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EXHIBIT 10.6
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "AGREEMENT") is made and
entered into as of June 4, 1998 by and between Home Interiors & Gifts, Inc., a
Texas corporation (hereinafter, together with its successors, referred to as
the "COMPANY"), on the one hand, and Xxxxxx X. Xxxxxx, Xx. (hereinafter
referred to as the "EXECUTIVE"), on the other hand.
W I T N E S S E T H :
WHEREAS, the Company is party to an Agreement and Plan of
Merger (the "MERGER AGREEMENT"), dated as of April 13, 1998, between the
Company and Xxxxxxx Investments, Inc., a Texas corporation ("NEWCO");
WHEREAS, pursuant to the terms of the Merger Agreement, Newco
will be merged (the "MERGER") with and into the Company, with the Company being
the surviving corporation of the Merger;
WHEREAS, upon the consummation of the Merger, the Company
desires to employ the Executive in an executive capacity with the Company, and
the Executive desires to be employed by the Company in said capacity; and
WHEREAS, the parties hereto desire to set forth in writing the
terms and conditions of their understandings and agreements.
NOW THEREFORE, in consideration of the foregoing, of the
mutual promises contained herein and of other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto hereby agree as follows:
SECTION 1. DEFINITIONS.
"ACCRUED BENEFITS" means (i) all salary earned or
accrued through the date the Executive's employment is terminated,
plus, in the case of death, the product of the Annual Bonus paid to
the Executive with respect to the preceding fiscal year (or, if
applicable, a partial fiscal year) of the Company and a fraction, the
numerator of which is the number of days in the current fiscal year of
the Company through the Date of Termination, and the denominator of
which is 365; (ii) reimbursement for any and all monies advanced in
connection with the Executive's employment for reasonable expenses
incurred by the Executive in accordance with Section 4(c)hereof
through the date the Executive's employment is terminated and (iii)
all other payments and benefits to which the Executive or the
Executive's family or other beneficiaries
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may be entitled under the terms of any applicable compensation
arrangement, benefit plan, program or policy of the Company, including
any compensation previously deferred by the Executive (together with
any accrued earnings thereon) and not yet paid by the Company and any
earned and accrued, but unused vacation pay, in each case through the
Date of Termination.
"ACT" shall mean the Securities Exchange Act of 1934,
as amended.
"AFFILIATE" shall have the meaning given such term in
Rule 12b-2 of the Act.
"ANNUAL BONUS" has the meaning set forth in Section
4(b).
"BASE SALARY" has the meaning set forth in Section
4(a).
"BOARD" shall mean the board of directors of the
Company.
"CAUSE" shall mean (i) the Executive's conviction of
any felony, unless the Board reasonably determines that the
Executive's conviction of such felony does not materially affect the
Executive's business reputation or significantly impair the
Executive's ability to carry out his duties under this Agreement
(provided the Board shall have no obligation to make such
determination); (ii) the Executive's willful and material breach of
his obligations under this Agreement which results in material damage
to the Company's business, or (iii) the Executive's dishonesty or
gross misconduct in connection with his employment hereunder which
results in material damage to the Company's business. Notwithstanding
the above, the occurrence of the event specified in clause (ii) above
shall not constitute Cause unless the Executive fails to cure such
event within ten (10) days after receipt from the Company of the
Notice of Termination (as defined in Section 5(e) below).
"CHANGE OF CONTROL" shall mean the first to occur of
the following events: (1) the Company is acquired or becomes
controlled by any Person or group of Persons, other than by any member
of the HMC Group (as hereinafter defined); (2) Hicks, Muse, Xxxx &
Xxxxx Incorporated or any of its Affiliates, including without
limitation HM/RB Partners, L.P., a Delaware limited partnership, or
its or their respective partners, employees, officers and directors
(and members of their respective families and trusts for the primary
benefit of such family members) (collectively, the "HMC GROUP") shall
cease to have the power, directly or indirectly, to vote or direct the
voting of securities having a majority of the ordinary voting power
for the election of directors of the Company; or (3) the shareholders
of the Company approve a complete liquidation or dissolution of the
Company; provided that the occurrence of an event described in (1) or
(2) above shall not be deemed a Change of Control if (a) prior to the
consummation of an Initial Public Offering (i)
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the HMC Group otherwise has the right, directly or indirectly, to
designate (and does so designate) a majority of the Board or (ii) the
HMC Group, together with members of management of the Company,
directly or indirectly, own of record and beneficially an amount of
common stock of the Company equal to at least fifty percent (50%) of
the amount of common stock of the Company (adjusted for stock splits,
stock dividends and other similar events on an equitable basis)
directly or indirectly owned by the HMC Group, together with
management of the Company, of record and beneficially as of the date
of this Agreement and such ownership by the HMC Group, together with
members of management of the Company, represents the largest single
block of voting securities of the Company held by any Person or group
of Persons (within the meaning of Section 13(d) of the Act), or (b)
after the consummation of an Initial Public Offering, and for any
reason whatever, (i) no Person or group of Persons, excluding the HMC
Group, shall become the beneficial owner, directly or indirectly, of
more than the greater of (x) fifteen percent (15%) of the voting
shares of the Company then outstanding and (y) the percentage of the
then outstanding voting stock of the Company directly or indirectly
owned by the HMC Group, together with members of management of the
Company; and (ii) the Board shall consist of a majority of Continuing
Directors. For the purposes of this definition, the term "the Company"
shall include any successor to the Company.
