EXHIBIT 10.13
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 Richard P. Hillman ("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 President
of the Company and shall have the normal duties, responsibilities, functions and
authority of the President, subject to the power and authority of the Board or
the Chief Executive Officer 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 or the
Chief Executive Officer may from time to time direct.
(b) During the Employment Period, Executive shall report to the Board and
the Chief Executive Officer 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
$252,000 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.
(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
2
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
35% 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 70% 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
0.35% 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 0.35% 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 three 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 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
3
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 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
4
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 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
5
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) 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 (iv) a material breach
of Sections 3 or 4 of this Agreement by the Company which is not cured within 10
days following 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
6
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 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,
7
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 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.
8
(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 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
9
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:
Richard P. Hillman
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
10
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 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 governed by, and construed in accordance with, the
laws of the State of Delaware, without giving
11
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.
12
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.
* * * * *
13
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
THE HILLMAN GROUP, INC.
By: /s/ MAX W. HILLMAN
-----------------------------
Its:
------------------------------
/s/ RICHARD P. HILLMAN
---------------------------------
Richard P. Hillman
EXHIBIT A
GENERAL RELEASE
I, Richard P. Hillman, 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
A-2
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.
A-3
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
A-4
(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/ RICHARD P. HILLMAN
-------------- --------------------------------
Richard P. Hillman
A-5