SEPARATION AGREEMENT AND GENERAL RELEASE

(a)

Executive and the Company mutually agree that as of April 13, 2007 (the “Separation Date”), the Executive’s employment by the Company will terminate for “Good Reason” by Executive (as such term is defined in the Employment Agreement), and Executive will cease to be the Chairman and a member of the Board of Directors of the Company.

(b)

Announcement Concerning Departure. The Company will release the announcement attached as Exhibit 2 regarding Executive’s departure from the Company on the Separation Date.

(a)

The Company will pay Executive the total amount of $1,716,000 (which equals two times Executive’s base salary of $650,000 and most recent bonus of $208,000) as follows: (i) $450,000 within 3 business days after

(b)

The Company will pay Executive on the payroll date coincident with or next following the Separation Date: (i) any accrued and unpaid base salary through the Separation Date; (ii) 4 weeks accrued vacation pay; and (iii) a lump sum payment equal to base salary otherwise payable to Executive had his employment not terminated on the Separation Date from the Separation Date through May 15, 2007, in consideration of Executive’s anticipated activities related to existing civil litigation involving a contractual dispute scheduled for trial commencing late April 2007. Executive will not be eligible to receive any bonus payment for 2007.

(c)

Executive will retain the right to exercise the 28,000 vested Stock Performance Rights (“SPRs”) granted to Executive on December 11, 2001, at an exercise price of $27.08, for 1 year after the Separation Date, pursuant to the terms of the SPRs and the Company’s Amended Stock Performance Plan. Payment will be made in a lump sum equal to the difference between the stock closing price on the date of exercise and the exercise price, less tax withholdings, as soon as practicable, but in any event no later than 30 days after Executive’s exercise of such SPRs.

(d)

(i) Executive will be eligible to continue group insurance coverage (medical, dental, vision, and life) under the terms of the applicable plans maintained by the Company, at Company expense, for Executive and his dependents, for 3 years after the Separation Date or, for Executive and his spouse Roberta Washlow, until they turn age 65, if later. Post 65 coverage will be pursuant to the Company’s retiree medical plan for executives. Any rights under COBRA will run concurrently with such coverage. During the 3 years after the Separation Date, the Company agrees not to materially reduce or eliminate the medical insurance coverage under the terms of the applicable plans maintained by the Company on the Separation Date, or in the event of such reduction or elimination, to reimburse Executive for the cost of obtaining similar medical coverage. During the 3 years after the Separation Date, the Company’s obligation with respect to life insurance will be to continue to pay the premiums on a $50,000 term life insurance policy on Executive, and Executive may designate the beneficiary. Commencing 3 years after the Separation Date, Executive will have any conversion rights provided under the policy through the insurer, and Executive will be solely responsible for any premium payments.

(e)

Within 30 days after the Separation Date, the Company will assign to Executive the ownership of a key man term life insurance policy on the life of Executive, Security-Connecticut Life Insurance Co. Policy No. SC2479793G, issued by ING on February 22, 2002, which has a face value of $5 million, and which has a guaranteed annual premium of $16,815 through February 22, 2012. Executive will be solely responsible for any premium payments due after the Separation Date.

(f)

In accordance with and subject to the terms of the Company’s 2004 Executive Deferral Plan, Executive will be entitled to distribution of his vested account balance calculated as of the close of business on the last day of the 6 month period following the Separation Date, and payable in a lump sum no later than 60 days after the last day of the 6 month period following the Separation Date.

(g)

In accordance with and subject to the terms of the Company’s Long-Term Capital Accumulation Plan (“LTCAP”), Executive’s 301 Shareholder Value Appreciation Rights (“SVARs”) will vest in full on the Separation Date, will be valued at $417,000, and will be payable as follows:

(i)

Within 3 business days after the Effective Date, Executive will receive from the Company a cash payment equal to fifty percent (50%) of the foregoing value of his vested SVARs;

(ii)

On each of the first and second anniversaries of the payment made under Section 2(g)(i) above, Executive will receive from the Company a cash payment equal to twenty-five percent (25%) of the foregoing value of his vested SVARs. No interest will be payable with respect to those amounts.

(h) 

In the event that a  " Sale of the Company " (as such term is defined in the LTCAP) occurs on or prior to December 31, 2008, the Company  will

(x)

The amount that Executive would have been paid under the LTCAP due to such Sale of the Company assuming that ( i ) Executive was still an active employee of the Company with 301 outstanding SVARs under the LTCAP at such time and ( ii ) Executive had not received any prior payment from the LTCAP; provided, however, Section 12(d)  of the LTCAP (which provides for allocating SVARs remaining available for award under the LTCAP to LTCAP participants who are then still active employees)  will  be inapplicable to Executive and  Executive will be ineligible to receive an allocation of any additional SVARs.      

(y)

The amount that Executive receives under the LTCAP due to the termination of  his  employment  as provided in Section 2 (g) of   this Agreement.