"CONTINUING DIRECTORS" shall mean the directors of
the Company on the date of this Agreement and each director appointed
subsequent to the date of this Agreement, if, in each case, such other
director's nomination for election to the Board, as applicable, is
recommended by a majority of the directors at the time of such
election or such director receives the vote of the HMC Group in his or
her election by the shareholders.
"CONTROL" (including the correlative terms
"Controlled by" and "Controlling") shall mean the possession, directly
or indirectly, of the power to direct, or to cause the direction of,
the management and policies of a Person, whether through ownership of
voting securities, by contract or otherwise.
"COBRA" means the Consolidated Omnibus Reconciliation
Act of 1985, as amended.
"EMPLOYMENT DATE" has the meaning set forth in
Section 2.
"EMPLOYMENT PERIOD" shall mean the period during
which the Executive is employed by the Company.
"GOOD REASON" shall mean (i) any material breach by
the Company of this Agreement or the Shareholders Agreement (for so
long as Executive is subject thereto) or the failure of the Executive
to be a director of the Company for any reason
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(other than death, Permanent Disability, voluntary resignation or
termination of employment for Cause); (ii) any reduction or
alteration, approved by the Board without the Executive's written
consent, in the Executive's title, duties or responsibilities or the
Executive's Base Salary and/or annual target bonus opportunity other
than under a circumstance which constitutes Cause; provided, that any
such reduction or alteration in the Executive's title, duties or
responsibilities without the Executive's consent during the ten-day
cure period applicable to subparagraph (ii) of the definition of Cause
shall not constitute "Good Reason"; provided, further, that any cure
by the Executive during such ten-day period shall entitle the
Executive to reinstatement of his title, duties and responsibilities;
and (iii) a change, without the Executive's written consent, of more
than twenty-five (25) miles in the office or location where the
Executive is based. Notwithstanding the above, the occurrence of any
of the events described above will not constitute Good Reason unless
the Company fails to cure any such event within ten (10) days after
receipt from the Executive of the Notice of Termination (as defined in
Section 5(e) below).
"INITIAL PUBLIC OFFERING" shall mean an underwritten
public offering of capital stock of the Company, as applicable,
pursuant to a registration statement filed with the Securities and
Exchange Commission in accordance with the Securities Act of 1933, as
amended.
"PERMANENT DISABILITY" shall mean the inability of
the Executive to discharge his duties hereunder for a period of six
(6) consecutive months, or for a total of six (6) months in any twelve
(12) month period, by reason of physical or mental illness, injury or
incapacity.
"PERSON" shall mean any "person," within the meaning
of Sections 13(d) and 14(d) of the Act, including a "group" as therein
defined.
"SHAREHOLDERS AGREEMENT" shall mean that certain
Shareholders Agreement, dated as of June 4, 1998, among the Company
and the securityholders of the Company listed on the signature pages
thereof.
"SUBSIDIARY" shall mean, with respect to any Person,
any other Person of which such first Person owns the majority of the
economic interest in such Person or owns or has the power to vote,
directly or indirectly, securities representing a majority of the
votes ordinarily entitled to be cast for the election of directors or
other governing Persons.
SECTION 2. TERM OF EMPLOYMENT. Unless earlier terminated
in accordance with the terms of this Agreement, the Executive's Employment
Period shall commence on the date hereof (the "EMPLOYMENT DATE") and shall end
on June 4, 2003; provided, however, that such Employment Period shall be
extended for successive terms of one (1)
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year each unless either party advises the other, at least one hundred twenty
(120) days prior to the end of the initial term or annual extension, as the
case may be, that it will not agree to extend this Agreement.
