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SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 2001 OR [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 [No Fee Required] Commission file number: 0-10546 LAWSON PRODUCTS, INC. (Exact Name of Registrant as Specified in Charter) DELAWARE 36-2229304 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1666 EAST TOUHY AVENUE, DES PLAINES, ILLINOIS 60018 (Address of principal executive offices) Registrant's telephone number, including area code: (847) 827-9666 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of Each Class on which registered ------------------- ------------------- None None Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, $1.00 PAR VALUE (Title of class) Indicate by check mark whether the Registrant (l) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No As of March 1, 2002, 9,629,707 shares of Common Stock were outstanding. The aggregate market value of the Registrant's Common Stock held by nonaffiliates on March 1, 2002 was approximately $137,080,000. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] The following documents are incorporated into this Form 10-K by reference: Proxy Statement for Annual Meeting of Stockholders to be held on May 14, 2002 Part III

PART I "SAFE HARBOR" STATEMENT UNDER THE SECURITIES LITIGATION REFORM ACT OF 1995: This Annual Report on Form 10-K contains certain forward-looking statements. These statements are based on management's current expectations, intentions or beliefs and are subject to a number of factors, assumptions and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. The factors that could cause actual results to differ materially from those described in the forward-looking statements include increased competition, seasonality, an economic downturn and the ability to integrate successfully newly acquired businesses. The Company undertakes no obligation to update any such factor or to publicly announce the results of any revisions to any forward-looking statements contained herein to reflect future events or developments. ITEM 1. BUSINESS. Lawson Products, Inc. was incorporated in Illinois in 1952 and reincorporated in Delaware in 1982. During 2001, the Company significantly increased net sales through an acquisition completed on March 30, 2001. We refer you to "Management's Discussion and Analysis of Results of Operations and Financial Condition-Liquidity and Capital Resources". PRODUCTS The Company is a seller and distributor of systems, services and products. The Company also manufactures and distributes production and specialized component parts to the OEM marketplace. The Company offers to customers over 400,000 expendable maintenance, repair and replacement products. These products may be divided into three broad categories: Fasteners, Fittings and Related Parts, such as screws, nuts, rivets and other fasteners; Industrial Supplies, such as hoses and hose fittings, lubricants, cleansers, adhesives and other chemicals, as well as files, drills, welding products and other shop supplies; and Automotive and Equipment Maintenance Parts, such as primary wiring, connectors and other electrical supplies, exhaust and other automotive parts. The Company estimates that these categories of products accounted for the indicated percentages of its total consolidated net sales for 2001, 2000 and 1999 respectively: PERCENTAGE OF CONSOLIDATED NET SALES ------------------- 2001 2000 1999 ---- ---- ---- Fasteners, Fittings and Related Parts..................... 45% 47% 46% Industrial Supplies....................................... 47 49 50 Automotive and Equipment Maintenance Parts................ 8 4 4 -- -- -- 100% 100% 100% Substantially all of the Company's maintenance and repair products are manufactured by others and must meet the Company's specifications. Approximately 90% of the Company's products are sold under the Company label. Substantially all maintenance and repair items which the Company distributes are purchased by the Company in bulk and subsequently repackaged in smaller quantities. The Company regularly uses a large number of suppliers but has no long-term or fixed price contracts with any of them. Most maintenance and repair items which the Company distributes are purchased from several sources, and the Company believes that the loss of any single supplier would not significantly affect its operations. No single supplier accounted for more than 3.3% of the Company's purchases in 2001. Production components sold to the O.E.M. marketplace may be manufactured to customers' specification or purchased from other sources. MARKETING The Company's principal markets are as follows:

Heavy Duty Equipment Maintenance. Customers in this market include operators of trucks, buses, agricultural implements, construction and road building equipment, mining, logging and drilling equipment and other off-the-road equipment. The Company estimates that approximately 27% of 2001 sales were made to customers in this market. In-Plant and Building Maintenance. This market includes plants engaged in a broad range of manufacturing and processing activities, as well as institutions such as hospitals, universities, school districts and government units. The Company estimates that approximately 43% of 2001 sales were made to customers in this market. Passenger Car Maintenance. Customers in this market include automobile service center chains, independent garages, automobile dealers, car rental agencies and other fleet operators. The Company estimates that approximately 16% of 2001 sales were made to customers in this market. Original Equipment Manufacturers. This market includes plants engaged in a broad range of manufacturing and processing activities. The Company estimates that approximately 14% of 2001 sales were made to customers in this market. At December 31, 2001, the Company had approximately 319,000 customers, the largest of which accounted for less than one percent of net sales during 2001. Sales were made through a force of approximately 2,000 independent sales representatives at December 31, 2001. Included in this group were 255 district and zone managers, each of whom, in addition to his or her own sales activities, acted in an advisory capacity to other sales representatives in a designated area. At December 31, 2001, the Company also employed 38 regional managers to coordinate regional marketing efforts. Most sales representatives, including district and zone managers, are compensated on a commission basis and are responsible for repayment of commissions on their respective uncollectible accounts. In addition to the sales representatives and district, zone and regional managers discussed above, the Company had approximately 1,410 employees at December 31, 2001. The Company's products are sold in all 50 states, Mexico, Puerto Rico, the District of Columbia, Canada and the United Kingdom. The Company believes that an important factor in its success is its ability to service customers promptly. During the past five years, more than 99.5% of all items stocked were shipped to the customer within 24 hours after an order was received by the Company. This rapid delivery is facilitated by computer controlled order entry and inventory control systems in each general distribution center. In addition, the receipt of customer orders at Lawson distribution facilities has been accelerated by portable facsimile transmission equipment and personal computer systems used by sales representatives. Customer orders are delivered by common carriers. The Company is required to carry significant amounts of inventory in order to meet its high standards of rapid processing of customer orders. The Company has historically funded its working capital requirements internally. Such internally generated funds, along with a $50 million unsecured revolving line of credit, are expected to finance the Company's future growth and working capital requirements. DISTRIBUTION AND MANUFACTURING FACILITIES Substantially all of the Company's maintenance products are stocked in and distributed from each of its eight general distribution centers in; Addison, Illinois; Reno, Nevada; Farmers Branch, Texas; Suwanee, Georgia; Fairfield, New Jersey; Mississauga, Ontario, Canada, Bradley Stoke (Bristol) England and Guadalajara, Mexico. Chemical products are distributed from a facility in Vernon Hills, Illinois and welding products are distributed from a facility in Charlotte, North Carolina. Production components are stocked in and distributed from five centers located in Decatur, Alabama; Burr Ridge, Illinois; Memphis, Tennessee; Lenexa, Kansas and Cincinnati, Ohio. Production components are manufactured in Decatur, Alabama. In the opinion of the Company, all existing facilities are in good condition and are well maintained. All are being used substantially to capacity on a single shift basis, except the manufacturing facility in Decatur, Alabama which operates two shifts and the inbound facility in Des Plaines, Illinois, which operates two shifts. Further expansion of warehousing capacity may require new or expanded warehouses, some of which may be located in new geographical areas. -2-

CANADIAN OPERATIONS Canadian operations are conducted at the Company's 40,000 square foot general distribution center in Mississauga, Ontario, a suburb of Toronto. These operations constituted less than 4% of the Company's net sales during 2001. UNITED KINGDOM OPERATIONS Operations in the United Kingdom are conducted under the name of Lawson Products Limited from a 19,000 square foot general distribution center in Bradley Stoke (Bristol) England. These operations constituted less than 1% of the Company's net sales during 2001. MEXICAN OPERATIONS Operations in Mexico are conducted under the name of Lawson Products de Mexico S.A. de C.V. from a 10,000 square foot facility in Guadalajara, Mexico. These operations constituted less than 1% of the Company's net sales during 2001. COMPETITION The Company encounters intense competition from several national distributors and manufacturers and a large number of regional and local distributors. Due to the nature of its business and the absence of reliable trade statistics, the Company cannot estimate its position in relation to its competitors. However, the Company recognizes that some competitors may have greater financial and personnel resources, handle more extensive lines of merchandise, operate larger facilities and price some merchandise more competitively than the Company. Although the Company believes that the prices of its products are competitive, it endeavors to meet competition primarily through the quality of its product line, its response time and its delivery systems. EXECUTIVE OFFICERS OF THE REGISTRANT The executive officers of the Company, all of whose terms of office expire on May 14, 2002, are as follows: YEAR FIRST NAME AND PRESENT ELECTED TO OTHER OFFICES HELD POSITION WITH COMPANY AGE PRESENT OFFICE DURING THE PAST FIVE YEARS - --------------------- --- -------------- -------------------------- Sidney L. Port 91 1977 * Chairman of the Executive Committee and Director Robert J. Washlow 57 1999 Mr. Washlow has been Chairman of the Board and Chief Chairman of the Board, Chief Executive Officer since August 1999. Prior thereto, Executive Officer and Director Mr. Washlow was Executive Vice President-Corporate Affairs beginning in 1998, Secretary beginning in 1985 and a member of the Office of the President beginning in January 1999. -3-

Jeffrey B. Belford 55 1999 Mr. Belford became Chief Operating Officer and a Office of the President and Chief member of the Office of the President effective Operating Officer January 1, 1999. Prior to 1999, Mr. Belford was Executive Vice President - Operations, Chief Operating Officer since 1989. Roger Cannon 53 1999 Mr. Cannon has been a member of the Office of the Office of the President and Chief President since January 1, 1999. Prior to 1999, Sales Officer Mr. Cannon was Executive Vice President, Sales - Marketing from 1997-1999, and Vice President - - Central Field Sales from 1991 to 1997. Jerome Shaffer, 74 1987 * Vice President, Treasurer and Director James Smith 61 1996 Mr. Smith was Vice President, Personnel from 1995 to Vice President-- Human Resources 1996. Prior to 1995, Mr. Smith was Manager, Human Resources since he joined the Company in 1993. Joseph L. Pawlick, 59 1999 Prior to 1999, Mr. Pawlick was Vice President, Chief Financial Officer Controller and Assistant Secretary of the Company since 1987. Victor G. Galvez 45 1999 Mr. Galvez was Assistant Controller of the Company Controller from 1994 to 1999. Neil Jenkins 52 2000 From 1996 to 2000, Mr. Jenkins operated a golf Secretary travel business and was a business consultant. Prior thereto, Mr. Jenkins was executive vice president, secretary and a member of the Board of Directors of Bally Gaming, International, Inc., a publicly held manufacturer and distributor of gaming equipment and systems. * Held position for more than five years. ITEM 2. PROPERTIES. The Company owns two facilities located in Des Plaines, Illinois, (152,600 and 27,000 square feet, respectively). These buildings contain the Company's main administrative activities and an inbound warehouse facility that principally supports the Addison, Illinois facility and all Lawson distribution facilities. Additional administrative, warehouse and distribution facilities owned by the Company are located in Addison, Illinois (90,000 square feet); Fairfield, New Jersey (61,000 square feet); Reno, Nevada (97,000 square feet); Suwanee, Georgia (105,000 square feet); Farmers Branch, Texas (54,500 square feet); and Mississauga, Ontario, Canada (40,000 square feet). The Company also leases administrative office space (12,600 square feet) in Independence, Ohio. Chemical products are distributed from a 105,400 square foot owned facility in Vernon Hills, Illinois and welding products are distributed from a 40,000 square foot owned facility located in Charlotte, North Carolina. Administrative, warehouse and distribution facilities in Bradley Stoke (Bristol) England (19,000 square feet) are leased by the Company. Administrative and distribution facilities in Guadalajara, Mexico (10,000 square feet) are leased by the Company. Production components are distributed from leased facilities in Burr Ridge, Illinois (23,400 sq. ft.) Memphis, Tennessee, (33,800 sq. ft.), Lenexa, Kansas (40,500 sq. ft.) and Cincinnati, Ohio (16,800 sq. ft.). The Company owns a 54,000 square foot facility in Decatur, Alabama which manufacturers and distributes production components. From time to time, the Company leases additional warehouse space near its present -4-

facilities. See Item 1, "Business - Distribution Facilities" for further information regarding the Company's properties. ITEM 3. LEGAL PROCEEDINGS. There is no material pending litigation to which the Company, or any of its subsidiaries, is a party or to which any of their property is subject. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. No matter was submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this Report. -5-

PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The Company's Common Stock is traded on the NASDAQ National Market System under the symbol of "LAWS." The approximate number of stockholders of record at December 31, 2001 was 908. The following table sets forth the high and low closing sale prices as reported on the NASDAQ National Market System during the last two years. The table also indicates the cash dividends paid by the Company during such periods. 2001 2000 ----------------------------------- ------------------------------------ CASH CASH HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS ---- --- --------- ---- --- --------- First Quarter $28.69 $23.38 $.16 $24.50 $21.50 $.15 Second Quarter 29.30 24.64 .16 24.88 22.00 .15 Third Quarter 29.47 22.79 .16 25.88 23.75 .15 Fourth Quarter 27.80 22.55 .16 27.75 22.88 .15 -6-

