EXHIBIT 10.1
CONFIDENTIAL SEPARATION
AGREEMENT AND RELEASE
This Confidential Separation Agreement and Release (the "Agreement") is
made and entered into by and between Nora I. Serrano ("Employee") and Home
Interiors & Gifts, Inc. (the "Company"), herein collectively referred to as the
"Parties". This Agreement will become effective as of August 15, 2003 (the
"Effective Date").
RECITALS
WHEREAS, Employee has been employed by the Company as Senior Vice
President of Sales.
WHEREAS, Employee and the Company have mutually agreed to terminate
Employee's employment with the Company; and
WHEREAS, the Parties desire to settle fully and finally, in the manner
set forth herein, all differences between them which have arisen, or which may
arise, prior to, or at the time of, the execution of this Agreement, including
but not limited to, any and all claims and controversies arising out of the
employment relationship, including the termination thereof, between Employee and
the Company.
NOW, THEREFORE, in consideration of the recitals and the mutual
promises, covenants and agreements set forth herein, the Parties covenant and
agree as follows:
1. Termination of Employment. Employee and the Company agree that
Employee's employment with the Company and any of its
affiliates (including, without limitation, in any position as
an officer of the Company and any of its affiliates) is
terminated effective as of August 15, 2003 (the "Termination
Date"). Effective as of the Termination Date, all benefits
under all Company plans, programs and/or arrangements shall
terminate, except as otherwise provided in this Agreement. The
Company may open and answer, and authorize others to open and
answer, all mail, communications, and other correspondence
addressed to Employee relating to the Company or any of its
subsidiaries or affiliates or to Employee's employment with
the Company or any of its subsidiaries, and Employee shall
promptly refer to the Company all inquiries, mail,
communications, and correspondence received by her relating to
the Company or any of it subsidiaries or affiliates or to
Employee's employment with the Company or any of its
subsidiaries or affiliates. The Company will promptly forward
to Employee all of Employee's personal mail, communications or
correspondence received by the Company, unopened to the extent
it is reasonably ascertained to be of a personal nature.
2. General Release. Employee, for and on behalf of herself, and
Employee's spouse, family, agents, assigns, successors, heirs,
executors, administrators, affiliates, associates, and legal
representatives does hereby IRREVOCABLY AND UNCONDITIONALLY
RELEASE, RELINQUISH, QUITCLAIM, ACQUIT,
CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 1
AND FOREVER DISCHARGE the Company, its predecessors,
successors, past and present parent companies, subsidiary
companies, affiliates, associates, partnerships, and its
respective current and former owners, partners, assigns,
successors, employees, agents, heirs, executors,
administrators, legal representatives, officers, directors,
shareholders and attorneys and insurers of said corporations,
firms, associations, partnerships, and entities (hereinafter
the "Releasees"), of and from any and all complaints, claims,
grievances, liabilities, suits, demands, causes of action,
obligations, promises, agreements, rights, damages, costs
(including court costs and attorney's fees), losses, expenses
and compensation of any nature whatsoever, KNOWN OR UNKNOWN,
past, present or future, fixed or contingent, liquidated or
unliquidated, ACCRUED OR CONTINGENT, including, but not
limited to, any and all known or unknown claims which have
resulted or may result from any alleged acts or omissions,
arising out of Employee's hiring, terms and conditions of
employment, employment benefits, treatment during employment,
and separation from employment, including but not limited to
any bonus plans, stock option plans (except to the extent
specifically provided below) or other compensation
arrangements and expressly including, but not limited to, any
and all claims or causes of action based on, related to or
arising out of any alleged discrimination, harassment or
retaliation based on age, race, sex, national origin, color,
religion, citizenship status, disability, or handicap under
any municipal, local, state, or federal law, common or
statutory; including Title VII of the Civil Rights Act of 1964
(as amended) or any similar law; the Age Discrimination in
Employment Act (as amended) or any similar law; the Americans
with Disabilities Act (as amended), the Federal Rehabilitation
Act or any similar law; the Fair Labor Standards Act or any
similar law; the Older Workers Benefit Protection Act and any
similar law; wages, compensation, or benefits of employment;
retirement benefits or compensation; severance pay or
benefits; future compensation, including bonuses or profit
sharing; wrongful discharge from employment; negligence;
intentional torts; personal injury; mental anguish or
emotional distress; exemplary damages; alleged retaliation
related to workers' compensation claims under chapter 451 or
the Texas Labor Code or any similar law or relating to
so-called "whistle-blowers" law; Texas Payday Act or any
similar law; defamation, libel or slander; fraud; or breach of
contract (including, without limitation, any and all claims or
causes of action based on, related to or arising out of that
certain Employment Agreement, dated as of November 1, 2001, as
amended by that certain Amendment to Employment Agreement,
entered into as of December 12, 2002 (the "Employment
Agreement") or any other agreement relating to employment,
written or oral), any of which existed or may have existed
prior to, or contemporaneously with the execution of this
Agreement.
By the signature below, Employee does hereby acknowledge that
upon payment of all the consideration recited herein this is
final, full and complete satisfaction, settlement and
discharge of any and all liability of the Releasees, if any,
to Employee whatsoever by reason of any manner, cause or thing
in any way connected with or arising out of the Employee's
employment and/or termination
CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 2
of employment and that Employee shall not receive any further
sums of money or other property, except as set forth in this
Agreement, from the Company.
Except as expressly provided in this Agreement, neither the
Company nor any of its predecessors, successors, assigns,
subsidiaries or affiliates shall have any further obligation
to Employee in connection with the Employment Agreement or
Employee's employment by the Company or any of its affiliates
or subsidiaries, including but not limited to severance,
compensation (including but not limited to deferred
compensation, employment contracts, stock options, bonuses and
commissions), health insurance, life insurance, disability
insurance, club dues, vehicle allowances, vacation pay, sick
pay and any similar obligations.
3. Covenant Not to Sue. Employee, for herself and on behalf of
Employee's attorneys, spouse, family, heirs, assigns,
successors, executors, and administrators, COVENANTS NOT TO
SUE, OR OTHERWISE CONSENT TO PARTICIPATE IN ANY ACTION
AGAINST, any of the Releasees based upon any of the claims
released in Paragraph 2 of this Agreement and represents that
no other person or entity has initiated or will initiate any
such proceedings on her behalf. A violation by Employee of
this Section 3 will result in indemnification obligations
under Section 9, below. EMPLOYEE AGREES, WARRANTS, AND
REPRESENTS TO THE COMPANY THAT EMPLOYEE HAS FULL EXPRESS
AUTHORITY TO SETTLE ALL CLAIMS AND DEMANDS THAT ARE THE
SUBJECT OF SECTION 2 OF THIS AGREEMENT AND THAT EMPLOYEE HAS
NOT GIVEN OR MADE ANY ASSIGNMENT TO ANYONE, INCLUDING
EMPLOYEE'S SPOUSE, FAMILY OR LEGAL COUNSEL, OF ANY CLAIMS
AGAINST ANY PERSON OR ENTITY ASSOCIATED WITH THE COMPANY OR
ANY RELEASEES. TO THE EXTENT THAT ANY CLAIM RELATED TO THIS
AGREEMENT MAY BE BROUGHT BY PERSONS OR ENTITIES CLAIMING BY,
THORUGH, OR UNDER EMPLOYEE, HER HEIRS, SUCCESSORS, OR ASSIGNS,
THEN EMPLOYEE FURTHER AGREES TO INDEMNIFY, DEFEND, AND HOLD
HARMLESS THE COMPANY OR ANY COMPANY PARTY, THEIR RESPECTIVE
AGENTS, AND THEIR RESPECTIVE SUCCESSORS FROM ANY LAWSUIT,
JUDGMENT, OR SETTLEMENT ARISING FROM SUCH CLAIMS. EMPLOYEE
FURTHER HEREBY ASSIGNS TO THE COMPANY ALL CLAIMS AND CAUSES OF
ACTION COVERED BY SECTION 2.
4. Non-Disclosure of Agreement. Employee agrees that she will
keep the terms, amount, and facts of this Agreement STRICTLY
AND COMPLETELY CONFIDENTIAL, and that she will not communicate
or otherwise disclose the terms, amount, or facts of this
Agreement to any employee of the Company (past, present, or
future), or to any other person, except (a) to Employee's
spouse, attorneys, accountants, financial advisors, and future
employers, provided that such individuals are advised of and
agree to maintain the confidentiality of such matters and (b)
as may be required by law or compulsory process. The Company
agrees to take reasonable action to keep the terms, amount,
and facts of this Agreement STRICTLY AND COMPLETELY
CONFIDENTIAL, and that it will
CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 3
take reasonable action to prevent any employee from
communicating or otherwise disclosing the terms, amount or
facts of this Agreement to any employee of the Company (past,
present or future) or to any other person, except (a) to the
Company's senior management, directors, attorneys,
accountants, financial advisors, lenders, and other persons
which senior management of the Company believes need to be
aware of such matters, provided that such individuals are
advised of and agree to maintain the confidentiality of such
matters, (b) as the Company may deem appropriate in connection
with any transactions involving the sale of securities of the
Company or of any material portion of the assets of the
Company or any transactions involving a merger of the Company
with any third party, (c) future employers of Employee as
referenced in Sections 5 and 6(e), and (d) as may be required
by law or compulsory process. In the event that a Party is
required or compelled by law or compulsory process to disclose
the existence and or contents of this Agreement, such Party
will use best efforts to provide the other Party with written
notice, at least seven (7) days in advance of any such
disclosure.
5. Confidentiality. Employee acknowledges that during the term of
employment with the Company, Employee received valuable
special training, had access to and became acquainted with
various displayer lists, customer lists, trade secrets and
other confidential information not ordinarily available to the
general public. Employee agrees that such special knowledge
received is included in the Company's proprietary confidential
information. Employee agrees that this confidential
information is valuable to the Company and that its protection
and maintenance constitutes a legitimate interest to be
protected by the enforcement of the covenants contained in
this Agreement.
Employee acknowledges that the Confidential Information (as
defined below) relating to the business of the Company, or any
of its affiliates, which has been obtained during her
employment with the Company, is the property of the Company.
Employee agrees that she will not disclose or use at any time,
any Confidential Information, without the prior written
consent of the Company. Employee agrees to destroy or deliver
to the Company, after the termination from employment, all
memoranda, notes, plans, records, reports, drawings, sketches,
specifications, diskettes, tapes and other storage media,
documentation and other materials (and copies thereof),
whether in written, printed or digital format, containing
Confidential Information, no matter where such material is
located and no matter what form the material may be in, which
Employee may then possess or have under her control. If
requested by the Company, Employee shall provide to the
Company written confirmation that all such materials have been
delivered to the Company or have been destroyed. Employee
shall take all appropriate steps to safeguard Confidential
Information and to protect it against disclosure, misuse,
espionage, loss and theft. Company shall be authorized to
disclose to any future employer of Employee that Employee's
use or disclosure of the Confidential Information is governed
by this Agreement and, at the Company's election, furnish such
new employer with a copy of this Agreement or relevant portion
thereof.
CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 4
For purpose of this Agreement, "Confidential Information"
shall mean trade secrets, confidential or proprietary
information and all other knowledge, know-how, information,
documents or materials owned, developed or possessed by the
Company or any of its affiliates, whether in tangible or
intangible form, pertaining to the business of the Company or
any of its affiliates, or any customer thereof, known or
intended to be known only to employees of the Company of any
of its affiliates or other persons in a confidential
relationship with the Company, or the confidentiality of which
the Company takes reasonable measure to protect, including,
but not limited to manufacturing processes, research and
development data, project data, assignments of individual
employees, testing and evaluation procedures, cost data and
techniques, data bases, designs, models, operation procedures,
knowledge of the organization (including pricing and sales
policies, techniques and concepts), trade shows (including
prices, costs, sales or content), details of joint venture or
sponsorship agreements, knowledge of strategic or marketing
plans for future products, events, processes, techniques,
contracts, financial information or measures, business
methods, future business plans, package design, retail design,
field marketing outsourcing, displayers and customers
(including identities and contact information of displayers
and customers and prospective displayers and customers, and
identities and contact information of individual contacts at
business entities, which are customers), suppliers, vendors,
business relationships and other information owned, developed
or possessed by the Company; provided however, that
Confidential Information shall not include (i) information
(other than the identities of displayers and customers) that
is in the public domain through no fault of Employee; (ii)
information approved for release by written authorization of
the Company; or (iii) information that may be required by law
or an order of any court, agency or proceeding to be publicly
disclosed.
6. Non-Solicitation and Non-Teaming.
(a) The Employee acknowledges that: (i) the Company's
business is international in scope and its products
are marketed throughout the United States and the
world; (ii) the Company competes with other
businesses both within the United States and
internationally; and (iii) the provisions of this
Section 6 are reasonable and necessary to protect the
Company's business.
(b) In consideration of the acknowledgments by the
Employee, and in consideration of the compensation
and benefits to be paid or provided to the Employee
by the Company under this Agreement, the Employee
agrees that she will not, directly or indirectly:
(i) during the Post-Employment Period (as
defined below), participate with two (2) or
more individuals who were members of
management or unit directors (or higher
level directors) of the Company within the
three (3) year period prior to the Effective
Date in the ownership, management, or
operation of any business
CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 5
that involves direct sales or any business
whose products, services or activities
compete in whole or in part with the
products, services or activities of the
Company or its affiliates, anywhere within
the United States or within any foreign
country where the Company or its affiliates
conduct or market their business or
services, PROVIDED HOWEVER, that any
violation of this Section 6(b)(i) shall not
constitute a material breach under Section 9
(giving rise to the remedies listed
therein), if such violation is cured by
Employee within ten (10) days following the
giving of written notice by the Company to
the Employee at the address set forth on the
signature page of this Agreement;
(ii) whether for the Employee's own account or
for the account of any other person or
entity, at any time during the
Post-Employment Period, solicit business of
the same or similar type being carried on by
the Company or its affiliates, from any
retail or wholesale customer of the Company
or its affiliates in existence at any time
during the year prior to the Effective Date,
whether or not the Employee had personal
contact with such customer during and by
reason of the Employee's employment with the
Company;
(iii) whether for the Employee's own account or
the account of any other person or entity,
at any time during the Post-Employment
Period, solicit, employ, or otherwise engage
as an employee, independent contractor, or
otherwise, any person who is or was at the
time of such solicitation, employment or
engagement an employee, displayer,
consultant or independent contractor of the
Company or its affiliates or in any manner
induce or attempt to induce any employee of
the Company or its affiliates to terminate
his/her employment with the Company, or its
affiliates or in any manner induce or
attempt to induce any displayer of the
Company or its affiliates to terminate
his/her relationship with the Company or its
affiliates; or
(iv) whether for the Employee's own account or
the account of any other person at any time
during the Post-Employment Period, interfere
with the Company's or any of its affiliates'
relationship with any person, including any
person who is or was at any time prior to or
during the Post-Employment Period, an
employee, displayer, contractor, supplier,
or customer of the Company or its
affiliates.
(c) If any covenant in this Section 6 is held to be
unreasonable, arbitrary, or against public policy,
such covenant will be considered to be divisible with
respect to scope, time, and geographic area, and such
lesser scope, time, or geographic area, or all of
them, as a court of competent jurisdiction may
determine to be reasonable, not arbitrary,
CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 6
and not against public policy, will be effective,
binding, and enforceable against the Employee.
(d) The period of time applicable to any covenant in this
Section 6 will be extended by the duration of any
violation by the Employee of such covenant.
(e) The Employee will, while the covenant under this
Section 6 is in effect, give written notice to the
Company, within ten (10) days after accepting any
other employment or consulting arrangement, of the
identity of the Employee's new employer or contractor
and all of the material duties and services to be
provided by Employee in such employment or retention,
which shall not require disclosure by Employee of any
terms of compensation. The Company may notify such
new employer that the Employee is bound by this
Agreement and, at the Company's election, furnish
such new employer with a copy of this Agreement or
relevant portion thereof.
(f) The term "Post-Employment Period" means the three (3)
year period following the Effective Date.
7. Severance Benefit Terms. The Company agrees to:
(a) Pay to Employee within three (3) days following the
Effective Date cash in the amount of ONE MILLION
NINETY SIX THOUSAND SIX HUNDRED NINETY-ONE DOLLARS
($1,096,691.00) (such amount representing three (3)
times Employee's 2002 year-end salary and 2002
bonus), less (A) payroll deductions and other
deductions required by law, and (B) taxes required to
be withheld by the Company with respect to the
transfer to Employee of the automobile described in
Section 7(d) of this Agreement.
(b) Reimburse Employee for insurance premiums required to
maintain health coverage under COBRA, and for
supplemental life, accidental death and dismemberment
insurance policies, (or at the Company's election,
pay such premiums directly) through the earlier of
August 31, 2004 or the date on which Employee has
comparable coverage through a new employer.
(c) Subject to Section 9, below, the Company shall amend
and restate (A) the terms of those certain
Non-Qualified Stock Option Agreements, dated November
1, 2000 (as amended as of March 18, 2002), and May 7,
2002, in accordance with the terms of an Amended and
Restated Non-Qualified Stock Option Agreement
substantially in the form of Exhibit A attached
hereto and (B) the terms of that certain
Non-Qualified Stock Option Agreement, dated September
27, 2002, in accordance with the terms of an Amended
and Restated Non-Qualified Stock Option Agreement
substantially in the form of Exhibit B attached
hereto.
CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 7
(d) Transfer to Employee title to the 2003 Mercedes Benz
E320 currently being leased by the Company for use by
Employee.
(e) Subject to Sections 5 and 6, above, waive any all
rights the Company may have to enforce the
non-competition covenant of Employee under Section
9(b)(i) of the Employment Agreement for actions taken
by Employee after the Termination Date.
The payments and benefits set forth in Section 7
shall be subject to applicable federal, state and
local withholding taxes and to any withholding that
would be applicable were Employee an employee of the
Company. EMPLOYEE AGREES THAT, TO THE EXTENT THAT ANY
INDIVIDUAL FEDERAL OR STATE TAXES OF ANY KIND MAY BE
DUE AS A RESULT OF ANY SUCH PAYMENT TO EMPLOYEE,
EMPLOYEE SHALL BE SOLELY RESPONSIBLE FOR SUCH TAXES
AND WILL INDEMNIFY, DEFEND, AND HOLD HARMLESS THE
COMPANY IN THE EVENT THERE IS ANY CLAIM AGAINST THE
COMPANY FOR SUCH TAXES. THIS SECTION SHALL NOT
RELEASE THE COMPANY OF ITS OBLIGATIONS WITH RESPECT
TO WITHHOLDING.
8. No Admission. This Agreement is not an admission of wrongdoing
or liability by either Employee or the Company. The Parties
hereto recognize that, by entering into this Agreement, the
Company does not admit any violation of any local, state, or
federal law, common or statutory. The Parties further
recognize that this Agreement has been entered into in release
and compromise of any claims that might be asserted by
Employee, in connection with Employee's employment with the
Company, or the termination thereof, and to avoid the expense
and burden of any litigation related thereto.
9. Breach by Employee. The Parties acknowledge and agree that in
the event Employee materially breaches any provision of this
Agreement: (a) the Company may suspend payments under this
Agreement and/or rescind the Agreement; (b) Employee will
indemnify and hold the Company harmless from and against any
and all resulting damages or loss incurred by the Company
(including attorneys' fees and expenses); (c) Employee will
immediately repay to the Company in full any payment made to
her under the provisions of this Agreement; and (d) the
Company will be entitled to recover from Employee any payment
not repaid to the Company, as required by subpart (c) of this
paragraph, as well as any and all other resulting actual or
consequential damages. Further, in the event Employee
materially breaches any provision of this Agreement all
options described under Section 7(c) shall be forfeited,
whether or not then vested or unvested. The Company may also
pursue any other available remedies for any breach of this
Agreement.
One or more waivers of a breach of any covenant, term, or
provision of this Agreement by any of the Parties shall not be
construed as a waiver of a
CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 8
subsequent breach of the same covenant term, or provision, nor
shall it be considered a waiver of any other existing or
subsequent breach of a different covenant, term, or provision.
10. Severability. If any provision or term of this Agreement is
held to be illegal, invalid, or unenforceable, such provision
or term shall be fully severable; this Agreement shall be
construed and enforced as if such illegal, or unenforceable
provision had never comprised part of this Agreement; and the
remaining provisions of this Agreement shall remain in full
force and effect and shall not be affected by the illegal,
invalid, or unenforceable provision or by its severance from
this Agreement. However, the Parties agree that all payments
made under the Agreement shall remain full and final and the
occurrence of any event of inapplicability, invalidity,
illegality, unenforceability, or modification made to this
Agreement shall in no way (a) entitle the Employee to any
additional payment, compensation, or cost from the Company or
create any liability for the Company to the Employee under
this Agreement, or (b) revise, reinstate, or otherwise restore
any claims or causes of action being released hereby. The
Parties further agree that the occurrence of any such
inapplicability, invalidity, illegality, unenforceability, or
modification will not operate to reduce the consideration paid
to the Employee under this Agreement. Furthermore, in lieu of
such illegal, invalid, or unenforceable provision or term
there shall be added automatically as a part of this Agreement
another provision or term as similar to the illegal, invalid,
or unenforceable provisions, as may be possible and that is
legal, valid, and enforceable.
11. Remedies. The Parties agree that should one party sue the
other party for a breach of any provision of this Agreement,
the prevailing party shall be entitled to recover its
attorneys' fees and costs of court. The parties hereby agree
that each party shall have the right to sue for specific
performance of this Agreement, and for declaratory and
injunctive relief.
12. Entire Agreement. This Agreement (together with the stock
option agreements substantially in the form attached hereto as
Exhibits A and B) constitutes the entire Agreement of the
Parties, and supersedes all prior and contemporaneous
negotiations and agreements, oral or written. All such prior
and contemporaneous negotiations and agreements are deemed
incorporated and merged into this Agreement and are deemed to
have been abandoned if not so incorporated. No
representations, oral or written, are being relied upon by
either party in executing this Agreement other than the
express representations of this Agreement. This Agreement
cannot be changed or terminated without the express written
consent of the parties.
13. Reference. The Parties acknowledge and agree that Employee
will direct any request for employment references from the
Company to the Chief Executive Officer of the Company, and
that the Company will not be obligated to respond to any such
requests, or to any other inquiries from prospective employers
of
CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 9
Employee, except to disclose only a neutral reference that
discloses only Employee's job title and dates of employment.
14. Waiver. Employee waives and releases forever any right or
rights she might have to seek re-employment, or reinstatement
with the Company or any of the other Releasees.
15. Non-Disparagement. Employee agrees that she shall not,
directly or indirectly, in any way disparage the Company or
its affiliates or any of the shareholders, partners, members,
or other holders of equity in the Company or its current and
former officers, directors, and employees, or make to, or
solicit from, any third party, any comments, statements, and
the like that may be considered to be derogatory or
detrimental to the good name or business reputation of the
Company. The Company agrees that it shall take reasonable
action to prevent any employee of the Company from disparaging
the Employee or making any comments, statements and the like
that may be considered to be derogatory or detrimental to the
good name or business reputation of the Employee, and if the
Company becomes aware of any material violation of such
instruction to employees, the Company shall take reasonable
action to prevent the recurrence of such violation.
16. Statement of Understanding. By executing this Agreement,
Employee acknowledges that (a) Employee has been advised by
the Company in writing to consult with an attorney regarding
the terms of the Agreement; (b) Employee has consulted with an
attorney of her own choosing regarding the terms of the
Agreement; (c) any and all questions regarding the terms of
this Agreement have been asked and answered to Employee's
complete satisfaction; (d) Employee has read this Agreement
and fully understands its terms and their import; (e) except
as provided by this Agreement, Employee has no contractual
right or claim to the benefits described herein; (f) the
consideration provided for herein is good and valuable; (g)
Employee is entering into this Agreement voluntarily, of her
own free will, and without any coercion, undue influence,
threat, or intimidation of any kind or type whatsoever; and
(h) Employee is no longer an employee of the Company and its
subsidiaries effective on the Termination Date.
17. Controlling Law and Venue. This Agreement shall be subject to
and construed in accordance with the laws of the State of
Texas. Venue shall be in Dallas County, Texas for any disputes
arising out of the interpretation or enforcement of any of the
terms of this Agreement.
18. Binding Effect. This Agreement is binding on and inures to the
benefit of the Company, its successors and assigns, and on
Employee and Employee's heirs and assigns.
19. Cooperation and Further Assurances. In order to assist with
the transition following the termination of her employment
with the Company, Employee agrees to make herself available to
assist with such transition through and
CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 10
including August 31, 2003, in such manner as may be reasonably
requested by the Company. The Parties agree to execute and
deliver such other and further documents and take such other
action as may be reasonably necessary to more completely,
fully and/or correctly evidence or effect the intents and
purposes of this Agreement.
20. LEGAL COUNSEL. EMPLOYEE UNDERSTANDS THAT SHE IS WAIVING
IMPORTANT LEGAL RIGHTS BY SIGNING THIS AGREEMENT AND, FURTHER,
THAT EMPLOYEE HAS CONSULTED WITH AN ATTORNEY OF HER CHOOSING
BEFORE SIGNING THIS AGREEMENT.
CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 11
IN WITNESS WHEREOF, the undersigned have executed this Agreement freely and
voluntarily intending to be legally bound by it.
ACCEPTED AND AGREED TO BY:
EMPLOYEE
/s/ Nora I. Serrano
- -------------------
Nora I. Serrano
August 14, 2003
Date
Address for Notice:
5648 Dunlap Court
Plano, Texas 75093
STATE OF TEXAS )
)
COUNTY OF )
BEFORE ME, the undersigned, a Notary Public, on this day personally
appeared Nora I. Serrano known to me to be the person whose name is subscribed
to the foregoing instrument and acknowledged to me that she executed the same
for the purposes and consideration therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this day of
.
_________________________________________
Notary Public, State of Texas
My commission expires: __________________
[SEAL]
CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 12
HOME INTERIORS & GIFTS, INC.
By: /s/ Kenneth J. Cichocki
-----------------------
Name: Kenneth J. Cichocki
Title: Senior Vice President of Finance
Date August 14, 2003
CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 13
EXHIBIT A
FORM OF 1998 NON-QUALIFIED STOCK OPTION AGREEMENT
THE SHARES ISSUABLE PURSUANT TO THIS AGREEMENT ARE SUBJECT TO AN OPTION TO
REPURCHASE PROVIDED UNDER THE PROVISIONS OF THE COMPANY'S 1998 STOCK OPTION PLAN
FOR KEY EMPLOYEES AND THIS AGREEMENT ENTERED INTO PURSUANT THERETO. A COPY OF
SUCH PLAN IS AVAILABLE UPON WRITTEN REQUEST TO THE COMPANY AT ITS PRINCIPAL
EXECUTIVE OFFICES.
HOME INTERIORS & GIFTS, INC.
1998 STOCK OPTION PLAN
AMENDED AND RESTATED NON-QUALIFIED STOCK OPTION AGREEMENT
FOR KEY EMPLOYEES
August 15, 2003
Ms. Nora I. Serrano
5648 Dunlap Ct.
Plano, TX 75093
Re: Grant of Stock Option
Dear Nora:
The Board of Directors of Home Interiors & Gifts, Inc. (the "Company")
has adopted the Company's 1998 Stock Option Plan (the "Plan") for certain
individuals and key employees of the Company and its Related Entities. A copy of
the Plan is being furnished to you concurrently with the execution of this
Option Agreement and shall be deemed a part of this Option Agreement as if fully
set forth herein. Unless the context otherwise requires, all capitalized terms
used but not otherwise defined herein shall have the meanings given such terms
in the Plan.
The Company granted to you an option to purchase 5,000 shares of the
Common Stock of the Company under that certain Non-Qualified Stock Option
Agreement for Key Employees, dated November 1, 2000 (as amended as of March 18,
2002), and the option to purchase an additional 5,000 shares of the Common Stock
of the Company under that certain Non-Qualified Stock Option Agreement dated May
7, 2002 (collectively, the "Old Agreements"). The Old Agreements are hereby
amended and restated in their entirety.
EXHIBIT A TO CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 14
1. The Grant.
The Company granted to you, effective as of November 1, 2000
(the "2000 Grant Date"), the right and option to purchase (the "2000 Option"),
in accordance with the terms and conditions set forth herein and in the Plan, an
aggregate of 5,000 shares of Common Stock of the Company (the "2000 Option
Shares"), at the Exercise Price (as hereinafter defined). The Company granted to
you, effective as of May 7, 2002 (the "2002 Grant Date," each of the 2000 Grant
Date and the 2002 Grant Date being a "Grant Date"), the right and option to
purchase (the "2002 Option," and collectively with the 2000 Option, the
"Option"), in accordance with the terms and conditions set forth herein and in
the Plan, an aggregate of 5,000 shares of Common Stock of the Company (the "2002
Option Shares," and collectively with the 2000 Option Shares, the "Option
Shares"), at the Exercise Price. As used herein, the term "Exercise Price" shall
mean a price equal to $18.05 per share, subject to the adjustments and
limitations set forth herein and in the Plan. The Option is intended to
constitute a Non-Qualified Option within the meaning of the Plan; however, you
should consult with your tax advisor concerning the proper reporting of any
federal or state tax liability that may arise as a result of the grant or
exercise of the Option.
2. Exercise.
(a) For purposes of this Option Agreement, all of the
Option Shares shall be deemed "Vested Shares." The Option shall not be subject
to any requirements in the Plan for vesting or exercise relating to continuing
employment with the Company.
(b) Subject to the relevant provisions and limitations
contained herein and in the Plan, you may exercise the Option to purchase all or
a portion of the applicable number of Vested Shares at any time prior to the
termination of the Option pursuant to this Option Agreement. In no event shall
you be entitled to exercise the Option for a fraction of a Vested Share.
(c) The unexercised portion of the Option, if any, will
automatically, and without notice, terminate and become null and void upon the
expiration of ten (10) years from the applicable Grant Date.
(d) Any exercise by you of the Option shall be in writing
addressed to the Secretary of the Company at its principal place of business (a
copy of the form of exercise to be used will be available upon written request
to the Secretary), and shall be accompanied by a certified or bank check payable
to the order of the Company in the full amount of the Exercise Price of the
shares so purchased, or in such other manner as described in the Plan and
established by the Committee.
(e) Notwithstanding any provisions herein or in the Plan
to the contrary, in the event of a material breach by you of either that certain
Employment Agreement, dated as of November 1, 2001, as amended by that certain
Amendment to Employment Agreement, entered into as of December 12, 2002, or that
certain Confidential Separation Agreement and Release, dated as of August 15,
2003, you shall immediately and automatically forfeit to the Company, for no
consideration, the Option and all Option Shares (regardless of the fact that
they are Vested Shares).
EXHIBIT A TO CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 15
3. Transferability.
Except as otherwise provided in Section 4 hereof, the Option
and any rights or interests therein are not assignable or transferable by you
except by will or the laws of descent and distribution, and during your
lifetime, the Option shall be exercisable only by you or, in the event that a
legal representative has been appointed in connection with your Disability, such
legal representative.
