EXHIBIT 10.11
EXECUTION
THE HILLMAN GROUP, INC.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made as of March 31,
2004, by and between The Hillman Group, Inc., a Delaware corporation (the
"Company"), and Max W. Hillman, Jr. ("Executive"). This Agreement is being
executed concurrently with the merger of HCI Acquisition Corp., a Delaware
corporation, with and into The Hillman Companies, Inc., a Delaware corporation
and the indirect parent of the Company ("Hillman").
In consideration of the mutual covenants contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Employment. The Company shall employ Executive, and Executive
hereby accepts employment with the Company, upon the terms and conditions set
forth in this Agreement for the period beginning on the date hereof and ending
as provided in Section 4(a) hereof (the "Employment Period").
2. Position and Duties.
(a) During the Employment Period, Executive shall serve as the
Chief Executive Officer (including full profit and loss responsibility for the
operation of the Company and its Subsidiaries) of the Company and shall have the
normal duties, responsibilities, functions and authority of the Chief Executive
Officer (including full profit and loss responsibility for the operation of the
Company and its Subsidiaries), subject to the power and authority of the Board
to expand or limit such duties, responsibilities, functions and authority and to
overrule actions of officers of the Company. During the Employment Period,
Executive shall render such administrative, financial and other executive and
managerial services to Hillman and its Subsidiaries which are consistent with
Executive's position as the Board may from time to time direct.
(b) During the Employment Period, Executive shall report to the
Board and shall devote his best efforts and his full business time and attention
(except for permitted vacation periods and reasonable periods of illness or
other incapacity) to the business and affairs of Hillman and its Subsidiaries.
Executive shall perform his duties, responsibilities and functions to Hillman
and its Subsidiaries hereunder to the best of his abilities in a diligent,
trustworthy, professional and efficient manner and shall comply with the
Company's and its Subsidiaries' policies and procedures in all material
respects. During the Employment Period, Executive shall not serve as an officer
or director of, or otherwise perform services for compensation for, any other
entity without the prior written consent of the Board; provided that Executive
may serve as an officer or director of, or otherwise participate in, purely
educational, welfare, social, religious or civic organizations so long as such
activities do not interfere with Executive's employment.
(c) For purposes of this Agreement, "Subsidiaries" shall mean,
with respect to any Person, any corporation, limited liability company,
partnership, association, or business entity of which (i) if a corporation, a
majority of the total voting power of shares of stock entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
managers, or trustees thereof is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof, or (ii) if a limited liability company,
partnership, association, or other business entity (other than a corporation), a
majority of partnership or other similar ownership interest thereof is at the
time owned or controlled, directly or indirectly, by any Person or one or more
Subsidiaries of the Person or a combination thereof. For purposes hereof, a
Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association, or other business entity
(other than a corporation) if such Person or Persons shall be allocated a
majority of limited liability company, partnership, association or other
business entity gains or losses or shall be or control any managing director or
member or general partner of such limited liability company, partnership,
association, or other business entity. For purposes hereof, "Person" shall mean
an individual, a partnership, a corporation, a limited liability company, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity or any department, agency, or political
subdivision thereof.
3. Compensation and Benefits.
(a) During the Employment Period, Executive's base salary shall be
$365,000 per annum or such higher rate as the Board may determine from time to
time (such amount, as may be increased from time to time based on no less
frequent than an annual review by the Board, the "Base Salary"), which Base
Salary shall be payable by the Company in regular installments in accordance
with the Company's general payroll practices in effect from time to time. During
the period beginning on the date of this Agreement and ending December 31, 2004,
the Base Salary shall be pro rated on an annualized basis. In addition, during
the Employment Period, Executive shall be entitled to participate in employee
benefit programs and receive perquisites reasonably comparable to those in
effect as of the date hereof and as determined by the Board, including, without
limitation, participation in group health insurance and disability insurance,
life insurance, MERP benefits (up to $2,500 of out-of-pocket medical expenses
per annum), participation in the Company's 401K plan, vacation and paid holidays
and participation in the Company's deferred compensation plan (provided that any
participation in such deferred compensation plan is funded solely by the
Executive other than match by the Company of $.25 per $1.00 up to $2,500).
During the Employment Period, the Company shall reimburse Executive for
reasonable expenses incurred by Executive in connection with leasing an
automobile (including lease payments, licenses and insurance) not to exceed $600
per month (or, if Executive seeks to purchase an automobile, reimbursement of
reasonable expenses incurred in connection with such purchase, including car
loan payments, licenses and insurance), subject to the Company's requirements
with respect to reporting and documentation of such expenses. Executive shall
bear the cost of gas, cost of repairs on the automobile, and costs of any
tickets, traffic offenses or fines of any kind. During the Employment Period,
the Company shall reimburse Executive for reasonable expenses incurred by
Executive in connection with club membership at a club of Executive's choice not
to exceed $500 per month, subject to the Company's requirements with respect to
reporting and documentation of such expenses.
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(b) During the Employment Period, the Company shall reimburse
Executive for all ordinary and reasonable business expenses incurred by him in
the course of performing his duties and responsibilities under this Agreement
which are consistent with the Company's policies in effect from time to time
with respect to travel, entertainment and other business expenses, subject to
the Company's requirements with respect to reporting and documentation of such
expenses.
(c) In addition to the Base Salary, the Company shall pay to
Executive cash bonus compensation pursuant to the terms of a performance-based
bonus plan. The bonus plan will provide for performance-based targets to be
agreed to annually by the Chief Executive Officer of the Company and the Board.
