Facility (the “Facility Reduction
Notice”); (ii) the Facility Reduction Notice shall state the total amount of the intended
reduction to the Maximum Facility (“Maximum Facility Reduction”) and the effective date of
the Maximum Facility Reduction; (iii) the aggregate outstanding principal balance of the Revolving
Loan as of the date of the Facility Reduction Notice shall not exceed the Maximum Facility as
reduced by the Maximum Facility Reduction (the “Reduced Maximum Facility”); and (iv) the
aggregate outstanding principal balance of the Revolving Loan subsequent to the Facility Reduction
Notice shall not at any time thereafter exceed the Reduced Maximum Facility. Notwithstanding
anything to the contrary contained in this Section 3.2 to the contrary, the Maximum
Facility Reduction shall in no event be less than five million dollars ($5,000,000.00).



21









 





     2.4 The Borrower’s Loan Account. The Lender shall maintain a loan account (the
“Loan Account”) on its internal data control system in which shall be recorded (i) all
loans and advances made by the Lender to the Borrower pursuant to this Agreement, (ii) all payments
made by the Borrower on all such loans and advances, and (iii) all other appropriate debits and
credits as provided in this Agreement, including, without limitation, all fees, charges, expenses
and interest. All entries in the Borrower’s Loan Account shall be made in accordance with the
Lender’s customary accounting practices as in effect from time to time. Subject to adjustments and
objections (if any) pursuant to subsection 2.5 below, the Borrower promises to pay the
amount reflected as owing by it under its Loan Account and all of its other obligations hereunder
and under any other Loan Documents as such amounts become due (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise) pursuant to the terms of this Agreement and
the other Loan Documents.



     2.5 Statements. All advances and other financial accommodations to the Borrower, and
all other debits and credits provided for in this Agreement, shall be evidenced by entries made by
the Lender in its internal data control systems showing the date, amount and reason for each such
debit or credit. Until such time as the Lender shall have rendered to the Borrower written
statements of account as provided herein, the balance in the Borrower’s Loan Account, as set forth
on the Lender’s most recent printout, shall be rebuttably presumptive evidence of the amounts due
and owing the Lender by the Borrower. Not more than twenty (20) days after the last day of each
Fiscal Quarter, the Lender shall render to the Borrower a statement setting forth the balance of
the Borrower’s Loan Account, including principal, interest, expenses and fees. Each such statement
shall be subject to subsequent adjustment by the Lender but shall, absent manifest errors or
omissions, be rebuttably presumed correct and shall constitute an account stated unless, within
thirty (30) days after receipt of such statement from the Lender, the Borrower shall deliver to the
Lender written objection thereto specifying the error or errors, if any, contained in such
statement. Lender shall, upon request, provide supporting detail as to third party charges, such
as attorneys’ fees.



     2.6 Interest and Fees.



     (A) Interest. Except as otherwise provided in this Section 2.6, the principal
amount of the Revolving Loans outstanding from time to time shall bear interest at the Borrower’s
option of either the BBA LIBOR Daily Floating Rate or the BBA LIBOR Rate (Adjusted Periodically).
Accrued and unpaid interest on the unpaid principal balance of all Revolving Loans outstanding from
time to time which are BBA LIBOR Daily Floating Rate LIBOR Loans, shall be due and payable monthly,
in arrears, on the first day of each calendar month commencing with the first such date to occur
after the date hereof and continuing on the first day of each calendar month thereafter, and on the
Maturity Date. Accrued and unpaid interest on the unpaid principal balance of all Revolving Loans
outstanding from time to time which are BBA LIBOR Rate (Adjusted Periodically) LIBOR Loans shall be
payable on the last Business Day of each Interest Period, commencing on the first such date to
occur after the date hereof, on the date of any principal repayment of a BBA LIBOR Rate (Adjusted
Periodically) LIBOR Loan and on the Maturity Date.



     (B) LIBOR Loan Prepayments. If, for any reason, a BBA LIBOR Rate (Adjusted
Periodically) LIBOR Loan is paid prior to the last Business Day of any Interest Period, whether



22









 







voluntary, involuntary, by reason of acceleration or otherwise, each such prepayment of a BBA LIBOR
Rate (Adjusted Periodically) LIBOR Loan will be accompanied by the amount of accrued interest on
the amount prepaid and any and all costs, expenses, penalties and charges incurred by Lender as a
result of the early termination or breakage of a BBA LIBOR Rate (Adjusted Periodically) LIBOR Loan,
plus the amount, if any, by which (i) the additional interest which would have been payable during
the Interest Period on the BBA LIBOR Rate (Adjusted Periodically) LIBOR Loan prepaid had it not
been prepaid, exceeds (ii) the interest which would have been recoverable by Lender by placing the
amount prepaid on deposit in the domestic certificate of deposit market, the eurodollar deposit
market, or other appropriate money market selected by Lender, for a period starting on the date on
which it was prepaid and ending on the last day of the Interest Period for such BBA LIBOR Rate
(Adjusted Periodically) LIBOR Loan. The amount of any such loss or expense payable by Borrower to
Lender under this section shall be determined in Lender’s sole discretion based upon the assumption
that Lender funded its loan commitment for BBA LIBOR Rate (Adjusted Periodically) LIBOR Loans in
the London Interbank Eurodollar market and using any reasonable attribution or averaging methods
which Lender deems appropriate and practical, provided, however, that Lender is not obligated to
accept a deposit in the London Interbank Eurodollar market in order to charge interest on a BBA
LIBOR Rate (Adjusted Periodically) LIBOR Loan at the BBA LIBOR Rate (Adjusted Periodically).



     (C) BBA LIBOR Rate (Adjusted Periodically) Unavailability. If Lender determines in
good faith (which determination shall be conclusive, absent manifest error) prior to the
commencement of any Interest Period that (i) the making or maintenance of any BBA LIBOR Rate
(Adjusted Periodically) LIBOR Loan would violate any applicable law, rule, regulation or directive,
whether or not having the force of law, (ii) United States dollar deposits in the principal amount,
and for periods equal to the Interest Period for funding any BBA LIBOR Rate (Adjusted Periodically)
LIBOR Loan are not available in the London Interbank Eurodollar market in the ordinary course of
business, (iii) by reason of circumstances affecting the London Interbank Eurodollar market,
adequate and fair means do not exist for ascertaining the BBA LIBOR Rate (Adjusted Periodically) to
be applicable to the relevant BBA LIBOR Rate
(Adjusted Periodically) LIBOR Loan, or (iv) the BBA LIBOR Rate (Adjusted Periodically) does
not accurately reflect the cost to Lender of a BBA LIBOR Rate (Adjusted Periodically) LIBOR Loan,
Lender shall promptly notify Borrower thereof and, so long as the foregoing conditions continue,
none of the Loans may be advanced as a BBA LIBOR Rate (Adjusted Periodically) LIBOR Loan
thereafter. In addition, at Borrower’s option, each existing BBA LIBOR Rate (Adjusted
Periodically) LIBOR Loan shall be immediately (i) converted to a BBA LIBOR Daily Floating Rate
LIBOR Loan on the last Business Day of the then existing Interest Period, or (ii) due and payable
on the last Business Day of the then existing Interest Period, without further demand, presentment,
protest or notice of any kind, all of which are hereby waived by Borrower.



     (D) Regulatory Change. In addition, if, after the date hereof, a regulatory change
shall, in the reasonable determination of Lender, make it unlawful for Lender to make or maintain
the BBA LIBOR Rate (Adjusted Periodically) LIBOR Loans, then Lender shall promptly notify Borrower
and none of the Loans may be advanced as a BBA LIBOR Rate (Adjusted Periodically) LIBOR Loan
thereafter. In addition, at Borrower’s option, each existing BBA LIBOR Rate (Adjusted
Periodically) LIBOR Loan shall be immediately (i) converted to a BBA LIBOR Daily Floating Rate
LIBOR Loan on the last Business Day of the then existing



23









 







Interest Period or on such earlier date as
required by law, or (ii) due and payable on the last Business Day of the then existing
Interest
Period or on such earlier date as required by law, all without further demand, presentment, protest
or notice of any kind, all of which are hereby waived by Borrower.



     (E) LIBOR Indemnity. If any regulatory change, or compliance by Lender or any Person
controlling Lender with any request or directive of any governmental authority, central bank or
comparable agency (whether or not having the force of law) shall (a) impose, modify or deem
applicable any assessment, reserve, special deposit or similar requirement against assets held by,
or deposits in or for the account of or loans by, or any other acquisition of funds or
disbursements by, Lender; (b) subject Lender or any BBA LIBOR Rate (Adjusted Periodically) LIBOR
Loan to any tax, duty, charge, stamp tax or fee or change the basis of taxation of payments to
Lender of principal or interest due from Borrower to Lender hereunder (other than a change in the
taxation of the overall net income of Lender); or (c) impose on Lender any other condition
regarding such Loan or Lender’s funding thereof, and Lender shall determine (which determination
shall be conclusive, absent manifest error) that the result of the foregoing is to increase the
cost to, or to impose a cost on, Lender or such controlling Person of making or maintaining such
Loan or to reduce the amount of principal or interest received by Lender hereunder, then Borrower
shall pay to Lender or such controlling Person, on demand, such additional amounts as Lender shall,
from time to time, determine are sufficient to compensate and indemnify Lender for such increased
cost or reduced amount.



     (F) Default Rate of Interest. Upon and after the occurrence of a Default and during
the continuation thereof, the principal amount of the Revolving Loan then outstanding shall bear
interest, calculated daily (computed on the actual days elapsed over a year of 360 days), at a rate
per annum equal to three percent (3%) above the rate otherwise applicable to such outstanding
Revolving Loan (the rate of interest calculated pursuant to this subsection 2.6(E) shall be
referred to herein as the “Post Default Rate”).



     (G) Maximum Interest. In no contingency or event whatsoever shall the aggregate of
all amounts deemed interest hereunder or under the Note and charged or collected pursuant to the
terms of this Agreement or pursuant to the Note exceed the highest rate permissible under any law
which a court of competent jurisdiction shall, in a final determination, deem applicable hereto.
In the event that such a court determines that Lender has charged or received interest hereunder in
excess of the highest applicable rate, the rate in effect hereunder shall automatically be reduced
to the maximum rate permitted by applicable law and Lender shall promptly refund to Lawson any
interest received by Lender in excess of the maximum lawful rate or, if so requested by Lawson,
shall apply such excess to the principal balance of the Liabilities. It is the intent hereof that
Borrower not pay or contract to pay, and that Lender not receive or contract to receive, directly
or indirectly in any manner whatsoever, interest in excess of that which may be paid by Borrower
under applicable law.



     (H) Borrowing Procedures.




	 	(i)	 	Each Revolving Loan may be advanced either as a BBA LIBOR Daily
Floating Rate LIBOR Loan or a BBA LIBOR Rate (Adjusted Periodically) LIBOR
Loan. Each Loan shall be made available to Borrower upon any




24









 






	 	 	 	written, verbal, electronic, telephonic or telecopy loan request which Lender in good faith
believes to emanate from a properly authorized representative of Lawson,
whether or not that is in fact the case. Each such request shall be effective
upon receipt by Lender, shall be irrevocable, and shall specify the date,
amount and type of borrowing and, in the case of a BBA LIBOR Rate (Adjusted
Periodically) LIBOR Loan, the initial Interest Period therefor. Borrower shall
use commercially reasonable efforts to select Interest Periods so as not to
require a payment or prepayment of any BBA LIBOR Rate (Adjusted Periodically)
LIBOR Loan during an Interest Period for such BBA LIBOR Rate (Adjusted
Periodically) LIBOR Loan. The final Interest Period for any BBA LIBOR Rate
(Adjusted Periodically) LIBOR Loan must be such that its expiration occurs on
or before the Maturity Date. A request for a BBA LIBOR Daily Floating Rate
LIBOR Loan must be received by Lender no later than 11:00 a.m. Chicago,
Illinois time, on the day it is to be funded. A request for a BBA LIBOR Rate
(Adjusted Periodically) LIBOR Loan must be (i) received by Lender no later than
11:00 a.m. Chicago, Illinois time, three (3) Business Days before the day it is
to be funded, and (ii) in an amount equal to One Million and 00/100 Dollars
($1,000,000.00) or a higher integral multiple of Two Hundred Fifty Thousand and
00/100 Dollars ($250,000.00). The proceeds of each Loan shall be made
available at the office of Lender by credit to the account of Borrower or by
other means requested by Borrower and acceptable to Lender. Borrower does
hereby irrevocably confirm, ratify and approve all such advances by Lender and
does hereby indemnify Lender against losses and expenses (including court
costs, attorneys’ and paralegals’ fees) and shall hold Lender harmless with
respect thereto.






	 	(ii)	 	LIBOR Conversion and Continuation Procedures. Upon
notice to Lender as set forth above, Borrower may, by written, verbal,
electronic, telephonic or telecopy notice from Lawson and subject to the terms
and conditions of this Agreement, (a) elect, as of any Business Day, to convert
any BBA LIBOR Daily Floating Rate LIBOR Loan into a BBA LIBOR Rate (Adjusted
Periodically) LIBOR Loan; or (b) elect, as of the last day of the applicable
Interest Period, to continue any BBA LIBOR Rate (Adjusted Periodically) LIBOR
Loan having an Interest Period expiring on such day for a new Interest Period,
or to convert any such BBA LIBOR Rate (Adjusted Periodically) LIBOR Loan into a
BBA LIBOR Daily Floating Rate LIBOR Loan. Such notice shall, in the case of a
conversion into a BBA LIBOR Daily Floating Rate LIBOR Loan, be given before
11:00 a.m., Chicago time, on the proposed date of such conversion, and in the
case of conversion into, or continuation of, BBA LIBOR Rate (Adjusted
Periodically) LIBOR Loans, be given before 11:00 a.m., Chicago time, at least
three (3) Business Days prior to the proposed date of such conversion or
continuation, specifying in each case: (i) the proposed date of conversion or
continuation; (ii) the aggregate amount of Loans to be converted or continued;
(iii) the type of Loans resulting from






25












 






	 	 	 	the proposed conversion or continuation;
and (iv) in the case of conversion into, or continuation of, BBA LIBOR Rate
(Adjusted Periodically) LIBOR Loans, the duration of the requested Interest
Period therefor. Each Interest Period occurring after the initial Interest
Period of any BBA LIBOR Rate (Adjusted Periodically) LIBOR Loan shall commence
on the day on which the preceding Interest Period for such BBA LIBOR Rate
(Adjusted Periodically) LIBOR Loan expires. Whenever the last day of any
Interest Period would otherwise occur on a day other than a Business Day, the
last day of such Interest Period shall be extended to occur on the next
succeeding Business Day, provided, however, that if such extension would cause
the last day of such Interest Period to occur in the next following calendar
month, then the last day of such Interest Period shall occur on the immediately
preceding Business Day. Whenever an Interest Period would otherwise end on a
day of a month for which there is no numerically corresponding day in the
calendar month, such Interest Period shall end on the last Business Day of such
calendar month. If upon the expiration of any Interest Period applicable to a
BBA LIBOR Rate (Adjusted Periodically) LIBOR Loan, Borrower has failed to
select timely a new Interest Period to be applicable to such LIBOR Loan,
Borrower shall be deemed to have elected to convert such BBA LIBOR Rate
(Adjusted Periodically) LIBOR Loan to a BBA LIBOR Daily Floating Rate LIBOR
Loan effective on the last day of such Interest Period, without demand,
presentment, protest or notice of any kind, all of which are hereby waived by
Borrower. Any conversion of a BBA LIBOR Rate (Adjusted Periodically) LIBOR
Loan on a day other than the last day of an Interest Period therefor shall be
subject to Section 2.6(D).





     (I) Number of Portions: At no time shall there exist more than six (6) separate BBA
LIBOR Rate (Adjusted Periodically) LIBOR Loans during the Term.



     (J) Intentionally Omitted.



     (K) Unused Commitment Fee. The Borrower shall pay to Lender a fee (the “Unused
Commitment Fee”) on the first day of each Fiscal Quarter commencing with the Fiscal Quarter
commencing January 1, 2009, equal to (1) for all periods prior to the First Amendment Effective
Date, the Unused Commitment Fee set forth on Grid A (as in effect prior to the First Amendment
Effective Date) based on the face amount of the average daily unused amount of the Maximum Facility
in excess of $7,500,000 during the immediately prior Fiscal Quarter, and (2) for all periods from
and including to the First Amendment Effective Date, the Unused Commitment Fee set forth on Grid A
(as in effect on and after the First Amendment Effective Date) based on the face amount of the
average daily unused amount of the Maximum Facility during the immediately prior Fiscal Quarter.
The Unused Commitment Fee shall be computed on the basis of a 360-day year for the actual number of
days elapsed.



     2.7 Method for Making Payments. All payments of principal and interest hereunder
shall be paid by automatic debit, wire transfer, check or in coin or currency which, at the time or
times of payment, is the legal tender for public and private debts in the United States of America



26









 







and shall be made at such place as Lender or the legal holder or holders of the Note may from time
to time appoint in the payment invoice or otherwise in writing, and in the absence of such
appointment, then at the offices of Lender at 135 South LaSalle Street, 7th Floor, Chicago,
Illinois 60603. Payment made by check shall be deemed paid on the date Lender receives such check;
provided, however, that if such check is subsequently returned to Lender unpaid due to insufficient
funds or otherwise, the payment shall not be deemed to have been made and shall continue to bear
interest until collected. Notwithstanding the foregoing, the final payment due hereunder must be
made by wire transfer or other final funds. If requested by Lawson, interest, principal payments
and any fees and expenses owed Lender from time to time will be deducted by Lender automatically on
the due date from the designated Borrower’s account with Lender, as designated in writing by
Lawson. Borrower will maintain sufficient funds in the account on the dates Lender enters debits
authorized under the Note. If there are insufficient funds in the account on the date Lender
enters any debit authorized by the Note, the debit will be reversed. Lawson may terminate this
direct debt arrangement at any time by sending written notice to Lender at the address specified
above.



     2.8 Maturity, Term.



     (A) Loan Maturity. The Revolving Loan, including the full outstanding principal
balance thereon and all accrued and then unpaid interest thereon, if not sooner paid, shall be
immediately due and payable without notice or demand on the Maturity Date.



     (B) Termination. This Agreement shall terminate at the end of the Term; provided,
however, that the Lender shall retain the right to terminate this Agreement sooner at any time upon
the occurrence and only during the continuance of a Default; and further provided, however,
that notwithstanding any such termination all of the Lender’s rights and remedies under this
Agreement shall survive such termination until all of the Liabilities have been fully paid and
satisfied. Notwithstanding the foregoing, Lawson may by written notice to Lender terminate this
Agreement at any time as provided above conditioned upon and subject to the prior payment by
Borrower to Lender of all then outstanding principal and accrued interest and payment and
performance of all other Liabilities. Upon the effective date of termination of this Agreement,
all of the Liabilities (other than contingent and indemnity obligations) shall become immediately
due and payable without notice or demand. Notwithstanding any termination, until all of the
Liabilities shall have been fully paid and satisfied and all Loan Documents between the Borrower
and the Lender shall have been terminated, all of the Lender’s rights and remedies under this
Agreement and the other Loan Documents shall survive.


3.  INTENTIONALLY OMITTED.



4.  CONDITIONS OF ADVANCES.




     Notwithstanding any other provisions contained in this Agreement the making of any Loan shall
be conditioned upon the following:



     4.1 Borrower’s Written Request. As to any BBA LIBOR Rate (Adjusted Periodically)
LIBOR Loan, Lawson shall comply with Section 2.6(H). In addition, prior to making any
advance or loan, Lender shall have received copies of all documents required to have



27









 







been delivered to the Lender pursuant to this Agreement (including, without limitation, subsection
7.1).



     4.2 Financial Condition. No material adverse change, as determined by the Lender in
its sole discretion, in the financial condition or operations of the Borrower shall have occurred
(a) at any time or times subsequent to the most recent annual financial statements provided
pursuant to subsection 7.1(B) of this Agreement and (b) prior to the receipt of the first
of such statements, at any time subsequent to receipt of the Financials.



     4.3 No Default. There shall not have occurred any Default or an Event of Default
which is then continuing, nor shall any such Default or Event of Default occur after giving effect
to the advance or loan.



     4.4 Representations and Warranties True and Correct. The representations and
warranties of Borrower contained in this Agreement shall be true and correct in all material
respects on and as of the date of any advance or loan, as though made on and as of such date,
except for any waivers thereof expressly granted by an officer of Lender in writing delivered to
Lawson.



     4.5 Other Requirements. The Lender shall have received, in form and substance
satisfactory to the Lender, all certificates, orders, authorities, consents, affidavits, schedules,
opinions, instruments, security agreements, financing statements, mortgages and other documents
which are required hereunder, or which the Lender may at any time reasonably request.



     4.6 Conditions as to Initial Advance. Prior to the first Revolving Loan made
hereunder, each of the conditions set forth on Schedule 4.6 hereto shall be fully performed
in form and substance satisfactory to Lender and its legal counsel.



     4.7 Issuance of Letters of Credit. Each Letter of Credit shall be issued by the
Lender upon the execution of the Lender’s standard Master Letter of Credit Agreement by any of the
Borrowers and the Lender, and the execution and delivery by such Borrower and the acceptance by the
Lender, in its sole discretion, of the Lender’s standard application for Letter of Credit and the
payment by the Borrower of the Lender’s fees charged in connection therewith. In addition to all
other applicable fees, charges and/or interest payable by the Borrower pursuant to the Master
Letter of Credit Agreement or otherwise payable in accordance with the Lender’s standard letter of
credit fee schedule, all standby Letters of Credit issued under and pursuant to this Agreement
shall bear an annual fee equal to the percentage set forth on the Pricing Grid of the face amount
of such standby Letter of Credit, payable by the Borrower on or before the issuance of such Letter
of Credit by the Lender and quarterly in advance thereafter unless and unit (i) such Letter of
Credit has expired or has been returned to the Lender; or (ii) the Lender has paid the beneficiary
thereunder the full face amount of such Letter of Credit. All Letters of Credit other than standby
Letters of Credit shall bear such fees, costs and interest as charged by the Lender and shall
contain such other terms as set forth in the Master Letter of Credit Agreement and the Lender’s
standard letter of credit fee schedule.



28









 





5. INTENTIONALLY OMITTED.




6. WARRANTIES ETC.




     Each Borrower jointly and severally represents, warrants and agrees, except to the extent not
applicable to such Borrower that, as of the date hereof and each day thereafter, continuing so long
as the Liabilities remain outstanding, and (even if there shall be no Liabilities outstanding) so
long as this Agreement remains in effect:



     6.1 Existence. (i) Lawson is a corporation, duly organized and in good standing under
the laws of the State of Delaware and in good standing in Illinois and all other states where the
nature and extent of the business transacted by it or the ownership of its assets makes such
qualification necessary, except for those jurisdictions in which the failure so to qualify would
not, in the aggregate, have a material adverse effect on Lawson’s financial condition, results of
operations or business or the ability of Lawson to perform its obligations hereunder; (ii) each
Subsidiary listed on Schedule 6.12 is the business entity type as indicated on Schedule
6.12, duly organized and in good standing under the laws of the state or country of its
organization and all other states or countries where the nature and extent of the business
transacted by it, or the ownership of its assets makes such qualification necessary, except for
those jurisdictions in which the failure so to qualify would not, in the aggregate, have a material
adverse effect on such Subsidiary’s financial condition, results of operations or business or the
ability of such Subsidiary to perform its obligations hereunder.