SECTION 3. DUTIES. During the Employment Period, the
Executive (i) shall serve as Chairman of the Board and Chief Executive Officer
of the Company, subject to the direction and control of the Board; (ii) shall
report directly to the Board; and (iii) shall devote his full business time
during normal business hours to the business and affairs of the Company and
shall use his best efforts to perform faithfully and efficiently the
responsibilities assigned to Executive hereunder, to the extent necessary to
discharge such responsibilities, except for: (A) time spent in managing
Executive's personal, financial, and legal affairs and serving on corporate,
civic, or charitable boards or committees, in each case, only to the extent not
substantially interfering with the performance of such responsibilities; and
(B) a vacation to which Executive is entitled. The continuing service by the
Executive on any boards and committees on which he is serving or with which he
is otherwise associated immediately preceding the date of this Agreement, or
the Executive's service on any other boards or committees of which the Company
has knowledge and does not object in writing, within thirty (30) days after
first becoming aware of such service or proposed service, shall not be deemed
to interfere with the performance of the Executive's services to the Company;
provided that Executive's time commitment or participation in respect of such
continuing service does not materially increase after the date hereof or after
the expiration of such thirty (30) day period, as applicable.
SECTION 4. COMPENSATION. During the Employment Period,
the Executive shall be compensated as follows:
(a) the Executive shall receive a minimum annual
salary (pro rata for any partial year) equal to Five Hundred Thousand
and No/100 Dollars ($500,000) ("BASE SALARY"), which Base Salary shall
be payable in equal monthly installments and shall be subject to
appropriate increase, as determined by the sole discretion of the
Board;
(b) the Executive shall be eligible to receive an
annual bonus (the "ANNUAL BONUS") in an amount up to the percentage of
the Executive's Base Salary set forth on Schedule 1 hereto for each
fiscal year of the Company commencing with the fiscal year ending
December 31, 1998 (on a pro rata basis for any partial year)
calculated based upon budgeted earnings before interest, income tax,
depreciation and amortization ("EBITDA") as approved by the Board in
good faith, and such other criteria as may be recommended by
management and established by the Board from time to time, at the
beginning of each fiscal year provided that in any event the Executive
shall become entitled to receive an annual bonus for any fiscal year
in which the Company achieves at least eighty-eight percent (88%) of
such budgeted EBITDA in such fiscal year (the amount of such bonus to
be determined in good faith
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by the Board based upon the formula set forth on Schedule 1 hereto).
Each Annual Bonus (or portion thereof) shall be paid in cash promptly
following the delivery to the Board of audited financial statements of
the Company for the fiscal year for which the Annual Bonus (or
prorated portion) is earned or awarded, unless electively deferred by
the Executive pursuant to any deferral programs or arrangements that
the Company may make available to the Executive;
(c) the Executive shall be reimbursed, at such
intervals and in accordance with such Company policies as may be in
effect from time to time, for any and all reasonable business expenses
incurred by him in the business interests of the Company, including
but not limited to travel expenses;
(d) the Executive shall be entitled to
participate in all incentive, savings, retirement and death benefit
plans, practices, policies and programs on a basis no less favorable
than that basis available to similarly-situated senior executives of
the Company as determined by the Board from time to time;
(e) the Executive and/or the Executive's family,
as the case may be, shall be eligible for participation in and shall
receive all benefits under welfare benefit plans, practices, policies
and programs generally provided by the Company to similarly-situated
senior executives of the Company (including, without limitation,
medical, prescription, dental, disability, salary continuance,
employee life, group life, accidental death and travel accident
insurance plans and programs), in each case at the most favorable
level of participation and providing the highest levels of benefits
available to them;
(f) the Executive shall be entitled to receive
(in addition to the benefits described above) such perquisites and
fringe benefits appertaining to Executive's position in accordance
with any practice established by the Board, including without
limitation, air travel arrangements consistent with policies and
practice in effect during the one (1) year prior to the date of this
Agreement; and
(g) in addition to any benefits the Executive may
receive pursuant to paragraph 4(d), the Company shall grant stock
options (the "STOCK OPTIONS") to the Executive under the Company's
1998 Stock Option Plan exercisable for an aggregate of 338,441 shares
of common stock, par value $.10 per share, at an exercise price of
$18.05451 per share. The Stock Options shall vest and become
exercisable in five equal annual installments commencing on the first
anniversary of the date of grant; provided, however, that the Stock
Options shall, subject to Section 7 below, vest and become immediately
exercisable upon (i) the termination of the Executive's employment
without Cause, (ii) the Executive's termination of his employment for
Good Reason, (iii) the occurrence of a Change of Control; (iv) the
sale, conveyance or other disposition by the Company of all or
substantially all of its assets to a Person
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that is not an Affiliate of the Company. In addition to the foregoing,
the Stock Options will contain the following provisions:
(i) Stock options will be exercisable
for a period of ten (10) years from the date of issuance.
(ii) To the extent definitions in this
Agreement are different from the definitions in the Company's
1998 Stock Option Plan (e.g., Change of Control, Cause, Good
Reason, etc.), the definitions in this Agreement will control.
(iii) On a termination for Cause or a
voluntary termination by the Executive, the Executive may
exercise all vested options within thirty (30) days after the
termination date.
(iv) If Employment is terminated as a
result of death or disability, the vested stock options may be
exercised within one hundred eighty (180) days after the date
of the Executive's termination of employment.
(v) On a termination of employment for
any other reason, all vested stock options may be exercised
within thirty (30) days after such date of termination. The
Committee (as such term is defined in the Company's 1998 Stock
Option Plan) may not shorten the exercise period described in
clauses (iii), (iv) or (v).
(vi) The Company shall have no right to
purchase the Executive's Stock Options or shares of stock
pursuant to Section 9 of the Stock Option Plan.
SECTION 5. TERMINATION OF EMPLOYMENT.
(a) Permanent Disability. The Company may
terminate the Executive's employment because of a Permanent Disability
by first giving Executive written notice of the Company's intention to
terminate such employment.
(b) Voluntary Termination by Executive.
Notwithstanding anything in this Agreement to the contrary the
Executive may, upon not less than thirty (30) days written notice to
the Company, voluntarily terminate employment for any reason (provided
that any termination by the Executive pursuant to Section 5(d) on
account of Good Reason shall not be treated as a voluntary termination
under this Section 5(b)).
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(c) Termination by the Company. The Company at
any time may terminate the Executive's employment for Cause or without
Cause.
(d) Good Reason. The Executive at any time may
terminate his employment for Good Reason.
(e) Notice of Termination. Any termination by the
Company for Cause or by the Executive for Good Reason shall be
communicated by a Notice of Termination to the other party hereto
given in accordance with Section 18. For purposes of this Agreement, a
"NOTICE OF TERMINATION" means a written notice given, in the case of a
termination for Cause, within one hundred eighty (180) days of the
Company's having actual knowledge of the events giving rise to such
termination, and in the case of a termination for Good Reason, within
one hundred eighty (180) days of the Executive's having actual
knowledge of the events giving rise to such termination. The Notice of
Termination shall: (i) indicate the specific termination provision in
this Agreement relied upon; (ii) set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated; and (iii)
if the termination date is other than the date of receipt of such
notice, specify the termination date of this Agreement (which date
shall be no more than fifteen (15) days after the giving of such
notice). The failure by the Executive or the Company to set forth in
the Notice of Termination any fact or circumstance which contributes
to a showing of Good Reason or Cause, as applicable, shall not waive
any right of the Executive hereunder or preclude the Executive from
asserting such fact or circumstance in enforcing his rights hereunder.
In addition, in the event the Company determines to terminate the
Executive's employment without Cause, the Company shall deliver to the
Executive written notification thereof on a date not later than the
Date of Termination.
(f) Date of Termination. For the purpose of this
Agreement, the term "DATE OF TERMINATION" means: (i) in the case of a
termination for which a Notice of Termination is required, the date of
receipt of such Notice of Termination or, if later, the date specified
therein, as the case may be; and (ii) in all other cases, the actual
date on which the Executive's employment terminates.
SECTION 6. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
Upon termination of the Executive's employment with the Company, the Company
shall have the following obligations:
(a) Death. If the Executive's employment is
terminated by reason of the Executive's death, all Accrued Expenses
shall be paid to the Executive, his beneficiaries, or his estate, as
applicable, in a lump sum in cash within thirty (30) days after the
Date of Termination. In addition, the Executive's family shall be
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entitled to receive benefits generally available to the surviving
families of other senior executive officers of the Company.
(b) Permanent Disability. If the Executive's
employment is terminated by reason of the Executive's Permanent
Disability, the Executive, and the Executive's spouse, shall be
entitled to continue to participate in or be covered under the
Company's health and life insurance benefit plans generally applicable
to similarly situated senior executives of the Company or, at the
Company's option, to receive equivalent benefits by alternate means,
at least equal to such health and life insurance benefits. Unless
otherwise directed by the Executive, the Executive shall also be paid
all Accrued Benefits in a lump sum in cash within thirty (30) days
after the Date of Termination. In addition, the Executive shall
receive severance pay from the Company in an amount equal to one
hundred percent (100%) of the total Base Salary and Annual Bonus, if
any, received by the Executive with respect to the fiscal year
immediately prior to the fiscal year in which such Date of Termination
occurs; provided, however, that the Company shall not be obligated to
make such severance payment to the extent that such severance payment
reduces the disability benefits to which the Executive is entitled
from an insurer by an equal or greater amount. Such severance payment
is to be made within thirty (30) days after the Date of Termination.
(c) Termination by the Company for Cause and
Voluntary Termination by Executive. If the Executive's employment is
terminated for Cause or voluntarily terminated by the Executive (other
than for Good Reason), the Company shall pay the Executive the Accrued
Benefits in a lump sum in cash within thirty (30) days after the Date
of Termination.
(d) Other Termination of Employment. If the
Company terminates the Executive's employment other than for Cause or
Permanent Disability, or the Executive terminates his employment for
Good Reason, the Company shall pay or provide the Executive the
following:
(A) Cash Payment. The Company shall pay
to the Executive in a lump sum in cash within 30 days after
the Date of Termination the following amounts (other than
amounts payable from non-qualified retirement plans and
deferred compensation plans, which amounts shall be paid in
accordance with the terms of such plans):
(1) all Accrued Benefits;
(2) if the Date of Termination
occurs on or prior to the first anniversary of this
Agreement, a cash amount equal to five (5) times the
Executive's Base Salary;
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(3) if the Date of Termination
occurs after the first anniversary of this Agreement,
a cash amount equal to the greater of:
(I) the Base Salary that would be
paid to the Executive from the Date of
Termination through June 4, 2003 if the Date
of Termination had not occurred; and
(II) three (3) times the total Base
Salary and Annual Bonus, if any, received by
the Executive with respect to the fiscal year
immediately prior to the fiscal year in which
the Date of Termination occurs.
(B) Other Benefits Continuation. The
Company shall provide for the continued participation of the
Executive, and his spouse, as the case may be, until June 4,
2003, in the Company's health and life insurance benefit plans
generally applicable to similarly situated senior executives
of the Company. In lieu of continued participation in any such
medical and life insurance programs, the Executive may elect
by written notice delivered to the Company prior to the Date
of Termination to receive an amount equal to the annual cost
to the Company (based on premium rates) of providing such
coverage.
(e) Any amounts payable to the Executive pursuant
to this Section 6 shall be considered severance payments and be in
full and complete satisfaction of the obligations of the Company to
the Executive in connection with the termination of the Executive.
SECTION 7. APPLICABILITY OF SECTION 280G OF THE CODE.
(a) Limitation on Severance Pay and Other
Benefits. Notwithstanding any other provision of this Agreement to the
contrary, unless and until this Agreement has been approved by a
separate vote of the Company's shareholders in accordance with Section
7(g) below, the Company shall not be obligated to make any payment or
provide any benefit (including the acceleration of Stock Options) to
the extent that such payment or benefit results (as determined in
accordance with Section 7(c) below) in a parachute payment (as defined
in Section 280G of the Code); provided, however, that the Company
shall make all payments and provide all benefits under this Agreement
to the fullest extent permitted without giving rise to a parachute
payment.
(b) Tax Reimbursement Payment. If the amount or
benefit paid or distributed to the Executive by the Company or any
Person that is an Affiliate of the Company, whether pursuant to this
Agreement or otherwise with respect to
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employment by the Company after the Employment Date (collectively, the
"Covered Payments"), is or becomes subject to the tax imposed under
Section 4999 of the Code or any similar tax that may hereafter be
imposed (the "Excise Tax") and if this Agreement has been approved by
a separate vote of the Company's shareholders in accordance with
Section 7(g) below, the Company shall pay to the Executive, at the
time specified in Section 7(f) below, the Tax Reimbursement Payment
(as defined below). The Tax Reimbursement Payment is defined as an
amount, which when added to the Covered Payments and reduced by any
Excise Tax on the Covered Payments and any federal, state and local
income tax and Excise Tax on the Tax Reimbursement Payment provided
for by this Agreement (but without reduction for any federal, state
and local income or employment tax on such Covered Payments), shall be
equal to the sum of (i) the amount of the Covered Payments; and (ii)
an amount equal to the product of any otherwise permitted deductions
disallowed for federal, state or local income tax purposes as a result
of the inclusion of the Tax Reimbursement Payment in the Executive's
adjusted gross income and the applicable marginal rate of federal,
state or local income taxation if the Tax Reimbursement Payment had
not been made, respectively, for the calendar year in which the Tax
Reimbursement Payment is to be made.