If 100% of such bonus targets are met in a year, Executive shall be entitled to
a bonus equal to 65% of his Base Salary for that year. If the Company and its
Subsidiaries perform at a level in excess of 100% of the bonus targets, the
Executive shall be entitled to a proportionately higher amount of bonus
compensation up to a maximum of 124% of his Base Salary for that year, i.e.,
with each 1% increase above 100% of the bonus target, Executive shall be
entitled to an additional 0.65% of his Base Salary for that year. Executive
shall be entitled to bonus compensation in a proportionately reduced amount if
the Company and its Subsidiaries perform at a level that is less than 100% of
the bonus targets but in excess of 85% of the bonus targets, i.e., with each 1%
decrease below 100% of the bonus target, Executive's bonus shall be reduced from
the bonus he would have received had the Company and its Subsidiaries met 100%
of the bonus target by 0.65% of his Base Salary for that year. Executive shall
not be entitled to a bonus if 85% or less of the bonus targets are met. Bonuses
shall be paid in accordance with the Company's general payroll practices (in
effect from time to time).
4. Term.
(a) The Employment Period shall be four years beginning
on the date hereof (the "Initial Term") and shall automatically be renewed on
the same terms and conditions set forth herein as modified from time to time by
the parties hereto for additional one-year periods unless the Company or
Executive gives the other party written notice of the election not to renew the
Employment Period at least 60 days prior to any such renewal date (the end of
the Initial Term or the end of an effective one-year extension period being
referred to herein as the "Expiration Date"); provided that (i) the Employment
Period shall terminate prior to its Expiration Date immediately upon Executive's
resignation (with or without Good Reason, as defined below), death or
Disability, and (ii) the Employment Period may be terminated by the Company at
any time prior to its Expiration Date for Cause (as defined below) or without
Cause. Except as otherwise provided herein, any termination of the Employment
Period by the Company shall be effective as specified in a written notice from
the Company to Executive.
(b) In the event of Executive's death or Disability, or
upon the Expiration Date, Executive shall be entitled to payment of all accrued
and unpaid salary (including accrued vacation), expense reimbursement pursuant
to Section 3(b) of this Agreement, and a pro rata share (based on the number of
days that have elapsed from the beginning of the bonus period until the date of
termination of the Employment Period) of that year's bonus as determined
pursuant to Section 3(c) above. In addition, in the event of Executive's
Disability, the Company
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shall use commercially reasonable efforts to allow Executive to participate in
the Company's group health coverage, to the extent permitted by its insurers and
under the same terms and conditions that generally apply to Company employees;
provided that Executive pays all of the premiums and similar costs and expenses
for such coverage. Executive shall not be entitled to receive his Base Salary,
or any other perquisites or employee benefits or bonuses for periods after the
termination of the Employment Period, except as otherwise specifically provided
for in the Company's employee benefit plans or as otherwise expressly required
by applicable law.
(c) If the Employment Period is terminated by the Company
for Cause, or if Executive resigns without Good Reason, Executive shall only be
entitled to receive his Base Salary through the date of such termination,
resignation or expiration, accrued vacation and expense reimbursement pursuant
to Section 3(b) of this Agreement. In addition, the Company shall use
commercially reasonable efforts to allow Executive to participate in the
Company's group health coverage, to the extent permitted by its insurers and
under the same terms and conditions that generally apply to Company employees;
provided that Executive pays all of the premiums and similar costs and expenses
for such coverage. Executive shall not be entitled to any other salary, bonuses,
employee benefits, perquisites or other compensation from the Company or its
Subsidiaries thereafter, except as otherwise specifically provided for under the
Company's employee benefit plans or as otherwise expressly required by
applicable law.
(d) If the Employment Period is terminated by the Company
without Cause or if Executive resigns with Good Reason, then Executive shall be
entitled to receive severance compensation in an amount as determined below:
(i) If, during the Initial Term, the Employment Period is
terminated by the Company without Cause or if Executive resigns with
Good Reason, then Executive shall be entitled to receive (A) an amount
equal to two times his then applicable Base Salary, (B) an amount equal
to the Termination Bonus Amount (as defined in Section 4(d)(iii)), and
(C) health continuation coverage during the period beginning on the
date of the termination of the Employment Period and ending on the
first anniversary thereof, at the Company's expense. For purposes of
determining Executive's rights to COBRA continuation coverage as
required under Section 4980B of the Internal Revenue Code ("COBRA"),
the date of termination of the Employment Period shall be the date of
the COBRA qualifying event. In addition, Executive shall be permitted
to participate, during the period beginning on the date of the
termination of the Employment Period and ending on the first
anniversary thereof, in the Company's group life and disability
coverages, to the extent permitted by its insurers and under the same
terms and conditions that generally apply to Company employees, at the
Company's expense.
(ii) If, after the Initial Term, the Employment Period is
terminated by the Company without Cause or if Executive resigns with
Good Reason, then Executive shall be entitled to receive (A) an amount
equal to his then applicable Base Salary, (B) 50% of the Termination
Bonus Amount (as defined in Section 4(d)(iii)), and (C) health
continuation coverage during the period beginning on the date of the
termination of the Employment Period and ending six months thereafter,
at the Company's expense. For purposes of determining Executive's
rights to COBRA continuation coverage, the date of
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termination of the Employment Period shall be the date of the COBRA
qualifying event. In addition, Executive shall be permitted to
participate, during the period beginning on the date of the termination
of the Employment Period and ending six months thereafter, in the
Company's group life and disability coverages, to the extent permitted
by its insurers and under the same terms and conditions that generally
apply to Company employees, at the Company's expense.