ITEM 6. SELECTED FINANCIAL DATA. The following selected financial data should be read in conjunction with the Financial Statements of the Company and notes thereto included elsewhere in this Annual Report. The income statement data and balance sheet data is for and as of the end of each of the years in the five-year period ended December 31, 2001, are derived from the audited Financial Statements of the Company. 2001 2000 1999 1998 1997 ------ ------ ------ ------ ------ Net Sales (1) $379,407,075 $348,967,486 $328,987,099 $301,831,128 $286,638,316 Income Before Income Taxes 17,142,193 47,565,673 40,269,981 33,590,229 35,723,277 Net Income (2) 8,787,193 28,135,673 23,927,981 19,474,229 21,350,277 Total Assets 232,780,365 222,721,466 215,990,877 198,982,290 188,974,415 Return on Assets (percent) 3.8% 12.6% 11.1% 9.8% 11.3% Noncurrent Liabilities 40,520,140 28,946,453 27,525,033 25,246,269 24,577,547 Stockholders' Equity 159,898.075 159,912,465 150,039,989 142,934,735 139,925,387 Return on Average Equity (percent) 5.4% 18.6% 16.5% 13.5% 16.0% Per Share of Common Stock: Basic Net Income $0.91 $2.85 $2.29 $1.77 $1.91 Diluted Net Income 0.91 2.85 2.29 1.76 1.91 Stockholders' Equity (3) 16.51 16.22 14.37 12.97 12.55 Cash Dividends Declared .64 .60 .57 .56 .54 Basic Weighted Average Shares Outstanding 9,684,510 9,859,610 10,444,076 11,023,934 11,153,091 Diluted Weighted Average Shares Outstanding 9,708,299 9,873,680 10,445,836 11,041,819 11,175,232 (1) Net sales for the years 2001, 2000 and 1999 were positively impacted by the acquisition of ACS/SIMCO in the third quarter of 1999. In addition, net sales for 2001 were also positively impacted by the acquisition of the North American Industrial Products and Kent Automotive Divisions in March 2001. (2) In 2001, the Company recorded non-recurring charges for the write-off of capitalized software and implementation costs related to an enterprise information system project which the Company decided to discontinue as well as a promotional program related to the acquisition of Premier operations. These charges reduced net income by $5,138,000 and $2,021,000, respectively. During 2000, the Company recorded a gain of $2,136,000 as a result of the sale of the Company's interest in a real estate investment. In 1999 and 1998, the Company recorded special charges for compensation arrangements related to management personnel reductions and retirements which reduced net income by $1,760,000 and $1,520,000, respectively. Additionally, in 1999, a gain of $554,000 was recorded on the sale of marketable securities. (3) These per share amounts were computed using basic weighted average shares outstanding for all periods presented. -7-

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION. RESULTS OF OPERATIONS Net sales for 2001 and 2000 increased 8.7% and 6.1 %, respectively, over the immediately preceding years. In 2001, Maintenance, Repair and Replacement (MRO) distribution net sales increased by $22.9 million, including $34.9 million in sales generated by the addition of the field and inside sales representatives from the Industrial Products Division (IPD) and Kent Automotive Division (Kent), of the North American business of Premier Farnell (Premier), acquired March 30, 2001. These sales gains more than offset reduced contributions by other MRO units. International distribution sales were also positively impacted by the sales of IPD and Kent, representing $6.3 million of the segment increase of $7.1 million. Lawson's Original Equipment Manufacturer (OEM) distribution net sales were relatively flat for 2001. The sales gains realized by our MRO and OEM distribution segments for 2000 resulted from the addition of new customers, a higher average order size throughout Lawson's businesses and from the full year impact of the mid-year 1999 acquisition of our subsidiary, ACS/SIMCO, now combined with Assembly Component Systems (ACS). Operating income for 2001 decreased $25.6 million, or 61%. The year and MRO results were adversely impacted by the $8.5 million write-off of an enterprise information system which the Company discontinued. Also impacting 2001 was the $3.4 million non-recurring promotional program put in place to support the newly acquired Premier business. Excluding these amounts, the MRO segment's 2001 operating profit was approximately $27.1 million compared to $39.3 million in 2000. The decrease, excluding special items, was due to slightly lower gross margins due to pricing inconsistencies on certain Premier product lines and higher selling, general and administrative expenses (S,G&A). In 2001, the Company incurred significantly higher S,G&A costs to expand the Company's national sales group, integrated approximately 400 sales professionals; incurred over $1 million of transition costs to integrate acquired inventory, realign existing warehouses and upgrade information systems and also had $1 million of additional goodwill amortization expense. OEM operating income was down due to lower gross margins resulting from significant pricing pressures. Operating income for 2000 was up approximately $4.4 million, or 11.8% over 1999. The MRO segment drove the operating income growth due to higher sales and cost containment efforts. OEM distribution also contributed to the earnings improvement. Net income for 2001 declined 68.8% from 2000 to $8.8 million, while diluted net income per share in 2001 decreased 68.1 % to $.91 from $2.85 in 2000. Results for 2001 were negatively impacted by the special charges and increased S,G&A expenses discussed above. Net income for 2000 increased 17.6% over 1999 to $28.1 million, while diluted net income per share in 2000 advanced 24.5 % to $2.85 from $2.29 in 1999. Sales gains from our MRO distribution segment discussed above, the after tax gain of $2.1 million on the sale of the Company's interest in a real estate investment, and cost containment efforts were primarily responsible for the increase in net income in 2000 over 1999. Excluding the $2.1 million gain noted above, net income for 2000 was approximately $26.0 million ($2.63 per diluted share), an advance of 3.4% over 1999 net income, exclusive of a $1.8 million special charge, for compensation arrangements related to management personnel retirements and a gain of $600,000 from the sale of marketable securities. Per share net income for 2001, 2000 and 1999 was positively affected by the Company's share repurchases discussed below. LIQUIDITY AND CAPITAL RESOURCES Cash flows provided by operations for 2001, 2000 and 1999 were $6.4 million, $22.9 million and $23.3 million, respectively. The decline in 2001 was due primarily to the decrease in net income noted above, as well as the impact of increases in accounts receivable and inventories largely associated with additional sales generated by the outside sales representatives of IPD and Kent, and lower operating liabilities. The slight decrease in 2000 was due primarily to the impact of lower operating liabilities which more than offset the gain in net income noted above. Current investments, cash flows from operations and the new $50 million unsecured line of credit have continued to -8-

be sufficient to fund operating requirements, cash dividends and capital improvements. Such internally generated funds and the new line of credit are also expected to finance the Company's future growth. Capital expenditures for 2001, 2000 and 1999, respectively, were $5.2 million, $3.4 million and $6.5 million. Consistent with prior years, capital expenditures were incurred primarily for new facilities, improvement of existing facilities and for the purchase of related equipment. Capital expenditures during 2001 primarily reflect purchases of computer related equipment and improvement of existing facilities and for the purchase of related equipment. Capital expenditures during 2000 primarily reflect purchases of computer related equipment, while in 1999, reflected costs incurred relative to the construction of a new Lawson outbound facility in Suwanee, Georgia and purchases of computer related equipment. Future obligations and commitments to make future payments under contracts consisted of the following as of December 31, 2001. (AMOUNTS IN THOUSANDS) 2007 AND 2002 2003 2004 2005 2006 THEREAFTER TOTAL --------------------------------------------------------------------------------------------- Revolving line of credit $ 4,000 $ 0 $ 0 $ 0 $ 10,000 $ 0 $ 14,000 Rental commitments 2,658 1,871 1,624 1,312 933 5,092 13,490 - ---------------------------------------------------------------------------------------------------------------------- Total contractual cash obligations $ 6,658 $ 1,871 $ 1,624 $ 1,312 $ 10,933 $ 5,092 $ 27,490 On March 30, 2001, the Company purchased certain assets of Premier Farnell's Cleveland based North American Industrial Products and Kent Automotive Divisions for approximately $28.4 million plus approximately $7.2 million for related inventories. The all-cash transaction was accounted for as a purchase; accordingly the accounts and transactions of the acquired business have been included in the consolidated financial statements since the date of acquisition. Under the agreement, the Company acquired the field sales, inside sales and customer service professionals, the customer accounts, certain administrative executives, and various intellectual properties, including trademarks and trade names of the divisions in certain territories. The Company incorporated into its existing operations, Premier Farnell's Premier Fastener, Rotanium Products, Certainium Alloys, CT Engineering, JI Holcomb and Kent Automotive business units in the United States, Canada, Mexico, Central America and the Caribbean. The assets acquired were recorded at fair values based on actual purchase cost of inventories and valuations of various intellectual properties, including trademarks and trade names of the IPD and Kent divisions. This acquisition did not require a significant investment by the Company in facilities or equipment. The acquisition generated approximately $41.2 million of incremental sales. As the Company only acquired portions of the inventory and sales professionals of the IPD and Kent businesses, the Company is unable to provide any meaningful pro forma information of operating results for 2001 or sales and operating results from the prior period. In the third quarter of 1999, the Company purchased, for cash, substantially all of the assets and liabilities of SunSource Inventory Management Company, Inc. (SunSource) and Hillman Industrial Division (Hillman), headquartered in Lenexa, Kansas, at a cost of approximately $10.5 million. SunSource and Hillman are distributors of fasteners to the original equipment marketplace. The former business operations of SunSource and Hillman are conducted by ACS. During 2001, the Company purchased 84,497 shares of its own common stock for approximately $2.2 million. These shares were acquired pursuant to the 1999 Board authorization to purchase up to 500,000 shares. During 2000, the Company purchased 501,268 shares of its own common stock for approximately $11.9 million. Of these purchases, 412,668 shares were acquired pursuant to the 1999 Board authorization and 88,600 shares represented the remaining shares authorized for purchase under the 1998 Board authorization to purchase up to 500,000 shares. During 1999, the Company purchased 459,900 shares of its own common stock for approximately $10.5 million. Of these purchases, 411,400 shares were acquired pursuant to the 1998 Board authorization and -9-

48,500 shares represented the remaining shares authorized for purchase under the 1996 Board authorization to purchase up to 1,000,000 shares. At December 31, 2001, 502,835 shares were available for purchase pursuant to Board authorizations in 2000 and 1999. No shares have been purchased pursuant to the 2000 Board authorization of 500,000 shares and 2,835 shares remain, relative to the 1999 Board authorization. Funds to purchase these shares were provided by investments and cash flows from operations. CRITICAL ACCOUNTING POLICIES The Company has disclosed its accounting policies in Note B to the consolidated financial statements. The following provides supplemental information to these accounting policies as well as information on the accounts requiring more significant estimates. ALLOWANCE FOR DOUBTFUL ACCOUNTS METHODOLOGY We evaluate the collectibility of our accounts receivable based on a combination of factors. In circumstances where we are aware of a specific customer's inability to meet its financial obligations to us (e.g., bankruptcy filings, substantial down-grading of credit ratings), we record a specific reserve for bad debts against amounts due to reduce the net recognized receivable to the amount we reasonably believe will be collected. For all other customers, we recognize reserves for bad debts based on our historical experience of bad debt write-offs as a percent of outstanding accounts receivable. If circumstances change (i.e., higher than expected defaults or an unexpected material adverse change in a major customer's ability to meet its financial obligations to us), our estimates of the recoverability of amounts due us could be revised by a material amount. INVENTORIES -- SLOW MOVING AND OBSOLESCENCE The Company carries a significant amount of inventories, which provides a competitive advantage in the Company's ability to fulfill the vast majority of its customers' orders the same day received. However, this strategy also increases the risk that portions of the inventory have decreased in value below their carrying cost. To reduce inventory to a lower of cost, or market value, the Company records a reserve for slow-moving and obsolete inventory. The Company defines obsolete as those inventory parts on hand which the Company plans to discontinue to offer to its customers. Slow-moving inventory is monitored by examining reports of parts which have not been sold for extended periods. The Company records the reserve needed based on its historical experience of how much the selling prices must be reduced to dispose of such obsolete or slow-moving products. If experience or market conditions change, estimates of the reserves needed could be revised by a material amount. IMPACT OF INFLATION AND CHANGING PRICES The Company has continued to pass on to its customers most increases in product costs and, accordingly, gross margins have not been materially impacted. The impact from inflation has been more significant on the Company's fixed and semi-variable operating expenses, primarily wages and benefits, although to a lesser degree in recent years due to moderate inflation levels. Although the Company expects that future costs of replacing warehouse and distribution facilities will rise due to inflation, such higher costs are not anticipated to have a material effect on future earnings. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The Company, through its foreign subsidiaries, distributes products in the United Kingdom, Canada and Mexico. As a result, the Company is from time to time exposed to market risk relating to the impact of foreign currency exchange rates. A hypothetical 10% adverse movement in exchange rates would decrease income by $238,000 in 2001. The Company also has $14 million outstanding as of December 31, 2001 under a revolving line of credit. As a result, the Company is exposed to market risk relating to interest rate movements. A hypothetical 10% adverse movement in interest rates would have increased interest expense by $68,000 in 2001. -10-

The Company maintains a portfolio of marketable securities, the majority of which are debt securities. As a result, the Company is exposed to market risk relating to interest rate movements. A hypothetical 10% adverse movement in interest rates would have no material impact on net income of the Company in 2001. -11-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The following information is presented in this report: Report of Independent Auditors Consolidated Balance Sheets as of December 31, 2001 and 2000. Consolidated Statements of Income for the Years ended December 31, 2001, 2000 and 1999. Consolidated Statements of Changes in Stockholders' Equity for the Years ended December 31, 2001, 2000 and 1999. Consolidated Statements of Cash Flows for the Years ended December 31, 2001, 2000 and 1999. Notes to Consolidated Financial Statements. Schedule II -12-

REPORT OF INDEPENDENT AUDITORS To the Stockholders and Board of Directors Lawson Products, Inc. We have audited the accompanying consolidated balance sheets of Lawson Products, Inc. as of December 31, 2001 and 2000, and the related consolidated statements of income, changes in stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2001. Our audits also included the financial statement schedule listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements and schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Lawson Products, Inc. at December 31, 2001 and 2000, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /s/Ernst & Young LLP Chicago, Illinois February 28, 2002 -13-