     6.2 Entity Authority. The execution and delivery by each Borrower hereunder of this
Agreement and all of the other Loan Documents executed by it and the performance of the Borrower’s
obligations hereunder and thereunder: (i) are within the Borrower’s corporate, company or other
entity powers; (ii) are duly authorized by the Borrower’s Directors, Managers or the equivalent,
and, to the extent required, Shareholders, Members, Partners or the equivalent; (iii) are not in
contravention of the terms of the Borrower’s Articles of Incorporation and by-laws, Articles of
Organization and Operating Agreement, or other such similar entity formation and operating
agreement, or of any indenture, or other material agreement or undertaking to which the Borrower is
a party or by which the Borrower or any of its property is bound or any judgment, decree or order
applicable to Borrower; (iv) do not, as of the execution hereof, require the Borrower to obtain any
governmental consent, registration or approval; (v) do not contravene any contractual or
governmental restriction binding upon the Borrower; and (vi) will not, except as contemplated
herein, result in the imposition of any Lien upon any property of the Borrower under any existing
indenture, mortgage, deed of trust, loan or credit agreement or other material agreement or
instrument to which the Borrower is a party or by which it or any of its property may be bound or
affected.



     6.3 Binding Effect. This Agreement and all of the other Loan Documents to which each
Borrower is a party are the legal, valid and binding obligations of such Borrower and are
enforceable against such Borrower, as applicable, in accordance with their respective terms.



     6.4 Financial Data. Lawson has furnished to the Lender consolidated financial
statements as of December 31, 2007 and consolidated financial statements as of various dates
subsequent to December 31, 2007, including, without limitation, financial statements as of June



29









 







30, 2008 (collectively, the “Financials”). The Financials are in accordance with the books and
records of the Borrower and fairly present the financial condition of the Borrower at the dates
thereof and the results of operations for the periods indicated (subject, in the case of unaudited
financial statements, to normal year-end adjustments), and such Financials and financial statements
have been prepared in conformity with GAAP throughout the periods involved. Since the date of the
Financials, there have been no changes in the condition, financial or otherwise, of the Borrower as
shown on such Financials, except (a) as expressly contemplated herein, and (b) for changes in the
ordinary course of business (none of which individually or in the aggregate has been materially
adverse). All information, reports and other materials furnished in writing by or on behalf of the
Borrower to the Lender for purposes of, or in connection with this Agreement, is true and correct
in all material respects as of the date as of which such information, report or other material was
dated or certified, and none of such information, reports or other materials is incomplete by
omitting to state any material fact necessary to make such information, reports or other materials
not misleading in light of the circumstances under which made (it being recognized by the Lender
that any projections and forecasts provided by the Borrower are based on good faith estimates and
assumptions believed by the Borrower to be reasonable as of the date of the applicable projections
or assumptions and that actual results during the period or periods covered by any such projections
or forecasts may differ from projected or forecasted results).



     6.5 Intentionally Omitted.



     6.6 Solvency. As of the date hereof after giving effect to the transaction
contemplated herein, Lawson (i) is not “insolvent” as that term is defined in Section 101(32) of
the Federal Bankruptcy Code (the “Bankruptcy Code”) (11 U.S.C. ‘ 101(32)), Section 2 of the
Uniform Fraudulent Transfer Act (“UFTA”) or Section 2 of the Uniform Fraudulent Conveyance
Act (“UFCA”); (ii) does not have “unreasonably small capital,” as that term is used in
Section 548 (a) (2) (B) (ii) of the Bankruptcy Code or Section 5 of the UFCA; (iii) is not engaged
or about to engage in a business or a transaction for which its remaining property is “unreasonably
small” in relation to the business or transaction as that term is used in Section 4 of the UFTA;
(iv) is able to pay its debts as they mature or become due in the ordinary course within the
meaning of Section 548(a) (2)(B) (iii) of the Bankruptcy Code, Section 4 of the UFTA and Section 6
of the UFCA; and (v) now owns assets having a value both at “fair valuation” and at “present fair
salable value” greater than the amount required to pay Lawson’s “debts” in the ordinary course as
such terms are used in Section 2 of the UFTA and Section 2 of the UFCA. Lawson shall not be
rendered insolvent (as defined above) by the execution and delivery of this Agreement on the
Closing Date, or any of the other Loan Documents or by the transactions contemplated hereunder or
thereunder.



     6.7 Intentionally Omitted.



     6.8 Intentionally Omitted.



     6.9 Tax Liabilities. The Borrower has filed all federal, state and local tax reports
and returns required by any law or regulation to be filed by it except those for which extensions
have been duly obtained. The Borrower has either duly paid all taxes, duties and charges indicated
due on the basis of such returns and reports, other than those being contested in good faith and



30









 







except as set forth in Schedule 6.9 or has made adequate provision for the payment thereof,
and the assessment of any material amount of additional taxes in excess of those paid and reported
is not reasonably expected. No federal income tax returns of Borrower have been audited by the
Internal Revenue Service other than audits which did not have a material adverse effect on
Borrower. The reserves for taxes, if any, reflected on the Financials constitute, and the
consolidated balance sheets of the Borrower submitted to the Lender in accordance with the terms of
subsection 7.1 below will constitute, reasonable estimations of the amount necessary for the
payment of all liabilities for all federal, state and local taxes (whether or not disputed) of the
Borrower accrued through the date of such balance sheets. There are no material unresolved
questions or claims concerning any tax liability of the Borrower.



     6.10 Margin Security. The Borrower does not own any margin securities and none of the
loans advanced hereunder will be used for the purpose of purchasing or carrying any margin
securities or for the purpose of reducing or retiring any indebtedness which was originally
incurred to purchase any margin securities or for any other purpose not permitted by Regulation U
of the Board of Governors of the Federal Reserve System.



     6.11 Survival of Warranties. All representations and warranties contained in this
Agreement or any of the other Loan Documents shall survive the execution and delivery of this
Agreement.



     6.12 Subsidiaries. All of Borrower’s Subsidiaries, including the principal place of
business and chief executive office thereof, are listed on Schedule 6.12.



     6.13 Litigation and Proceedings. Except as disclosed on Schedule 6.13
attached hereto, no judgments are outstanding against the Borrower nor is there now pending or, to
the best of the Borrower’s knowledge after reasonably diligent inquiry, threatened any litigation,
contested claim, or governmental proceeding by or against the Borrower except judgments and pending
or threatened litigation, contested claims and governmental proceedings set forth in and upon
Schedule 6.13 hereto that exceed $500,000 in the aggregate. To the best of Borrower’s
knowledge, the amount of liability set forth on Schedule 6.13 as to each suit listed
thereon is the maximum amount of Borrower’s liability under such suit.



     6.14 Other Agreements. The Borrower is not in default under any material contract,
lease, or commitment to which it is a party or by which it is bound except such defaults which are
not likely to result in a materially adverse effect on Borrower’s financial condition or business
operation. The Borrower knows of no dispute regarding any contract, lease, or commitment which is
material to the continued financial success and well-being of the Borrower.



     6.15 Employee Controversies. There are no controversies pending or, to the best of
the Borrower’s knowledge after diligent inquiry, threatened or anticipated, between the Borrower
and any of its employees, other than employee grievances arising in the ordinary course of business
which are not, in the aggregate, material to the continued financial success and wellbeing of the
Borrower. The Borrower has no accrued and unpaid liability to any of its employees arising under
the Fair Labor Standards Act, as amended.



     6.16 Compliance with Laws and Regulations.



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     (A) General Compliance. The execution and delivery by the Borrower of this Agreement
and all of the other Loan Documents to which it is a party and the performance of the Borrower’s
obligations hereunder and thereunder are not in contravention of any law or laws applicable to
Borrower. The Borrower is in compliance in all material respects with all laws, orders,
regulations and ordinances of all federal, foreign, state and local governmental authorities
relating to the business operations and the assets of the Borrower, except for laws, orders,
regulations and ordinances the violation of which would not, in the aggregate, have a material
adverse effect on the Borrower’s financial condition, results of operations or business.



     (B) Environmental Compliance. The operations of the Borrower comply in all material
respects with all applicable federal, state or local environmental, health and safety statutes and
regulations. The Borrower has not received notice of any judicial or administrative proceeding
alleging the violation of any federal, state or local environmental, health or safety statute or
regulation by or pertaining to the Real Property, the Borrower or its property or operations or
stating that the Borrower is the subject of any federal or state investigation evaluating whether
any remedial action is needed to respond to a release of any hazardous or toxic waste, substance,
material or constituent, or other substance into the environment which has not been settled or
resolved with such governmental agency. Except as expressly set forth on Schedule 6.13
hereto, the Borrower has not filed any notice under any federal or state law indicating past or
present treatment, storage or disposal of a hazardous waste or reporting a spill or release of a
hazardous or toxic waste, substance, material or constituent, or other substance into the
environment. Except as expressly set forth on Schedule 6.13 hereto, the Borrower does not
have any contingent liability of which the Borrower has knowledge or reasonably should have
knowledge in connection with any release of any hazardous or toxic waste, substance, material or
constituent, or other substance into the environment.



     (C) Borrower is not an “investment company,” or an “affiliated person” of, or “promoter” or
“principal underwriter” for, an “investment company,” as such terms are defined in the Investment
Company Act of 1940, as amended. Neither the making of the Revolving Loan, nor the issuance of any
Letters of Credit, nor the application of the proceeds or repayment thereof by the Borrower, will
violate any provision of such Act or any rule, regulation or order of the Securities and Exchange
Commission thereunder or any takeover, disclosure or other federal, state or foreign securities law
or Regulations U or X of the Federal Reserve Board. The Borrower is not subject to regulation
under any federal, state or foreign statute or regulation which limits its ability to incur Debt.



     6.17 Patents, Trademarks, Licenses, Etc. The Borrower possesses adequate assets,
licenses, patents, patent applications, copyrights, service marks, trademarks, trademark
applications, trade styles and trade names, governmental approvals or other authorizations and
other rights that are necessary for the Borrower to continue to conduct its business as heretofore
conducted by it.



     6.18 ERISA. Neither Lawson nor any ERISA Affiliate of Lawson maintains or contributes
to any Pension Plan other than a Pension Plan identified on Schedule 6.18 attached hereto.
Each Pension Plan which is intended to be a qualified plan under Section 401(a) of the Internal
Revenue Code has been determined by the Internal Revenue Service to be so qualified and each trust
related to any such Pension Plan has been determined to be exempt from federal



32









 







income tax under subsection 501(a) of the Internal Revenue Code or will be submitted to the Internal Revenue Service
prior to the end of the remedial amendment period. Except as otherwise disclosed on Schedule
6.18 attached hereto, neither Lawson nor any ERISA Affiliate of Lawson maintains or contributes
to any employee welfare benefit plan within the meaning of subsection 3(1) of ERISA which provides
lifetime medical benefits to retirees. Each Pension Plan has been administered in all material
respects in accordance with its terms and the terms of ERISA, the Internal Revenue Code and all
other statutes and regulations applicable thereto. Neither Borrower nor any ERISA Affiliate of
Borrower has breached in any material respect any of the responsibilities, obligations or duties
imposed on it by ERISA or regulations promulgated thereunder with respect to any Pension Plan. No
accumulated funding deficiency (as defined in subsection 302(a) (2) of ERISA and Section 4 12(a) of
the Internal Revenue Code) exists in respect to any Pension Plan. Neither Lawson nor any ERISA
Affiliate of Lawson nor any fiduciary of any Pension Plan which is not a Multiemployer Plan (i) has
engaged in a nonexempt “prohibited transaction” described in Section 406 of ERISA or Section 4975
of the Internal Revenue Code which could result in any liability to Borrower, or (ii) has taken any
action which would constitute or result in a Termination Event with respect to any Pension Plan
which could result in any liability to Borrower. Schedule B, if any, to the most recent
annual report filed with the Internal Revenue Service with respect to each Pension Plan has been
furnished to Lender and is complete and accurate; since the date of each such Schedule B,
there has been no material adverse change in the funding status or financial condition of the
Pension Plan relating to such Schedule B. Neither Lawson nor any ERISA Affiliate of Lawson
has incurred any liability to the PBGC which remains outstanding. Neither Lawson nor any ERISA
Affiliate of Lawson has (i) failed to make a required contribution or payment to a Multiemployer
Plan, or (ii) made or expects to make a complete or partial withdrawal under subsections 4203 or
4205 of ERISA from a Multiemployer Plan for which Lawson or any ERISA Affiliate of Lawson has any
liability which has not been satisfied. Neither Lawson nor any ERISA Affiliate of Lawson has
failed to make a required installment under subsection (m) of Section 412 of the Internal Revenue
Code or any other payment required under Section 412 of the Internal Revenue Code on or before the
due date for such installment or other payment. Neither Lawson nor any ERISA Affiliate of Lawson
is required to provide security to a Pension Plan under Section 401(a) (29) of the Internal Revenue
Code due to a Pension Plan amendment that results in an increase in current liability for the plan
year. The present value of the benefits of each Pension Plan of Borrower and each ERISA Affiliate
of the Borrower as of the last day of the year for such Plan, as determined by such Pension Plan’s
independent actuaries, does not exceed the aggregate value, as determined by such actuaries, of all
assets under such Pension Plan. Borrower is not required to contribute to any Multiemployer Plan.
No matter is pending relating to any Pension Plan before any court or governmental agency.
Borrower has given to Lender all of the following: copies, if any, of each Pension Plan and related
trust agreement (including all amendments to such Plan and trust) in existence or committed to as
of the date hereof and the most recent summary plan description, actuarial report, determination
letter issued by the Internal Revenue Service and Form 5500 filed in respect of each such Pension
Plan; a listing of all of the Multiemployer Plans with the aggregate amount of the most recent
annual contributions required to be made by Lawson and all ERISA Affiliates of Lawson to each such
Multiemployer Plan; copies of any information which has been provided to Lawson or any ERISA
Affiliate of Lawson regarding withdrawal liability under any Multiemployer Plan and all collective
bargaining agreements pursuant to which such contributions are required to be made; and copies



33









 







of each employee welfare benefit plan within the meaning of subsection 3(l) of ERISA which provides
lifetime medical benefits to employees, the most recent summary plan description for such plan and
the aggregate amount of the most recent annual payments made to terminated employees under each
such plan.



     6.19 Financial Condition. Except for matters disclosed to the Lender in the January
19, 2009 meeting between Borrower and Lender where Borrower’s 2009 forecast was presented and
reflected in the revised projections delivered to the Lender thereafter, since the date of the
consolidated financial statements of Lawson, dated December 31, 2007 and the consolidated interim
statement dated June 30, 2008, there has been no material adverse change in Borrower’s financial
condition, results of operations or business or in the value of the Collateral.



     6.20 Subordinated Debt. Borrower has no subordinated debt.



     6.21 Officers and Directors. The officers and directors of Lawson and each Subsidiary
are set forth on Schedule 6.21.



     6.22 Certain Proceedings. There are no pending or, to the best of the Borrower’s
knowledge upon due investigation, threatened eminent domain, condemnation, special assessment or
other governmental proceedings pertaining to the Real Property which would have a material adverse
effect on Borrower’s financial condition or business operations.



     6.23 No Violations. Except as set forth in Schedule 6.13, The Borrower has
not received any written notice of, and has no actual knowledge of, violations of any zoning,
building, fire or health code statutes or ordinances of any applicable governmental body existing
upon the Real Property which have not been corrected and which would have a material adverse effect
on Borrower’s financial condition or business operations. Borrower’s use of the Real Property is
consistent with and allowed by applicable zoning law.



     6.24 Taxes. All real estate taxes for the Real Property which have become due have
been paid in full except any such taxes or charges which are being diligently contested in good
faith by appropriate proceedings and do not cause a material adverse effect to Borrower’s financial
condition or business operations.



     6.25 Utilities. All water, sewer, gas, electric, telephone, drainage and other
utility equipment, facilities and services required or necessary for the operation of Real Property
for the business to be conducted by the Borrower are installed and connected. To the best of the
Borrower’s knowledge, no fact, condition or proceeding exists which would result in the termination
or impairment of the furnishing of such utility services to the Borrower and would have a material
adverse effect on Borrower’s financial condition or business operations.



7. AFFIRMATIVE COVENANTS.




     Each Borrower jointly and severally covenants and agrees, except to the extent not applicable
to such Borrower that, so long as any of the Liabilities remain outstanding, and (even if there
shall be no Liabilities outstanding) so long as this Agreement remains in effect:



34









 





     7.1 Financial Statements. Borrower shall keep proper books of record and account in
which full and true entries will be made of all dealings or transactions of or in relation to the
business and affairs of Borrower, in accordance with GAAP. The Financials will be in accordance
with the books and records of the Borrower and will fairly present in all material respects, the
financial condition of the Borrower at the dates thereof and the results of operations for the
periods indicated (subject, in the case of unaudited financial statements, to normal yearend
adjustments), and such Financials and financial statements will be prepared in conformity with GAAP
throughout the periods involved. All information, reports and other materials furnished in writing
by or on behalf of the Borrower to the Lender for purposes of, or in connection with this
Agreement, will be true and correct in all material respects as of the date as of which such
information, report or other material was dated or certified, and none of such information, reports
or other materials will be incomplete by omitting to state any material fact necessary to make such
information, reports or other materials not misleading in light of the circumstances under which
made (it being recognized by the Lender that any projections and forecasts provided by the Borrower
are based on good faith estimates and assumptions believed by the Borrower to be reasonable as of
the date of the applicable projections or assumptions and that actual results during the period or
periods covered by any such projections or forecasts may differ from projected or forecasted
results).



     Lawson shall cause to be furnished to Lender in accordance with past practice consistently
applied:



     (A) Periodic Reporting. As soon as practicable, and in any event within forty-five
days after the end of each Fiscal Quarter:




	 	(i)	 	consolidated statements of income, retained
earnings and cash flow of Borrower for such calendar month and for the
period from the beginning of the then current Fiscal Year to the end of
such Fiscal Quarter, and a consolidated balance sheet of Borrower as of
the end of such Fiscal Quarter, setting forth in each case, in
comparative form, figures (1) in the case of statements, for the
corresponding periods in the preceding Fiscal Year and (2) in the case
of balance sheets, as of the last day of the preceding Fiscal Year
(unless a different period is reasonably requested by the Lender), all
in reasonable detail and certified as accurate by an Authorized Officer
pursuant to a certificate in the form of Exhibit A attached
hereto, subject to changes resulting from normal year-end adjustments;
	 
	 	(ii)	 	statements prepared in the ordinary course, if
any, in which income for such Fiscal Quarter and for the period from
the start of the then current Fiscal Year to the end of such Fiscal
Quarter, the cash flows for the period from the start of the then
current Fiscal Year to the end of such Fiscal Quarter, and the actual
balance sheets at the end of such Fiscal Quarter (in each case as
required to be delivered pursuant to subsection 7.1(A) (i) hereof) are
compared with the corresponding projected statements of income and cash




35









 






	 	 	 	flow and balance sheets for such periods and time furnished to Lender
pursuant to subsection 7.l (F) below, in each case in the same format
as the audited statements of income and cash flow and the audited
balance sheet; all in reasonable detail along with a Covenant
Compliance Certificate certified by an Authorized Officer pursuant to a
certificate in the form of Exhibit A attached hereto;






	 	(iii)	 	(a) as reasonably requested by Lender, copies
of consolidated operating statements for such Fiscal Quarter prepared
by Borrower for internal use, including, without limitation, statements
of cash flow, purchases and sales of inventory and other similar data,
and (b) a comparison of actual cash flow and Capital Expenditures with
amounts budgeted for such Fiscal Quarter;
	 
	 	(iv)	 	calculations setting forth the compliance with
the financial covenants set forth in subsection 8.14 hereof for the
most recently completed Fiscal Quarter; and
	 
	 	(v)	 	in the event that any of the foregoing
statements indicate that Borrower has varied in any material respect
from any financial projections provided by Borrower to Lender, upon
Lender’s reasonable request a statement of explanation of such
deviation from an Authorized Officer;





     (B) Annual. As soon as practicable and in any event within one hundred and twenty
(120) days after the end of each Fiscal Year of Borrower, consolidated statements of income,
retained earnings and cash flow of Borrower for such Fiscal Year, and a consolidated balance sheet
of Borrower as of the end of such Fiscal Year, setting forth in each case, in comparative form,
corresponding figures for the period covered by the preceding annual statement (in the case of
statements) and as of the end of the preceding Fiscal Year (in the case of balance sheets) prepared
in accordance with GAAP and audited by independent certified public accountants selected by Lawson,
whose opinion shall be either unqualified or in scope and substance reasonably satisfactory to
Lender and, if reasonably requested by Lender, be the subject of a reliance letter from such
accountants permitting Lender to rely on the contents thereof as if prepared specifically for use
by Lender, along with a Covenant Compliance Certificate certified by an Authorized Officer pursuant
to a certificate in the form of Exhibit A attached hereto;



     (C) Default Notices. As soon as practicable (but in any event not more than five (5)
Business Days after any Responsible Officer of Borrower obtains knowledge of the occurrence of an
event or the existence of a circumstance giving rise to an Event of Default or a Default), notice
of any and all Events of Default or Defaults hereunder;



     (D) Other Defaults and Material Information. As soon as practicable (but in any event
not more than five (5) Business Days after any officer of Borrower obtains knowledge of the
occurrence of an event or the existence of a circumstance giving rise to a Default or Event of



36









 







Default under or a material violation of any term hereunder, notice of any such Default, Event of
Default or violation, and immediately upon the receipt thereof, copies of any notices with respect
thereto and any other material correspondence or information relating thereto shall be provided to
Lender by Borrower;



     (E) Budget. To the extent prepared by Borrower in the ordinary course of business, or
if reasonably requested in writing by Lender, Borrower shall (i) prepare an annual budget for the
next Fiscal Year, in reasonable detail (on a fiscal month basis for the immediately succeeding
Fiscal Year), and a detailed statement of the methods and assumptions used in the preparation of
such budget or (ii) prepare a pro forma budget in the preparation for or investigation regarding an
acquisition;



     (F) Letters from Accountants and Consultants. As soon as practicable and in any event
within ten (10) days of delivery to Lawson, a copy of (i) to the extent that such letters may from
time to time be issued by Borrower’s independent certified public accountants, each “Management
Letter” prepared by Borrower’s independent certified public accountants in connection with the
financial statements referred to in subsection 7.1(B) hereof and (ii) to the extent that such
letters may from time to time be issued by Borrower’s independent certified public accountants or
other management consultants (collectively, “Accounting Systems Letters”), any letter issued by
Borrower’s independent certified public accountants or other management consultants with respect to
recommendations relating to Borrower’s financial or accounting systems or controls, and Borrower
shall use its best efforts to cause each Management Letter and Accounting Systems Letter to be
either addressed to Lender or accompanied by a reliance letter from such accountants permitting
Lender to rely on the contents of each of the above as if prepared specifically for use by Lender
(Borrower further agrees that upon Borrower’s receipt of any Accounting Systems Letters wherein
such accountants or consultants have made recommendations for improvements to Borrower’s financial
or accounting systems or controls, Borrower promptly shall commence actions to correct any material
defects in such financial or accounting systems or controls unless Lender otherwise consents or
Borrower reasonably disagrees with the need for such actions.);



     (G) Other Information. With reasonable promptness, such other business or financial
data as Lender may reasonably request.



     (H) Covenant Compliance Certificate. The Borrower shall, contemporaneously with the
furnishing of the financial statements pursuant to this Section 7.1, but in no event later
than forty-five (45) days after the end of any Fiscal Quarter, deliver to the Lender a duly
completed compliance certificate in form set forth as Exhibit A attached hereto and made a
part hereof, in form and substance acceptable to Lender, dated as of the date of such financial
statements and certified as true and correct by an Authorized Officer, containing a computation of
each of the financial covenants set forth in Section 7.1 and stating that the Borrower has
not become aware of any Event of Default or Default that has occurred and is continuing or, if
there is any such Event of Default or Default describing it and the steps, if any, being taken to
cure it.