(z)

In the event that any payment (or portion thereof) under this Section  2(h) of this Agreement, as determined without regard to this clause (z), would be considered an “excess parachute payment” as determined under Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), the amount of such payment  will be reduced (including to $0) until the payment (or any portion thereof) is no longer considered an “excess parachute payment” as determined under Section 280G of the Code.

(a)

Executive hereby RELEASES the Company, its past and present parents, subsidiaries, affiliates, predecessors, successors, assigns, related companies, entities or divisions, its or their past and present employee benefit plans, trustees, fiduciaries and administrators, and any and all of its and their respective past and present officers, directors, owners, investors, partners, insurers, agents, attorneys, representatives, assigns and employees (collectively “Releasees”), from any and all claims, demands or causes of action which Executive, or Executive’s heirs, executors, administrators, beneficiaries, agents, attorneys, representatives or assigns (collectively “Releasors”), have, had or may have against the Releasees, based on any events or circumstances arising or occurring prior to and including the date of Executive’s execution of this Agreement to the fullest extent permitted by law, regardless of whether such claims are now known or are later discovered, including but not limited to any claims relating to Executive’s employment or termination of employment by the Company, and any rights of continued employment, reinstatement or reemployment by the Company (“Claims”), PROVIDED, HOWEVER, Executive is not waiving, releasing or giving up the right to enforce the terms of this Agreement or rights under benefit plans or agreements expressly preserved and provided herein, or any other rights which cannot be waived as a matter of law.

(b)

Executive agrees and acknowledges:

(i)

that this Agreement is intended to be a general release that extinguishes all Claims by Executive against the Company;

(ii)

that Executive is waiving any Claims arising under Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Americans With Disabilities Act, the Age Discrimination in Employment Act, the Employee Retirement Income Security Act, the Illinois Human Rights Act, and all other federal, state and local statutes, ordinances and common law, including but not limited to any and all Claims alleging personal injury, emotional distress and other torts, breach of contract, and breach of any public policy or legal duty or obligation of any sort, to the fullest extent permitted by law;

(iii)

that Executive is waiving all Claims against the Company, known or unknown, arising or occurring prior to and including the date of Executive’s execution of this Agreement;

(iv) 

that if Executive now has or ever had any kind of legal Claims whatsoever against the Company, Executive is giving them up forever by entering into this Agreement, even if Executive does not

(v)

that Executive expressly waives all rights that Executive may have under any law that is intended to protect Executive from waiving unknown Claims and Executive understands the significance of doing so;

(vi)

that the consideration that Executive will receive in exchange for Executive’s waiver of the Claims specified herein exceeds anything of value to which Executive is already entitled;

(vii)

that Executive was hereby informed by the Company in writing to consult with an attorney, and Executive was represented by attorneys at Mayer, Brown, Rowe & Maw LLP, regarding this Agreement;

(viii)

that Executive had at least 21 days to consider this Agreement, although he may choose to sign this Agreement sooner;

(ix) 

that Executive has had a reasonable period of time within which to consider this Agreement; and

(x) 

that Executive has entered into this Agreement knowingly and voluntarily with full understanding of its terms and after having had the opportunity to seek and receive advice from counsel of Executive’s choosing.

(c)

In the event any Claims are filed on Executive’s behalf, Executive hereby waives any and all rights to receive monetary damages or injunctive relief in favor of Executive.

(d)

Executive represents that Executive has not assigned any Claim against the Company to any person or entity.

(a)

Executive will be eligible for indemnification pursuant to the provisions of Section 6 of the Employment Agreement, and subject to the advancement and repayment rights and obligations set forth therein.

(b)

The Company will reimburse Executive for reasonable attorneys’ fees and expenses of Mayer, Brown, Rowe & Maw LLP incurred by Executive in connection with the negotiation and preparation of this Agreement through the Separation Date, in an amount not to exceed $60,000.

(c)

Except as provided in Sections 4(a) and (b) above or as a prevailing party as provided in Section 17(e) below, Executive will be solely responsible

(a)

Executive acknowledges that all documents and other tangible property related in any way to the business of the Company are the exclusive property of the Company even if Executive authored or created them. Executive further acknowledges that all business processes, methodologies and techniques created during Executive’s employment even if Executive authored or created them are similarly the property of the Company. Executive agrees that, to the extent Executive has not already done so, Executive will promptly return to the Company all documents (whether in paper, on computer, or stored in electronic or other form) and other property of the Company in Executive’s possession, custody or control, including without limitation all keys, credit cards, computers and hard drives for such computers, cell phones or other equipment.

(b)

In connection with any court proceeding or government investigation of the Company or Executive, or any other proceeding, investigation or claim involving Executive or relating in any way to Executive’s actions as an employee of the Company or in his capacity as Chief Executive Officer or member of the Board, the Company agrees to allow Executive or Executive’s designated representative reasonable access to potentially relevant Company documents dated prior to the Separation Date, as determined by the Company in its sole discretion, with reasonable notification, PROVIDED, HOWEVER, Executive has no right to access any documents which are privileged by the Company’s attorney/client privilege or by the Company’s or its attorneys’ work product privileges, or which relate to this Separation Agreement, or the Special Committee of the Board.  