LAWSON PRODUCTS, INC. CONSOLIDATED BALANCE SHEETS DECEMBER 31, ------------------------------------------- 2001 2000 ---- ---- ASSETS Current assets: Cash and cash equivalents $ 6,986,556 $ 7,911,710 Marketable securities 1,737,129 29,972,654 Accounts receivable, less allowance for doubtful accounts (2001-$1,803,179; 2000-$1,658,585) 44,314,400 40,823,141 Inventories 65,542,890 55,228,380 Miscellaneous receivables 2,981,961 2,696,986 Prepaid expenses 9,027,089 6,658,687 Deferred income taxes 2,471,000 1,857,000 ----------------- ----------------- Total Current Assets 133,061,025 145,148,558 ----------------- ----------------- Property, plant and equipment, at cost, less allowances for depreciation and amortization (2001-$45,931,265; 2000-$41,571,230) 39,059,470 39,404,599 ----------------- ----------------- Other assets: Marketable securities - 400,832 Investments in real estate 945,000 705,000 Cash value of life insurance 16,390,758 15,795,812 Deferred income taxes 10,679,000 9,212,000 Goodwill, less accumulated amortization (2001-$1,674,529; 2000-$304,632) 28,809,722 2,431,347 Other 3,835,390 9,623,318 ----------------- ----------------- 60,659,870 38,168,309 ----------------- ----------------- $ 232,780,365 $ 222,721,466 ================= ================= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Revolving line of credit $ 4,000,000 $ - Accounts payable 6,947,987 6,730,250 Accrued expenses and other liabilities 21,414,163 24,517,530 Income taxes - 2,614,768 ----------------- ----------------- Total Current Liabilities 32,362,150 33,862,548 ----------------- ----------------- Non-current liabilities and deferred credits: Accrued liability under security bonus plans 19,296,652 17,968,018 Revolving line of credit 10,000,000 - Deferred compensation and other liabilities 11,223,488 10,978,435 ----------------- ----------------- 40,520,140 28,946,453 ----------------- ----------------- Stockholders' equity: Preferred Stock, $1 par value: Authorized-500,000 shares; Issued and outstanding-None - - Common Stock, $1 par value: Authorized-35,000,000 shares; Issued-2001-9,629,307; 2000-9,706,404 shares 9,629,307 9,706,404 Capital in excess of par value 912,921 761,725 Retained earnings 151,553,577 151,065,840 ----------------- ----------------- 162,095,805 161,533,969 Foreign currency translation adjustment (2,197,730) (1,621,504) ----------------- ----------------- Accumulated other comprehensive loss (2,197,730) (1,621,504) ----------------- ------------------ 159,898,075 159,912,465 ----------------- ----------------- $ 232,780,365 $ 222,721,466 ================= ================= See notes to consolidated financial statements -14-

LAWSON PRODUCTS, INC. CONSOLIDATED STATEMENTS OF INCOME YEAR ENDED DECEMBER 31, --------------------------------------------------------- 2001 2000 1999 ---------------- --------------- --------------- Net sales $ 379,407,075 $ 348,967,486 $ 328,987,099 Cost of goods sold 131,064,519 117,256,150 109,370,225 ---------------- --------------- --------------- Gross profit 248,342,556 231,711,336 219,616,874 Selling, general and administrative expenses 221,712,271 188,468,661 178,210,549 Special charges 8,527,101 - 2,932,365 Provision for doubtful accounts 1,901,379 1,419,120 1,065,811 ---------------- --------------- --------------- Operating Income 16,201,805 41,823,555 37,408,149 ---------------- --------------- --------------- Interest and dividend income 654,257 1,072,730 1,312,312 Interest expense (705,756) (7,959) (7,351) Gain from sale of partnership interest - 3,502,336 - Other income - net 991,887 1,175,011 1,556,871 ---------------- --------------- --------------- 940,388 5,742,118 2,861,832 Income Before Income Taxes 17,142,193 47,565,673 40,269,981 ---------------- --------------- --------------- Federal and state income taxes (benefit): Current 10,126,000 20,012,000 18,275,000 Deferred (1,771,000) (582,000) (1,933,000) ---------------- --------------- --------------- 8,355,000 19,430,000 16,342,000 ---------------- --------------- --------------- Net Income $ 8,787,193 $ 28,135,673 $ 23,927,981 ================ =============== ============== Net Income Per share of Common Stock Basic $ 0.91 $ 2.85 $ 2.29 ================ =============== =============== Diluted $ 0.91 $ 2.85 $ 2.29 ================ =============== =============== See notes to consolidated financial statements -15-

LAWSON PRODUCTS, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY COMMON CAPITAL ACCUMULATED STOCK, IN EXCESS OF OTHER $1 PAR PAR RETAINED COMPREHENSIVE COMPREHENSIVE VALUE VALUE EARNINGS LOSS INCOME ----- ----- -------- ---- ------ Balance at January 1, 1999 $ 10,663,822 $ 749,320 $ 132,208,644 $ (687,071) $ - Net income 23,927,981 23,927,981 Other comprehensive income, net of tax: Unrealized loss on marketable securities (696,000) (696,000) Adjustment for foreign currency translation 301,567 301,567 ------------- Other comprehensive loss for the year (394,433) -------------- Comprehensive income for the year $23,533,548 ============= Cash dividends declared (5,908,594) Purchase and retirement of common stock (459,900) (32,316) (10,027,484) -------------- ------------ --------------- ---------------- Balance at December 31, 1999 10,203,922 717,004 140,200,567 (1,081,504) ------------- ----------- -------------- ---------------- Net income 28,135,673 $ 28,135,673 Other comprehensive income, net of tax: Unrealized gain on marketable securities 28,000 28,000 Adjustment for foreign currency translation (568,000) (568,000) -------------- Other comprehensive loss for the year (540,000) -------------- Comprehensive income for the year $ 27,595,673 ============= Cash dividends declared (5,875,305) Stock issued under employee stock plans 3,750 80,625 Purchase and retirement of common stock (501,268) (35,904) (11,395,095) -------------- ------------ --------------- Balance at December 31, 2000 9,706,404 761,725 151,065,840 (1,621,504)) ============= =========== ============== ================= Net income 8,787,193 $ 8,787,193 Other comprehensive income, net of tax: Adjustment for foreign currency translation (576,226) (576,226) -------------- Other comprehensive loss for the year (576,226) -------------- Comprehensive income for the year $ 8,210,967 ============= Cash dividends declared (6,190,716) Stock issued under employee stock plans 7,400 159,100 Purchase and retirement of common stock (84,497) (7,904) (2,108,740) -------------- ------------ --------------- Balance at December 31, 2001 $ 9,629,307 $ 912,921 $ 151,553,577 $ (2,197,730) ============= =========== ============== ================ See notes to consolidated financial statements -16-

LAWSON PRODUCTS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS YEAR ENDED DECEMBER 31, --------------------------------------------------------- 2001 2000 1999 ----------------- ---------------- --------------- Operating activities: Net income $ 8,787,193 $ 28,135,673 $ 23,927,981 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 5,740,752 5,986,466 5,977,205 Amortization 2,405,261 677,197 550,254 Provision for allowance for doubtful accounts 1,901,379 1,419,120 1,065,811 Deferred income taxes (1,771,000) (582,000) (1,933,000) Deferred compensation and security bonus plans 3,399,366 3,922,781 4,651,635 Payments under deferred compensation and security bonus plans (2,395,036) (2,420,361) (2,263,293) Losses (Gains) from sale of marketable securities (13,276) 803 (902,960) Income from investments in real estate (480,000) (695,000) (544,000) Gain from sale of investment in real estate - (3,502,336) - Changes in operating assets and liabilities (Exclusive of effect of acquisition): Accounts receivable (5,392,638) (1,134,140) (4,276,788) Inventories (3,093,011) 256,152 (2,886,074) Prepaid expenses and other assets 3,258,709 (3,730,055) (5,757,891) Accounts payable and accrued expenses (2,970,360) (2,770,387) 4,290,592 Income taxes payable (2,614,768) (1,717,167) 1,049,135 Other (315,698) (961,691) 368,539 ----------------- ---------------- --------------- Net Cash Provided by Operating Activities 6,446,873 22,885,055 23,317,146 ---------------- --------------- --------------- Investing activities: Additions to property, plant and equipment (5,228,929) (3,392,458) (6,462,348) Purchases of marketable securities (13,267,926) (75,344,146) (122,774,913) Proceeds from sale of marketable securities 41,916,388 61,987,598 130,451,955 Proceeds from sale of investment in real estate - 7,400,000 - Acquisition of businesses, net of cash acquired (36,890,933) - (10,519,909) Other 240,000 200,000 490,000 ---------------- --------------- --------------- Net Cash Used In Investing Activities (13,231,400) (9,149,006) (8,815,215) ----------------- ---------------- ---------------- Financing Activities: Proceeds from revolving line of credit 71,800,000 - - Payments on revolving line of credit (57,800,000) - - Purchases of common stock (2,201,140) (11,932,267) (10,519,700) Proceeds from exercise of stock options 166,500 84,375 - Dividends paid (6,105,987) (5,951,058) (5,879,340) ----------------- ---------------- ---------------- Net Cash Provided by (Used in) Financing Activities 5,859,373 (17,798,950) (16,399,040) ---------------- ---------------- ---------------- Decrease in Cash and Cash Equivalents (925,154) (4,062,901) (1,897,109) Cash and Cash Equivalents at Beginning of Year 7,911,710 11,974,611 13,871,720 ---------------- --------------- --------------- Cash and Cash Equivalents at End of Year $ 6,986,556 $ 7,911,710 $ 11,974,611 ================ =============== =============== See notes to consolidated financial statements -17-

LAWSON PRODUCTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A -- DESCRIPTION OF BUSINESS Lawson Products, Inc. and subsidiaries principally are distributors of expendable parts and supplies for maintenance, repair and operation of equipment. NOTE B -- SUMMARY OF MAJOR ACCOUNTING POLICIES Principles of Consolidation. The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries, each of which is wholly owned. All inter-company accounts and transactions have been eliminated in consolidation. Revenue Recognition. Sales and associated cost of goods sold are recognized when products are shipped and title passes to customers. Shipping and Handling Fees and Costs. In the fourth quarter of 2000, the Company adopted Emerging Issues Task Force (EITF) No. 00-10 "Accounting for Shipping and Handling Fees and Costs." EITF No. 00-10 requires companies to reflect all amounts billed to customers in sales transactions as part of net sales. Costs related to shipping and handling fees are included on the Income Statement in the caption Selling, general and administrative expenses and totaled $11,460,000, $10,521,000, and $10,017,000 in 2001, 2000 and 1999, respectively. Use of Estimates. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates. Investment in Real Estate. The Company's investment in real estate representing a limited partnership interest is carried on the basis of the equity method. Marketable Securities. Marketable equity and debt securities are classified as available-for-sale and are carried at fair value, with the unrealized gains and losses, net of tax, recorded in stockholders' equity. Realized gains and losses, declines in value judged to be other-than-temporary, and interest and dividends are included in investment income. The cost of securities sold is based on the specific identification method. Inventories. Inventories (principally finished goods) are stated at the lower of cost (first-in, first-out method) or market. Property, Plant and Equipment. Provisions for depreciation and amortization are computed by the straight-line method for buildings using useful lives of 20 to 30 years and by the double declining balance method for machinery and equipment, furniture and fixtures and vehicles using useful lives of 3 to 10 years. Investment Tax Credits. Investment tax credits on assets leased to others (see Investment in Real Estate) are deferred and amortized over the useful life of the related asset. Cash Equivalents. The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Stock Options. Stock options are accounted for under Accounting Principles Board (APB) Opinion No. 25, "Accounting For Stock Issued to Employees." Under APB 25, no compensation expense is recognized because the exercise price of the stock options granted equals the market price of the underlying stock at the date of grant. -18-

Goodwill. Goodwill represents the cost of business acquisitions in excess of the fair value of identifiable net tangible assets acquired. Goodwill is amortized over 20 years using the straight-line method and the carrying value is reviewed for impairment annually. If this review indicates that goodwill is not expected to be recoverable based on the undiscounted cash flows of the entity acquired over the remaining amortization period, the Company's carrying value of the goodwill will be reduced. (See New Accounting Standards) Foreign Currency Translation. The financial statements of foreign entities have been translated in accordance with Statement of Financial Accounting Standards No. 52 and, accordingly, unrealized foreign currency translation adjustments are reflected as a component of stockholders' equity. Realized foreign currency transaction gains and losses were not significant for the years ended December 31, 2001, 2000 and 1999. Income per share. Basic EPS is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted EPS reflects the potential dilution from the exercise or conversion of securities into common stock, such as stock options. Reclassifications. Certain amounts have been reclassified in the 2000 and 1999 financial statements to conform with the 2001 presentation. New Accounting Standards. In June 1998, the Financial Accounting Standards Board (FASB) issued Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities." The Company adopted the new Statement effective January 1, 2001. Statement No. 133 required the Company to recognize all derivatives on the consolidated balance sheet at fair value. The adoption of Statement No. 133 did not have a significant effect on its results of operations or financial position. In June 2001, the FASB issued Statement No. 141, "Business Combinations" and Statement No. 142 "Goodwill and Other Intangibles," effective for fiscal years beginning after December 15, 2001. Under the new rules, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but subject to annual impairment tests. The Company will apply the new rules of accounting for goodwill and other intangible assets beginning in the first quarter of 2002. Application of the nonamortization provisions of the statement is expected to result in an increase in operating income of approximately $1.3 million for 2002. During 2002, the Company will perform the first of the required impairment tests of goodwill and indefinite lived intangible assets as of January 1, 2002. The Company has not determined what the effect of these tests will be on earnings and the financial position of the Company. NOTE C -- BUSINESS COMBINATION On March 30, 2001, the Company purchased certain assets of Premier Farnell's Cleveland based North American Industrial Products (IPD) and Kent Automotive (Kent) Divisions for approximately $28.4 million plus approximately $7.2 million for related inventories. This all-cash transaction was accounted for as a purchase; accordingly, the accounts and transactions of the acquired business have been included in the consolidated financial statements since the date of acquisition. Under the agreement, the Company acquired the field sales, inside sales and customer service professionals, the customer accounts, certain administrative executives, and various intellectual properties, including trademarks and trade names of the divisions in certain territories. The identifiable intangibles acquired in the acquisitions were recorded at an independent appraised value of approximately $1.4 million, which is recorded as a component of other assets. These intangibles are being amortized over a weighted average estimated life of 15.1 years. The remaining excess of purchase price over net assets acquired of approximately $27 million represents goodwill. The assets acquired were recorded at estimated fair values as determined by the Company's management based on information currently available. Accordingly, the allocation of the purchase price is subject to revision. As the Company only acquired inventory and sales professionals of the IPD and Kent businesses, the Company is unable to provide any meaningful pro forma information of prior period results. Net sales attributed to the acquired division represented approximately $41,252,000 for 2001. -19-

