Document:

exv10w1

 

EXHIBIT 10.1

EMPLOYMENT AND NON-COMPETITION AGREEMENT

     THIS EMPLOYMENT AND NON-COMPETITION AGREEMENT (this “Agreement”) is made effective as of June
20, 2005, between HOME INTERIORS & GIFTS, INC., a Texas corporation (together with its successors
and assigns, the “Company”), and KEITH S. KRZEMINSKI (the “Executive”).

     WHEREAS, the Company’s desires to employ the Executive and the Executive desires to be
employed by the Company on the terms and conditions set forth herein;

     NOW, THEREFORE, IT IS AGREED AS FOLLOWS:

     1. Employment Period. The Company agrees to employ the Executive, and the Executive
agrees to be employed by the Company, in accordance with the terms and conditions of this
Agreement, for the period commencing as of the date of this Agreement and continuing until
December 31, 2006 (the “Employment Period”); provided, however, that such Employment Period (i)
shall be extended for successive terms of one (1) year unless either party advises the other in
writing, at least one hundred twenty (120) days prior to the end of the initial term, or any
annual extension thereof, that it will not agree to extend this Agreement, and (ii) may be
terminated in accordance with Section 3 and Section 4, below.

     2. Terms of Employment.

     (a) Position and Duties.

     (i) During the Employment Period, the Executive shall have the title of Senior
Vice President of Finance and Chief Financial Officer of the Company and shall
report to the Chief Executive Officer of the Company. The Executive shall have such
powers and duties as may from time to time be assigned or delegated to him by
appropriate officers of the Company, or, in the absence of such assignment or
delegation, shall have such powers and duties as are normally associated with and
inherent in such position.

     (ii) During the Employment Period, excluding any periods of vacation and sick
leave to which the Executive is entitled, the Executive agrees to devote such time
as shall be necessary (which shall not be less than forty (40) hours during a
regular work week), up to and including substantially all of his business time, to
the business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive’s
reasonable best efforts to perform faithfully, effectively and efficiently such
responsibilities. The Executive will use his reasonable best efforts to promote the
success of the Company’s business, and will cooperate fully with the Board of
Directors and executive management of the Company. Notwithstanding the foregoing,
nothing herein prohibits Executive from serving on corporate, civic or charitable
board or committee, or from delivering lectures and fulfilling speaking engagements,
or managing personal investments; provided

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that such activities do not significantly interfere with Executive’s
obligations hereunder.

     (b) Compensation.

     (i) Base Salary. During the Employment Period, the Executive shall
receive, at such intervals and in accordance with such Company policies as may be
in effect from time to time, an annual salary (pro rata for any partial year) equal
to Three Hundred Twenty Five Thousand and No/100 Dollars ($325,000.00), payable in
equal installments in accordance with the Company’s normal practices, but no less
often than monthly (the “Annual Base Salary”), which Annual Base Salary shall be
subject to increase, as determined in the sole discretion of the Board of Directors
of the Company.

     (ii) Key Employee Annual Bonus. The Executive shall be eligible to
participate in the Company’s Key Employee Bonus Plan applicable to senior
executives of the Company (the “Annual Bonus”) on a pro rata basis for the fiscal
year of the Company ending December 31, 2005 and thereafter during the term of this
Agreement, as may be extended from year to year, as approved by the Board of
Directors of the Company in good faith, and subject to such other criteria as may
be recommended by management and established by the Board of Directors of the
Company from time to time. The Annual Bonus (or pro rata portion thereof) shall be
in an amount up to fifty percent (50%) of Executive’s Annual Base Salary, paid in
cash promptly following delivery to the Board of Directors of the Company of
audited financial statements of the Company for the fiscal year for which the
Annual Bonus (or pro rated portion) is earned or awarded, unless electively
deferred by the Executive pursuant to any deferral programs or arrangements that
the Company may make available to the Executive. For the fiscal year of the
Company ending December 31, 2005 only, the Executive shall receive a minimum Annual
Bonus of $50,000.00 in order to offset any bonuses sacrificed by the Executive to
become an employee of the Company.

     (iii) Discretionary Annual Bonus. At the end of each fiscal year of
the Company beginning December 31, 2005 and thereafter during the term of this
Agreement, as may be extended from year to year, the Executive will be eligible to
receive an additional discretionary bonus (pro rata for any partial year) of up to
thirty percent (30%) of Executive’s Annual Base Salary (the “Discretionary Bonus”).
The amount of the Discretionary Bonus, if any, shall be determined by the
Company’s Chief Executive Officer in such person’s sole and absolute discretion and
shall be based upon the achievement by the Executive of certain objective and/or
subjective goals to be established by the Executive and the Company’s Chief
Executive Officer. For the fiscal year of the Company ending December 31, 2005
only, when determining the amount, if any, of the Discretionary Bonus, such
Discretionary Bonus shall be based upon the Executive’s Annual Base Salary, as if
he were an employee of the Company as of January 1, 2005.

     (c) Incentive, Savings and Retirement Plans. During the term of the
Executive’s employment, the Executive shall be entitled to participate in all incentive,

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savings, and retirement plans, practices, policies and programs applicable generally
to management-level employees of the Company (“Investment Plans”) as determined by and at
the discretion of the Board of Directors of the Company.