(a)

Executive agrees that, subject to reimbursement by the Company of reasonable out-of-pocket costs and expenses, Executive will cooperate fully and truthfully with the Company and its attorneys with respect to any matter (including litigation, investigation or governmental proceedings) that relates to matters with which Executive was involved while Executive was employed by the Company. Executive’s required cooperation may include appearing from time to time at the Company offices or the Company attorneys’ offices for conferences and interviews, and in general providing the Company and its attorneys with the full benefit of Executive’s knowledge with respect to any such matter. Executive agrees to cooperate in a timely fashion and at times that are agreeable to all parties. Executive agrees to promptly notify the Company’s General Counsel if Executive is the recipient of a subpoena or other request for information about the Company, and to cooperate with the Company’s response to such subpoena or request.

(b)

Notwithstanding any provision herein, Executive and the Company agree that no provision of this Agreement is meant: (i) to preclude Executive from fully and truthfully cooperating with any governmental investigation or proceeding; (ii) to preclude Executive in his sole discretion from exercising his rights under the Fifth Amendment of the U.S. Constitution; or (iii) to preclude Executive from declining to be interviewed by the Company or its agents, if so advised by his current attorneys and also provided the subject matter of the interview relates to pending investigations being conducted by the U.S. government.    

(a)

The payments under this Agreement shall be subject to federal, state and local tax withholding, to the extent applicable.

(b)

Executive assumes full responsibility to any federal, state, or local taxing authorities for any tax consequences, including interest and penalties, regarding income and other taxes arising out of the payments and benefits provided to Executive pursuant to this Agreement, and will defend, indemnify and hold the Company harmless from any taxes, including interest and penalties, and attorney fees and costs incurred by the Company in proceedings relating thereto. Executive agrees that the Company has made no representations regarding the proper tax treatment of the payments and benefits provided to Executive pursuant to this Agreement.

10.

Office and Space Access.

(a)

Executive will have reasonable access to his office at the Company to effect the relocation of Executive’s personal property through May 15, 2007, as determined in the Company’s sole discretion. If Executive has not vacated his office at the Company by May 15, 2007, the Company will move and store Executive’s property until no later than November 15, 2007, and then move Executive’s property as directed by Executive or to his home, at Company expense.

(b)

In the event Executive vacates his office at the Company by May 15, 2007, and establishes and maintains an office outside his home, the Company will: (i) reimburse Executive for the cost of alternative office space and related expenses in the amount of $5,000 per month for up to 18 months after May 15, 2007; and (ii) assign a Company employee on the Company’s payroll to provide assistance to Executive for up to 18 months after May 15, 2007.

(a)

Arbitrable Claims. The Company and Executive mutually consent to the resolution by final and binding arbitration of any and all disputes, controversies or claims related in any way to Executive's employment with the Company, including, but not limited to, any dispute, controversy or claim of alleged discrimination, harassment or retaliation (including, but not limited to, claims based on race, sex, sexual preference, religion, national origin, age, marital or family status, medical condition, handicap or disability), any claim arising out of or relating to this Agreement and any dispute as to the arbitrability of a matter under this provision (collectively, "Claims"); provided, however, that nothing herein shall require arbitration of any claim or charge which, by law, cannot be the subject of a compulsory arbitration agreement. The Company and Executive expressly acknowledge that they waive the right to litigate Claims in a judicial forum before a judge or jury.

(b)

Claim Initiation/Time Limits. A party must notify the other party in writing of a request to arbitrate Claims within the same statute of limitations applicable to the legal claim asserted. The written request for arbitration must specify: (i) the factual basis on which the Claims are made; (ii) the statutory provision or legal theory under which Claims are made; and (iii) the nature and extent of any relief or remedy sought.

(c)

Procedures. The arbitration will be administered in accordance with the rules then in effect of the American Arbitration Association (“AAA”), in Chicago, Illinois, before a single arbitrator, licensed to practice law in that jurisdiction, who has been selected in accordance with such rules. Executive and the Company may be represented by counsel of their choosing. The Company will pay any fees of the AAA, filing costs, and arbitrator fees or expenses for any arbitration proceeding.

(d)

Responsibilities of Arbitrator; Award; Judgment. The arbitrator will act as the impartial decision maker of any Claims that come within the scope of this arbitration provision. The arbitrator will have the powers and

(e)

Attorneys’ Fees and Costs. The Company and Executive will pay their own legal fees (including counsel fees), and other fees and expenses incurred by them in obtaining or defending any right or benefit under such Claims; PROVIDED, HOWEVER, the prevailing party in any arbitration proceeding hereunder will be entitled to payment from the other party of all reasonable attorneys’ fees and costs incurred by the prevailing party in the arbitration.

If to the Executive:

Robert J. Washlow

AGREED:

EXECUTIVE:

Name: Robert J. Washlow  

Date:  

AGREED:

LAWSON PRODUCTS INC.

By:  

Name:  

Title:  

Date: