STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT") is entered into as of
the 31st day of March, 2004 by and among Home Interiors & Gifts, Inc., a Texas
corporation (the "COMPANY"), HI Cayman, L.P., a Cayman Islands exempted limited
partnership ("HI CAYMAN"), and HI Senior Debt Partners, L.P., a Texas limited
partnership ("HI SENIOR DEBT PARTNERS" and collectively with HI Cayman, the
"SELLERS").
RECITALS
WHEREAS, HI Cayman is the owner of 50,900 shares (the "HI CAYMAN
SHARES") of 12.5% Senior Convertible Preferred Stock of the Company, par value
$0.01 per share, as issued in accordance with that certain Securities Exchange
Agreement dated as of July 16, 2001 among the Company and the Sellers (the
"SECURITIES EXCHANGE AGREEMENT"), and HI Senior Debt Partners is the owner of
45,158.98 shares (the "HI SENIOR DEBT PARTNERS SHARES" and collectively with the
HI Cayman Shares, the "SENIOR PREFERRED STOCK") of 12.5% Senior Convertible
Preferred Stock of the Company, par value $0.01 per share, as issued in
accordance with the Securities Exchange Agreement;
WHEREAS, pursuant to the terms and conditions of this Agreement, each
Seller desires to sell to the Company, and the Company desires to repurchase
from such Seller, all shares of Senior Preferred Stock held by such Seller; and
WHEREAS, this Agreement is being entered into in connection and
contemporaneously with a refinancing by the Company of its existing credit
facility (the "REFINANCING");
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements, and conditions hereinafter
set forth, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Repurchase and Sale of Senior Preferred Stock.
(a) Sale of Shares. Upon the terms and subject to the conditions of
this Agreement, at the Closing (as hereinafter defined), (i) HI Cayman shall
sell and deliver to the Company, free and clear of any and all liens, pledges,
charges, restrictions, options, rights of first refusal, preemptive rights,
security interests, beneficial ownership interests of other parties, or other
encumbrances of any character whatsoever, whether written or oral (collectively,
"ENCUMBRANCES"), all right, title and interest in and to the HI Cayman Shares,
and the Company shall purchase such shares from HI Cayman and (ii) HI Senior
Debt Partners shall sell and deliver to the Company, free and clear of any and
all Encumbrances, all right, title and interest in and to the HI Senior Debt
Partners Shares, and the Company shall purchase such shares from HI Senior Debt
Partners.
(b) Consideration for the Senior Preferred Stock. At the Closing: (i)
the Company shall pay to HI Cayman $73,653,707.34 by wire transfer of
immediately available funds to the account or accounts designated by HI Cayman
in full consideration of the sale and delivery of the HI Cayman Shares to it
pursuant to Section 1(a) hereof and (ii) the Company shall pay to HI Senior Debt
Partners $65,346,292.66 by wire transfer of immediately available funds to the
account or accounts designated by HI Senior Debt Partners in full consideration
of the sale and delivery of the HI Senior Debt Partners Shares to it pursuant to
Section 1(a) hereof.
2. Closing.
(a) Time and Place of Closing. Unless this Agreement is terminated
pursuant to Section 7 hereof and subject to the satisfaction or waiver of all
conditions precedent set forth herein, the closing of the transactions
contemplated by this Agreement (the "CLOSING") shall take place on a date to be
agreed upon by the parties hereto at the offices of Haynes and Boone, LLP,
located at 901 Main Street, Suite 3100, Dallas, Texas 75202 (the date and time
on which the Closing occurs are referred to herein as the "CLOSING DATE").
(b) Deliveries by the Company at the Closing. At the Closing, the
Company shall deliver or cause to be delivered to each Seller the following:
(i) payment by wire transfer of immediately available funds to
the account or accounts designated by such Seller of the amount payable
to such Seller pursuant to Section 1(b) hereof; and
(ii) such other documents, instruments, and certificates
incidental to the transactions contemplated by this Agreement and
reasonably requested by such Seller, including, without limitation, the
Termination and Release Agreement (as defined in Section 9(c) of this
Agreement).
(c) Deliveries by the Sellers at the Closing. At the Closing, each
Seller shall deliver or cause to be delivered to the Company the following:
(i) the stock certificate(s) representing the shares of Senior
Preferred Stock to be sold by such Seller to the Company pursuant to
this Agreement, duly endorsed or accompanied by a duly executed stock
power and assignment as necessary to effectuate the transfer of such
shares to the Company as the Company shall request; and
(ii) such other documents, instruments, and certificates
incidental to the transactions contemplated by this Agreement and
reasonably requested by the Company, including, without limitation, the
Termination and Release Agreement.
3. Representations and Warranties of the Company. The Company hereby
represents and warrants to each Seller as follows:
(a) Organization, Standing and Authorization. The Company is duly
organized, validly existing, and in good standing under the laws of its
jurisdiction of organization. The Company has full corporate power and authority
to execute, deliver and perform its obligations under this Agreement and under
any other instrument and document delivered at the Closing pursuant to Section
2(b) hereof (collectively, the "COMPANY TRANSACTION DOCUMENTS"). The execution,
delivery, and performance by the Company of each of the Company Transaction
Documents have been duly and validly authorized by all necessary action
(corporate or otherwise) and proceedings on the part of the Company. This
Agreement has been, and each of the other Company Transaction Documents will be
at the Closing, duly and validly executed and delivered by the Company and,
assuming due execution and delivery by, and enforceability against, each Seller,
this Agreement constitutes, and each of the other Company Transaction Documents
will constitute upon delivery at the Closing, the valid and binding agreement of
the Company, enforceable against it in accordance with its terms, subject to
applicable bankruptcy, reorganization, moratorium, and similar laws affecting
creditors' rights and remedies generally and subject, as to enforceability, to
general principles of equity, including, without limitation, principles of
commercial reasonableness, good faith, and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity).
(b) Consents and Conflicts. Except for those that will have been
obtained at or prior to the Closing and that will be effective at the Closing,
no actions, consents, approvals or orders of, or filings or registrations with,
any governmental authorities or third parties are required in connection with
the execution, delivery, or performance by the Company of the Company
Transaction Documents. Neither the execution and delivery of the Company
Transaction Documents by the Company nor the performance by the Company of its
obligations thereunder will: (i) violate or conflict with any of the terms,
conditions, or provisions of the articles of incorporation or bylaws of the
Company currently in effect or in effect at the Closing; (ii) violate, result in
a breach of or constitute (with or without due notice or lapse of time or both)
a default (or give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions, or provisions of any
documents, agreements, or other instruments to which the Company is a party or
by which the Company is bound or to which any of the Company's assets are
subject; (iii) violate any applicable state, federal, foreign or local law,
statute, ordinance, or regulation (collectively, "LAW"); or (iv) violate any
judgment, writ, injunction, order, or ruling of any court or state, federal,
foreign or local governmental authority (collectively, "ORDER") binding on the
Company.
(c) No Broker. No broker, finder, or other similar agent has
represented the Company or acted for or on behalf of the Company in connection
with the transactions contemplated hereby in such a manner as to give rise to
any valid claim or demand against any Seller for a brokerage commission,
finder's fee, or other similar payment.
(d) Solvency. If the Refinancing and the transactions contemplated by
this Agreement (the "CONTEMPLATED TRANSACTIONS") are consummated as proposed,
immediately after and giving effect to the Refinancing and the Contemplated
Transactions on a pro forma basis, (i) the fair value and present fair saleable
value of the Company's assets would exceed the Company's stated liabilities and
identified contingent liabilities, (ii) the Company's financial forecasts
(including its cash flow analysis) for the period 2004 to 2008 indicate positive
cash flow for such period, including (and after giving effect to) the payment of
installments due under loans incurred in the Refinancing and the Contemplated
Transactions, as such installments are scheduled at the close of the Refinancing
and the Contemplated Transactions, and the satisfaction of the Company's stated
liabilities and identified contingent liabilities, (iii) the capital remaining
in the Company after the Refinancing and the Contemplated Transactions would not
be unreasonably small for the business in which the Company is engaged, as
management has indicated it is now conducted and is proposed to be conducted
following the consummation of the Refinancing and the Contemplated Transactions,
and (iv) the fair value and present fair saleable value of the Company's assets
would exceed the Company's stated liabilities and identified contingent
liabilities plus the total par value of the Company's capital stock by at least
the amount of the Refinancing.
4. Representations and Warranties of the Sellers. Each Seller hereby
represents and warrants, severally and not jointly with the other Seller, to the
Company as follows:
(a) Organization, Standing and Authorization. Such Seller is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has full power and authority to execute,
deliver and perform its obligations under this Agreement and under any other
instrument and document delivered by such Seller at the Closing pursuant to
Section 2(c) hereof (collectively, the "SELLER TRANSACTION DOCUMENTS"). The
execution, delivery, and performance by such Seller of each of the Seller
Transaction Documents have been duly and validly authorized by all necessary
action (partnership or otherwise) and proceedings on the part of such Seller.
This Agreement has been, and each of the other Seller Transaction Documents will
be at the Closing, duly and validly executed and delivered by such Seller and,
assuming due execution and delivery by, and enforceability against, the
Company, this Agreement constitutes, and each of the other Seller Transaction
Documents will constitute upon delivery at the Closing, the valid and binding
agreement of such Seller, enforceable against it in accordance with its terms,
subject to applicable bankruptcy, reorganization, moratorium, and similar laws
affecting creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity, including, without limitation,
principles of commercial reasonableness, good faith, and fair dealing
(regardless of whether enforcement is sought in a proceeding at law or in
equity).
(b) Consents and Conflicts. No actions, consents, approvals or orders
of, or filings or registrations with, any governmental authorities or third
parties are required in connection with the execution, delivery, or performance
by such Seller of the Seller Transaction Documents. Neither the execution and
delivery of the Seller Transaction Documents by such Seller nor the performance
by such Seller of its obligations thereunder will: (i) violate or conflict with
any of the terms, conditions, or provisions of the organizational and other
governing charter documents of such Seller currently in effect or in effect at
the Closing; (ii) violate, result in a breach of or constitute (with or without
due notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) under any of the terms, conditions,
or provisions of any documents, agreements, or other instruments to which such
Seller is a party or by which such Seller is bound or to which any of such
Seller's assets are subject; (iii) violate any Law; (iv) violate any Order
binding on such Seller; or (v) result in the creation or imposition of any
Encumbrance upon the Senior Preferred Stock to be sold under this Agreement.
(c) No Broker. No broker, finder, or other similar agent has
represented such Seller or acted for or on behalf of such Seller in connection
with the transactions contemplated hereby in such a manner as to give rise to
any valid claim or demand against the Company for a brokerage commission,
finder's fee, or other similar payment.
(d) Title to Senior Preferred Stock. Such Seller owns, and shall own as
of the Closing Date, in the case of HI Cayman, all of the HI Cayman Shares, and,
in the case of HI Senior Debt Partners, all of the HI Senior Debt Partners
Shares, in each case, lawfully, beneficially and of record, free and clear of
any and all Encumbrances, and that, upon the sale and delivery of the shares of
Senior Preferred Stock sold hereunder by such Seller in accordance with the
terms hereof at the Closing, the Company will acquire good and valid title to
the shares of Senior Preferred Stock sold hereunder by such Seller, free and
clear of any and all Encumbrances (other than any restrictions arising under the
Certificate of Designation, Preferences and Relative, Participating, Optional
and Other Special Rights of Preferred Stock and Qualifications, Limitations and
Restrictions Thereof and Encumbrances that the Company may expressly allow or
create). No Seller is a party to, or is bound by, any voting trust or other
voting agreement with respect to any shares of Senior Preferred Stock or other
securities of the Company or any agreement, understanding or arrangement
relating to the registration, issuance, sale, purchase, acquisition, redemption,
transfer or other disposition of any shares of Senior Preferred Stock or other
securities of the Company or any other matter(s) concerning the Company.
(e) Securities Law Matters.
(i) With respect to this Agreement and the transactions
contemplated by this Agreement, no representation or warranty has been
made by the Company or any affiliate, agent, or representative of the
Company concerning the business of the Company other than the
representations and warranties set forth herein and such Seller is
relying only upon the information and the representations and
warranties set forth herein. Such Seller has such knowledge and
experience in financial and business matters that such Seller is
capable of evaluating the risks and merits relating to the transactions
contemplated by this Agreement;
(ii) Such Seller has been provided, to its satisfaction, all
information that such Seller has requested to the extent that such
Seller considers necessary or advisable in connection with the
consummation of this Agreement and the transactions contemplated by
this Agreement; and
(iii) Such Seller has been provided, to its satisfaction, the
opportunity to ask questions and to receive answers from the Company
concerning the business of the Company and the transactions
contemplated by this Agreement and all additional information (to the
extent the Company possessed such information or could acquire such
information without unreasonable effort or expense) necessary to verify
the accuracy of any and all information provided to such Seller or to
which such Seller had access.
5. Covenants. From and after the Closing Date, each Seller covenants,
severally and not jointly with the other Seller, that (i) such Seller shall not
have any right, title or interest in or to any shares of Senior Preferred Stock
or any accrued, declared, or other dividends under the Senior Preferred Stock
and (ii) this Agreement and the transactions contemplated by this Agreement
shall be deemed to be and constitute a redemption of the shares of Senior
Preferred Stock sold hereunder by such Seller.
6. Conditions to Closing.
(a) The Company. The obligation of the Company to consummate the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Closing of the following conditions:
(i) Each Seller shall have complied in all material respects
with all of its agreements and covenants contained herein and required
to be complied with at or prior to the Closing, and all of the
representations and warranties of the Sellers contained herein shall be
true and correct in all material respects (except to the extent any
representation or warranty is already qualified by materiality, in
which case it shall be true and correct without further qualification)
on and as of the date of this Agreement and the Closing Date (except
for representations or warranties that speak as of a specific date,
which shall be true and correct in all material respects, or true and
correct, as the case may be, as of such date) as if made on such date;
(ii) Each Seller shall have delivered to the Company a
certificate, dated the Closing Date, stating that all of the
representations and warranties of such Seller contained herein were and
are true and correct in all material respects (except to the extent any
representation or warranty is already qualified by materiality, in
which case it shall be true and correct without further qualification)
on and as of the date of this Agreement and the Closing Date,
respectively, (except for representations or warranties that speak as
of a specific date, which shall be true and correct in all material
respects, or true and correct, as the case may be, as of such date) as
if made on such date and that no breach of any covenant of such Seller
contained in this Agreement has occurred or would result from the
Closing hereunder;
(iii) There shall not be in effect on the Closing Date any
Order restraining, enjoining or otherwise preventing the consummation
of the transactions contemplated by this Agreement;
(iv) The Company shall have received the deliveries of the
Sellers as set forth in Section 2(c) of this Agreement;
(v) The Company shall have obtained financing (A) upon terms
and in amounts satisfactory to the Company, in the sole and absolute
discretion of the Company, and (B)
sufficient to refinance its existing credit facility and consummate all
of the transactions contemplated by this Agreement;
(vi) The Company shall have received the written opinion(s)
(dated as of the date this Agreement and the distributions and other
transactions contemplated by this Agreement are authorized by the
Special Committee (the "SPECIAL COMMITTEE") of the Board of Directors
of the Company (the "BOARD") (established by the Board at the meeting
of the Board on February 9, 2004) and the Board (including, without
limitation, a majority of the disinterested members of the Board)),
which shall not have been withdrawn or modified, from Houlihan Lokey
Howard & Zukin Financial Advisors, Inc., to the effect that, as of such
date(s), (A) this Agreement and the transactions contemplated by this
Agreement are fair, from a financial point of view, to the Company and
the shareholders of the Company (other than Hicks, Muse, Tate & Furst
and its affiliates and certain members of the Carter family and their
affiliates), (B) the Company would not be insolvent after giving effect
to the distribution(s) contemplated by this Agreement, and (C) the
distribution(s) contemplated by this Agreement shall not exceed the
surplus of the Company;
(vii) There shall have been duly and validly obtained all
consents and approvals required in connection with this Agreement and
the transactions contemplated by this Agreement and all such consents
and approvals shall be in full force and effect as of the Closing Date;
(viii) The Sellers shall have delivered to the Company at the
Closing the opinion of Vinson & Elkins L.L.P., counsel to the Sellers,
dated as of the Closing Date and addressed to the Company substantially
in the form attached hereto as Exhibit A; and
(ix) The Sellers shall have delivered to the Company at the
Closing the opinion of Hunter & Hunter, counsel to the Sellers, dated
as of the Closing Date and addressed to the Company substantially in
the form attached hereto as Exhibit B.
(b) Sellers. The obligation of each of the Sellers to consummate the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Closing of the following conditions:
(i) The Company shall have complied in all material respects
with all of its agreements and covenants contained herein and required
to be complied with at or prior to the Closing, and all of the
representations and warranties of the Company shall be true and correct
in all material respects (except to the extent any representation or
warranty is already qualified by materiality, in which case it shall be
true and correct without further qualification) on and as of the date
of this Agreement and the Closing Date (except for representations or
warranties that speak as of a specific date, which shall be true and
correct in all material respects, or true and correct, as the case may
be, as of such date) as if made on such date;
(ii) The Company shall have delivered to the Sellers a
certificate, dated the Closing Date, stating that all of the
representations and warranties of the Company contained herein were and
are true and correct in all material respects (except to the extent any
representation or warranty is already qualified by materiality, in
which case it shall be true and correct without further qualification)
on and as of the date of this Agreement and the Closing Date,
respectively, (except for representations or warranties that speak as
of a specific date, which shall be true and correct in all material
respects, or true and correct, as the case may be, as of such date) as
if made on such date and that no breach of any covenant of the Company
contained in this Agreement has occurred or would result from the
Closing hereunder;
(iii) There shall not be in effect on the Closing Date any
Order restraining, enjoining or otherwise preventing the consummation
of the transactions contemplated by this Agreement; and
(iv) The Sellers shall have received the deliveries of the
Company as set forth in Section 2(b) of this Agreement.
7. Termination. This Agreement may be terminated and the transactions
herein contemplated abandoned at any time (a) by any party hereto if the Closing
has not occurred on or before the 120th calendar day after the date this
Agreement and the distributions and other transactions contemplated by this
Agreement are authorized by the Special Committee and the Board (including,
without limitation, a majority of the disinterested members of the Board) or, if
this Agreement and the distributions and other transactions contemplated by this
Agreement involve the incurrence by the Company of any indebtedness or deferred
payment obligation, on or before the 120th calendar day after the date(s) the
indebtedness or obligation is incurred or (b) by the mutual written agreement of
the Company and the Sellers. If this Agreement is terminated pursuant to this
Section 7, this Agreement shall be null and void and of no further force and
effect (except for the provisions of Section 9(c), 9(d), 9(j), 9(k) and 9(l)
hereof, which shall survive any such termination).
8. Indemnification.
(a) Indemnification Obligations.
(i) Company Indemnification Obligation. The Company shall
indemnify, hold harmless, and promptly reimburse each Seller and its
affiliates and their respective officers, directors, employees, agents
and representatives (collectively "REPRESENTATIVES"), from, against,
and for, and to pay to such indemnified parties the amount of, any
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, attorneys' fees, expenses and
disbursements of any kind ("LOSSES") which may be imposed upon,
incurred by or asserted against such indemnified parties in any manner
relating to or arising out of (1) any breach of any representation,
warranty, agreement, covenant, or obligation by the Company contained
herein or in any certificate or document delivered pursuant hereto or
(2) the transactions contemplated by this Agreement (collectively, the
"COMPANY INDEMNIFICATION OBLIGATION").
(ii) Seller Indemnification Obligation. Each Seller, severally
and not jointly with the other Seller, shall indemnify, hold harmless,
and promptly reimburse the Company and its affiliates and their
respective Representatives, from, against, and for, and to pay to such
indemnified parties the amount of, any Losses which may be imposed
upon, incurred by or asserted against such indemnified parties in any
manner relating to or arising out of any breach of any representation,
warranty, agreement, covenant, or obligation by such Seller contained
herein or in any certificate or document delivered pursuant hereto
(collectively, the "SELLER INDEMNIFICATION OBLIGATION").
(b) Indemnification Procedure. All claims for indemnification by one or
more parties entitled to be indemnified hereunder (each, an "INDEMNITEE" and
collectively, the "INDEMNITEE") by one or more parties hereto (each, an
"INDEMNITOR" and collectively, the "INDEMNITOR"), shall be asserted and resolved
as follows:
(i) In the event that any action, suit, claim, proceeding,
investigation, audit, examination, demand, assessment, fine, judgment,
settlement, compromise, interest, penalty, cost, remedial action and
other expense (including, without limitation, reasonable attorneys'
fees and
expenses) (collectively, "ACTIONS") for which the Indemnitee may claim
indemnity under this Agreement is asserted against or sought to be
collected from the Indemnitee by a third party, the Indemnitee shall as
promptly as practicable notify the Indemnitor following the receipt by
the Indemnitee of notice, written or otherwise, of such Action,
specifying the nature of such Action and the amount or the estimated
amount thereof to the extent then feasible (which estimate shall not be
conclusive of the final amount of such Action) (the "CLAIM NOTICE");
provided, however, that the failure so to notify the Indemnitor will
not relieve the Indemnitor from any liability it may have to the
Indemnitee under this Agreement unless, and only to the extent that,
such failure so to notify materially prejudices the Indemnitor or
results in the loss of substantive rights or defenses;
(ii) The Indemnitor shall have thirty calendar days from the
date on which the Claim Notice is duly given (the "NOTICE PERIOD") to
notify the Indemnitee (A) whether or not it disputes the liability of
the Indemnitor to the Indemnitee hereunder with respect to such claim
or demand, and (B) whether or not the Indemnitor desires, at its sole
cost and expense, to defend the Indemnitee against such Action. If the
Indemnitor notifies the Indemnitee within the Notice Period that it
disputes its liability under the Company Indemnification Obligation or
Seller Indemnification, as applicable, to the Indemnitee with respect
to a particular Action, and such dispute is determined by a final and
nonappealable Order to be a wrongful denial of such liability, the
Indemnitor shall be liable to the Indemnitee for the amount of any and
all Losses arising from the Indemnitor's failure to satisfy such
Indemnification Obligation with respect to such Action;
(iii) In the event the Indemnitor notifies (the "INDEMNITOR
NOTICE") the Indemnitee within the Notice Period that it desires to
defend the Indemnitee against such Action, then except as hereinafter
provided the Indemnitor shall defend, at its sole cost and expense, the
Indemnitee by appropriate activities or proceedings, shall use its
commercially reasonable efforts to settle or prosecute or otherwise
contest, at Indemnitor's election (subject to the terms of this
Agreement), such activities or proceedings to a final conclusion in
such a manner as to attempt to avoid the Indemnitee becoming subject to
any injunctive or other equitable Order for relief or to liability for
any other matter, and shall control the conduct of such defense;
provided, however, that if the Indemnitor fails to take reasonable
steps necessary to defend the Indemnitee diligently against such Action
after providing such Indemnitor Notice, within ten calendar days after
receiving written notice from the Indemnitee stating that the
Indemnitee believes that the Indemnitor has failed to take such steps,
the Indemnitee may assume its own defense and the Indemnitor shall be
liable for all Losses arising out of such Action; provided, further,
that the Indemnitor shall not be entitled to assume the defense of any
such Action pursuant to this Section unless it has accepted and assumed
in writing the obligation to indemnify the Indemnitee with respect to
Losses arising from or relating to such Action, and that the Indemnitor
shall not in any Action in which Losses include any obligation other
than, or in addition to, the payment of money for which the Indemnitor
has assumed the obligation, without the prior written consent of the
Indemnitee, which consent shall not be unreasonably withheld or
delayed, consent to the entry of any judgment against the Indemnitee or
enter into any settlement or compromise which does not include, as an
unconditional term thereof, the giving by all claimants and plaintiffs
to the Indemnitee of a release, in form and substance reasonably
satisfactory to the Indemnitee, from all liability for which the
Indemnitor is not liable pursuant to the terms of this Agreement in
respect of any Action. If the defendants in any such Action include
both the Indemnitor and the Indemnitee and the Indemnitee shall have
reasonably concluded that there may be legal defenses or rights
available to the Indemnitee which are different from, in actual or
potential conflict with, or additional to those available to the
Indemnitor, the Indemnitee shall have the right to select one law firm
to act at the Indemnitor's expense as separate counsel, on behalf of
the Indemnitee. In addition, if the Indemnitee desires to participate
in, but not control, any other defense or
settlement, it may do so at its sole cost and expense. So long as the
Indemnitor is defending in good faith any such Action, the Indemnitee
shall not settle such Action without the consent of the Indemnitor,
which shall not be unreasonably withheld or delayed; provided, however,
that the Indemnitee reserves the right to settle any Action at the
Indemnitee's sole cost and expense without the consent of the
Indemnitor and the Indemnitor shall have no further liability or
obligation with respect to any such Action so settled.
(iv) Prior to the Indemnitor's settling any Action, the
defense of which it has assumed control, in which the settlement
includes any obligation of the Indemnitee other than, or in addition
to, the payment of money for which the Indemnitor has assumed the
obligation, the Indemnitor shall obtain the Indemnitee's prior
approval, confirmed in writing in accordance with the notice provisions
hereof, which approval shall not be unreasonably withheld or delayed.
If such settlement consists of a bona fide offer and the Indemnitee
notifies the Indemnitor of its disapproval of such settlement, the
Indemnitee shall thereupon become liable, from and after the date of
its disapproval, for the amount of any award, settlement, costs,
expenses (including, without limitation, reasonable attorneys' fees and
court costs) or other Losses in excess of the proposed settlement
amount and shall have the right to elect to control the defense of such
Action at its sole cost and expense.
(v) In the event the Indemnitee should have a claim for
indemnification against the Indemnitor hereunder which does not involve
an Action being asserted against or sought to be collected from the
Indemnitee by a third party, the Indemnitee shall promptly send a Claim
Notice with respect to such claim to the Indemnitor; provided, however,
that the failure so to notify the Indemnitor will not relieve the
Indemnitor from any liability it may have to the Indemnitee under this
Agreement unless, and only to the extent that, such failure so to
notify materially prejudices the Indemnitor or results in the loss of
substantive rights or defenses. If the Indemnitor does not notify the
Indemnitee within the Notice Period that it disputes such claim, the
Indemnitor shall be liable for the amount of any Losses related
thereto.
(c) Survival. All representations, warranties, agreements, and
covenants of the parties made in and obligations under this Agreement shall
survive for two years following the Closing Date; provided, however, that (i)
the representations and warranties contained in Section 4(d) and the related
indemnification obligations of the Sellers set forth in Section 8(a) with
respect to the representations and warranties contained in Section 4(d) shall
survive indefinitely and (ii) the indemnification obligations set forth in
Section 8(a)(i)(2) shall survive until 30 days after the expiration of all
statute of limitations applicable to any claim or proceeding with respect to
which a claim for indemnification may be brought pursuant to Section 8(a)(i)(2),
provided that if any claim for indemnification under Section 8(a)(i)(2) is made
before the expiration of the survival of such indemnification obligation then
such obligation will survive after such survival period until the resolution of
such claim by final, non-applicable judgment or settlement.
(d) Limitation on Indemnification. Notwithstanding anything to the
contrary contained in this Agreement, the Company shall not be liable for the
Company Indemnification Obligation in an aggregate amount in excess of the
aggregate payments made by the Company to the Sellers pursuant to this
Agreement. Notwithstanding anything to the contrary contained in this Agreement,
neither Seller shall be liable (i) pursuant to such Seller's Indemnification
Obligation in an aggregate amount in excess of the aggregate payments made by
the Company to such Seller pursuant to this Agreement or (ii) for any Seller
Indemnification Obligation of the other Seller. Except as expressly set forth
herein, the right to indemnification from or against or reimbursement for or
payment of Losses, or any other remedy based on any representation, warranty,
agreement, covenant, or obligation shall not be affected by any investigation
conducted, or any knowledge acquired (or capable of being acquired), at any
time, whether
before or after the execution and delivery of this Agreement or the Closing
Date, with respect to the accuracy or inaccuracy of or compliance with, any such
representation, warranty, agreement, covenant, or obligation. Except as
expressly set forth herein, the waiver of any condition based on the accuracy of
any representation or warranty, or on the performance of or compliance with any
agreement, covenant, or obligation, shall not affect the right to
indemnification, reimbursement for or payment of Losses, or any other remedy
based on any such representation, warranty, agreement, covenant, or obligation.
9. Miscellaneous.
(a) Amendment. This Agreement may be supplemented, amended, or waived,
in whole or in part, only by a written instrument executed by each of the
parties hereto.
(b) Successors and Assigns. Neither this Agreement nor any right or
obligation hereunder may be assigned in whole or in part by any party without
the written consent of the other parties to this Agreement. Subject to the
foregoing provisions of this Section 9(b), this Agreement shall benefit and bind
the parties hereto and their respective heirs, executors, administrators, legal
representatives, successors, and permitted assigns. All references herein to
"Company", "Seller", or "party" shall include the respective heirs, executors,
administrators, legal representatives, successors, and permitted assigns
thereof. Nothing expressed or referred to in this Agreement shall be construed
to give any person other than the parties to this Agreement any legal or
equitable right, remedy, or claim under or with respect to this Agreement or any
provision of this Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to this
Agreement and the successors, heirs, personal representatives, and permitted
assigns of the parties hereto.
(c) Entire Agreement; Termination and Release. Subject to the following
sentence, this Agreement (together with the Termination and Release Agreement)
sets forth the entire agreement and understanding of the parties hereto with
respect to the subject matter hereof and supersedes, terminates, and replaces
any and all prior agreements and understandings, written or oral, with respect
to such subject matter, including, without limitation, the Securities Exchange
Agreement (except as otherwise provided in the Termination and Release
Agreement). At Closing, the Company and the Sellers will execute and deliver a
Termination and Release Agreement substantially in the form attached hereto as
Exhibit C (the "TERMINATION AND RELEASE AGREEMENT").
(d) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to conflict of
laws principles.
(e) Captions, Schedules, and Exhibits. The captions, headings, and
arrangements used in this Agreement are for convenience only and do not in any
way affect, limit, amplify, or modify the terms or conditions hereof. All
pronouns used herein shall be deemed to refer to the masculine, feminine, or
neuter gender as the identity of the applicable person may require, and words
using the singular or plural number shall be deemed to include respectively the
plural or singular number as applicable. Unless otherwise specified, all
references in this Agreement to "Sections" shall refer to provisions of this
Agreement and all references in this Agreement to "Exhibits" shall refer to
exhibits to this Agreement. All exhibits attached hereto are made a part hereof
and incorporated herein by reference for all purposes.