     (d) Welfare Benefit Plans. During the term of the Executive’s employment, the
Executive and/or the Executive’s family, as the case may be, shall be eligible for
participation in and shall receive all benefits under welfare benefit plans, practices,
policies and programs (“Welfare Plans”) provided by the Company (including, without
limitation, medical, prescription, dental, disability, employee life, group life,
accidental death and travel accident insurance plans and programs) to the extent offered
and applicable generally to other management-level employees of the Company and to the
extent the Executive is eligible under the terms of the Welfare Plans. In addition, during
the term of Executive’s employment, the Company shall (A) pay all medical, dental and
vision insurance costs for the Executive and the Executive’s family, including all premiums
and co-payments, and (B) increase the Executive’s and family members’ annual maximum dental
covered expenses from $1,000 to $5,000. Until such time as the Executive is eligible to
participate in the Welfare Plans, the Company shall reimburse the Executive for all of his
out of pocket costs related to any COBRA coverage maintained for the Executive and the
Executive’s family.

     (e) Expenses. During the term of the Executive’s employment, the Executive
shall be entitled to receive prompt reimbursement for all reasonable employment expenses
incurred by the Executive at the request of, or on behalf of, the Company and in performance
of the Executive’s duties under this Agreement, and in accordance with the policies,
practices and procedures of the Company. The Executive must file expense reports with
respect to such expenses in accordance with the Company’s normal policies.

     (f) Vacation and Holidays. During the term of the Executive’s employment, the
Executive shall be entitled to paid vacation of four (4) weeks per year and paid holidays
in accordance with the plans, policies, programs and practices of the Company for its
employees. Such vacation shall be taken at such time or times reasonably acceptable to the
Company.

     (g) Automobile. During the term of the Executive’s employment, the Company
shall lease a vehicle for the Executive with such monthly lease, fuel, maintenance and
insurance costs as are reasonable and customary for other similarly situated executives of
the Company. Upon termination of the Executive’s employment for any reason, the Executive
shall be entitled to purchase such vehicle at the then-current trade-in value as determined
by the National Auto Research Black Book published by Hearst Holdings.

     (h) Physical Exam. During the term of the Executive’s employment, the Company
shall reimburse the Executive for all costs associated with Executive’s physical exam at
the Cooper Clinic or a similar facility; provided, that the Executive shall only be
reimbursed for the costs of one such exam during each calendar year.

     (i) Supplemental Insurance. The Company shall procure supplemental life,
accidental death and dismemberment insurance in the amount of $1,000,000.00 for the
Executive; provided, however, that the Company shall only pay annual
premiums on such policies for so long as the Executive is employed by the Company.

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     3. Termination of Employment.

     (a) Death or Disability. The Executive’s employment shall terminate
automatically upon the Executive’s death during the Employment Period. If the Disability of
the Executive has occurred during the Employment Period (pursuant to the definition of
Disability set forth below), the Company shall give to the Executive no less than thirty
(30) days written notice in accordance with Section 11(b) hereof of its intention to
terminate the Executive’s employment based upon Disability. In such event, the Executive’s
employment with the Company shall terminate effective on the later of 30 days from the date
specified in such notice or the date that Executive’s disability benefits begin (the
“Disability Effective Date”). For purposes of this Agreement, “Disability” shall mean the
Executive’s inability to perform his duties and obligations hereunder for a period of one
hundred twenty (120) consecutive days or any one hundred twenty (120) days in any twelve
(12) month period due to mental or physical incapacity as determined by a physician selected
by the Company or its insurers and acceptable to the Executive or the Executive’s legal
representative (such agreement as to acceptability not to be withheld unreasonably).

     (b) Termination by the Company. The Company may terminate the Executive’s
employment during the Employment Period with or without Cause. If termination by the
Company is without Cause, the Company shall give Executive ten (10) days prior written
notice of the Company’s intent to do so. For purposes of this Agreement, “Cause” means: (i)
the Executive’s material breach of this Agreement or any other document, agreement or
contract to which the Executive and the Company are a party, which constitutes a material
nonperformance by the Executive of his obligations and duties hereunder or thereunder, as
reasonably determined by the Board of Directors of the Company, which is not remedied within
ten (10) business days after receipt of written notice from the Company in accordance with
Section 11(b), specifying such breach; (ii) the Executive’s failure to adhere to any
material written policy of the Company, which is not remedied within thirty (30) days after
receipt of written notice from the Company specifying such failure; (iii) the Executive’s
appropriation (or attempted appropriation) of a material business opportunity of the
Company, including, without limitation, attempting to secure or securing, any personal
profit in connection with any transaction entered into on behalf of the Company; (iv) the
Executive’s commission of (or attempt to commit) an act of fraud, illegality, theft or
dishonesty toward the Company in the course of employment with the Company that relates to
the Company’s assets, activities, operations or other employees; (v) the Executive’s
conviction of, the indictment for (or its procedural equivalent), or the entering of a
guilty plea or plea of no contest or deferred adjudication with respect to, a felony, the
equivalent thereof, or any other crime with respect to which imprisonment is a possible
punishment; (vi) the Executive’s absence from his duties without the consent of the
Company’s Board of Directors for more than ten (10) consecutive business days for reasons
other than vacation authorized under this Agreement, illness or injury; (vii) a material
breach by the Executive of Section 6 or Section 9 hereof; or (viii) the failure of the
Executive to carry out, or comply with, in any material respect any directive of the Board
of Directors consistent with the terms of this Agreement, which is not remedied within
thirty (30) days after receipt of written notice from the Company specifying such failure.

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     (c) Voluntary Termination by Executive. Notwithstanding anything in this
Agreement to the contrary, the Executive’s employment may be terminated during the
Employment Period by the Executive for Good Reason or no reason, provided the Executive
gives three (3) months prior written notice to the Company of the Executive’s intention to
do so.

     (d) Termination for Good Reason. The Executive may terminate his employment at
any time for Good Reason. For purposes of this Agreement, “Good Reason” shall mean (i) any
reduction, approved by the Board of Directors without the Executive’s consent, in the
Executive’s title or the Executives’ Base Salary other than under a circumstance that
constitutes Cause; provided, that any such reduction or alteration in the
Executive’s title without the Executive’s consent during the thirty-day cure period
applicable to subparagraph (viii) of Section 3(b) shall not constitute Good Reason; (ii)
any alteration, approved by the Board of Directors without the Executive’s consent, in the
Executive’s duties, which alteration results in duties that are not commensurate with
Executive’s title in businesses of similar size and complexity (it being understood that
alterations in Executive’s duties are contemplated during the term of this Agreement),
other than under a circumstance that constitutes Cause; provided, that any such
alteration in the Executive’s duties without the Executive’s consent during the thirty-day
cure period applicable to subparagraph (viii) of Section 3(b) shall not constitute Good
Reason; and (iii) a change, without the Executive’s consent, of more than fifty (50) miles
in the office or location where the Executive is based. Notwithstanding the above, the
occurrence of any of the events described above will not constitute Good Reason unless the
Company fails to cure any such event within thirty (30) days after receipt from the
Executive of the Notice of Termination (as defined in Section 3(e)).

     (e) Notice of Termination. Any termination by the Company (for Cause or
otherwise), or by the Executive, shall be communicated by Notice of Termination to the other
party hereto given in accordance with Section 1l(b).

     (f) Date of Termination. “Date of Termination” means: (i) the date of receipt
of a Notice of Termination, or any later date specified therein, and (ii) if the
Executive’s employment is terminated by reason of death or Disability, the date of death of
the Executive or the Disability Effective Date, as the case may be.

     4. Obligations of the Company upon Termination.

     (a) Termination by the Company Other Than For Cause. If the Company
terminates the Executive without Cause, other than in connection with death or Disability,
or fails to renew this Agreement beyond the initial term ending December 31, 2006, or any
extension term, or if the Executive terminates this Agreement for Good Reason, the Company
shall pay to the Executive: (i) in a lump sum in cash within thirty (30) days after the
Date of Termination (1) the sum of the Executive’s applicable Annual Base Salary through
the Date of Termination to the extent not theretofore paid (“Accrued Obligations”), (2) any
amount arising from the Executive’s participation in, or benefits under, any Investment
Plans (“Accrued Investments”), which amounts shall be payable in accordance with the terms
and conditions of such Investment Plans, and (3) severance pay in an amount equal to
twenty-four (24) months of the Executive’s Annual Base

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Salary (“Severance Pay”); and (ii) any earned but unpaid Annual Bonus in respect of
any full fiscal year ended prior to the date the Executive’s employment is terminated,
payable in a lump sum in cash at such time as such Annual Bonus otherwise would be payable
(“Accrued Bonus”), but not a prorated or partial bonus with respect to the time period
between the end of the previous full fiscal year and the date the Executive’s employment is
terminated.

     (b) Termination by the Company for Death or Disability. If the Executive’s
employment is terminated by reason of the Executive’s death or Disability during the
Employment Period, the Company shall pay to his legal representatives: (i) in a lump sum
in cash within thirty (30) days after the Date of Termination the aggregate Accrued
Obligations; (ii) the Accrued Investments, which shall be payable in accordance with the
terms and conditions of the Investment Plans; and (iii) any Accrued Bonus, which shall be
payable at such time as such Annual Bonus otherwise would be payable. The Company shall
have no further payment obligations to the Executive or his legal representatives under
this Agreement.

     (c) Termination by the Company for Cause or by Executive. If the Executive’s
employment shall be terminated by the Company for Cause or terminated by the Executive,
during the Employment Period, the Company shall have no further payment obligations to the
Executive other than for payment of Accrued Obligations (which shall be paid within thirty
(30) days after the Date of Termination), Accrued Investments (which shall be payable in
accordance with the terms and conditions of the Investment Plans) and Accrued Bonus (which
shall be payable at such time as such Annual Bonus otherwise would be payable).

     (d) Change of Control. If following the occurrence of a Change of Control (or
following the execution of a definitive agreement that, upon consummation, would result in
a Change of Control), if the Company terminates the Executive other than for Cause, or
other than in connection with death or Disability as covered by Section 4(b) above,
or fails to renew this Agreement beyond the initial term ending December 31, 2006 or any
extension term, or if the Executive terminates his employment for Good Reason, the Company
shall: (i) pay to the Executive all Accrued Benefits in a lump sum in cash within ten (10)
days after the Date of Termination, (ii) pay to the Executive a severance payment equal to
twenty-four (24) months of the Executive’s Annual Base Salary, (iii) pay to the Executive
any Accrued Bonus, payable in a lump sum in cash at such time as such Annual Bonus
otherwise would be payable pursuant to the last sentence of Section 2(b)(ii), and
(iv) for a period of twelve (12) months from the Date of Termination, pay all medical,
dental and vision insurance costs for the Executive and the Executive’s family, including
all premiums and co-payments. 

     For purposes of this Section 4(d), the following definitions shall apply:

     “Affiliate” shall mean, as to any Person, a Person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under common
control with, such Person;

     “Change of Control” shall mean the first to occur of the following events: (i) any
sale, lease, exchange, or other transfer (in one transaction or series of related
transactions) of all or substantially all of the assets of the Company to any Person or

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Group, other than one or more members of the HMC Group, or (ii) the acquisition by any
Person or Group other than one or more members of the HMC Group of the power, directly or
indirectly, to vote or direct the voting of securities having more than 50% of the ordinary
voting power for the election of directors of the Company;

     “Group” shall have the meaning given such term in Section 13(d) of the Securities
Exchange Act of 1934, as amended, and the rules and regulations and interpretations
thereunder;

     “HMC Group” shall mean Hicks, Muse, Tate & Furst Incorporated, its Affiliates, and
their respective employees, officers, partners, and directors (and members of their
respective families and trusts for the primary benefit of such family members); and

     “Person” shall mean any individual, firm, corporation, partnership, limited liability
company, trust, or other entity.  

     (e) Full Settlement; Mitigation. In no event shall the Executive be obligated
to seek other employment or take any other action by way of mitigation of the amounts
payable to the Executive under any of the provisions of this Agreement, and such amounts
shall not be reduced whether or not the Executive obtains other employment. The Company
shall not be liable to the Executive for any damages in addition to the amounts payable
under Section 4 arising out of the termination of the Executive’s employment, for any
reason, prior to the end of the Employment Period; provided, however, that the Company
shall be entitled to seek damages from the Executive for any breach of Sections 6, 7, or 9
hereof or criminal misconduct.

     5. Ownership of Intellectual Property. Any and all inventions, trade secrets,
copyrights, patents or other intellectual property rights relating to the Business (as defined
below) prepared or created by the Executive during the Employment Period (together with all
extension and renewal rights), shall be owned exclusively by the Company, its successors and
assigns, absolutely and forever, and for all uses and purposes whatsoever and free from the
payment of any royalty or compensation whatsoever to Executive. In the event any such items may
not, by operation of law, be deemed the property of the Company, the Executive hereby assigns to
the Company, for no additional consideration, all rights, including intellectual property rights,
in such items. The Executive shall execute such documents, and provide such assistance as the
Company may reasonably request to give full effect to the provisions of this Section 5. This
provision shall survive the termination of this Agreement.

     6. Confidential Information.

     (a) The Executive acknowledges that during the Employment Period and as part of his
employment, the Executive will be and has been afforded access to confidential information
of the Company and its Affiliates, as defined herein. The Executive further acknowledges
that for purposes of this Agreement, “Affiliates” shall be defined as any corporation,
partnership, limited liability company or other entity controlling, controlled by or under
common control with the Company, all of which have trade, business, and financial secrets
and other confidential and proprietary information, including, but not limited to, product
information, designs and formulas, processes, pricing and cost information, sales and
marketing strategies, and identities of suppliers and displayers, and that such
confidential information constitutes valuable, special and

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unique property of the Company and its Affiliates (collectively, the “Confidential
Information”). As defined herein, Confidential Information shall not include (i) public
information or information that is generally known to other persons or entities; (ii)
information that is or becomes available to the Executive on a non-confidential basis from
a source other than the Company and its Affiliates, provided that such source was not known
by Executive to be bound by a confidentiality agreement with the Company and its Affiliates
or to be otherwise prohibited from transmitting the information to Executive by a
contractual, legal or fiduciary obligation; (iii) information that was within the
Executive’s possession prior to its being furnished to the Executive by or on behalf of the
Company and its Affiliates, including, without limitation, product and marketing
information possessed by Executive prior to employment by the Company, provided that the
source of such information was not known by the Executive to be bound by a confidentiality
agreement with the Company and its Affiliates or to be otherwise prohibited from
transmitting the information to Executive by a contractual, legal or fiduciary obligation;
or (iv) information required to be disclosed by the Executive pursuant to a subpoena or
court order, or pursuant to a requirement of a governmental agency or law of the United
States of America or a state thereof or any governmental or political subdivision thereof;
provided, however, that the Executive shall take all reasonable steps, at the cost of the
Company, to prohibit disclosure of such Confidential Information pursuant to subsection
(iv) herein.

     (b) The Executive also acknowledges that public disclosure of such Confidential
Information could have an adverse effect on the Company and its business and that the
provisions of this Section 6 are reasonable and necessary to prevent the improper use or
disclosure of Confidential Information.

     (c) In consideration of the compensation and benefits to be paid or provided to the
Executive by the Company under this Agreement, the Executive covenants that both during and
after the Employment Period, the Executive shall (i) hold Confidential Information in
confidence; (ii) not disclose, disseminate, publish or release (either directly or
indirectly) Confidential Information to any person (other than Company employees and other
persons to whom it is appropriate to disclose such Confidential Information in order to
carry out the Executive’s duties or to pursue the best interests of the Company or to whom
the Company has authorized the Executive to disclose such information and then only to the
extent that such Company employees and other persons authorized by the Company have a need
for such knowledge); and (iii) not use any Confidential Information for the benefit of any
person or entity other than the Company.

     (d) If the Executive becomes legally compelled to disclose any Confidential
Information, he will provide the Company with prompt written notice of such requirement
prior to disclosure so that the Company may seek appropriate relief. If such relief is not
obtained, then the Executive will furnish only that portion of the Confidential Information
that the Executive is legally required to furnish and will use commercially reasonable
efforts to assist the Company in obtaining assurances that such Confidential Information
will be accorded confidential treatment.

     7. Surrender of Materials Upon Termination. Upon termination of the Executive’s
employment for any reason, the Executive shall immediately return to the Company all originals
and/or copies, in whatever form, of any and all Confidential Information and any

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other property of the Company and its Affiliates, which are in the Executive’s possession,
custody or control, whether or not provided by the Company.

     8. Successors.

     (a) This Agreement is personal to the Executive and shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive’s legal representatives.

     (b) This Agreement shall inure to the benefit of and be binding upon the Company and
its successors and assigns.

     (c) The Company may assign this Agreement only to an assignee that agrees to perform
this Agreement in the same manner and to the same extent that the Company would be required
to perform if no such succession had taken place. The failure of any assignee of the
Company to expressly assume to perform this Agreement in writing, which is not remedied
within ten (10) business days after receipt of written notice from the Executive in
accordance with Section 11(b), notifying Company or Company’s assignee of such failure,
shall, at the election of Executive, be deemed to be a termination of this Agreement
without cause.

     9. Non-Competition and Non-Solicitation.

     (a) The Executive acknowledges that: (i) the services to be performed by him under
this Agreement are of a special, unique, unusual, extraordinary, and intellectual
character; (ii) the Business is international in scope and the Company’s and its
Affiliates’ products are marketed throughout the United States and the world; (iii) the
Company competes with other businesses both nationally within the United States and
internationally; and (iv) the provisions of this Section 9 are reasonable and necessary to
protect the Business. For purposes of this Agreement, the term “Business” shall mean the
Company’s and its Affiliates’ production and sale of home decorative and garden decorative
products of the types offered for sale by the Company and its Affiliates as of the date of
this Agreement and during the Employment Period.

     (b) In consideration of the acknowledgments by the Executive, and in consideration of
the compensation and benefits to be paid or provided to the Executive by the Company, the
Executive agrees that he will not, directly or indirectly:

     (i) during the Employment Period, except in the course of his employment
hereunder, and during the Post-Employment Period, engage in, invest in, own, manage,
operate, finance, control, or participate in the ownership, management, operation,
financing or control of, be employed by, or render services to, (1) any business
whose products or services compete with the Business, anywhere within the United
States or within foreign countries in which the Company or its Affiliates conduct
the Business, or (2) any business that utilizes a direct sales or multi-level sales
format to sell consumer products anywhere within the United States;

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     (ii) whether for the Executive’s own account or for the account of any other
person, at any time during the Employment Period and the Post-Employment Period,
solicit business from (either directly or indirectly) or sell products to any
customer of the Company or its Affiliates, including without limitation, customers
with whom the Executive had personal contact prior to Executive’s employment with
the Company;

     (iii) whether for the Executive’s own account or the account of any other
person, at any time during the Employment Period and the Post-Employment Period,
solicit, employ, or otherwise engage as an employee, independent contractor, or
otherwise, any person who is or was at the time of such solicitation, employment or
engagement an employee, consultant or independent contractor of the Company or its
Affiliates or in any manner induce or attempt to induce any employee of the Company
or its Affiliates to terminate his employment with the Company or its Affiliates;
or

     (iv) at any time during or after the Employment Period, and during the
Post-Employment Period, disparage the Company or its Affiliates or any of their
shareholders, partners, members, other holders of equity in the Company, directors,
officers, employees, or agents or any Affiliate of the foregoing.

     (c) If any covenant in this Section 9 is held to be unreasonable, arbitrary, or
against public policy, such covenant will be considered to be divisible with respect to
scope, time, and geographic area, and such lesser scope, time, or geographic area, or all
of them, as a court of competent jurisdiction may determine to be reasonable, not
arbitrary, and not against public policy, will be effective, binding, and enforceable
against the Executive.

     (d) The period of time applicable to any covenant in this Section 9 will be extended
by the duration of any conduct which the Executive knew or should reasonably have known
violated such covenant.

     (e) The Executive will, while the covenant under this Section 9 is in effect, give
written notice to the Company, within ten (10) days after accepting any other employment or
consulting arrangement, of the identity of the Executive’s new employer or contractor and
all of the material duties and services to be provided by the Executive in such employment
or retention, which shall not require disclosure by the Executive of any terms of
compensation. The Company may notify such new employer that the Executive is bound by this
Agreement and, at the Company’s election, furnish such new employer with a copy of this
Agreement or relevant portion thereof.

     (f) The term “Post-Employment Period” means the one (1) year period beginning on the
date of termination of the Executive’s employment with the Company.

     (g) The Executive acknowledges that the geographic boundaries, scope of prohibited
activities, and time duration of the preceding paragraphs are reasonable in nature and are
no broader than are necessary to maintain the confidentiality and the goodwill of the
Company’s and the Affiliates’ proprietary information, plans and services and to protect
the other legitimate business interests of the Company and the Affiliates.

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     10. Effect of Agreement on Other Benefits. The existence of this Agreement shall not
prohibit or restrict the Executive’s entitlement to full participation in the employee benefit and
other plans or programs in which management-level employees of the Company are eligible to
participate.

     11. Miscellaneous.

     (a) Jurisdiction and Venue. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas without reference to principles of
conflict of laws. Any legal action to enforce or interpret any provision of this Agreement
shall be brought exclusively in Dallas County, Texas. By execution and delivery of this
Agreement, the Executive accepts and consents to for himself, the jurisdiction of the
Courts of the State of Texas, County of Dallas.

     (b) Notice. All notices and other communications hereunder shall be in writing
and shall be given by hand delivery, by overnight courier (providing proof of delivery) or
by registered or certified mail, return receipt requested, postage prepaid, addressed as
follows:

	 	 	 
	          If to the Executive:

	 	Keith S. Krzeminski
	 

	 	5800 Harmony Ranch Road
	 

	 	Aubrey, Texas 76227
	 
	 	 
	          If to the Company:

	 	Home Interiors & Gifts, Inc.
	 

	 	1649 Frankford Road West
	 

	 	Carrollton, Texas 75007
	 

	 	Attn: President

or to such other address as either party shall have furnished to the other in writing in
accordance herewith. Notice and communications shall be effective when actually received by
the addressee.

     (c) Severability. If any provision of this Agreement is held to be illegal,
invalid or unenforceable under present or future laws effective during the term of this
Agreement, such provision shall be fully severable; this Agreement shall be construed and
enforced as if such illegal, invalid or unenforceable provision had never comprised a
portion of this Agreement; and the remaining provisions of this Agreement shall remain in
full force and effect and shall not be affected by the illegal, invalid or unenforceable
provision or by its severance from this Agreement. Furthermore, in lieu of such illegal,
invalid or unenforceable provision there shall be added automatically as part of this
Agreement a provision as similar-in terms to such illegal, invalid or unenforceable
provision as may be possible and be legal, valid and enforceable.

     (d) Withholding. The Company may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be required to be withheld pursuant
to any applicable law or regulation.

EMPLOYMENT AND NON-COMPETITION AGREEMENT - Page 11

 

 

     (e) Obligations Contingent on Performance. The obligations of the Company
hereunder, including its obligation to pay the compensation provided for herein, are
contingent upon the Executive’s performance of the Executive’s obligations hereunder.

     (f) Waiver. The Executive’s or the Company’s failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any right the
Executive or the Company may have hereunder shall not be deemed to be a waiver of such
provision or right or any other provision or right of this Agreement.

     (g) Injunctive Relief and Additional Remedy. The Executive acknowledges that
money damages would be both incalculable and an insufficient remedy for a breach of Section
6 or 9 by the Executive and that any such breach would cause the Company irreparable harm.
Accordingly, the Company, in addition to any other remedies at law or in equity it may
have, shall be entitled, without the requirement of posting of bond or other security, to
equitable relief, including injunctive relief and specific performance, in connection with
a breach of Section 6 or 9 by the Executive. If the Executive breaches in any material
respect any of the material provisions of Section 6 or 9, following termination of
Executive’s employment, the Company will have the right to cease making any payments
otherwise due to the Executive under this Agreement.

     (h) Entire Agreement; Amendments. The provisions of this Agreement constitute
the complete understanding and agreement between the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, oral or written,
between or among the parties hereto. This Agreement may not be amended orally, but only by
an agreement in writing signed by the parties hereto or their respective successors and
legal representatives.

     (i) Counterparts. This Agreement may be executed in one or more counterparts,
each of which will be deemed to be an original copy of this Agreement and all of which,
when taken together, will be deemed to constitute one and the same Agreement.

     (j) Covenants of Sections 6 and 9 are Essential and Independent Covenants. The
covenants by the Executive in Sections 6 and 9 are essential elements of this Agreement,
and without the Executive’s agreement to comply with such covenants, the Company would not
have entered into this Agreement or employed or continued the employment of the Executive.
The Company and the Executive have independently consulted their respective counsel and
have been advised in all respects concerning the reasonableness and propriety of such
covenants, with specific regard to the nature of the business conducted by the Company.

     (k) Section Headings; Construction. The captions or headings of Sections in
this Agreement are provided for convenience only and are not part of the provisions hereof
and shall have no force or effect. Whenever the terms “hereof”, “hereby”, “herein”, or
words of similar import are used in this Agreement they shall be construed as referring to
this Agreement in its entirety rather than to a particular section or provision, unless the
context specifically indicates to the contrary. Any reference to a particular “Section” or
“paragraph” shall be construed as referring to the indicated section or paragraph of this
Agreement unless the context indicates to the contrary. The use of the term “including”
herein shall be construed as meaning “including, without limitation.”

EMPLOYMENT AND NON-COMPETITION AGREEMENT - Page 12

 

 

(Signature Page Follows)

EMPLOYMENT AND NON-COMPETITION AGREEMENT - Page 13

 

 

     EXECUTED to be effective as of June 20, 2005.

	 	 	 	 	 
	 	 	EXECUTIVE:
	 

 
	 	 	 	 
	 	 	/s/ Keith S. Krzeminski
	 	 	 
	 	 	Keith S. Krzeminski, Individually
	 

 
	 	 	 	 
	 	 	COMPANY:
	 
	 	 	 	 
	 	 	HOME INTERIORS & GIFTS, INC.,
	 	 	a Texas corporation
	 

 
	 	 	 	 
	 

	 	By:
	 	/s/ Michael D. Lohner
	 

	 	 	 	 
	 

	 	 	 	Michael D. Lohner

President and CEO

EMPLOYMENT AND NON-COMPETITION AGREEMENT - Page 14AMENDMENT
NO. 7

TO AMENDED AND RESTATED MASTER REPURCHASE AGREEMENT

AMENDMENT NO.  7 TO AMENDED AND RESTATED MASTER REPURCHASE
AGREEMENT, dated as of March 7, 2005, (the
Amendment") by and between Merrill Lynch Mortgage
Capital Inc. (the "Buyer"), and
MortgageIT, Inc. ("MIT" and a
"Seller") and MortgageIT Holdings,
Inc. ("Holdings" and a
"Seller" and together with MIT the
"Sellers"):

The Buyer and the
Sellers are parties to that certain Amended and Restated Master
Repurchase Agreement, dated as of August 4, 2004, as amended by
Amendment No.  1, dated as of September 21, 2004, Amendment No.
2, dated as of November 11, 2004, Amendment No. 3, dated as of November
18, 2004, Amendment No. 4, dated as of December 8, 2004, Amendment No.
5, dated as of December 10, 2004 and Amendment No. 6, dated as of
December 17, 2004 (the "Existing Repurchase
Agreement"; as amended by this Amendment, the
"Repurchase Agreement"). Capitalized
terms used but not otherwise defined herein shall have the meanings
given to them in the Existing Repurchase Agreement.

The Buyer
and the Sellers have agreed, subject to the terms and conditions of
this Amendment, that the Existing Repurchase Agreement be amended to
reflect certain agreed upon revisions to the terms of the Existing
Repurchase Agreement.

Accordingly, the Buyer and the Sellers
hereby agree, in consideration of the mutual premises and mutual
obligations set forth herein, that the Existing Repurchase Agreement is
hereby amended as follows:

Section
1.    Definitions.    Section 2 of the Existing Repurchase
Agreement is hereby amended by:

1.1    deleting the definition
of "Market Value" in its entirety
and replacing it with the following language:

"Market Value" shall mean, as of
any date with respect to any Purchased Mortgage Loan, the price at
which such Mortgage Loan could readily be sold as determined by the
Buyer in its sole good-faith discretion. Without limiting the
generality of the foregoing, the Sellers acknowledge that the Market
Value of a Purchased Mortgage Loan may be reduced to zero by Buyer
if:

(a)    such Purchased Mortgage Loan ceases to be an
Eligible Mortgage Loan;

(b)    the Purchased
Mortgage Loan has been released from the possession of the Custodian
under the Custodial Agreement (other than to a Take-out Investor
pursuant to a Bailee Letter) for a period in excess of 10 Business
Days;

(c)    the Purchased Mortgage Loan is a
Wet-Ink Mortgage Loan for which the related Mortgage File has not been
received and certified by the Custodian by the seventh Business Day
following the related Purchase Date;

(d)    such Purchased Mortgage Loan is a
Delinquent Mortgage Loan;

(e)    such
Purchased Mortgage Loan is rejected by the related Takeout
Investor;

(f)    such Purchased Mortgage Loan
has been subject to a Transaction hereunder for period of greater than
120 days, unless such Purchased Mortgage Loan is an Aged Mortgage
Loan;

(g)    a First Payment Default occurs
with respect to such Purchased Mortgage Loan;

(h)    the Buyer has determined in its sole
good-faith discretion that the Purchased Mortgage Loan is not eligible
for whole loan sale or securitization in a transaction consistent with
the prevailing sale and securitization industry with respect to
substantially similar Mortgage Loans;

(i)    such Purchased Mortgage Loan contains a
material breach of a representation or warranty made by a Seller in
this Repurchase Agreement or the Custodial Agreement;

(j)    when the Purchase Price for such Purchased
Mortgage Loan is added to the aggregate Purchase Price of other
Purchased Mortgage Loans, the aggregate Purchase Price of all Aged
Mortgage Loans exceeds 5% of the Maximum Purchase Price;

(k)    when the Purchase
Price for such Purchased Mortgage Loan is added to the aggregate
Purchase Price of other Purchased Mortgage Loans, the aggregate
Purchase Price of all HELOCs exceeds $100,000,000;

(l)    when the Purchase Price for such Purchased
Mortgage Loan is added to the aggregate Purchase Price of other
Purchased Mortgage Loans, the aggregate Purchase Price of all HELOCs
that have a FICO score of 680 or less exceeds $35,000,000;

(m)    when the Purchase Price for such Purchased
Mortgage Loan is added to the aggregate Purchase Price of other
Purchased Mortgage Loans, the aggregate Purchase Price of all Closed
End Second Lien Mortgage Loans exceeds 5% of the Maximum
Purchase Price;

(n)    when the Purchase Price
for such Purchased Mortgage Loan is added to the aggregate Purchase
Price of other Purchased Mortgage Loans, the aggregate Purchase Price
of all Super Jumbo Mortgage Loans exceeds 7.5% of the Maximum
Purchase Price;

(o)    when the Purchase Price
for such Purchased Mortgage Loan is added to the aggregate Purchase
Price of other Purchased Mortgage Loans, the aggregate Purchase Price
of all EC Mortgage Loans exceeds 5% of the aggregate Purchase
Price of all Purchased Mortgage Loans;

(p)    when the Purchase Price for such Purchased
Mortgage Loan is added to the aggregate Purchase Price of other
Purchased Mortgage Loans, the aggregate Purchase Price of all Wet-Ink
Mortgage Loans exceeds (i) with respect to the first five (5) Business
Days of a month and the last five (5) Business Days of a month,
$275,000,000 or (ii) with respect to all other times, $200,000,000;

(q)    when the Purchase Price for such Purchased
Mortgage Loan is added to the aggregate Purchase Price of other
Purchased Mortgage Loans, the aggregate Purchase Price of all Sub-prime
Mortgage Loans exceeds 20% of the Maximum Purchase Price;

(r)    when the Purchase Price for such Purchased
Mortgage Loan is added to the aggregate Purchase Price of other
Purchased Mortgage Loans, the aggregate Purchase Price of all Wet-Ink
Mortgage Loans that are Sub-prime Mortgage Loans exceeds 4% of
the Maximum Purchase Price; and

(s)    when
the Purchase Price for such Purchased Mortgage Loan is added to the
aggregate Purchase Price of other Purchased Mortgage Loans, the
aggregate Purchase Price of all Co-op Loans exceeds 5% of the
aggregate Purchase Price of all Purchased Mortgage Loans.

1.2    deleting the definition of "Purchase Price
Percentage" in its entirety and replacing it with the
following language:

"Purchase Price
Percentage" shall mean:

(a)    With respect
Mortgage Loans other than Wet-Ink Mortgage Loans, the respective
percentages set forth opposite the applicable type of Mortgage
Loan:

							
	Closed
End Second Lien		 	95	% 
	Aged Mortgage
Loan		 	95	% 
	Co-op
Loan		 	95	% 
	HELOC		 	95	% 
	Super
Jumbo Mortgage Loan		 	97	% 
	Sub-prime
Mortgage Loan		 	98	% 
	Conforming Mortgage
Loan		 	98	% 
	Jumbo Mortgage
Loan		 	98	% 
	EC Mortgage
Loan		 	98	% 
	

(b)    With respect
Mortgage Loans that are Wet-Ink Mortgage Loans, the respective
percentages set forth opposite the applicable type of Wet-Ink Mortgage
Loan:

2

							
	Closed
End Second Lien		 	95	% 
	Sub-prime
Mortgage Loan		 	95	% 
	Co-op
Loan		 	95	% 
	HELOC		 	95	% 
	Super
Jumbo Mortgage Loan		 	95	% 
	Conforming
Mortgage Loan		 	97	% 
	Jumbo Mortgage
Loan		 	97	% 
	EC Mortgage
Loan		 	97	% 
	

1.3    Section 2 of the
Existing Repurchase Agreement is hereby amended by deleting the
definition of "Pricing Spread" in
its entirety and replacing it with the following language:

"Pricing Spread" shall mean
0.70%.

Section 2.    Conditions
Precedent.    This Amendment shall become effective on the date
hereof (the "Amendment Effective
Date") subject to the satisfaction of the following
conditions precedent:

2.1    Delivered
Documents.    On the Amendment Effective Date, the Buyer shall
have received the following documents, each of which shall be
satisfactory to the Buyer in form and substance:

(a)    this
Amendment, executed and delivered by a duly authorized officer of each
of the Buyer and the Sellers; and

(b)    such other documents
as the Buyer or counsel to the Buyer may reasonably request.

Section 3.    Fees.    Each Seller agrees to pay as and
when billed by the Buyer all of the reasonable fees, disbursements and
expenses of counsel to the Buyer in connection with the development,
preparation and execution of, this Amendment or any other documents
prepared in connection herewith and receipt of payment thereof shall be
a condition precedent to the Buyer entering into any Transaction
pursuant hereto.

Section
4.    Confidentiality.    The parties hereto acknowledge
that this Amendment, the Existing Repurchase Agreement, and all drafts
thereof, documents relating thereto and transactions contemplated
thereby are confidential in nature and the Sellers agree that, unless
otherwise directed by a court of competent jurisdiction, it shall limit
the distribution of such documents and the discussion of such
transactions to such of its officers, employees, attorneys, accountants
and agents as is required in order to fulfill its obligations under
such documents and with respect to such transactions.

Section
5.    Limited Effect.    Except as expressly amended and
modified by this Amendment, the Existing Repurchase Agreement shall
continue to be, and shall remain, in full force and effect in
accordance with its terms.

Section
6.    Counterparts.    This Amendment may be executed in
one or more counterparts and by different parties hereto on separate
counterparts, each of which, when so executed, shall constitute one and
the same agreement.

Section 7.    GOVERNING
LAW.    THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, AND THE OBLIGATIONS, RIGHTS AND REMEDIES
OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.

Section 8.    Conflicts.    The parties
hereto agree that in the event there is any conflict between the terms
of this Amendment, and the terms of the Existing Repurchase Agreement,
the provisions of this Amendment shall control.

[SIGNATURE PAGE FOLLOWS]

3

IN WITNESS WHEREOF, the parties have caused
their names to be signed hereto by their respective officers thereunto
duly authorized as of the day and year first above written.

											
	Buyer:		MERRILL
LYNCH MORTGAGE
 CAPITAL INC.
	 		By:		/s/ JOHN
WINCHESTER

Name: John Winchester
Title: Vice
President
	Seller:		MORTGAGEIT,
INC.
	 		By:		/s/
ROBERT A. GULA

Name: Robert A. Gula
Title:
CFO
	Seller:		MORTGAGEIT
HOLDINGS, INC.
	 		By:		/s/
GLENN J. MOURIDY

Name: Glenn J.
Mouridy
Title: Pres. & CFO
	

4

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