(c) Determining Excise Tax. For purposes of
determining whether any of the Covered Payments will be subject to the
Excise Tax and the amount of such Excise Tax,
(i) such Covered Payments will be
treated as "parachute payments" within the meaning of Section
280G of the Code, and all "parachute payments" in excess of
the "base amount" (as defined under Section 280G(b)(3) of the
Code) shall be treated as subject to the Excise Tax, to the
extent so determined in the opinion of the Company's
independent certified public accountants (the "Accountants");
and
(ii) the value of any non-cash benefits
or any deferred payment or benefit shall be determined by the
Accountants in accordance with the principles of Section 280G
of the Code.
(d) Applicable Tax Rates and Deductions. For
purposes of determining the amount of the Tax Reimbursement Payment,
the Executive shall be deemed:
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(i) to pay federal income taxes at the
highest applicable marginal rate of federal income taxation
for the calendar year in which the Tax Reimbursement Payment
is to be made, except in connection with the determination of
the Tax Reimbursement Payment attributable to a disallowed
deduction under clause (ii) of the definition of Tax
Reimbursement Payment; and
(ii) to pay any applicable state and
local income taxes at the highest applicable marginal rate of
taxation for the calendar in which the Tax Reimbursement
Payment is to be made, net of the maximum reduction in federal
income taxes which could be obtained from the deduction of
such state or local taxes if paid in such year (determined
without regard to limitations on deductions based upon the
amount of the Executive's adjusted gross income).
(e) Subsequent Events. In the event that the
Excise Tax is subsequently determined by the Accountants or the
Internal Revenue Service to be less than the amount taken into account
hereunder in calculating the Tax Reimbursement Payment made, the
Executive shall repay to the Company, at the time that the amount of
such reduction in the Excise Tax is finally determined, the portion of
such prior Tax Reimbursement Payment that has been paid to the
Executive or to federal, state or local tax authorities on the
Executive's behalf and that would not have been paid if such Excise
Tax had been applied in initially calculating such Tax Reimbursement
Payment, plus interest on the amount of such repayment at the rate
provided in Section 1274(b)(2)(B) of the Code. Notwithstanding the
foregoing provisions of this Section 7(e), in the event any portion of
the Tax Reimbursement Payment to be refunded to the Company has been
paid to any federal, state or local tax authority, repayment thereof
shall not be required until actual refund or credit of such portion
has been made to the Executive, and interest payable to the Company
shall not exceed interest received or credited to the Executive by
such tax authority for the period it held such portion. The Executive
and the Company shall mutually agree upon the course of action to be
pursued (and the method of allocating the expenses thereof) if the
Executive's good faith claim for refund or credit is denied.
In the event that the Excise Tax is later determined
by the Accountants to exceed the amount taken into account hereunder
at the time the Tax Reimbursement Payment is made (including, but not
limited to, by reason of any payment the existence or amount of which
cannot be determined at the time of the Tax Reimbursement Payment in
respect thereof) the Company shall make an additional Tax
Reimbursement Payment of such excess (which Tax Reimbursement Payment
shall include any interest or penalty payable with respect to such
excess) at the time that the amount of such excess is finally
determined.
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The Company and the Executive each agrees to
reasonably cooperate in good faith in the event of any reduction in
payments or benefits pursuant to Section 7(a) or any Tax Reimbursement
Payment pursuant to Section 7(b) to minimize the amount of such
reduction or Tax Reimbursement Payment and to take such other actions
under this Section 7 as may be necessary or required.
(f) Date of Payment. The portion of the Tax
Reimbursement Payment attributable to a Covered Payment shall be paid
to the Executive within ten (10) business days following the payment
of the Covered Payment. If the amount of such Tax Reimbursement
Payment (or portion thereof) is due, the Company shall pay to the
Executive, an amount estimated in good faith by the Accountants to be
the minimum amount of such Tax Reimbursement Payment and shall pay the
remainder of such Tax Reimbursement Payment (which Tax Reimbursement
Payment shall include interest at the rate provided in Section
1274(b)(2)(B) of the Code) as soon as the amount thereof can be
determined, but in no event later than forty-five (45) calendar days
after payment of the related Covered Payment. In the event that the
amount of the estimated Tax Reimbursement Payment exceeds the amount
subsequently determined to have been due, such excess shall be repaid
or refunded pursuant to the provisions of Section 7(e) above.
