EXHIBIT 10.10
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (this "Agreement"), dated as of March 31,
2004, is made by and between CHS Management IV LP, a Delaware limited
partnership ("CHS"), and The Hillman Group, Inc., a Delaware corporation (the
"Company").
The Company desires to receive financial and management consulting
services from CHS, and thereby obtain the benefit of the experience of CHS in
business and financial management generally and its knowledge of the Company and
its subsidiaries and the Company's and its subsidiaries' financial affairs in
particular.
CHS is willing to provide financial and management consulting services
to the Company. Accordingly, the compensation arrangements set forth in this
Agreement are designed to compensate CHS for such services.
NOW, THEREFORE, in consideration of the foregoing premises and the
respective agreements hereinafter set forth and the mutual benefits to be
derived herefrom, CHS and the Company hereby agree as follows:
TERMS
1. Engagement. The Company hereby engages CHS as a financial and
management consultant, and CHS hereby agrees to provide financial and
management consulting services to the Company and its subsidiaries, all
on the terms and subject to the conditions set forth below.
2. Services of CHS. CHS hereby agrees during the term of this engagement
to consult with the board of directors (the "Board") and the management
of the Company and its subsidiaries in such manner and on such business
and financial matters as may be reasonably requested from time to time
by the Board, including but not limited to: (a) general business
strategy; (b) identification, support, negotiation and analysis of
financing alternatives, including equity financings, acquisitions,
capital expenditures and refinancing of existing indebtedness; and (c)
human resource functions, including searching for and hiring of
executives.
3. Compensation.
(a) Monthly Fee. The Company agrees to pay to CHS, as compensation
for services to be rendered by CHS under Section 2 hereof, a
monthly fee equal to $57,692 (the "Monthly Fee"), payable
monthly in arrears on the last day of each month, commencing
with the month during which the closing of the Merger (as
defined below) occurs, with the monthly payment for the month
in which the Merger is closed being pro rated for the number
of days between the date of such closing and the end of such
month. Upon a termination of this Agreement in accordance with
paragraph 5 hereof which does not occur on the last day of a
month, a pro rated monthly fee shall be paid based upon the
number of days elapsed in the partial month prior to
termination.
(b) Merger. As compensation for services rendered by CHS to the
Company in connection with the identification of the Company
and negotiation of the Agreement and Plan of Merger, the
structuring of the transactions contemplated by the Agreement
and Plan of Merger, dated as of February 14, 2004, by and
among HCI Acquisition Corp., The Hillman Companies, Inc., a
Delaware corporation ("Hillman Companies") and the
stockholders and optionholders of Hillman Companies, and in
connection with the financing of such transaction (the
"Merger"), the Company agrees to pay to CHS on the date hereof
an amount equal to $4,320,000.
(c) Future Investments. After the date hereof, when and as CHS or
its affiliated funds (the "Future Investors") purchase
additional securities from Hillman Companies or the Company or
any of Hillman Companies' subsidiaries or parents, the Company
will pay to CHS a fee (a "Future Investment Fee") equal to
five percent (5%) of the cost of the total aggregate
investment made by the Future Investors in such purchase, as
compensation for services to be rendered by CHS to the Company
in connection with the consummation of such investment.
(d) Notwithstanding anything to the contrary contained herein, the
Company and CHS hereby agree and acknowledge that, so long as
there are amounts outstanding under the Senior Credit
Agreement or Loan Agreement (as defined below), the Company
shall not make any payments under this Section 3 (and CHS will
not take any action in respect thereof) so long as an Event of
Default or Default shall have occurred and be continuing or an
Event of Default or Default would result from such payments,
provided that such payments will accrue but not be payable
until it is permitted to be paid pursuant to this Section 3,
Section 7.09 of the Senior Credit Agreement and Section 7.09
of the Loan Agreement. The terms "Event of Default" and
"Default" shall have the meanings given thereto in each of (i)
the Loan Agreement, dated as of the date hereof, by and among
the Company, The Hillman Companies, Inc. ("Hillman
Companies"), Hillman Investment Company ("Investment Company")
and Allied Capital Corporation (the "Loan Agreement") and (ii)
the Senior Credit Agreement, dated as of the date hereof, by
and among the Company, Hillman Companies, Investment Company,
the banks and other financial institutions from time to time
party thereto and other signatories party thereto (the "Senior
Credit Agreement").
4. Expense Reimbursement. The Company shall promptly reimburse CHS for
such reasonable travel expenses and other out-of-pocket fees and
expenses as has or may be incurred by CHS, its partners and employees
in connection with the Merger and future acquisitions, and in
connection with the rendering of services hereunder.
5. Term. This Agreement shall be in effect for an initial term of five
years commencing on the date hereof, and shall be automatically renewed
thereafter on a year to year basis unless either CHS or the Company
gives 30 days' prior written notice to the other party hereto of its
desire to terminate this Agreement; provided, however, that this
Agreement shall terminate on the first to occur of a Sale of the
Company or a Public Offering (each as defined in the Stockholders
Agreement, dated as of the date hereof, among Hillman
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Companies and its stockholders). No termination of this Agreement,
whether pursuant to this paragraph or otherwise, shall affect the
Company's obligations with respect to the fees, costs and expenses
incurred by CHS in rendering services hereunder and not reimbursed by
the Company as of the effective date of such termination.
6. Indemnification. The Company agrees to indemnify and hold harmless CHS,
its officers and employees against and from any and all losses,
liabilities, suits, claims, costs, damages and expenses (including
attorneys' fees) arising from their performance hereunder, except as a
result of their gross negligence or intentional wrongdoing.
7. CHS an Independent Contractor. CHS and the Company agree that CHS shall
perform services hereunder as an independent contractor, retaining
control over and responsibility for its own operations and personnel.
Neither CHS nor its partners or employees shall be considered employees
or agents of the Company as a result of this Agreement nor shall any of
them have authority to contract in the name of or bind the Company,
except as expressly agreed to in writing by the Company.
8. Notices. Any notice, report or payment required or permitted to be
given or made under this Agreement by any party to another party shall
be deemed to have been duly given or made if personally delivered or,
if mailed, when mailed by registered or certified mail, postage
prepaid, to the other party at the following addresses (or at such
other address as shall be given in writing by one party to the other):
If to CHS:
CHS Management IV LP
10 South Wacker Drive
Suite 3175
Chicago, IL 60606
Facsimile: (312) 876-3854
Attn: Peter M. Gotsch
with a copy to:
Kirkland & Ellis LLP
200 East Randolph Drive
Chicago, IL 60601
Facsimile: (312) 861-2200
Attn: Stephen L. Ritchie, P.C.
If to the Company:
The Hillman Group, Inc.
10590 Hamilton Avenue
Cincinnati, Ohio 45231
Facsimile: (513) 851-5531
Attn: Chief Executive Officer
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9. Entire Agreement; Modification. This Agreement (a) contains the
complete and entire understanding and agreement of CHS and the Company
with respect to the subject matter hereof; (b) supersedes all prior and
contemporaneous understandings, conditions and agreements, oral or
written, express or implied, respecting the engagement of CHS in
connection with the subject matter hereof; and (c) may not be modified
except by an instrument in writing executed by CHS and the Company.
10. Waiver of Breach. The waiver by either party of a breach of any
provision of this Agreement by the other party shall not operate or be
construed as a waiver of any subsequent breach of that provision or any
other provision hereof.
11. Assignment. Neither CHS nor the Company may assign its rights or
obligations under this Agreement without the express written consent of
the other party hereto.
12. Choice of Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Illinois, without
giving effect to any choice of law or conflict of law provision or rule
(whether of the State of Illinois or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the
State of Illinois.
* * * *
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IN WITNESS WHEREOF, CHS and the Company have caused this Management
Agreement to be duly executed and delivered on the date and year first above
written.
CHS MANAGEMENT IV LP
By: Code Hennessy & Simmons LLC
Its: General Partner
By: /S/ PETER M. GOTSCH
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Name:
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Its:
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THE HILLMAN GROUP, INC.
By: /S/ MAX W. HILLMAN
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Name:
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Its:
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