     All financial statements delivered to Lender pursuant to the requirements of this subsection
7.1 (except where otherwise expressly indicated) shall be prepared in accordance with GAAP (subject
in the case of interim financial statements to the lack of footnotes and normal year-end
adjustments) consistently applied, except for changes therein with which the



37









 







independent certified
public accountants issuing the opinion on the financial statements delivered pursuant to subsection
7.1(B) hereof have previously concurred in writing. Together with each delivery of financial
statements required by subsections 7.1(A) and 7.1(B) hereof, Lawson shall deliver to Lender a
certificate of an Authorized Officer of Lawson in the form attached hereto as Exhibit A
setting forth in such detail as is reasonably acceptable to Lender calculations with respect to
Borrower’s compliance with each of the financial covenants contained in this Agreement and stating
that to the best knowledge of the Authorized Officer upon due investigation there exists no Default
or Event of Default, or, if any Default or Event of Default exists, specifying the nature and the
period of existence thereof and what action Borrower proposes to take with respect thereto.



     Lender shall exercise reasonable efforts to keep such information, and all information
acquired as a result of any inspection conducted in accordance with subsection 7.2 hereof,
confidential, provided that Lender may communicate such information (a) to any other Person in
accordance with the customary practices of commercial banks relating to routine trade inquiries,
(b) to any regulatory authority having jurisdiction over Lender, (c) to any other Person in
connection with Lender’s sale of any participations in the Liabilities or assignment of any rights
and obligations of Lender under this Agreement and the other Loan Documents, (d) to any other
Person in connection with the exercise of Lender’s rights, prerogatives or performance hereunder or
under any of the other Loan Documents, (e) to any Person in any litigation in which Lender is a
party, or (f) to any Person if Lender believes in Good Faith that disclosure is necessary or
appropriate to comply with any applicable law, rule or regulation or in response to a subpoena,
order or other legal process or informal investigative demand, whether issued by a court, judicial
or administrative or legislative body or committee or other governmental authority or (g) to any
agents, employees, attorneys, accountants or appraisers of the Lender. Notwithstanding the
foregoing, information shall not be deemed to be confidential to the extent such information (i)
was already lawfully in the possession of Lender prior to such information being provided to Lender
by Borrower, (ii) is available in the public domain, (iii) becomes available in the public domain
other than as a result of unauthorized disclosure by Lender, or (iv) is acquired from a Person not
known by Lender to be in breach of an obligation of secrecy to Borrower. Borrower authorizes
Lender to discuss the financial condition of Borrower with Borrower’s independent certified public
accountants and agrees that such discussion or communication shall be without liability to either
Lender or Borrower’s independent certified public accountants and other professional
representatives.



     7.2 Intentionally Omitted.



     7.3 Conduct of Business. Lawson shall maintain its legal existence as a Delaware
Corporation, each Subsidiary shall maintain its legal existence as the State or County entity type
stated on Schedule 6.12, Borrower shall maintain in full force and effect all material
licenses, permits, authorizations, bonds, franchises, leases, patents, contracts and other rights
necessary for the profitable conduct of its business, shall continue in, and limit its operations
to, the same general line of business as that presently conducted by it and shall comply with all
applicable laws and regulations of any federal, foreign, state or local governmental authority,
except for such laws and regulations the violation of which would not, in the aggregate, have a
material adverse effect on the Borrower’s financial condition, results of operations or business or
the Borrower’s ability to perform its obligations.



38









 





     7.4 Claims and Taxes. The Borrower agrees to indemnify and hold Lender and each of
its officers, directors, employees, attorneys and agents harmless from and against any and all
claims, demands, liabilities, losses, damages, penalties, costs, and expenses (including without
limitation reasonable attorneys’ and consultants’ fees) relating to or in any way arising out of
the possession, use, operation or control of any of the Borrower’s assets. The Borrower agrees
that it shall pay or cause to be paid all license fees, bonding premiums and related taxes and
charges, and shall pay or cause to be paid all of Borrower’s real and personal property taxes,
assessments and charges and all of Borrower’s franchise, income, unemployment, use, excise, old age
benefit, withholding, sales and other taxes and other governmental charges assessed against
Borrower or payable by Borrower, at such times and in such manner as to prevent any penalty from
accruing or any lien or charge from attaching to its property or the Real Property, provided that
Borrower shall have the right to contest in good faith, by an appropriate proceeding promptly
initiated and diligently conducted, the validity, amount or imposition of any such tax, assessment
or charge, and during the pendency of such good faith contest to delay or refuse payment thereof,
if (i) Borrower establishes adequate reserves to cover such contested taxes, assessments or
charges, and (ii) such contest does not have a material adverse effect on Borrower’s financial
condition, results of operations or business, the ability of Borrower to pay any of the
Liabilities, or the value to Lender of the Collateral.



     7.5 The Lender’s Costs and Expenses as Additional Liabilities. The Borrower, agrees
to reimburse the Lender promptly for all reasonable expenses and fees paid or incurred in
connection with the analysis, documentation, negotiation and closing of the loans and other
extensions of credit described herein, including, without limitation, lien search, filing and
recording fees and the reasonable fees and expenses of the Lender’s attorneys and paralegals and
consultants (whether such attorneys and paralegals are employees of Lender or are separately
engaged by Lender), whether such expenses and fees are incurred prior to or after the date hereof.
All costs and expenses incurred by the Lender with respect to the negotiation, documentation,
enforcement, collection and protection of the Lender’s interests in the collateral shall be
additional Liabilities of the Borrower to the Lender, payable on demand, repaid as provided in
subsection 2.6 hereof.



     7.6 The Borrower’s Liability Insurance. The Borrower shall maintain, at its expense,
such public liability and third party property damage insurance in such amounts and with such
deductibles as is acceptable to the Lender in its reasonable discretion exercised in Good Faith.



     7.7 The Borrower’s Property Insurance and Business Interruption Insurance. The
Borrower shall, at its expense, maintain business interruption insurance and keep and maintain its
assets insured against loss or damage by fire, theft, burglary, pilferage, loss in transit,
explosion, spoilage and all other hazards and risks and in such amounts as is ordinarily insured
against by other owners or users of such properties in similar businesses. All such policies of
insurance shall be in form and substance reasonably satisfactory to the Lender, and the Borrower
shall not amend or otherwise change any such policies in any way which may materially adversely
affect the Lender without the prior written consent of the Lender. The Borrower shall deliver to
the Lender a certificate or other satisfactory evidence of each policy of insurance and evidence of
payment of all premiums therefor. If the Borrower, at any time or times hereafter, shall fail to
obtain or maintain any of the policies of insurance required above or to pay any premium in whole or in part relating thereto, then the Lender, without waiving or releasing any



39









 







obligation or
default by the Borrower hereunder, may at any time or times thereafter (but shall be under no
obligation to do so) obtain and maintain such policies of insurance and pay such premiums and take
any other action with respect thereto which the Lender deems advisable.



     7.8 ERISA. Lawson shall deliver to Lender, at Lawson’s expense, the following
information as and when provided below:




	 	(i)	 	as soon as possible, and in any event within
twenty (20) days after Lawson or an ERISA Affiliate of Lawson knows or
has reason to know that a Termination Event has occurred, a written
statement of an Authorized Officer of Lawson describing such
Termination Event and the action, if any, which Lawson or such ERISA
Affiliate of Lawson has taken, is taking or proposes to take with
respect thereto, and when known, any action taken or threatened by the
Internal Revenue Service (“IRS”), the Department of Labor (“DOL”) or
PBGC with respect thereto;
	 
	 	(ii)	 	as soon as possible, and in any event within
thirty (30) days, after Lawson or an ERISA Affiliate of Lawson knows or
has reason to know that a prohibited transaction (defined in Section
406 of ERISA and Section 4975 of the Internal Revenue code) has
occurred, a statement of an Authorized Officer of Lawson describing
such transaction;
	 
	 	(iii)	 	promptly after the filing thereof with the
DOL, IRS or PBGC, copies of each annual report, including Schedule
B thereto, filed with respect to each Pension Plan;
	 
	 	(iv)	 	promptly after the filing thereof with the IRS,
a copy of each funding waiver request filed with respect to any Pension
Plan and all communications received by Lawson or any ERISA Affiliate
of Lawson with respect to such request;
	 
	 	(v)	 	promptly upon the occurrence thereof,
notification of any increases in the benefits of any existing Pension
Plan or the establishment of any new Pension Plan or the commencement
of contributions to any Pension Plan to which Lawson or any ERISA
Affiliate of Lawson was not previously contributing;
	 
	 	(vi)	 	promptly upon, and in any event within ten (10)
Business Days after, receipt by Lawson or an ERISA Affiliate of Lawson
of the PBGC’s intention to terminate a Pension Plan or to have a
trustee appointed to administer a Pension Plan, copies of each such
notice;
	 
	 	(vii)	 	promptly upon, and in any event within ten
(10) Business Days after, receipt by Lawson or an ERISA Affiliate of
Lawson of an unfavorable determination letter from the IRS regarding the





40









 











	 	 	 	qualification of a Pension Plan under Section 401(a) of the
Internal Revenue Code, copies of such letter;
	 
	 	(viii)	 	promptly upon, and in any event within ten (10) Business Days after
receipt by Lawson or an ERISA Affiliate of Lawson of a notice from a
Multiemployer Plan regarding the imposition of withdrawal liability,
copies of such notice; and
	 
	 	(ix)	 	promptly upon, and in any event within twenty
(20) Business Days after either Lawson or an ERISA Affiliate of Lawson
fails to make a required installment under subsection (m) of Section
412 of the Code or any other payment required under Section 412 on or
before the due date for such installment or payment, a notification of
such failure.





     Lawson shall, and shall cause each of its ERISA Affiliates to, (a) keep in full force and
effect any Pension Plans that are presently in existence or may, from time to time, come into
existence, (b) make contributions to all Pension Plans in a timely manner and in a sufficient
amount to comply with the requirements of the Pension Plans, the Code and ERISA, (c) comply with
all requirements of ERISA and the Code which relate to all Pension Plans, and (d) notify Lender
immediately upon receipt by Lawson or any of its ERISA Affiliates of any notice of the institution
of any proceeding or other action which may result in the termination of any Pension Plan or where
there may constitute a Termination Event. Lawson shall, and shall cause each of its ERISA
Affiliates to, make any and all payments to any Multiemployer Plan that Lawson or any ERISA
Affiliate thereof may be required to make under any agreement relating to any Multiemployer Plan or
any law pertaining thereto, except for any such payments being contested in good faith by
appropriate proceedings.



     7.9 Notice of Suit or Adverse Change in Business. The Borrower shall, as soon as
possible, and in any event within five (5) Business Days after any Responsible Officer of the
Borrower learns of the following, give written notice to the Lender of: (i) any material
proceeding(s) (including, without limitation, litigation, arbitration or governmental proceedings)
being instituted or threatened to be instituted by or against the Borrower in any federal, state,
local or foreign court or before any commission or other regulatory body (federal, state, local or
foreign) which seeks an award against Borrower in an amount in excess of $500,000 or would result
in a materially adverse effect on the financial condition or operation of business of Borrower;
(ii) notice that the Borrower’s operations are in material noncompliance with requirements of
applicable federal, state or local environmental, health and safety statutes and regulations; (iii)
notice that the Borrower is subject to federal or state investigation evaluating whether any
material remedial action is needed to respond to the release of any hazardous or toxic waste,
substance or constituent, or other substance into the environment; (iv) notice that any material
portion of the properties or assets of the Borrower or the Real Property is subject to an
Environmental Lien; and (v) any material adverse change in the business, assets or condition,
financial or otherwise, of the Borrower.



     7.10 Supervening Illegality. If, at any time or times hereafter, there shall become
effective any amendment to, deletion from or revision, modification or other change in any



41









 







provision of any statute, or any rule, regulation or interpretation thereunder or any similar law
or regulation, affecting, in the Lender’s reasonable determination, the Lender’s extension of
credit described in this Agreement or the selling of participations therein, the Borrower shall
either (i) pay to the Lender the then outstanding balance of the Liabilities which are in violation
thereof, and hold the Lender harmless from and against any and all obligations, fees, liabilities,
losses, penalties, costs, expenses and damages of every kind and nature imposed upon or incurred by
the Borrower by reason of the Lender’s failure or inability to comply with the terms of this
Agreement or any of the other Loan Documents as a result of, but only to the extent of such change,
or (ii) indemnify and hold the Lender harmless from and against any and all obligations, fees,
liabilities, losses, penalties, costs, expenses and damages of every kind and nature imposed upon
or incurred by the Lender by reason of such amendment, deletion, revision, modification, or other
change as a result of, but only to the extent of such change. The obligations of the Borrower
under this subsection 7.10 shall survive payment of the Liabilities and termination of this
Agreement.



     7.11 Environmental Laws. If the Borrower shall (a) receive notice that any violation
of any federal, state or local environmental law or regulation may have been committed or is about
to be committed by the Borrower which will have a material adverse effect on Borrower’s financial
condition or business operations, (b) receive notice that any administrative or judicial complaint
or order has been filed or is about to be filed against the Borrower alleging a material violation
of any federal, state or local environmental law or regulation or requiring the Borrower to take
any action in connection with the material release of toxic or hazardous substances into the
environment, or (c) receive any notice from a federal, state, or local governmental agency or
private party alleging that the Borrower may be liable or responsible for any material amount of
costs associated with a response to or cleanup of a release of a toxic or hazardous substance into
the environment or any damages caused thereby, the Borrower shall provide the Lender with a copy of
such notice within fifteen (15) days after the Borrower’s receipt thereof. Within fifteen (15)
days after the Borrower has learned of the enactment or promulgation of any federal, state or local
environmental law/or regulation which may result in any material adverse change in the condition,
financial or otherwise, of the Borrower, the Borrower shall provide the Lender with notice thereof.



     7.12 Lender as Depository. Lawson shall continue to utilize Lender as its depository
and remittance point for funds received by Lawson in the ordinary course of business to the extent
so used as of the date hereof. Lawson shall maintain sufficient balances to cover the costs of
account activity.



     7.13 Compliance with Certain Statutes. The Borrower shall (a) ensure, and cause each
Subsidiary to ensure, that no person who owns a controlling interest in or otherwise controls the
Borrower or any Subsidiary is or shall be listed on the Specially Designated Nationals and Blocked
Person List or other similar lists maintained by the Office of Foreign Assets Control
(“OFAC”), the Department of the Treasury or included in any Executive Orders, (b) not use
or permit the use of the proceeds of the Revolving Loans to violate any of the foreign asset
control regulations of OFAC or any enabling statute or Executive Order relating thereto, and (c)
comply, and cause each Subsidiary to comply, with all applicable Bank Secrecy Act (“BSA”)
laws and regulations, as amended.



42









 





8. NEGATIVE COVENANTS.




     Each Borrower jointly and severally covenants and agrees, except to the extent not applicable
to it that, so long as any of the Liabilities remain outstanding, and (even if there shall be no
Liabilities outstanding) so long as this Agreement remains in effect (unless the Lender shall give
its prior written consent thereto):



     8.1 Encumbrances. The Borrower will not create, incur, assume or suffer to exist any
Lien of any nature whatsoever on any of its assets or property, other than: (i) deposits under
workmen’s compensation, unemployment insurance, social security and other similar laws, or to
secure the performance of bids, tenders or contracts (other than for the repayment of borrowed
money) or to secure indemnity, performance or other similar bonds for the performance of bids,
tenders or contracts (other than for the repayment of borrowed money) or to secure statutory
obligations or surety or appeal bonds, or to secure indemnity, performance or other similar bonds
in the ordinary course of business; (ii) the security interests in favor of Lender; (iii) Liens
which arise by operation of law, other than Environmental Liens; (iv) Liens for taxes not yet due
which are being diligently contested in good faith by appropriate proceedings; (v) easements,
rights-of-way, restrictions, covenants or other agreements of record, and other similar charges or
encumbrances on real estate, that do not secure any monetary obligation and do not interfere with
the Borrower’s ordinary course of business; (vi) normal and customary rights of setoff upon
deposits in favor of depository institutions, and Liens of a collecting bank on payment items in
the course of collection; (vii) Liens in connection with purchase money Indebtedness and
Capitalized Leases permitted pursuant to Section 8.2; provided, that such Liens secure only
the amounts borrowed to finance the purchase or lease, and attaches only to, the assets relating to
the purchase or lease; and (viii) Liens existing on the Closing Date and set forth on Schedule
8.1 hereto (clauses (i) through (viii), collectively, “Permitted Liens”).



     8.2 Indebtedness. Except for (a) Indebtedness existing on the First Amendment
Effective Date and set forth on Schedule 8.2 to the First Amendment, (b) Hedging Obligations
incurred in the ordinary course of business for the purpose of directly mitigating risks associated
with liabilities, commitments, investments, assets, or property held or reasonably anticipated, and
not for purposes of speculation or taking a “market view;” (c) Bank Product Obligations other than
Hedging Obligations; (d) any refinancings, refundings, renewals or extensions of any of the
foregoing provided that (i) the amount of such Indebtedness is not increased at the time of
such refinancing, refunding, renewal or extension and (ii) the terms relating to principal amount,
amortization, maturity, collateral (if any) and subordination (if any), and other material terms
taken as a whole, of any such refinancing, refunding, renewing or extending Indebtedness, and of
any agreement entered into and of any instrument issued in connection therewith, are no less
favorable in any material respect to the Borrower or the Lender than the terms of any agreement or
instrument governing the Indebtedness being refinanced, refunded, renewed or extended and the
interest rate applicable to any such refinancing, refunding, renewing or extending Indebtedness
does not exceed the then applicable market interest rate; (e) Indebtedness to the Lender; (f)
excluding purchase money Indebtedness and Capitalized Leases set forth on Schedule 8.2
hereto, purchase money Indebtedness and Capitalized Leases in an aggregate amount not to exceed
$2,500,000 at any time outstanding; and (g) Indebtedness permitted under Sections 8.4(vi)
or (vii), Borrower shall not create, assume, or become liable in any manner with



43









 







respect to or permit to exist any obligations or Indebtedness to anyone without the prior written consent of
the Lender.



     8.3 Consolidations, Mergers or Acquisitions. Borrower shall not recapitalize,
consolidate with, merge with, or otherwise acquire all or substantially all of the assets or
properties of any other Person without the prior written consent of Lender.



     8.4 Investments or Loans. Borrower shall not make or permit to exist investments or
loans in or to any other Person, except (i) investments in short-term direct obligations of the
United States Government, (ii) investments in negotiable certificates of deposit or other
investment accounts (i.e. money market accounts) issued by Lender, an affiliate of Lender or by
any other bank or financial institution satisfactory to Lender, in its reasonable discretion, and
payable to the order of Borrower or to bearer, (iii) investments in commercial paper rated Al or
Pl, (iv) advances to employees of Borrower in the ordinary course of business to the extent that
such advances do not materially adversely affect Borrower’s financial condition or operation of
business, (v) advances against commissions to independent sales agents of Borrower in the ordinary
course of business to the extent that such advances do not materially adversely affect Borrower’s
financial condition or operation of business, (vi) intercompany transfers between one or more
Borrowers in the ordinary course of business to the extent that such intercompany transfers do not
materially adversely affect Borrower’s financial condition, operation of business or the financial
covenants contained in Section 8.13 herein, (vii) intercompany transfers between Lawson and
Lawson Canada in an amount not to exceed $25,000,000 in the aggregate at any time, and (viii) loans
to current employees or officers of Borrower as permitted pursuant to Section 8.6.



     8.5 Guarantees. Except for obligations of other Persons not to exceed $25,000 in the
aggregate or as related to a relocation of an employee or independent sales agent of Borrower,
Borrower shall not guarantee, endorse or otherwise in any way become or be responsible for
obligations of any other Person, whether by agreement to purchase the indebtedness of any other
Person or through the purchase of goods, supplies or services, or maintenance of working capital or
other balance sheet covenants or conditions, or by way of stock purchase, capital contribution,
advance or loan for the purpose of paying or discharging any indebtedness or obligation of such
other Person or otherwise, except endorsements of negotiable instruments for collection in the
ordinary course of business.



     8.6 Compensation to Officers and Others. Except for (a) advances and reimbursements
for travel and expenses to Borrower’s officers, directors or employees in the ordinary course of
business, (b) reasonable salaries and bonuses for all salaried personnel, officers, and directors,
(c) payments pursuant to existing agreements entered into by Borrower in the ordinary course, (d)
existing loans to officers and employees of Borrower, and (e) advances permitted pursuant to
clauses (iv), (v), and (viii) of Section 8.4, the Borrower shall not make any loans to or
pay any bonuses, fees or other amounts to any officers, directors, employees or stockholders of the
Borrower.



     8.7 Issuance of Stock. The Borrowers other than Lawson shall not issue or distribute
any capital stock or other securities for consideration or otherwise without the prior written
consent of Lender.



44









 





     8.8 Amendment of Articles of Incorporation, By-Laws; Company Name; Places of Business.
Borrower shall not amend its Articles of Incorporation, Articles of Organization, or similar
organizational documents or By-Laws, operating agreements, or similar governing documents, without
prior written notice to Lender, and except that Borrower may amend its Articles of Incorporation,
Articles of Organization or similar organizational document to effect a change in its company name
or adopt assumed names, provided that Borrower furnishes to Lender such financing statements
executed by Borrower which Lender may reasonably request prior to the filing of such amendment and
furnishes to Lender a copy of such amendment, certified by all appropriate Secretaries of State or
other state officials within ten (10) Business Days of the date such amendment is filed with such
Secretary of State. Borrower shall not make any change to the location of its principal place of
business or chief executive office unless prior to the effective date of such change in location,
Borrower delivers to Lender such financing statements executed by Borrower which Lender may request
to reflect such change in location. Borrower shall deliver such other documents and instruments as
Lender may request in connection with such change in name or location within ten (10) Business Days
of the effectiveness of such change or Lender’s request therefor.



     8.9 Transactions with Subsidiaries and Affiliates. Borrower will not enter into any
transaction with any Affiliate (including, without limitation: (a) the making of any loans to, or
the payment of any bonuses, fees or other money to, any Affiliate, and/or (b) the purchase, sale or
exchange of property or the rendering of any service to any Subsidiary or Affiliate) except for (i)
transactions solely among one or more Borrowers, (ii) transactions permitted under clauses (vi) or
(vii) of Section 8.4, and (iii) transactions in the ordinary course of and pursuant to the
reasonable requirements of Borrower’s business and upon fair and reasonable terms no less favorable
to Borrower than Borrower would obtain in a comparable arm’s-length transaction with an
unaffiliated person or corporation.



     8.10 ERISA Violations. Borrower shall not:



     (A) engage, or permit an ERISA Affiliate of Borrower to engage, in any prohibited transaction
described in Section 406 of ERISA or Section 4975 of the Internal Revenue Code for which a class
exemption is not available or a private exemption has not been previously obtained from the DOL;



     (B) permit to exist any accumulated funding deficiency for any Pension Plan (as defined in
subsection 302 of ERISA and Section 412 of the Internal Revenue Code), whether or not waived;



     (C) fail, or permit an ERISA Affiliate of Borrower to fail, to pay timely required
contributions or annual installments due with respect to any Plan including without limitation any
installments due with respect to any waived funding deficiency to any Pension Plan;



     (D) terminate, or permit an ERISA Affiliate of Borrower to terminate, any Pension Plan which
would result in any liability of Borrower or an ERISA Affiliate of Borrower under Title IV of
ERISA;



45









 





     (E) fail, or permit an ERISA Affiliate of Borrower to fail, to pay to any Pension Plan any
required installment under section (m) of Section 412 of the Internal Revenue Code or any other
payment required under Section 412 of the Internal Revenue Code on or before the due date for such
installment or other payment;



     (F) amend, or permit an ERISA Affiliate of Borrower to amend, a Pension Plan resulting in an
increase in current liability for the plan year such that either Borrower or an ERISA Affiliate of
Borrower is required to provide security to such Plan under Section 401(a) (29) of the Internal
Revenue Code;



     (G) permit any reportable event (as defined in Section 4043 of ERISA) to occur;



     (H) withdraw, or permit any ERISA Affiliate to withdraw, from any Pension Plan during a plan
year for which Borrower or any ERISA Affiliate is a substantial employer with respect to such plan
if Borrower or such ERISA Affiliate would incur liability to the PBGC with respect to such plan
under Sections 4063 or 4064 of ERISA; or



     (I) withdraw, or permit any ERISA Affiliate to withdraw, from any Multiemployer Plan if a
withdrawal liability would result to Borrower or any ERISA Affiliate pursuant to Section 4201 of
ERISA.