(g) Shareholder Approval. The Company shall use
its reasonable best efforts to obtain, within 45 days following the
Employment Date, the approval of this Agreement (including, without
limitation, the removal of the limitation under Section 7(a), the Tax
Reimbursement Payment, the acceleration of vesting of Stock Options
upon a Change of Control and the continuation of benefits following a
termination of employment without Cause or resignation for Good Reason
within one year of a Change of Control) by a separate vote of the
Company's shareholders who own more than 75% of the total voting power
of all outstanding stock of the Company (excluding for this purpose
all stock actually or constructively owned by the Executive and all
other disqualified individuals (as defined in Section 280G of the
Code) who would receive payments constituting parachute payments if
shareholder approval for purposes of Section 280G of the Code was not
obtained). The vote of the Company's shareholders pursuant to this
Section 7(g) is intended to satisfy the shareholder approval
requirement described in Question and Answer 7 of the Proposed
Regulations under Section 280G of the Code.
SECTION 8. NON-EXCLUSIVITY OF RIGHTS. Nothing in this
Agreement shall prevent or limit the Executive's continuing or future
participation, during the term of Executive's employment, in any benefit bonus,
incentive or other plan or program provided by the Company and for which the
Executive may qualify, nor shall anything herein limit or otherwise prejudice
such rights as the Executive may have under any other agreements with the
Company, including, but not limited to stock option or restricted stock
agreements. Amounts which are vested benefits or which the Executive is
otherwise entitled to receive
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under any plan or program of the Company at or subsequent to the Date of
Termination shall be payable in accordance with such plan or program.
SECTION 9. FULL SETTLEMENT. Except as provided in
Section 11(b), the Company's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be
affected by any circumstances, including, without limitation, any set-off,
counterclaim, recoupment, defense or other right which the Company may have
against the Executive or others whether by reason of the subsequent employment
of the Executive or otherwise. In no event shall the Executive be obligated to
seek other employment by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement.
SECTION 10. LEGAL FEES AND EXPENSES. The Company shall
pay or cause to be paid any and all reasonable attorneys' fees and expenses
incurred by Executive in connection with the preparation and negotiation of
this Agreement promptly following receipt of an invoice therefor (together with
reasonable supporting documentation) from Executive.
SECTION 11. FURTHER OBLIGATIONS OF THE EXECUTIVE.
(a) During and following the Executive's
employment by the Company, the Executive shall use commercially
reasonable efforts to hold in confidence and not directly or
indirectly disclose any confidential information or proprietary data
of the Company or any of its Subsidiaries, except to the extent
authorized by the Board or required by any court or administrative
agency or legal process, other than to an employee of or contractor
with the Company or any of its Subsidiaries, or a Person to whom the
Executive in good faith believes disclosure is reasonably necessary or
appropriate in connection with the performance by the Executive of his
duties as an executive of the Company. In determining whether such
disclosure is required, Executive will be entitled to rely on the
written advice of counsel provided to the Company. Confidential
information shall not include any information known generally to the
public or in the industry in which Company is engaged. All records,
files, documents and materials, or copies thereof, relating to the
Company's or any of its Subsidiaries', business which the Executive
shall prepare, or use, or come into contact with, shall be and remain
the sole property of the Company or any of its Subsidiaries, as the
case may be, and shall be promptly returned by the Executive to the
Company or such Subsidiary (as applicable) upon termination of the
Executive's employment with the Company.
(b) Except with the Board's prior written
approval, during the Employment Period and for three (3) years after
the Date of Termination, the Executive shall not, directly or
indirectly (i) solicit, entice, persuade or induce any employee,
displayer, or other independent contractor of the Company or any of
its Subsidiaries to terminate his employment or relationship with the
Company or any of
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its Subsidiaries or to become employed or engaged in a similar
capacity by any Person other than the Company or any of its
Subsidiaries or (ii) authorize, solicit or assist in the taking of
such actions by any third party.
(c) During the Employment Period and for three
(3) years after the Date of Termination, the Executive shall not,
directly or indirectly, engage, participate, make any financial
investment in, or become employed by or render advisory or other
services to or for any Person or other business enterprise (other than
the Company and its Affiliates) engaged in the business of selling
home decorative accessories within any of the same markets as the
Company or any of its Subsidiaries (any of the foregoing activities
being referred to herein as "COMPETITIVE ACTIVITIES"). The foregoing
covenant respecting Competitive Activities shall not be construed to
preclude the Executive from making any investments in the securities
of any company, and whether or not engaged in competition with the
Company or any of its Subsidiaries, to the extent that such securities
are actively traded on a national securities exchange or in the
over-the-counter market in the United States or any foreign securities
exchange and such investment does not exceed five percent (5%) of the
issued and outstanding shares of such company or give the Executive
the right or power to control or participate directly in making the
policy decisions of such company.