On July 1, 1999, the Company purchased substantially all of the assets and liabilities of SunSource Inventory Management Company, Inc. (SunSource) and Hillman Industrial Division (Hillman), at a cost of approximately $10.5 million with certain contingent purchase price adjustment features based on future operating results. This all-cash transaction was accounted for as a purchase; accordingly, the accounts and transactions of the acquired company have been included in the consolidated financial statements since the date of acquisition. The purchase price exceeded tangible net assets acquired by approximately $3.7 million. This goodwill was being amortized over 20 years using the straight-line method. SunSource and Hillman are distributors of fasteners to the original equipment marketplace. The former business operations of SunSource and Hillman are being conducted by Assembly Component Systems. NOTE D -- SPECIAL CHARGES In the fourth quarter of 2001, the Company wrote-off capitalized software and implementation costs of a discontinued enterprise information system project. This write-off represents a non-cash charge of $8,527,000 ($5,138,000 net of tax benefits). In the second and fourth quarter of 1999, the Company recorded special charges of $2,053,000 and $879,000, respectively. These charges were for severance and early retirement benefits to several members of management. These benefits will be paid through 2004. Payments against these accruals of approximately $575,000, $1,033,000 and $323,000 were made in 2001, 2000 and 1999, respectively. In addition, an adjustment to reduce the accrual for approximately $31,000 was made in 2001 to reflect a change in the estimated total severance payments required. In the fourth quarter of 1998, the Company recorded a special charge of $2,621,000 for severance and early retirement benefits for several members of management. These benefits will be paid through 2003. Payments of approximately $309,000, $626,000 and $1,069,000 were made in 2001, 2000 and 1999 against this accrual, respectively. In addition, an adjustment to reduce the accrual for approximately $129,000 was made in 1999 to reflect a change in the estimated total severance payments required. NOTE E -- MARKETABLE SECURITIES The following is a summary of the Company's investments at December 31 which are classified as available-for-sale. The contractual maturity of all marketable securities at December 31, 2001 is less than one year. Gross Gross Estimated Unrealized Unrealized Fair (In thousands) Cost Gains Losses Value 2001 - -------------------------------------------------------------------------------------------------------------- Obligations of states and political subdivisions $ - $- $ - $ - Foreign government securities 1,737 - - 1,737 Other debt securities - - - - - -------------------------------------------------------------------------------------------------------------- Total debt securities $1,737 $- $ - $1,737 ============================================================================================================== 2000 - -------------------------------------------------------------------------------------------------------------- Obligations of states and political subdivisions $ 3,454 $5 $ 5 $ 3,454 Foreign government securities 7,797 - - 7,797 Other debt securities 19,122 - - 19,122 - -------------------------------------------------------------------------------------------------------------- Total debt securities $30,373 $5 $ 5 $30,373 ============================================================================================================== The gross realized gains on sales of marketable securities totaled: $13,000, $1,000 and $992,000 in 2001, 2000 and 1999, respectively, and the gross realized losses totaled $0, $2,000 and $89,000, respectively. The net adjustment to unrealized holding gains included as a separate component of stockholders' equity, net of taxes, totaled $28,000 in 2000 while in 1999, the net adjustment to unrealized holding losses included as a separate component of stockholders' equity, net of taxes, totaled $696,000. -20-

NOTE F -- PROPERTY, PLANT AND EQUIPMENT The cost of property, plant and equipment consists of: 2001 2000 - ------------------------------------------------------------------------------- Land $6,597,182 $6,649,440 Buildings and improvements 40,905,512 39,145, 917 Machinery and equipment 31,214,970 28,955,498 Furniture and fixtures 5,557,969 5,231,947 Vehicles 252,251 217,345 Construction in Progress 462,851 775,682 - ------------------------------------------------------------------------------- $84,990,735 $80,975,829 ================================================================================ NOTE G -- INVESTMENT IN REAL ESTATE The Company is a limited partner in one real estate limited partnership. An officer and member of the Board of Directors of the Company has a 1.5% interest as a general partner in this partnership. This interest is subordinated to the Company's interests in distributable cash. In the fourth quarter of 2000, the Company sold its interest in a real estate partnership for $7,400,000 to the general partners, of which one is an officer and member of the Board of Directors, resulting in an after-tax gain to the Company of $2,136,000. A special committee of outside directors of the Board of Directors approved the sales price after receiving independent appraisals of the property sold. NOTE H -- ACCRUED EXPENSES AND OTHER LIABILITIES Accrued expenses and other liabilities consist of the following: 2001 2000 - -------------------------------------------------------------------------------- Salaries, commissions and other compensation $ 5,547,617 $ 7,490,351 Accrued special charges 1,458,054 2,671,088 Accrued and withheld taxes, other than income taxes 2,607,879 2,344,955 Accrued profit sharing contributions 2,843,621 2,606,254 Accrued self-insured health benefits 1,300,000 1,300,000 Cash dividends payable 1,540,689 1,455,961 Other 6,116,303 6,648,921 - -------------------------------------------------------------------------------- $21,414,163 $24,517,530 ================================================================================ NOTE I-- LINE OF CREDIT On February 21, 2001, the Company entered into a $50 million unsecured multi-currency line of credit. The Company had $14 million outstanding under the line at December 31, 2001 at an interest rate of 3.06 percent. Amounts outstanding under the line carried interest at 1.5% below the prime rate or .75% over the LIBOR rate as determined by the Company. The line matures on February 21, 2006. Since the line's interest rate floats on a variable basis with either prime or LIBOR, the carrying value of the debt approximates fair value. The Company has classified $4 million of the amount outstanding as current based on the Company's ability and intent to satisfy this portion of the line amount within the next year. The line requires the Company to meet certain covenants, all of which were met on December 31, 2001. The Company paid interest of $605,000 in 2001. NOTE J -- STOCK PLANS In 2001 and 2000, the Company granted Stock Performance Rights (SPRs) pursuant to an incentive plan adopted in 2000. These SPRs have an exercise price ranging from $24.60 to $28.50 per share. These SPRs vest at 20% per year and entitle the recipient to receive a cash payment equal to the difference between the SPR price and -21-

the market value of the Company's common stock when the SPRs are surrendered. No significant compensation expense for the SPRs was incurred in 2001 and 2000. Additional information with respect to SPRs is summarized as follows: Average SPR Exercise Price # of SPRs - -------------------------------------------------------------------------------- Outstanding January 1, 2000 $-- -- Granted 26.50 71,250* - -------------------------------------------------------------------------------- Outstanding December 31, 2000 26.50 71,250 Granted 27.08 149,000 - -------------------------------------------------------------------------------- Outstanding December 31, 2001 $26.90 220,250 ================================================================================ * Includes 14,250 SPRs vested at December 31, 2001 The Company also has an Incentive Stock Plan As Amended (Plan), which provides for the issuance of shares of Common Stock to non-employee directors, officers and key employees pursuant to stock options, SPRs, stock purchase agreements and stock awards. 636,627 shares of Common Stock were available for issuance under the Plan as of December 31, 2001. The Plan permits the grant of incentive stock options, subject to certain limitations, with substantially the same terms as non-qualified stock options. Non-employee directors are not eligible to receive incentive stock options. Stock options are not exercisable within six months from date of grant and may not be granted at prices less than the fair market value of the shares at the dates of grant. Benefits may be granted under the Plan through December 16, 2006. Additional information with respect to the Plan is summarized as follows: Average Price Option Shares - -------------------------------------------------------------------------------- Outstanding January 1,1999 $23.34 270,890 Granted 22.44 9,000 Exercised -- -- Canceled or expired 23.56 (9,700) - -------------------------------------------------------------------------------- Outstanding December 31,1999 24.18 270,190 Granted 23.56 11,000 Exercised 22.50 (3,750) Canceled or expired 27.50 (97,050) - -------------------------------------------------------------------------------- Outstanding December 31, 2000 22.86 180,390 Granted -- -- Exercised 22.50 (7,400) Canceled or expired -- -- - -------------------------------------------------------------------------------- Outstanding December 31, 2001 $22.87 172,990 ================================================================================ Exercisable options at December 31, 2001 $22.79 157,990 December 31, 2000 $22.71 157,890 December 31,1999 $24.44 216,139 As of December 31, 2001, the Company had the following outstanding options: Exercise Price $22.44-$23.56 $26.75 $27.00 - -------------------------------------------------------------------------------- Options Outstanding 162,990 9,000 1,000 Weighted Average Exercise Price $23.24 $26.75 $27.00 Weighted Average Remaining Life 4.6 6.3 5.6 Options Exercisable 150,240 6,750 1,000 Weighted Average Exercise Price $23.52 $26.75 $27.00 -22-

Disclosure of pro forma information regarding net income and net income per share is required by FASB Statement No. 123, "Accounting for Stock-Based Compensation," and has been determined as if the Company had accounted for its employee stock options under the fair value method of that Statement. The fair value of these options was estimated at the date of grant using the Black-Scholes options pricing model. The Company's weighted average fair value of options granted and assumptions used, were as follows: 2001 2000 1999 - -------------------------------------------------------------------------------- Risk-free interest rate - 5.22% 6.79% Dividend yield - 2.00% 2.00% Stock price volatility factor - .19 .18 Weighted average expected life (years) - 8 8 Weighted average fair value of options granted - $6.25 $6.95 For purposes of pro forma disclosures, the estimated fair value of options granted is amortized to expense over the option's vesting period. The pro forma effect on net income is not representative of the pro forma effect on net income in future years because grants made in 1996 and later years have an increasing vesting period. The Company's pro forma information consisted of the following: 2001 2000 1999 - ----------------------------------------------------------------------------------------- Net income - as reported $8,787,193 $28,135,673 $23,927,981 Net income - pro forma 8,738,000 27,968,000 23,565,000 Basic earnings per share - as reported .91 2.85 2.29 Diluted earnings per share - as reported .91 2.85 2.29 Basic earnings per share - pro forma .90 2.84 2.26 Diluted earnings per share - pro forma .90 2.83 2.26 NOTE K -- PROFIT SHARING AND SECURITY BONUS PLANS The Company and certain subsidiaries have a profit sharing plan for office and warehouse personnel. The amounts of the companies' annual contributions are determined by the respective boards of directors subject to limitations based upon current operating profits (as defined) or participants' compensation (as defined). The plan also has a 401 (k) defined contribution saving feature. This feature, available to all participants, was provided to give employees a pre-tax investment vehicle to save for retirement. The Company does not match the contributions made by plan participants. The Company and its subsidiaries also have in effect security bonus plans for the benefit of their regional managers and independent sales representatives, under the terms of which participants are credited with a percentage of their yearly earnings (as defined). Of the aggregate amounts credited to participants' accounts, 25% vests after five years and an additional 5% vests each year thereafter. For financial reporting purposes, amounts are charged to operations over the vesting period. Provisions for profit sharing and security bonus plans aggregated $5,363,000, $5,222,000 and $5,051,000 for the years ended December 31, 2001, 2000 and 1999, respectively. NOTE L -- INCOME TAXES Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. In addition, deferred income taxes include net operating loss carryforwards of a foreign subsidiary which do not expire. The valuation allowance has been provided since there is no assurance that the benefit of the net operating loss -23-

carryforwards will be realized. Significant components of the Company's deferred tax assets and liabilities as of December 31 are as follows: Deferred Tax Assets: 2001 2000 - -------------------------------------------------------------------------------- Compensation and benefits $11,938,000 $12,257,000 Inventory 2,363,000 1,847,000 Net operating loss carryforwards of subsidiary 5,106,000 4,718,000 Accounts receivable 557,000 519,000 Other 1,183,000 873,000 - -------------------------------------------------------------------------------- Total Deferred Tax Assets 21,147,000 20,214,000 Valuation allowance for deferred tax assets (5,106,000) (4,718,000) - -------------------------------------------------------------------------------- Net Deferred Tax Assets 16,041,000 15,496,000 - -------------------------------------------------------------------------------- Deferred Tax Liabilities: - -------------------------------------------------------------------------------- Property, plant & equipment 675,000 883,000 Investment in real estate 1,767,000 1,949,000 Other 449,000 1,595,000 - -------------------------------------------------------------------------------- Total Deferred Tax Liabilities 2,891,000 4,427,000 - -------------------------------------------------------------------------------- Total Net Deferred Tax Assets $13,150,000 $11,069,000 ================================================================================ Net deferred tax assets include the tax impact of items in comprehensive income of $1,183,000 and $873,000 at December 31, 2001 and 2000, respectively. Income (loss) before income taxes for the years ended December 31, consisted of the following: 2001 2000 1999 - -------------------------------------------------------------------------------- United States $18,522,707 $49,259,320 $41,494,677 Foreign (1,380,514) (1,693,647) (1,224,696) - -------------------------------------------------------------------------------- $17,142,193 $47,565,673 $40,269,981 ================================================================================ The provisions for income taxes for the years ended December 31, consisted of the following: 2001 2000 1999 - -------------------------------------------------------------------------------- Current Federal $8,348,000 $16,945,000 $15,187,000 State 1,778,000 3,067,000 3,088,000 - -------------------------------------------------------------------------------- 10,126,000 20,012,000 18,275,000 Deferred benefit (1,771,000) (582,000) (1,933,000) - -------------------------------------------------------------------------------- $8,355,000 $19,430,000 $16,342,000 ================================================================================ The reconciliation between the effective income tax rate and the statutory federal rate is as follows: 2001 2000 1999 - -------------------------------------------------------------------------------- Statutory federal rate 35.0% 35.0% 35.0% Increase (decrease) resulting from: State income taxes, net of federal income tax benefit 6.7 4.2 5.0 Foreign losses 5.1 1.5 1.5 Other items, net 1.9 .1 (.9) - -------------------------------------------------------------------------------- Provision for income taxes 48.7% 40.8% 40.6% ================================================================================ Income taxes paid for the years ended December 31, 2001, 2000, and 1999 amounted to $13,399,000, $21,212,000 and $17,157,000, respectively. -24-

NOTE M -- COMMITMENTS The Company's minimum rental commitments, principally for equipment, under noncancelable leases in effect at December 31, 2001, amounted to approximately $13,490,177. Such rentals are payable as follows: 2002 - $2,657,673; 2003 - $1,871,082; 2004 - $1,624,366; 2005 - $1,312,326; 2006 - $932,460; and 2007 and thereafter- $5,092,270. Total rental expense for the years ended December 31, 2001, 2000 and 1999 amounted to $3,090,000, $2,783,000 and $2,203,000, respectively. NOTE N -- INCOME PER SHARE The computation of basic and diluted earnings per share consisted of the following: Year ended December 31 (In thousands, except per share data) 2001 2000 1999 - -------------------------------------------------------------------------------- Numerator: Net income $8,787 $28,136 $23,928 ================================================================================ Denominator: Denominator for basic income per share - weighted average shares 9,684 9,860 10,444 Effect of dilutive securities: Stock option plans 25 14 2 - -------------------------------------------------------------------------------- Denominator for diluted income per share - adjusted weighted average shares 9,709 9,874 10,446 ================================================================================ Basic income per share $0.91 $2.85 $2.29 ================================================================================ Diluted income per share $0.91 $2.85 $2.29 ================================================================================ NOTE 0 -- SEGMENT REPORTING The Company has three reportable segments: Maintenance, Repair and Replacement (MRO) distribution, Original Equipment Manufacturer (OEM) distribution and manufacturing, and international distribution. The operations of the Company's MRO distribution segment distribute a wide range of MRO parts to repair and maintenance organizations by the Company's force of independent sales agents. The operations of the Company's OEM segment manufacture and distribute component parts to large OEM manufacturers through a network of independent sales agents as well as internal sales employees. The international distribution segment consists of the Company's distribution businesses in Canada, Mexico, and the United Kingdom of principally MRO parts. The Company's reportable segments are distinguished by the nature of products distributed and sold, types of customers, and geographical location. The Company evaluates performance and allocates resources to reportable segments primarily based on operating income. The accounting polices of the reportable segments are the same as those described in the summary of significant policies except that the Company records its federal and state deferred tax assets and liabilities at corporate. Intersegment sales are not significant. Financial information for the Company's reportable segments consisted of the following: -25-

Year ended December 31 2001 2000 1999 - ------------------------------------------------------------------------------------------- Net sales MRO distribution $306,917,045 $283,969,540 $274,040,132 OEM distribution 52,350,227 52,001,028 42,435,187 International distribution 20,139,803 12,996,918 12,511,780 - ------------------------------------------------------------------------------------------- Consolidated total $379,407,075 $348,967,486 $328,987,099 - ------------------------------------------------------------------------------------------- Operating Income (loss) MRO distribution $15,167,119 $39,336,157 $35,084,960 OEM distribution 2,165,731 4,052,210 3,465,508 International distribution (1,131,045) (1,564,812) (1,142,319) - ------------------------------------------------------------------------------------------- Consolidated total $16,201,805 $41,823,555 $37,408,149 - ------------------------------------------------------------------------------------------- Capital expenditures MRO distribution $4,496,163 $2,761,755 $5,681,211 OEM distribution 683,937 570,225 520,536 International distribution 48,829 60,478 260,601 - ------------------------------------------------------------------------------------------- Consolidated total $5,228,929 $3,392,458 $6,462,348 - ------------------------------------------------------------------------------------------- Depreciation and amortization MRO distribution $6,553,422 $5,176,344 $5,074,905 OEM distribution 1,060,392 1,130,394 1,011,618 International distribution 532,199 356,925 440,936 - ------------------------------------------------------------------------------------------- Consolidated total $8,146,013 $6,663,663 $6,527,459 - ------------------------------------------------------------------------------------------- Total assets MRO distribution $165,126,824 $160,169,065 $155,376,398 OEM distribution 34,183,609 32,181,862 32,763,599 International distribution 20,319,932 19,301,539 17,677,880 - ------------------------------------------------------------------------------------------- Segment total 219,630,365 211,652,466 205,817,877 - ------------------------------------------------------------------------------------------- Corporate 13,150,000 11,069,000 10,173,000 - ------------------------------------------------------------------------------------------- Consolidated total $232,780,365 $222,721,466 $215,990,877 =========================================================================================== The reconciliation of segment profit to consolidated income before income taxes consisted of the following: Year ended December 31 2001 2000 1999 - ----------------------------------------------------------------------------------------- Total operating income for reportable segments $16,201,805 $41,823,555 $37,408,149 Interest and dividend income 654,257 1,072,730 1,312,312 Interest expense (705,756) (7,959) (7,351) Gain from sale of partnership interest -- 3,502,336 -- Other - net 991,887 1,175,011 1,556,871 - ----------------------------------------------------------------------------------------- Income before income taxes $17,142,193 $47,565,673 $40,269,981 ======================================================================================== Financial information related to the Company's operations by geographic area consisted of the following: Year ended December 31 2001 2000 1999 - -------------------------------------------------------------------------------- Net sales United States $359,267,272 $335,970,568 $316,475,319 Canada 13,998,416 7,980,367 7,154,424 Other foreign countries 6,141,387 5,016,551 5,357,356 - -------------------------------------------------------------------------------- Consolidated total $379,407,075 $348,967,486 $328,987,099 ================================================================================ -26-

December 31 2001 2000 1999 - -------------------------------------------------------------------------------- Long-lived assets United States $61,173,006 $39,155,963 $42,509,070 Canada 6,300,247 2,154,539 2,312,377 Other foreign countries 395,939 525,444 778,652 - -------------------------------------------------------------------------------- Consolidated total $67,869,192 $41,835,946 $45,600,099 ================================================================================ Net sales are attributed to countries based on the location of customers. Long-lived assets consist of total property, plant and equipment and intangible assets such as goodwill. NOTE P -- SUMMARY OF UNAUDITED QUARTERLY RESULTS OF OPERATIONS Unaudited quarterly results of operations for the years ended December 31, 2001 and 2000 are summarized as follows: Quarter ended 2001 Mar. 31 Jun. 30 Sept. 30 Dec. 31(1,2) - ---------------------------------------------------------------------------------------------------------------------- (In thousands, except per share data) Net sales (3) $83,650 $98,980 $100,000 $96,777 Cost of goods sold(3) 29,937 33,888 35,256 31,984 Income (loss) before income taxes(3) 5,825 6,927 5,838 (1,448) Provision for income taxes 2,587 2,939 2,525 304 Net income (loss) 3,238 3,988 3,313 (1,752) Net income (loss) per share of common stock Basic .33 .41 .34 (.18) Diluted .33 .41 .34 (.18) Diluted weighted average shares outstanding 9,730 9,740 9,715 9,652 Quarter ended 2000 Mar. 31 Jun. 30 Sept. 30 Dec. 31(1,4) - ---------------------------------------------------------------------------------------------------------------------- (In thousands, except per share data) Net sales $86,280 $89,632 $88,064 $84,991 Cost of goods sold 29,946 30,458 30,094 26,758 Income before income taxes 10,908 11,381 10,736 14,541 Provision for income taxes 4,463 4,664 4,358 5,945 Net income 6,445 6,717 6,378 8,596 Net income per share of common stock Basic .64 .68 .66 .89 Diluted .64 .68 .65 .88 Diluted weighted average shares outstanding 10,093 9,895 9,718 9,729 1 Inventories and cost of goods sold during interim periods are determined through the use of estimated gross profit rates. The difference between actual and estimated gross profit rates used for interim periods is adjusted in the fourth quarter. This adjustment increased net income by approximately $2,055,000 and $1,349,000 in 2001 and 2000, respectively. 2 The fourth quarter included non-recurring charges for the write-off of capitalized software and implementation costs of an enterprise information system project which the Company decided to discontinue as well as a non-recurring promotional program related to the acquisition of Premier operations. These charges reduced net income by $5,138,000 and $2,021,000, respectively. 3 The Company acquired the business of Premier as of March 30, 2001. The results of the acquisition are included in the quarterly results since the date of the acquisition. 4 The fourth quarter includes a gain of $2,136,000, net of income taxes, relative to the sale of the Company's interest in a real estate investment. -27-

SCHEDULE II LAWSON PRODUCTS, INC. AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS BALANCE AT CHARGED TO BEGINNING OF COSTS AND DEDUCTIONS- BALANCE AT END DESCRIPTION PERIOD EXPENSES DESCRIBE (A) OF PERIOD ----------- ------ -------- ------------ --------- Allowance deducted from assets to which it applies: Allowance for doubtful accounts: Year ended December 31, 2001 $1,658,585 $1,901,379 $1,756,785 $1,803,179 Year ended December 31, 2000 1,601,649 1,419,120 1,362,184 1,658,585 Year ended December 31, 1999 1,450,067 1,065,811 914,229 1,601,649 Note A - Uncollected receivables written off, net of recoveries. -28-

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. a. Directors --------- The information required by this Item is set forth in the Company's Proxy Statement for the Annual Meeting of Stockholders to be held on May 14, 2002, under the caption "Election of Directors," which information is incorporated herein by reference. b Executive Officers ------------------ The information required by this Item is set forth in Item 1 - Business under "Executive Officers of the Registrant." ITEM 11. EXECUTIVE COMPENSATION. The information required by this Item is set forth in the Company's Proxy Statement for the Annual Meeting of Stockholders to be held on May 14, 2002, under the caption "Remuneration of Executive Officers," which information is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information required by this Item is set forth in the Company's Proxy Statement for the Annual Meeting of Stockholders to be held on May 14, 2002 under the caption "Securities Beneficially Owned by Principal Stockholders and Management," which information is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information required by this Item is set forth in the Company's Proxy Statement for the Annual Meeting of stockholders to be held on May 14, 2002 under the caption "Election of Directors," which information is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) (1) Financial Statements -------------------- The following information is presented in this report: Consolidated Balance Sheets as of December 31, 2001 and 2000. Consolidated Statements of Income for the Years ended December 31, 2001, 2000 and 1999. Consolidated Statements of Changes in Stockholders' Equity for the Years ended December 31, 2001, 2000 and 1999. Consolidated Statements of Cash Flows for the Years ended December 31, 2001, 2000 and 1999. -29-

Notes to Consolidated Financial Statements. (2) Financial Statement Schedule ---------------------------- The following consolidated financial statement schedule of Lawson Products, Inc. and subsidiaries is included in Item 14(d): Schedule II - Valuation and Qualifying Accounts is submitted with this report. All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not submitted because they are not applicable or are not required under Regulation S-X or because the required information is included in the financial statements or notes thereto. (a) (3) Exhibits. -------- 3(a) Certificate of Incorporation of the Company, as amended, incorporated herein by reference to Exhibit 3(a) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1988. 3(b) Amended and Restated By-laws of the Company. *10(c)(1) Lawson Products, Inc. Incentive Stock Plan, incorporated herein by reference to Appendix A to the Company's Proxy Statement for the Annual Meeting of Stockholders held on May 11, 1999. *10(c)(2) Salary Continuation Agreement between the Company and Mr. Sidney L. Port dated January 7, 1980 incorporated herein by reference from Exhibit 10(c)(2) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991. *10(c)(3) Employment Agreement between the Company and Mr. Jerome Shaffer, incorporated herein by reference from Exhibit 10(c)(9) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1985. *10(c)(3.1)First Amendment to Employment Agreement dated as of August 1, 1996, incorporated herein by reference from Exhibit 10(c)(6.1) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. *10(c)(4) Employment Agreement between the Company and Jeffrey B. Belford dated March 10, 1983, incorporated herein by reference from Exhibit 10(c)(5) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999. *10(c)(5) Amended and Restated Executive Deferral Plan, incorporated herein by reference from Exhibit 10(c)(7) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995. *10(c)(6) Employment Agreement dated July 21, 1994 between the Company and Roger F. Cannon, incorporated herein by reference to Exhibit 10(c)(8) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998. *10(c)(7) Agreement between the Company and Bernard Kalish dated July 31, 1999, incorporated herein by reference from Exhibit 10(c)(8) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999. - -------- *Indicates management employment contracts or compensatory plans or arrangements. -30-