     8.11 Fiscal Year. Borrower’s Fiscal Year commences January 1 and ends December 31 of
each year. Borrower may change its Fiscal Year only with the prior written consent of Lender.



     8.12 Subsidiaries. Borrower shall not form or acquire any additional Subsidiaries
other than those listed on Schedule 6.12 without the prior consent of Lender.



     8.13 Financial Covenants.



     (A) Intentionally Omitted.



     (B) Minimum Shareholder Equity. Lawson shall not permit its total shareholder equity
as of the end of any Fiscal Quarter to be less than the sum of (i) eighty percent (80%) of the
Borrower’s Net Worth as at June 30, 2008 plus (ii) fifty percent (50%) of the Borrower’s Net Income
for each Fiscal Quarter thereafter; provided, that the amount of Borrower’s Net Income for each
Fiscal Quarter in clause (ii) shall be greater than zero.



     (C) Fixed Charge Coverage. As of the end of each of its Fiscal Quarters commencing
with the Fiscal Quarter ending on December 31, 2009, calculated on a rolling four (4) Fiscal
Quarter basis (i.e. the one (1) year period encompassing such Fiscal Quarter and the previous
three (3) Fiscal Quarters then elapsed), the Borrower shall maintain a ratio of (a) the total for
such four (4) Fiscal Quarter period of EBITDA minus all Capital Expenditures which are not
financed with Funded Debt, to (b) the sum for such four (4) Fiscal Quarter period of (i) Interest
Charges, (ii) required payments of principal of the Liabilities (iii) dividends, and (iv) the sum
of all income taxes paid in cash by the Borrowers, of not less than 1.25 to 1.00.




46












 





     (D) Minimum EBITDA. The Borrower shall maintain a total EBITDA for each of the Fiscal
Quarters set forth below of not less than the amount set forth below for such Fiscal Quarter:



	 	 	 	 	 
	Fiscal Quarter	 	Minimum EBITDA
	Fiscal Quarter ending March 31, 2009
	 	$	-2,500,000	 
	Fiscal Quarter ending June 30, 2009
	 	$	2,744,000	 
	Fiscal Quarter ending September 30, 2009
	 	$	4,446,000	 






     (E) Intentionally Omitted.



     (F) Total Debt to EBITDA. As of the end of each of its Fiscal Quarters commencing
with the Fiscal Quarter ending on December 31, 2009, the Borrower shall maintain a ratio of
consolidated Total Debt to consolidated EBITDA for the period of four Fiscal Quarters ending on
such date, of not greater than (a) as of the end of the Fiscal Quarter ending December 31, 2009,
3.50 to 1.00; (b) as of the end of the Fiscal Quarter ending March 31, 2010, 3.25 to 1.00; and (c)
as of the end of each subsequent Fiscal Quarter, 3.00 to 1.00.



     Without limiting the foregoing, in addition to a reserve taken by Borrower in its Fiscal
Quarter ending June 30, 2008 for the Federal Settlement Amount, the Borrower will also incur
approximately $5,000,000 of costs and expenses relating to the Federal Settlement (the “Federal
Settlement Costs and Expenses”). For purposes of calculating the Total Debt to consolidated
EBITDA covenant set forth in this Section 8.13(F), costs and expenses relating to the Federal
Settlement of up to $250,000 incurred during the Fiscal Quarter ending on March 31, 2009 shall not
be classified as a reduction to EBITDA for the applicable measurement periods.



     8.14 Intentionally Omitted.



     8.15 Environmental. Borrower shall not fail to comply in any material respect with
all federal, state or local environmental laws and regulations, including, without limitation,
environmental, land use, occupational safety or health laws, rules, regulations, requirements or
permits in all jurisdictions in which it, is or may at any time be doing business, including
without limitation the federal Resource Conservation and Recovery Act, the Federal Comprehensive
Environmental Response, Compensation and Liability Act, the Federal Clear Air Act, the Federal
Clean Water Act, and the Federal Occupational Safety and Health Act, as the same may be amended
from time to time; provided, however that nothing contained in this subsection 8.15 shall
prevent the Borrower from contesting, in good faith by appropriate legal proceedings, any such law,
regulation, interpretation thereof or application thereof, provided, further, that
Borrower shall not fail to comply with the order of any court or other governmental body of
applicable jurisdiction relating to such laws unless Borrower shall currently be prosecuting an
appeal or proceedings for review and shall have secured a stay of enforcement or execution or other
arrangement postponing enforcement or execution pending such appeal or proceedings for review.



47









 





     8.16 Disposal of Property. Borrower shall not sell, lease, transfer or otherwise
dispose of any of its assets or property to any Person, except for (a) sales of Inventory to
customers in the ordinary course of business, (b) the sale of uncollectible Accounts to collection
companies in the ordinary course of business and for fair value, (c) sales of obsolete and/or
unusable equipment in the ordinary course of business, (d) sales of the owned Real Property located
at 4335 Beltwood Parkway, Dallas, TX and 6510 Northpark Boulevard, Charlotte, NC, and sales of
excess equipment resulting from the closure of such locations, in each case so long as such sale is
for not less than the fair market value of the subject equipment or Real Property, and (e) sales of
other assets or property so long as (i) each such sale is for not less than the fair market value
of the subject assets or property, and (ii) the aggregate fair market value of all such sales does
not exceed $5,000,000 in any Fiscal Year.



     8.17 Distributions; Restrictions on Upstream Payments. Borrower shall not (a) declare
or make any Distributions, except (i) Upstream Payments and (ii) Distributions on the equity
interests of Lawson in an aggregate amount not to exceed $260,000 during any Fiscal Quarter; or (b)
create or suffer to exist any encumbrance or restriction on the ability of a Subsidiary to make any
Upstream Payment, except for restrictions under the Loan Documents or under Applicable Law.


9. DEFAULT, RIGHTS AND REMEDIES OF THE LENDER.




     9.1 Defaults. Each of the following Events of Default which occur while any
Liabilities remain outstanding and continues uncured for the applicable cure period contained
herein shall constitute a Default under this Agreement:



     (A) Failure to pay interest, costs, or fees in accordance with the terms of this Agreement or
the other Loan Documents upon the date that such payment is due and such default shall continue for
five (5) days after written notice to Lawson;



     (B) Failure to pay principal in accordance with the terms of this Agreement or the other Loan
Documents upon the date that such payment is due;



     (C) Default by Borrower in the due observance or performance of any covenant contained in
Section 7.1, 7.2, 7.3, 7.6, 7.7, 7.9, 7.12, 7.13, or Article 8.



     (D) Default by Borrower in the due observance or performance of any covenant contained in any
Loan Documents and not addressed elsewhere in this Section 9.1, which default continues for thirty
(30) days after service of written notice thereof, provided that if in Lender’s reasonable
judgment such breach cannot reasonably be cured within such 30-day period but can be cured within
sixty (60) days, the Borrower shall commence such cure and proceed to so cure in a diligent manner
and to complete such cure within sixty (60) days after service of written notice thereof,
provided further that such grace period shall not apply, and a Default shall be
deemed to have occurred promptly upon such breach, if such breach may not, in Lender’s reasonable
determination, be cured by Borrower during such sixty (60) day grace period;



     (E) an Event of Default under any of the other Loan Documents;



48









 





     (F) any warranty or representation now or hereafter made by Borrower is untrue or incorrect in
any material respect when made, or any schedule, certificate, statement, report, financial data,
notice, or writing furnished at any time by Borrower to Lender is untrue or incorrect in any
material respect on the date as of which the facts set forth therein are stated or certified or any
of the foregoing omits to state a fact necessary to make the statements therein contained not
misleading in any material respect;



     (G) one or more judgments or orders requiring payment in excess of $1,000,000.00 in the
aggregate (except for judgments constituting Liens and which are not a Lien on Collateral, which
are being contested by Borrower in good faith) shall be rendered against Borrower and any such
judgment or order shall remain unsatisfied or undischarged and in effect for ten (10) consecutive
days without a stay of enforcement or execution, provided that this subsection 9.1(F) shall
not apply to any judgment for which Borrower is fully insured (except for normal deductibles in
connection therewith) and with respect to which the insurer has assumed the defense or is not
defending under reservation of right and with respect to which Lender reasonably believes the
insurer will pay the full amount thereof (except for normal deductibles in connection therewith);



     (H) a notice of Lien, levy or assessment is filed or recorded with respect to any Collateral
or all or a substantial part of the assets of Borrower by the United States, or any department,
agency or instrumentality thereof, or by any state, county, municipality or other governmental
agency, or any taxes or debts owing at any time or times hereafter to any one or more of them
become a Lien upon any part of the Collateral; and (i) such Lien, levy or assessment is not
discharged or released or the enforcement thereof is not stayed within thirty (30) days of the
notice or attachment thereof, or (ii) if the enforcement thereof is stayed, such stay shall cease
to be in effect, provided that this subsection 9.1(G) shall not apply to any Liens, levies
or assessments which relate to current taxes not yet due and payable;



     (I) there shall occur any loss, theft, substantial damage or destruction of any item or items
of Collateral for which Borrower is not fully insured as required by this Agreement or the other
Loan Documents (a “Loss”), if the amount of such Loss not fully covered by insurance
(excluding any reasonable deductible amount in connection therewith), together with the amount of
all other Losses not fully covered by insurance (excluding any deductibles in connection therewith)
occurring in the same Fiscal Year, exceeds $2,500,000.00;



     (J) all or any part of the Collateral is attached, seized, subjected to a writ or distress
warrant, or is levied upon, or comes within the possession of any receiver, trustee, custodian or
assignee for the benefit of creditors and on or before the thirtieth (30th) day thereafter such
assets are not returned to Borrower, and/or such writ, distress warrant or levy is not dismissed,
stayed or lifted;



     (K) (1) a proceeding under any bankruptcy, reorganization, arrangement of debt, insolvency,
readjustment of debt or receivership law or statute is filed (a) against Borrower and an
adjudication or appointment is made or order for relief is entered, or such proceeding remains
undismissed for a period in excess of sixty (60) days; or (b) by Borrower; or (2) Borrower (x)
makes an assignment for the benefit of creditors; or (y) takes any corporate action to authorize
any of the foregoing;



49









 





     (L) Lawson voluntarily or involuntarily dissolves or is dissolved, terminates or is terminated
or any other Borrower voluntarily or involuntarily dissolves or is dissolved, terminates or is
terminated without prior written notice to Lender;



     (M) Borrower, on a consolidated basis, becomes insolvent or fails generally to pay its debts
as they become due;



     (N) Borrower is enjoined, restrained, or in any way prevented by the order of any court or any
administrative or regulatory agency from conducting all or any material part of its business
affairs on a consolidated basis, for a period in excess of twenty-one (21) Business Days;



     (O) a breach by Borrower shall occur under any material agreement, document or instrument
(other than an agreement, document or instrument evidencing the lending of money), whether
heretofore, now or hereafter existing between Borrower and any other Person, and such breach,
continues unwaived for more than thirty (30) days after such breach first occurs, provided
that if in Lender’s reasonable judgment such breach cannot reasonably be cured within such 30-day
period but can be cured within sixty (60) days, the Borrower shall commence such cure and proceed
to so cure in a diligent manner and to complete such cure within sixty (60) days after service of
written notice thereof, provided further that such grace period shall not apply,
and a Default shall be deemed to have occurred promptly upon such breach, if such breach may not,
in Lender’s reasonable determination, be cured by Borrower during such sixty (60) day grace period;



     (P) as to more than $1,000,000.00 in indebtedness in the aggregate at any time (i) Borrower
shall fail to make any payment due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) on any other obligation for borrowed money and such failure
shall continue after the applicable grace period, if any, specified in the agreement or instrument
relating to such indebtedness; (ii) any other default under any agreement or instrument relating to
any such indebtedness, or any other event, shall occur and shall continue after the applicable
grace period, if any, specified in such agreement or instrument if the effect of such default or
event is to accelerate, or to permit the acceleration of, the maturity of such indebtedness; or
(iii) any such indebtedness shall be declared to be due and payable or required to be prepaid
(other than by a regularly scheduled required prepayment) prior to the stated maturity thereof;



     (Q) a material and adverse change shall occur (i) in the present or reasonably foreseeable
prospective operations or financial condition of Borrower or in the value of any material portion
of the Collateral, or (ii) which materially impairs the ability of Borrower to perform Borrower’s
obligations under this Agreement and the other Loan Documents, in each case as determined by Lender
in its sole Good Faith discretion;



     (R) the plan administrator of any Pension Plan applies under Section 4 12(d) of the Internal
Revenue Code for a waiver of the minimum funding standards of Section 4 12(a) of the Internal
Revenue Code and Lender in good faith believes that the approval of such waiver could subject
Borrower or an ERISA Affiliate of Borrower to liability in excess of One Million and no/100 Dollars
($1,000,000.00).



50









 





     (S) an accumulated funding deficiency (as defined in Section 203 of ERISA and Section 412 of
the Code) exists with respect to any Pension Plan as of the last day of any plan year;



     (T) as of the last day of any plan year, the present value of the benefits under any Pension
Plan, as determined by such Plan’s independent actuaries, exceeds the value as of such date, as
determined by such actuaries, of all assets of such Plan by One Million and no/100 Dollars
($1,000,000.00);



     (U) the aggregate present value of the benefits under all Pension Plans that do not satisfy
clause (S) above, as of the end of each Plan’s plan year, as determined by such Plans’ independent
actuaries, exceeds the aggregate value as of such date, as determined by such actuaries of all
assets of all such Pension Plans by One Million and no/100 Dollars ($1,000,000.00);



     (V) a Termination Event occurs which Lender in good faith believes could individually, or
together with any other Termination Event subject either Borrower or an ERISA Affiliate of Borrower
to liability in excess of One Million and no/100 Dollars ($1,000,000.00); or



     (W) except as otherwise specifically permitted herein, any sale, conveyance, assignment or
other transfer of, or grant of a security interest, pledge or negative pledge in, all or any part
of the Collateral;



     (X) a Change in Control without the written consent of Lender provided, however, that a Change
in Control shall be permitted if written notice of the intended sale, conveyance, assignment or
other transfer of or grant of security interest in one or more shares of the capital stock of
Lawson that causes the Change in Control is given to Lender and if such sale, conveyance,
assignment or transfer is to (i) a member of the Immediate Family of the assigning Shareholder, or
(ii) a trust, partnership or other entity for the benefit of the assigning Shareholder or his
Immediate Family, including but not limited to Port Investment LLP, a Delaware Limited Liability
Partnership. (In the event of a permitted transfer of capital stock in Lawson hereunder Lender
shall be provided written notice thereof at least five (5) Business Days prior to such transfer.)



     Upon the occurrence of any of the foregoing Defaults, Lender may, without notice to Borrower
(i) terminate Lender’s obligation to make advances to Borrower and/or (ii) deem all of the
Liabilities immediately due and payable, except that if a Default described in subsection 9.1(J)
hereof shall exist or occur, all of the Liabilities shall automatically, without notice of any
kind, be immediately due and payable.



     9.2 Rights and Remedies Generally. In the event of a Default, the Lender shall have,
in addition to any other rights and remedies contained in this Agreement or in any of the other
Loan Documents, all of the rights and remedies of an unsecured party under the Code or other
applicable laws, all of which rights and remedies shall be cumulative, and non-exclusive, to the
extent permitted by law.



51









 





     9.3 Waiver of Demand. Demand, presentment, protest and notice of nonpayment are
hereby waived by the Borrower. The Borrower also waives the benefit of all valuation, appraisal
and exemption laws.


10. MISCELLANEOUS




     10.1 Waiver. Lender’s failure, at any time or times hereafter, to require strict
performance by Borrower of any provision of this Agreement shall not waive, affect or diminish any
right of Lender thereafter to demand strict compliance and performance therewith. Any suspension
or waiver by Lender of a Default by Borrower under this Agreement or any of the other Loan
Documents shall not suspend, waive or affect any other Default by Borrower under this Agreement or
any of the other Loan Documents, whether the same is prior or subsequent thereto and whether of the
same or of a different kind or character. None of the undertakings, agreements, warranties,
covenants and representations of Borrower contained in this Agreement or any of the other Loan
Documents and no Default by Borrower under this Agreement or any of the other Loan Documents shall
be deemed to have been suspended or waived by Lender unless such suspension or waiver is in writing
signed by an officer of Lender, and directed to Borrower specifying such suspension or waiver. All
Defaults shall continue until the same are waived by Lender in accordance with the preceding
sentence.



     10.2 Costs and Attorneys’ Fees. If at any time or times hereafter Lender employs
counsel in connection with protecting Lender’s security interest in the Collateral or in connection
with any of Lender’s other rights contemplated by or arising out of this Agreement or any of the
other Loan Documents, whether (a) to prepare, negotiate or execute (i) any amendment to or
modification or extension of this Agreement, any other Loan Documents or any instrument, document
or agreement executed by any Person in connection with the transactions contemplated by this
Agreement, (ii) any new or supplemental Loan Documents, or any instrument, document or agreement to
be executed by any Person in connection with the transactions contemplated by this Agreement, or
(iii) any instrument, document or agreement in connection with any sale or attempted sale of any
interest herein to any participant provided, however that prior to Lender employing counsel
for such purpose, Lender shall give Borrower sixty (60) days advance written notice of such intent
and Borrower may issue a Facility Reduction Notice pursuant to Section 2.3, (b) to
commence, defend, or intervene in any litigation with respect to the Collateral or Lender’s
security interest therein or the solvency of Borrower, or to file a petition, complaint, answer,
motion or other pleadings with respect to the Collateral or Lender’s security interest therein or
the solvency of Borrower, (c) to take any other action in or with respect to any suit or proceeding
(bankruptcy or otherwise), (d) to consult with officers of Lender to advise Lender, (e) to the
extent Lender has such rights to protect, collect, lease, sell, take possession of, release or
liquidate any of the Collateral, or (f) to attempt to enforce or to enforce any interest of Lender
in any of the Collateral, or to enforce any rights of Lender, including, without limitation,
Lender’s rights to collect any of the Liabilities, then in any of such events, all of the
reasonable attorneys’ fees arising from such services, and any expenses, costs and charges relating
thereto, including, without limitation, all reasonable fees of all paralegals and other staff
employed by such attorneys, together with interest following demand for payment thereof at the rate
from time to time prescribed in subsection 2.6(C) hereof, shall be part of the Liabilities,
payable on demand and secured by the Collateral.



52









 





     10.3 Expenditures by the Lender. In the event Borrower shall fail to pay taxes,
insurance, assessments, costs or expenses which Borrower is, under any of the terms hereof,
required to pay, or fails to keep the Collateral free from other Liens, except as permitted herein,
Lender may, in its sole discretion, make expenditures for any or all of such purposes, and the
amount so expended, together with interest thereon at the rate prescribed in subsection 2.6(C)
hereof, shall be part of the Liabilities, payable on demand.



     10.4 Custody and Preservation of Assets. Lender shall be deemed to have exercised
reasonable care in the custody and preservation of any assets of Borrower in its possession if it
takes such action for that purpose as Borrower shall request in writing, but failure by Lender to
comply with any such request shall not of itself be deemed a failure to exercise reasonable care,
and no failure by Lender to preserve or protect any right with respect to such Collateral against
prior parties, or to do any act with respect to the preservation of such Collateral not so
requested by Borrower shall of itself be deemed a failure to exercise reasonable care in the
custody or preservation of such Collateral.



     10.5 Reliance by the Lender. All covenants, agreements, representations, obligations
and warranties made herein by Borrower shall be joint and several, notwithstanding whether the
proceeds of the Revolving Loan is paid to Borrower and shall, notwithstanding any investigation by
Lender, be deemed to be material to and to have been relied upon by Lender.



     10.6 Parties. Whenever in this Agreement there is reference made to any of the
parties hereto, such reference shall be deemed to include, wherever applicable, a reference to the
successors and assigns of Borrower and the successors and assigns of Lender, and the provisions of
this Agreement shall be binding upon and shall inure to the benefit of said successors and assigns.
Notwithstanding anything herein to the contrary, the Borrower may not assign or otherwise transfer
its rights or obligations under this Agreement without the prior written consent of Lender.
Without in any way limiting Lender’s rights, Lender may sell participations in the Liabilities or
sell or assign its rights hereunder and under the other Loan Documents, in whole or in part, on
such terms as Lender may determine. In connection with any such proposed participations or
assignments, Lender may disclose information otherwise required to be kept confidential hereunder
provided such disclosure shall not be made unless the party to whom it is disclosed shall have
agreed to keep such information confidential as set forth herein.



     10.7 CHOICE OF LAW. THIS AGREEMENT SHALL BE DEEMED TO BE EXECUTED AND HAS BEEN
DELIVERED AND ACCEPTED IN CHICAGO, ILLINOIS BY SIGNING AND DELIVERING IT THERE. ANY DISPUTE
BETWEEN THE PARTIES HERETO ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT, AND WHETHER ARISING IN
CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS AND
NOT THE CONFLICTS OF LAW PROVISIONS OF THE STATE OF ILLINOIS.



     10.8 CONSENT TO JURISDICTION.



     (A) EXCLUSIVE JURISDICTION. EXCEPT AS PROVIDED IN SUBSECTION 10.8(B) HEREOF, LENDER
AND BORROWER AGREE THAT ALL DISPUTES BETWEEN



53









 







THEM ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY OR
OTHERWISE, SHALL BE RESOLVED ONLY BY STATE OR FEDERAL COURTS LOCATED IN COOK COUNTY, ILLINOIS, AND
THE BORROWER AND THE LENDER WAIVE ANY OBJECTION BASED ON VENUE OR FORUM NON CONVENIENCE WITH
RESPECT TO ANY ACTION INSTITUTED THEREIN, BUT THE LENDER AND THE BORROWERS ACKNOWLEDGE THAT CERTAIN
APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF COOK COUNTY, ILLINOIS.
THE BORROWER WAIVES IN ALL DISPUTES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT
CONSIDERING THE DISPUTE.



     (B) OTHER JURISDICTIONS. THE BORROWER AGREES THAT LENDER SHALL HAVE THE RIGHT TO
PROCEED AGAINST BORROWER OR THE BORROWER’S PROPERTY (“PROPERTY”) IN A COURT IN ANY LOCATION TO
ENABLE LENDER TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF LENDER. BORROWER
AGREES THAT IT WILL NOT ASSERT ANY PERMISSIVE COUNTERCLAIM IN ANY PROCEEDING BROUGHT BY LENDER TO
REALIZE ON PROPERTY, COLLATERAL OR ANY OTHER SECURITY FOR THE LIABILITIES, OR TO ENFORCE A JUDGMENT
OR OTHER COURT ORDER IN FAVOR OF LENDER. BORROWER THEREBY WAIVES ANY OBJECTION THAT IT MAY HAVE TO
THE LOCATION OF THE COURT IN WHICH LENDER HAS COMMENCED A PROCEEDING DESCRIBED IN THIS SUBSECTION
10.8(B).