(d) If any court determines that any portion of
this Section 11 is invalid or unenforceable, the remainder of this
Section 11 shall not thereby be affected and shall be given full
effect without regard to the invalid provision. If any court construes
any of the provisions of this Section 11, or any part thereof, to be
unreasonable because of the duration or scope of such provision, such
court shall have the power to reduce the duration or scope of such
provision and to enforce such provision as so reduced.
(e) The Executive hereby acknowledges and agrees
that damages will not be an adequate remedy for the Executive's breach
of any of his covenants contained in this Section 11, and further
agrees that the Company shall be entitled to obtain appropriate
injunctive and/or other equitable relief for any such breach, without
the posting of any bond or other security.
SECTION 12. SUCCESSORS. The Company may assign its rights
under this Agreement to any successor to all or substantially all the assets of
the Company, by merger or otherwise, and may assign or encumber this Agreement
and its rights hereunder as security for indebtedness of the Company. Any such
assignment by the Company shall remain subject to the Executive's rights under
this Agreement, including without limitation, Section 5 and Section 6 hereof.
The rights of the Executive under this Agreement may not be assigned or
encumbered by the Executive, voluntarily or involuntarily, during his lifetime,
and any such purported assignment shall be void ab initio. However, all rights
of the Executive
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under this Agreement shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, estates, executors,
administrators, heirs and beneficiaries. All amounts payable to the Executive
hereunder shall be paid, in the event of the Executive's death, to the
Executive's estate, heirs or representatives.
SECTION 13. THIRD PARTIES. Except for the rights granted
to the Company and its Subsidiaries pursuant hereto (including, without
limitation, pursuant to Section 10 hereof) and except as expressly set forth or
referred to herein, nothing herein expressed or implied is intended or shall be
construed to confer upon or give any Person other than the parties hereto and
their successors and permitted assigns any rights or remedies under or by
reason of this Agreement.
SECTION 14. ENFORCEMENT. The provisions of this Agreement
shall be regarded as divisible, and if any of said provisions or any part
thereof is declared invalid or unenforceable by a court of competent
jurisdiction, the validity and enforceability of the remainder of such
provisions or parts hereof and the applicability thereof shall not be affected
thereby.
SECTION 15. AMENDMENT. This Agreement may not be amended
or modified at any time except by a written instrument approved by the Board,
and executed by the Company and the Executive; provided, however, that any
attempted amendment or modification without such approval and execution shall
be null and void ab initio and of no effect.
SECTION 16. WITHHOLDING. The Company shall be entitled to
withhold from any amounts to be paid to the Executive hereunder any federal,
state, local, or foreign withholding or other taxes or charges which it is from
time to time required to withhold. The Company shall be entitled to rely on an
opinion of counsel if any question as to the amount or requirement of any such
withholding shall arise.
SECTION 17. GOVERNING LAW. This Agreement and the rights
and obligations hereunder shall be governed by and construed in accordance with
the laws of the State of Texas, without regard to principles of conflicts of
law of Texas or any other jurisdiction.
SECTION 18. NOTICE. Notices given pursuant to this
Agreement shall be in writing and shall be deemed given when received and, if
mailed, shall be mailed by United States registered or certified mail, return
receipt requested, addressee only, postage prepaid:
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If to the Company:
Home Interiors & Gifts, Inc.
0000 Xxxxxx Xxxxxx Xxxx
Xxxxxx, Xxxxx 00000
Attention: President
If to the Executive:
Xxxxxx X. Xxxxxx, Xx.
0000 Xxxxxxxxx Xxxxxx
Xxxxx, Xxxxx 00000
or to such other address as the party to be notified shall have given to the
other in accordance with the notice provisions set forth in this Section 13.
SECTION 19. NO WAIVER. No waiver by either party at any
time of any breach by the other party of, or compliance with, any condition or
provision of this Agreement to be performed by the other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at any time.
SECTION 20. HEADINGS. The headings contained herein are
for reference only and shall not affect the meaning or interpretation of any
provision of this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement
in one or more counterparts, each of which shall be deemed one and the same
instrument, as of the day and year first written above.
HOME INTERIORS & GIFTS, INC.
By:
--------------------------------
Xxxxxxx X. Xxxxxxxxx
Chief Financial Officer
EXECUTIVE:
-----------------------------------
Xxxxxx X. Xxxxxx, Xx.
