exv10w2



 





 Exhibit 10.2


SUPPLY AGREEMENT




     This Supply Agreement (“Supply Agreement”) is entered into on January ___, 2006
(“Effective Date”), by and between The SteelWorks Corporation, a Colorado corporation
(“Seller”), and The Hillman Group, Inc., a Delaware corporation (“Buyer”). Seller
and Buyer may be referred to herein individually as a “Party” and collectively as the
“Parties.



RECITALS




     WHEREAS, Seller and Buyer have agreed to enter into this Supply Agreement pursuant to which
Seller has agreed to provide to Buyer certain products on the terms and conditions set forth
herein; and



     WHEREAS, it is a condition to the consummation of the transactions contemplated by the
Purchase Agreement that Seller and Buyer execute and deliver this Supply Agreement.



     NOW, THEREFORE, in consideration of the foregoing and the mutual covenants, conditions and
provisions contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties agree as follows:




	1.	 	Definitions.
	 
	 	 	The following terms, when used in this Supply Agreement with initial capital letters, shall
have the meanings set forth in this Section 1. All capitalized terms used herein and not
otherwise defined herein shall have the meanings given them in the Purchase Agreement.






	 	(a)	 	“Buyer Competitor” means, at any given time, any Person, who (i)
directly or indirectly, markets, sells or otherwise distributes Retail Products in the
Retail Market, or (ii) if, directly or indirectly, it/he were to acquire Retail
Products, a reasonable Person would determine at the time knowing all relevant facts,
would reasonably be likely to market, sell or otherwise distribute Retail Products in
the Retail Market.
	 
	 	(b)	 	“Buyer Confidential Information” means proprietary information
(including financial information, sales information, customer lists and information,
technical processes, product sourcing information, pricing information, marketing
information, operational costs, operational methods and personnel information) that has
value to Buyer and that is not known to the public or Buyer’s competition generally,
including (i) any and all information concerning Buyer and its operations that Buyer,
its agents or its representatives furnish to Seller, whether furnished before or after
the Effective Date, (ii) all information obtained by Seller by meeting with Buyer’s
personnel or representatives, (iii) any and all information concerning Retail Customers
that is obtained by Buyer, its agents or its representatives on a confidential basis
and is furnished to Seller, and (iv) all information derived by Seller or its
Representatives from any of the foregoing. Buyer Confidential Information specifically
includes information received from
Seller regarding the Retail Customers and Purchased Assets pursuant to the Purchase
Agreement.




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	 	(c)	 	“Claims” means claims, actions, suits or demands of any kind.
	 
	 	(d)	 	“Display Products” means the displays, header signs and point of
purchase materials identified on Schedule 1(d) attached hereto (as supplemented
or deleted by mutual agreement of the Parties in writing from time to time), including
product line extensions thereto.
	 
	 	(e)	 	“Force Majeure Event” means an event that is caused by any of the
following: acts of war, terrorism, civil riots or rebellions; quarantines, embargoes
and other similar unusual governmental action; extraordinary elements of nature or acts
of God; or other event or condition outside the reasonable control of the Party subject
to such failure or delay.
	 
	 	(f)	 	“Products” means Retail Products and Display Products, collectively.
	 
	 	(g)	 	“Purchase Agreement” means the Asset Purchase Agreement between Seller
and Buyer dated the date hereof.
	 
	 	(h)	 	“Recalls” means Retail Product recalls.
	 
	 	(i)	 	“Regulations” means any federal, state or local laws or regulatory
requirements to the extent applicable to the manufacture, packaging or supply of the
Products to Buyer or Retail Customers in the Retail Market hereunder.
	 
	 	(k)	 	“Representatives” means Seller’s Affiliates, advisors, employees,
officers or agents, collectively.
	 
	 	(j)	 	“Retail Customers” means all customers of Buyer for Retail Products.
	 
	 	(k)	 	“Retail Products” means all products identified on Schedule
1(k) attached hereto (as supplemented or deleted by mutual agreement of the Parties
in writing from time to time), including product line extensions thereto.
	 
	 	(l)	 	“Seller Confidential Information” means any information not generally
known to the public that is made available or disclosed by Seller to Buyer in
connection with this Supply Agreement that is marked “confidential,” including all of
the following: financial information; sales information; customer lists and
information; technical processes; product sourcing information; pricing information;
marketing information; operational costs; operational methods; and personnel
information). For the avoidance of doubt, Seller Confidential Information shall not
include any Buyer Confidential Information.
	 
	 	(m)	 	“Standards” means the specifications of Buyer or its Retail Customer
for the Products set forth in the applicable purchase order.




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	 	(n)	 	“Term” means the Initial Term and any extension thereof.
	 
	 	(o)	 	“Transition Services Agreement” means the Transition Services Agreement
between Buyer and Seller dated the date hereof.