10(c)(8) Lawson Products, Inc. Stock Performance Plan, incorporated herein by reference from Exhibit 10(c)(8) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000. 21 Subsidiaries of the Company. 23 Consent of Ernst & Young LLP. (b) Reports on Form 8-K ------------------- No reports on Form 8-K were filed during the fourth quarter of the fiscal year covered by this Report. (c) Exhibits -------- See item 14(a)(3) above for a list of exhibits to this report. (d) Schedules --------- See item 14(a)(2) above for a list of schedules filed with this report. -31-

SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. LAWSON PRODUCTS, INC. Date: March 21, 2002 By /s/ Robert J. Washlow ----------------------------------- Robert J. Washlow, Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below this 21st day of March, 2002, by the following persons on behalf of the registrant and in the capacities indicated. SIGNATURE TITLE /s/ Robert J. Washlow Chairman of the Board, Chief Executive - --------------------------------- Officer and Director Robert J. Washlow (principal executive officer) /s/ Joseph L. Pawlick Chief Financial Officer - --------------------------------- (principal financial officer) Joseph L. Pawlick /s/ Victor G. Galvez Controller - --------------------------------- (principal accounting officer) Victor G. Galvez /s/ Jerome Shaffer Vice President, Treasurer and Director - --------------------------------- Jerome Shaffer /s/ James T. Brophy Director - --------------------------------- James T. Brophy /s/ Bernard Kalish Director - --------------------------------- Bernard Kalish /s/ Robert M. Melzer Director - --------------------------------- Robert M. Melzer /s/ Ronald B. Port Director - --------------------------------- Ronald B. Port /s/ Sidney L. Port Director - --------------------------------- Sidney L. Port /s/ Robert G. Rettig Director - --------------------------------- Robert G. Rettig /s/ Mitchell H. Saranow Director - --------------------------------- Mitchell H. Saranow -32-

EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ------ ---------------------- 3(a) Certificate of Incorporation of the Company, as amended, incorporated herein by reference to Exhibit 3(a) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1988. 3(b) Amended and Restated By-laws of the Company. 10(c)(1) Lawson Products, Inc. Incentive Stock Plan, incorporated herein by reference to Appendix A to the Company's Proxy Statement for the Annual Meeting of Stockholders held on May 11, 1999. 10(c)(2) Salary Continuation Agreement between the Company and Mr. Sidney L. Port, dated January 7, 1980, incorporated herein by reference from Exhibit 10(c)(2) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991. 10(c)(3) Employment Agreement between the Company and Mr. Jerome Shaffer, incorporated herein by reference from Exhibit 10(c)(9) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1985. 10(c)(3.1) First Amendment to Employment Agreement dated as of August 1, 1996, incorporated herein by reference from Exhibit 10(c)(6.1) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. 10(c)(4) Employment Agreement between the Company and Jeffrey B. Belford dated March 10, 1983, incorporated herein by reference to Exhibit 10(c)(5) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999. 10(c)(5) Amended and Restated Executive Deferral Plan, incorporated herein by reference from Exhibit 10(c)(7) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995. 10(c)(6) Employment Agreement dated July 21, 1994 between the Company and Roger F. Cannon, incorporated herein by reference to Exhibit 10(c)(8) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998. 10(c)(7) Agreement between the Company and Bernard Kalish dated July 31, 1999, incorporated herein by reference from Exhibit 10(c)(8) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999. 10(c)(8) Lawson Products, Inc. Stock Performance Plan, incorporated herein by reference from Exhibit 10(c)(8) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000. 21 Subsidiaries of the Company. 23 Consent of Ernst & Young LLP. -33-

EXHIBIT 3(b) LAWSON PRODUCTS, INC. AMENDED AND RESTATED BY-LAWS * * * ARTICLE I OFFICES Section 1.1. Registered Office. The registered office of the Corporation shall be maintained in the City of Dover, State of Delaware, and the registered agent in charge thereof is United States Corporation Company. Section 1.2. Other Offices. The Corporation may also have an office in the City of Des Plaines, State of Illinois and at such other places as the Board of Directors may from time to time determine or the business of the Corporation may require. ARTICLE II STOCKHOLDERS MEETINGS Section 2.1. Place of Meetings. All meetings of the stockholders, whether annual or special, shall be held at the offices of the Corporation in Des Plaines, Illinois, or at such other place as may be fixed from time to time by the Board of Directors. Section 2.2. Annual Meetings. An annual meeting of the stockholders shall be held in May in each year on such date and at such time as may from time to time be determined by the Board of Directors, at which the stockholders shall elect directors, and transact such other business as may properly be brought before the meeting. Section 2.3. Notice of Meeting. (a) Written notice of the annual meeting stating the place, date and hour of the meeting, shall be given not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting, and the means of remote communication, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such meeting. (b) Notice to stockholders may be given by writing in paper form or solely in the form of electronic transmission as permitted by this Section 2.3. If given by writing in paper form, notice may be delivered personally, may be delivered by mail, or, with the consent of the stockholder entitled to receive notice, may be delivered by facsimile telecommunication or any of the other means of electronic transmission specified in this Section 2.3. If mailed, such notice shall be delivered by postage prepaid envelope directed to each stockholder at such stockholder's address as it appears in the records of the Corporation. Any notice to stockholders given by the Corporation shall be

effective if delivered or given by a form of electronic transmission to which the stockholder to whom the notice is given has consented. Notice given pursuant to this subsection shall be deemed given: (1) if by facsimile telecommunication, when directed to a facsimile telecommunication number at which the stockholder has consented to receive notice; (2) if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice; (3) if by posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of (A) such posting and (B) the giving of such separate notice; and (4) if by any other form of electronic transmission, when directed to the stockholder. An affidavit of the secretary or an assistant secretary or of the transfer agent or other agent of the Corporation that the notice has been given by personal delivery, by mail, or by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein. Section 2.4. Stockholder Nominations and Proposals. At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before an annual meeting. To be properly brought before an annual meeting, business must be (i) specified in the notice of the meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (ii) otherwise properly brought before the meeting by or at the direction of the Board of Directors or (iii) otherwise properly brought before the meeting by a stockholder of the Corporation who was a stockholder of record at the time of giving of notice provided for in this Section, who is entitled to vote at the meeting and who complied with the notice procedures set forth in this Section. For business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation at the principal executive office of the Corporation. To be timely, a stockholder's notice shall be delivered not less than 90 days nor more than 110 days prior to the first anniversary of the preceding year's meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from such anniversary date, notice by the stockholder, to be timely, must be so delivered not later than the 10th day following the day on which public announcement (as defined herein) of the date of such meeting is first made. Such stockholder's notice shall set forth as to each matter the stockholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting and any interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (ii) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the proposal is made (A) the name and address of such stockholder, as they appear on the Corporation's books, and the name and address of such beneficial owner, (B) the class and number of shares of the Corporation which are owned beneficially and of record by such stockholder and such beneficial owner as of the date such notice is given, and (C) a representation that such stockholder intends to appear in person or by proxy at the meeting to propose such business; (iii) in the event that such business includes a proposal to amend either the Certificate of Incorporation or the Bylaws of the Corporation, the language of the proposed amendment and (iv) if the stockholder intends to solicit proxies in support of such stockholder's proposal, a representation to that effect. The foregoing notice requirements shall be deemed satisfied by a stockholder if the stockholder has notified the Corporation of his or her intention to present a proposal at an annual meeting and such stockholder's proposal has been included in a proxy statement that has been prepared by -2-

management of the Corporation to solicit proxies for such annual meeting; provided, however, that if such stockholder does not appear or send a qualified representative to present such proposal at such annual meeting, the Corporation need not present such proposal for a vote at such a meeting, notwithstanding that proxies in respect of such vote may have been received by the Corporation. Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at any annual meeting except in accordance with this paragraph, and the Chairman of the Board or other person presiding at an annual meeting of stockholders, may refuse to permit any business to be brought before an annual meeting without compliance with the foregoing procedures or if the stockholder solicits proxies in support of such stockholder's proposal without such stockholder having made the representation required by clause (iv) of the second preceding sentence. For the purposes of this paragraph "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). In addition to the provisions of this paragraph, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth herein. Nothing in these Bylaws shall be deemed to affect any rights of the stockholders to request inclusion of proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act. Section 2.5. Stockholders List. At least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at said meeting, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of each stockholder, shall be prepared, or caused to be prepared, by the Secretary. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. Section 2.6. Special Meetings. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the Certificate of Incorporation, may be called by the Chairman of the Executive Committee, if any, the Chairman of the Board or by the President and shall be called by the Secretary at the request in writing of a majority of the Board of Directors. Such request shall state the purpose or purposes of the proposed meeting. Unless otherwise prescribed by statute or by the Certificate of Incorporation, stockholders of this Corporation shall not be entitled to request a special meeting of stockholders. Section 2.7. Notice of Special Meetings. Except as otherwise provided by statute, written notice of a special meeting, stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called, shall be given not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting. If given by writing in paper form, notice may be delivered personally, may be delivered by mail, or, with the consent of the stockholder entitled to receive notice, may be delivered by facsimile telecommunication or any of the other means of electronic transmission specified in this Section 2.7. If mailed, such notice shall be delivered by postage prepaid envelope directed to each stockholder at such stockholder's address as it appears in the records of the Corporation. Any notice to stockholders given by the Corporation shall be effective if delivered or given by a form of electronic transmission to which the stockholder to whom -3-

the notice is given has consented. Notice given pursuant to this subsection shall be deemed given: (1) if by facsimile telecommunication, when directed to a facsimile telecommunication number at which the stockholder has consented to receive notice; (2) if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice; (3) if by posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of (A) such posting and (B) the giving of such separate notice; and (4) if by any other form of electronic transmission, when directed to the stockholder. An affidavit of the secretary or an assistant secretary or of the transfer agent or other agent of the Corporation that the notice has been given by personal delivery, by mail, or by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein. Section 2.8. Quorum. The holders of a majority of the total voting power of all outstanding shares of capital stock of the Corporation entitled to vote thereat, present in person or represented by proxy, shall be requisite and shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute, by the Certificate of Incorporation or by these By-Laws. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, of the place, date and hour of the adjourned meeting, until a quorum shall again be present or represented by proxy. At the adjourned meeting at which a quorum shall be present or represented by proxy, the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 2.9. Voting. When a quorum is present at any meeting, and subject to the provisions of the General Corporation Law of the State of Delaware, the Certificate of Incorporation or by these By-Laws in respect of the vote that shall be required for a specified action, the vote of the holders of a majority of the total voting power of all outstanding shares of capital stock of the Corporation, present in person or represented by proxy, shall be determinative of any question brought before such meeting, unless the question is one upon which, by express provision of the statutes or of the Certificate of Incorporation or of these By-Laws, a different vote is required in which case such express provision shall govern and control the decision of such question. Each stockholder shall have one vote for each share of stock having voting power registered in his name on the books of the Corporation, except as otherwise provided in the Certificate of Incorporation. Section 2.10. Proxies. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may in writing authorize another person or persons to act for him by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period not to exceed ten years. Without limiting the manner in which a stockholder may authorize another person or persons to act for him as proxy, a stockholder may validly authorize another person or persons to act for him as proxy by: (a) executing a -4-

writing to that effect, which execution may be accomplished by the stockholder or his authorized officer, director, employee or agent signing the writing or causing his signature to be affixed to the writing by any reasonable means including, but not limited to, by facsimile signature; or (b) transmitting or authorizing the transmission of a telegram, cablegram, or other means of electronic transmission to the person who will be the holder of the proxy or to a proxy solicitation firm, proxy support service organization or like agent duly authorized by the person who will be the holder of the proxy to receive such transmission, provided that any telegram, cablegram or other means of electronic transmission must either set forth or be submitted with information from which it can be determined that the telegram, cablegram or other electronic transmission was authorized by the stockholder. If it is determined that any telegram, cablegram or other electronic transmission submitted pursuant to clause (b) above is valid, the inspectors shall specify the information upon which they relied. Any copy, facsimile telecommunication or other reliable reproduction of the writing or transmission created pursuant to this paragraph may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission. Section 2.11. Elimination of Right to Act by Consent. No action required to be taken or which may be taken at any annual or special meeting of stockholders of the Corporation may be taken without a meeting, and the power of stockholders to consent in writing, without a meeting, to the taking of any action is specifically denied. Section 2.12. Voting Procedures and Inspectors of Elections. (a) The Corporation, by action of the Secretary, shall, in advance of any meeting of stockholders, appoint one or more inspectors to act at the meeting of stockholders and make a written report thereof. The Corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of stockholders, the person presiding at the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his ability (b) The inspectors shall (i) ascertain the number of shares outstanding and the voting power of each, (ii) determine the shares represented at a meeting and the validity of proxies and ballots, (iii) count all votes and ballots, (iv) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors, and (v) certify their determination of the number of shares represented at the meeting and their count of all votes and ballots. The inspectors may appoint or retain other persons or entities to assist them in the performance of their duties. (c) The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting. No ballot, proxies or votes, nor any revocations thereof or changes thereto, shall be accepted by the inspectors after the closing of the polls unless the Court of Chancery upon application by a stockholder shall determine otherwise. -5-

(d) In determining the validity and counting of proxies and ballots, the inspectors shall be limited to an examination of the proxies, any envelopes submitted with those proxies, any information provided in accordance with clause (b) of Section 2.10 of these By-Laws, ballots and the regular books and records of the Corporation, except that the inspectors may consider other reliable information for the limited purpose of reconciling proxies and ballots submitted by or on behalf of banks, brokers, their nominees or similar persons which represent more votes than the holder of a proxy is authorized by the record owner to cast or more votes than the stockholder holds of record. If the inspectors consider other reliable information for the limited purpose permitted herein, the inspectors, at the time they make their certification pursuant to subsection (b)(v) of this Section, shall specify the specific information considered by them, including the person or persons from whom they obtained the information, when the information was obtained, the means by which the information was obtained and the basis for the inspectors belief that the information is accurate and reliable. Section 2.13. Remote Communication. For the purposes of these Bylaws, if authorized by the Board of Directors in its sole discretion, and subject to such guidelines and procedures as the Board of Directors may adopt, stockholders and proxyholders may, by means of remote communication: (A) participate in a meeting of stockholders; and (B) be deemed present in person and vote at a meeting of stockholders whether such meeting is to be held at a designated place or solely by means of remote communication, provided that (i) the Corporation shall implement reasonable measures to verify that each person deemed present and permitted to vote at the meeting by means of remote communication is a stockholder or proxyholder, (ii) the Corporation shall implement reasonable measures to provide such stockholders and proxyholders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the stockholders, including an opportunity to read or hear the proceedings of the meeting substantially concurrently with such proceedings, and (iii) if any stockholder or proxyholder votes or takes other action at the meeting by means of remote communication, a record of such vote or other action shall be maintained by the corporation. ARTICLE III DIRECTORS Section 3.1. General Powers. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors which may exercise all such powers of the Corporation and do all such acts and things as are not by the General Corporation Law of the State of Delaware nor by the Certificate of Incorporation nor by these By-Laws directed or required to be exercised or done by the stockholders. Section 3.2. Number of Directors, Classes, Terms and Election; Vacancies. The number of directors shall not be less than five nor more than nine, the exact number of directors to be determined from time to time by resolution adopted by a majority of the whole Board, and such exact number shall -6-

be nine until otherwise determined by resolution adopted by a majority of the whole Board. As used in this Article, a whole Board means the total number of directors which at the time are to constitute the Board of Directors, either as designated in this Section or as determined by the Board of Directors in accordance herewith, as the case may be. No decrease in the number of directors constituting the Board shall shorten the term of any incumbent director. The Board of Directors shall be divided into three classes as nearly equal in number as possible, with the term of office of Class I expiring at the annual meeting of stockholders in 1983, of Class II expiring at the annual meeting of stockholders in 1984, and of Class III expiring at the annual meeting of stockholders in 1985. At each annual meeting of stockholders, directors chosen to succeed those whose terms then expire shall be elected for a term of office expiring at the third succeeding annual meeting of stockholders after their election. If the office of any director or directors becomes vacant by reason of death, resignation, retirement, disqualification, removal from office, or otherwise, or a new directorship is created, a majority of the remaining directors, though less than a quorum, shall choose a successor or successors, or a director to fill the newly created directorship. Directors elected to fill a vacancy shall hold office for a term expiring at the annual meeting at which the term of the class to which they shall have been elected expires. Section 3.3. Removal of Directors. Subject to the rights of the holders of any series of Preferred Stock then outstanding, (a) any director, or the entire Board of Directors may be removed at any time, but only for cause; and (b) the affirmative vote of the holders of not less than 75% of the total voting power of all outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors (considered for this purpose as one class) outstanding at the time a determination is made shall be required to remove a director from office. Section 3.4. Place of Meetings. The Board of Directors may hold its meetings outside of the State of Delaware, at the office of the Corporation or at such other places as they may from time to time determine, or as shall be fixed in the respective notices or waivers of notice of such meetings. Section 3.5. Committees of Directors. The Board of Directors may, by resolution or resolutions passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alternate Members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Any such committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amendment to the By-Laws of the Corporation; and, unless the resolution, By-Laws, or Certificate of Incorporation expressly so provide, no such committee shall have -7-

the power or authority to declare a dividend or to authorize the issuance of stock. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. The committees shall keep regular minutes of their proceedings and report the same to the Board of Directors when required. Section 3.6. Compensation of Directors. Directors, as such, may receive such stated salary for their services and/or such fixed sums and expenses of attendance for attendance at each regular or special meeting of the Board of Directors as may be established by resolution of the Board; provided that nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. Section 3.7. Annual Meeting. The annual meeting of the Board of Directors shall be held within ten days after the annual meeting of the stockholders in each year. Notice of such meeting, unless waived, shall be given by mail or telegram to each director elected at such annual meeting, at his address as the same may appear on the records of the Corporation, or in the absence of such address, at his residence or usual place of business, at least three days before the day on which such meeting is to be held. Said meeting may be held at such place as the Board may fix from time to time or as may be specified or fixed in such notice or waiver thereof. Section 3.8. Special Meetings. Special meetings of the Board of Directors may be held at any time on the call of the Chairman of the Executive Committee (if any), the Chairman of the Board or President or at the request in writing made to either of said Chairman or the President of any three directors. Notice of any such meeting, unless waived, shall be given by mail or telegram to each director at his address as the same appears on the records of the Corporation not less than one day prior to the day on which such meeting is to be held if such notice is by telegram, and not less than three days prior to the day on which the meeting is to be held if such notice is by mail. If the Secretary shall fail or refuse to give such notice, then the notice may be given by the officer to whom the request is made or by any one of the directors making the call. Any such meeting may be held at such place as the Board may fix from time to time or as may be specified or fixed in such notice or waiver thereof. Any meeting of the Board of Directors shall be a legal meeting without any notice thereof having been given, if all the directors shall be present thereat, and no notice of a meeting shall be required to be given to any director who shall attend such meeting. Section 3.9. Action Without Meeting; Participation at Meeting by Telephone. Any action required or permitted to be taken at any meeting of the Board of Directors or any committee thereof may be taken without a meeting, if a written consent to such action is signed by all members of the Board or of such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the Board of Directors. Members of the Board of Directors, or any committee designated by the Board, may participate in a meeting of the Board or committee by means of conference telephone or similar communications equipment by means of which all -8-

persons participating in the meeting can hear each other, and participation in a meeting pursuant to this section shall constitute presence in person at such meeting. Section 3.10. Quorum and Manner of Acting. Except as otherwise provided in these By-Laws, a majority of the total number of directors as at the time specified by the By-Laws shall constitute a quorum at any regular or special meeting of the Board of Directors. Except as otherwise provided by statute, by the Certificate of Incorporation, or by these By-Laws, the vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board of Directors. In case of an equality of votes on any question before the Board of Directors of the Corporation, the Director who holds the office of Chairman of the Executive Committee, if any, Chairman of the Board, or the President (if a director), in that order if present, shall have a second and deciding vote. In the absence of a quorum, a majority of the directors present may adjourn the meeting from time to time until a quorum shall be present. Notice of any adjourned meeting need not be given, except that notice shall be given to all directors if the adjournment is for more than thirty days. ARTICLE IV OFFICERS Section 4.1. Executive Officers. The executive officers of the Corporation shall be a Chairman of the Executive Committee (if such a committee is established in the manner prescribed by Section 3.5 of these By-Laws) , a Chairman of the Board, President or Office of the President established in the manner prescribed by Section 4.17 of these by-laws, one or more Executive Vice Presidents, one or more Senior Vice Presidents, such number of Vice Presidents, if any, as the Board of Directors may determine, a Secretary and a Treasurer. One person may hold any number of said offices. Section 4.2. Election, Term of Office and Eligibility. The executive officers of the Corporation shall be elected annually by the Board of Directors at its annual meeting or at a special meeting held in lieu thereof. Each officer, except such officers as may be appointed in accordance with the provisions of Section 4.3, shall hold office until his successor shall have been duly elected or appointed and qualified or until his death, resignation or removal. The Chairman of the Board shall be and remain a member of the Board of Directors. None of the other officers need be members of the Board. Section 4.3. Subordinate Officers. The Board of Directors may appoint such Assistant Secretaries, Assistant Treasurers, Controller and other officers, and such agents as the Board may determine, to hold office for such period and with such authority and to perform such duties as the Board may from time to time determine. The Board may, by specific resolution, empower the chief executive officer of the Corporation or the Executive Committee to appoint any such subordinate officers or agents. Section 4.4. Removal. The Chairman of the Executive Committee, the Chairman of the Board, the President, any Vice President, the Secretary and/or the Treasurer may be removed at any time, either with or without cause, but only by the affirmative vote of the majority of the total number of directors as at the time specified by the By-Laws. Any subordinate officer appointed pursuant to -9-

Section 4.3 may be removed at any time, either with or without cause, by the majority vote of the directors present at any meeting of the Board or by any committee or officer empowered to appoint such subordinate officers. Section 4.5. The Chairman of the Executive Committee. The Chairman of the Executive Committee shall, subject to the control of the Board of Directors and to such limitations as are imposed by statute, the Articles of Incorporation, and these By-Laws, be responsible for planning the future course and direction of the business of this Corporation and developing a program for the implementation thereof. Such responsibilities may include, but shall not be limited to, initiating programs for the development of new executive positions within this Corporation, the establishment of requirements and qualifications of personnel to fill such positions, determining potential new product categories, and exploring the utilization of new and more sophisticated operating and general business techniques. In the absence of the Chairman of the Board, the Chairman of the Executive Committee shall act as Chief Executive Officer of the Company and shall administer and be responsible for the management of the business and affairs of this Corporation. Section 4.6. The Chairman of the Board. The Chairman of the Board shall be the chief executive officer of the Corporation. Subject to the control vested in the Board of Directors by statute, by the Certificate of Incorporation, or by these By-Laws, he shall administer and be responsible for the overall management of the business and affairs of the Corporation. He shall preside at all meetings of the stockholders and the Board of Directors; and in general, shall perform all duties incident to the office of the Chairman of the Board and such other duties as from time to time may be assigned to him by the Board of Directors. Section 4.7. The President. The President shall have authority to see that all resolutions of the Board of Directors and of the Executive Committee are carried into effect, shall perform such duties as are incident to the office of President or as may from time to time be assigned by the Chairman of the Executive Committee, the Chairman of the Board, or the Board of Directors, and, if the President is a director, in the absence or disability of the Chairman of the Board, shall perform the duties of the Chairman of the Board. Section 4.8. The Executive Vice Presidents. In the absence of the Chairman of the Executive Committee, the Chairman of the Board and the President, or in the event of their inability or refusal to act, the Executive Vice President (or in the event there be more than one Executive Vice President, Executive Vice Presidents in the order designated, or in the absence of any designation, in the order elected) shall perform the duties of the Chairman of the Executive Committee, the Chairman of the Board and the President. Each Executive Vice President shall perform such other duties as from time to time may be assigned to him by the Chairman of the Executive Committee, the Chairman of the Board, the President or by the Board of Directors. Section 4.9. The Vice Presidents. In the event of the absence or disability of the Chairman of the Executive Committee, the Chairman of the Board, the President and/or all Executive Vice Presidents, each senior Vice President, in the order of his seniority, which shall be in the order of his election, and then each Vice President, in the order of his seniority, shall perform the duties of such officers. The Vice Presidents shall also perform such other duties as from time to time may be assigned to them by the Chairman of the -10-

Executive Committee, the Chairman of the Board, the President, Executive Vice Presidents or by the Board of Directors of the Corporation. Section 4.10. The Secretary. The Secretary shall: (a) Keep the minutes of the meetings of the stockholders and of the Board of Directors; (b) See that all notices are duly given in accordance with the provisions of these By-Laws or as required by law; (c) Be custodian of the records and of the seal of the Corporation and see that the seal or a facsimile or equivalent thereof is affixed to or reproduced on all documents, the execution of which on behalf of the Corporation under its seal is duly authorized; (d) Have charge of the stock record books of the Corporation, unless the same shall be entrusted by the Board of Directors to a registrar or transfer agent, in which case the registrar or transfer agent shall have charge of same; (e) In general, perform all duties incident to the office of Secretary, and such other duties as are provided by these By-Laws and as from time to time are assigned to him by the Chairman of the Executive Committee, the Chairman of the Board, the President or the Board of Directors of the Corporation. Section 4.11. The Assistant Secretaries. If one or more Assistant Secretaries shall be appointed pursuant to the provisions of Section 4.3 respecting subordinate officers, then, at the request of the Secretary, or in his absence or disability, the Assistant Secretary designated by the Secretary (or in the absence of such designations, then any one of such Assistant Secretaries) shall perform the duties of the Secretary and when so acting shall have all the powers of and be subject to all the restrictions upon the Secretary. Section 4.12. The Treasurer. The Treasurer shall: (a) Receive and be responsible for all funds of and securities owned or held by the Corporation and, in connection therewith, among other things: keep or cause to be kept full and accurate records and accounts for the Corporation; deposit or cause to be deposited to the credit of the Corporation all moneys, funds and securities so received in such bank or other depository as the Board of Directors or an officer designated by the Board may from time to time establish; and disburse or supervise the disbursement of the funds of the Corporation as may be properly authorized; (b) Render to the Board of Directors at any meeting thereof, or from time to time whenever the Board of Directors or the chief executive officer of the Corporation may require, financial and other appropriate reports on the condition of the Corporation; -11-