     10.9 SERVICE OF PROCESS. THE BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL
PROCESS UPON IT AND IRREVOCABLY APPOINTS ELIZABETH A. DAVIDSON, JENNER & BLOCK LLP, 330 N. WABASH
AVENUE, CHICAGO, ILLINOIS, 60611, AS BORROWER’S AGENT FOR THE PURPOSE OF ACCEPTING SERVICE OF
PROCESS WITHIN THE STATE OF ILLINOIS. LENDER AGREES TO PROMPTLY FORWARD BY REGISTERED MAIL (NO
RETURN RECEIPT REQUIRED) A COPY OF ANY PROCESS SO SERVED UPON SAID AGENT TO BORROWER AT ITS ADDRESS
SET FORTH IN SUBSECTION 10.17 HEREOF. BORROWER HEREBY CONSENTS TO SERVICE OF PROCESS AS
AFORESAID. BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF THE COURTS
REFERRED TO IN SUBSECTION 10.8 HEREOF IN ANY SUCH ACTION OR PROCEEDING BY MAILING COPIES OF
SUCH SERVICE BY REGISTERED MAIL, POSTAGE PREPAID TO BORROWER AT SAID ADDRESS. NOTHING IN THIS
AGREEMENT SHALL AFFECT THE RIGHT OF LENDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW
BUT ANY FAILURE TO RECEIVE SUCH COPY SHALL NOT AFFECT IN ANY WAY THE SERVICE OF SUCH PROCESS.



     10.10 WAIVER OF JURY TRIAL AND BOND.



     (A) WAIVER OF JURY TRIAL. THE BORROWER AND THE LENDER EACH WAIVE ANY RIGHT TO HAVE A
JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE,
BETWEEN THE LENDER AND THE BORROWER ARISING OUT OF, CONNECTED WITH, RELATED TO



54









 







OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT
OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION THEREWITH OR THE
TRANSACTIONS OR IN ANY PROCEEDING REFERRED TO IN THE SECTIONS 10.8, 10.9 AND
10.10.



     (B) WAIVER OF BOND. THE BORROWER WAIVES THE POSTING OF ANY BOND OTHERWISE REQUIRED OF
LENDER IN CONNECTION WITH ANY JUDICIAL PROCESS OR PROCEEDING TO OBTAIN POSSESSION OF, REPLEVY,
ATTACH OR LEVY UPON COLLATERAL OR ANY OTHER SECURITY FOR THE LIABILITIES, TO ENFORCE ANY JUDGMENT
OR OTHER COURT ORDER ENTERED IN FAVOR OF LENDER, OR TO ENFORCE BY SPECIFIC PERFORMANCE, TEMPORARY
RESTRAINING ORDER, PRELIMINARY OR PERMANENT INJUNCTION, THIS AGREEMENT, OR ANY OTHER AGREEMENT OR
DOCUMENT BETWEEN LENDER AND THE BORROWER.



     10.11 ADVICE OF COUNSEL. THE BORROWER ACKNOWLEDGES AND REPRESENTS TO THE LENDER THAT
IT DISCUSSED THIS AGREEMENT WITH ITS LAWYERS.



     10.12 SEVERABILITY. WHEREVER POSSIBLE, EACH PROVISION OF THIS AGREEMENT SHALL BE
INTERPRETED IN SUCH MANNER AS TO BE EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT IF ANY PROVISION
OF THIS AGREEMENT SHALL BE PROHIBITED BY OR INVALID UNDER APPLICABLE LAW, SUCH PROVISION SHALL BE
INEFFECTIVE ONLY TO THE EXTENT OF SUCH LAW, SUCH PROVISION SHALL BE INEFFECTIVE ONLY TO THE EXTENT
OF SUCH PROHIBITION OR INVALIDITY, WITHOUT INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE
REMAINING PROVISIONS OF THIS AGREEMENT.



     10.13 Application of Payments. Notwithstanding any contrary provision contained in
this Agreement or in any of the other Loan Documents, Borrower irrevocably waives the right to
direct the application of any and all payments at any time or times hereafter received by Lender
from Borrower or with respect to any of the Collateral, and Borrower does hereby irrevocably agree
that Lender shall have the continuing exclusive right to apply and reapply any and all payments
received at any time or times hereafter, whether with respect to the Collateral or otherwise,
against the Liabilities in such manner as Lender may deem advisable, notwithstanding any entry by
Lender upon any of its books and records.



     10.14 Marshalling; Payments Set Aside. The Lender shall be under no obligation to
marshall any assets in favor of the Borrower or any other party or against or in payment of any or
all of the Liabilities. To the extent that the Borrower makes a payment or payments to Lender or
Lender enforces its security interests or exercises its rights of set off, and such payment or
payments or the proceeds of such enforcement or set off or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential set aside and/or required to be repaid to a
trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or
equitable cause, then, to the extent of such recovery, the obligation or part thereof originally



55









 







intended to be satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or set off had not occurred.



     10.15 Section Titles. The section titles contained in this Agreement shall be without
substantive meaning or content of any kind whatsoever and are not a part of the agreement between
the parties.



     10.16 Continuing Effect. This Agreement, Lender’s security interests in the
Collateral, and all of the other Loan Documents shall continue in full force and effect so long as
any Liabilities shall be owed to Lender, and (even if there shall be no Liabilities outstanding) so
long as this Agreement has not been terminated as provided in subsection 2.8 hereof.



     10.17 Notices. Except as otherwise expressly provided herein, any notice required or
desired to be served, given or delivered hereunder shall be in writing, and shall be deemed to have
been validly served, given or delivered (i) three (3) days after deposit in the United States
mails, with proper postage prepaid, (ii) if sent before 5:00 p.m. CST or CSDT on a Business Day,
then on the date when sent after receipt of confirmation or answer back if sent by telecopy, or
other similar facsimile transmission and if sent after 5:00 p.m. CST or CSDT on a Business Day or
on a non-Business Day, then on the next Business Day, (iii) one (1) Business Day after deposited
with a reputable overnight courier with all charges prepaid, or (iv) when delivered, if
hand-delivered by messenger, all of which shall be properly addressed to the party to be notified
and sent to the address or number indicated as follows:



	 	 	 	 	 
	 

	 	If to the Lender at:
	 	Bank of America, N.A., successor by merger to
	 

	 	 	 	LaSalle Bank National Association
	 

	 	 	 	135 S. LaSalle St., Suite 713
	 

	 	 	 	Chicago, IL 60603
	 

	 	 	 	Attn: David Bacon, Vice President
	 

	 	 	 	Phone 312.904.4082
	 

	 	 	 	Fax 312.904.0409
	 
	 	 	 	 
	 

	 	With a copy to:
	 	McGuireWoods LLP
	 

	 	 	 	77 West Wacker Drive, Suite 4100
	 

	 	 	 	Chicago, IL 60601
	 

	 	 	 	Attn: Donald J. Gibson, Jr.
	 

	 	 	 	Telephone: 312/750-8918
	 

	 	 	 	Fax: 312/920-6592
	 
	 	 	 	 
	 

	 	If to Borrower at:
	 	LAWSON PRODUCTS, INC.
	 

	 	 	 	1666 East Touhy Avenue
	 

	 	 	 	Des Plaines, Illinois 60018
	 

	 	 	 	Attn: Thomas Neri, CEO
	 

	 	 	 	Telephone: 847/827-9666
	 

	 	 	 	Facsimile: 847/795-9030
	 
	 	 	 	 
	 

	 	with a copy to:
	 	JENNER & BLOCK LLP
	 

	 	 	 	330 N. Wabash Avenue






56









 






	 	 	 	 	 
	 

	 	 	 	Chicago, Illinois 60611
	 

	 	 	 	Attn: Elizabeth A. Davidson
	 

	 	 	 	Telephone: 312/840-8693
	 

	 	 	 	Facsimile: 312/840-8793





or to such other address or number as each party designates to the other in the manner herein
prescribed.




     10.18 Equitable Relief. The Borrower recognizes that, in the event Borrower fails to
perform, observe or discharge any obligations or liabilities under this Agreement, any remedy at
law may prove to be inadequate relief to Lender; therefore, the Borrower agrees that Lender, if
Lender so requests, shall be entitled to temporary and permanent injunctive relief in any such case
without the necessity of proving actual damages and the granting of any such relief shall not
preclude the Lender from pursuing any other relief or remedies for such breach.



     10.19 Indemnification. Borrower agrees to defend, protect, indemnify and hold
harmless Lender and each of its officers, directors, employees, attorneys, consultants and agents
(collectively, the “Indemnitees”) from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of
any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements
of counsel for and consultants of such Indemnitees in connection with any investigative,
administrative or judicial proceeding, whether or not such Indemnitees shall be designated as
parties thereto), which may be imposed on, incurred by, or asserted against such Indemnitees
(whether direct, indirect, or consequential and whether based on any federal or state laws or other
statutory regulations, including, without limitation, securities, environmental and commercial laws
and regulations, under common law or at equitable cause or on contract or otherwise) in any manner
other Loan Documents, or any act, event or transaction related or attendant thereto, the agreements
of Lender contained herein, the making of the Revolving Loans, the management of such Loans or the
Collateral (including any liability under federal, state or local environmental laws or
regulations) or the use or intended use of the proceeds of such (collectively, the “Indemnified
Matters”); provided that the Borrower shall not have an obligation to any Indemnitee hereunder
with respect to Indemnified Matters caused by or resulting from the fraud, bad faith, willful
misconduct or gross negligence of any Indemnitee. To the extent that the undertaking to indemnify,
pay and hold harmless set forth in this subsection 10.19 may be unenforceable because it is
violative of any law or public policy, the Borrower shall contribute the maximum portion which it
is permitted to pay and satisfy under applicable law, to the payment and satisfaction of all
Indemnified Matters incurred by the Indemnitees.



     10.20 Non-Discharge. The Borrower waives any defenses based on suretyship or
impairment of Collateral, waives any right of discharge under ‘3-605 of the Code and consents in
advance to (i) any extension which the Lender may in its sole discretion hereafter grant in the due
date for the payment or performance of any obligation of Borrower hereunder, (ii) any modification
for the benefit of Borrower, including a material modification of any obligation of the Borrower
hereunder which the Lender may in its sole discretion hereafter grant, any action taken hereunder
which may result in any impairment of the value of any Collateral whether provided by Borrower,
including, without limitation, any impairment of collateral as described in subsection 3-605(g) of
the Code; (iv) any diligence in collection, the discharge or release of any




57












 




party hereto or party to any subordination agreement, (v) the discharge or release of any
collateral or, all presentment for payment, demand, protest or notice of protest, dishonor or
non-payment, or (vi) the granting of any additional credit hereunder without notice.




     10.21 Effective Date. This Agreement shall be effective from and after the Closing
Date.



     10.22 Lender’s Right to Assign. Lender shall have the right to assign, transfer,
sell, negotiate, pledge or otherwise hypothecate this Agreement and any of its rights and security
hereunder, including the Note and any other Loan Documents. Borrower hereby agrees that all of the
rights and remedies of Lender in connection with the interest so assigned shall be enforceable
against Borrower by such assignee with the same force and effect and to the same extent as the same
would have been enforceable by Lender but for such assignment. Lender shall have the right to sell
participations in the Revolving Loan at any time without the consent of Borrower and at no cost to
Borrower.



     10.23 Setoff. Borrower agrees that Lender has all rights of setoff and banker’s Lien
provided by applicable law and, in addition thereto, Borrower agrees that at any time any Default
exists, Lender may apply to the payment of the Liabilities any and all balances, credits, deposits,
accounts or moneys of Borrower then or thereafter with Lender. Without limitation of the
foregoing, Borrower agrees that, upon the occurrence and during the continuance of a Default,
Lender and each of its branches and offices is hereby authorized, at any time and from time to
time, without notice, (i) to setoff against, and to appropriate and apply to the payment of, the
Liabilities (whether matured or unmatured, fixed or contingent or liquidated or unliquidated) any
and all amounts owing by Borrower to Lender or any such office or branch of Lender (whether matured
or unmatured, and, in the case of deposits, whether general or special, time or demand and however
evidenced) and (ii) pending any such action, to the extent necessary, to hold such amounts as
collateral to secure such Liabilities and to return as unpaid for insufficient funds any and all
checks and other items drawn against any deposits so held as Lender may elect in its sole
discretion exercised in Good Faith.



     10.24 Construction: In interpreting or constructing the terms of this Agreement, the
Loan Documents and the other Loan Documents, there shall be no presumption of construction or
interpretation against the drafter thereof.



     10.25 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.



     10.26 Continuing Indebtedness. This Agreement amends and restates the Original
Agreement and the Note constitutes a renewal and restatement of, and a replacement and substitution
for, the Existing Note. The indebtedness evidenced by the Existing Note is continuing indebtedness
evidenced by the Note, and nothing herein shall be deemed to constitute



58









 




a payment, settlement or novation of the Existing Note, or to release or otherwise adversely
affect any guarantor, surety or other party primarily or secondarily liable for such indebtedness.




(Signature Page Attached)




59









 





     IN WITNESS WHEREOF, the parties hereto have executed this First Amended and Restated Credit
Agreement dated as of the day and year first above written



LENDER:




Bank of America, N.A., successor by merger to

LASALLE BANK NATIONAL ASSOCIATION, a

national banking association (as Lender)




	 	 	 	 	 
	By:

	 	/s/ David Bacon
 

	 	 
	Name:

	 	 David Bacon	 	 
	Its:

	 	Vice President	 	 






BORROWERS:






LAWSON PRODUCTS, INC., a Delaware

Corporation (as Borrower)




	 	 	 	 	 
	By:

	 	/s/ Thomas Neri
 

	 	 
	 

	 	Thomas Neri	 	 
	Its:

	 	 President	 	 






LAWSON PRODUCTS, INC., a Georgia

Corporation (as Borrower)




	 	 	 	 	 
	By:

	 	/s/ Thomas Neri
 

	 	 
	 

	 	Thomas Neri	 	 
	Its:

	 	 President	 	 






LAWSON PRODUCTS, INC., a New

Jersey Corporation (as Borrower)




	 	 	 	 	 
	By:

	 	/s/ Thomas Neri
 

	 	 
	 

	 	Thomas Neri	 	 
	Its:

	 	 President	 	 






LAWSON PRODUCTS, INC., a Nevada

Corporation (as Borrower)




	 	 	 	 	 
	By:

	 	/s/ Thomas Neri
 

	 	 
	 

	 	Thomas Neri	 	 
	Its:

	 	 President	 	 






Signature Page to First Amended and Restated

Credit Agreement







LAWSON PRODUCTS, INC., a Texas

corporation (as Borrower)




	 	 	 	 	 
	By:

	 	/s/ Thomas Neri
 

	 	 
	 

	 	Thomas Neri	 	 
	Its:

	 	 President	 	 






LP SERVICE CO., an Illinois Corporation

(as Borrower)




	 	 	 	 	 
	By:

	 	/s/ Thomas Neri
 

	 	 
	 

	 	Thomas Neri	 	 
	Its:

	 	 President	 	 






LPI HOLDINGS, INC., an Illinois

Corporation (as Borrower)




	 	 	 	 	 
	By:

	 	/s/ Thomas Neri
 

	 	 
	 

	 	Thomas Neri	 	 
	Its:

	 	 President	 	 






CRONATRON WELDING SYSTEMS

LLC, a North Carolina limited liability

company (as Borrower)




	 	 	 	 	 
	By:

	 	/s/ Thomas Neri
 

	 	 
	 

	 	Thomas Neri	 	 
	Its:

	 	 President	 	 











 









 





DRUMMOND AMERICAN LLC, an

Illinois limited liability company (as

Borrower)




	 	 	 	 	 
	By:

	 	/s/ Thomas Neri
 

Thomas Neri
	 	 
	Its:

	 	President	 	 






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:

	 	 President	 	 






RUTLAND TOOL & SUPPLY CO., A

Nevada Corporation




	 	 	 	 	 
	By:

	 	/s/ Thomas Neri
 

	 	 
	Thomas Neri	 	 
	Its:

	 	Chief Executive Officer	 	 






Signature Page to First Amended and Restated

Credit Agreement





 









 








EXHIBITS AND SCHEDULES




	 	 	 
	Grid A

	 	Pricing Grid
	 
	 	 
	Exhibit A

	 	Form of Certificate to Accompany Financial Statements
	Exhibit A1

	 	Real Property — Owned
	Exhibit A2

	 	Real Property – Leased or otherwise occupied by Borrower
	Exhibit B

	 	Form of Signature Authorization
	Exhibit C

	 	Form of Note
	Exhibit D

	 	Responsible Officers
	 
	 	 
	Schedule 3.4

	 	Deposit Inventory System
	Schedule 3.7

	 	Third Party Goods
	Schedule 4.6

	 	Conditions Precedent
	Schedule 6.5

	 	Permitted Liens
	Schedule 6.8

	 	Other Company Names or Fictitious Names
	Schedule 6.9

	 	Tax Liabilities
	Schedule 6.12

	 	Subsidiaries
	Schedule 6.13

	 	Litigation
	Schedule 6.18

	 	ERISA Plans
	Schedule 6.21

	 	Officers and Directors of Borrower
	Schedule 8.1

	 	Liens, Security Interests and Encumbrances
	Schedule 8.2

	 	Other Indebtedness






List of Exhibits and Schedules




 









 





Grid A




PRICING GRID




	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	UNUSED
	 	 	TOTAL DEBT/	 	APPLICABLE	 	LETTER OF	 	COMMITMENT
	 	 	EBITDA	 	MARGIN	 	CREDIT FEE	 	FEE
	Level I
	 	< 2.00 to 1.00
	 	200 bps
	 	200 bps
	 	30 bps
	Status	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	Level II
	 	3 2.00 to 1.00 but
	 	250 bps
	 	250 bps
	 	40 bps
	Status
	 	< 2.50 to 1.0	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	Level III
	 	3 2.50 to 1.00 but
	 	300 bps
	 	300 bps
	 	50 bps
	Status
	 	< 3.00 to 1.0	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	Level IV
	 	3 3.00 to 1. 00
	 	350 bps
	 	350 bps
	 	50 bps
	Status	 	 	 	 	 	 	 	 






     From the First Amendment Effective Date until delivery by the Borrower to the Lender of
Financials for the Fiscal Quarter ending March 31, 2009, Level IV Status shall be deemed to exist.



     For the purposes of this Pricing Grid, the following terms have the following meanings,
subject to the final paragraph of this Schedule:



     “Financials” means the annual or quarterly financial statements of the Borrowers delivered
pursuant to the Credit Agreement.



     “Level IV Status” exists at any date if, as of the last day of the fiscal quarter of the
Borrowers referred to in the most recent Financials the Borrowers have not qualified for Level I
Status, Level II Status, or Level III Status.



     “Level III Status” exists at any date if, as of the last day of the fiscal quarter of the
Borrowers referred to in the most recent Financials, (i) the Borrowers have not qualified for Level
II or Level I Status and (ii) the ratio of Total Debt to EBITDA is greater than or equal to 2.50 to
1.00 but less than 3.00 to 1.0.



     “Level II Status” exists at any date if, as of the last day of the fiscal quarter of the
Borrowers referred to in the most recent Financials, (i) the Borrowers have not qualified for Level
I Status and (ii) the ratio of Total Debt to EBITDA is greater than or equal to 2.00 to 1.00 but
less than 2.50 to 1.0.



     “Level I Status” exists at any date if, as of the last day of the fiscal quarter of the
Borrowers referred to in the most recent Financials, the ratio of Total Debt to EBITDA is less than
2.00 to 1.00.



 









 





     The ratio of Total Debt to EBITDA shall be calculated as set forth in the Credit Agreement.



     “Status” means Level I Status, Level II Status, Level III Status or Level IV Status.



     The Applicable Margin shall be determined in accordance with the foregoing table based on the
Borrowers’ Status as reflected in the then most recent Financials. Adjustments, if any, to the
Applicable Margin shall be effective five Business Days after the Lender has received the
applicable Financials. If the Borrowers fail to deliver Financials to the Lender at the times
required pursuant to the Agreement, and, upon delivery and review of such Financials the Status
would increase to a different Level, such increase shall be retroactive to the date on which the
Financials were required to have been delivered.



64









 





SECURITY AGREEMENT




     THIS SECURITY AGREEMENT dated as of March 9, 2009 (this “Security Agreement”) is being
entered into among LAWSON PRODUCTS, INC., a Delaware corporation (“Lawson”), EACH OF THE
UNDERSIGNED SUBSIDIARIES OF LAWSON AND EACH OTHER PERSON WHO SHALL BECOME A PARTY HERETO BY
EXECUTION OF A SECURITY JOINDER AGREEMENT (each of the foregoing individually, a “Grantor”
and collectively, the “Grantors”), and BANK OF AMERICA, N.A., as secured party (together
with its successors and assigns, the “Secured Party”).



RECITALS:




     A. The Grantors and the Secured Party are party to a First Amended and Restated Credit
Agreement dated as of November 7, 2008 (as amended, restated, supplemented or otherwise modified
from time to time, the “Credit Agreement”), pursuant to which the Secured Party agreed to
provide to the Grantors a revolving credit facility in the original maximum principal amount of
$75,000,000.



     B. The Grantors have requested that the Secured Party agree to amend various provisions of the
Credit Agreement pursuant to a First Amendment to First Amended and Restated Credit Agreement to be
dated as of the date hereof (the “First Amendment”), which First Amendment shall, among
other things, reduce the maximum principal amount of the revolving credit facility to $55,000,000.



     C. It is a condition precedent to the Secured Party entering into the First Amendment that the
Grantors shall have executed and delivered this Security Agreement to the Secured Party.



     NOW THEREFORE, in consideration of the premises, and the mutual covenants and agreements set
forth herein, the parties hereto agree as follows:



     1. Certain Definitions. All capitalized terms used but not otherwise defined herein
shall have the meanings assigned thereto in the Credit Agreement. Terms used in this Security
Agreement that are not otherwise expressly defined herein or in the Credit Agreement, and for which
meanings are provided in the Uniform Commercial Code as in effect in the State of Illinois (or,
when the laws of any other jurisdiction govern the perfection or enforcement of any Lien, the
Uniform Commercial Code as in effect in such jurisdiction) (the “UCC”), shall have such
meanings unless the context requires otherwise. In addition, for purposes of this Security
Agreement, the following terms have the following definitions:



     “Facility Termination Date” means the date as of which all of the following shall have
occurred: (a) the commitment of Secured Party to provide Loans under the Credit Agreement has
terminated, (b) all Secured Obligations have been paid in full (other than (x) contingent
indemnification obligations and (y) Bank Product Obligations as to which arrangements satisfactory
to the provider of the Bank Products have been made), and (c) all Letters of Credit



65









 




have terminated or expired (other than Letters of Credit as to which other arrangements with
respect thereto satisfactory to the Secured Party shall have been made).




     “Qualifying Control Agreement” shall have the meaning set forth on Schedule
1.1 attached hereto.



     “Real Estate Collateral” shall have the meaning set forth on Schedule 1.1
attached hereto.



     “Secured Obligations” means all of the Liabilities, including the payment and
performance by each Grantor of its obligations and liabilities (whether now existing or hereafter
arising) under the Credit Agreement and each of the other Loan Documents (including this Security
Agreement) to which such Grantor is now or hereafter becomes a party.



