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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2009
 Commission file number 1-13293
 The Hillman Companies, Inc.
  Delaware
    
    23-2874736(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 10590 Hamilton AvenueCincinnati, Ohio
    
    45231(Address of principal executive offices)
    
    (Zip Code)
 (513) 851-4900
 Securities registered pursuant to Section 12(b) of the Act:
 Title of Each Class
    
    Name of Each Exchange on Which Registered11.6% Junior Subordinated Debentures 
Preferred Securities Guaranty
    
    None
None
 Securities registered pursuant to Section 12(g) of the Act:
 o þ
 o þ
 þ o
 o o
 þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ




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TABLE OF CONTENTS  PART IItem 1  BusinessItem 1A  Risk FactorsItem 1B  Unresolved Staff CommentsItem 2  PropertiesItem 3  Legal ProceedingsItem 4  ReservedPART IIItem 5  Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesItem 6  Selected Financial DataItem 7  Managements Discussion and Analysis of Financial Condition and Results of OperationItem 7A   Quantitative and Qualitative Disclosures About Market RiskItem 8   Financial Statements and Supplementary DataItem 9  Changes in and Disagreements With Accountants on Accounting and Financial DisclosureItem 9A  Controls and ProceduresItem 9B  Other InformationPART IIIItem 10  Directors, Executive Officers, and Corporate GovernanceItem 11  Executive CompensationItem 12  Security Ownership of Certain Beneficial Owners and ManagementItem 13  Certain Relationships and Related TransactionsItem 14  Principal Accounting Fees and ServicesPART IVItem 15  Exhibits and Financial Statement SchedulesSIGNATURESEX-10.28EX-10.30EX-10.31EX-10.32EX-12.1EX-21.1EX-31.1EX-31.2EX-32.1EX-32.2    Table of Contents  
 PART I
 
 Item 1  Business .
 General
  http://www.hillmangroup.com
 Background
     2




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Industry Overview
    The Hillman Group
    3




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Products and Suppliers
  Fasteners
 ,
     4




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Keys and Key Accessories
       Engraving
   5




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Letters, Numbers and Signs
      Threaded Rod
    Builders Hardware
  6




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Markets and Customers
      Sales and Marketing
   7




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Competition
   Insurance Arrangements
  Employees
  8




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Backlog
  Where You Can Find More Information
 http://www.sec.gov
 
 Item 1A  Risk Factors.
  Current economic conditions may adversely impact demand for our products, reduce access to credit
and cause our customers and others with which we do business to suffer financial hardship, all of
which could adversely impact our business, results of operations, financial condition and cash
flows.
   The Company operates in a highly competitive industry, which may have a material adverse effect on
its business, financial condition and results of operations.
  9




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If the current weakness continues in the retail markets including hardware stores, home centers,
mass merchants and other retail outlets in North America, or general recessionary conditions
worsen, it could have a material adverse effect on the Companys business.
  The Company has significant indebtedness that could affect operations and financial condition.
   The failure to meet certain financial covenants required by our credit agreements may materially
and adversely affect assets, financial position and cash flows.
  The Companys business, financial condition and results of operations may be materially adversely
affected by seasonality.
  10




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Large customer concentration and the inability to penetrate new channels of distribution could
adversely affect the business.
  Successful sales and marketing efforts depend on the Companys ability to recruit and retain
qualified employees.
  The Company is exposed to adverse changes in currency exchange rates.
   The Companys results of operations could be negatively impacted by inflation or deflation in the
cost of raw materials, freight and energy.
  11




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The Companys business is subject to risks associated with sourcing product from overseas.
   Acquisitions have formed a significant part of our growth strategy in the past and may continue to
do so. If we are unable to identify suitable acquisition candidates or obtain financing needed to
complete an acquisition, our growth strategy may not succeed.
    If the Company were required to write down all or part of its goodwill or indefinite-lived
tradenames, its results of operations could be materially adversely affected.
  12




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The Companys success is highly dependent on information and technology systems.
  The Company is subject to fluctuations in interest rates.
  
 Item 1B  Unresolved Staff Comments.
  13




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Item 2  Properties.
  ApproximateLocation
    
    Square Footage
    
    DescriptionCincinnati, Ohio
    
    248,200
    
    Office, DistributionForest Park, Ohio
    
    335,700
    
    DistributionTempe, Arizona
    
    184,100
    
    Office, Mfg., DistributionJacksonville, Florida
    
    96,500
    
    DistributionShafter, California
    
    84,000
    
    DistributionLewisville, Texas
    
    80,500
    
    DistributionWilsonville, Oregon
    
    29,400
    
    DistributionLaCrosse, Wisconsin
    
    48,000
    
    DistributionGoodlettsville, Tennessee
    
    72,000
    
    Mfg., DistributionPompano Beach, Florida
    
    38,800
    
    Office, DistributionMississauga, Ontario
    
    34,700
    
    Office, Distribution
  
 Item 3  Legal Proceedings.
  
 Item 4  Reserved.
 14




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PART II
 
 Item 5  Market for Registrants Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity Securities.
 Stock Exchange Listing
  2009
    
    High
    
    LowFirst Quarter
    
    $
    13.00
    
    
    $
    3.56Second Quarter
    
    
    21.50
    
    
    
    10.00Third Quarter
    
    
    25.30
    
    
    
    20.80Fourth Quarter
    
    
    26.00
    
    
    
    21.00
 2008
    
    High
    
    LowFirst Quarter
    
    $
    29.81
    
    
    $
    28.47Second Quarter
    
    
    30.22
    
    
    
    29.30Third Quarter
    
    
    30.23
    
    
    
    28.75Fourth Quarter
    
    
    28.50
    
    
    
    10.00
  Distributions
     Issuer Purchases of Equity Securities
  15




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Item 6  Selected Financial Data.
  (dollars in thousands)Years Ended December 31,2009
    
    2008
    
    2007
    
    2006
    
    2005Income Statement Data:Net sales
    
    $
    458,161
    
    
    $
    481,923
    
    
    $
    445,628
    
    
    $
    423,901
    
    
    $
    382,512Gross profit
    
    
    233,519
    
    
    
    237,276
    
    
    
    229,895
    
    
    
    220,450
    
    
    
    206,290Extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    726
    
    
    
    Net loss
    
    
    (3,059
    )
    
    
    (2,953
    )
    
    
    (9,759
    )
    
    
    (7,648
    )
    
    
    (2,442
    )Balance Sheet Data at December 31:Total assets
    
    $
    630,598
    
    
    $
    652,794
    
    
    $
    662,475
    
    
    $
    655,999
    
    
    $
    633,703Long-term debt & capital lease obligations (1)
    
    
    208,163
    
    
    
    253,069
    
    
    
    281,800
    
    
    
    284,406
    
    
    
    263,508Mandatorily redeemable preferred stock
    
    
    111,452
    
    
    
    100,146
    
    
    
    89,773
    
    
    
    80,494
    
    
    
    72,110Management purchased preferred options
    
    
    6,617
    
    
    
    6,016
    
    
    
    5,298
    
    
    
    4,659
    
    
    
    4,087
 
 (1)
    
    Includes current portion of long-term debt and capitalized lease obligations. 16




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Item 7  Managements Discussion and Analysis of Financial
Condition and Results of Operation .
  ForwardLooking Statements
    General
  17




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Merger Transaction
   Financing Arrangements
    18




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19




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Acquisitions
  Product Revenues
  Year
    
    
    Year
    
    
    YearEnded
    
    
    Ended
    
    
    EndedDecember 31,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2007Net salesKeys
    
    $
    78,012
    
    
    $
    80,754
    
    
    $
    79,370Engraving
    
    
    35,518
    
    
    
    40,945
    
    
    
    39,158Letters, numbers and signs
    
    
    34,287
    
    
    
    34,671
    
    
    
    37,711Fasteners
    
    
    253,703
    
    
    
    261,646
    
    
    
    230,857Threaded rod
    
    
    30,118
    
    
    
    37,145
    
    
    
    30,693Code cutter
    
    
    3,353
    
    
    
    4,934
    
    
    
    5,149Builders hardware
    
    
    3,832
    
    
    
    1,606
    
    
    
    2,578Other
    
    
    19,338
    
    
    
    20,222
    
    
    
    20,112Consolidated net sales
    
    $
    458,161
    
    
    $
    481,923
    
    
    $
    445,628
 20




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Results of Operations
 Sales and Profitability for each of the Three Years Ended December 31,
 (dollars in thousands)2009
    
    
    2008
    
    
    2007% of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % ofAmount
    
    
    Total
    
    
    Amount
    
    
    Total
    
    
    Amount
    
    
    TotalNet sales
    
    $
    458,161
    
    
    
    100.0
    %
    
    $
    481,923
    
    
    
    100.0
    %
    
    $
    445,628
    
    
    
    100.0
    %Cost of sales (exclusive
of
depreciation and
amortization
shown below)
    
    
    224,642
    
    
    
    49.0
    %
    
    
    244,647
    
    
    
    50.8
    %
    
    
    215,733
    
    
    
    48.4
    %Gross profit
    
    
    233,519
    
    
    
    51.0
    %
    
    
    237,276
    
    
    
    49.2
    %
    
    
    229,895
    
    
    
    51.6
    %Operating expenses:Selling
    
    
    77,099
    
    
    
    16.8
    %
    
    
    82,312
    
    
    
    17.1
    %
    
    
    80,174
    
    
    
    18.0
    %Warehouse & delivery
    
    
    48,496
    
    
    
    10.6
    %
    
    
    55,781
    
    
    
    11.6
    %
    
    
    55,328
    
    
    
    12.4
    %General & administrative
    
    
    24,818
    
    
    
    5.4
    %
    
    
    20,776
    
    
    
    4.3
    %
    
    
    21,232
    
    
    
    4.8
    %Stock compensation
expense
    
    
    8,737
    
    
    
    1.9
    %
    
    
    2,481
    
    
    
    0.5
    %
    
    
    5,322
    
    
    
    1.2
    %Total SG&A
    
    
    159,150
    
    
    
    34.7
    %
    
    
    161,350
    
    
    
    33.5
    %
    
    
    162,056
    
    
    
    36.4
    %Depreciation
    
    
    16,993
    
    
    
    3.7
    %
    
    
    17,835
    
    
    
    3.7
    %
    
    
    18,224
    
    
    
    4.1
    %Amortization
    
    
    6,912
    
    
    
    1.5
    %
    
    
    7,073
    
    
    
    1.5
    %
    
    
    7,274
    
    
    
    1.6
    %Management fees
    
    
    1,010
    
    
    
    0.2
    %
    
    
    1,043
    
    
    
    0.2
    %
    
    
    1,023
    
    
    
    0.2
    %Total operating
expenses
    
    
    184,065
    
    
    
    40.2
    %
    
    
    187,301
    
    
    
    38.9
    %
    
    
    188,577
    
    
    
    42.3
    %Other income (expense)
    
    
    (120
    )
    
    
    0.0
    %
    
    
    (2,250
    )
    
    
    -0.5
    %
    
    
    839
    
    
    
    0.2
    %Income from operations
    
    
    49,334
    
    
    
    10.8
    %
    
    
    47,725
    
    
    
    9.9
    %
    
    
    42,157
    
    
    
    9.5
    %Interest expense
    
    
    15,521
    
    
    
    3.4
    %
    
    
    20,545
    
    
    
    4.3
    %
    
    
    25,528
    
    
    
    5.7
    %Interest expense on
mandatorily
redeemable preferred
stock &
management purchased
preferred
options
    
    
    12,312
    
    
    
    2.7
    %
    
    
    11,091
    
    
    
    2.3
    %
    
    
    9,919
    
    
    
    2.2
    %Interest expense on junior
subordinated debentures
    
    
    12,820
    
    
    
    2.8
    %
    
    
    12,609
    
    
    
    2.6
    %
    
    
    12,609
    
    
    
    2.8
    %Investment income on trust
common securities
    
    
    (378
    )
    
    
    -0.1
    %
    
    
    (378
    )
    
    
    -0.1
    %
    
    
    (378
    )
    