(iii) The severance payments outlined in (i) and (ii) of
this Section 4(d) are in addition to all accrued and unpaid Base Salary
through the date of termination of the Employment Period, plus accrued
vacation, plus a prorated portion (based on the number of days which
have elapsed from the beginning of the bonus period until the date of
termination of the Employment Period) of the bonus for the year in
which the termination occurs (as determined pursuant to Section 3(c)
above), plus expense reimbursement pursuant to Section 3(b) of this
Agreement. In addition, the Company shall use commercially reasonable
efforts to allow Executive to participate in the Company's group health
coverage, to the extent permitted by its insurers and under the same
terms and conditions that generally apply to Company employees;
provided that, if not a part of the severance payments outlined in
Sections 4(d)(i)(C) and 4(d)(ii)(C) above, Executive pays all of the
premiums and similar costs and expenses for such coverage. Severance
payments will be paid and benefit coverage will be provided only if
Executive delivers to the Company an executed Release Agreement in the
form of Exhibit A attached hereto and only so long as Executive has not
breached the provisions of Sections 5 and 6 hereof. Severance payments
under Sections 4(d)(i)(A) and 4(d)(ii)(A) above shall be paid by
continuation of regular payroll compensation payments beginning on the
date of termination of the Employment Period and continuing, in the
case of Sections 4(d)(i)(A) for two years, and in the case of
4(d)(ii)(A), for one year. Severance payments under Sections 4(d)(i)(B)
and 4(d)(ii)(B) above shall be paid annually, at the date bonuses are
paid in the year following the date of termination of the Employment
Period. For purposes of Section 4(d) hereof, "Termination Bonus Amount"
shall mean an amount equal to the greater of: (A) the annual average of
Executive's annual bonuses for the preceding three years and (B) the
amount of Executive's last annual bonus received prior to the
termination of the Employment Period.
(e) If, after the third anniversary of the date hereof, a Change
of Control occurs, and within 90 days after such Change of Control, the
Employment Period is terminated by the Company without Cause or Executive
resigns with Good Reason, Executive shall be entitled to a lump sum payment
payable 30 days after such termination or resignation in an amount equal to (i)
the Executive's then applicable Base Salary, plus (ii) the greater of (A) 50% of
the annual average of Executive's annual bonuses for the preceding three years,
and (B) 50% of the amount of Executive's last annual bonus received prior to the
date of termination of the Employment Period. In addition, Executive shall be
entitled to receive his Base Salary through the date of such termination or
resignation, accrued vacation, a prorated portion (based on the number of days
which have elapsed from the beginning of the bonus period until the date of
termination of the Employment Period) of the bonus for the year in which the
termination occurs and expense reimbursement pursuant to Section 3(b) of this
Agreement. In addition, the Company shall use commercially reasonable efforts to
allow Executive to participate in the
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Company's group health coverage, to the extent permitted by its insurers and
under the same terms and conditions that generally apply to Company employees;
provided that Executive pays all of the premiums and similar costs and expenses
for such coverage. Payments will not be paid under this Section 4(e) unless
Executive delivers to the Company an executed Release Agreement in the form of
Exhibit A attached hereto. A "Change of Control" means any transaction or series
of transactions pursuant to which any Person(s) or a group of related Persons
(other than the investors purchasing shares in Hillman and/or its Subsidiaries
as of the date hereof and their affiliates) in the aggregate acquire(s) (i)
capital stock of Hillman possessing the voting power (other than voting rights
accruing only in the event of a default, breach or event of noncompliance) to
elect a majority of the board of Hillman (whether by merger, consolidation,
reorganization, combination, sale or transfer of Hillman's capital stock,
shareholder or voting agreement, proxy, power of attorney or otherwise) or (ii)
all or substantially all of Hillman's assets determined on a consolidated basis;
provided, that a Change of Control shall not include a Public Offering. A
"Public Offering" means an underwritten initial public offering and sale,
registered under the Securities Act, of shares of Hillman's common stock.
(f) The amounts payable pursuant to Sections 4(d) and 4(e) are
mutually exclusive, and under no circumstances shall Executive be entitled to
receive payments under both Sections.
(g) Executive agrees and acknowledges that Executive shall be
responsible for the payment of any and all taxes arising from continued coverage
under the Company's benefit plans.
(h) Upon the expiration of the Employment Period, to the extent
permitted under the terms of any applicable life insurance policy, Executive
shall be permitted to purchase from the Company life insurance policies issued
in his name; provided that Executive pays the purchase price of any such life
insurance policies, including any fees and expenses associated with such a
transfer.
(i) For purposes of this Agreement, "Cause" is defined as (i)
willful failure to substantially perform duties hereunder, other than due to
Disability; (ii) willful act which constitutes gross misconduct or fraud and
which is injurious to Hillman or its Subsidiaries; (iii) conviction of, or plea
of guilty or no contest, to a felony or (iv) material breach of confidentiality,
noncompete or non-solicitation agreements (including Sections 5 and 6 hereof)
with the Company which is not cured within ten (10) days after written notice
from the Company.
(j) For purposes of this Agreement, "Good Reason" means
termination of the Employment Agreement by Executive due to (i) any material
diminution in Executive's position, authority or duties with the Company, (ii)
the Company reassigning Executive to work at a location that is more than
seventy-five (75) miles from his current work location, (iii) to the extent the
Chief Executive Officer of Hillman is entitled to a board seat pursuant to the
HCI Stockholders Agreement, the removal without cause of Executive as a director
of Hillman, (iv) any amendment to the Company's bylaws which results in a
material and adverse change to the officer and director indemnification
provisions contained therein or (v) a material breach of Sections 3 or 4 of this
Agreement by the Company which is not cured within 10 days following
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written notice from Executive. For purposes of this Agreement, the "HCI
Stockholders Agreement" means the HCI Stockholders Agreement dated as of the
date hereof by and among HCI Acquisition Corp., Code Hennessy & Simmons IV LP,
Ontario Teachers' Pension Plan Board, HarbourVest Partners, LLC and each of the
other purchasers listed on Schedule A attached thereto.
(k) For purposes of this Agreement, "Disability" shall mean
Executive's inability to perform the essential duties, responsibilities and
functions of his position with the Company and its Subsidiaries for more than 26
weeks in any 12-month period as a result of any mental or physical disability or
incapacity as defined in the Americans with Disabilities Act or as otherwise
determined by the Board in its reasonable good faith judgment.
5. Confidential Information.
(a) Obligation to Maintain Confidentiality. Executive
acknowledges that the information, observations and data (including trade
secrets) obtained by him during the course of his employment with the Company
and its Subsidiaries concerning the business or affairs of Hillman or any its
Subsidiaries ("Confidential Information") are the property of Hillman or such
Subsidiary. Therefore, Executive agrees that he shall not disclose to any person
or entity or use for his own purposes any Confidential Information without the
prior written consent of the Board, unless and to the extent that the
Confidential Information becomes generally known to and available for use by the
public other than as a result of Executive's acts or omissions. Executive shall
deliver to the Company at the termination or expiration of the Employment
Period, or at any other time the Company may request in writing, all memoranda,
notes, plans, records, reports, computer files, disks and tapes, printouts and
software and other documents and data (and copies thereof) embodying or relating
to Confidential Information, Third Party Information (as defined in Section 5(b)
below), Work Product (as defined in Section 5(c) below) or the business of
Hillman or any other Subsidiaries which he may then possess or have under his
control.
(b) Third Party Information. Executive understands that
Hillman and its Subsidiaries and Affiliates will receive from third parties
confidential or proprietary information ("Third Party Information") subject to a
duty on Hillman's and its Subsidiaries' and affiliates' part to maintain the
confidentiality of such information and to use it only for certain limited
purposes. During the Employment Period and thereafter, and without in any way
limiting the provisions of Section 5(a) above, Executive will hold Third Party
Information in the strictest confidence and will not disclose to anyone (other
than personnel of Hillman or its Subsidiaries and affiliates who need to know
such information in connection with their work for Hillman or such Subsidiaries
and affiliates) or use, except in connection with his work for Hillman or its
Subsidiaries and affiliates, Third Party Information unless expressly authorized
by a member of the Board in writing.
(c) Intellectual Property, Inventions and Patents.
Executive acknowledges that all discoveries, concepts, ideas, inventions,
innovations, improvements, developments, methods, designs, analyses, drawings,
reports, patent applications, copyrightable work and mask work (whether or not
including any confidential information) and all registrations or applications
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related thereto, all other proprietary information and all similar or related
information (whether or not patentable) which relate to Hillman's or any of its
Subsidiaries' actual or anticipated business, research and development or
existing or future products or services and which are conceived, developed or
made by Executive (whether alone or jointly with others) while employed by the
Company and its Subsidiaries, whether before or after the date of this Agreement
("Work Product"), belong to the Company or such Subsidiary. Executive shall
promptly disclose such Work Product to the Board and, at the Company's expense,
perform all actions reasonably requested by the Board (whether during or after
the Employment Period) to establish and confirm such ownership (including,
without limitation, assignments, consents, powers of attorney and other
instruments). Executive acknowledges that all Work Product shall be deemed to
constitute "works made for hire" under the U.S. Copyright Act of 1976, as
amended.
6. Non-Compete, Non-Solicitation.
(a) Non-Compete. In further consideration of the
compensation to be paid to Executive hereunder, Executive acknowledges that
during the course of his employment with the Company and its Subsidiaries he has
and shall become familiar with the Company's trade secrets and with other
Confidential Information and that his services have been and shall continue to
be of special, unique and extraordinary value to the Company and its
Subsidiaries. Therefore, Executive agrees that, during the Employment Period and
(i) in the event of termination of the Employment Period by the Company without
Cause or resignation with Good Reason during the Initial Term, two years
following the date of such termination of the Employment Period, or (ii) in the
event of termination of the Employment Period by the Company without Cause or by
Executive with Good Reason after the Initial Term, one year following the date
of such termination of the Employment Period, or (iii) in the event of
termination of the Employment Period by the Company without Cause or by
Executive with Good Reason within 90 days of a Change of Control which occurs
after the third anniversary of the date hereof, one year following the date of
such termination of the Employment Period, or (iv) in the event of termination
of the Employment Period by the Company for Cause or by Executive without Good
Reason, one year following the date of such termination of the Employment
Period, or (v) upon the expiration on the Expiration Date of the Employment
Period or termination of the Employment Period due to Disability, one year
following the date of such termination of the Employment Period, Executive shall
not, directly or indirectly own any interest in, manage, control, participate
in, consult with, render services for, be employed in an executive, managerial
or administrative capacity by, or in any manner engage in any business competing
with the businesses of the Company or its Subsidiaries, as such businesses exist
or are in the process of being implemented during the Employment Period or on
the date of the termination or expiration of the Employment Period, within any
geographical area in which the Company or its Subsidiaries engage or plan to
engage in such businesses. Executive acknowledges (i) that the business of the
Company and its Subsidiaries will be conducted throughout the United States,
(ii) notwithstanding the state of incorporation or principal office of the
Company or any of its Subsidiaries, or any of its executives or employees
(including the Executive), it is expected that the Company and its Subsidiaries
will have business activities and have valuable business relationships within
its industry throughout the United States and (iii) as part of his
responsibilities, Executive will be traveling throughout the United States in
furtherance of the business and relationships of the Company and its
Subsidiaries. Nothing herein shall prohibit Executive from being a passive
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owner of not more than 2% of the outstanding stock of any class of a corporation
which is publicly traded, so long as Executive has no active participation in
the business of such corporation.