     2. Grant of Security Interest. Each Grantor grants as collateral security for the
payment, performance and satisfaction of the Secured Obligations, to the Secured Party a continuing
first priority security interest in and to, and collaterally assigns to the Secured Party, the
following property of such Grantor or in which such Grantor has or may have or acquire an interest
or the power to transfer rights therein, whether now owned or existing or hereafter created,
acquired or arising and wheresoever located:




     (a) All accounts, and including accounts receivable, contracts, bills, acceptances,
choses in action, and other forms of monetary obligations at any time owing to such Grantor
arising out of property sold, leased, licensed, assigned or otherwise disposed of or for
services rendered or to be rendered by such Grantor, and all of such Grantor’s rights with
respect to any property represented thereby, whether or not delivered, property returned by
customers and all rights as an unpaid vendor or lienor, including rights of stoppage in
transit and of recovering possession by proceedings including replevin and reclamation
(collectively referred to hereinafter as “Accounts”);




     (b) All inventory, including all goods manufactured or acquired for sale or lease, and
any piece goods, raw materials, work in process and finished merchandise, component
materials, and all supplies, goods, incidentals, office supplies, packaging materials and
any and all items used or consumed in the operation of the business of such Grantor or which
may contribute to the finished product or to the sale, promotion and shipment thereof, in
which such Grantor now or at any time hereafter may have an interest, whether or not the
same is in transit or in the constructive, actual or exclusive occupancy or possession of
such Grantor or is held by such Grantor or by others for such Grantor’s account
(collectively referred to hereinafter as “Inventory”);




     (c) All goods, including all machinery, equipment, motor vehicles, parts, supplies,
apparatus, appliances, tools, patterns, molds, dies, blueprints, fittings, furniture,
furnishings, fixtures and articles of tangible personal property of every description, and
all computer programs embedded in any of the foregoing and all supporting information
relating to such computer programs (collectively referred to hereinafter as
“Equipment”);



66









 






     (d) All general intangibles, including all rights now or hereafter accruing to such
Grantor under contracts, leases, agreements or other instruments, including all contracts or
contract rights to perform or receive services, to purchase or sell goods, or to hold or use
land or facilities, and to enforce all rights thereunder, all causes of action, corporate or
business records, inventions, patents and patent rights, rights in mask works, designs,
trade names and trademarks and all goodwill associated therewith, trade secrets, trade
processes, copyrights, licenses, permits, franchises, customer lists, computer programs and
software, all internet domain names and registration rights thereto, all internet websites
and the content thereof, all payment intangibles, all claims under guaranties, tax refund
claims, all rights and claims against carriers and shippers, leases, all claims under
insurance policies, all interests in general and limited partnerships, limited liability
companies, and other Persons not constituting Investment Property (as defined below), all
rights to indemnification and all other intangible personal property and intellectual
property of every kind and nature (collectively referred to hereinafter as “General
Intangibles”);




     (e) All deposit accounts, including demand, time, savings, passbook, or other similar
accounts maintained with any bank by or for the benefit of such Grantor (collectively
referred to hereinafter as “Deposit Accounts”);




     (f) All chattel paper, including tangible chattel paper, electronic chattel paper, or
any hybrid thereof (collectively referred to hereinafter as “Chattel Paper”);




     (g) All investment property, including all securities, security entitlements,
securities accounts, commodity contracts and commodity accounts of or maintained for the
benefit of such Grantor (collectively referred to hereinafter as “Investment
Property”);




     (h) All instruments, including all promissory notes (collectively referred to
hereinafter as “Instruments”);




     (i) All documents, including warehouse receipts, bills of lading and other documents of
title (collectively referred to hereinafter as “Documents”);




     (j) All rights to payment or performance under letters of credit including rights to
proceeds of letters of credit (“Letter-of-Credit Rights”), and all guaranties,
endorsements, Liens, other Guarantee obligations or supporting obligations of any Person
securing or supporting the payment, performance, value or liquidation of any of the
foregoing (collectively, with Letter-of-Credit Rights, referred to hereinafter as
“Supporting Obligations”);




     (k) The commercial tort claims identified on Schedule 9(i) hereto, as such Schedule may
be supplemented from time to time in accordance with the terms hereof (collectively referred
to hereinafter as “Commercial Tort Claims”);



67









 






     (l) All books and records relating to any of the foregoing (including customer data,
credit files, ledgers, computer programs, printouts, and other computer materials and
records (and all media on which such data, files, programs, materials and records are or may
be stored)); and




     (m) All proceeds, products and replacements of, accessions to, and substitutions for,
any of the foregoing, including without limitation proceeds of insurance policies insuring
any of the foregoing.



     All of the property and interests in property described in subsections (a) through (m) are
herein collectively referred to as the “Collateral.”



     Notwithstanding the foregoing, the security interest granted herein and the term “Collateral”
when used with respect to any Grantor shall not include (a) any lease, license, contract, property
rights or agreement to which any Grantor is a party or any of its rights or interests thereunder if
and for so long as the grant of such security interest shall constitute or results in (i) the
abandonment, invalidation or unenforceability of any right, title or interest of any Grantor
therein, or (ii) a breach or termination pursuant to the terms of, or a default under, any such
lease, license, contract property rights or agreement (other than to the extent that any such term
would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the Uniform
Commercial Code (or any successor provision or provisions) of any relevant jurisdiction or any
other applicable law or principles of equity); provided, however, that the term
Collateral shall include and such security interest shall attach immediately at such time as the
condition causing such abandonment, invalidation or unenforceability shall be remedied and to the
extent severable, shall attach immediately to any portion of such lease, license, contract,
property rights or agreement that does not result in any of the consequences specified in clauses
(a)(i) and (ii) above, (b) any equity interest in any Subsidiary, other than the pledge provided
pursuant to the Pledge Agreement, and (c) any Real Estate Collateral of any Grantor;
provided, however, that in any event the security interest granted herein and the
term “Collateral” shall include all proceeds, products and replacements of, accessions to, and
substitutions for, any of the foregoing, including without limitation proceeds of insurance
policies insuring any of the foregoing.



     3. Perfection. As of the date of execution of this Security Agreement or Security
Joinder Agreement by each Grantor, as applicable (with respect to each Grantor, its “Applicable
Date”), such Grantor shall have:




     (a) furnished the Secured Party with duly authorized financing statements in form,
number and substance suitable for filing, sufficient under applicable law, and satisfactory
to the Secured Party in order that upon the filing of the same the Secured Party, shall have
a duly perfected security interest in all Collateral in which a security interest can be
perfected by the filing of financing statements;




     (b) to the extent expressly required by the terms of this Security Agreement or the other Loan
Documents, furnished the Secured Party with properly executed Qualifying Control Agreements, issuer
acknowledgments of the Secured Party’s interest



68









 






in Letter-of-Credit Rights, and evidence of the placement of a restrictive legend on
tangible chattel paper (and the tangible components of electronic Chattel Paper), and taken
appropriate action acceptable to the Secured Party sufficient to establish the Secured
Party’s control of electronic Chattel Paper (and the electronic components of hybrid Chattel
Paper), as appropriate, with respect to Collateral in which either (i) a security interest
can be perfected only by control or such restrictive legending, or (ii) a security interest
perfected by control or accompanied by such restrictive legending shall have priority as
against a lien creditor, a purchaser of such Collateral from the applicable Grantor, or a
security interest perfected by Persons not having control or not accompanied by such
restrictive legending, in each case in form and substance acceptable to the Secured Party
and sufficient under applicable law so that the Secured Party shall have a security interest
in all such Collateral perfected by control; and




          (c) to the extent expressly required by the terms of this Security Agreement or the
other Loan Documents, delivered to the Secured Party or, if the Secured Party shall
specifically consent in each instance, an agent or bailee of the Secured Party that has
acknowledged such status in a properly executed Qualifying Control Agreement possession of
all Collateral with respect to which either a security interest can be perfected only by
possession or a security interest perfected by possession shall have priority as against
Persons not having possession, and including in the case of Instruments, Documents, and
Investment Property in the form of certificated securities, duly executed endorsements or
stock powers in blank, as the case may be, affixed thereto in form and substance acceptable
to the Secured Party and sufficient under applicable law so that the Secured Party shall
have a security interest in all such Collateral perfected by possession;


with the effect that the Liens conferred in favor of the Secured Party shall be and remain duly
perfected and of first priority subject only, to the extent applicable, to Permitted Liens. All
financing statements (including all amendments thereto and continuations thereof), control
agreements, certificates, acknowledgments, stock powers and other documents, electronic
identification, restrictive legends, and instruments furnished in connection with the creation,
enforcement, protection, perfection or priority of the Secured Party’s security interest in
Collateral, including such items as are described above in this Section 3, are sometimes
referred to herein as “Perfection Documents”. The delivery of possession of items of or
evidencing Collateral, causing other Persons to execute and deliver Perfection Documents as
appropriate, the filing or recordation of Perfection Documents, the establishment of control over
items of Collateral, and the taking of such other actions as may be necessary or advisable in the
determination of the Secured Party to create, enforce, protect, perfect, or establish or maintain
the priority of, the security interest of the Secured Party in the Collateral is sometimes referred
to herein as “Perfection Action”.




     4. Maintenance of Security Interest; Further Assurances.




     (a) Each Grantor will from time to time at its own expense, deliver specific
assignments of Collateral or such other Perfection Documents, and take such other or
additional Perfection Action, as may be required by the terms of the Loan Documents or



69









 






as the Secured Party may reasonably request in connection with the administration or
enforcement of this Security Agreement or related to the Collateral or any part thereof in
order to carry out the terms of this Security Agreement, to perfect, protect, maintain the
priority of or enforce the Secured Party’s security interest in the Collateral, subject only
to Permitted Liens, or otherwise to better assure and confirm unto the Secured Party its
rights, powers and remedies hereunder. Without limiting the foregoing, each Grantor hereby
irrevocably authorizes the Secured Party to file (with, or to the extent permitted by
applicable law, without the signature of the Grantor appearing thereon) financing statements
(including amendments thereto and initial financing statements in lieu of continuation
statements) or other Perfection Documents (including copies thereof) showing such Grantor as
“debtor” at such time or times and in all filing offices as the Secured Party may from time
to time determine to be necessary or advisable to perfect or protect the rights of the
Secured Party and the Secured Parties hereunder, or otherwise to give effect to the
transactions herein contemplated, any of which Perfection Documents, at the Secured Party’s
election, may describe the Collateral as or including all assets or property of the Grantor.
Each Grantor hereby irrevocably ratifies and acknowledges the Secured Party’s authority to
have effected filings of Perfection Documents made by the Secured Party prior to its
Applicable Date.




     (b) With respect to any and all Collateral, each Grantor agrees to do and cause to be
done all things necessary to perfect, maintain the priority of and keep in full force the
security interest granted in favor of the Secured Party, including, but not limited to, the
prompt payment upon demand therefor by the Secured Party of all reasonable fees and expenses
(including documentary stamp, excise or intangibles taxes) incurred in connection with the
preparation, delivery, or filing of any Perfection Document or the taking of any Perfection
Action to perfect, protect or enforce a security interest in Collateral in favor of the
Secured Party, subject only to Permitted Liens. All amounts not so paid when due shall
constitute additional Secured Obligations and (in addition to other rights and remedies
resulting from such nonpayment) shall bear interest from the date of demand until paid in
full at the Post Default Rate.




     (c) Each Grantor agrees to maintain among its books and records appropriate notations
or evidence of, and to make or cause to be made appropriate disclosure upon its financial
statements of, the security interest granted hereunder to the Secured Party.



     5. Receipt of Payment. In the event a Default shall occur and be continuing and a
Grantor (or any of its Affiliates, subsidiaries, stockholders, directors, officers, employees or
agents) shall receive any proceeds of Collateral, including without limitation monies, checks,
notes, drafts or any other items of payment, each Grantor shall hold all such items of payment in
trust for the Secured Party, and as the property of the Secured Party, separate from the funds and
other property of such Grantor, and no later than the first Business Day following the receipt
thereof, at the election of the Secured Party, such Grantor shall cause such Collateral to be
forwarded to the Secured Party for its custody, possession and disposition on behalf of the Secured
Parties in accordance with the terms hereof and of the other Loan Documents.



     6. Preservation and Protection of Collateral.



70









 






     (a) The Secured Party shall be under no duty or liability with respect to the
collection, protection or preservation of the Collateral, or otherwise. Except for
Collateral in the physical possession of the Secured Party or its agents and
representatives, each Grantor shall be responsible for the safekeeping of its Collateral,
and in no event shall the Secured Party have any responsibility for (i) any loss or damage
thereto or destruction thereof occurring or arising in any manner or fashion from any cause,
(ii) any diminution in the value thereof, or (iii) any act or default of any carrier,
warehouseman, bailee or forwarding agency thereof or other Person in any way dealing with or
handling such Collateral.




     (b) Each Grantor shall keep and maintain its tangible personal property Collateral in
good operating condition and repair, ordinary wear and tear and casualty excepted; provided,
however, that such Grantor may discontinue routine maintenance and repair with respect to
Collateral which, in its commercially reasonable judgment is no longer used or useful in its
business. No Grantor shall permit any such items to become a fixture to real property
(unless such Grantor has granted the Secured Party a Lien on such real property having a
priority acceptable to the Secured Party) or accessions to other personal property.




     (c) Each Grantor agrees (i) to pay when due all taxes, charges and assessments against
the Collateral, unless being contested in good faith by appropriate proceedings diligently
conducted and against which adequate reserves have been established in accordance with GAAP
applied on a basis consistent with the application of GAAP in the audited financial
statements delivered pursuant to the Credit Agreement and provided that all enforcement
proceedings in the nature of levy or foreclosure are effectively stayed, and (ii) to cause
to be terminated and released all Liens (other than Permitted Liens) on the Collateral.
Upon the occurrence and during the continuance of a Default based upon the failure of any
Grantor to so pay or contest such taxes, charges, or assessments, or cause such Liens to be
terminated, the Secured Party at its option may pay or contest any of them or amounts
relating thereto (the Secured Party having the sole right to determine the legality or
validity and the amount necessary to discharge such taxes, charges, Liens or assessments)
but shall not have any obligation to make any such payment or contest. All sums so
disbursed by the Secured Party, including all reasonable fees and expenses of counsel
(collectively, “Attorneys’ Costs”), court costs, expenses and other charges related
thereto, shall be payable on demand by the applicable Grantor to the Secured Party and shall
be additional Secured Obligations secured by the Collateral, and any amounts not so paid on
demand (in addition to other rights and remedies resulting from such nonpayment) shall bear
interest from the date of demand until paid in full at the Post Default Rate.



     7. Status of Grantors and Collateral Generally. Each Grantor represents and warrants
to, and covenants with, the Secured Party, with respect to itself and the Collateral as to which it
has or acquires any interest, that:



71









 






     (a) It is at its Applicable Date (or as to Collateral acquired after its Applicable
Date will be upon the acquisition of the same) and, except as permitted by the Credit
Agreement and subsection (b) of this Section 7, will continue to be, the owner of
the Collateral, free and clear of all Liens, other than Permitted Liens, and that it will at
its own cost and expense defend such Collateral and any products and proceeds thereof
against all claims and demands of all Persons (other than claims and demands in respect of
Permitted Liens) at any time claiming the same or any interest therein adverse to the
Secured Party. Upon the failure of any Grantor to so defend, the Secured Party may do so at
its option but shall not have any obligation to do so. All sums so disbursed by the Secured
Party, including reasonable Attorneys’ Costs, court costs, expenses and other charges
related thereto, shall be payable on demand by the applicable Grantor to the Secured Party
and shall be additional Secured Obligations secured by the Collateral, and any amounts not
so paid on demand (in addition to other rights and remedies resulting from such nonpayment)
shall bear interest from the date of demand until paid in full at the Post Default Rate.




     (b) It shall not (i) sell, assign, transfer, lease, license or otherwise dispose of, or
grant any option with respect to, any of the Collateral, except for dispositions permitted
under the Credit Agreement, (ii) create or suffer to exist any Lien upon or with respect to
any of the Collateral except for the security interests created by this Security Agreement
and Permitted Liens, or (iii) take any other action in connection with any of the Collateral
that would materially impair the value of the interest or rights of such Grantor in the
Collateral taken as a whole or that would materially impair the interest or rights of the
Secured Party.




     (c) It has full power, legal right and lawful authority to enter into this Security
Agreement (and any Security Joinder Agreement applicable to it) and to perform its terms,
including the grant of the security interests in the Collateral herein provided for.




     (d) No authorization, consent, approval or other action by, and no notice to or filing
with, any Governmental Authority or any other Person which has not been given or obtained,
as the case may be, is required either (i) for the grant by such Grantor of the security
interests granted hereby or for the execution, delivery or performance of this Security
Agreement (or any Security Joinder Agreement) by such Grantor, or (ii) for the perfection of
or the exercise by the Secured Party of its rights and remedies hereunder, except for action
required by the Uniform Commercial Code to perfect and exercise remedies with respect to the
security interest conferred hereunder.




     (e) No effective financing statement or other Perfection Document similar in effect,
nor any other Perfection Action, covering all or any part of the Collateral purported to be
granted or taken by or on behalf of such Grantor (or by or on behalf of
any other Person and which remains effective as against all or any part of the
Collateral) has been filed in any recording office, delivered to another Person for filing
(whether upon the occurrence of a contingency or otherwise), or otherwise taken, as the case
may be, except such as pertain to Permitted Liens and such as may have been filed for the



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benefit of, delivered to, or taken in favor of, the Secured Party in connection with the
security interests conferred hereunder.




     (f) Schedule 7(f) attached hereto contains true and complete information as to
each of the following: (i) the exact legal name of each Grantor as it appears in its
organization documents as of its Applicable Date and at any time during the five (5) year
period ending as of its Applicable Date (the “Covered Period”), (ii) the
jurisdiction of formation and form of organization of each Grantor, and the identification
number of such Grantor in its jurisdiction of formation (if any), in each case as of its
Applicable Date and at any time during the Covered Period, (iii) each address of the chief
executive office of each Grantor as of its Applicable Date, (iv) all trade names or trade
styles used by such Grantor as of its Applicable Date and at any time during the Covered
Period, (v) the address of each location of such Grantor at which any tangible personal
property Collateral (including Account Records and Account Documents) is located at its
Applicable Date, (vi) with respect to each location described in clause (v) that is not
owned beneficially and of record by such Grantor, the name and address of the owner thereof;
and (vii) the name of each Person other than such Grantor and the address of such Person at
which any tangible personal property Collateral of such Grantor is held under any warehouse,
consignment, bailment or other arrangement as of its Applicable Date. No Grantor shall
change its name, jurisdiction of formation (whether by reincorporation, merger or
otherwise), or the location of its chief executive office, except in each case upon giving
not less than thirty (30) days’ prior written notice to the Secured Party and taking or
causing to be taken at such Grantor’s expense all such Perfection Action, including the
delivery of such Perfection Documents, as may be required, or as the Secured Party may
reasonably request, to perfect or protect, or maintain the perfection and priority of, the
Lien of the Secured Party in Collateral contemplated hereunder. No Grantor shall maintain
any tangible personal property Collateral at any location not listed on Schedule
7(f) unless such Grantor shall have delivered prior written notice to the Secured Party,
which notice shall include all of the information required by Schedule 7(f).




     (g) No Grantor shall engage in any consignment transaction in respect of any of the
Collateral or cause, suffer or permit any of the tangible personal property Collateral to be
in the possession, custody or control of any warehouseman or other bailee unless (i) such
location is listed on Schedule 7(f) or such Grantor shall have delivered prior written
notice to the Secured Party, which notice shall include all of the information required by
Schedule 7(f), and (ii) with respect to any such location at which tangible personal
property Collateral with a value in excess of $1,250,000 is maintained, caused at its
expense to be prepared and executed such additional Perfection Documents and to be taken
such other Perfection Action as may be required, or as the Secured Party
may reasonably request, to perfect or protect, or maintain the perfection and priority
of, the Lien of the Secured Party in Collateral contemplated hereunder.




     (h) No Grantor shall cause, suffer or permit any of the tangible personal property
Collateral to be evidenced by any document of title (except for shipping



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documents as
necessary or customary to effect the receipt of raw materials or components or the delivery
of inventory to customers, in each case in the ordinary course of business).




     (i) No tangible personal property Collateral is or shall be located at any location
that is leased by such Grantor from any other Person (other than another Grantor) other than
Inventory the value of which, at any such location, is less than $2,500,000, and when
aggregated with all other Inventory kept at any location which is leased by all Grantors
from Persons other than other Grantors, is less than $10,000,000, unless (i) such location
is listed on Schedule 7(f) or such Grantor shall have delivered prior written notice to the
Secured Party, which notice shall include all of the information required by Schedule
7(f), and (y) such lessor acknowledges the Lien in favor of the Secured Party conferred
hereunder and waives its statutory and consensual Liens and rights with respect to such
Collateral pursuant to an agreement in form and substance acceptable to the Secured Party
and delivered to the Secured party prior to any Collateral being located at any such
location.



     8. Inspection. The Secured Party (by any of its officers, employees and agents),
shall have the right upon prior notice to an executive officer of any Grantor, and at any
reasonable times during such Grantor’s usual business hours, to inspect the Collateral, all records
related thereto (and to make extracts or copies from such records), and the premises upon which any
of the Collateral is located, and to discuss such Grantor’s affairs and finances with senior
officers and accountants of the Grantors; provided that with respect to any discussions with
accountants such discussions shall be upon reasonable prior notice and shall be conducted with a
senior officer of Lawson present (the presence of such senior officer not to be unreasonably
withheld or delayed). Upon or after the occurrence and during the continuation of a Default, the
Secured Party may at any time and from time to time employ and maintain on such Grantor’s premises
a custodian selected by the Secured Party who shall have full authority to do all acts necessary to
protect the Secured Party’s interest. All expenses incurred by the Secured Party by reason of the
employment of such custodian shall be paid by such Grantor on demand from time to time and shall be
added to the Secured Obligations secured by the Collateral, and any amounts not so paid on demand
(in addition to other rights and remedies resulting from such nonpayment) shall bear interest from
the date of demand until paid in full at the Post Default Rate.



     9. Specific Collateral.




     (a) Accounts. With respect to its Accounts whether now existing or hereafter created
or acquired and wheresoever located, each Grantor represents, warrants and covenants to the
Secured Party that:




     (i) Each Grantor shall keep accurate and complete records of its Accounts,
including all payments and collections thereon (“Account Records”), and
shall submit to Secured Party a schedule of sales, collection, reconciliation and
other reports (“Schedule of Accounts”), in form reasonably satisfactory to
Secured Party, on such periodic basis as Secured Party may request;
provided, however, that such Grantor’s failure to execute and
deliver any such Schedule of Accounts shall not affect or limit the Secured Party’s
security interest or other



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rights in and to any Accounts. If requested by the
Secured Party, each Grantor shall furnish the Secured Party with proof of delivery,
copies of invoices and invoice registers, copies of related documents, repayment
histories, status reports and other information and such other matter and
information relating to the status of then existing Accounts (collectively,
“Account Documents”) as the Secured Party shall reasonably request. Each
Grantor shall also provide to Secured Party, on such periodic basis as Secured Party
may request, an aged trial balance of all Accounts as of the end of the preceding
month, specifying each Account’s Account Debtor name and address, amount, invoice
date and due date, showing any discount, allowance, credit, authorized return or
dispute, and including such Account Documents as Secured Party may reasonably
request.




     (ii) The Accounts are genuine, are in all respects what they purport to be, are
not evidenced by an instrument or document or, if evidenced by an instrument or
document, are only evidenced by one original instrument or document.




     (iii) The Accounts cover bona fide sales and deliveries of Inventory usually
dealt in by such Grantor, or the rendition by such Grantor of services, to an
Account Debtor in the ordinary course of business.




     (iv) The amounts of the face value of any Account shown or reflected on any
Schedule of Accounts, invoice statement, or certificate delivered to the Secured
Party, are actually owing to such Grantor and are not contingent for any reason; and
there are no setoffs, discounts, allowances, claims, counterclaims or disputes of
any kind or description existing or asserted with respect thereto and such Grantor
has not made any agreement with any Account Debtor thereunder for any deduction
therefrom, except returns, discounts, allowances for prompt payment allowed by such
Grantor in the ordinary course of its business which are not likely to result in any
material adverse change in such Grantor’s financial condition or business operations
and stated in the Schedule of Accounts and reflected in the calculation of the face
value of each respective invoice related thereto.




     (v) Except for conditions generally applicable to such Grantor’s industry and
markets, there are no facts, events, or occurrences known to such Grantor pertaining
particularly to any Accounts which are reasonably expected to materially impair in
any way the validity, collectibility or enforcement of
Accounts that would reasonably be likely, in the aggregate, to be of material
economic value, or in the aggregate materially reduce the amount payable thereunder
from the amount of the invoice face value shown on any Schedule of Accounts, or on
any certificate, contract, invoice or statement delivered to the Secured Party with
respect thereto.