    
    -0.1
    %Income (loss) before
taxes
    
    
    9,059
    
    
    
    2.0
    %
    
    
    3,858
    
    
    
    0.8
    %
    
    
    (5,521
    )
    
    
    -1.2
    %Income tax provision
    
    
    12,118
    
    
    
    2.6
    %
    
    
    6,811
    
    
    
    1.4
    %
    
    
    4,238
    
    
    
    1.0
    %Net loss
    
    $
    (3,059
    )
    
    
    -0.7
    %
    
    $
    (2,953
    )
    
    
    -0.6
    %
    
    $
    (9,759
    )
    
    
    -2.2
    %
 21




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Current Economic Conditions
    Years Ended December 31, 2009 and 2008
    22




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23




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24




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Years Ended December 31, 2008 and 2007
        25




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26




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Liquidity and Capital Resources
 Cash Flows
 Operating Activities
    Investing Activities
    27




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Financing Activities
    Liquidity
   (dollars in thousands)
    AmountIncrease in cash and cash equivalents
    
    $
    10,031Decrease in accounts receivable, net
    
    
    (1,633
    )Decrease in inventories, net
    
    
    (18,282
    )Decrease in other current assets
    
    
    (767
    )Decrease in deferred taxes
    
    
    (295
    )Decrease in accounts payable
    
    
    6,219Increase in senior term loans & capital lease obligations
    
    
    (7,563
    )Increase in accrued salaries and wages
    
    
    (2,122
    )Increase in accrued pricing allowances
    
    
    (27
    )Decrease in accrued income and other taxes
    
    
    105Increase in accrued interest
    
    
    (948
    )Increase in other accrued liabilities
    
    
    (635
    )Net decrease in working capital for the year ended December 31, 2009
    
    $
    (15,917
    )
 28




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Contractual Obligations
  Payments DueLess Than
    
    
    1 to 3
    
    
    3 to 5
    
    
    More ThanContractual Obligations
    
    Total
    
    
    One Year
    
    
    Years
    
    
    Years
    
    
    Five YearsJunior Subordinated Debentures (1)
    
    $
    115,716
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    115,716Long Term Senior Term Loans
    
    
    157,849
    
    
    
    9,519
    
    
    
    148,330
    
    
    
    
    
    
    
    Bank Revolving Credit Facility
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Long Term Unsecured Subordinated Notes
    
    
    49,820
    
    
    
    
    
    
    
    49,820
    
    
    
    
    
    
    
    Interest payments (2)
    
    
    32,442
    
    
    
    13,442
    
    
    
    19,000
    
    
    
    
    
    
    
    Operating Leases
    
    
    35,712
    
    
    
    7,937
    
    
    
    10,957
    
    
    
    6,007
    
    
    
    10,811Mandatorily Redeemable Preferred Stock
    
    
    111,452
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    111,452Management Purchased Preferred Options
    
    
    6,617
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,617Accrued Stock Based Compensation on
Preferred Options
    
    
    14,151
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,151Deferred Compensation Obligations
    
    
    3,043
    
    
    
    334
    
    
    
    668
    
    
    
    668
    
    
    
    1,373Capital Lease Obligations
    
    
    514
    
    
    
    361
    
    
    
    147
    
    
    
    6
    
    
    
    Purchase Obligations
    
    
    1,225
    
    
    
    350
    
    
    
    700
    
    
    
    175
    
    
    
    Other Long Term Obligations
    
    
    2,677
    
    
    
    839
    
    
    
    989
    
    
    
    247
    
    
    
    602Uncertain Tax Position Liabilities
    
    
    2,879
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,879Total Contractual Cash Obligations (3)
    
    $
    534,097
    
    
    $
    32,782
    
    
    $
    230,611
    
    
    $
    7,103
    
    
    $
    263,601
 
 (1)
    
    The junior subordinated debentures liquidation value is approximately $108,707.(2)
    
    Interest payments for Long Term Senior Term Loans and the Long Term Unsecured Subordinated
Notes. Interest payments on the variable rate Long Term Senior Term Loans were calculated using
actual interest rates as of December 31, 2009 and a LIBOR rate of 0.27% plus applicable margin of
between 2.75% and 4.50% thereafter.(3)
    
    All of the contractual obligations noted above are reflected on the Companys consolidated
balance sheet as of December 31, 2009 except for the interest payments and operating
leases. In addition to the contractual obligations above, the Company has issued certain equity
securities to management shareholders with terms that allow them to be put back to the Company upon
termination from employment, death or disability. The terms of the equity securities held by
management limit cash distributions for puttable equity securities to an aggregate of $5.0 million
per annum. During 2009, equity securities with a value of $1,141 were put back to the Company by
former management shareholders. See Note 13, Common and Preferred
Stock, of Notes to Consolidated Financial
Statements for additional information.  Off-Balance Sheet Arrangements
  29




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Borrowings
   December 31, 2009
    
    
    December 31, 2008Facility
    
    
    Outstanding
    
    
    Interest
    
    
    Facility
    
    
    Outstanding
    
    
    Interest(dollars in 000s)
    
    Amount
    
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Amount
    
    
    RateTerm B-1 Loan
    
    
    
    
    
    $
    17,992
    
    
    
    3.02
    %
    
    
    
    
    
    $
    202,849
    
    
    
    3.46
    %Term B-2 Loan
    
    
    
    
    
    
    139,857
    
    
    
    4.77
    %
    
    
    
    
    
    
    
    
    
    
    Total Term Loans
    
    
    
    
    
    
    157,849
    
    
    
    
    
    
    
    
    
    
    
    202,849Revolving credit facility
    
    $
    20,000
    
    
    
    
    
    
    
    
    
    
    $
    40,000
    
    
    
    
    
    
    
    Capital leases & other obligations
    
    
    
    
    
    
    494
    
    
    various
    

    
    
    
    
    
    400
    
    
    variousTotal secured credit
    
    
    
    
    
    
    158,343
    
    
    
    
    
    
    
    
    
    
    
    203,249Unsecured subordinated notes
    
    
    
    
    
    
    49,820
    
    
    
    12.50
    %
    
    
    
    
    
    
    49,820
    
    
    
    10.00
    %Total borrowings
    
    
    
    
    
    $
    208,163
    
    
    
    
    
    
    
    
    
    
    $
    253,069
    30




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Ratio(dollars in 000s)
    
    Actual
    
    
    RequirementFixed Charge RatioAdjusted EBITDA (1)
    
    $
    82,293Cash interest expense (2)
    
    
    14,043Interest on junior subordinated debentures
    
    
    12,442Capital expenditures, net of disposals
    
    
    12,728Scheduled principal payments
    
    
    1,011Tax payments, net
    
    
    1,759Total fixed charges
    
    $
    41,983Fixed charge ratio (must be above requirement)
    
    
    1.96
    
    
    
    1.15Interest Coverage RatioAdjusted EBITDA (1)
    
    $
    82,293Cash interest expense (2)
    
    $
    14,043Interest coverage ratio (must be above requirement)
    
    
    5.86
    
    
    
    2.50Leverage RatioSenior term loan balance
    
    $
    157,849Capital lease obligations
    
    
    494Subordinated notes
    
    
    49,820Total debt
    
    $
    208,163Adjusted EBITDA (1)
    
    $
    82,293Leverage ratio (must be below requirement)
    
    
    2.53
    
    
    
    3.25
 
 (1)
    
    Adjusted EBITDA is defined as income from operations ($49,334) plus depreciation
($16,993), amortization ($6,912), non-cash stock compensation expense ($8,737),
restructuring costs ($838), other non recurring expenses ($15) and less foreign exchange
gains ($536).(2)
    
    Includes cash interest expense on senior term loans, capitalized lease obligations and
subordinated notes.  31




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Related Party Transactions
   Critical Accounting Policies and Estimates
  Revenue Recognition :
    Accounts Receivable and Allowance for Doubtful Accounts
  Inventory Realization
  32




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Goodwill and Other Intangible Assets
     Long-Lived Assets
  Income Taxes
  33




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Risk Insurance Reserves
   Common and Preferred Stock:
   34




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December 31,
    
    
    December 31,
    
    
    December 31,(dollars in 000s)
    
    2009
    
    
    2008
    
    
    2007Trailing twelve fiscal months EBITDA (1)
    
    $
    83,303
    
    
    $
    77,391
    
    
    $
    74,623Valuation Multiple (2)
    
    
    8.0
    
    
    
    8.0
    
    
    
    8.3Hillman Enterprise Value Excluding All Points
    
    
    666,424
    
    
    
    619,128
    
    
    
    619,371All Points Fair Value (3)
    
    
    
    
    
    
    
    
    
    
    10,243Hillman Enterprise Value
    
    
    666,424
    
    
    
    619,128
    
    
    
    629,614Less:Senior term loans
    
    
    157,849
    
    
    
    202,849
    
    
    
    231,475Bank revolving credit
    
    
    
    
    
    
    
    
    
    
    Unsecured subordinated notes
    
    
    49,820
    
    
    
    49,820
    
    
    
    49,820Junior subordinated debentures redemption value, net (4)
    
    
    105,446
    
    
    
    105,446
    
    
    
    105,446Total Debt
    
    
    313,115
    
    
    
    358,115
    
    
    
    386,741Plus:Cash
    
    
    17,164
    
    
    
    7,133
    
    
    
    11,919Less:Accrued Hillman Investment Company Class A Preferred (5)
    
    
    117,434
    
    
    
    105,038
    
    
    
    93,480Accrued Hillman Class A Preferred (5)
    
    
    173,358
    
    
    
    154,297
    
    
    
    136,630290,792
    
    
    
    259,335
    
    
    
    230,110Common Equity Value
    
    
    79,681
    
    
    
    8,811
    
    
    
    24,682Liquidity & Minority Discount on Common Only (6)
    
    
    23,904
    
    
    
    2,643
    
    
    
    7,405Discounted Common Equity Value
    
    
    55,777
    
    
    
    6,168
    
    
    
    17,277Fully-diluted Common Shares outstanding
    
    
    10,227
    
    
    
    10,309
    
    
    
    10,209Fully-diluted Discounted Value Per Common Share
    
    $
    5,454
    
    
    $
    598
    
    
    $
    1,692
 
 (1)
    -
    EBITDA is calculated for the most recent four fiscal quarters as follows: December 31,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2007Income from operations
    
    $
    49,334
    
    
    $
    47,725
    
    
    $
    42,157Depreciation and amortization
    
    
    23,905
    
    
    
    24,908
    
    
    
    25,498Management fees
    
    
    1,010
    
    
    
    1,043
    
    
    
    1,023Stock compensation expense
    
    
    8,737
    
    
    
    2,481
    
    
    
    5,322Exchange rate (gain) loss
    
    
    (536
    )
    
    
    980
    
    
    
    (409
    )Other adjustments
    
    
    853
    
    
    
    254
    
    
    
    1,032EBITDA
    
    $
    83,303
    
    
    $
    77,391
    
    
    $
    74,623
  
 (2)
    -
    The Company periodically reviews the valuation multiple used and notes that it is
consistent with comparable multiples used for distribution companies.(3)
    -
    In the initial period following the acquisition of All Points, the purchase price was
deemed the most accurate measure of enterprise value.(4)
    -
    The value of the junior subordinated debentures is the redemption value of $25 per
share.(5)
    -
    Redemption value of all preferred shares and options thereon, less any applicable strike
price.(6)
    -
    Under the terms of the ESA agreement with management shareholders, the redemption of
shares is subject to a
discount given the lack of a public market for the shares. A 30% discount has applied to the
equity value to adjust for the lack of an active market for the
shares. 35




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##### Table of Contents



Stock-Based Compensation
  Fair Value of Financial Instruments :
  Recent Accounting Pronouncements
   36




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##### Table of Contents



Item 7A  Quantitative and Qualitative Disclosures About Market Risk.
      37




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##### Table of Contents



Item 8   Financial Statements and Supplementary Data.
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
 Page(s)Report of Management on Internal Control Over Financial Reporting
    
    
    39Report of Independent Registered Public Accounting Firm
    
    
    40Consolidated Financial Statements:Consolidated Balance Sheets
    
    
    41-42Consolidated Statements of Operations
    
    
    43Consolidated Statements of Cash Flows
    
    
    44Consolidated Statements of Changes in Stockholders Equity
    
    
    45Notes to Consolidated Financial Statements
    
    
    46-75Financial Statement Schedule:Valuation Accounts
    
    
    76
 38




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##### Table of Contents



Report of Management on Internal Control Over Financial Reporting
  Internal Control  Integrated Framework
    /s/ Max W. Hillman
    
    /s/ James P. WatersMax W. Hillman
    
    James P. WatersChief Executive Officer
    
    Chief Financial OfficerDated: March 26, 2010
    
    Dated: March 26, 2010
 39




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 Board of Directors and Shareholders of
The Hillman Companies, Inc.
     
 40




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##### Table of Contents



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 (dollars in thousands)
 December 31,
    
    
    December 31,2009
    
    
    2008ASSETSCurrent assets:Cash and cash equivalents
    
    $
    17,164
    
    
    $
    7,133Restricted investments
    
    
    334
    
    
    
    282Accounts receivable, net
    
    
    51,757
    
    
    
    53,390Inventories, net
    
    
    83,182
    
    
    
    101,464Deferred income taxes, net
    
    
    8,100
    
    
    
    8,395Other current assets
    
    
    2,657
    
    
    
    3,424Total current assets
    
    
    163,194
    
    
    
    174,088Property and equipment, net
    
    
    47,565
    
    
    
    51,694Goodwill
    
    
    259,923
    
    
    
    259,923Other intangibles, net
    
    
    146,640
    
    
    
    153,553Restricted investments
    
    
    2,709
    
    
    
    3,972Deferred income taxes, net
    
    
    418
    
    
    
    485Deferred financing fees, net
    
    
    5,690
    
    
    
    4,438Investment in trust common securities
    
    
    3,261
    
    
    
    3,261Other assets
    
    
    1,198
    
    
    
    1,380Total assets
    
    $
    630,598
    
    
    $
    652,794LIABILITIES AND STOCKHOLDERS (DEFICIT) EQUITYCurrent liabilities:Accounts payable
    
    $
    19,191
    
    
    $
    25,410Current portion of senior term loans
    
    
    9,519
    
    
    
    2,080Current portion of capitalized lease obligations
    
    
    349
    
    
    
    225Accrued expenses:Salaries and wages
    
    
    7,624
    
    
    
    5,502Pricing allowances
    
    
    5,317
    
    
    
    5,290Income and other taxes
    
    
    1,904
    
    
    
    2,009Interest
    
    
    2,199
    
    
    
    1,251Deferred compensation
    
    
    334
    
    
    
    282Other accrued expenses
    
    
    6,147
    
    
    
    5,512Total current liabilities
    
    
    52,584
    
    
    
    47,561Long term senior term loans
    
    
    148,330
    
    
    
    200,769Long term capitalized lease obligations
    
    
    145
    
    
    
    175Long term unsecured subordinated notes
    
    
    49,820
    
    
    
    49,820Junior subordinated debentures
    
    
    115,716
    
    
    
    116,110Mandatorily redeemable preferred stock
    
    
    111,452
    
    
    
    100,146Management purchased preferred options
    
    
    6,617
    
    
    
    6,016Deferred compensation
    
    
    2,709
    
    
    
    3,972Deferred income taxes, net
    
    
    60,208
    
    
    
    50,068Accrued dividends on preferred stock
    
    
    75,580
    
    
    
    58,708Other non-current liabilities
    
    
    18,467
    
    
    
    15,131Total liabilities
    
    
    641,628
    
    
    
    648,476
 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS
 41




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##### Table of Contents



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
 December 31,
    
    
    December 31,2009
    
    
    2008LIABILITIES AND STOCKHOLDERS (DEFICIT) EQUITY (CONTINUED)Common and Preferred stock with put options:Class A Preferred stock, $.01 par, $1,000 liquidation value, 238,889 shares
authorized, none issued and outstanding at December 31, 2009 and
88.0 issued and outstanding at December 31, 2008
    
    
    
    
    
    
    88Class A Common stock, $.01 par, 23,141 shares authorized,
395.7 issued and outstanding at December 31, 2009 and
412.0 issued and outstanding at December 31, 2008
    
    
    2,158
    
    
    
    247Class B Common stock, $.01 par, 2,500 shares authorized,
970.6 issued and outstanding at December 31, 2009 and
1,000 issued and outstanding at December 31, 2008
    
    
    5,293
    
    
    
    598Commitments and contingencies (Note 17)Stockholders equity:Preferred Stock:Class A Preferred stock, $.01 par, $1,000 liquidation value, 238,889 shares
authorized, 82,104.8 issued and outstanding at December 31, 2009 and 2008
    
    
    1
    
    
    
    1Common Stock:Class A Common stock, $.01 par, 23,141 shares authorized,
5,805.3 issued and outstanding at December 31, 2009 and 2008
    
    
    
    
    
    
    Class C Common stock, $.01 par, 30,109 shares authorized,
2,787.1 issued and outstanding at December 31, 2009 and 2008
    
    
    
    
    
    
    Additional paid-in capital
    
    
    10,302
    
    
    
    29,209Accumulated deficit
    
    
    (27,299
    )
    
    
    (24,240
    )Accumulated other comprehensive loss
    
    
    (1,485
    )
    
    
    (1,585
    )Total stockholders (deficit) equity
    
    
    (18,481
    )
    
    
    3,385Total liabilities and stockholders (deficit) equity
    
    $
    630,598
    
    
    $
    652,794
 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS
 42




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##### Table of Contents



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 For the years ended December 31, 2009, 2008, and 2007
 (dollars in thousands)
 2009
    
    
    2008
    
    
    2007Net sales
    
    $
    458,161
    
    
    $
    481,923
    
    
    $
    445,628Cost of sales (exclusive of depreciation and
amortization shown separately below)
    
    
    224,642
    
    
    
    244,647
    
    
    
    215,733Gross profit
    
    
    233,519
    
    
    
    237,276
    
    
    
    229,895Operating expenses:Selling, general and administrative expenses
    
    
    159,150
    
    
    
    161,350
    
    
    
    162,056Depreciation
    
    
    16,993
    
    
    
    17,835
    
    
    
    18,224Amortization
    
    
    6,912
    
    
    
    7,073
    
    
    
    7,274Management and transaction fees to related
party
    
    
    1,010
    
    
    
    1,043
    
    
    
    1,023Total operating expenses
    
    
    184,065
    
    
    
    187,301
    
    
    
    188,577Other income (expense), net
    
    
    (120
    )
    
    
    (2,250
    )
    
    
    839Income from operations
    
    
    49,334
    
    
    
    47,725
    
    
    
    42,157Interest expense, net
    
    
    15,521
    
    
    
    20,545
    
    
    
    25,528Interest expense on mandatorily redeemable
preferred stock and management purchased
preferred options
    
    
    12,312
    
    
    
    11,091
    
    
    
    9,919Interest expense on junior subordinated
debentures
    
    
    12,820
    
    
    
    12,609
    
    
    
    12,609Investment income on trust common securities
    
    
    (378
    )
    
    
    (378
    )
    
    
    (378
    )Income (loss) before income taxes
    
    
    9,059
    
    
    
    3,858
    
    
    
    (5,521
    )Income tax provision
    
    
    12,118
    
    
    
    6,811
    
    
    
    4,238Net loss
    
    $
    (3,059
    )
    
    $
    (2,953
    )
    
    $
    (9,759
    )
 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS
 43




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##### Table of Contents



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the years ended December 31, 2009, 2008, and 2007
 (dollars in thousands)
 2009
    
    
    2008
    
    
    2007Cash flows from operating activities:Net loss
    
    $
    (3,059
    )
    
    $
    (2,953
    )
    
    $
    (9,759
    )Adjustments to reconcile net loss to net cash
provided by operating activities:Depreciation and amortization
    
    
    23,905
    
    
    
    24,908
    
    
    
    25,498Dispositions of property and equipment
    
    
    243
    
    
    
    75
    
    
    
    4Deferred income tax provision
    
    
    10,502
    
    
    
    5,264
    
    
    
    6,028Deferred financing and original issue
discount amortization
    
    
    1,275
    
    
    
    1,294
    
    
    
    894Interest on mandatorily redeemable preferred stock
and management purchased options
    
    
    12,312
    
    
    
    11,091
    
    
    
    9,919Stock-based compensation
    
    
    8,737
    
    
    
    2,481
    
    
    
    5,322Changes in operating items, net of effect of
acquisition:Decrease (increase) in accounts receivable, net
    
    
    1,633
    
    
    
    (4,428
    )
    
    
    386Decrease (increase) in inventories, net
    
    
    18,282
    
    
    
    (3,488
    )
    
    
    1,777Decrease (increase) in other assets
    
    
    949
    
    
    
    (740
    )
    
    
    (749
    )(Decrease) increase in accounts payable
    
    
    (6,219
    )
    
    
    2,177
    
    
    
    108Increase (decrease) in other accrued liabilities
    
    
    3,627
    
    
    
    569
    
    
    
    (2,739
    )Other items, net
    
    
    (190
    )
    
    
    1,342
    
    
    
    (173
    )Net cash provided by operating activities
    
    
    71,997
    
    
    
    37,592
    
    
    
    36,516Cash flows from investing activities:All Points acquisition
    
    
    
    
    
    
    
    
    
    
    (9,762
    )Capital expenditures
    
    
    (12,971
    )
    
    
    (13,409
    )
    
    
    (14,765
    )Net cash used for investing activities
    
    
    (12,971
    )
    
    
    (13,409
    )
    
    
    (24,527
    )Cash flows from financing activities:Repayments of senior term loans
    
    
    (45,000
    )
    
    
    (28,626
    )
    
    
    (2,350
    )Borrowings of revolving credit loans
    
    
    
    
    
    
    24,250
    
    
    
    9,500Repayments of revolving credit loans
    
    
    
    
    
    
    (24,250
    )
    
    
    (9,500
    )Borrowings of other financing obligations
    
    
    461
    
    
    
    
    
    
    
    Principal payments under capitalized lease obligations
    
    
    (394
    )
    
    
    (343
    )
    
    
    (271
    )Financing fees, net
    
    
    (2,921
    )
    
    
    
    
    
    
    Redemption of securities
    
    
    (1,141
    )
    
    
    
    
    
    
    Net cash used for financing activities
    
    
    (48,995
    )
    
    
    (28,969
    )
    
    
    (2,621
    )Net increase (decrease) in cash and cash equivalents
    
    
    10,031
    
    
    
    (4,786
    )
    
    
    9,368Cash and cash equivalents at beginning of period
    
    
    7,133
    
    
    
    11,919
    
    
    
    2,551Cash and cash equivalents at end of period
    
    $
    17,164
    
    
    $
    7,133
    
    
    $
    11,919
 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS
 44




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##### Table of Contents



Accumulated
    
    
    
    
    
    
    TotalAdditional
    
    
    Class A
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    StockholdersCommon Stock
    
    
    Paid-in
    
    
    Preferred
    
    
    Accumulated
    
    
    Comprehensive
    
    
    Comprehensive
    
    
    EquityClass A
    
    
    Class C
    
    
    Capital
    
    
    Stock
    
    
    Deficit
    
    
    Income (Loss)
    
    
    Income (Loss)
    
    
    (Deficit)Balance at December 31, 2006
    
    $
    
    
    
    $
    
    
    
    $
    57,599
    
    
    $
    1
    
    
    $
    (10,090
    )
    
    $
    (277
    )
    
    
    
    
    
    $
    47,233Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,759
    )
    
    
    
    
    
    $
    (9,759
    )
    
    
    (9,759
    )Adoption of guidance from ASC 740-10-25 (FIN 48)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,438
    )
    
    
    
    
    
    
    
    
    
    
    (1,438
    )Dividends to shareholders
    
    
    
    
    
    
    
    
    
    
    (13,484
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,484
    )Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    49
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    49Change in cumulative foreign translation adjustment (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (54
    )
    
    
    (54
    )
    
    
    (54
    )Change in derivative security value (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (80
    )
    
    
    (80
    )
    
    
    (80
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (9,893
    )Balance at December 31, 2007
    
    
    
    
    
    
    
    
    
    
    44,164
    
    
    
    1
    
    
    
    (21,287
    )
    
    
    (411
    )
    
    
    
    
    
    
    22,467Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,953
    )
    
    
    
    
    
    $
    (2,953
    )
    
    
    (2,953
    )Class A Common Stock FMV adjustment (2)
    
    
    
    
    
    
    
    
    
    
    170
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    170Dividends to shareholders
    
    
    
    
    
    
    
    
    
    
    (15,141
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,141
    )Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16Change in cumulative foreign translation adjustment (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    74
    
    
    
    74
    
    
    
    74Change in derivative security value (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,248
    )
    
    
    (1,248
    )
    
    
    (1,248
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (4,127
    )Balance at December 31, 2008
    
    
    
    
    
    
    
    
    
    
    29,209
    
    
    
    1
    
    
    
    (24,240
    )
    
    
    (1,585
    )
    
    
    
    
    
    
    3,385Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,059
    )
    
    
    
    
    
    $
    (3,059
    )
    
    
    (3,059
    )Class A Common Stock FMV adjustment (2)
    
    
    
    
    
    
    
    
    
    
    (1,995
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,995
    )Dividends to shareholders
    
    
    
    
    
    
    
    
    
    
    (16,912
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,912
    )Change in cumulative foreign translation adjustment (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (197
    )
    
    
    (197
    )
    
    
    (197
    )Change in derivative security value (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    297
    
    
    
    297
    
    
    
    297Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (2,959
    )Balance at December 31, 2009
    
    $
    
    
    
    $
    
    
    
    $
    10,302
    
    
    $
    1
    
    
    $
    (27,299
    )
    
    $
    (1,485
    )
    
    
    
    
    
    $
    (18,481
    )
 
 (1)
    
    The realized gains on investments, cumulative foreign translation adjustment and change in derivative
security value are net of taxes and represent the only items of other comprehensive income (loss).(2)
    
    Management controlled 395.7 shares of Class A common stock at December 31, 2009 and 412.0 shares of
Class A common stock at December 31, 2008. These shares contain a put feature that allows redemption
at the holders option. These shares are classified as temporary equity and have been adjusted to fair value.
See Note 13, Common and Preferred Stock, for further details.  45




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THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (dollars in thousands)
 1. Basis of Presentation:
    Nature of Operations:
  2. Summary of Significant Accounting Policies:
 Cash and Cash Equivalents :
  Restricted Investments :
  46




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THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 2. Summary of Significant Accounting Policies: (continued)
 Accounts Receivable and Allowance for Doubtful Accounts
  Inventories :
  Property and Equipment :
   Depreciation :
  Goodwill and Other Intangible Assets :
  47




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THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 2. Summary of Significant Accounting Policies: (continued)
    Long-Lived Assets :
  Income Taxes :
  Risk Insurance Reserves
  48




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THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 2. Summary of Significant Accounting Policies: (continued)
  Retirement Benefits :
   Revenue Recognition :
    Shipping and Handling :
  Research and Development
  49




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THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 2. Summary of Significant Accounting Policies: (continued)
 Common and Preferred Stock:
       Stock Based Compensation
  50




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THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 2. Summary of Significant Accounting Policies: (continued)
 Fair Value of Financial Instruments :
  Translation of Foreign Currencies :
  Comprehensive Income (Loss):
  Year
    
    
    Year
    
    
    Yearended
    
    
    ended
    
    
    endedDecember 31,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2007Net loss
    
    $
    (3,059
    )
    
    $
    (2,953
    )
    
    $
    (9,759
    )Foreign currency translation adjustment, net
    
    
    (197
    )
    
    
    74
    
    
    
    (54
    )Change in derivative security value, net (1)
    
    
    297
    
    
    
    (1,248
    )
    
    
    (80
    )Comprehensive loss
    
    $
    (2,959
    )
    
    $
    (4,127
    )
    
    $
    (9,893
    )
 
 (1)
    
    Utilizing an income tax rate of 38.7%, 38.5%, and 38.5% for the years ended December 31, 2009,
2008, and 2007, respectively.  Use of Estimates in the Preparation of Financial Statements:
  51




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THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 3. Recent Accounting Pronouncements:
     52




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THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 4. Acquisitions:
   Cash
    
    $
    481Account receivable, net
    
    
    1,017Inventory, net
    
    
    7,563Other current assets
    
    
    51Deferred income taxes
    
    
    614Property and equipment
    
    
    435Goodwill
    
    
    292Intangibles
    
    
    655Total assets acquired
    
    
    11,108Less:Liabilities assumed
    
    
    865Total purchase price
    
    $
    10,243
  53




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THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 4. Acquisitions: (continued)
  (unaudited)2007Net sales
    
    $
    468,415Net loss
    
    
    (9,225
    )
  5. Related Party Transactions:
   54




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THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 6. Income Taxes:
  Year
    
    
    Year
    
    
    Yearended
    
    
    ended
    
    
    endedDecember 31,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2007Current:Federal & State
    
    $
    1,579
    
    
    $
    878
    
    
    $
    462Foreign
    
    
    102
    
    
    
    104
    
    
    
    Total current
    
    
    1,681
    
    
    
    982
    
    
    
    462Deferred:Federal & State
    
    
    10,241
    
    
    
    6,376
    
    
    
    3,692Foreign
    
    
    196
    
    
    
    (547
    )
    
    
    84Total deferred
    
    
    10,437
    
    
    
    5,829
    
    
    
    3,776Provision for income taxes
    
    $
    12,118
    
    
    $
    6,811
    
    
    $
    4,238
    55




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THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 6. Income Taxes: (continued)
    As of December 31, 2009
    
    
    As of December 31, 2008Current
    
    
    Non-current
    
    
    Current
    
    
    Non-currentDeferred Tax Asset:Inventory
    
    $
    5,163
    
    
    $
    
    
    
    $
    5,287
    
    
    $
    Bad debt reserve
    
    
    724
    
    
    
    
    
    
    
    641
    
    
    
    Casualty loss reserve
    
    
    325
    
    
    
    478
    
    
    
    444
    
    
    
    390Accrued bonus / deferred compensation
    
    
    1,975
    
    
    
    1,312
    
    
    
    1,181
    
    
    
    1,566Medical insurance reserve
    
    
    374
    
    
    
    
    
    
    
    670
    
    
    
    Original issue discount amortization
    
    
    
    
    
    
    355
    
    
    
    
    
    
    
    370Derivative security value
    
    
    
    
    
    
    733
    
    
    
    
    
    
    
    912Transaction costs
    
    
    
    
    
    
    2,009
    
    
    
    
    
    
    
    2,024Federal / foreign net operating loss
    
    

    
    
    
    
    5,715
    
    
    
    
    
    
    
    16,315State net operating loss
    
    
    
    
    
    
    1,565
    
    
    
    
    
    
    
    2,178Unrecognized tax benefit
    
    
    
    
    
    
    (2,879
    )
    
    
    
    
    
    
    (2,872
    )Federal capital loss carryforwards
    
    
    
    
    
    
    657
    
    
    
    
    
    
    
    134Tax credit carryforwards
    
    
    
    
    
    
    2,181
    
    
    
    
    
    
    
    1,436All other items
    
    
    584
    
    
    
    794
    
    
    
    728
    
    
    
    683Gross deferred tax assets
    
    
    9,145
    
    
    
    12,920
    
    
    
    8,951
    
    
    
    23,136Valuation allowance for deferred tax assets
    
    
    (1,045
    )
    
    
    (1,464
    )
    
    
    (556
    )
    
    
    (1,430
    )Net deferred tax assets
    
    $
    8,100
    
    
    $
    11,456
    
    
    $
    8,395
    
    
    $
    21,706Deferred Tax Liability:Intangible asset amortization
    
    $
    
    
    
    $
    65,575
    
    
    $
    
    
    
    $
    65,888Property and equipment
    
    
    
    
    
    
    5,671
    
    
    
    
    
    
    
    5,401Deferred tax liabilities
    
    $
    
    
    
    $
    71,246
    
    
    $
    
    
    
    $
    71,289Net deferred tax liability
    
    
    
    
    
    $
    51,690
    
    
    
    
    
    
    $
    41,188Long term net deferred tax liability
    
    
    
    
    
    $
    60,208
    
    
    
    
    
    
    $
    50,068Current net deferred tax asset
    
    
    
    
    
    
    8,100
    
    
    
    
    
    
    
    8,395Long term net deferred tax asset
    
    
    
    
    
    
    418
    
    
    
    
    
    
    
    485Net deferred tax liability
    
    
    
    
    
    $
    51,690
    
    
    
    
    
    
    $
    41,188
 56




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THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 6. Income Taxes: (continued)
     Year
    
    Year
    
    Yearended
    
    ended
    
    endedDecember 31,
    
    December 31,
    
    December 31,2009
    
    2008
    
    2007Statutory federal income tax rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %Non-U.S. taxes and the impact of non-U.S. losses
for which a current tax benefit is not available
    
    
    0.6
    %
    
    
    -0.9
    %
    
    
    1.0
    %State and local income taxes, net of U.S. federal
income tax benefit
    
    
    12.6
    %
    
    
    20.5
    %
    
    
    -8.7
    %Adjustment of reserve for change in valuation
allowance and other items
    
    
    5.7
    %
    
    
    -1.5
    %
    
    
    -1.4
    %Adjustment for change in tax law
    
    
    3.5
    %
    
    
    -4.1
    %
    
    
    -4.1
    %Permanent differences:Interest expense on mandatorily redeemable
preferred stock
    
    
    47.6
    %
    
    
    100.6
    %
    
    
    -62.9
    %Stock based compensation expense
    
    
    31.1
    %
    
    
    22.4
    %
    
    
    -33.4
    %Dividends received exclusion
    
    
    0.0
    %
    
    
    -0.1
    %
    
    
    0.1
    %Meals and entertainment expense
    
    
    1.2
    %
    
    
    3.2
    %
    
    
    -2.3
    %Other permanent differences
    
    
    0.2
    %
    
    
    1.4
    %
    
    
    -0.1
    %Reconciliation of tax return to tax provision
    
    
    -3.7
    %
    
    
    0.0
    %
    
    
    0.0
    %Effective income tax rate
    
    
    133.8
    %
    
    
    176.5
    %
    
    
    -76.8
    %
 57




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THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 6. Income Taxes: (continued)
  2009
    
    
    2008Unrecognized tax benefits  January 1
    
    $
    2,872
    
    
    $
    2,875Gross increases  tax positions in prior period
    
    
    7
    
    
    
    Gross decreases  tax positions in prior period
    
    
    
    
    
    
    (3
    )Unrecognized tax benefits  December 31
    
    $
    2,879
    
    
    $
    2,872Amount of unrecognized tax benefit that, if
recognized would affect the companys effective
tax rate
    
    $
    2,879
    
    
    $
    2,872
   58




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THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 7. Property and Equipment, net:
  EstimatedUseful Life(Years)
    
    2009
    
    
    2008Land
    
    n/a
    
    $
    131
    
    
    $
    131Buildings
    
    27
    
    
    781
    
    
    
    781Leasehold improvements
    
    3-10
    
    
    4,961
    
    
    
    4,540Machinery and equipment
    
    2-10
    
    
    104,568
    
    
    
    100,173Furniture and fixtures
    
    3-5
    
    
    1,481
    
    
    
    1,469Construction in process
    
    
    
    
    1,051
    
    
    
    1,539Property and equipment, gross
    
    
    
    
    112,973
    
    
    
    108,633Less: Accumulated depreciation
    
    
    
    
    65,408
    
    
    
    56,939Property and equipment, net
    
    
    
    $
    47,565
    
    
    $
    51,694
  8. Other Intangibles, net:
   EstimatedUseful Life(Years)
    
    2009
    
    
    2008Customer relationships  Hillman
    
    23
    
    $
    126,651
    
    
    $
    126,651Customer relationships  All Points
    
    15
    
    
    555
    
    
    
    555Trademarks
    
    Indefinite
    
    
    47,394
    
    
    
    47,394Patents
    
    9
    
    
    7,960
    
    
    
    7,960Non Compete Agreements
    
    4
    
    
    5,742
    
    
    
    5,742Intangible assets, gross
    
    
    
    
    188,302
    
    
    
    188,302Less: Accumulated amortization
    
    
    
    
    41,662
    
    
    
    34,749Other intangibles, net
    
    
    
    $
    146,640
    
    
    $
    153,553
  59




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THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 9. Long-Term Debt:
     60




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THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 9. Long-Term Debt: (continued)
        61




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THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 9. Long-Term Debt: (continued)
  2009
    
    
    2008Revolving Credit Agreement
    
    $
    
    
    
    $
    Term Loan B
    
    
    157,849
    
    
    
    202,849Subordinated Debt Issuance
    
    
    49,820
    
    
    
    49,820Capital Leases
    
    
    494
    
    
    
    400208,163
    
    
    
    253,069Less: amounts due in one year
    
    
    9,868
    
    
    
    2,305Long-term debt
    
    $
    198,295
    
    
    $
    250,764
  Amount2010
    
    $
    9,8682011
    
    
    17,5472012
    
    
    180,7422013
    
    
    62014
    
    
    2015 and thereafter
    
    
    
   62




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THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 10. Leases:
  Capital
    
    
    OperatingLeases
    
    
    Leases2010
    
    $
    361
    
    
    $
    7,9372011
    
    
    99
    

    
    
    6,3362012
    
    
    48
    
    
    
    4,6212013
    
    
    6
    
    
    
    3,5972014
    
    
    
    
    
    
    2,410Later years
    
    
    
    
    
    
    10,811Total minimum lease payments
    
    
    514
    
    
    $
    35,712Less amounts representing interest
    
    
    (20
    )Present value of net minimum lease payments
(including $349 currently payable)
    
    $
    494
  11. Deferred Compensation Plan:
     63




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THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 12. Guaranteed Preferred Beneficial Interest in the Companys Junior Subordinated Debentures:
      Non-current assets  junior subordinated debentures  preferred
    
    $
    112,455Non-current assets  junior subordinated debentures  common
    
    
    3,261Total assets
    
    $
    115,716Non-current liabilities  trust preferred securities
    
    $
    112,455Stockholders equity  trust common securities
    
    
    3,261Total liabilities and stockholders equity
    
    $
    115,716
   64




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THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 12. Guaranteed Preferred Beneficial Interest in the Companys Junior Subordinated Debentures: (continued)
    13. Common and Preferred Stock:
 Common Stock issued in connection with the Merger Transaction:
    65




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THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 13. Common and Preferred Stock: (continued)
     Preferred Stock:
   66




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THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 13. Common and Preferred Stock: (continued)
     Purchased Options:
   67




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THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 13. Common and Preferred Stock: (continued)
  December 31,
    
    
    December 31,2009
    
    
    2008Hillman Investment Company Class A Preferred Stock
    
    $
    57,282
    
    
    $
    57,344Purchased Options  Hillman Investment Company
Class A Preferred Stock
    
    
    2,188
    
    
    
    2,254Accumulated and unpaid dividends
    
    
    51,982
    
    
    
    40,548Total mandatorily redeemable preferred stock
    
    $
    111,452
    
    
    $
    100,146Purchased Options  Hillman Companies, Inc. Class A
Preferred Stock
    
    $
    3,135
    
    
    $
    3,230Accumulated and unpaid dividends
    
    
    3,482
    
    
    
    2,786Total management purchased preferred options
    
    $
    6,617
    
    
    $
    6,016
 2006 Equity Issuance:
     68




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THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 13. Common and Preferred Stock: (continued)
 2009 Equity Redemptions:
   14. Stock-Based Compensation:
 Common Option Plan:
   Preferred Options:
  69




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THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 14. Stock-Based Compensation: (continued)
     Class B Shares:
   70




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THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 15. Derivatives and Hedging:
     16. Fair Value Measurements:
  Level 1:
    
    Quoted market prices in active markets for identical assets or liabilities.
 Level 2:
    
    Observable market-based inputs or unobservable inputs that are corroborated by
market data.
 Level 3:
    
    Unobservable inputs reflecting the reporting entitys own assumptions.
   Fair Value Measurementat December 31, 2009Level 1
    
    Level 2
    
    Level 3
    
    TotalTrading securities
    
    $
    3,043
    
    
    $
    
    
    
    $
    
    
    
    $
    3,043Interest rate swaps
    
    
    
    
    
    
    (1,894
    )
    
    
    
    
    
    
    (1,894
    )Fixed rate debt
    
    
    
    
    
    
    (49,820
    )
    
    
    
    
    
    
    (49,820
    )
 71




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##### Table of Contents



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 16. Fair Value Measurements: (continued)
       17. Commitments and Contingencies:
    72




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THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 17. Commitments and Contingencies: (continued)
   18. Statements of Cash Flows:
  Year
    
    
    Year
    
    
    Yearended
    
    
    ended
    
    
    endedDecember 31,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2007Cash paid (refunded) during the
period for:Interest on junior subordinated
debentures
    
    $
    12,442
    
    
    $
    12,231
    
    
    $
    12,231Interest
    
    $
    14,043
    
    
    $
    19,112
    
    
    $
    26,117Income taxes
    
    $
    1,759
    
    
    $
    985
    
    
    $
    (17
    )Non-cash investing activities:Property and equipment purchased
with capital lease
    
    $
    27
    
    
    $
    238
    
    
    $
    15Non-cash financing activities:Increase in accrued dividends on preferred stock
    
    $
    16,872
    
    
    $
    15,142
    
    
    $
    13,484
 19. Quarterly Data (unaudited):
 2009
    
    Fourth
    
    Third
    
    Second
    
    FirstNet sales
    
    $
    99,462
    
    
    $
    122,673
    
    
    $
    123,813
    
    
    $
    112,213Gross profit
    
    
    51,785
    
    
    
    65,093
    
    
    
    62,704
    
    
    
    53,937Net (loss) income
    
    
    (2,950
    )
    
    
    2,290
    
    
    
    1,920
    
    
    
    (4,319
    )2008
    
    Fourth
    
    Third
    
    Second
    
    FirstNet sales
    
    $
    113,469
    
    
    $
    132,588
    
    
    $
    129,070
    
    
    $
    106,796Gross profit
    
    
    54,520
    
    
    
    64,653
    
    
    
    64,252
    
    
    
    53,851Net (loss) income
    
    
    (2,606
    )
    
    
    1,321
    
    
    
    1,686
    
    
    
    (3,354
    )
 73




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THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 20. Concentration of Credit Risks:
    21. Segment and Geographic Information:
   2009
    
    
    2008
    
    
    2007Net salesUnited States
    
    $
    442,695
    
    
    $
    467,925
    
    
    $
    429,627Canada
    
    
    4,479
    
    
    
    4,241
    
    
    
    7,289Mexico
    
    
    4,980
    
    
    
    3,416
    
    
    
    2,523Other
    
    
    6,007
    
    
    
    6,341
    
    
    
    6,189Consolidated net sales
    
    $
    458,161
    
    
    $
    481,923
    
    
    $
    445,628Long-lived assets:United States
    
    $
    466,737
    
    
    $
    477,855
    
    
    $
    489,234Canada
    
    
    249
    
    
    
    311
    
    
    
    509Mexico
    
    
    
    
    
    
    55
    
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    Consolidated long-lived assets
    
    $
    466,986
    
    
    $
    478,221
    
    
    $
    489,743
 74




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##### Table of Contents



THE HILLMAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
 21. Segment and Geographic Information: (continued)
 As of
    
    
    As of
    
    
    As ofDecember 31,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2007Cash & cash equivalentsUnited States
    
    $
    16,801
    
    
    $
    6,775
    
    
    $
    11,080Canada
    
    
    250
    
    
    
    234
    
    
    
    288Mexico
    
    
    113
    
    
    
    124
    
    
    
    551Other
    
    
    
    
    
    
    
    
    
    
    Consolidated cash & cash equivalents
    
    $
    17,164
    
    
    $
    7,133
    
    
    $
    11,919
  Year
    
    
    Year
    
    
    YearEnded
    
    
    Ended
    
    
    EndedDecember 31,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2007Net salesKeys
    
    $
    78,012
    
    
    $
    80,754
    
    
    $
    79,370Engraving
    
    
    35,518
    
    
    
    40,945
    
    
    
    39,158Letters, numbers and signs
    
    
    34,287
    
    
    
    34,671
    
    
    
    37,711Fasteners
    
    
    253,704
    
    
    
    261,646
    
    
    
    230,857Threaded rod
    
    
    30,118
    
    
    
    37,145
    
    
    
    30,693Code cutter
    
    
    3,353
    
    
    
    4,934
    
    
    
    5,149Builders hardware
    
    
    3,832
    
    
    
    1,606
    
    
    
    2,578Other
    
    
    19,337
    
    
    
    20,222
    
    
    
    20,112Consolidated net sales
    
    $
    458,161
    
    
    $
    481,923
    
    
    $
    445,628
 22. Subsequent Events:
  75




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##### Table of Contents



Financial Statement Schedule:
 
 Schedule II  VALUATION ACCOUNTS
  Deducted From Assets in Balance SheetAllowance forAllowance for
    
    
    Obsolete/Doubtful
    
    
    ExcessAccounts
    
    
    InventoryEnding Balance  December 31, 2006
    
    $
    369
    
    
    $
    4,642Additions charged to cost and expense
    
    
    200
    
    
    
    230Additions from acquired company
    
    
    124
    
    
    
    1,629Deductions due to:Others
    
    
    96
    (A)
    
    
    337
    (A)Ending Balance  December 31, 2007
    
    
    597
    
    
    
    6,164Additions charged to cost and expense
    
    
    40
    
    
    
    381Deductions from acquired company
    
    
    
    
    
    
    (191
    )Deductions due to:Others
    
    
    93
    (A)
    
    
    266
    (A)Ending Balance  December 31, 2008
    
    
    544
    
    
    
    6,088Additions charged to cost and expense
    
    
    345
    
    
    
    1,530Deductions due to:Others
    
    
    375
    (A)
    
    
    473
    (A)Ending Balance  December 31, 2009
    
    $
    514
    
    
    $
    7,145
 
  (A)
    
    Includes write-off of accounts receivable (net of bad debt recoveries) and inventories. 76




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##### Table of Contents



Item 9  Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
  
 Item 9A  Controls and Procedures.
 Disclosure Controls and Procedures
  Managements Annual Report on Internal Control Over Financial Reporting.
  
    
    Pertain to the maintenance of records that in reasonable detail accurately and fairly
reflect the transactions and the dispositions of assets;
    
    Provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in
accordance with appropriate authorizations; and
    
    Provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the companys assets that could have a material effect
on our financial statements. Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. Therefore, even those systems
determined to be effective can provide only reasonable assurance with respect to financial
statement preparation and presentation.
  77




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##### Table of Contents



Attestation Report of Registered Public Accounting Firm on Internal Control Over Financial
Reporting.
  Changes in Internal Control over Financial Reporting.
  