(c) In general, perform all the duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him by the Chairman of the Executive Committee, the Chairman of the Board, the President or the Board of Directors of the Corporation. Section 4.13. The Assistant Treasurers. If one or more Assistant Treasurers shall be appointed pursuant to the provisions of Section 4.3 respecting subordinate officers, then, at the request of the Treasurer, or in his absence or disability, the Assistant Treasurer designated by the Treasurer (or in the absence of such designation, then any one of such Assistant Treasurers) shall perform all the duties of the Treasurer and when so acting shall have all the powers of and be subject to all the restrictions upon the Treasurer. Section 4.14. Salaries. The salaries of the officers shall be fixed from time to time by the Board of Directors, and no officer shall be prevented from receiving such salary by reason of the fact that he is also a director of the Corporation. Section 4.15. Bonds. If the Board of Directors or the chief executive officer shall so require, any officer or agent of the Corporation shall give bond to the Corporation in such amount and with such surety as the Board of Directors or the chief executive officer, as the case may be, may deem sufficient, conditioned upon the faithful performance of their respective duties and offices. Section 4.16. Delegation of Duties. In case of the absence of any officer of the Corporation or for any other reason which may seem sufficient to the Board of Directors, the Board of Directors may, for the time being, delegate his powers and duties, or any of them, to any other officer or to any director. Section 4.17. Office of the President. Notwithstanding anything herein to the contrary, the Board of Directors of the Corporation may at any time, and from time to time, (i) designate, in lieu of a President, an Office of the President or (ii) disband such Office of the President in favor of a President. The Office of the President shall consist of at least two, but not more than three employees of the Corporation, elected by the Board of Directors. Each member of the Office of the President shall perform such duties as may be prescribed by the Chairman of the Board or the Board of Directors and shall have the same duties and powers as a President of the Corporation hereunder; provided, however, that (i) the Board of Directors of the Corporation may, by resolution, designate only certain members of the Office of the President who may exercise certain authority of a President hereunder, and (ii) the approval of at least two members of the Office of the President shall be required for all actions of the Office of the President including, but not limited to, the following: (a) Calling for a special meeting of stockholders pursuant to Section 2.6 hereof; (b) Calling for a special meeting of the Board of Directors of the Corporation pursuant to Section 3.8 hereof; (c) Casting the deciding vote on any question before the Board of Directors of the Corporation pursuant to Section 3.10 if and only if all such members of the Office of the President are also directors of -12-

the Corporation. If only one member of the Office of the President is a director, such member shall have authority to cast the deciding vote pursuant to Section 3.10 hereof; and (d) Assign duties to any Executive Vice President, any Vice President, the Secretary or the Treasurer. ARTICLE V SHARES Of STOCK Section 5.1. Regulation. Subject to the terms of any contract of the Corporation, the Board of Directors may make such rules and regulations as it may deem expedient concerning the issue, transfer and registration of certificates for shares of the stock of the Corporation, including the issue of new certificates for lost, stolen or destroyed certificates, and including the appointment of transfer agents and registrars. Section 5.2. Stock Certificates. Certificates for shares of the stock of the Corporation shall be respectively numbered serially for each class of stock, or series thereof, as they are issued, shall be impressed with the corporate seal or a facsimile thereof, and shall be signed by the Chairman of the Board, the President or an Executive Vice President, and by the Secretary or Treasurer, or an Assistant Secretary or an Assistant Treasurer, provided that such signatures may be facsimiles on any certificate countersigned by a transfer agent other than the Corporation or its employee. Each certificate shall exhibit the name of the Corporation, the class (or series of any class) and number of shares represented thereby, the name of the holder, the par value of the shares represented thereby, or that such shares are without par value. The powers, designations, preferences, and relative, participating, optional or other special rights of each class of stock and series of any class and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificates which the Corporation shall issue, or such certificate shall contain a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Each certificate shall be otherwise in such form as may be prescribed by the Board of Directors. Section 5.3. Transfer of Shares. Shares of the capital stock of the Corporation shall be transferable on the books of the Corporation by the holder thereof in person or by his duly authorized attorney, upon the surrender or cancellation of a certificate or certificates for a like number of shares. Upon presentation and surrender of a certificate properly endorsed and payment of all taxes therefor, the transferee shall be entitled to a new certificate or certificates in lieu thereof. As against the Corporation, a transfer of shares can be made only on the books of the Corporation and in the manner hereinabove provided, and the Corporation shall be entitled to treat the registered holder of any share as the owner thereof and shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person, whether or not it shall have express or other notice thereof, save as expressly provided by the statutes of the State of Delaware. -13-

Section 5.4. Fixing Date for Determination Stockholders of Record. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. Section 5.5. Lost Certificate. Any stockholder claiming that a certificate representing shares of stock has been lost, stolen or destroyed may make an affidavit or affirmation of the fact and, if the Board of Directors so requires, advertise the same in a manner designated by the Board, and give the Corporation a bond of indemnity in form and with security for an amount satisfactory to the Board (or an officer or officers designated by the Board), whereupon a new certificate may be issued of the same tenor and representing the same number, class and/or series of shares as were represented by the certificate alleged to have been lost, stolen or destroyed. ARTICLE VI BOOKS AND RECORDS Section 6.1. Location. The books, accounts and records of the Corporation may be kept at such place or places within or without the State of Delaware as the Board of Directors may from time to time determine. Section 6.2. Inspection. The books, accounts and records of the Corporation shall be open to inspection by any member of the Board of Directors at all times; and open to inspection by the stockholders at such times, and subject to such regulations as the Board of Directors may prescribe, except as otherwise provided by statute. Section 6.3. Corporate Seal. The corporate seal shall contain two concentric circles between which shall be the name of the Corporation and the word Delaware and in the center shall be inscribed the words Corporate Seal. ARTICLE VII DIVIDENDS AND RESERVES Section 7.1. Dividends. Dividends upon the outstanding shares of capital stock of the Corporation (other than liquidating dividends) shall be declared only from the earned surplus or net profits of the Corporation. Subject to the provisions of the Certificate of Incorporation, and to any other lawful commitments of the Corporation, and subject to applicable law, dividends may be declared and made payable at such times and in such amounts as the Board of Directors may from time to time determine. Dividends may be declared at any regular or special meeting of the Board and may be paid in cash or other property or in the form of a stock dividend. -14-

Section 7.2. Reserves. The Board of Directors of the Corporation may set apart, out of any of the funds of the Corporation available for dividends, a reserve or reserves for any proper purpose and may increase, reduce or abolish any such reserve. ARTICLE VIII MISCELLANEOUS PROVISIONS Section 8.1. Fiscal Year. The fiscal year of the Corporation shall end an the 31st day of December of each year. Section 8.2. Depositories. The Board of Directors or an officer designated by the Board shall appoint banks, trust companies, or other depositories in which shall be deposited from time to time the money or securities of the Corporation. Section 8.3. Checks, Drafts and Notes. All checks, drafts, or other orders for the payment of money and all notes or other evidences of indebtedness issued in the name of the Corporation shall be signed by such officer or officers or agent or agents as shall from time to time be designated by resolution of the Board of Directors or by an officer appointed by the Board. Section 8.4. Contracts and Other Instruments. The Board of Directors may authorize any officer, agent or agents to enter into any contract or execute and deliver any instrument in the name and on behalf of the Corporation and such authority may be general or confined to specific instances. Section 8.5. Notices. Whenever under the provisions of the statutes or of the Certificate of Incorporation or of these By-Laws notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, by depositing the same in a post office or letter box, in a postpaid sealed wrapper or by delivery to a telegraph company, addressed to such director or stockholder at such address as appears on the records of the Corporation, and such notice shall be deemed to be given at the time when the same shall be thus mailed or delivered to a telegraph company. Section 8.6. Waivers of Notice. Whenever any notice is required to be given under the provisions of the statutes or of the Certificate of Incorporation or of these By-Laws, a waiver thereof in writing signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors or members of a committee of directors need be specified in any written waiver of notice. Section 8.7. Stock in Other Corporations. Any shares of stock in any other Corporation which may from time to time be held by this Corporation may be represented and voted at any meeting of shareholders of such Corporation by the Chairman of the Executive Committee, if any, the Chairman of the Board, or the President or an Executive Vice President, or by any other person or persons -15-

thereunto authorized by the Board of Directors, or by any proxy designated by written instrument of appointment executed in the name of this Corporation by its Chairman of the Executive Committee, if any, the Chairman of the Board, the President or an Executive Vice President. Shares of stock belonging to the Corporation need not stand in the name of the Corporation, but may be held for the benefit of the Corporation in the individual name of the Treasurer or of any other nominee designated for the purpose by the Board of Directors. Certificates for shares so held for the benefit of the Corporation shall be endorsed in blank or have proper stock powers attached so that said certificates are at all times in due form for transfer, and shall be held for safekeeping in such manner as shall be determined from time to time by the Board of Directors. Section 8.8. Indemnification. (a) The Corporation shall indemnify each person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that the person is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit or proceeding to the fullest extent authorized by the laws of Delaware as the same now or may hereafter exist (but, in the case of any change, only to the extent that such change authorizes the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such change) if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the Corporation, and with respect to any criminal actions or proceeding had no reasonable cause to believe that the person's conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that the person did not act in good faith and in a manner which the person reasonably believed to be in or not opposed to the best interest of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that the person's conduct was unlawful. (b) The Corporation shall indemnify each person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that the person is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) to the fullest extent authorized by the laws of Delaware as the same now or may hereafter exist (but, in the case of any change, only to the extent that such change authorizes the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such change) actually and reasonably incurred by the person in defense or settlement of such action or suit if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the Corporation and except that that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent the Court of Chancery of Delaware or the court in which such action or suite was brought shall determine upon -16-

application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery of Delaware or such other court shall deem proper. (c) To the extent that a present or former director or officer of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections (a) and (b) of this Section 8.8, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection therewith. (d) Any indemnification under subsections (a) and (b) of this Section 8.8 (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the present or former director or officer is proper in the circumstances because the person has met the applicable standard of conduct set forth in subsections (a) and (b) of this Section 8.8. Such determination shall be made, with respect to a person who is a director or officer at the time of such determination, (1) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (2) by a committee of such directors designated by majority vote of such directors, even though less than a quorum, or (3) if there are no such directors, of if such directors so direct, by independent legal counsel in a written opinion, or (4) by the stockholders. (e) Expenses (including attorneys' fees) incurred by an officer or director in defending any civil, criminal, administrative or investigative action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation as authorized in this Section 8.8. Such expenses (including attorneys' fees) incurred by former directors and officers or other employees and agents shall be so paid upon such terms and conditions as the Corporation deems appropriate. (f) The indemnification and advancement of expenses provided by, or granted pursuant to, the other subsections of this Section 8.8 shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person's official capacity and as to action in another capacity while holding such office. (g) The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person's status as such, whether or not the Corporation would have the power to indemnify such person against such liability under this Section 8.8. (h) With respect to any person made or threatened to be made a party to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative by reason of the fact that -17-

such a person is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director or officer of another enterprise, the rights to indemnification and to the advancement of expenses conferred in Section 8.8 shall be contract rights. (i) For purposes of this Section 8.8, references to "the Corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under this Section 8.8 with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued. (j) For purposes of this Section 8.8, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to any employee benefit plan; and references to "serving at the request of the corporation" shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the corporation" as referred to in this Section 8.8. (k) The indemnification and advancement of expenses provided by, or granted pursuant to, this Section 8.8 shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director or officer of the Corporation and shall inure to the benefit of the heirs, executors and administrators of such a person. (l) Any amendment, repeal or modification of any provision of this Section 8.8 by the stockholders or the directors of the Corporation shall not adversely affect any right or protection of a director or officer of the Corporation existing at the time of such amendment, repeal or modification. Section 8.9. Amendment of By-Laws. The stockholders, by the affirmative vote of holders of not less than 75% of the total voting power of all outstanding shares of capital stock of the Corporation may, at any annual or special meeting if notice of such alteration or amendment of the By-Laws is contained in the notice of such meeting, alter, amend, or repeal these By-Laws, and alterations or amendments of By-Laws made by the stockholders shall not be altered or amended by the Board of Directors. The Board of Directors, by the affirmative vote of a majority of the whole Board, may make, alter, amend, or repeal these By-Laws at any meeting, except as provided in the above paragraph. By-Laws made, altered, amended or repealed by the Board of Directors may be altered or repealed by the stockholders. -18-

                                   EXHIBIT 21

                           SUBSIDIARIES OF THE COMPANY


NAME                                               JURISDICTION OF INCORPORATION
- ----                                               -----------------------------

Lawson Products, Inc.                              New Jersey
Lawson Products, Inc.                              Texas
Lawson Products, Inc.                              Georgia
Lawson Products, Inc.                              Nevada
Lawson Products, Inc. (Ontario)                    Ontario, Canada
Lawson Products Limited                            England
LPI Holdings, Inc.                                 Illinois
Lawson Products de Mexico S.A. de C.V.             Mexico
Drummond American Corporation                      Illinois
Cronatron Welding Systems, Inc.                    North Carolina

Allprocure.com, Inc.(1)                            Missouri
Assembly Component Systems, Inc.                   Illinois
Automatic Screw Machine Products Company, Inc.(2)  Alabama
LP Service Co.                                     Illinois
C.B. Lynn Company                                  Illinois

(1) owned 65% by the Company
(2) subsidiary of Assembly Component Systems, Inc.

                                   EXHIBIT 23

                         CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 33-17912) of our report dated February 28, 2002, with respect to the
consolidated financial statements and schedule of Lawson Products, Inc. included
in the Annual Report (Form 10-K), for the year ended December 31, 2001.

                                                           /s/ Ernst & Young LLP

Chicago, Illinois
March 19, 2002