	2.	 	Purchase of Products.






	 	(a)	 	Purchase Requirements. Seller agrees to manufacture, process, package
and supply to Buyer all of Buyer’s requirements of Products as specified on written
purchase orders submitted by Buyer to Seller from time to time, and Buyer agrees to
purchase exclusively from Seller, all of Buyer’s requirements of Products.
Notwithstanding anything contained herein to the contrary:






	 	(i)	 	Buyer may (after providing Seller with the reasonable
opportunity to match the other Person’s product type, price, delivery, quality,
volume and such other terms and conditions as Buyer deems material) purchase
any threaded rod Products from other Persons and in such event, Buyer shall pay
to Seller ten percent (10%) of Buyer’s cost of all such purchases, including
stickering, bundling, packaging for shipment and delivery charges to Buyer’s
warehouse;
	 
	 	(ii)	 	the foregoing exclusivity obligation with respect to any
specific Product and the obligation to pay Seller pursuant to Section 2(a)(i)
shall terminate and shall be of no further force and effect with respect to
such Product upon the occurrence of all of the following: (A) Buyer requests
Seller to maintain a Buffer Inventory for such Product pursuant to Section
2(c); (B) Seller fails to satisfy Buyer’s requirements for such Product
hereunder; (C) within twenty-one (21) days following receipt of written notice
from Buyer describing such failure in reasonable detail, Seller does not cure
such failure; and (D) Buyer is able to obtain such Product from another Person.
Notwithstanding the foregoing, during the time period when Seller is unable or
unwilling to satisfy Buyer’s requirements for such Product hereunder and during
such twenty-one (21) day cure period, notwithstanding Section 2(a), Buyer shall
be entitled to purchase such Product from another Person and shall have no
obligation to pay Seller pursuant to Section 2(a) with respect to such
purchases; and
	 
	 	(iii)	 	the foregoing exclusivity obligation with respect to any
Product and the obligation to pay Seller pursuant to Section 2(a)(i) shall not
apply with respect to any Product(s) during any period for which Seller has
declared a Force Majeure Event with respect to such Product(s) to Buyer in
writing pursuant to Section 5(e)(i). Such Force Majeure Event period shall
terminate upon written notice by Seller to Buyer.






	 	(b)	 	Order Procedures. Buyer shall submit written purchase orders to Seller
at least thirty (30) days prior to the requested delivery date for such Products.
Buyer may submit purchase orders less than thirty (30) days prior to the requested
delivery
date with a request for expedited delivery, and Seller shall use its commercially
reasonable best efforts to satisfy such expedited requests (“Expedited
Orders”). All purchase orders shall specify the type and quantity of Products
to be delivered by Seller.




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	 	(c)	 	Product Deliveries. Seller shall deliver the exact type and quantity
of Products as is specified in the purchase orders. Any variation between the type
and/or quantity of Products specified in a purchase order and the type and/or quantity
of Products delivered by Seller hereunder must be pre-approved in writing by Buyer
prior to the delivery of such Products. In the event that the quantity of Products
received by Buyer, or a Retail Customer in the case of Products shipped by Seller
directly to a Retail Customer, is greater than the quantity of Products specified in a
purchase order and such variation was not pre-approved by Buyer in the manner provided
above, then Buyer or the Retail Customer, as the case may be, shall have the right to
reject the overage amount. In the event that a shipment overage as described above is
shipped without prior written approval by Buyer, Seller shall pay all related freight
charges and shipping costs in connection with shipment of the rejected Products back to
Seller’s facilities. Seller shall use its commercially reasonable best efforts to
deliver to Buyer (or to such other Persons as specified in the purchase orders) the
Products listed in the purchase orders on or before the delivery dates set forth in
such purchase orders. If Seller fails to deliver Products listed in the purchase
orders on or before the delivery dates set forth in such purchase orders (other than
Expedited Orders), Seller shall have a grace period of one (1) week to remedy such
failure. If Seller does not ship Products ordered within the grace period, Buyer shall
be entitled to request Seller to maintain on Seller’s premises, for the balance of the
calendar year, an inventory (“Buffer Inventory”) equal to four (4) weeks
inventory of Products that have been ordered and not delivered, based on the volume of
each such Product purchased by Buyer in the previous year. Such Buffer Inventory shall
be and remain the property of Seller. During the first year of the Term, the Buffer
Inventory (if any) shall be determined using the volume of each such Product sold or
otherwise provided by Sellers to Retail Customers in the Retail Market during the
one-year period immediately preceding the Effective Date.
	 
	 	(d)	 	Corrections. Each Party hereto reserves the right to correct any
typographical or clerical errors in any purchase order, quotation, order
acknowledgement form or other related document.






	3.	 	Prices; Payment Terms.






	 	(a)	 	Product Prices. The initial prices for Products shall be as set forth
on Schedule 3(a)(1) attached hereto. The Parties shall adjust the prices on
the fifteenth day of each calendar quarter (e.g., each January 15, April 15,
July 15, October 15) in accordance with the formula set forth on Schedule
3(a)(2) attached hereto.