 Item 9B  Other Information.
  78




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##### Table of Contents



PART III
 
 Item 10  Directors, Executive Officers, and Corporate Governance.
  Directors
 Principal Occupation; Five-YearName and Age
    
    Employment; Other DirectorshipsAndrew W. Code (51)
    
    Chairman of The Hillman Companies, Inc. since
April 27, 2009. Mr. Code has been a general
partner of CHS Management Limited Partnership
(CHS Management) and a general partner of
Code Hennessy & Simmons Limited Partnership
(CHS) since August 1988. Mr. Code is on the
Boards of Pool Corporation and Woodstream
Corp.Peter M. Gotsch (45)
    
    From March 31, 2004 to April 26, 2009, Mr.
Gotsch was Chairman of The Hillman Companies,
Inc., Cincinnati, Ohio. Mr. Gotsch has been a
general partner of Ellipse Capital LLC since
June 2008. Mr. Gotsch had been a member of
Code Hennessy & Simmons LLC since 1997 and
employed by its affiliates since 1989.
Mr. Gotsch presently serves on the Board of
Beacon Roofing Supply, Inc. and the Board of
Houston Wire & Cable Company.Maurice P. Andrien, Jr. (68)
    
    From September 2001 to March 2004, Mr.
Andrien was Chairman of The Hillman
Companies, Inc., Cincinnati, Ohio. From
April 1999 to November 2001, Mr. Andrien was
President and Chief Executive Officer of
SunSource Inc., the predecessor of the
Company. Mr. Andrien presently serves on the
Boards of State Industrial Products, Inc.,
Cogniscape LLC and Kaba Holding AG.Max W. Hillman (63)
    
    President and Chief Executive Officer of The
Hillman Companies, Inc., Chief Executive
Officer of The Hillman Group, Inc.,
Cincinnati, Ohio. From April 2000 to
November 2001, Mr. Hillman was Co-Chief
Executive Officer of The Hillman Group, Inc.
Mr. Hillman presently serves on the Boards of
State Industrial Products, Inc., Sunsource
Technology Services Inc. and Woodstream Corp.
 79




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##### Table of Contents



Principal Occupation; Five-YearName and Age
    
    Employment; Other DirectorshipsLarry Wilton (62)
    
    Mr. Wilton has been CEO of United Plastics Group
since 2007 and he was CEO of Compass Home Inc. from
2004 to 2005. From 1996 to 2002, Mr. Wilton was
President and CEO of Philips Lamps NAFTA. From 1994
to 1996, Mr. Wilton was Executive Vice President of
Philips Lighting United States and Canada. From 1999
to 2002, Mr. Wilton served on the Philips NV Lamps
Board of Directors.Shael J. Dolman (38)
    
    Mr. Dolman is a Director at the private equity arm of
the Ontario Teachers Pension Plan (OTPP).
Mr. Dolman joined OTPP in 1997 after working in
Commercial and Corporate Banking at a Canadian
chartered bank. He is a director of ALH Holding, Inc
and Easton-Bell Sports, Inc.
        80




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##### Table of Contents



Committees
    Risk Oversight and Board Structure
  Performance-Based Compensation and Risk
  Code of Ethics
  81




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##### Table of Contents



Executive Officers
 Position with the Company;Name and Age
    
    Five-year Employment HistoryMax W. Hillman (63)
    
    President and Chief Executive Officer of The
Hillman Companies, Inc., Chief Executive Officer
of The Hillman Group, Inc., Cincinnati, Ohio. See
page 79 for five-year employment history. Mr.
Hillman is the brother of Richard P. Hillman.Richard P. Hillman (61)
    
    President of The Hillman Group, Inc., Cincinnati,
Ohio. Mr. Hillman has held such position since
1991. Mr. Hillman is the brother of Max W.
Hillman.James P. Waters (48)
    
    Chief Financial Officer and Secretary of The
Hillman Companies, Inc., Cincinnati, Ohio and Vice
President, Chief Financial Officer and Secretary
of The Hillman Group, Inc., Cincinnati, Ohio.
From September 1999 to November 2001, Mr. Waters
was Vice President and Chief Financial Officer of
The Hillman Group, Inc.George L. Heredia (51)
    
    Senior Vice President of Engraving for The Hillman
Group, Inc., Tempe, Arizona. Mr. Heredia has held
various executive positions since April 2000.
Prior to April 2000, Mr. Heredia had held the
positions of Senior Vice President of Marketing
and Senior Vice President of Operations for Axxess
Technologies, Inc.Ali Fartaj (42)
    
    Senior Vice President of Operations for The
Hillman Group, Inc., Cincinnati, Ohio since
January 2008. From 2006 to 2008, Mr. Fartaj was a
Principal with AMF Partners. From 1999 to 2006,
Mr. Fartaj was with Thomas & Betts Corporation,
most recently as Vice President of Global
Logistics and Transportation.
  82




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##### Table of Contents



Item 11  Executive Compensation
 Compensation Discussion & Analysis
 Overview of the Compensation Program
 Compensation Philosophy
  Components of Total Compensation
  
    
    Annual base salary;
    
    Performance based cash bonuses, determined on an annual basis;
    
    Benefits, which consist primarily of health and welfare benefits and retirement benefits
under its Defined Contribution Plan and its Deferred Compensation Plan; and
    
    Perquisites to certain NEOs, including reimbursements in connection with the lease or
purchase of an automobile and reimbursement of country club dues.
 Establishing Compensation Levels
 Role of the Compensation Committee and Management
   Assessment of Market Data, Peer Comparisons and Benchmarking of Compensation
  83




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##### Table of Contents



Determination of NEO Compensation
   Base Salary
      Performance Based Bonuses
   84




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##### Table of Contents




    
    James Waters was awarded a bonus of $175,000, which represents approximately 73.7% of
his base salary and is an increase of approximately 203 percent from 2008;
    
    Richard Hillman was awarded a bonus of $162,400, which represents 56% of his base salary
and is an increase of approximately 87 percent from 2008;
    
    George Heredia was awarded a bonus of $119,070, which represents 49% of his base salary
and is an increase of approximately 132 percent from 2008; and
    
    Ali Fartaj was awarded a bonus of $157,500, which represents 70% of his base salary and
is an increase of approximately 112 percent from 2008.
   Benefits
  Amended Stock Option Plan
    85




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##### Table of Contents



Defined Contribution Plan
  Perquisites
  Executive Securities Agreement
  86




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##### Table of Contents



Compensation Committee Report
      
  87




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##### Table of Contents



Summary Compensation Table
  Change inPensionValue andNonqualifiedDeferredName and
    
    
    
    
    
    
    
    
    
    
    
    
    
    Option
    
    Compensation
    
    All OtherPrincipal Position
    
    Year
    
    Salary(1)
    
    Bonus(2)
    
    Awards (3)
    
    Earnings (4)
    
    Compensation
    
    TotalMax W. Hillman
    
    
    2009
    
    
    
    425,000
    
    
    
    368,900
    
    
    
    
    
    
    
    
    
    
    
    28,592
    (5)
    
    
    822,492President and CEO
    
    
    2008
    
    
    
    424,182
    
    
    
    207,506
    
    
    
    
    
    
    
    
    
    
    
    36,503
    (6)
    
    
    668,191The Hillman Companies, Inc.
    
    
    2007
    
    
    
    413,284
    
    
    
    185,468
    
    
    
    
    
    
    
    
    
    
    
    35,041
    (7)
    
    
    633,793James P. Waters
    
    
    2009
    
    
    
    237,308
    
    
    
    175,000
    
    
    
    
    
    
    
    
    
    
    
    8,298
    (8)
    
    
    420,606CFO and Secretary
    
    
    2008
    
    
    
    218,615
    
    
    
    57,750
    
    
    
    
    
    
    
    
    
    
    
    11,429
    (9)
    
    
    287,794The Hillman Companies, Inc.
    
    
    2007
    
    
    
    201,477
    
    
    
    48,225
    
    
    
    
    
    
    
    
    
    
    
    9,383
    (10)
    
    
    259,085Richard P. Hillman
    
    
    2009
    
    
    
    290,000
    
    
    
    162,400
    
    
    
    
    
    
    
    
    
    
    
    6,825
    (11)
    
    
    459,225President
    
    
    2008
    
    
    
    289,231
    
    
    
    87,000
    
    
    
    
    
    
    
    
    
    
    
    13,228
    (12)
    
    
    389,459The Hillman Group, Inc.
    
    
    2007
    
    
    
    279,231
    
    
    
    74,622
    
    
    
    
    
    
    
    
    
    
    
    14,359
    (13)
    
    
    368,212George L. Heredia
    
    
    2009
    
    
    
    243,000
    
    
    
    119,070
    
    
    
    
    
    
    
    
    
    
    
    15,058
    (14)
    
    
    377,128Senior VP of Engraving
    
    
    2008
    
    
    
    242,615
    
    
    
    51,231
    
    
    
    
    
    
    
    
    
    
    
    16,150
    (15)
    
    
    309,996The Hillman Group, Inc.
    
    
    2007
    
    
    
    237,462
    
    
    
    44,527
    
    
    
    
    
    
    
    
    
    
    
    16,286
    (16)
    
    
    298,275Ali Fartaj
    
    
    2009
    
    
    
    225,000
    
    
    
    157,500
    
    
    
    
    
    
    
    
    
    
    
    173,940
    (17)
    
    
    556,440Senior VP of Operations
    
    
    2008
    
    
    
    216,346
    
    
    
    74,260
    
    
    
    6,000
    
    
    
    
    
    
    
    13,863
    (18)
    
    
    310,469The Hillman Group, Inc.
    
    
    2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19)
    
    
    
 
 (1)
    
    Represents base salary including any deferral of salary into the Hillman Nonqualified
Deferred Compensation Plan.(2)
    
    Represents earned bonus for services rendered in each year.(3)
    
    In connection with the 2004 acquisition by CHS, Max W. Hillman, James P. Waters, Richard P.
Hillman and George L. Heredia were issued options to purchase Class A Preferred Stock and
shares of Class A Preferred Stock in Hillman Investment Company. The options were issued with
a strike price equal to the fair value of the underlying securities. The option awards are
classified as liability based awards, and accordingly, no compensation would have been
recognized under SFAS 123R.In June 2008, Ali Fartaj was issued 50 options to purchase shares of the Companys Class B
Common Shares. The Class B Common Options were issued with a strike price equal to the fair
value at the date of grant which was $6,000.(4)
    
    There were no above market earnings in the Hillman Nonqualified Deferred Compensation Plan
for the NEOs.(5)
    
    Includes employer matching contributions to the Hillman Retirement Savings and 401(k) Plan of
$3,746, reimbursement of country club dues of $12,246 and car allowance of $12,600.(6)
    
    Includes employer matching contributions to the Hillman Retirement Savings and 401(k) Plan of
$6,971, employer matching contributions to the Hillman Nonqualified Deferred Compensation Plan
of $2,500, reimbursement of country club dues of $14,432 and car allowance of $12,600.(7)
    
    Includes employer matching contributions to the Hillman Retirement Savings and 401(k) Plan of
$8,941, employer matching contributions to the Hillman Nonqualified Deferred Compensation Plan
of $2,500, reimbursement of country club dues of $11,000 and car allowance of $12,600.(8)
    
    Includes employer matching contributions to the Hillman Retirement Savings and 401(k) Plan of
$5,559, employer matching contributions to the Hillman Nonqualified Deferred Compensation Plan
of $1,971 and personal use of Company owned vehicles of $768.(9)
    
    Includes employer matching contributions to the Hillman Retirement Savings and 401(k) Plan of
$6,334, employer matching contributions to the Hillman Nonqualified Deferred Compensation Plan
of $2,500 and personal use of Company owned vehicles of $2,595. 88




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##### Table of Contents



(10)
    
    Includes employer matching contributions to the Hillman Retirement Savings and 401(k) Plan of
$6,271, employer matching contributions to the Hillman Nonqualified Deferred Compensation Plan
of $2,500 and personal use of Company owned vehicles of $612.(11)
    
    Includes employer matching contributions to the Hillman Retirement Savings and 401(k) Plan of
$4,056, employer matching contributions to the Hillman Nonqualified Deferred Compensation Plan
of $1,971 and personal use of Company owned vehicles of $798.(12)
    
    Includes employer matching contributions to the Hillman Retirement Savings and 401(k) Plan of
$7,173, employer matching contributions to the Hillman Nonqualified Deferred Compensation Plan
of $2,500 and personal use of Company owned vehicles of $3,555.(13)
    
    Includes employer matching contributions to the Hillman Retirement Savings and 401(k) Plan of
$9,283, employer matching contributions to the Hillman Nonqualified Deferred Compensation Plan
of $2,500 and personal use of Company owned vehicles of $2,576.(14)
    
    Includes employer matching contributions to the Hillman Retirement Savings and 401(k) Plan of
$6,658 and car allowance of $8,400.(15)
    
    Includes employer matching contributions to the Hillman Retirement Savings and 401(k) Plan of
$7,750 and car allowance of $8,400.(16)
    
    Includes employer matching contributions to the Hillman Retirement Savings and 401(k) Plan of
$5,386, employer matching contributions to the Hillman Nonqualified Deferred Compensation Plan
of $2,500, and car allowance of $8,400.(17)
    
    Includes employer matching contributions to the Hillman Retirement Savings and 401(k) Plan of
$3,469, employer matching contributions to the Hillman Nonqualified Deferred Compensation Plan
of $1,464, a car allowance of $7,200 and $161,807 for reimbursement of expenses incurred
relative to the sale of his home and relocation to Cincinnati.(18)
    
    Includes employer matching contributions to the Hillman Retirement Savings and 401(k) Plan of
$4,439, employer matching contributions to the Hillman Nonqualified Deferred Compensation Plan
of $2,500 and a car allowance of $6,924.(19)
    
    Mr. Fartaj joined the Company on January 6, 2008 as Senior Vice of Operations. As a result,
no compensation information is included for the year ended December 31, 2007. Grants of Plan-Based Award Tables
  All OtherOptionAwards;
    
    
    
    
    
    Grant DateNumber of
    
    Exercise or
    
    Fair ValueSecurities
    
    Base Price
    
    of Stock andUnderlying
    
    of Option
    
    OptionName
    
    Grant Date
    
    Options
    
    Awards
    
    AwardsMax W. Hillman
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    James P. Waters
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Richard P. Hillman
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    George L. Heredia
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Ali Fartaj
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 89




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##### Table of Contents



Outstanding Equity Awards at Fiscal Year-End
  Option AwardsEquityIncentivePlan Awards:Number of
    
    Number of
    
    Number ofSecurities
    
    Securities
    
    SecuritiesUnderlying
    
    Underlying
    
    UnderlyingUnexercised
    
    Unexercised
    
    Unexercised
    
    Option
    
    OptionOptions
    
    Options
    
    Unearned
    
    Exercise
    
    ExpirationName
    
    Exercisable
    
    Unexercisable
    
    Options
    
    Price
    
    Date(a)
    
    (b)
    
    (c)
    
    (d)
    
    (e)
    
    (f)Max W. Hillman
    
    
    3,247
    (1)
    
    
    
    (1)
    
    
    
    
    
    $
    1,000
    
    
    
    03/31/20142,265
    (2)
    
    
    
    (2)
    
    
    
    
    
    $
    1,000
    
    
    
    03/31/2014James P. Waters
    
    
    683
    (1)
    
    
    
    (1)
    
    
    
    
    
    $
    1,000
    
    
    
    03/31/2014476
    (2)
    
    
    
    (2)
    
    
    
    
    
    $
    1,000
    
    
    
    03/31/2014Richard P. Hillman
    
    
    1,389
    (1)
    
    
    
    (1)
    
    
    
    
    
    $
    1,000
    
    
    
    03/31/2014969
    (2)
    
    
    
    (2)
    
    
    
    
    
    $
    1,000
    
    
    
    03/31/2014George L. Heredia
    
    
    717
    (1)
    
    
    
    (1)
    
    
    
    
    
    $
    1,000
    
    
    
    03/31/2014500
    (2)
    
    
    
    (2)
    
    
    
    
    
    $
    1,000
    
    
    
    03/31/2014Ali Fartaj
    
    
    
    (3)
    
    
    50
    (3)
    
    
    
    
    
    $
    6,000
    
    
    
    06/30/2018
 
 (1)
    
    Class A Preferred Options of the Company.(2)
    
    Class A Preferred Options of The Hillman Investment Company, a wholly-owned subsidiary of the
Company.(3)
    
    Class B Common Shares were granted under the 2004 Stock Option Plan (Common Option Plan)
following Board and shareholder approval. Grants under the Common Option Plan consist of
non-qualified stock options for the purchase of Class B Common Shares and vest 100% on the
second anniversary of the date of grant.  Option Exercises and Stock Vested
  90




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Nonqualified Deferred Compensation
   Executive
    
    Registrant
    
    Aggregate
    
    Aggregate
    
    AggregateContributions
    
    Contributions
    
    Earnings
    
    Withdrawals/
    
    Balance atName
    
    in Last FY (1)
    
    in Last FY (2)
    
    in Last FY (3)
    
    Distributions
    
    Last FYEMax W. Hillman
    
    $
    
    
    
    $
    
    
    
    $
    180,204
    
    
    $
    (1,538,749
    )
    
    $
    1,820,863James P. Waters
    
    $
    29,705
    
    
    $
    1,971
    
    
    $
    18,120
    
    
    $
    
    
    
    $
    144,590Richard P. Hillman
    
    $
    31,899
    
    
    $
    1,971
    
    
    $
    55,903
    
    
    $
    
    
    
    $
    376,610George L. Heredia
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Ali Fartaj
    
    $
    7,426
    
    
    $
    1,464
    
    
    $
    5,864
    
    
    $
    
    
    
    $
    24,563
 
 (1)
    
    Executive Contributions represent the deferral of Base Salary and Bonuses and are also
included in the Summary Compensation Table in the Salary column.(2)
    
    The amounts in this column are also included in the Summary Compensation Table in the all
other compensation column.(3)
    
    Earnings in the deferred compensation plan are excluded from the base salary and bonus
reported in the Summary Compensation Table. Severance and Change in Control Arrangements
  Employment Contracts, Termination of Employment and Change-in-Control Arrangements
 Max W. Hillman, President and Chief Executive Officer
   91




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James P. Waters, Chief Financial Officer
   92




---



##### Table of Contents



Richard P. Hillman, President of The Hillman Group, Inc.
    93




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##### Table of Contents



Termination
    
    Termination
    
    Terminationby named
    
    without cause
    
    without causeexecutive
    
    or
    
    orDeath or
    
    officer for
    
    resignation
    
    resignationdisability of
    
    cause or
    
    for good
    
    for good
    
    Terminationnamed
    
    resignation
    
    reason
    
    reason
    
    as a resultexecutive
    
    without good
    
    (during
    
    (following
    
    of a changeName
    
    officer
    
    reason
    
    initial term)
    
    initial term)
    
    in controlMax W. Hillman
    
    $
    
    
    
    $
    
    
    
    $
    804,900
    
    
    $
    609,450
    
    
    $
    804,900James P. Waters
    
    $
    
    
    
    $
    
    
    
    $
    436,000
    
    
    $
    337,500
    
    
    $
    436,000Richard P. Hillman
    
    $
    
    
    
    $
    
    
    
    $
    463,400
    
    
    $
    371,200
    
    
    $
    463,400George L. Heredia
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Ali Fartaj
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 94




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##### Table of Contents



Director Compensation
  Change inPensionValue andFees
    
    
    
    
    
    
    
    
    
    Non-Equity
    
    NonqualifiedEarned
    
    
    
    
    
    
    
    
    
    Incentive
    
    Deferredor Paid
    
    Stock
    
    Option
    
    Plan
    
    Compensation
    
    All OtherName
    
    in Cash
    
    Awards
    
    Awards
    
    Compensation
    
    Earnings
    
    Compensation
    
    Total(a)
    
    (b)
    
    (c)
    
    (d)
    
    (e)
    
    (f)
    
    (g)
    
    (h)Peter M. Gotsch
    
    $
    0
    
    
    NA
    
    NA
    
    NA
    
    $
    0
    
    
    $
    0
    
    
    $
    0Maurice P. Andrien, Jr.
    
    $
    29,500
    
    
    NA
    
    NA
    
    NA
    
    $
    0
    
    
    $
    0
    
    
    $
    29,500Max W. Hillman (1)
    
    $
    0
    
    
    NA
    
    NA
    
    NA
    
    $
    0
    
    
    $
    0
    
    
    $
    0Andrew W. Code
    
    $
    0
    
    
    NA
    
    NA
    
    NA
    
    $
    0
    
    
    $
    0
    
    
    $
    0Larry Wilton
    
    $
    29,500
    
    
    NA
    
    NA
    
    NA
    
    $
    0
    
    
    $
    0
    
    
    $
    29,500Shael J. Dolman
    
    $
    0
    
    
    NA
    
    NA
    
    NA
    
    $
    0
    
    
    $
    0
    
    
    $
    0
 
 (1)
    
    Mr. Hillman also serves as the Companys Chief Executive Officer. The compensation
awarded to him in this capacity is represented in the Summary Compensation Table. He is not
compensated in his role as a Director.  95




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##### Table of Contents



Item 12  Security Ownership of Certain Beneficial Owners and Management.
  Class A Common
    
    Class B Common
    
    Class C Common
    
    
    
    
    
    
    
    
    
    Class A PreferredStock (1)
    
    Stock (2)
    
    Stock (3)
    
    Total Common Stock (4)
    
    Stock (5)Name
    
    Shares
    
    Percent
    
    Shares
    
    Percent
    
    Shares
    
    Percent
    
    Shares
    
    Percent
    
    Shares
    
    Percent5% OwnersCode Hennessy & Simmons IV LP
10 South Wacker Dr.
Suite 3175
Chicago, IL 60606
    
    
    4,904.9
    
    
    
    79.10
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,904.9
    
    
    
    49.25
    %
    
    
    46,869.4
    
    
    
    49.25
    %Ontario Teachers Pension Plan
5650 Yonge St.
North York, Ontario
M2M 4H5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,787.1
    
    
    
    100.00
    %
    
    
    2,787.1
    
    
    
    27.99
    %
    
    
    26,632.3
    
    
    
    27.99
    %HarbourVest Partners VI  Direct Fund, L.P.
One Financial Center
44th Floor
Boston, MA 02111
    
    
    871.0
    
    
    
    14.05
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    871.0
    
    
    
    8.75
    %
    
    
    8,322.6
    
    
    
    8.75
    %Directors and Executive OfficersMax W. Hillman
    
    
    166.4
    
    
    
    2.68
    %
    
    
    343.4
    
    
    
    35.39
    %
    
    
    
    
    
    
    
    
    
    
    509.8
    
    
    
    5.12
    %
    
    
    4,565.9
    
    
    
    4.80
    %(6)Richard P. Hillman
    
    
    54.6
    
    
    
    0.88
    %
    
    
    144.6
    
    
    
    14.90
    %
    
    
    
    
    
    
    
    
    
    
    199.2
    
    
    
    2.00
    %
    
    
    1,953.7
    
    
    
    2.05
    %(7)George L. Heredia
    
    
    23.3
    
    
    
    0.38
    %
    
    
    73.9
    
    
    
    7.61
    %
    
    
    
    
    
    
    
    
    
    
    97.2
    
    
    
    0.98
    %
    
    
    1,007.8
    
    
    
    1.06
    %(8)James P. Waters
    
    
    23.9
    
    
    
    0.38
    %
    
    
    67.3
    
    
    
    6.93
    %
    
    
    
    
    
    
    
    
    
    
    91.2
    
    
    
    0.92
    %
    
    
    912.4
    
    
    
    0.96
    %(9)Ali Fartaj
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    All Directors and Executive Officers as a Group (8 persons)
    
    
    350.7
    
    
    
    5.66
    %
    
    
    874.2
    
    
    
    90.1
    %
    
    
    
    
    
    
    
    
    
    
    1,224.9
    
    
    
    12.30
    %
    
    
    11,770.2
    
    
    
    12.37
    %
 
 (1)
    
    Each holder of Class A Common Stock is entitled at any time to convert any or all of
the shares into an equal number of shares of Class C Common Stock.(2)
    
    Class B Common Stock has no voting rights.(3)
    
    Each holder of Class C Common Stock is entitled at any time to convert any or all
of the shares into an equal number of shares of Class A Common Stock. Each share of
Class C Common Stock is entitled to one vote provided that the aggregate voting power of
Class C Common Stock (with respect to the election of directors) never exceeds 30%.(4)
    
    Total of all classes of Common Stock(5)
    
    Class A Preferred shares do not have voting rights.(6)
    
    Includes options to purchase 3,243.7 shares of Class A Preferred stock(7)
    
    Includes options to purchase 1,387.9 shares of Class A Preferred stock.(8)
    
    Includes options to purchase 716.0 shares of Class A Preferred stock.(9)
    
    Includes options to purchase 648.2 shares of Class A Preferred stock. 96




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##### Table of Contents



Item 13  Certain Relationships and Related Transactions.
    
 Item 14  Principal Accounting Fees and Services.
 Audit Fees
  Audit Related Fees
  Tax Fees
  All Other Fees
   97




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##### Table of Contents



98




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##### Table of Contents



PART IV
 
 Item 15  Exhibits and Financial Statement Schedules.
 (a) Documents Filed as a Part of the Report:
 1.
    
    Financial Statements.The information concerning financial statements called for by Item 15 of Form 10-K is set
forth in Part II, Item 8 of this annual report on Form 10-K.2.
    
    Financial Statement Schedules.The information concerning financial statement schedules called for by Item 15 of Form 10-K
is set forth in Part II, Item 8 of this annual report on Form 10-K.3.
    
    Exhibits, Including Those Incorporated by Reference.The following is a list of exhibits filed as part of this annual report on Form 10-K. Where
so indicated by footnote, exhibits which were previously filed are incorporated by reference.
For exhibits incorporated by reference, the location of the exhibit in the previous filing
is indicated in parentheses.
 2.1
    
    Unit Repurchase Agreement by and among The Hillman Companies, Inc., SunSub
Holdings LLC and GC-Sun Holdings, L.P. dated April 13, 2002. (6)(Exhibit 10.2)2.2
    
    Asset Purchase Agreement between Fastenal Company and The Hillman Group, Inc.
dated October 3, 2002. (7)(Exhibit 10.3)2.3
    
    Agreement and Plan of Merger dated as of June 18, 2001 by and among Allied
Capital Corporation, Allied Capital Lock Acquisition Corporation and SunSource Inc.
(4)(Exhibit 2.1)2.4
    
    Asset Purchase Agreement dated September 28, 2001, by and between SunSource
Technology Services, LLC, and STS Operating, Inc. (5)(Exhibit 2.1)2.5
    
    Agreement and Plan of Merger dated as of February 14, 2004 by and among the
Company, HCI Acquisition Corp. and the Common Stockholders of the Company. (2)(Exhibit
2.1)2.6
    
    Stock Purchase Agreement by and among All Points Industries, Inc., Gabrielle
Mann, Gregory Mann, and The Hillman Group, Inc. dated as of December 28, 2007.
(16)(Exhibit 2.6)3.1
    
    Bylaws as adopted by the Corporations stockholders as of March 30, 2004.
(10)(Exhibit 3.2)3.2
    
    Amendment No. 1 to the Companys Bylaws effective October 26, 2007. (15)(Exhibit
99.1)3.3
    
    Restated Certificate of Incorporation of the Company as of March 30, 2004.
(10)(Exhibit 3.1)4.1
    
    HCI Stockholders Agreement dated March 31, 2004. (9)(Exhibit 4.1)4.2
    
    Amended and Restated Declaration of Trust. (1)(Exhibit 4.1)4.3
    
    Indenture between the Company and the Bank of New York. (1)(Exhibit 4.2)4.4
    
    Preferred Securities Guarantee. (1)(Exhibit 4.3)
 99




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##### Table of Contents



4.5
    
    Rights Agreement between the Company and the Registrar and Transfer Company.
(1)(Exhibit 10.5)4.6
    
    Amendment No. 1 to the Rights Agreement dated June 18, 2001. (8)(Exhibit 4.6)4.7
    
    Amendment No. 2 to the Rights Agreement dated February 14, 2004. (8)(Exhibit 4.7)4.8
    
    Hillman Investment Company Stockholders Agreement dated March 31, 2004. (9)
(Exhibit 4.2)4.9
    
    Registration Agreement dated March 31, 2004. (9) (Exhibit 4.3)10.1
    
    Credit Agreement dated as of March 31, 2004 by and among The Hillman Companies,
Inc., Hillman Investment Company, The Hillman Group, Inc., Merrill Lynch Capital as
Administrative Agent, Issuing Lender and Swingline Lender, JP Morgan Chase Bank as
Syndication Agent, and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated and JP Morgan Securities as Joint Lead Arrangers and Joint Lead
Bookrunners. (9)(Exhibit 10.1)10.2
    
    Loan Agreement dated as of March 31, 2004 by and among The Hillman Companies,
Inc., Hillman Investment Company, The Hillman Group, Inc., and Allied Capital
Corporation. (9)(Exhibit 10.2)10.3
    
    Subordination and Intercreditor Agreement dated March 31, 2004. (9)(Exhibit 10.3)10.4
    
    The Hillman Companies, Inc. 2004 Stock Option Plan. (9)(Exhibit 10.4)10.5
    
    The Hillman Companies, Inc. Amended and Restated 2004 Stock Option Plan. (12)
(Exhibit 10.5)10.6
    
    The Hillman Companies, Inc. Employee Securities Purchase Plan. (9)(Exhibit 10.5)10.7
    
    Hillman Investment Company Employee Securities Purchase Plan. (9)(Exhibit 10.6)10.8
    
    HCI Securities Purchase Agreement dated March 31, 2004. (9)(Exhibit 10.7)10.9
    
    Joinder to Securities Purchase Agreement dated March 31, 2004. (9)(Exhibit 10.8)10.10
    
    Hillman Investment Company Securities Purchase Agreement dated March 31, 2004.
(9)(Exhibit 10.9)10.11
    
    Management Agreement dated March 31, 2004. (9)(Exhibit 10.10)10.12
    
    Employment Agreement by and between The Hillman Group, Inc. and Max W. Hillman
dated March 31, 2004. (9)(Exhibit 10.11)10.13
    
    Executive Securities Agreement between Max W. Hillman and HCI Acquisition Corp.
dated March 31, 2004. (9)(Exhibit 10.12)10.14
    
    Employment Agreement by and between The Hillman Group, Inc. and Richard P.
Hillman dated March 31, 2004. (9)(Exhibit 10.13)10.15
    
    Executive Securities Purchase Agreement between HCI Acquisition Corp. and
Richard P. Hillman dated March 31, 2004. (9)(Exhibit 10.14)10.16
    
    Employment Agreement by and between The Hillman Group, Inc. and James P. Waters
dated March 31, 2004. (9)(Exhibit 10.15)
 100




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##### Table of Contents



10.17
    
    Executive Securities Agreement by and between HCI Acquisition Corp. and James
P. Waters dated March 31, 2004. (9)(Exhibit 10.16)10.18
    
    Executive Securities Agreement by and between HCI Acquisition Corp. and George
L. Heredia dated March 31, 2004. (12)(Exhibit 10.18)10.19
    
    Executive Securities Agreement by and between HCI Acquisition Corp. and Terry R.
Rowe dated March 31, 2004. (12)(Exhibit 10.19)10.20
    
    SunSource Inc. Nonqualified Deferred Compensation Plan dated as of August 1,
2000. (3)(Exhibit 10.1)10.21
    
    The Hillman Companies, Inc. Nonqualified Deferred Compensation Plan (amended and
restated). (11)(Exhibit 10.1)10.22
    
    First Amendment to The Hillman Companies, Inc. Nonqualified Deferred
Compensation Plan. (11)(Exhibit 10.2)10.23
    
    Asset Purchase Agreement dated January 5, 2006 between The SteelWorks
Corporation and The Hillman Group, Inc. (13)(Exhibit 10.1)10.24
    
    Supply Agreement dated January 5, 2006 between The SteelWorks Corporation and
The Hillman Group, Inc. (13)(Exhibit 10.2)10.25
    
    Amended and Restated Credit Agreement dated July 21, 2006. (14)(Exhibit 10.1)10.26
    
    Second Amendment to Loan Agreement dated July 21, 2006. (14)(Exhibit 10.2)10.27
    
    Amended and Restated Credit Agreement dated July 21, 2006, amended as of August
7, 2009. (17)(Exhibit 10.1)10.28
    
    * Third Amendment to Loan Agreement dated May 6, 2009.10.29
    
    Fourth Amendment to Loan Agreement dated August 7, 2009. (17)(Exhibit 10.2)10.30
    
    * Amended and Restated Employment Agreement by and between The Hillman Group,
Inc. and Max W. Hillman dated December 21, 2008.10.31
    
    * Amended and Restated Employment Agreement by and between The Hillman Group,
Inc. and Richard P. Hillman dated December 21, 2008.10.32
    
    * Amended and Restated Employment Agreement by and between The Hillman Group,
Inc. and James P. Waters dated December 21, 2008.12.1
    
    * Computation of Ratio of Income to Fixed Charges.21.1
    
    * Subsidiaries. (As of December 31, 2009)31.1
    
    * Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or
15d-14(a) under the Securities Exchange Act of 1934.31.2
    
    * Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or
15d-14(a) under the Securities Exchange Act of 1934.32.1
    
    * Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    * Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
 101




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##### Table of Contents



(1)
    
    Filed as an exhibit to Registration Statement No. 333-44733 on Form S-2.(2)
    
    Filed as an exhibit to the Form 8-K filed February 17, 2004.(3)
    
    Filed as an exhibit to Annual Report on Form 10-K for the year ended December 31,
2000.(4)
    
    Filed on June 21, 2001 as an exhibit to the Current Report on Form 8-K filed on
June 21, 2001.(5)
    
    Filed as an exhibit to the Current Report on Form 8-K filed on October 15, 2001.(6)
    
    Filed as an exhibit to Quarterly Report on Form 10-Q for the Quarter ended June
30, 2002.(7)
    
    Filed as an exhibit to the Current Report on Form 8-K filed on October 4, 2002.(8)
    
    Filed as an exhibit to the Annual Report on Form 10-K for the year ended December
31, 2003.(9)
    
    Filed as an exhibit to the Quarterly Report on Form 10-Q for the Quarter ended
March 31, 2004.(10)
    
    Filed as an exhibit to the Quarterly Report on Form 10-Q for the Quarter ended
June 30, 2004.(11)
    
    Filed as an exhibit to the Quarterly Report on Form 10-Q for the Quarter ended
September 30, 2004.(12)
    
    Filed as an exhibit to the Annual Report on Form 10-K for the year ended December
31, 2004.(13)
    
    Filed as an exhibit to the Current Report on Form 8-K filed on January 11, 2006.(14)
    
    Filed as an exhibit to the Current Report on Form 8-K filed on August 1, 2006.(15)
    
    Filed as an exhibit to the Current Report on Form 8-K filed on November 1, 2007.(16)
    
    Filed as an exhibit to the Current Report on Form 8-K filed on December 28, 2007.(17)
    
    Filed as an exhibit to the Quarterly Report on Form 10-Q for the Quarter ended
September 30, 2009.*
    
    Filed herewith. 102




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##### Table of Contents



SIGNATURES
  THE HILLMAN COMPANIES, INC.Date: March 26, 2010
    By:
    /s/ James P. WatersJames P. WatersTitle:
    Chief Financial
Officer and Duly
Authorized 
Officer
of the Registrant
(Principal Financial
Officer)  Signature
    
    Capacity
    
    Date/s/ Max W. Hillman

Max W. Hillman
    
    Principal Executive
Officer and Director
    
    March 26, 2010/s/ Andrew W. Code

Andrew W. Code
    
    Chairman and Director
    
    March 26, 2010/s/ Harold J. Wilder

Harold J. Wilder
    
    Principal Accounting
Officer
    
    March 26, 2010/s/ Peter M. Gotsch

Peter M. Gotsch
    
    Director
    
    March 26, 2010/s/ Larry Wilton

Larry Wilton
    
    Director
    
    March 26, 2010/s/ Maurice P. Andrien, Jr.

Maurice P. Andrien, Jr.
    
    Director
    
    March 26, 2010/s/ Shael J. Dolman

Shael J. Dolman
    
    Director
    
    March 26, 2010
 103