(f) Severability. If any provision of this Agreement, or the
application of such provision to any person or circumstance, shall be held
invalid under the applicable law of any jurisdiction, the remainder of this
Agreement or the application of such provision to other persons or circumstances
or in other jurisdictions shall not be affected thereby. Also, if any provision
of this Agreement is held to be invalid or unenforceable under any applicable
law, then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such law. Any
provision hereof that may be held invalid or unenforceable under any applicable
law shall not affect the validity or enforceability of any other provision
hereof.
(g) Further Assurances. Each of the parties hereto shall cooperate with
the others and proceed, as promptly as is reasonably practicable, to seek to
obtain all consents and approvals necessary to consummate the sale by the
Sellers of the Senior Preferred Stock pursuant to this Agreement. In addition,
from time to time after the Closing, each of the Company and the Sellers shall,
at the request of the other but without further consideration, execute and
deliver such other certificates, statements, and documents, and take such other
action as such other party may reasonably request, in order to more effectively
consummate the transactions contemplated hereby.
(h) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
(i) Notices. Any notice, request, consent, or other communication
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given or delivered to any party: (i) when received by such party if
delivered by hand; (ii) within one business day after being sent by reputable
overnight delivery service; (iii) upon receipt of written confirmation if
delivered by facsimile; or (iv) within five business days after being mailed by
first-class mail, postage prepaid, and in each case addressed to the party to
whom such notice, request, consent, or other communication is directed at its
address set forth below:
If to the Company:
Home Interiors & Gifts, Inc.
1649 Frankford Road West
Carrollton, Texas 75007
Attention: Kenneth J. Cichocki
Facsimile: 972-695-1022
Phone: 972-695-1091
With a copy (which shall not constitute notice) to:
Weil, Gotshal & Manges LLP
200 Crescent Court, Suite 300
Dallas, Texas 75201
Attention: Jeffrey B. Hitt
Facsimile: 214-746-7777
Phone: 214-746-7702
If to the Special Committee:
Special Committee of the Board of Directors of Home Interiors
& Gifts, Inc.
c/o ClubCorp, Inc.
3030 LBJ Freeway
Suite 700
Dallas, Texas 75234
Attention: Robert H. Dedman, Jr. and Gretchen Minyard Williams
Facsimile: 972-888-7788
Phone: 972-888-7323
With a copy (which shall not constitute notice) to:
Haynes and Boone, LLP
901 Main Street
Suite 3100
Dallas, Texas 75202-3789
Attention: Michael M. Boone and Greg R. Samuel
Facsimile: 214-200-0369
Phone: 214-651-5552
If to HI Cayman:
HI Cayman, L.P.
200 Crescent Court
Suite 1600
Dallas, Texas 75201
Attention: Joseph V. Colonnetta
Facsimile: 214-720-7888
Phone: 214-740-7300
With a copy (which shall not constitute notice) to:
Vinson & Elkins L.L.P.
3700 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201-2975
Attention: Rodney L. Moore
Facsimile: 214-999-7781
Phone: 214-220-7781
If to HI Senior Debt Partners:
HI Senior Debt Partners, L.P.
200 Crescent Court
Suite 1600
Dallas, Texas 75201
Attention: Joseph V. Colonnetta
Facsimile: 214-720-7888
Phone: 214-740-7300
With a copy (which shall not constitute notice) to:
Vinson & Elkins L.L.P.
3700 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201-2975
Attention: Rodney L. Moore
Facsimile: 214-999-7781
Phone: 214-220-7781
(j) Publicity. Except to the extent required by law, none of the
parties hereto shall, without the prior written consent of the other parties
hereto, directly or indirectly, make any public comment, statement, or
communication with respect to, or otherwise disclose or permit the disclosure of
the existence of discussions regarding, a possible transaction among the parties
hereto or any of the terms, conditions, or other aspects of the transactions
proposed in this Agreement; provided, however, that each party hereto may
communicate with, and disclose information to, the directors, officers,
partners, employees, representatives, and potential financing sources of such
party that need to know such information for purposes of this Agreement (it
being understood and agreed that such directors, officers, employees,
representatives, and potential financing sources shall be informed by such party
of the confidential nature of such information and shall be requested by such
party to treat such information confidentially).
(k) Fees and Expenses. Except as otherwise expressly provided in this
Agreement, if the transactions contemplated by this Agreement are consummated,
the Company shall bear and pay, on the Closing Date or as soon as commercially
practicable thereafter, any and all of the reasonable expenses of each party to
this Agreement incurred in connection with the negotiation, preparation,
execution, delivery, and performance of this Agreement and the transactions
contemplated by this Agreement, including, without limitation, any and all
reasonable fees and expenses of any agent, representative, attorney, accountant,
and printer of such party; provided, however, that, notwithstanding anything in
this Agreement to the contrary, the Company shall not be obligated to bear or
pay any fees or expenses of Vinson & Elkins L.L.P. in excess of $35,000 in the
aggregate or any fees or expenses of Hunter & Hunter in excess of $10,000 in the
aggregate. In the event of any termination of this Agreement, the obligation of
the Company to pay the expenses of such party shall be subject to any right of
the Company arising from a breach of this Agreement by any other party.
Notwithstanding anything to the contrary in this Section 9(k), (i) the
prevailing party in any dispute involving any proceeding shall be entitled to
recovery of any and all fees and expenses of such party, including, without,
limitation, any and all reasonable fees and expenses of any attorney of such
party, incurred in connection with such proceeding and (ii) in the event this
Agreement is terminated or the Closing Date otherwise does not occur other than
as result of (A) any breach by any Seller of any representations or warranties
of such Seller contained herein or the failure of any Seller to perform its
covenants and obligations contained in this Agreement or (B) the failure of any
condition set forth (1) in Section 6(a)(ii), (iii), or (iv) to have been
satisfied or (2) in Section 6(a)(vii) to have been satisfied to the extent
required to be obtained from any party other than the Company, the Board or the
Special Committee, in each case other than as a result of any breach by the
Company of its representations, warranties or covenants contained in this
Agreement, the Company shall pay any and all reasonable expenses of Sellers
incurred in connection with the negotiation, preparation, execution, delivery
and performance of Sellers' obligations under this Agreement and the
transactions contemplated by this Agreement, including without limitation any
and all reasonable attorneys fees and expenses..
(l) No Seller Affiliate Liability. Except with respect to the several
and not joint liability of the Sellers with respect to any breach of a
representation or warranty contained in Section 4 hereof or any agreement,
covenant, or obligation contained in Section 8 hereof, no Seller Affiliate (as
defined below) shall have any liability or obligation of any nature whatsoever
in connection with any Seller's obligations under this Agreement, the other
Seller Transaction Documents or the transactions contemplated herein or therein,
and the Company hereby waives and releases all claims of any such liability or
obligation, it being understood and agreed that no Seller Affiliate shall be
liable for or in respect of each Seller's obligations under this Agreement or
under the Seller Transaction Documents. For the purposes of this paragraph, a
"SELLER AFFILIATE" shall mean, with respect to each Seller: (i) the general
partner, each limited partner and any other person or entity that is or becomes
a partner in such Seller; (ii) any direct or indirect holder of any equity
interest or securities in any of the persons or entities described in clause (i)
above (whether limited or general partners, members, shareholders or otherwise);
(iii) any Affiliate (as defined below) of any of the persons or entities
described in clause (i) above; or (iv) any director, officer,
employee, representative or agent of any of the persons or entities described in
clause (i), (ii) or (iii) above. For the purposes of this paragraph, an
"AFFILIATE" shall mean, with respect to any person or entity, any other person
or entity directly or indirectly controlling, controlled by, or under direct or
indirect common control with, such first person or entity. For the purposes of
this paragraph, "CONTROL," when used with respect to any entity, means the power
to direct the management or policies of such entity, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and, when used with respect to any natural person, means the power to direct the
decisions of such person, directly or indirectly, whether through family
relationships or otherwise; and the terms "CONTROLLING" and "CONTROLLED" have
meanings correlative to the foregoing.
(m) Waiver. Neither the failure to exercise, nor any delay by any party
in exercising, any right, power, or privilege under this Agreement or the
documents referred to in this Agreement shall operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege shall preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (i) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one (1) party, in whole or in part, by a waiver or renunciation of the claim
or right unless in writing signed by the other parties, (ii) no waiver that may
be given by a party shall be applicable except in the specific instance for
which it is given, and (iii) no notice to or demand on one (1) party shall be
deemed to be a waiver of any obligation of such party or of the right of the
party giving such notice or demand to take further action without notice or
demand as provided in this Agreement or any other documents contemplated by this
Agreement.
(n) Time of the Essence. With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.
SIGNATURE PAGE TO FOLLOW.
IN WITNESS WHEREOF, the undersigned have executed this Agreement
effective as of the date first set forth above.
HOME INTERIORS & GIFTS, INC.
By: /s/ Michael D. Lohner
---------------------------------------
Name: Michael D. Lohner
Title: President and Chief Executive Officer
HI CAYMAN, L.P.
By: HI CAYMAN GP, LTD.
Its general partner
By: /s/ David W. Knickel
---------------------------------------
Name: David W. Knickel
Title: Vice President, Treasurer and Secretary
HI SENIOR DEBT PARTNERS, L.P.
By: HI SENIOR DEBT PARTNERS GP, LLC
Its general partner
By: /s/ David W. Knickel
---------------------------------------
Name: David W. Knickel
Title: Vice President, Treasurer and Secretary
EXHIBIT A
FORM OF OPINION OF VINSON & ELKINS L.L.P.
[ATTACHED]
[Vinson & Elkins L.L.P. letterhead]
March 31, 2004
Home Interiors & Gifts, Inc.
1649 Frankford Road West
Carrollton, Texas 75007
Ladies and Gentlemen:
We have acted as special counsel to HI Senior Debt Partners, L.P., a
Texas limited partnership (the "Partnership"), and HI Cayman, L.P., a Cayman
Islands exempted limited partnership ("HI Cayman"), in connection with the sale
by the Partnership and HI Cayman to Home Interiors & Gifts, Inc., a Delaware
corporation ("Home Interiors"), of 45,158.98 and 50,900 shares of 12.5% Senior
Convertible Preferred Stock of Home Interiors, respectively, pursuant to that
certain Stock Purchase Agreement, dated as of March 31, 2004 (the "Purchase
Agreement"), by and among the Partnership, HI Cayman and Home Interiors. This
opinion is being rendered pursuant to Section 6(a)(viii) of the Purchase
Agreement. Each capitalized term used herein, and not otherwise defined herein,
and defined in the Purchase Agreement has the meaning set forth in the Purchase
Agreement.
In rendering the opinions set forth below, we have reviewed (a) the
Purchase Agreement, (b) a copy of the Certificate of Limited Partnership of the
Partnership, filed by the Partnership with the office of the Secretary of State
of the State of Texas on February 20, 2001 (the "Certificate of Limited
Partnership"), (c) a copy of the Second Amended and Restated Limited Partnership
Agreement of the Partnership dated as of July 16, 2001 (the "Partnership
Agreement"), (d) a copy of the Limited Liability Company Regulations of HI
Senior Debt Partners GP, LLC, a Texas limited liability company and the sole
general partner of the Partnership, dated as of February 14, 2001, (e) a copy of
the Written Consent of the General Partner of the Partnership dated as of March
31, 2004, and (f) the agreements and instruments listed on Exhibit A attached
hereto which have been certified to us by the Partnership as being the only
material agreements of the Partnership (items (a)-(f), collectively, referred to
herein as the "Reviewed Documents"). We have limited our review to the Reviewed
Documents with your acknowledgement and consent and in reliance on the
Certificate of the General Partner of the Partnership dated as of March 31,
2004, a copy of which has been provided to you. As to any facts material to our
opinions, we have made no independent investigation or verification of such
facts and have relied, to the extent that we deem such reliance proper, on
certificates of public officials and officers or other representatives of the
Partnership, and on the representations and warranties set forth in the Purchase
Agreement.
In rendering the opinions expressed below, we have assumed that (a) all
signatures on all documents reviewed by us are genuine, (b) all documents
submitted to us as originals are true and complete, (c) all documents submitted
to us as copies are true and complete copies of the originals thereof, (d) each
natural person signing any document reviewed by us had the legal capacity to do
so, (e) each person (other than the representatives signing on behalf of the
Partnership) signing any document reviewed by us in a representative capacity
had authority to sign in such capacity, (f) all formalities and requirements of
the laws of any relevant jurisdiction (other than compliance by the Partnership
with federal law and the laws of the State of Texas and the State of New York),
and of any regulatory authority therein, applicable to the execution, delivery,
performance and enforceability of the Purchase Agreement, have been or will be
duly complied with, and (g) the Purchase Agreement has been duly authorized,
executed and delivered by each party thereto (other than the Partnership) and
constitutes a valid and legally binding obligation of each such party,
enforceable against each such party in accordance with its terms and conditions.
Based upon the foregoing, and subject to the assumptions,
qualifications, exceptions and limitations set forth herein, it is our opinion
that:
1. The Partnership is a limited partnership validly existing and in
good standing under the laws of the State of Texas.
2. The Partnership has the requisite power and authority to execute and
deliver the Purchase Agreement and to perform its obligations thereunder. The
execution and delivery of the Purchase Agreement by the Partnership and the
performance by the Partnership of its obligations thereunder have been duly
authorized by all necessary action on the part of the Partnership.
3. The Purchase Agreement has been duly executed by the Partnership and
constitutes the valid and binding obligation of the Partnership and HI Cayman,
enforceable against the Partnership and HI Cayman in accordance with its terms
and conditions, except that the enforcement thereof may be limited by (a)
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws now or hereafter in effect relating to
creditors' rights and remedies generally and (b) general principles of equity
(regardless of whether enforceability is considered in a proceeding at law or in
equity), (c) standards of commercial reasonableness, good faith and fair
dealing, (d) the effect of judicial decisions that may permit the introduction
of extrinsic evidence to supplement the terms of the Purchase Agreement or to
aid in the interpretation of the Purchase Agreement, and (e) public policy.
4. Based solely on our review of the Reviewed Documents, no consents or
approvals are required to be obtained from any third party by the Partnership in
connection with the execution and delivery by the Partnership of the Purchase
Agreement or the performance by the Partnership of its obligations thereunder.
The execution and delivery by the Partnership of the Purchase Agreement do not,
and the performance by the Partnership of its obligations thereunder will not
(a) violate or conflict with any of the terms, conditions, or provisions of the
Certificate of Limited Partnership or the Partnership Agreement, (b) violate,
result in a breach of or constitute (with or without due notice or lapse of time
or both) a default (or give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions, or provisions of any of the
Reviewed Documents, (c) violate any Applicable Law, or (d) violate any Order
known to us to be binding on the Partnership.
The foregoing opinions are subject to the following assumptions,
qualifications, exceptions and limitations:
a. In rendering the opinions set forth in paragraph 1 above
with respect to the existence and good standing of the Partnership, we have
relied solely on the certificates of authorities of the State of Texas as of a
date we deem sufficiently recent that we received in response to our request for
confirmation of the existence and good standing of the Partnership.
b. We express no opinion with respect to the validity or
enforceability of the following provisions to the extent that they are contained
in the Purchase Agreement:
i. provisions releasing, exculpating or exempting a
party from, or requiring indemnification of a party for, liability for its own
negligence or other action or inaction to the extent that the same are
inconsistent with public policy;
ii. provisions inconsistent with public policy;
iii. provisions concerning or affecting venue or
jurisdiction;
iv. provisions relating to severability or other
adjustments;
v. provisions providing that decisions by a person
are conclusive or may be made in its sole discretion; and
vi. provisions purporting to establish evidentiary
standards for suits or proceedings.
c. For purposes of this opinion letter, the term "Applicable
Laws" means those laws of the State of Texas, the State of New York and the
federal laws of the United States of America or regulations thereunder, which in
our experience are normally applicable to transactions of the type provided in
the Purchase Agreement. Furthermore, the term "Applicable Laws" does not
include, and we do not express any opinion with regard to (i) any Texas or
federal law, rule or regulation relating to (A) pollution or protection of the
environment, (B) zoning, land use, building or construction, (C) labor and
employee rights and benefits, including ERISA, or (D) the regulation of
utilities, (ii) tax laws, rules and regulations or (iii) state securities laws.
d. We have made no examination of, and express no opinion with
respect to, any financial, accounting or similar covenants or provisions
contained in the Purchase Agreement or other documents we have reviewed in
connection with rendering the opinions expressed herein.
e. For purposes of the opinion in paragraph 3 with respect to
HI Cayman, we have assumed that HI Cayman has taken all action under the laws of
the Cayman Islands and its organizational documents necessary for it to legally
execute and bind itself under the Purchase Agreement and there are no laws of
the Cayman Islands or regulations thereunder which prohibit or restrict the
enforceability of the Purchase Agreement on HI Cayman or that otherwise prohibit
or restrict HI Cayman from performing its obligations under the Purchase
Agreement.
When an opinion is given "to our knowledge," or with reference to
matters of which "we are aware" or which are "known to us," or with another
similar qualification, we have not
undertaken any independent examination of facts or the records of any court,
tribunal or other body, but have based our opinion in sole reliance upon the
representations and warranties set forth in the Purchase Agreement, certificates
of officers and other representatives of the Partnership, and the actual
knowledge or awareness of the individual lawyers in the firm who have
participated directly in the specific transactions to which such opinion
relates, provided that such qualifications of actual knowledge or awareness are
not intended to imply that we in fact have actual knowledge or awareness of the
subject matter to which such terms apply. You are advised that our engagement by
the Partnership has been limited to specific matters about which we have been
consulted; consequently, there are matters of a legal nature involving the
Partnership about which we have not advised and/or represented the Partnership.
The opinions expressed above are limited solely to the laws of the
State of Texas, the laws of the State of New York and the federal laws of the
United States of America, and we do not express any opinions as to the laws of
any other jurisdiction. No opinion is given herein as to the choice of law or
forum or internal substantive rules of law that any tribunal or arbitrator may
apply to the transactions referred to herein.
We express no opinion as to any matter other than as expressly set
forth above, and no opinion on any other matter may be inferred or implied
herefrom. The opinions expressed herein are given as of the date hereof, and we
undertake no, and hereby disclaim any, obligation to advise you of any change in
any matter set forth herein.
The opinions expressed herein are rendered to you solely in connection
with the transactions contemplated by the Purchase Agreement and are not to be
further circulated, quoted, relied on or otherwise referred to in connection
with any transaction other than those contemplated by the Purchase Agreement, or
by any person other than you without our prior written consent.
Very truly yours,
EXECUTION VERSION
EXHIBIT A
MATERIAL AGREEMENTS OF THE PARTNERSHIP
1. HI Senior Debt Partners, L.P. Second Amended and Restated Limited Partnership
Agreement dated as of July 16, 2001.
2. Securities Exchange Agreement dated as of the 16th day of July, 2001 by and
among Home Interiors & Gifts, Inc., a Texas corporation, HI Cayman, L.P., a
Cayman Islands exempted limited partnership, and HI Senior Debt Partners,
L.P., a Texas limited partnership.
3. Registration Rights Agreement dated as of the 30th day of August, 2001 by and
among Home Interiors & Gifts, Inc., a Texas corporation, HI Cayman, L.P., a
Cayman Islands exempted limited partnership, and HI Senior Debt Partners,
L.P., a Texas limited partnership.
4. Promissory Notes, dated July 16, 2001, issued by HI Senior Debt Partners,
L.P. to each of the following lenders:
a) HI Senior Debt Partners GP, LLC in the principal sum of $37.62
b) HMTF Equity Fund IV (1999), L.P. in the principal sum of
$29,067,333.57
c) HMTF Private Equity Fund IV (1999), L.P. in the principal sum of
$205,930.89
d) HM4-SBS (1999) Coinvestors, L.P. in the principal sum of $714,746.34
e) HM4-EQ (1999) Coinvestors, L.P. in the principal sum of $475,109.91
f) Hicks, Muse PG - IV (1999), C.V. in the principal sum of
$1,547,501.67
g) Personal Way Transportation, L.L.C. in the principal sum of
$5,648,940.00, transferred and assigned to Donald J. Carter,
pursuant to an Assignment of Note entered into by and between
Personal Way Transportation, L.L.C. and Donald J. Carter effective
as of December 30, 2002.
5. Acceptance and Adoption of the Provisions of the Second Amended and Restated
Limited Partnership Agreement of HI Senior Debt Partners, L.P. entered into
by Donald J. Carter and HI Senior Debt Partners GP, LLC dated effective as of
December 30, 2002.
EXHIBIT B
FORM OF OPINION OF HUNTER & HUNTER
[ATTACHED]
[HUNTER & HUNTER LETTERHEAD]
31 March 2004
Dear Sirs
HI CAYMAN, L.P.
We refer to the sale by HI Cayman, L.P. ("Partnership"), an exempted limited
partnership established under the laws of the Cayman Islands, of 50,900 shares
of 12.5% Senior Convertible Preferred Stock of Home Interiors & Gifts, Inc.
("Company") to the Company.
We have examined the following:-
(1) a final draft Execution Version of a Stock Purchase Agreement dated as
of 30 March, 2004 ("Document") to be made between the Company, the
Partnership and HI Senior Debt Partners, L.P.;
(2) a copy of the Certificate of Registration and Registration Statement of
the Partnership as issued by or registered with the Registrar of
Exempted Limited Partnerships in the Cayman Islands with all amendments
and a copy of the Second Amended and Restated Limited Partnership
Agreement in respect of the Partnership ("Partnership Agreement") dated
as of 16 July, 2001;
(3) a copy of the Certificate of Incorporation and Memorandum and Articles
of Association of HI Cayman, GP Ltd., the general partner of the
partnership, ("General Partner") as issued by or registered with the
Registrar of Companies in the Cayman Islands;
(4) a certified copy (by a Director of the General Partner) of the
Unanimous Written Resolutions of the General Partner of the Partnership
passed on 31 March, 2004 and of
Unanimous Written Resolutions of the sole Director of the General
Partner passed on 26 October, 2000; and
(5) a Certificate of Good Standing dated 25 March, 2004 in respect of the
Partnership issued by the Registrar of Exempted Limited Partnerships in
the Cayman Islands and a Certificate of Good Standing dated 26 March,
2004 in respect of the General Partner issued by the Registrar of
Companies of the Cayman Islands.
In giving this opinion, we have relied upon the accuracy of the Certificate of a
Director of the General Partner dated 31 March, 2004 without further
verification. We have assumed without independent verification:
(a) the genuineness of all signatures, authenticity of all documents
submitted to us as originals and the conformity with original documents
of all documents submitted to us by telefax or as copies or conformed
copies;
(b) the Document is, or will be, legal, valid, binding and enforceable
against all relevant parties in accordance with its terms under the
laws of the State of New York (by which it is expressly governed) and
all other relevant laws (other than the laws of the Cayman Islands) and
the choice of the laws of the State of New York as the governing law of
the Document has been made in good faith and is valid and binding under
the laws of the State of New York and all other relevant laws (other
than the laws of the Cayman Islands);
(c) the power, authority and legal right of all parties (other than the
General Partner and the Partnership) under all relevant laws and
regulations (other than the laws of the Cayman Islands) to enter into,
execute and perform their respective obligations under the Document and
that the Document has been, or, as the case may be, will be duly
authorised, executed and delivered by or on behalf of all relevant
parties (other than General Partner and the Partnership); and
(d) the Document (of which we have seen only a draft) will be duly
completed, executed and delivered by the General Partner of the
Partnership substantially in the form reviewed by us.
On the basis of the foregoing and subject to the qualifications below, we are of
the opinion that:-
1. The Partnership is duly formed and validly existing in good standing as
an exempted limited partnership under the laws of the Cayman Islands
and has full power to enter into and perform its obligations under the
Document and to carry on its business as contemplated in the Document.
2. The Partnership has taken all necessary action to authorise the
execution, delivery and performance of the Document and the
transactions contemplated thereby.
3. Neither the execution nor delivery of the Document nor the transactions
contemplated therein nor compliance with the terms and provisions
thereof will (a) contravene any provision of any law, statute, decree,
rule or regulation of the Cayman Islands or any Cayman Islands
judgement, decree or permit to which the Partnership is subject or (b)
violate any provisions of the Memorandum and Articles of Association of
the General Partner or (c) violate any provisions of the Partnership
Agreement.
4. The Document, when executed by the General Partner of the Partnership
and delivered on behalf of the Partnership, will have been duly
executed by or on behalf of the Partnership and constitute legal, valid
and binding obligations of the Partnership enforceable in accordance
with its terms.
5. No consents, authorisations, licences or approvals of or registration
with or declaration to any governmental or public bodies or authorities
or courts in the Cayman Islands are required in connection with the
entry into, execution, delivery and performance by the Partnership of,
or the validity, enforceability or admissibility in evidence of, the
Document.
6. It is not necessary to ensure the legality, validity, enforceability or
admissibility in evidence of the Document that it or any other
instrument relating thereto be notarised, filed, recorded, registered
or enrolled in any court, public office, register or elsewhere in the
Cayman Islands.
7. The obligations of the Partnership under the Document are direct,
general and unconditional obligations of the Partnership and rank at
least pari passu with all other present or future unsecured and
unsubordinated indebtedness of the Partnership.
8. There are no taxes or other governmental charges payable under the laws
of the Cayman Islands or to any governmental authority of or in the
Cayman Islands in respect of any amount payable under the Document.
9. Under Cayman Islands law there is no requirement for any of the parties
to the Document to make any deduction from or any withholding of any
part of any payment under any of the Document. Subject to the
qualification below concerning stamp duty, there are no stamp or
registration or similar taxes or charges payable in the Cayman Islands
in respect of the Document or the enforcement thereof in the Courts of
the Cayman Islands.
10. The Courts of the Cayman Islands will observe and give effect, upon
proof of the relevant provisions of the laws of the State of New York,
to the choice of the laws of the State of New York as the governing law
of the Document. The submission by the Partnership to the jurisdiction
of the courts of the State of New York with respect to the Document is
valid and binding upon it.
11. A final and conclusive judgement in personam of the courts of the State
of New York having competent jurisdiction for a debt or definite sum of
money (not being a sum payable in respect of taxes or other charges of
a like nature or in respect of a fine or other
similar penalty) and obtained without fraud or without breaching the
principles of natural justice in the Cayman Islands or in contravention
of Cayman Islands public policy in respect of the Document would be
recognised and enforced by the Courts of the Cayman Islands by
originating action on such judgement.
12. Under Cayman Islands law, neither the Partnership nor any of its
properties or assets are immune on the grounds of sovereignty or
otherwise from institution of legal proceedings or the obtaining or
execution of a judgement in the Cayman Islands.
13. It is not necessary under the laws of the Cayman Islands that the
Company be authorised, licensed or qualified to carry on business in
the Cayman Islands for its entry into, execution, delivery, performance
or enforcement of the Document.
14. The Company will not be deemed to be resident, domiciled, carrying on
business or subject to taxation in the Cayman Islands by reason only of
its entry into, execution, delivery, performance or enforcement of, or
receipt of any payment under, the Document.
The opinions expressed above concerning, in particular, enforceability of the
Document are, to the extent that Cayman Islands law might apply, subject to the
following qualifications:-
(a) The enforcement of the Document may be limited by applicable
bankruptcy, insolvency, reorganisation, moratorium, limitation of
actions, fraudulent dispositions or other similar laws relating to the
enforcement of creditors rights generally and claims may become subject
to the defence of set off or to counter claims.
(b) Obligations or liabilities of the Partnership otherwise than for the
payment of money may not be enforceable in a Cayman Islands court by
way of such equitable remedies as injunction or specific performance
which remedies are in the discretion of such court.
(c) Any provisions requiring any party to pay interest on overdue amounts
in excess of the rate (if any) payable on such amounts before they
become overdue or to pay sums on breach of any agreement other than
such as represent a genuine pre-estimate of loss may be unenforceable
if held by a Cayman Islands court to be a penalty.
(d) If any party to the Document is vested with a discretion or may
determine a matter in its opinion, the courts of the Cayman Islands may
require that such discretion is exercised reasonably or that such
opinion is based on reasonable grounds.
(e) Any provision in the Document that certain calculations or certificates
will be conclusive and binding will not be effective if such
calculations or certificates are fraudulent or erroneous on their face
and will not necessarily prevent judicial enquiry.
(f) If any of the provisions of the Document are held to be illegal,
invalid or unenforceable, the severance of such provisions from the
remaining provisions of such Document will be subject to the exercise
of the discretion of a Cayman Islands court.
(g) The Grand Court Rules, 1995 of the Cayman Islands expressly contemplate
that judgements may be granted by the Grand Court of the Cayman Islands
in currencies other than Cayman Islands dollars or United States
dollars. Such Rules provide for various specific rates of interest
payable upon judgement debts according to the currency of the
judgement. In the event the Partnership is placed into liquidation, the
Grand Court is likely to require that all debts are converted (at the
official exchange rate at the date of conversion) into and paid in a
common currency which is likely to be Cayman Islands or United States
dollars.
(h) The courts of the Cayman Islands are likely to award costs and
disbursements in litigation in accordance with the relevant contractual
provisions in the Document. There is some uncertainty, however, with
regard to the recoverability of post-judgement costs which, if
recoverable at all, are likely to be limited to an amount determined
upon taxation or assessment of those costs pursuant to the Grand Court
Rules 1995. In the absence of contractual provisions as to costs, the
reasonable costs (as determined by taxation as aforesaid) of the
successful party will normally be recoverable, subject to the limits
laid down in guidelines made under such Rules as to the type and amount
of fees and expenses that may be recovered. Such orders are in the
discretion of the court and may be made to reflect particular
circumstances of the case and the conduct of the parties.
(i) To be enforceable in the courts of the Cayman Islands, stamp duty will
be chargeable on agreements such as the Document, in the sum of
CI$2.00. Stamp duty is payable on execution in order to avoid penalties
if such document is to be admitted in evidence in a Cayman Islands
court.
(j) We express no opinion as to any provision in the Document that it may
only be varied by written instrument or agreement.
(k) We express no opinion as to the effectiveness of the date of the
Document which is dated as of or with effect from a date prior to that
on which it is authorised, executed and delivered by all parties
thereto.
(l) An exempted limited partnership under Cayman Islands law is not a
separate legal entity and can only act by its general partner.
We are practising in the Cayman Islands and do not purport to be experts on the
laws of any other jurisdiction and we therefore express no opinion as to the
laws of any jurisdiction other than Cayman Islands law. This opinion is also
based upon the laws of the Cayman Islands in effect at the date hereof and is
given only as to the circumstances existing on the date hereof and known to us.
Except as specifically stated herein, we make no comment with regard to any
representations or warranties which may be made by the Partnership in the
document referred to above or otherwise.
This opinion is addressed to you and is solely for your benefit. It may not be
relied upon by any other person without our prior written consent.
Yours faithfully
HUNTER & HUNTER
per:___________________________
Bruce S. D. Putterill
EXHIBIT C
FORM OF TERMINATION AND RELEASE AGREEMENT