     (vii) Except to the extent of the allowance for doubtful Accounts shown on the
Financials, such Grantor has no knowledge of any fact or circumstance



75









 







which would
tend to impair the validity or collectibility thereof; and except to the extent of
the allowance for doubtful Accounts shown on the Financials, to such Grantor’s
knowledge, there are no proceedings or actions which are threatened or pending
against any Account Debtor which are likely to result in any material adverse change
in such Account Debtor’s financial condition.




     (viii) To such Grantor’s knowledge, and except to the extent of the allowance
for doubtful Accounts shown on the Financials, all Account Debtors have the capacity
to contract and are solvent.




     (ix) The property or services giving rise thereto are not, and were not at the
time of the sale or performance thereof, subject to any Lien other than Permitted
Liens.




     (x) Such Grantor shall notify the Secured Party with respect to any Accounts
with respect to which the warranties in this Section 9(a) are not true.




     (xi) In the event any amounts due and owing in excess of $1,000,000
individually, or $5,000,000 in the aggregate amount, are in dispute between any
Account Debtor and such Grantor (which shall include without limitation any dispute
in which an offset claim or counterclaim may result), such Grantor shall provide the
Secured Party with written notice thereof as soon as practicable, explaining in
detail the reason for the dispute, all claims related thereto and the amount in
controversy.




     (xii) The Secured Party shall have the right, at any time or times hereafter,
in the Secured Party’s name or in the name of a nominee of the Secured Party, to
verify the validity, amount or any other matter relating to any Accounts, by mail,
telephone, telegraph or otherwise.




     (xiii) Such Grantor shall promptly upon its learning thereof: (i) inform the
Secured Party in writing of any material delay in the Grantor’s performance of any
of its material obligations to any Account Debtor or of any assertion of any
material claims, setoff or counterclaims by any Account Debtor; (ii) furnish to and
inform the Secured Party of all material adverse information of which such Grantor
obtains knowledge relating to the financial condition of any Person who
is then an Account Debtor as to open Accounts with a face amount, in the aggregate,
in excess of $1,000,000.




     (b) Inventory. With respect to its Inventory whether now existing or hereafter
created or acquired and wheresoever located, each Grantor represents, warrants and covenants
to the Secured Party that:




     (i) Each Grantor shall keep accurate and complete records of its Inventory and
shall submit to Secured Party inventory and reconciliation reports, in form
satisfactory to Secured Party, on such periodic basis as Secured Party may



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request.
Grantor shall conduct periodic cycle counts consistent with historical practices,
and shall provide to Secured Party a summary report based on such counts on such
periodic basis as Secured Party may request, together with such supporting
information as Secured Party may request.




     (ii) The Secured Party shall not be responsible for: (i) the safekeeping of the
Inventory; (ii) any loss of or damage to the Inventory; (iii) any diminution in the
value of the Inventory; or (iv) any act or default of any carrier, warehouseman,
bailee, forwarding agency or any other Person. All risk of loss, damage,
destruction or diminution in value of the Inventory shall be borne by Grantor.
Except as expressly set forth in this Agreement or pursuant to the Deposit Inventory
System, no Inventory shall, without Secured Party’s prior written consent, be at any
time or times hereafter stored with a bailee, warehouseman, consignee or similar
third party. Except for the Deposit Inventory System, Grantor shall not sell any of
its Inventory on a bill-and-hold, guaranteed sale, sale-or-return, sale on approval
or consignment basis or any other basis subject to a repurchase obligation or return
right.




     (iii) Such Grantor shall not sell any of its Inventory on a bill-and-hold basis
if it would cause the aggregate outstanding amount of all Accounts arising therefrom
to exceed at any time $250,000 with respect to all such Account Debtors.




     (iv) If any Account Debtor returns any Inventory to a Grantor after shipment
thereof, and such return generates a credit in excess of $1,000,000 on any
individual Account or $5,000,000 in the aggregate on any Accounts of such Account
Debtor, such Grantor shall notify the Secured Party in writing of the same as soon
as practicable.




     (c) Equipment. With respect to its Equipment whether now existing or hereafter
created or acquired and wheresoever located, each Grantor represents, warrants and covenants
to the Secured Party that such Grantor, as soon as practicable following a request therefor
by the Secured Party, shall deliver to the Secured Party any and all evidence of ownership
of any of the Equipment (including without limitation certificates of title and applications
for title).




     (d) Supporting Obligations. With respect to its Supporting Obligations whether
now existing or hereafter created or acquired and wheresoever located, each Grantor
represents, warrants and covenants to the Secured Party that:




     (i) Each Grantor shall (i) maintain at all times, and furnish to the Secured
Party from time to time at the Secured Party’s request, a current list identifying
in reasonable detail each Supporting Obligation relating to any Collateral from a
single obligor in excess of $1,000,000, and (ii) upon the request of the Secured
Party from time to time following the occurrence and during the continuance of any
Default, deliver to the Secured Party the originals of all



77









 






documents evidencing or
constituting Supporting Obligations, together with such other documentation
(executed as appropriate by the applicable Grantor) and information as may be
necessary to enable the Secured Party to realize upon the Supporting Obligations in
accordance with their respective terms or transfer the Supporting Obligations as may
be permitted under the Loan Documents or by applicable law.




     (ii) With respect to each letter of credit giving rise to Letter-of-Credit
Rights that has an aggregate stated amount available to be drawn in excess of
$2,500,000, each Grantor shall, at the request of the Secured Party, cause the
issuer thereof to execute and deliver to the Secured Party a Qualifying Control
Agreement.




     (e) Investment Property. With respect to its Investment Property constituting
Collateral, whether now existing or hereafter created or acquired and wheresoever located,
each Grantor represents, warrants and covenants to the Secured Party that:




     (i) Schedule 9(e) attached hereto contains a true and complete
description of (x) the name and address of each securities intermediary with which
such Grantor maintains a securities account as of its Applicable Date, and (y) all
other Investment Property of such Grantor other than interests in Subsidiaries in
which such Grantor has granted a Lien to the Secured Party pursuant to a Pledge
Agreement.




     (ii) Except with the express prior written consent of the Secured Party in each
instance, all Investment Property other than interests in Subsidiaries in which such
Grantor has granted a Lien to the Secured Party pursuant to a Pledge Agreement shall
be maintained at all times in the form of (a) certificated securities, which
certificates shall have been delivered to the Secured Party together with duly
executed undated stock powers endorsed in blank pertaining thereto, or (b) security
entitlements credited to one or more securities accounts as to each of which the
Secured Party has received (1) copies of the account agreement between the
applicable securities intermediary and such Grantor and
the most recent statement of account pertaining to such securities account (each
certified to be true and correct by an officer of such Grantor) and (2) a Qualifying
Control Agreement from the applicable securities intermediary which remains in full
force and effect and as to which the Secured Party has not received any notice of
termination. Without limiting the generality of the foregoing, no Grantor shall
cause, suffer or permit any Investment Property to be credited to or maintained in
any securities account not listed on Schedule 9(e) attached hereto except in
each case upon giving prior written notice to the Secured Party.




     (iii) All dividends and other distributions with respect to any of the
Investment Property shall be subject to the security interest conferred hereunder.




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     (iv) So long as no Default shall have occurred and be continuing, the
registration of Investment Property in the name of a Grantor as record and
beneficial owner shall not be changed and such Grantor shall be entitled to exercise
all voting and other rights and powers pertaining to Investment Property for all
purposes not inconsistent with the terms hereof or of any Qualifying Control
Agreement relating thereto.




     (v) Upon the occurrence and during the continuance of any Default, at the
option of the Secured Party, all rights of the Grantors to exercise the voting or
consensual rights and powers which it is authorized to exercise pursuant to clause
(iv) immediately above shall cease and the Secured Party may thereupon (but shall
not be obligated to), at its request, cause such Collateral to be registered in the
name of the Secured Party or its nominee or agent and/or exercise such voting or
consensual rights and powers as appertain to ownership of such Collateral, and to
that end each Grantor hereby appoints the Secured Party as its proxy, with full
power of substitution, to vote and exercise all other rights as a shareholder with
respect to such Investment Property upon the occurrence and during the continuance
of any Default, which proxy is coupled with an interest and is irrevocable until the
Facility Termination Date, and each Grantor hereby agrees to provide such further
proxies as the Secured Party may request; provided, however, that the Secured Party
in its discretion may from time to time refrain from exercising, and shall not be
obligated to exercise, any such voting or consensual rights or such proxy.




     (vi) Upon the occurrence and during the continuance of any Default, all rights
of the Grantors to receive and retain cash dividends and other distributions upon or
in respect to Investment Property pursuant to clause (iii) above shall cease and
shall thereupon be vested in the Secured Party, and each Grantor shall, or shall
cause, all such cash dividends and other distributions with respect to the
Investment Property to be promptly delivered to the Secured Party (together, if the
Secured Party shall request, with any documents related thereto) to be held,
released or disposed of by it hereunder or, at the option of the Secured Party, to
be applied to the Secured Obligations.




     (f) Deposit Accounts. With respect to its Deposit Accounts whether now
existing or hereafter created or acquired and wheresoever located, each Grantor represents,
warrants and covenants to the Secured Party that:




     (i) Schedule 9(f) attached hereto contains a true and complete
description of the name and address of each depositary institution with which such
Grantor maintains a Deposit Account as of its Applicable Date.




     (ii) Grantors shall comply with Section 7.12 of the Credit Agreement with
respect to Deposit Accounts. Without limiting the generality of the foregoing, no
Grantor shall cause, suffer or permit any Deposit Account to be opened or maintained
(other than Deposit Accounts listed on Schedule 9(f))



79









 






unless the applicable Grantor shall have given prior written notice thereof to the
Secured Party. In addition, all Deposit Accounts in which collected balances or
deposits in excess of $250,000 are or may at any time be credited or maintained
(other than Deposit Accounts maintained with the Secured Party as depositary
institution) shall be subject to a Qualifying Control Agreement from the applicable
depositary institution which remains in full force and effect and as to which the
Secured Party has not received any notice of termination.




     (g) Chattel Paper. With respect to its Chattel Paper whether now existing or
hereafter created or acquired and wheresoever located, each Grantor represents, warrants and
covenants to the Secured Party that:




     (i) Each Grantor shall at all times retain sole physical possession of the
originals of all Chattel Paper (other than electronic Chattel Paper and the
electronic components of hybrid Chattel Paper); provided, however,
that (x) upon the request of the Secured Party from time to time, such Grantor shall
immediately deliver physical possession of such Chattel Paper to the Secured Party
or its designee, and (y) in the event that there shall be created more than one
original counterpart of any physical document that alone or in conjunction with any
other physical or electronic document constitutes Chattel Paper, then such
counterparts shall be numbered consecutively starting with “1” and such Grantor
shall retain the counterpart numbered “1”.




     (ii) All counterparts of all tangible Chattel Paper (and the tangible
components of hybrid Chattel Paper) shall immediately upon the creation or
acquisition thereof by any Grantor be conspicuously legended as follows: “A FIRST
PRIORITY SECURITY INTEREST IN THIS CHATTEL PAPER HAS BEEN GRANTED TO BANK OF
AMERICA, N.A., PURSUANT TO A SECURITY AGREEMENT DATED AS OF MARCH [___], 2009, AS
AMENDED FROM TIME TO TIME. NO SECURITY INTEREST OR OTHER INTEREST IN FAVOR OF ANY
OTHER PERSON MAY BE CREATED BY THE TRANSFER OF PHYSICAL POSSESSION OF THIS CHATTEL
PAPER OR OF ANY COUNTERPART HEREOF EXCEPT BY OR WITH THE CONSENT OF THE AFORESAID
SECURED PARTY AS PROVIDED IN SUCH SECURITY AGREEMENT.” In the case of electronic
Chattel Paper (including the electronic components of hybrid Chattel Paper), no
Grantor shall create or acquire any such Chattel Paper unless, prior to such
acquisition or creation, it shall have taken such Perfection Action as the Secured
Party may require to perfect by control the security interest of the Secured Party
in such Collateral.




     (iii) Other than in the ordinary course of business and in keeping with
reasonable and customary practice, no Grantor shall amend, modify, waive or
terminate any provision of, or fail to exercise promptly and diligently each
material right or remedy conferred under or in connection with, any Chattel Paper,



80









 






in any case in such a manner as could reasonably be expected to materially adversely
affect the value of affected Chattel Paper as collateral.




     (h) Instruments. With respect to its Instruments whether now existing or
hereafter created or acquired and wheresoever located, each Grantor represents, warrants and
covenants to the Secured Party that:




     (i) Each Grantor shall (i) maintain at all times, and furnish to the Secured
Party from time to time at the Secured Party’s request, a current list identifying
in reasonable detail Instruments of which such Grantor is the payee or holder (other
than Instruments with respect to which another Grantor is the obligor) and having a
face amount payable in excess of $1,000,000, and (ii) upon the request of the
Secured Party from time to time, deliver to the Secured Party the originals of all
such Instruments, together with duly executed undated endorsements in blank affixed
thereto and such other documentation and information as may be necessary to enable
the Secured Party to realize upon the Instruments in accordance with their
respective terms or transfer the Instruments as may be permitted under the Loan
Documents or by applicable law.




     (ii) Other than in the ordinary course of business and in keeping with
reasonable and customary practice, no Grantor shall amend, modify, waive or
terminate any provision of, or fail to exercise promptly and diligently each
material right or remedy conferred under or in connection with, any Instrument, in
any case in such a manner as could reasonably be expected to materially adversely
affect the value of affected Instrument as collateral.




     (i) Commercial Tort Claims. With respect to its Commercial Tort Claims whether
now existing or hereafter created or acquired and wheresoever located, each Grantor
represents, warrants and covenants to the Secured Party that:




     (i) Schedule 9(i) attached hereto contains a true and complete list of
all Commercial Tort Claims in which any Grantor has an interest and which have been
identified by a Grantor as of its Applicable Date (“Grantor Claims”). Each
Grantor shall furnish to the Secured Party from time to time upon its request a
certificate of an officer of such Grantor referring to this Section 9(i) and
(x) identifying all Grantor Claims that are not then described on Schedule
9(i) attached hereto and stating that each of such additional Grantor Claims
shall be deemed added to such Schedule 9(i) and shall constitute a
Commercial Tort Claim, a Grantor Claim, and additional Collateral hereunder, and (y)
summarizing the status or disposition of any Grantor Claims that have been settled,
or have been made the subject of any binding mediation, judicial or arbitral
proceeding, or any judicial or arbitral order on the merits, or that have been
abandoned. With respect to each such additional Grantor Claim, such Grantor Claim
shall be and become part of the Collateral hereunder from the date such claim is
identified to the Secured Party as provided above without further action, and (ii)
the Secured Party is hereby authorized at the expense of the applicable Grantor to
execute and



81









 






file such additional financing statements or amendments to previously filed
financing statements, and take such other action as it may deem necessary or
advisable, to perfect the Lien on such additional Grantor Claims conferred
hereunder, and the Grantor shall, if required by applicable law or otherwise at the
request of the Secured Party, execute and deliver such Perfection Documents and take
such other Perfection Action as the Secured Party may determine to be necessary or
advisable to perfect or protect the Lien of the Secured Party in such additional
Grantor Claims conferred hereunder.




     (j) Internet Property Rights. With respect to its rights, titles and
interests in and to any internet domain names or registration rights relating thereto, and
any internet websites or the content thereof (collectively, “Internet Property
Rights”) whether now existing or hereafter created or acquired and wheresoever located,
each Grantor represents, warrants and covenants to the Secured Party that Schedule
9(j) attached hereto contains a true and complete description of each internet domain
name registered to such Grantor or in which such Grantor has ownership, operating or
registration rights.




     (k) Third Party Goods. Grantor shall not hold or accept any Third Party
Goods, whether on a consignment basis or otherwise, other than Third Party Goods (i) with an
aggregate value of $2,500,000 or less; or (ii) from a Person approved by Secured Party,
provided that, with respect to any other such Person, Secured Party has (a) been furnished
with an accurate description of the arrangements and agreements (if not reduced to writing)
with respect to such Third Party Goods, together with true, correct and complete copies of
any written instruments, documents or agreements with respect thereto, and (b) received an
executed intercreditor agreement from such Person in form and substance satisfactory to
Secured Party. If any of the arrangements or instruments, documents or agreements referred
to in this Section 9(k) are amended, modified or supplemented, Grantor promptly shall
provide Secured Party with notice thereof and copies of such amendment, modification or
supplement. Schedule 9(k) sets forth a complete listing of all Persons now having
an interest in any Third Party Goods, which Schedule shall be amended and supplemented by
Grantor in conjunction with the delivery of the Covenant Compliance Certificates required by
Section 7.1(H) of the Credit Agreement. Grantor shall take such action as Secured Party may
from time to time require to assure Secured Party that no Person storing any Third Party
Goods with Grantor has any interest in the Collateral.



     10. Casualty and Liability Insurance Required.




     (a) Each Grantor will keep the Collateral continuously insured as required pursuant to
the terms of the Credit Agreement.




     (b) Each insurance policy obtained in satisfaction of the requirements of the Credit
Agreement:




     (i) may be provided by blanket policies now or hereafter maintained by each or
any Grantor;



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     (ii) shall be issued by such insurer (or insurers) as shall be financially
responsible, of recognized standing and reasonably acceptable to the Secured Party;




     (iii) shall be in such form and have such provisions (including without
limitation the loss payable clause, the waiver of subrogation clause, the deductible
amount, if any, and the standard mortgagee endorsement clause) as are generally
considered standard provisions for the type of insurance involved and are reasonably
acceptable in all respects to the Secured Party;




     (iv) shall prohibit cancellation or substantial modification, termination or
lapse in coverage by the insurer without at least thirty (30) days’ prior written
notice to the Secured Party, except for non-payment of premium, as to which such
policies shall provide for at least ten (10) days’ prior written notice to the
Secured Party; and




     (v) shall name the Secured Party as loss payee and as a party insured
thereunder in respect of any claim for payment.




     (c) Prior to expiration of any such policy, such Grantor shall furnish the Secured
Party with evidence satisfactory to the Secured Party that the policy or certificate has
been renewed or replaced or is no longer required by this Security Agreement.




     (d) Each Grantor hereby makes, constitutes and appoints the Secured Party (and all
officers, employees or agents designated by the Secured Party), as such Grantor’s true and
lawful attorney (and agent-in-fact) for the purpose of making, settling and adjusting claims
under such policies of insurance, endorsing the name of such Grantor on any check, draft,
instrument or other item or payment for the proceeds of such policies of insurance and for
making all determinations and decisions with respect to such policies of insurance, which
appointment is coupled with an interest and is irrevocable; provided, however, that the
powers pursuant to such appointment shall be exercisable only upon the occurrence and during
the continuation of a Default.




     (e) In the event such Grantor shall fail to maintain, or fail to cause to be
maintained, the full insurance coverage required hereunder, the Secured Party may (but shall
be under no obligation to), without waiving or releasing any Secured Obligation or Default
or Event of Default by such Grantor hereunder, contract for the required policies of
insurance and pay the premiums on the same; and all sums so disbursed by Secured Party,
including reasonable Attorneys’ Costs, court costs, expenses and other charges related
thereto, shall be payable on demand by such Grantor to the Secured Party, shall be
additional Secured Obligations secured by the Collateral, and (in addition to other rights
and remedies resulting from such nonpayment) shall bear interest from the date of demand
until paid in full at the Post Default Rate.



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     (f) So long as no Default shall have occurred and be continuing, the Grantors shall be
entitled to receive payment of the proceeds of such insurance; provided, that, at
all times during which a Default shall have occurred and be continuing, the Secured Party
shall be entitled to receive direct and immediate payment of the proceeds of such insurance
and such Grantor shall take all action as the Secured Party may reasonably request to
accomplish such payment. In the event any Grantor shall receive any such proceeds at any
times during which a Default shall have occurred and be continuing, such Grantor shall
immediately deliver such proceeds to the Secured Party and, pending such delivery, shall
hold such proceeds in trust and keep the same segregated from its other funds.




     (h) In case of any material damage to, destruction or loss of, or claim or proceeding
against, all or any material part of the Collateral pledged hereunder by a Grantor, such
Grantor shall give prompt notice thereof to the Secured Party. Each such notice shall
describe generally the nature and extent of such damage, destruction, loss, claim or
proceeding. Subject to Section 10(d), each Grantor is hereby authorized and
empowered to adjust or compromise any loss under any such insurance other than losses
relating to claims made directly against any Secured Party.




     (k) The provisions contained in this Security Agreement pertaining to insurance shall
be cumulative with any additional provisions imposing additional insurance requirements with
respect to the Collateral or any other property on which a Lien is conferred under any
Collateral Document.