4. Purchase Option.
(a) The Company shall have the Purchase Option on the
Option and the Option Shares set forth in clause (ii) of Section 9(a) of the
Plan (relating to a Change in Control); provided, however, that the Company
expressly disclaims the Purchase Option on the Option and the Option Shares set
forth in clause (i) of Section 9(a) of the Plan (relating to the termination of
your employment with the Company). If in accordance with the immediately
preceding sentence, the Company shall exercise such Purchase Option, you (or
your executor or the administrator of your estate or the Person who acquired the
right to exercise the Option by bequest or inheritance in the event of your
death, or your legal representative in the event of your incapacity
(hereinafter, collectively with such optionee, the "Grantor")) shall sell to the
Company and/or its assignee(s), all or any portion (at the Company's option) of
the Option Shares and/or the Option held by the Grantor (such Option Shares and
Option collectively being referred to as the "Purchasable Shares").
(b) The Company shall give notice in writing to the
Grantor of the exercise of the Purchase Option within one (1) year from the date
the Purchase Option arises under the terms of the Plan. Such notice shall state
the number of Purchasable Shares to be purchased and the determination of the
Board of Directors of the Fair Market Value per share of such Purchasable
Shares. If no notice is given within the time limit specified above, the
Purchase Option shall terminate.
(c) The purchase price to be paid for the Purchasable
Shares purchased pursuant to the Purchase Option shall be, in the case of any
Option Shares, the Fair Market Value per share as of the date of notice of
exercise of the Purchase Option times the number of shares being purchased, and
in the case of the Option, the Fair Market Value per share times the number of
Vested Shares subject to such Option which are being purchased, less the
applicable per share Exercise Price. The purchase price shall be paid in cash.
The closing of such purchase shall take place at the Company's principal
executive offices within ten (10) days after the purchase price has been
determined. At such closing, the Grantor shall deliver to the purchaser(s) the
certificates or instruments evidencing the Purchasable Shares being purchased,
duly endorsed (or accompanied by duly executed stock powers) and otherwise in
good form for delivery, against payment of the purchase price by check of the
purchaser(s). In the event that, notwithstanding the foregoing, the Grantor
shall have failed to obtain the release of any pledge or other encumbrance on
any Purchasable Shares by the scheduled closing date, at the option of the
purchaser(s) the closing shall nevertheless occur on such scheduled closing
date, with the cash
EXHIBIT A TO CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 16
purchase price being reduced to the extent of all unpaid indebtedness for which
such Purchasable Shares are then pledged or encumbered.
(d) To assure the enforceability of the Company's rights
under this Section 4, each certificate or instrument representing Option Shares
subject to this Option Agreement shall bear a conspicuous legend in
substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN
OPTION TO REPURCHASE PROVIDED UNDER THE PROVISIONS OF THE
COMPANY'S 1998 STOCK OPTION PLAN FOR KEY EMPLOYEES AND A STOCK
OPTION AGREEMENT ENTERED INTO PURSUANT THERETO. A COPY OF SUCH
OPTION PLAN AND OPTION AGREEMENT ARE AVAILABLE UPON WRITTEN
REQUEST TO THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICES."
5. Registration.
The Company shall not in any event be obligated to file any
registration statement under the Securities Act or any applicable state
securities laws to permit exercise of the Option or to issue any Common Stock in
violation of the Securities Act or any applicable state securities laws. You (or
in the event of your death or, in the event a legal representative has been
appointed in connection with your Disability, the Person exercising the Option)
shall, as a condition to your right to exercise the Option, deliver to the
Company an agreement or certificate containing such representations, warranties
and covenants as the Company may deem necessary or appropriate to ensure that
the issuance of the Option Shares pursuant to such exercise is not required to
be registered under the Securities Act or any applicable state securities laws.
Certificates for the Option Shares, when issued, shall have
substantially the following legend, or statements of other applicable
restrictions, endorsed thereon, and may not be immediately transferable:
"THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS. THE SHARES MAY NOT BE OFFERED
FOR SALE, SOLD, PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF
UNTIL THE HOLDER HEREOF PROVIDES EVIDENCE SATISFACTORY TO THE
ISSUER (WHICH, IN THE DISCRETION OF THE ISSUER, MAY INCLUDE AN
OPINION OF COUNSEL SATISFACTORY TO THE ISSUER) THAT SUCH
OFFER, SALE, PLEDGE, TRANSFER OR OTHER DISPOSITION WILL NOT
VIOLATE APPLICABLE FEDERAL OR STATE LAWS."
EXHIBIT A TO CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 17
The foregoing legend may not be required for Option Shares
issued pursuant to an effective registration statement under the Securities Act
and in accordance with applicable state securities laws.
6. Miscellaneous.
This Option Agreement is subject to all the terms, conditions,
limitations and restrictions contained in the Plan. In the event of any conflict
or inconsistency between the terms hereof and the terms of the Plan, the terms
of the Plan shall be controlling. The Old Agreements (being amended and restated
in their entirety hereby) shall be of no further force or effect.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
EXHIBIT A TO CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 18
Please indicate your acceptance of all the terms and conditions of the
Option and the Plan by signing and returning a copy of this Option Agreement.
Very truly yours,
HOME INTERIORS & GIFTS, INC.
By: /s/ Donald J. Carter, Jr.
------------------------------
Name: Donald J. Carter, Jr.
Title: Chief Executive Officer
ACCEPTED:
/s/ Nora I. Serrano
- ------------------
Nora I. Serrano
Date: August 14, 2003
EXHIBIT A TO CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 19
EXHIBIT B
FORM OF 2002 NON-QUALIFIED STOCK OPTION AGREEMENT
THE SHARES ISSUABLE PURSUANT TO THIS AGREEMENT ARE SUBJECT TO AN OPTION
TO REPURCHASE PROVIDED UNDER THE PROVISIONS OF THE COMPANY'S 1998 STOCK
OPTION PLAN FOR KEY EMPLOYEES AND THIS AGREEMENT ENTERED INTO PURSUANT
THERETO. A COPY OF SUCH PLAN IS AVAILABLE UPON WRITTEN REQUEST TO THE
COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICES.
HOME INTERIORS & GIFTS, INC.
2002 STOCK OPTION PLAN
NON-QUALIFIED STOCK OPTION AGREEMENT
FOR KEY EMPLOYEES
August 15,2003
Ms. Nora I. Serrano
5648 Dunlap Ct.
Plano, TX 75093
Re: Grant of Stock Option
Dear Nora:
The Board of Directors of Home Interiors & Gifts, Inc., a Texas
corporation (the "Company") has adopted the Company's 2002 Stock Option Plan For
Key Employees (the "Plan") for certain individuals and key employees of the
Company and its Related Entities. A copy of the Plan is being furnished to you
concurrently with the execution of this Option Agreement and shall be deemed a
part of this Option Agreement as if fully set forth herein. Unless the context
otherwise requires, all capitalized terms used but no otherwise defined herein
shall have the meanings given such terms in the Plan.
The Company granted to you an option to purchase 500,000 shares of the
Common Stock of the Company under that certain Non-Qualified Stock Option
Agreement for Key Employees, dated September 27, 2002 (the "Old Agreement"). The
Old Agreement is hereby amended and restated in its entirety.
1. The Grant.
The Company granted to you, effective as of September 27, 2002
(the "Grant Date"), the right and option to purchase (the "Option"), in
accordance with the terms and conditions set forth herein and in the Plan, an
aggregate of 500,000 shares of Common Stock of
EXHIBIT B TO CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 20
the Company (the "Option Shares" at the Exercise Price (as hereinafter
defined)). As used herein, the term "Exercise Price" shall mean a price equal to
$19.42 per share, subject to the adjustment and limitations set forth herein and
in the Plan. The Option is intended to constitute a Non-Qualified Option within
the meaning of the Plan; however, you should consult with your tax advisor
concerning the proper reporting of any federal or state tax liability that may
arise as a result of the grant or exercise of the Option.
2. Exercise.
(a) For purposes of this Option Agreement, the Option
Shares shall be deemed "Nonvested Shares" unless and until they have become
"Vested Shares." The Option shall not be subject to any requirements in the Plan
for vesting or exercise relating to continuing employment with the Company.
Notwithstanding the foregoing sentence and anything to the contrary contained in
Section 6(c) of the Plan, however, and subject to the provisions of Section 2(c)
hereof, the Option shares shall become Vested Shares and shall become
exercisable only upon the achievement of the annual performance targets set
forth on Exhibit A attached hereto. Twenty percent (20%) of the Option Shares
shall become Vested Shares in accordance with the terms of the Plan upon the
achievement of each annual performance target; provided, however, that if for
any annual period the Equity Value Target for such period is not met, the number
of Option Shares that would have become Vested Shares upon the achievement in
any subsequent period of such Equity Value Target. In addition, in the event
that any future Equity Value Target is met in any annual period, the number of
Option Shares that would have become Vested Shares upon the achievement of such
future Equity Value Target in such subsequent annual period shall become Vested
Shares upon the achievement of such future Equity Value Target in the earlier
annual period regardless of whether the Equity Value Target in the earlier
annual period regardless of whether the Equity Value Target for such future
annual period is actually achieved in such future annual period.
(b) Determinations with respect to whether an applicable
annual Equity Value Target has been achieved (and the accompanying computations
of EBITDA and Net Consolidated Debt) shall be made by the Board of Directors or
the Option Committee within 30 days after approval by the Board of Directors (or
other appropriate committee thereof) of the Company's audited financial
statements for the applicable fiscal year, and shall be final and binding on the
Company and the Optionee absent manifest error. Until such determination has
been made, no Option Shares shall be deemed to be Vested Shares for any purposes
hereunder (including for purposes of determining whether any Options may be
exercised in connection with any termination of employment that occurred to the
date of determination).
(c) Upon the occurrence of a Change of Control,
irrespective of whether the annual performance targets set forth on Exhibit A
were achieved prior to the Change of Control Date (as defined in Exhibit A),
your Nonvested Shares shall become exercisable only as follows: Twenty Percent
(20%) of the Nonvested Shares shall become Vested Shares for each fiscal year in
which the Change of Control Equity Value (as defined in Exhibit A) equals or
exceeds the Equity Value Target for such fiscal year. In addition, in the event
that the Change of Control Equity Value exceeds an Equity Value Target for a
particular fiscal year but does not equal the Equity Value Target for the next
succeeding fiscal year, an additional twenty percent (20%) of your Unvested
Shares shall become Vested Shares. For example, if (i) a Change of Control
occurs during the fiscal year ended December 31, 2004, (ii) the Change of
Control Equity Value on the Change of Control
EXHIBIT B TO CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 21
Date was $750 million and (iii) none of your Option Shares had previously become
Vested Shares in accordance with Section 2(a) hereof, eighty percent (80%) of
your Option Shares would become Vested Shares and the remaining twenty percent
(20%) would constitute Unvested Shares.
(d) Subject to the relevant provisions and limitations
contained herein and in the Plan, you may exercise the Option to purchase all or
a portion of the applicable number of Vested Shares at any time prior to the
termination of the Option pursuant to this Option Agreement. In no event shall
you be entitled to exercise the Option for a fraction of a Vested Share.
(e) The unexercised portion of the Option, if any, will
automatically, and without notice, terminate and become null and void upon the
expiration of ten (10) years from the Grant Date.
(f) Any exercise by you of the Option shall be in writing
addressed to the Secretary of the Company at its principal place of business (a
copy of the form of exercise to be used will be available upon written request
to the Secretary), and shall be accompanied by a certified or bank check payable
to the order of the Company in the full amount of the Exercise Price of the
shares so purchased, or in such other manner as described in the Plan and
established by the Committee.
(g) Notwithstanding any provisions herein or in the Plan
to the contrary, in the event of a material breach by you of either that certain
Employment Agreement, dated as of November 1, 2001, as amended by that certain
Amendment to Employment Agreement, entered into as of December 12,2002, or that
certain Confidential Separation Agreement and Release, dated as of August 15,
2003, you shall immediately and automatically forfeit to the Company, for no
consideration, the Option and all Option Shares (regardless of whether they are
Vested Shares or Nonvested Shares).
3. Purchase Option.
(a) The Company shall have the Purchase Option on the
Option and the Option Shares set forth in clause (ii) of Section 9(a) of the
Plan (relating to a Change in Control); provided, however, that the Company
expressly disclaims the Purchase Option on the Option and the Option Shares set
forth in clause (i) of Section 9(a) of the Plan (relating to the termination of
your employment with the Company). If, in accordance with the immediately
preceding sentence, the Company shall exercise such Purchase Option, you (or
your executor or the administrator of your estate or the Person who acquired the
right to exercise the Option by bequest or inheritance in the event of your
death, or your legal representative in the event of your incapacity
(hereinafter, collectively with such optionee, the "Grantor")) shall sell to the
Company and/or its assignee(s), all or any portion (at the Company's option) of
the Option Shares and/or the Option held by the Grantor (such Option Shares and
Option collectively being referred to as the "Purchasable Shares").
(b) The Company shall give notice in writing to the
Grantor of the exercise of the Purchase Option within one (1) year from the date
the Purchase Option arises under the terms of the Plan. Such notice shall state
the number of Purchasable Shares to be purchased and the determination of the
Board of Directors of the Fair Market Value per share of such purchasable
EXHIBIT B TO CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 22
Shares. If no notice is given within the time limit specified above, the
Purchase Option shall terminate.
(c) The purchase price to be paid for the Purchasable
Shares purchased pursuant to the Purchase Option shall be, in the case of any
Option Shares, the Fair Market Value per share as of the date of notice of
exercise of the purchase Option times the number of shares being purchased, and
in the case of the Option, the Fair Market Value per share times the number of
Vested Shares subject to such Option which are being purchased, less the
applicable per share Exercise Price. The purchase price shall be paid in cash.
The closing of such purchase shall take place at the Company's principal
executive offices within ten (10) days after the purchase price has been
determined. At such closing, the Grantor shall deliver to the purchaser(s) the
certificates or instruments evidencing the Purchasable Shares being purchased,
duly endorsed (or accompanied by duly executed stock powers) and otherwise in
good form for delivery, against payment of the purchase price by check of the
purchase(s). In the event that, notwithstanding the foregoing, the Grantor shall
have failed to obtain the release of any pledge or other encumbrance on any
Purchasable Shares by the scheduled closing date, at the option of the
purchaser(s) the closing shall nevertheless occur on such scheduled closing
date, with the cash purchase price being reduced to the extent of all unpaid
indebtedness for which such Purchasable Shares are then pledged or encumbered.
(d) To assure the enforceability of the Company's rights
under this Section 3, each certificate or instrument representing Option Shares
subject to this Option Agreement shall bear a conspicuous legend in
substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN
OPTION TO REPURCHASE PROVIDED UNDER THE PROVISIONS OF THE
COMPANY'S 2002 STOCK OPTION PLAN FOR KEY EMPLOYEES AND A STOCK
OPTION AGREEMENT ENTERED INTO PURSUANT THERETO. A COPY OF SUCH
OPTION PLAN AND OPTION AGREEMENT ARE AVAILABLE UPON WRITTEN
REQUEST TO THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICES."
4. Registration.
The Company shall not in any event be obligated to file any
registration statement under the Securities Act or any applicable state
securities laws to permit exercise of the Option or to issue any Common Stock in
violation of the Securities Act or any applicable sate securities laws. You (or
in the event of your death or, in the event a legal representative has been
appointed in connection with your Disability, the Person exercising the Option)
shall, as a condition to your right to exercise the Option, deliver to the
Company an agreement or certificate containing such representations, warranties
and covenants as the Company may deem necessary or appropriate to ensure that
the issuance of the Option Shares pursuant to such exercise is not required to
be registered under the Securities Act or any applicable state securities laws.
EXHIBIT B TO CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 23
Certificates for the Option Shares, when issued, shall have
substantially the following legend, or statements of other applicable
restrictions, endorsed thereon, and may not be immediately transferable:
"THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS. THE SHARES MAY NOT BE OFFERED
FOR SALE, SOLD, PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF
UNTIL THE HOLDER HEREOF PROVIDES EVIDENCE SATISFACTORY TO THE
ISSUER (WHICH, IN THE DISCRETION of THE ISSUER, MAY INCLUDE AN
OPTION OF COUNSEL SATISFACTORY TO THE ISSUER) THAT SUCH OFFER,
SALE, PLEDGE, TRANSFER OR OTHER DISPOSITION WILL NOT VIOLATE
APPLICABLE FEDERAL OR STATE LAWS."
The foregoing legend may not be required for Option Shares
issued pursuant to an effective registration statement under the Securities Act
and in accordance with applicable state securities laws.
5. Miscellaneous.
This Option Agreement is subject to all the terms, conditions,
limitations and restrictions contained in the Plan. In the event of any conflict
or inconsistency between the terms hereof and the Plan, the Plan shall be
controlling. The Old Agreement (being amended and restated in its entirety
hereby) shall be of no further force or effect.
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EXHIBIT B TO CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 24
Please indicate your acceptance of all the terms and conditions of the
Option, and the Plan by signing and returning a copy of this Option Agreement.
Very truly yours,
HOME INTERIORS & GIFTS, INC.
By: /s/ Donald J. Carter, Jr.
--------------------------------
Name: Donald J. Carter, Jr.
Title: Chief Executive Officer
ACCEPTED:
/s/ Nora I. Serrano
- -------------------
Nora I. Serrano
Date: August 14, 2003
EXHIBIT B TO CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 25
Exhibit A
Vesting Schedule
PERCENT OF ORIGINAL
FISCAL YEAR ENDED OPTION SHARES EQUITY VALUE TARGET(1)
- ----------------- ------------------- ----------------------
December 31, 2002 20% $ 430 million
December 31, 2003 20% $ 555 million
December 31, 2004 20% $ 670 million
December 31, 2005 20% $ 885 million
December 31, 2006 20% $ 1,090 million
Definitions: The following definitions shall be used in calculating the Equity
Value Target.
"EBITDA" has the meaning given to such term in the Amended and Restated Credit
Agreement, dated June 30, 2001, among the Company, Bank of America, N.A., as
administrative agent, The Chase Manhattan Bank, as syndication agent, Citicorp,
USA, Inc. and Societe Generale, as co-agents, and the lenders from time to time
party thereto, as the same may be amended from time to time.
"EQUITY VALUE" means the product of EBITDA as of the end of the applicable
fiscal year times seven and one-half (7 1/2) less the average Net Consolidated
Debt outstanding at the end of such fiscal year. The calculation of Equity Value
shall be made by the Board of Directors or the Option Committee and shall be
final and binding on the Company and the Employee absent manifest error.
"INDEBTEDNESS" means, any indebtedness, whether or not contingent, in respect of
borrowed money determined in accordance with generally accepted accounting
principles.
"NET CONSOLIDATED DEBT" means the aggregate amount of Indebtedness of the
Company and its subsidiaries on a consolidated basis outstanding as of the end
of the applicable fiscal year less cash and cash equivalents of the Company and
its subsidiaries on a consolidated basis as of the end of the applicable fiscal
year.
/s/ Nora I. Serrano
- -------------------
Nora I. Serrano
Date: August 14, 2003
- ---------------
(1) The Employee acknowledges and agrees that the Committee has the right to
amend the Equity Value Target for any annual period to reflect changes in the
Company's business, including, without limitation, to reflect the acquisition or
divestiture of a Related Entity) or for such other reasons as it deems
appropriate.
EXHIBIT B TO CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 26