(b) Non-Solicitation. During the Employment Period and for two
years following the date of termination or expiration of the Employment Period,
Executive shall not directly or indirectly through another person or entity (i)
induce or attempt to induce any employee of the Company or any Subsidiary to
leave the employ of the Company or such Subsidiary, or in any way interfere with
the relationship between the Company or any Subsidiary and any employee thereof,
(ii) hire any person who was an employee of the Company or any Subsidiary at any
time during the Employment Period or (iii) induce or attempt to induce any
customer, supplier, licensee, licensor, franchisee or other business relation of
the Company or any Subsidiary to cease doing business (or materially reduce the
amount of business done) with the Company or such Subsidiary, or in any way
interfere with the relationship between any such customer, supplier, licensee or
business relation and the Company or any Subsidiary (including, without
limitation, making any negative or disparaging statements or communications
regarding the Company or its Subsidiaries).
(c) Scope of Restrictions. If, at the time of enforcement of this
Section 6, a court shall hold that the duration, scope or area restrictions
stated herein are unreasonable under circumstances then existing, the parties
agree that the maximum duration, scope or area reasonable under such
circumstances shall be substituted for the stated duration, scope or area and
that the court shall be allowed to revise the restrictions contained herein to
cover the maximum period, scope and area permitted by law.
(d) Equitable Relief. In the event of the breach or a threatened
breach by Executive of any of the provisions of this Section 6, the Company
would suffer irreparable harm, and in addition and supplementary to other rights
and remedies existing in its favor, the Company shall be entitled to specific
performance and/or injunctive or other equitable relief from a court of
competent jurisdiction in order to enforce or prevent any violations of the
provisions hereof (without posting a bond or other security). In addition, in
the event of a breach or violation by Executive of this Section 6, the time
periods referenced in this Section 6 shall be automatically extended by the
amount of time between the initial occurrence of the breach or violation and
when such breach or violation has been duly cured.
7. Executive's Representations. Executive hereby represents and
warrants to the Company that (i) the execution, delivery and performance of this
Agreement by Executive do not and shall not conflict with, breach, violate or
cause a default under any contract, agreement, instrument, order, judgment or
decree to which Executive is a party or by which he is bound, (ii) Executive is
not a party to or bound by any employment agreement, noncompete agreement or
confidentiality agreement with any other person or entity and (iii) upon the
execution and delivery of this Agreement by the Company, this Agreement shall be
the valid and binding obligation of Executive, enforceable in accordance with
its terms. Executive hereby acknowledges that the provisions of Section 6 above
are in consideration of (i) employment (as employee or consultant) with the
Company, (ii) the issuance of certain securities of Hillman under the Executive
Securities Agreement between Executive and Hillman and (iii) additional
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good and valuable consideration as set forth in this Agreement. In addition,
Executive agrees and acknowledges that the restrictions contained in Section 6
above are reasonable, do not preclude him from earning a livelihood, that he has
reviewed his rights and obligations under this Agreement with his legal counsel
and that he fully understands the terms and conditions contained herein. In
addition, Executive agrees and acknowledges that the potential harm to the
Company of the non-enforcement of Section 6 outweighs any potential harm to
Executive of its enforcement by injunction or otherwise. Executive acknowledges
that he has carefully read this Agreement and has given careful consideration to
the restraints imposed upon Executive by this Agreement, and is in full accord
as to their necessity for the reasonable and proper protection of confidential
and proprietary information of the Company now existing or to be developed in
the future. Executive expressly acknowledges and agrees that each and every
restraint imposed by this Agreement is reasonable with respect to subject
matter, time period and geographical area.
8. Survival. Sections 4(b) through 21, inclusive, shall survive
and continue in full force in accordance with their terms notwithstanding the
expiration or termination of the Employment Period.
9. Notices. Any notice provided for in this Agreement shall be in
writing and shall be either personally delivered, sent by reputable overnight
courier service or mailed by first class mail, return receipt requested, to the
recipient at the address below indicated:
Notices to Executive:
Max W. Hillman, Jr.
10590 Hamilton Avenue
Cincinnati, OH 45231
Telecopy: (513) 851-5531
Notices to the Company:
The Hillman Group, Inc.
10590 Hamilton Avenue
Cincinnati, OH 45231
Attn: Chief Executive Officer
and
Code Hennessy & Simmons LLC
10 South Wacker Drive, Suite 3175
Chicago, IL 60606
Telecopy: (312) 876-1840
Attn: Peter M. Gotsch
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With copies, which shall not constitute notice, to:
Kirkland & Ellis LLP
200 East Randolph Drive
Chicago, Illinois 60601
Telecopy: (312) 861-2200
Attn: Stephen L. Ritchie, P.C.
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement shall be deemed to have been given when so
delivered, sent or mailed.
10. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement or any action in any other jurisdiction,
but this Agreement shall be reformed, construed and enforced in such
jurisdiction as if such invalid, illegal or unenforceable provision had never
been contained herein.
11. Complete Agreement. This Agreement and those documents
expressly referred to herein and other documents of even date herewith embody
the complete agreement and understanding among the parties and supersede and
preempt any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way (including, without limitation, the Employment Agreement between the
parties hereto, dated June 18, 2001, and the Management Term Sheet dated
February 14, 2004, which shall be terminated and of no further force or effect
as of the date of the execution and delivery of this Agreement, but excluding
any breaches thereof by either party prior to the date hereof).
12. No Strict Construction. The language used in this Agreement
shall be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against any
party.
13. Counterparts. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
14. Successors and Assigns. This Agreement is intended to bind and
inure to the benefit of and be enforceable by Executive, the Company and their
respective heirs, successors and assigns, except that Executive may not assign
his rights or delegate his duties or obligations hereunder without the prior
written consent of the Company.
15. Choice of Law. All issues and questions concerning the
construction, validity, enforcement and interpretation of this Agreement and the
exhibits and schedules hereto shall be
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governed by, and construed in accordance with, the laws of the State of
Delaware, without giving effect to any choice of law or conflict of law rules or
provisions (whether of the State of Delaware or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other than the State
of Delaware.
16. Amendment and Waiver. The provisions of this Agreement may be
amended or waived only with the prior written consent of the Company (as
approved by the Board) and Executive, and no course of conduct or course of
dealing or failure or delay by any party hereto in enforcing or exercising any
of the provisions of this Agreement (including, without limitation, the
Company's right to terminate the Employment Period for Cause) shall affect the
validity, binding effect or enforceability of this Agreement or be deemed to be
an implied waiver of any provision of this Agreement.
17. Insurance. The Company may, at its discretion, apply for and
procure in its own name and for its own benefit life and/or disability insurance
on Executive in any amount or amounts considered advisable. Executive agrees to
cooperate in any medical or other examination, supply any information and
execute and deliver any applications or other instruments in writing as may be
reasonably necessary to obtain and constitute such insurance. Executive hereby
represents that he has no reason to believe that his life is not insurable at
rates now prevailing for healthy men of his age.
18. Indemnification and Reimbursement of Payments on Behalf of
Executive. The Company and its Subsidiaries shall be entitled to deduct or
withhold from any amounts owing from the Company or any of its Subsidiaries to
Executive any federal, state, local or foreign withholding taxes, excise tax, or
employment taxes ("Taxes") imposed with respect to Executive's compensation or
other payments from the Company or any of its Subsidiaries or Executive's
ownership interest in the Company (including, without limitation, wages,
bonuses, dividends, the receipt or exercise of equity options and/or the receipt
or vesting of restricted equity). In the event the Company or any of its
Subsidiaries does not make such deductions or withholdings, Executive shall
indemnify the Company and its Subsidiaries for any amounts paid with respect to
any such Taxes, together with any interest, penalties and related expenses
thereto.
19. MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN
CONNECTION WITH COMPLEX TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED
BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND
FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT
THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE,
TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, EACH PARTY TO THIS AGREEMENT HEREBY WAIVES ALL RIGHTS TO TRIAL BY
JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE BETWEEN
OR AMONG ANY OF THE PARTIES HERETO, WHETHER ARISING IN CONTRACT, TORT, OR
OTHERWISE, ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THIS
AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY AND/OR THE RELATIONSHIP
ESTABLISHED AMONG THE PARTIES HEREUNDER.
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20. Corporate Opportunity. During the Employment Period, Executive
shall submit to the Board all business, commercial and investment opportunities
or offers presented to Executive or of which Executive becomes aware which
relate to the areas of business engaged in by the Company at any time during the
Employment Period ("Corporate Opportunities"). Unless approved by the Board,
Executive shall not accept or pursue, directly or indirectly, any Corporate
Opportunities on Executive's own behalf.
21. Executive's Cooperation. During the Employment Period and
thereafter, Executive shall cooperate with the Company and its Subsidiaries in
any internal investigation, any administrative, regulatory or judicial
proceeding or any dispute with a third party as reasonably requested by the
Company (including, without limitation, Executive being available to the Company
upon reasonable notice for interviews and factual investigations, appearing at
the Company's request to give testimony without requiring service of a subpoena
or other legal process, volunteering to the Company all pertinent information
and turning over to the Company all relevant documents which are or may come
into Executive's possession, all at times and on schedules that are reasonably
consistent with Executive's other permitted activities and commitments). In the
event the Company requires Executive's cooperation in accordance with this
paragraph, the Company shall reimburse Executive solely for reasonable travel
expenses (including lodging and meals) upon submission of receipts.
22. Directors' and Officers' Liability Insurance. Executive shall
be a beneficiary of any directors' and officers' liability insurance policy
maintained by the Company so long as Executive remains an officer or director of
the Company.
* * * * *
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
THE HILLMAN GROUP, INC.
/s/ JAMES P. WATERS
--------------------------------------
By:
----------------------------------
Its:
---------------------------------
/s/ MAX W. HILLMAN
--------------------------------------
Max W. Hillman, Jr.
EXHIBIT A
GENERAL RELEASE
I, Max W. Hillman, Jr., in consideration of and subject to the
performance by The Hillman Companies, Inc., a Delaware corporation (together
with its subsidiaries, the "Company"), of its obligations under the Employment
Agreement, dated as of March 31, 2004, (the "Agreement"), do hereby release and
forever discharge as of the date hereof the Company and its affiliates and all
present and former directors, officers, agents, representatives, employees,
successors and assigns of the Company and its affiliates and the Company's
direct or indirect owners (collectively, the "Released Parties") to the extent
provided below.
1. I understand that any payments or benefits paid or granted to me under
Sections 4(d) and 4(e) of the Agreement represent, in part,
consideration for signing this General Release and are not salary,
wages or benefits to which I was already entitled. I understand and
agree that I will not receive the payments and benefits specified in
paragraph Sections 4(d) and 4(e) of the Agreement unless I execute this
General Release and do not revoke this General Release within the time
period permitted hereafter or breach this General Release. I also
acknowledge and represent that I have received all payments and
benefits that I am entitled to receive (as of the date hereof) by
virtue of any employment by the Company.
2. Except as provided in paragraph 4 below and except for the provisions
of my Agreement which expressly survive the termination of my
employment with the Company, I knowingly and voluntarily (for myself,
my heirs, executors, administrators and assigns) release and forever
discharge the Company and the other Released Parties from any and all
claims, suits, controversies, actions, causes of action, cross-claims,
counter-claims, demands, debts, compensatory damages, liquidated
damages, punitive or exemplary damages, other damages, claims for costs
and attorneys' fees, or liabilities of any nature whatsoever in law and
in equity, both past and present (through the date this General Release
becomes effective and enforceable) and whether known or unknown,
suspected, or claimed against the Company or any of the Released
Parties which I, my spouse, or any of my heirs, executors,
administrators or assigns, may have, which arise out of or are
connected with my employment with, or my separation or termination
from, the Company (including, but not limited to, any allegation, claim
or violation, arising under: Title VII of the Civil Rights Act of 1964,
as amended; the Civil Rights Act of 1991; the Age Discrimination in
Employment Act of 1967, as amended (including the Older Workers Benefit
Protection Act); the Equal Pay Act of 1963, as amended; the Americans
with Disabilities Act of 1990; the Family and Medical Leave Act of
1993; the Worker Adjustment Retraining and Notification Act; the
Employee Retirement Income Security Act of 1974; any applicable
Executive Order Programs; the Fair Labor Standards Act; or their state
or local counterparts; or under any other federal, state or local civil
or human rights law, or under any other local, state, or federal law,
regulation or ordinance; or under any public policy, contract or tort,
or under common law; or arising under any policies, practices or
procedures of the Company; or any claim for wrongful discharge, breach
of contract, infliction of emotional distress, defamation; or any claim
for costs, fees, or other
expenses, including attorneys' fees incurred in these matters) (all of
the foregoing collectively referred to herein as the "Claims").
3. I represent that I have made no assignment or transfer of any right,
claim, demand, cause of action, or other matter covered by paragraph 2
above.
4. I agree that this General Release does not waive or release any rights
or claims that I may have under the Age Discrimination in Employment
Act of 1967 which arise after the date I execute this General Release.
I acknowledge and agree that my separation from employment with the
Company in compliance with the terms of the Agreement shall not serve
as the basis for any claim or action (including, without limitation,
any claim under the Age Discrimination in Employment Act of 1967).
5. In signing this General Release, I acknowledge and intend that it shall
be effective as a bar to each and every one of the Claims hereinabove
mentioned or implied. I expressly consent that this General Release
shall be given full force and effect according to each and all of its
express terms and provisions, including those relating to unknown and
unsuspected Claims (notwithstanding any state statute that expressly
limits the effectiveness of a general release of unknown, unsuspected
and unanticipated Claims), if any, as well as those relating to any
other Claims hereinabove mentioned or implied. I acknowledge and agree
that this waiver is an essential and material term of this General
Release and that without such waiver the Company would not have agreed
to the terms of the Agreement. I further agree that in the event I
should bring a Claim seeking damages against the Company, or in the
event I should seek to recover against the Company in any Claim brought
by a governmental agency on my behalf, this General Release shall serve
as a complete defense to such Claims. I further agree that I am not
aware of any pending charge or complaint of the type described in
paragraph 2 as of the execution of this General Release.
6. I agree that neither this General Release, nor the furnishing of the
consideration for this General Release, shall be deemed or construed at
any time to be an admission by the Company, any Released Party or
myself of any improper or unlawful conduct.
7. I agree that I will forfeit all amounts payable by the Company pursuant
to the Agreement if I challenge the validity of this General Release. I
also agree that if I violate this General Release by suing the Company
or the other Released Parties, I will pay all costs and expenses of
defending against the suit incurred by the Released Parties, including
reasonable attorneys' fees, and return all payments received by me
pursuant to the Agreement.
8. I agree that this General Release is confidential and agree not to
disclose any information regarding the terms of this General Release,
except to my immediate family and any tax, legal or other counsel I
have consulted regarding the meaning or effect hereof or as required by
law, and I will instruct each of the foregoing not to disclose the same
to anyone. Notwithstanding anything herein to the contrary, each of the
parties (and each affiliate and person acting on behalf of any such
party) agree that each party (and each
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employee, representative, and other agent of such party) may disclose
to any and all persons, without limitation of any kind, the tax
treatment and tax structure of this transaction contemplated in the
Agreement and all materials of any kind (including opinions or other
tax analyses) that are provided to such party or such person relating
to such tax treatment and tax structure, except to the extent necessary
to comply with any applicable federal or state securities laws. This
authorization is not intended to permit disclosure of any other
information including (without limitation) (i) any portion of any
materials to the extent not related to the tax treatment or tax
structure of this transaction, (ii) the identities of participants or
potential participants in the Agreement, (iii) any financial
information (except to the extent such information is related to the
tax treatment or tax structure of this transaction), or (iv) any other
term or detail not relevant to the tax treatment or the tax structure
of this transaction.
9. Any non-disclosure provision in this General Release does not prohibit
or restrict me (or my attorney) from responding to any inquiry about
this General Release or its underlying facts and circumstances by the
Securities and Exchange Commission (SEC), the National Association of
Securities Dealers, Inc. (NASD), any other self-regulatory organization
or governmental entity.
10. I agree to reasonably cooperate with the Company in any internal
investigation, any administrative, regulatory, or judicial proceeding
or any dispute with a third party. I understand and agree that my
cooperation may include, but not be limited to, making myself available
to the Company upon reasonable notice for interviews and factual
investigations; appearing at the Company's request to give testimony
without requiring service of a subpoena or other legal process;
volunteering to the Company pertinent information; and turning over to
the Company all relevant documents which are or may come into my
possession all at times and on schedules that are reasonably consistent
with my other permitted activities and commitments. I understand that
in the event the Company asks for my cooperation in accordance with
this provision, the Company will reimburse me solely for reasonable
travel expenses, (including lodging and meals), upon my submission of
receipts.
11. I agree not to disparage the Company, its past and present investors,
officers, directors or employees or its affiliates and to keep all
confidential and proprietary information about the past or present
business affairs of the Company and its affiliates confidential unless
a prior written release from the Company is obtained. I further agree
that as of the date hereof, I have returned to the Company any and all
property, tangible or intangible, relating to its business, which I
possessed or had control over at any time (including, but not limited
to, company-provided credit cards, building or office access cards,
keys, computer equipment, manuals, files, documents, records, software,
customer data base and other data) and that I shall not retain any
copies, compilations, extracts, excerpts, summaries or other notes of
any such manuals, files, documents, records, software, customer data
base or other data.
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12. Notwithstanding anything in this General Release to the contrary, this
General Release shall not relinquish, diminish, or in any way affect
any rights or claims arising out of any breach by the Company or by any
Released Party of the Agreement after the date hereof.
13. Whenever possible, each provision of this General Release shall be
interpreted in, such manner as to be effective and valid under
applicable law, but if any provision of this General Release is held to
be invalid, illegal or unenforceable in any respect under any
applicable law or rule in any jurisdiction, such invalidity, illegality
or unenforceability shall not affect any other provision or any other
jurisdiction, but this General Release shall be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or
unenforceable provision had never been contained herein.
BY SIGNING THIS GENERAL RELEASE, I REPRESENT AND AGREE THAT:
(a) I HAVE READ IT CAREFULLY;
(b) I UNDERSTAND ALL OF ITS TERMS AND KNOW THAT I AM GIVING UP IMPORTANT
RIGHTS, INCLUDING BUT NOT LIMITED TO, RIGHTS UNDER THE AGE
DISCRIMINATION IN EMPLOYMENT ACT OF 1967, AS AMENDED, TITLE VII OF THE
CIVIL RIGHTS ACT OF 1964, AS AMENDED; THE EQUAL PAY ACT OF 1963, THE
AMERICANS WITH DISABILITIES ACT OF 1990; AND THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED;
(c) I VOLUNTARILY CONSENT TO EVERYTHING IN IT;
(d) I HAVE BEEN ADVISED TO CONSULT WITH AN ATTORNEY BEFORE EXECUTING IT AND
I HAVE DONE SO OR, AFTER CAREFUL READING AND CONSIDERATION I HAVE
CHOSEN NOT TO DO SO OF MY OWN VOLITION;
(e) I HAVE HAD AT LEAST 21 DAYS FROM THE DATE OF MY RECEIPT OF THIS RELEASE
SUBSTANTIALLY IN ITS FINAL FORM ON _______________ __, _____ TO
CONSIDER IT AND THE CHANGES MADE SINCE THE _______________ __, _____
VERSION OF THIS RELEASE ARE NOT MATERIAL AND WILL NOT RESTART THE
REQUIRED 21-DAY PERIOD;
(f) THE CHANGES TO THE AGREEMENT SINCE _______________ ___, _____ EITHER
ARE NOT MATERIAL OR WERE MADE AT MY REQUEST.
(g) I UNDERSTAND THAT I HAVE SEVEN DAYS AFTER THE EXECUTION OF THIS RELEASE
TO REVOKE IT AND THAT THIS RELEASE SHALL NOT BECOME EFFECTIVE OR
ENFORCEABLE UNTIL THE REVOCATION PERIOD HAS EXPIRED;
(h) I HAVE SIGNED THIS GENERAL RELEASE KNOWINGLY AND VOLUNTARILY AND WITH
THE ADVICE OF ANY COUNSEL RETAINED TO ADVISE ME WITH RESPECT TO IT; AND
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(i) I AGREE THAT THE PROVISIONS OF THIS GENERAL RELEASE MAY NOT BE AMENDED,
WAIVED, CHANGED OR MODIFIED EXCEPT BY AN INSTRUMENT IN WRITING SIGNED
BY AN AUTHORIZED REPRESENTATIVE OF THE COMPANY AND BY ME.
DATE: /S/ MAX W. HILLMAN
---------------- ----------------------------------
Max W. Hillman, Jr.
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