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	 	(b)	 	Shipping and Handling. For Products shipped by Seller directly to a
Retail Customer distribution center as listed in Schedule 3(a)(1), page 17 of
SKUCosts.xls, as such list may be updated by mutual agreement of the Parties in writing
from time to time, in addition to the price determined in accordance with Section 3(a),
Buyer shall pay Seller a shipping and handling charge equal to (i) 5.1% multiplied by
(ii) the product of (A) the quantity of Products shipped multiplied by (B) the
applicable price calculated pursuant to Section 3(a).
	 
	 	(c)	 	New Store Shipments. For Products shipped by Seller directly to a
Retail Customer that is setting up a new store, in addition to the price determined in
accordance with Section 3(a), Buyer shall pay Seller a shipping and handling charge
equal to (x) (i) 2.5% multiplied by (ii) the product of (A) the quantity of Products
shipped multiplied by (B) the applicable price calculated pursuant to Section 3(a) plus
(y) freight prepaid and added.
	 
	 	(d)	 	Payment Terms. Seller shall invoice Buyer for each shipment of
Products to Buyer or to a Retail Customer. The invoiced amount shall be for gross sales
(before returns). Except as provided under the Transition Services Agreement, Seller
shall not send invoices directly to Retail Customers. Buyer shall pay to Seller the
undisputed invoiced amount within thirty (30) days of receipt of the invoice. Late
payments shall accrue interest at the lower of (i) prime rate plus two percent (2%) and
(ii) the highest rate allowed by law on any such unpaid amounts, which interest shall
begin to accrue on the thirtieth (30th) day following the receipt of the
invoice.






	4.	 	Freight and Shipping Terms. All Products sold by Seller to Buyer hereunder shall be
shipped full truck load quantities FOB delivered to Hillman distribution center locations.
Notwithstanding the foregoing, full truck load quantities shall not relieve Seller of its
obligation to meet delivery dates (except as expressly provided in Section 2(b)). Buyer may
direct Seller to ship Products directly to a Retail Customer distribution center as listed in
Schedule 3(a)(1), page 17 of SKUCosts.xls, as such list may be updated by mutual
agreement of the Parties in writing from time to time, or new store in a purchase order with
freight and shipping terms as set forth in Section 3(b) or Section 3(c), respectively. In
addition, Buyer may direct Seller to ship Products directly to a Retail Customer destination
(other than described in Section 3(b) or Section 3(c)) with freight, shipping and handling
terms by mutual agreement of the Parties. If Buyer orders less than full truck load
quantities, additional freight may be charged.
	 
	5.	 	Term; Termination; Force Majeure.






	 	(a)	 	Term and Renewal. This Supply Agreement shall be effective as of the
Effective Date and shall continue in effect until the eighth (8th)
anniversary of the Effective Date (the “Initial Term”), unless terminated
earlier in accordance with the terms of this Supply Agreement. This Supply Agreement
shall automatically renew for successive one (1) year periods unless one Party notifies
the other Party in writing of its intent to terminate this Supply Agreement at least
two (2) years prior to the expiration of the Initial Term or any extension or future
extension thereof.




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	 	(b)	 	Effect of Expiration or Termination. The expiration or termination of
this Supply Agreement shall not (i) terminate the obligation of Buyer to pay to Seller
any amounts due Seller hereunder at the date of such expiration or earlier termination,
(ii) terminate the obligation of Seller to ship to Buyer or its Retail Customers the
Products ordered pursuant to this Supply Agreement prior to the date of such expiration
or termination, or (iii) otherwise release any Party from any liability or obligation
which at the time of such expiration or termination shall have accrued to the other
Party or which thereafter may accrue in respect of any act or omission occurring prior
to such expiration or termination.
	 
	 	(c)	 	Termination.






	 	(i)	 	By Seller. Seller may terminate this Supply Agreement
upon written notice if Buyer fails to pay Seller undisputed invoiced amounts
due and payable under this Supply Agreement within sixty (60) days after
Buyer’s receipt of written notice from Seller describing such failure in
reasonable detail (a “Failure to Pay”). Notwithstanding anything to
the contrary in this Supply Agreement, Seller shall have the right to stop
shipping Products under this Supply Agreement in the event of a Failure to Pay,
without terminating this Supply Agreement and without such action by Seller
constituting any grounds for Buyer to terminate this Supply Agreement or make a
claim for indemnification from Seller as a result thereof.
	 
	 	(ii)	 	By Buyer. Buyer may terminate this Supply Agreement
upon written notice if (A) Seller fails to perform any of its obligations
hereunder and, within the sixty (60) day period following receipt by Seller of
a written notice from Buyer describing such failure in reasonable detail,
Seller does not cure such failure; subject however to the provisions regarding
a Failure to Pay above; or (B) Seller becomes insolvent or the subject of
bankruptcy or insolvency proceedings that are not dismissed within sixty (60)
days.






	 	(d)	 	Survival. The following sections shall survive expiration or
termination of this Supply Agreement: 1 (to the extent necessary to interpret the
other surviving provisions), 3(d), 5(b), 5(d), 8(a), 8(c), 9, 10, 11, 12 and 13. In
addition, the expiration or earlier termination of this Supply Agreement shall not
affect in any way the survival of any right, duty or obligation of any Party that is
expressly stated elsewhere in this Supply Agreement to survive the expiration or
termination hereof.
	 
	 	(e)	 	Force Majeure.






	 	(i)	 	Seller shall not be liable for any failure or delay in the
performance of its obligations under this Supply Agreement to the extent such
failure or delay is caused by a Force Majeure Event. The Parties expressly
acknowledge that Force Majeure Events do not include the regulatory acts




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	 	 	 	of governmental agencies in the ordinary course, labor strikes by the
workforce of Seller, or the non-performance of subcontractors or third party
suppliers of Seller, unless such failure or non-performance by a
subcontractor or third party suppliers is itself caused by a Force Majeure
Event. Upon the occurrence of a Force Majeure Event, Seller shall provide
Buyer with written notice of such Force Majeure Event and Seller shall be
excused from any further performance or observance of the affected
obligation(s) for as long as such circumstances prevail, and Seller
continues to attempt to recommence performance or observance to the greatest
extent possible without delay.
	 
	 	(ii)	 	Notwithstanding Section 5(e)(i), Buyer may terminate this
Supply Agreement upon written notice to Seller, if Seller is unable to perform
its obligations under this Supply Agreement (including timely supply of
Products) in any material respect for more than sixty (60) consecutive days, as
a result of a Force Majeure Event.






	6.	 	Insurance. Seller shall purchase and maintain, at a minimum, the following types of
insurance policies with the following coverage amounts:






	 	(a)	 	Commercial General Liability coverage, including contractual liability and
broad form property damage liability, with a combined single limit of $1,000,000 and
aggregate limit of $2,000,000 with no deductible;
	 
	 	(b)	 	Product Liability Insurance with a combined single limit of $1,000,000 and
aggregate limit of $2,000,000 with no deductible; and which policy or policies shall be
maintained in full force and effect for a period of two (2) years following the
expiration or termination of this Supply Agreement; and
	 
	 	(c)	 	Umbrella coverage with limits of $2,000,000.






	 	 	Buyer shall be listed as an additional insured on all insurance policies required to be
purchased by Seller under this Supply Agreement. Seller shall provide Buyer with
certificates of insurance evidencing the above coverages prior to execution of this Supply
Agreement. Seller shall use commercially reasonable efforts to cause its insurance
carrier(s) to agree in writing to provide Buyer with thirty (30) days’ written notice prior
to the termination of any of the foregoing insurance policies.
	 
	7.	 	Representations, Warranties and Covenants.






	 	(a)	 	By Seller.






	 	(i)	 	Seller represents, warrants and covenants that all Products
manufactured, sourced or sold and supplied by Seller to Buyer hereunder shall,
at the time of receipt of the Products by Buyer (or the Retail Customers, if
shipped directly to the Retail Customer as the case may be), (i) be free from
defects, (ii) meet the Standards and (iii) meet the Regulations. Seller may not
be held liable for a claim for indemnity for breach of warranties




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	 	 	 	under this Section 7(a)(i), unless Seller is given the right to inspect the
Product giving rise to the claim and the Product has been returned to the
Seller, freight collect for Seller’s account. In addition to Seller’s
obligations set forth in Sections 9, 10 and 11, below, if any Products sold
to Buyer or Retail Customers do not conform to the warranty set forth in
this Section 7(a)(i) and if Buyer reports such nonconformity to Seller,
Seller shall, at its option, either replace the nonconforming Products
without cost to Buyer or refund to or credit Buyer for the purchase price
thereof. Buyer or its Retail Customers, as the case may be, shall randomly
inspect the Products and bills of lading in a commercially reasonable manner
promptly upon receipt thereof, and Buyer shall give oral notice upon
discovery and written notice promptly thereafter to Seller of any claims
relating to the warranty set forth in this Section 7(a)(i). Buyer shall
also have the right, upon reasonable notice to Seller, to inspect Seller’s
manufacturing to assess compliance by Seller with the Standards and
Regulations with respect to the Products generally, provided that such
inspection does not unreasonably interfere with the operations thereof.
	 
	 	(ii)	 	Seller represents, warrants and covenants: (i) that no Product
shall be adulterated or misbranded within the meaning of any state or local
law, or any rules and regulations promulgated thereunder; and (ii) that every
Product shall be manufactured, packaged and labeled in accordance with federal,
state and/or local laws, including all rules and regulations promulgated
thereunder, concerning the manufacturing, packaging and labeling of the
Products. Seller shall cooperate with regulatory authorities and Buyer to the
extent necessary in order to demonstrate to such regulatory authorities and
Buyer that such Products (and their transportation) comply in all material
respects with such laws, rules and regulations.
	 
	 	(iii)	 	In addition to the other representations, warranties and
covenants in this Section 7, with respect to any Display Products, Seller also
represents, warrants and covenants that such Products will not be false,
indecent, deceptive, misleading, inaccurate, illegal or constitute libel,
slander, defamation, plagiarism, unfair competition or an invasion of privacy
or publicity.
	 
	 	(iv)	 	Seller represents, warrants and covenants that all Products
will be manufactured at the Seller facility located at 4661 Monaco Street,
Denver, Colorado and/or such other facilities as determined reasonably
appropriate by Seller from time to time; provided, that Seller shall provide
Buyer with prior written notice if Seller moves manufacturing to another
facility.
	 
	 	(v)	 	Seller is a corporation organized and validly existing under
the laws of the state of its incorporation and has all requisite corporate
power and authority to enter into and legally perform its obligations under
this Supply Agreement. When executed and delivered, this Supply Agreement
shall constitute a valid and binding obligation of the Seller, legally enforceable against it in accordance with its terms.






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	 	(b)	 	By Buyer. Buyer is a corporation organized and validly existing under
the laws of the state of its incorporation and has all requisite corporate power and
authority to enter into and legally perform its obligations under this Supply
Agreement. When executed and delivered, this Supply Agreement shall constitute a valid
and binding obligation of the Buyer, legally enforceable against it in accordance with
its terms.






	8.	 	Confidential Information; Noncompete.






	 	(a)	 	Confidentiality.






	 	(i)	 	Seller. Seller shall not disclose Buyer Confidential
Information to others and shall maintain the confidentiality of all such
information in accordance with Seller’s policies for the protection of its own
nonpublic information. The limitations set forth in this Section 8(a)(i) shall
not apply with respect to the disclosure of any information: (i) to Seller’s
employees, auditors, counsel or other professional advisors, if Seller, in its
sole discretion, determines that it is reasonably necessary for such Person to
have access to such information, provided that any such Person agrees to be
bound by the provisions of this Section 8(a)(i) to the same extent as Seller;
(ii) as has become or previously was generally available to the public other
than by reason of a breach of this Section 8(a)(i) by Seller or has become
available to Seller on a non-confidential basis; (iii) as may be required or
reasonably necessary in any report, statement or testimony submitted to any
municipal, state or federal regulatory body having or claiming to have
jurisdiction over Seller (it being understood that, to the extent practicable,
Seller shall provide Buyer with prompt notice of any such event and cooperate
in good faith to enable Buyer to participate to protect its interest in such
confidential information); (iv) as may be required or reasonably necessary in
response to any summons or subpoena or in connection with any litigation; and
(v) in order to comply with any law, order, regulation or ruling applicable to
Seller.
	 
	 	(ii)	 	Buyer. Buyer shall not disclose any Seller
Confidential Information to others and shall maintain the confidentiality of
all such information in accordance with Buyer’s policies for the protection of
its own nonpublic information. The limitations set forth in this Section
8(a)(ii) shall not apply with respect to the disclosure of any information:
(i) to Buyer’s employees, auditors, counsel or other professional advisors, if
Buyer, in its sole discretion, determines that it is reasonably necessary for
such Person to have access to such information, provided that any such Person
agrees to be bound by the provisions of this Section 8(a)(ii) to the same
extent as Buyer; (ii) as has become or previously was generally available to
the public other than by reason of a breach of this Section 8(a)(ii) by Buyer
or




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	 	 	 	has become available to Buyer on a non-confidential basis; (iii) as may be
required or reasonably necessary in any report, statement or testimony
submitted to any municipal, state or federal regulatory body having or
claiming to have jurisdiction over Buyer (it being understood that, to the
extent practicable, Buyer shall provide Seller with prompt notice of any
such event and cooperate in good faith to enable Seller to participate to
protect its interest in such confidential information); (iv) as may be
required or reasonably necessary in response to any summons or subpoena or
in connection with any litigation; (v) in order to comply with any law,
order, regulation or ruling applicable to Buyer; and (vi) to the extent
related to the Retail Customers or the Purchased Assets.






	 	(b)	 	Noncompete. As an inducement to Buyer to execute this Supply Agreement
and the Purchase Agreement (and other agreements referenced therein) and complete the
transactions contemplated hereby and thereby, and in order to preserve the goodwill
associated with the Retail Customers and Purchased Assets, Seller hereby covenants and
agrees as follows:






	 	(i)	 	Until the expiration or termination of this Supply Agreement,
neither Seller nor any Affiliate will, directly or indirectly, sell Products to
any direct or indirect Buyer Competitor or any Retail Customer in the Retail
Market without Buyer’s express prior written consent in Buyer’s sole discretion
(which may be granted or withheld in Buyer’s sole discretion).
	 
	 	(ii)	 	Notwithstanding Section 8(b)(i) Seller may sell Products to
Paulin Industries, Inc. (a Delaware corporation) and Forney Industries, Inc. (a
Colorado corporation) for so long as such companies do not acquire, or are not
acquired by, a direct or indirect Buyer Competitor (whether structured as a
sale of assets, stock, merger or otherwise).
	 
	 	(iii)	 	In the event a court of competent jurisdiction determines that
any provision of Section 8(b) is excessively broad as to duration, geographic
scope, activity or otherwise, it is expressly agreed that such provision will
be construed so that the remaining provisions will not be affected, but will
remain in full force and effect, and any such overbroad provision will be
deemed, without further action on the part of any Person, to be modified,
amended and/or limited, but only to the extent necessary to render the same
valid and enforceable in such jurisdiction.






	 	(c)	 	Remedies. Seller agrees that money damages will not be an adequate
remedy in the event of any breach by any Seller or its Representatives of the
provisions of this Section 8, and that Buyer shall be entitled to equitable relief,
including injunction and specific performance, in addition to all other remedies
available to Buyer at law or in equity without the requirement of posting bond or
proving actual damages. Seller shall be required to reimburse Buyer for all costs and
expenses (including reasonable attorneys’ fees and expenses) incurred by Buyer
in successfully enforcing the obligations of the Seller and its Representatives
under this Section 8.




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	 	(d)	 	Consideration. Seller acknowledges and agrees that the benefits to it
of the transactions contemplated by this Supply Agreement are sufficient consideration
to support its agreements set forth in this Section 8.






	9.	 	Repurchased Products. During and after the Term, Seller shall repurchase from Buyer
all Products that fail to satisfy any Standards and/or Regulations as provided in Section
7(a). The purchase price for such repurchased Products shall be equal to the purchase price
paid by Buyer for such Products and shall be paid to Buyer in full within thirty (30) days
after the delivery of such Products to Seller’s facility and verification of the failure to
meet the applicable Standards and/or Regulations. Seller shall pay all freight charges and
shipping costs in connection with the shipment of such repurchased Products back to Seller’s
facility.






	10.	 	Claims and Recalls. In the event of any and all Claims and/or Recalls, whether
initiated by a Retail Customer, Buyer or Seller, or any other Person, Seller understands and
agrees that a Buyer designee shall have full control and responsibility (subject to the
indemnification obligations set forth in Section 11) for coordinating the collection of any
Product, communicating with Retail Customers or the media, replacing the Product (subject to
Section 9), and performing any other logistical or customer service functions stemming from
such Claims and/or Recalls. Additionally, a Buyer designee shall be the sole spokesperson on
behalf of Buyer and Seller to Retail Customers and the media, and Seller shall not release
information in any form regarding such Claims and/or Recalls to the press or any other media
source. However, Buyer and Seller shall jointly administer, prosecute, and defend any claims,
actions, suits, or demands leading up to, during, and following any threatened or actual legal
proceedings arising from any Claims or Recalls. Neither Buyer nor Seller shall negotiate,
compromise, or settle any Claim without the express written consent of the other Party. To
the extent Buyer or Seller settles any Claim without the express written consent of the other
Party, the settling Party shall indemnify and hold harmless the non-settling Party for all
costs, fees, damages, and expenses stemming from such Claim. Notwithstanding the foregoing,
if such Claims or Product Recalls result primarily and directly from the acts of Buyer, its
agents, its representative or contractors (other than Seller), Buyer and Seller shall
cooperate in coordinating communications and releases regarding such matter.







	11.	 	Indemnification.







	 	(a)	 	By Seller. Seller shall indemnify and defend the Buyer Parties and
hold each of them harmless from and against and pay on behalf of or reimburse such
Buyer Parties in respect of any Losses that any such Buyer Party has actually suffered
or sustained or become subject to (expressly including lost profits) as a result of, in
connection with or relating to:






	 	(i)	 	any breach by Seller of any representation or warranty made by
it in Section 7;




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	 	(ii)	 	any breach by Seller of any agreement, covenant, condition or
other provision of this Supply Agreement;
	 
	 	(iii)	 	any failure by Seller to comply with the Standards and
Regulations; or
	 
	 	(iv)	 	any Claims or Recalls relating to any Product except if such
Claims or Recalls result primarily and directly from the negligence of Buyer’s
officers, employees, agents, representatives or contractors or the applicable
Retail Customer occurring after title and risk of loss to such Product passed
to Buyer or the applicable Retail Customer under Section 4.






	 	(b)	 	By Buyer. Buyer shall indemnify and defend the Seller Parties and hold
each of them harmless from and against and pay on behalf of or reimburse such Buyer
Parties in respect of any Losses that any such Seller Party has actually suffered or
sustained or become subject to (expressly including lost profits) as a result of, in
connection with or relating to:






	 	(i)	 	any breach by Buyer of any representation or warranty made by
it in Section 7;
	 
	 	(ii)	 	any breach by Buyer of any agreement, covenant, condition or
other provision of this Supply Agreement; or
	 
	 	(iii)	 	any Claims or Recalls relating to any Product to the extent
such Claims or Recalls result primarily and directly from the negligence of
Buyer’s officers, employees, agents, representatives or contractors or the
applicable Retail Customer occurring after title and risk of loss to such
Product passed to Buyer or the applicable Retail Customer under Section 4.






	 	(c)	 	Indemnification Procedures. For any indemnification claim under this
Supply Agreement, the procedures (and only the mechanical procedures) set forth in
Section 5(d) of the Purchase Agreement shall apply.






	12.	 	Dispute Resolution.






The Parties shall attempt in good faith to resolve any controversy or claims arising out of
or relating to this Supply Agreement or any breach hereof promptly through negotiations
between their senior executives who have authority to settle the same. If the matter is not
resolved through such negotiations within fifteen (15) days of notice by a Party to the
other Party of the controversy or claim, either Party may refer the controversy or claim to
binding arbitration to be conducted as set forth in this Section 12. Notwithstanding the
foregoing, the Parties agree that the only circumstance in which disputes between them will
not be subject to the provisions of this Section 12 is where a Party makes a good faith
determination that a breach of the terms of this Supply Agreement by the other Party is such
that the damages to such Party resulting from the breach will be so immediate, so large or
severe and so incapable of adequate redress after the fact that a temporary
restraining order and/or other immediate injunctive relief is the only adequate remedy for
such breach.



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	 	(a)	 	Panel. The arbitration shall be heard and determined by a panel of
three (3) persons. Each Party shall have the right to designate one (1) member of the
panel. Such members shall select a third member of the panel.
	 
	 	(b)	 	AAA. The commercial rules of the American Arbitration Association
shall apply to any arbitration under this Supply Agreement, except to the extent the
provisions of this Article vary therefrom.
	 
	 	(c)	 	Expedited Schedule. The arbitration shall be conducted on an expedited
schedule. Unless otherwise agreed by the Parties, the Parties shall make their initial
submissions to the panel and the hearing shall commence within thirty (30) days of the
initiation of proceedings. The hearing shall be completed within thirty (30) days
thereafter.
	 
	 	(d)	 	Discovery. The Parties shall be entitled to discovery of all documents
and information reasonably necessary for a full understanding of any dispute raised in
the arbitration relating to this Supply Agreement. The Parties may use all methods of
discovery available under the United States Federal Rules of Civil Procedure, including
depositions, requests for admission and requests for production of documents. The time
periods applicable to such discovery methods shall be set by the panel so as to permit
compliance with the scheduling provisions of this Section.
	 
	 	(e)	 	Prompt Award. The award shall be made promptly by the panel, and,
unless agreed by the Parties, no later than thirty (30) days from the closing of the
hearing. The panel may not award punitive damages.
	 
	 	(f)	 	Binding Decisions. The decision or award rendered or made in
connection with the arbitration shall be final and binding upon the Parties thereto.
The prevailing Party may present the decision or award to any court of competent
jurisdiction for confirmation pursuant to the provisions of the Federal Arbitration
Act, 9 U.S.C. §§ 1-14, and such court shall enter forthwith an order confirming such
decision or award. The losing Party shall pay all costs of the arbitration. In
addition, the panel shall award to the prevailing Party its reasonable attorneys’ fees.
	 
	 	(g)	 	Location. The proceeding before the panel shall be held in Denver,
Colorado or as otherwise agreed upon by the Parties.






	13.	 	Miscellaneous.






	 	(a)	 	Entire Supply Agreement. This Supply Agreement (and the Exhibits
attached hereto and incorporated herein by this reference), the Transition Services
Agreement, and the Purchase Agreement constitute the entire agreement between the
Parties and supersede any prior understandings, agreements, or representations
by or between the Parties, written or oral, to the extent they relate in any way to
the subject matter hereof.




13









 






	 	(b)	 	Assignment; Change in Control. This Supply Agreement shall be binding
on the Parties and their respective successors and permitted assigns. Any attempted
assignment, delegation, or subcontracting not expressly contemplated by, or in
contravention of, this Section 13(b) shall be void and ineffective. Seller hereby
acknowledges that Buyer is entering into this Supply Agreement based upon (i) its
personal relationship with Seller and (ii) the personal judgment, skills and abilities
of Seller and its employees. Seller may assign this Supply Agreement, subject to
Buyer’s express prior written consent (not to be unreasonably withheld), to (x) one or
more of its Affiliates or (y) any entity that acquires all or substantially all of the
assets (whether such sale is structured as a sale of stock, a sale of assets, a merger
or otherwise) of Seller unless the assignee is a direct or indirect Buyer Competitor,
in which case such consent shall be subject to Buyer’s sole discretion. In addition,
during the Term, Seller shall not sell all or substantially all of the assets or a
material portion of the equity (whether such sale is structured as a sale of stock,
sale of assets, a merger or otherwise) of Seller or any of its Affiliates to a direct
or indirect Buyer Competitor without the express prior written consent of Buyer (such
consent shall be subject to Buyer’s sole discretion); provided,
however, that the foregoing limitation shall not apply to any sale of either an
Affiliate or a division of Seller that is not involved directly or indirectly in the
manufacture, packaging, storing, warehousing, marketing or sale of Retail Products.
Buyer may not assign this Supply Agreement without Seller’s prior written consent
(which consent shall not be unreasonably withheld); provided, however,
that Buyer may assign this Supply Agreement, upon written notice to Seller, but without
Seller’s prior written consent, to (x) one or more of its Affiliates provided that in
such case Buyer will nonetheless remain liable for all of its obligations hereunder or
(y) any entity that acquires all or substantially all of the assets of Buyer.
	 