     11. Rights and Remedies Upon Default. Upon the occurrence and during the continuance
of a Default, the Secured Party shall have the following rights and remedies in addition to any
rights and remedies set forth elsewhere in this Security Agreement or the other Loan Documents, all
of which may be exercised with or, if allowed by law, without notice to a Grantor:




     (a) All of the rights and remedies of a secured party under the UCC or under other
applicable law, all of which rights and remedies shall be cumulative, and none of which
shall be exclusive, to the extent permitted by law, in addition to any other rights and
remedies contained in this Security Agreement or any other Loan Document;




     (b) The right to foreclose the Liens and security interests created under this Security
Agreement by any available judicial procedure or without judicial process;




     (c) The right to (i) enter upon the premises of a Grantor through self-help and without
judicial process, without first obtaining a final judgment or giving such Grantor notice or
opportunity for a hearing on the validity of the Secured Party’s claim and without any
obligation to pay rent to such Grantor, or any other place or places where any Collateral is
located and kept, and remove the Collateral therefrom to the premises of the Secured Party
or any agent of the Secured Party, for such time as the Secured Party may desire, in order
effectively to collect or liquidate the Collateral, (ii) require such Grantor or any bailee
or other agent of such Grantor to assemble the Collateral and make it



84









 






available to the Secured Party at a place to be designated by the Secured Party that is
reasonably convenient to both parties, and (iii) notify any or all Persons party to a
Qualifying Control Agreement or who otherwise have possession of or control over any
Collateral of the occurrence of a Default and other appropriate circumstances, and exercise
control over and take possession or custody of any or all Collateral in the possession,
custody or control of such other Persons;




     (d) The right to (i) exercise all of a Grantor’s rights and remedies with respect to
the collection of Accounts, Chattel Paper, Instruments, Supporting Obligations and General
Intangibles (collectively, “Payment Collateral”), including the right to demand
payment thereof and enforce payment, by legal proceedings or otherwise; (ii) settle, adjust,
compromise, extend or renew all or any Payment Collateral or any legal proceedings
pertaining thereto; (iii) discharge and release all or any Payment Collateral; (iv) take
control, in any manner, of any item of payment or proceeds referred to in Section 5
above; (v) prepare, file and sign a Grantor’s name on any Proof of Claim in bankruptcy,
notice of Lien, assignment or satisfaction of Lien or similar document in any action or
proceeding adverse to any obligor under any Payment Collateral or otherwise in connection
with any Payment Collateral; (vi) endorse the name of a Grantor upon any chattel paper,
document, instrument, invoice, freight bill, bill of lading or similar document or agreement
relating to any Collateral; (vii) use the information recorded on or contained on a
Grantor’s internet website or otherwise in any data processing equipment and computer
hardware and software relating to any Collateral to which a Grantor has access; (viii) open
such Grantor’s mail and collect any and all amounts due to such Grantor from any Account
Debtors or other obligor in respect of Payment Collateral; (ix) take over such Grantor’s
post office boxes or make other arrangements as the Secured Party deems necessary to receive
such Grantor’s mail, including notifying the post office authorities to change the address
for delivery of such Grantor’s mail to such address as the Secured Party may designate; (x)
notify any or all Account Debtors or other obligor on any Payment Collateral that such
Payment Collateral has been assigned to the Secured Party and that Secured Party has a
security interest therein (provided that the Secured Party may at any time give such notice
to an Account Debtor that is a department, agency or authority of the United States
government); each Grantor hereby agrees that any such notice, in the Secured Party’s sole
discretion, may (but need not) be sent on such Grantor’s stationery, in which event such
Grantor shall co-sign such notice with the Secured Party if requested to do so by the
Secured Party; and (xi) do all acts and things and execute all documents necessary, in
Secured Party’s sole discretion, to collect the Payment Collateral; and




     (e) The right to sell all or any Collateral in its then existing condition, or after
any further manufacturing or processing thereof, at such time or times, at public or private
sale or sales, with such notice as may be required by law, in lots or in bulk, for cash or
on credit, with or without representations and warranties, all as the Secured Party, in its
sole discretion, may deem advisable. The Secured Party shall have the right to conduct such
sales on a Grantor’s premises or elsewhere and shall have the right to use a Grantor’s
premises without charge for such sales for such time or times as the Secured Party may see
fit. The Secured Party may, if it deems it reasonable, postpone or adjourn



85









 






any sale of the Collateral from time to time by an announcement at the time and place of
such postponed or adjourned sale, and such sale may, without further notice, be made at the
time and place to which it was so adjourned. Each Grantor agrees that the Secured Party has
no obligation to preserve rights to the Collateral against prior parties or to marshal any
Collateral for the benefit of any Person. The Secured Party is hereby granted an
irrevocable fully paid license or other right (including each Grantor’s rights under any
license or any franchise agreement), each of which shall remain in full force and effect
until the Facility Termination Date, to use, without charge, each of the labels, patents,
copyrights, names, trade secrets, trade names, trademarks and advertising matter, or any
property of a similar nature owned or licensed by any Grantor, as it pertains to the
Collateral, in completing production of, advertising for sale and selling any Collateral.
If any of the Collateral shall require repairs, maintenance, preparation or the like, or is
in process or other unfinished state, the Secured Party shall have the right, but shall not
be obligated, to perform such repairs, maintenance, preparation, processing or completion of
manufacturing for the purpose of putting the same in such saleable form as the Secured Party
shall deem appropriate, but the Secured Party shall have the right to sell or dispose of the
Collateral without such processing and no Grantor shall have any claim against the Secured
Party for the value that may have been added to such Collateral with such processing. In
addition, each Grantor agrees that in the event notice is necessary under applicable law,
written notice mailed to such Grantor in the manner specified herein ten (10) days prior to
the date of public sale of any of the Collateral or prior to the date after which any
private sale or other disposition of the Collateral will be made shall constitute
commercially reasonable notice to such Grantor. All notice is hereby waived with respect to
any of the Collateral which threatens to decline speedily in value or is of a type
customarily sold on a recognized market. The Secured Party may purchase all or any part of
the Collateral at public or, if permitted by law, private sale, free from any right of
redemption which is hereby expressly waived by such Grantor and, in lieu of actual payment
of such purchase price, may set off the amount of such price against the Secured
Obligations. Each Grantor recognizes that the Secured Party may be unable to effect a
public sale of certain of the Collateral by reason of certain prohibitions contained in the
Securities Act of 1933, as amended (the “Securities Act”), and applicable state law,
and may be otherwise delayed or adversely affected in effecting any sale by reason of
present or future restrictions thereon imposed by governmental authorities (“Affected
Collateral”), and that as a consequence of such prohibitions and restrictions the
Secured Party may be compelled (i) to resort to one or more private sales to a restricted
group of purchasers who will be obliged to agree, among other things, to acquire Affected
Collateral for their own account, for investment and not with a view to the distribution or
resale thereof, or (ii) to seek regulatory approval of any proposed sale or sales, or (iii)
to limit the amount of Affected Collateral sold to any Person or group. Each Grantor agrees
and acknowledges that private sales so made may be at prices and upon terms less favorable
to such Grantor than if such Affected Collateral was sold either at public sales or at
private sales not subject to other regulatory restrictions, and that the Secured Party has
no obligation to delay the sale of any Affected Collateral for the period of time necessary
to permit the Grantor or any other Person to register or otherwise qualify them under or
exempt them from any applicable restriction, even if such Grantor or other Person would
agree to register or otherwise qualify or exempt such Affected Collateral so



86









 






as to permit a public sale under the Securities Act or applicable state law. Each Grantor
further agrees, to the extent permitted by applicable law, that the use of private sales
made under the foregoing circumstances to dispose of Affected Collateral shall be deemed to
be dispositions in a commercially reasonable manner. Each Grantor hereby acknowledges that
a ready market may not exist for Affected Collateral that is not traded on a national
securities exchange or quoted on an automated quotation system.



     The net cash proceeds resulting from the collection, liquidation, sale, or other disposition
of the Collateral shall be applied first, to the expenses (including all Attorneys’ Costs)
of retaking, holding, storing, processing and preparing for sale, selling, collecting, liquidating
and the like; second, to the satisfaction of all Secured Obligations in accordance with the
terms of the Credit Agreement or as required by applicable law; and third, any remaining
balance shall be remitted to the applicable Grantors or as a court of competent jurisdiction shall
direct. Each Grantor shall be liable to the Secured Party, and shall pay to the Secured Party, on
demand any deficiency which may remain after such sale, disposition, collection or liquidation of
the Collateral.



     12. Attorney-in-Fact. Each Grantor hereby appoints the Secured Party as the Grantor’s
attorney-in-fact for the purposes of carrying out the provisions of this Security Agreement and
taking any action and executing any instrument which the Secured Party may deem necessary or
advisable to accomplish the purposes hereof, which appointment is irrevocable and coupled with an
interest; provided, that the Secured Party shall have and may exercise rights under this
power of attorney only upon the occurrence and during the continuance of a Default. Without
limiting the generality of the foregoing, upon the occurrence and during the continuance of a
Default, the Secured Party shall have the right and power




     (a) to ask, demand, collect, sue for, recover, compromise, receive and give acquittance
and receipts for moneys due and to become due under or in respect of any of the Collateral;




     (b) to receive, endorse and collect any drafts or other instruments, documents and
chattel paper in connection with clause (a) above;




     (c) to endorse such Grantor’s name on any checks, notes, drafts or any other payment
relating to or constituting proceeds of the Collateral which comes into the Secured Party’s
possession or the Secured Party’s control, and deposit the same to the account of the
Secured Party on account and for payment of the Secured Obligations.




     (d) to file any claims or take any action or institute any proceedings that the Secured
Party may deem necessary or desirable for the collection of any of the Collateral or
otherwise to enforce the rights of the Secured Party with respect to any of the Collateral;
and




     (e) to execute, in connection with any sale or other disposition of Collateral provided
for herein, any endorsement, assignments, or other instruments of conveyance or transfer
with respect thereto.



87









 





     13. Reinstatement. The granting of a security interest in the Collateral and the
other provisions hereof shall continue to be effective or be reinstated, as the case may be, if at
any time any payment of any of the Secured Obligations is rescinded or must otherwise be returned
by the Secured Party or is repaid by the Secured Party in whole or in part in good faith settlement
of a pending or threatened avoidance claim, whether upon the insolvency, bankruptcy or
reorganization of any Grantor or otherwise, all as though such payment had not been made. The
provisions of this Section 13 shall survive repayment of all of the Secured Obligations and
the termination or expiration of this Security Agreement in any manner, including but not limited
to termination upon occurrence of the Facility Termination Date.



     14. Certain Waivers by the Grantors. Each Grantor waives to the extent permitted by
applicable law (a) any right to require the Secured Party or any other obligee of the Secured
Obligations to (x) proceed against any Person or entity, including without limitation any Grantor,
(y) proceed against or exhaust any Collateral or other collateral for the Secured Obligations, or
(z) pursue any other remedy in its power; (b) any defense arising by reason of any disability or
other defense of any other Person, or by reason of the cessation from any cause whatsoever of the
liability of any other Person or entity, (c) any right of subrogation, and (d) any right to enforce
any remedy which the Secured Party or any other obligee of the Secured Obligations now has or may
hereafter have against any other Person and any benefit of and any right to participate in any
collateral or security whatsoever now or hereafter held by the Secured Party. Each Grantor
authorizes the Secured Party and each other obligee of the Secured Obligations without notice
(except notice required by applicable law) or demand and without affecting its liability hereunder
or under the Loan Documents from time to time to: (i) take and hold security, other than the
Collateral herein described, for the payment of such Secured Obligations or any part thereof, and
exchange, enforce, waive and release the Collateral herein described or any part thereof or any
such other security; and (ii) apply such Collateral or other security and direct the order or
manner of sale thereof as the Secured Party or obligee in its discretion may determine.



     The Secured Party may at any time deliver (without representation, recourse or warranty) the
Collateral or any part thereof to a Grantor and the receipt thereof by such Grantor shall be a
complete and full acquittance for the Collateral so delivered, and the Secured Party shall
thereafter be discharged from any liability or responsibility therefor.



     15. Continued Powers. Until the Facility Termination Date shall have occurred, the
power of sale and other rights, powers and remedies granted to the Secured Party hereunder shall
continue to exist and may be exercised by the Secured Party at any time and from time to time
irrespective of the fact that any of the Secured Obligations or any part thereof may have become
barred by any statute of limitations or that any part of the liability of any Grantor may have
ceased.



     16. Other Rights. The rights, powers and remedies given to the Secured Party by this
Security Agreement shall be in addition to all rights, powers and remedies given to the Secured
Party under any other Loan Document or by virtue of any statute or rule of law. Any forbearance or
failure or delay by the Secured Party in exercising any right, power or remedy hereunder shall not
be deemed to be a waiver of such right, power or remedy, and any single or




88












 




partial exercise of any right, power or remedy hereunder shall not preclude the further exercise
thereof; and every right, power and remedy of the Secured Party shall continue in full force and
effect until such right, power or remedy is specifically waived in accordance with the terms of the
Credit Agreement.




     17. Anti-Marshaling Provisions. The right is hereby given by each Grantor to the
Secured Party to make releases (whether in whole or in part) of all or any part of the Collateral
agreeable to the Secured Party without notice to, or the consent, approval or agreement of other
parties and interests, including junior lienors, which releases shall not impair in any manner the
validity of or priority of the Liens and security interests in the remaining Collateral conferred
hereunder, nor release any Grantor from personal liability for the Secured Obligations.
Notwithstanding the existence of any other security interest in the Collateral held by the Secured
Party, the Secured Party shall have the right to determine the order in which any or all of the
Collateral shall be subjected to the remedies provided in this Security Agreement. Each Grantor
hereby waives any and all right to require the marshaling of assets in connection with the exercise
of any of the remedies permitted by applicable law or provided herein or in any other Loan
Document.



     18. Entire Agreement. This Security Agreement and each Security Joinder Agreement,
together with the Credit Agreement and other Loan Documents, constitutes and expresses the entire
understanding between the parties hereto with respect to the subject matter hereof, and supersedes
all prior negotiations, agreements and understandings, inducements, commitments or conditions,
express or implied, oral or written, except as contained in the Loan Documents. The express terms
hereof and of the Security Joinder Agreements control and supersede any course of performance or
usage of the trade inconsistent with any of the terms hereof or thereof. Neither this Security
Agreement nor any Security Joinder Agreement nor any portion or provision hereof or thereof may be
changed, altered, modified, supplemented, discharged, canceled, terminated, or amended orally or in
any manner other than as provided in the Credit Agreement.



     19. Third Party Reliance. Each Grantor hereby consents and agrees that all issuers of
or obligors in respect of any Collateral, and all securities intermediaries, warehousemen, bailees,
public officials and other Persons having any interest in, possession of, control over or right,
privilege, duty or discretion in respect of, any Collateral shall be entitled to accept the
provisions hereof and of the Security Joinder Agreements as conclusive evidence of the right of the
Secured Party to exercise its rights hereunder or thereunder with respect to the Collateral,
notwithstanding any other notice or direction to the contrary heretofore or hereafter given by any
Grantor or any other Person to any of such Persons.



     20. Binding Agreement; Assignment. This Security Agreement and each Security Joinder
Agreement, and the terms, covenants and conditions hereof and thereof, shall be binding upon and
inure to the benefit of the parties hereto, and to their respective successors and assigns, except
that no Grantor shall be permitted to assign this Security Agreement, any Security Joinder
Agreement or any interest herein or therein or, except as expressly permitted herein or in the
Credit Agreement, in the Collateral or any part thereof or interest therein. All references herein



89









 







to the Secured Party shall include any successor thereof or permitted assignee, and any other
obligees from time to time of the Secured Obligations.



     21. Severability. WHEREVER POSSIBLE, EACH PROVISION OF THIS SECURITY AGREEMENT SHALL
BE INTERPRETED IN SUCH MANNER AS TO BE EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT IF ANY
PROVISION OF THIS SECURITY AGREEMENT SHALL BE PROHIBITED BY OR INVALID UNDER APPLICABLE LAW, SUCH
PROVISION SHALL BE INEFFECTIVE ONLY TO THE EXTENT OF SUCH LAW, SUCH PROVISION SHALL BE INEFFECTIVE
ONLY TO THE EXTENT OF SUCH PROHIBITION OR INVALIDITY, WITHOUT INVALIDATING THE REMAINDER OF SUCH
PROVISION OR THE REMAINING PROVISIONS OF THIS SECURITY AGREEMENT.



     22. Counterparts. This Security Agreement may be executed in any number of
counterparts each of which when so executed and delivered shall be deemed an original, and it shall
not be necessary in making proof of this Security Agreement to produce or account for more than one
such counterpart executed by the Grantor against whom enforcement is sought.



     23. Notices. Any notice required or permitted hereunder shall be given at the address
for the giving of notice then in effect under the Credit Agreement. All such addresses may be
modified, and all such notices shall be given and shall be effective, as provided in the Credit
Agreement for the giving and effectiveness of notices and modifications of addresses thereunder.



     24. Joinder. Each Person that shall at any time execute and deliver to the Secured
Party a Security Joinder Agreement substantially in the form attached as Exhibit A hereto
shall thereupon irrevocably, absolutely and unconditionally become a party hereto and obligated
hereunder as a Grantor and shall have thereupon pursuant to Section 2 hereof granted a
security interest in and collaterally assigned to the Secured Party all Collateral in which it has
at its Applicable Date or thereafter acquires any interest or the power to transfer, and all
references herein and in the other Loan Documents to the Grantors or to the parties to this
Security Agreement shall be deemed to include such Person as a Grantor hereunder. Each Security
Joinder Agreement shall be accompanied by the Supplemental Schedules referred to therein,
appropriately completed with information relating to the Grantor executing such Security Joinder
Agreement and its property. Each of the applicable Schedules attached hereto shall be deemed
amended and supplemented without further action by such information reflected on the Supplemental
Schedules.



     25. Rules of Interpretation. The rules of interpretation contained in Sections
1.02, 1.03, and 1.04 of the Credit Agreement shall be applicable to this Security Agreement and
each Security Joinder Agreement and are hereby incorporated by reference. All representations and
warranties contained herein shall survive the delivery of documents and any credit extensions
referred to herein or secured hereby.



90









 





26. Governing Law; Waivers.




     (a) THIS SECURITY AGREEMENT AND EACH SECURITY JOINDER AGREEMENT SHALL BE DEEMED TO BE
EXECUTED AND HAS BEEN DELIVERED AND ACCEPTED IN CHICAGO, ILLINOIS BY SIGNING AND DELIVERING
IT THERE. ANY DISPUTE BETWEEN THE PARTIES HERETO ARISING OUT OF, CONNECTED WITH, RELATED
TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS
SECURITY AGREEMENT AND EACH SECURITY JOINDER AGREEMENT, AND WHETHER ARISING IN CONTRACT,
TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS AND NOT
THE CONFLICTS OF LAW PROVISIONS OF THE STATE OF ILLINOIS; PROVIDED THAT (i) WITH RESPECT TO
THOSE INSTANCES IN WHICH THE APPLICABLE CHOICE OF LAWS RULES OF SUCH STATE, INCLUDING
SECTION 9-301 OF THE UCC, REQUIRE THAT THE MANNER OF CREATION OF A SECURITY INTEREST IN
SPECIFIC COLLATERAL OR THE MANNER OR EFFECT OF PERFECTION OR NONPERFECTION OR THE RULES
GOVERNING PRIORITY OF SECURITY INTERESTS ARE TO BE GOVERNED BY THE LAWS OF ANOTHER
JURISDICTION, THEN THE LAWS OF SUCH OTHER JURISDICTION SHALL GOVERN SUCH MATTERS, (ii) EACH
CONTROL AGREEMENT (INCLUDING EACH QUALIFYING CONTROL AGREEMENT) APPLICABLE TO ANY SECURITIES
ACCOUNT OR DEPOSIT ACCOUNT SHALL BE GOVERNED BY THE LAWS OF THE JURISDICTION SPECIFIED IN
SUCH CONTROL AGREEMENT, OR OTHERWISE BY THE LAWS OF THE JURISDICTION THAT GOVERN THE
SECURITIES ACCOUNT OR DEPOSIT ACCOUNT TO WHICH SUCH CONTROL AGREEMENT RELATES, AND (iii) IN
THOSE INSTANCES IN WHICH THE LAWS OF THE JURISDICTION IN WHICH COLLATERAL IS LOCATED GOVERN
MATTERS PERTAINING TO THE METHODS AND EFFECT OF REALIZING ON COLLATERAL, SUCH LAWS SHALL BE
GIVEN EFFECT WITH RESPECT TO SUCH MATTERS.



     (b) EACH GRANTOR HEREBY EXPRESSLY AND IRREVOCABLY AGREES AND CONSENTS THAT ANY SUIT,
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR ANY SECURITY
JOINDER AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREIN OR THEREIN MAY BE INSTITUTED IN
ANY STATE OR FEDERAL COURT SITTING IN THE COUNTY OF COOK, STATE OF ILLINOIS, UNITED STATES
OF AMERICA AND, BY THE EXECUTION AND DELIVERY OF THIS SECURITY AGREEMENT OR A SECURITY
JOINDER AGREEMENT, EXPRESSLY WAIVES ANY OBJECTION THAT IT MAY HAVE NOW OR HEREAFTER TO THE
LAYING OF THE VENUE OR TO THE JURISDICTION OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND
IRREVOCABLY SUBMITS GENERALLY AND UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN
ANY SUCH SUIT, ACTION OR PROCEEDING.



91









 





     (c) EACH GRANTOR AGREES THAT SERVICE OF PROCESS MAY BE MADE BY PERSONAL SERVICE OF A
COPY OF THE SUMMONS AND COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR
PROCEEDING, OR BY REGISTERED OR CERTIFIED MAIL (POSTAGE PREPAID) TO THE ADDRESS OF SUCH
PARTY PROVIDED IN SECTION 25 OR BY ANY OTHER METHOD OF SERVICE PROVIDED FOR UNDER
THE APPLICABLE LAWS IN EFFECT IN THE STATE OF ILLINOIS.



     (d) NOTHING CONTAINED IN SUBSECTIONS (b) OR (c) HEREOF SHALL PRECLUDE
THE SECURED PARTY FROM BRINGING ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS SECURITY AGREEMENT OR ANY SECURITY JOINDER AGREEMENT OR THE OTHER LOAN DOCUMENTS IN THE
COURTS OF ANY PLACE WHERE ANY OTHER PARTY OR ANY OF SUCH PARTY’S PROPERTY OR ASSETS MAY BE
FOUND OR LOCATED. TO THE EXTENT PERMITTED BY THE APPLICABLE LAWS OF ANY SUCH JURISDICTION,
EACH GRANTOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT AND EXPRESSLY
WAIVES, IN RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING, THE JURISDICTION OF ANY OTHER
COURT OR COURTS WHICH NOW OR HEREAFTER, BY REASON OF ITS PRESENT OR FUTURE DOMICILE, OR
OTHERWISE, MAY BE AVAILABLE UNDER APPLICABLE LAW.



     (e) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER OR
RELATED TO THIS SECURITY AGREEMENT OR ANY SECURITY JOINDER AGREEMENT OR ANY AMENDMENT,
INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN
CONNECTION WITH THE FOREGOING, EACH PARTY HEREBY AGREES, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT
BEFORE A JURY AND HEREBY EXPRESSLY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY
RIGHT SUCH PERSON MAY HAVE TO TRIAL BY JURY IN ANY SUCH ACTION, SUIT OR PROCEEDING.



     (f) EACH GRANTOR HEREBY EXPRESSLY WAIVES ANY OBJECTION IT MAY HAVE THAT ANY COURT TO
WHOSE JURISDICTION IT HAS SUBMITTED PURSUANT TO THE TERMS HEREOF IS AN INCONVENIENT FORUM.



[Signature pages follow]





92









 








     IN WITNESS WHEREOF, the parties have duly executed this Security Agreement on the day and year
first written above.



	 	 	 	 	 	 	 
	 	 	GRANTORS:	 	 
	 
	 	 	 	 	 	 
	 	 	LAWSON PRODUCTS, INC., a Delaware corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Thomas Neri
 

Thomas Neri
	 	 
	 

	 	Title:
	 	President	 	 
	 
	 	 	 	 	 	 
	 	 	LAWSON PRODUCTS, INC., a Georgia corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Thomas Neri	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Thomas Neri	 	 
	 

	 	Title:
	 	President	 	 
	 
	 	 	 	 	 	 
	 	 	LAWSON PRODUCTS, INC., a New Jersey corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Thomas Neri	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Thomas Neri	 	 
	 

	 	Title:
	 	President	 	 
	 
	 	 	 	 	 	 
	 	 	LAWSON PRODUCTS, INC., a Nevada corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Thomas Neri	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Thomas Neri	 	 
	 

	 	Title:
	 	President	 	 
	 
	 	 	 	 	 	 
	 	 	LAWSON PRODUCTS, INC., a Texas corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Thomas Neri	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Thomas Neri	 	 
	 

	 	Title:
	 	President	 	 






 









 






	 	 	 	 	 	 	 
	 	 	LP SERVICE CO., an Illinois corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Thomas Neri	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Thomas Neri	 	 
	 

	 	Title:
	 	President	 	 
	 
	 	 	 	 	 	 
	 	 	LPI HOLDINGS, INC., an Illinois corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Thomas Neri	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Thomas Neri	 	 
	 

	 	Title:
	 	President	 	 
	 
	 	 	 	 	 	 
	 	 	CRONATRON WELDING SYSTEMS, LLC, a North Carolina limited liability company	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Thomas Neri	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Thomas Neri	 	 
	 

	 	Title:
	 	President	 	 
	 
	 	 	 	 	 	 
	 	 	DRUMMOND AMERICAN I LLC, an Illinois 	 	 
	 	 	limited liability company	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Thomas Neri	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Thomas Neri	 	 
	 

	 	Title:
	 	President	 	 
	 
	 	 	 	 	 	 
	 	 	ASSEMBLY COMPONENT SYSTEMS, INC., an Illinois	 	 
	 	 	corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Thomas Neri	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Thomas Neri	 	 
	 

	 	Title:
	 	Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	AUTOMATIC SCREW MACHINE PRODUCTS COMPANY, INC., an Alabama corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Thomas Neri	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Thomas Neri	 	 
	 

	 	Title:
	 	Chief Executive Officer	 	 






 









 






	 	 	 	 	 	 	 
	 	 	C. B. LYNN COMPANY, an Illinois corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Thomas Neri	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Thomas Neri	 	 
	 

	 	Title:
	 	President	 	 
	 
	 	 	 	 	 	 
	 	 	RUTLAND TOOL & SUPPLY CO., A Nevada corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Thomas Neri	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Thomas Neri	 	 
	 

	 	Title:
	 	 Chief Executive Officer	 	 






 









 






	 	 	 	 	 	 	 
	 	 	SECURED PARTY:	 	 
	 
	 	 	 	 	 	 
	 	 	BANK OF AMERICA, N.A., as Secured Party	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ David Bacom
 

David Bacon
	 	 
	 

	 	Title:
	 	Vice President	 	 






 









 






Exhibit A-1