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EXHIBIT 10.1
FINANCIAL ADVISORY AGREEMENT
THIS FINANCIAL ADVISORY AGREEMENT (this "Agreement") is made and
entered into effective as of June 4, 1998 among Home Interiors & Gifts, Inc., a
Texas corporation (together with its successors, the "Company"), Dallas
Woodcraft, Inc., a Texas corporation (together with its successors,
"Woodcraft"), GIA, Inc., a Nebraska corporation (together with its successors,
"GIA"), Homco, Inc., a Texas corporation (together with its successors,
"Homco"), Homco Puerto Rico, Inc., a Delaware corporation (together with its
successors, "HPR"), Spring Valley Scents, Inc., a Texas corporation ("SVS"),
Homco de Mexico, S.A. de C.V., a Mexico corporation ("HDM" and, together with
the Company, Woodcraft, GIA, Homco, HPR and SVS, the "Clients"), and ▇▇▇▇▇,
Muse & Co. Partners, L.P., a Texas limited partnership (together with its
successors, "HMCo").
WHEREAS, pursuant to an Agreement and Plan of Merger, dated as of
April 13, 1998 (the "Merger Agreement"), between the Company and ▇▇▇▇▇▇▇
Investments, Inc., a Texas corporation ("Merger Sub"), Merger Sub is being
merged (the "Merger") with and into the Company, with the Company being the
surviving corporation;
WHEREAS, the Clients have requested that HMCo render, and HMCo has
rendered, financial advisory services to them in connection with the
negotiation of the Merger and the debt and equity financing transactions and
certain other transactions related thereto (collectively with the Merger, the
"Transaction"); and
WHEREAS, it is the intention of the board of directors of each Client
to retain HMCo to provide financial advisory and other services in areas where
HMCo has expertise and, accordingly, the Clients have requested that HMCo
render such financial advisory, investment banking, and other similar services
with respect to future proposals for a tender offer, acquisition, sale, merger,
exchange offer, recapitalization, restructuring, or other similar transaction
directly or indirectly involving any of the Clients or any of their respective
subsidiaries and any other person or entity (collectively, "Subsequent
Transactions") as the board of directors of the Company may from time to time
request;
NOW, THEREFORE, in consideration of the services rendered and to be
rendered by HMCo to the Clients, and to evidence the obligations of the Clients
to HMCo and the mutual
NOTICE IS HEREBY GIVEN THAT THIS AGREEMENT CONTAINS INDEMNIFICATION PROVISIONS
IN PARAGRAPH 5 THAT APPLY TO CLAIMS, LIABILITIES, LOSSES, DAMAGES OR EXPENSES
THAT HAVE RESULTED FROM OR ARE ALLEGED TO HAVE RESULTED FROM THE ACTIVE OR
PASSIVE OR THE SOLE, JOINT OR CONCURRENT ORDINARY NEGLIGENCE OR HMCO OR ANY
OTHER INDEMNIFIED PERSON IDENTIFIED THEREIN.
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covenants herein contained, the Clients hereby jointly and severally agree with
HMCo as follows:
1. Retention.
(a) The Clients hereby acknowledge that they have
retained HMCo, and HMCo acknowledges that it has acted, as financial advisor to
the Clients in connection with the Transaction.
(b) HMCo agrees that it shall provide financial advisory,
investment banking and other similar services in connection with any Subsequent
Transaction as may be requested from time to time by the board of directors of
the Company for the benefit of any Client. Each of the Clients acknowledges
and agrees that it will not retain any other person or entity to provide such
services in connection with any such Subsequent Transaction without the prior
written consent of HMCo.
2. Term. The term of this Agreement shall continue until the
date on which Hicks, Muse, ▇▇▇▇ & ▇▇▇▇▇ Incorporated ("HMTF") or its affiliated
successors and their respective affiliates (including, without limitation, any
equity fund sponsored by HMTF or its affiliated successors) shall cease to (i)
at any time prior to a Qualified IPO (as hereinafter defined), own
beneficially, directly or indirectly, at least 25% of the then outstanding
shares of Common Stock (as hereinafter defined) of the Company and be
contractually entitled to designate, or shall have otherwise designated, at
least one director to the board of directors of the Company or (ii) at any time
after a Qualified IPO, own beneficially, directly or indirectly, at least 10%
of the then outstanding shares of Common Stock of the Company and be
contractually entitled to designate, or shall have otherwise designated, at
least one director to the board of directors of the Company; provided, however,
that notwithstanding the foregoing, this Agreement shall terminate on the tenth
anniversary of the date hereof. As used herein, "Qualified IPO" means a firm
commitment underwritten public offering of common stock, par value $0.10 per
share ("Common Stock"), of the Company pursuant to a registration statement
under the Securities Act of 1933, as amended, where both (i) the proceeds to
the Company (prior to deducting any underwriters' discounts and commissions)
equal or exceed Twenty-Five Million Dollars ($25,000,000) and (ii) upon
consummation of such offering, the Common Stock is listed on the New York Stock
Exchange or authorized to be quoted and/or listed on the Nasdaq National
Market.
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3. Compensation.
(a) As compensation for HMCo's services as financial
advisor to the Clients in connection with the Transaction, the Clients hereby
irrevocably agree, jointly and severally, to pay to HMCo an aggregate cash fee
of $11,250,000, which will occur substantially simultaneously with the
execution of this Agreement. The parties hereto agree that the compensation
due pursuant to this Section 3(a) shall be allocated among the segments of the
financing for the Transaction in proportion to the dollar amount of each such
segment.
(b) In connection with any Subsequent Transaction
consummated during the term of this Agreement in which HMCo has rendered
financial advisory, investment banking or other similar services to the Clients
at the request of the board of directors of the Company for the benefit of any
Client, the applicable Client shall, and the other Clients shall cause such
Client to, pay to HMCo, at the closing of any such Subsequent Transaction, a
cash fee equal to 1.5% of the Transaction Value of such Subsequent Transaction.
As used herein, the term "Transaction Value" means the total value of the
Subsequent Transaction, including, without limitation, the aggregate amount of
the funds required to complete the Subsequent Transaction (excluding any fees
payable pursuant to this Section 3(b)), including, without limitation, the
amount of any indebtedness, preferred stock or similar items assumed (or
remaining outstanding).
4. Reimbursement of Expenses. In addition to the compensation to
be paid pursuant to Section 3 hereof, the Clients agree, jointly and severally,
to reimburse HMCo, promptly following demand therefor, together with invoices
or reasonably detailed descriptions thereof, for all reasonable disbursements
and out-of-pocket expenses (including, without limitation, reasonable fees and
disbursements of counsel) incurred by HMCo (i) as financial advisor to the
Clients in connection with the Transaction or (ii) in connection with the
performance by it of the services contemplated by Section 1(b) hereof.
5. Indemnification. The Clients jointly and severally shall
indemnify and hold harmless each of HMCo, its affiliates and their respective
directors, officers, controlling persons (within the meaning of Section 15 of
the Securities Act of 1933, as amended, or Section 20(a) of the Securities
Exchange Act of 1934, as amended), if any, agents and employees (HMCo, its
affiliates and such other specified persons being collectively referred to as
"Indemnified Persons" and individually as an "Indemnified Person") from and
against any and all claims, liabilities, losses, damages and expenses incurred
by an Indemnified Person (including, without limitation, those arising out of
an Indemnified Person's negligence and reasonable fees and disbursements of the
respective Indemnified Person's counsel) which (A) are related to or arise out
of (i) actions taken or omitted to be taken (including, without
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limitation, any untrue statements made or any statements omitted to be made) by
any of the Clients or (ii) actions taken or omitted to be taken by an
Indemnified Person with any Client's consent or in conformity with any Client's
instructions or any Client's actions or omissions or (B) are otherwise related
to or arise out of HMCo's engagement, and will reimburse each Indemnified
Person for all costs and expenses, including, without limitation, reasonable
fees and disbursements of any Indemnified Person's counsel, as they are
incurred, in connection with investigating, preparing for, defending or
appealing any action, formal or informal claim, investigation, inquiry or other
proceeding, whether or not in connection with pending or threatened litigation,
caused by or arising out of or in connection with HMCo's acting pursuant to
HMCo's engagement, whether or not any Indemnified Person is named as a party
thereto and whether or not any liability results therefrom. None of the
Clients will, however, be responsible for any claims, liabilities, losses,
damages or expenses pursuant to clause (B) of the preceding sentence that have
resulted primarily from HMCo's bad faith, gross negligence or willful
misconduct. The Clients also agree that neither HMCo nor any other Indemnified
Person shall have any liability to any Client for or in connection with such
engagement except for any such liability for claims, liabilities, losses,
damages or expenses incurred by any Client that have resulted primarily from
HMCo's bad faith, gross negligence or willful misconduct. The Clients further
agree that none of them will, without the prior written consent of HMCo, settle
or compromise or consent to the entry of any judgment in any pending or
threatened claim, action, suit or proceeding in respect of which
indemnification may be sought hereunder (whether or not any Indemnified Person
is an actual or potential party to such claim, action, suit or proceeding)
unless such settlement, compromise or consent includes an unconditional release
of HMCo and each other Indemnified Person hereunder from all liability arising
out of such claim, action, suit or proceeding. EACH CLIENT HEREBY ACKNOWLEDGES
THAT THE FOREGOING INDEMNITY SHALL BE APPLICABLE TO ALL CLAIMS, LIABILITIES,
LOSSES, DAMAGES OR EXPENSES THAT HAVE RESULTED FROM OR ARE ALLEGED TO HAVE
RESULTED FROM THE ACTIVE OR PASSIVE OR THE SOLE, JOINT OR CONCURRENT ORDINARY
NEGLIGENCE OF HMCO OR ANY OTHER INDEMNIFIED PERSON.
The foregoing right to indemnity shall be in addition to any rights
that HMCo and/or any other Indemnified Person may have at common law or
otherwise and shall remain in full force and effect following the completion or
any termination of the engagement. Each Client hereby consents to personal
jurisdiction and to service and venue in any court in which any claim which is
subject to this Agreement is brought against HMCo or any other Indemnified
Person.
It is understood that, in connection with HMCo's engagement, HMCo may
also be engaged to act for a Client or Clients in one or more additional
capacities, and that the terms
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of any such additional engagements may be embodied in one or more separate
written agreements. This indemnification shall apply to any such additional
engagement(s) (whether written or oral) and any modification of such additional
engagement(s) and shall remain in full force and effect following the
completion or termination of such additional engagement(s).
Each of the Clients further understands and agrees that if HMCo is
asked to furnish any Client a financial opinion letter or act for any Client in
any other formal capacity, such further action may be subject to a separate
agreement containing provisions and terms to be mutually agreed upon.
6. Confidential Information. In connection with the performance
of the services hereunder, HMCo agrees not to divulge any confidential
information, secret processes or trade secrets disclosed by any Client or any
of its subsidiaries to it solely in its capacity as a financial advisor, unless
such Client consents to the divulging thereof or such information, secret
processes or trade secrets are publicly available or otherwise available to
HMCo without restriction or breach of any confidentiality agreement or unless
required by any governmental authority or in response to any valid legal
process.
7. Governing Law. This Agreement shall be construed,
interpreted, and enforced in accordance with the laws of the State of Texas,
excluding any choice-of-law provisions thereof.
8. Assignment. This Agreement and all provisions contained
herein shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns; provided, however, neither
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned (other than with respect to the rights and obligations of HMCo,
which may be assigned to any one or more of its principals or affiliates) by
any of the parties without the prior written consent of the other parties.
9. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument, and the signature of any
party to any counterpart shall be deemed a signature to, and may be appended
to, any other counterpart.
10. Other Understandings. All discussions, understandings and
agreements heretofore made between any of the parties hereto with respect to
the subject matter hereof are merged in this Agreement, which alone fully and
completely expresses the agreement of the parties hereto.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
▇▇▇▇▇, MUSE & CO. PARTNERS, L.P.
By: HM PARTNERS INC.,
its General Partner
By:
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▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Managing Director and Principal, Executive
Vice President
HOME INTERIORS & GIFTS, INC.
By:
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Chief Executive Officer
DALLAS WOODCRAFT, INC.
By:
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Executive Vice President
GIA, INC.
By:
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Executive Vice President
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HOMCO, INC.
By:
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Executive Vice President
HOMCO PUERTO RICO, INC.
By:
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
President
SPRING VALLEY SCENTS, INC.
By:
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
President
HOMCO DE MEXICO, S.A. DE C.V.
By:
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
President