	 	(c)	 	Counterparts. This Supply Agreement may be executed in two or more
counterparts (including by means of facsimile), each of which shall be deemed an
original but all of which together shall constitute one and the same instrument.
	 
	 	(d)	 	Headings. The section headings contained in this Supply Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Supply Agreement.
	 
	 	(e)	 	Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand, claim, or
other communication hereunder shall be deemed duly given (i) when delivered personally
to the recipient, (ii) one (1) business day after being sent to the recipient by
reputable overnight courier service (charges prepaid), (iii) one (1) business day after
being sent to the recipient by facsimile transmission or electronic mail (confirmed by
telephone), or (iv) four (4) business days after being mailed to the recipient by
certified or registered mail, return receipt




14









 






	 	 	 	requested and postage prepaid, and addressed to the intended recipient as set forth
below:





	 	 	 	 	 
	 	 	To Seller:	 	To Buyer:
	 

	 	The SteelWorks Corporation
	 	The Hillman Group, Inc.
	 
	 	 	 	 
	 

	 	Attn: Larry G. Broderick
	 	Attn: James P. Waters
	 
	 	 	 	 
	 

	 	4661 Monaco Street
	 	10590 Hamilton Avenue
	 
	 	 	 	 
	 

	 	Denver, CO 80216
	 	Cincinnati, OH 45231
	 
	 	 	 	 
	 

	 	Facsimile: (303) 377-7893
	 	Facsimile: (513) 595-8297







Any Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Party notice
in the manner herein set forth.




	 	(f)	 	Governing Law. This Supply Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware (without giving effect
to its choice or conflict of law provisions).
	 
	 	(g)	 	Amendments and Waivers. No modification, amendment, supplement to or
waiver of any provision of this Supply Agreement will be binding upon the Parties
unless made in a writing signed by the Parties. A failure of a Party to exercise any
right provided for herein shall not be deemed to be a waiver of any right hereunder.
	 
	 	(h)	 	Severability. Any term or provision of this Supply Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the validity
or enforceability of the offending term or provision in any other situation or in any
other jurisdiction.
	 
	 	(i)	 	Construction. The Parties have participated jointly in the negotiation
and drafting of this Supply Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Supply Agreement shall be construed as if drafted
jointly by the Parties and no presumption or burden of proof shall arise favoring or
disfavoring any Party by virtue of the authorship of any of the provisions of this
Supply Agreement. The word “including” shall mean including without limitation.
	 
	 	(j)	 	Submission to Jurisdiction. To the extent that any Party asserts a
claim or cause of action not covered under Section 12, each of the Parties submits to
the exclusive jurisdiction and venue of any state or federal court sitting in
Wilmington, Delaware in any action or proceeding arising out of or relating to this
Supply Agreement and agrees that all claims in respect of the action or proceeding may
be heard and determined in any such court. Each of the Parties waives any




15









 






	 	 	 	defense of inconvenient forum to the maintenance of any action or proceeding so
brought and waives any bond, surety, or other security that might be required of any
other Party with respect thereto. Either Party may make service on the other Party
by sending or delivering a copy of the process to the Party to be served at the
address and in the manner provided for the giving of notices in Section
13(e) above. Nothing in this Section 13(j), however, shall affect the
right of any Party to serve legal process in any other manner permitted by law or in
equity. Each Party agrees that a final judgment in any action or proceeding so
brought shall be conclusive and may be enforced by suit on the judgment or in any
other manner provided by law or in equity.
	 
	 	(k)	 	Relationship of the Parties. The relationship between the Parties to
this Supply Agreement is that of independent contractors. Under no circumstances shall
either Party be deemed an agent or representative of the other Party. Neither Party
shall have authority to act for or bind the other Party in any way, or represent that
it is in any way responsible for acts of the other Party. Nothing in this Supply
Agreement shall be construed or interpreted to create a relationship between the
Parties of partner, joint venturer, principal and agent, or employer and employee.
	 
	 	(l)	 	Retail Products. For the avoidance of doubt and notwithstanding
anything to the contrary in this Supply Agreement but subject to the performance
obligations in this Supply Agreement, it is understood that Buyer and Seller shall not
be restricted from otherwise selling Retail Products in markets other than the Retail
Market.





* * * * *




16









 








     IN WITNESS WHEREOF, the Parties hereto have executed this Supply Agreement on the Effective
Date.



	 	 	 	 	 	 	 
	 	 	THE HILLMAN GROUP, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Title:
	 	 

	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 	 	THE STEELWORKS CORPORATION
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Title: