Exhibit 10.1
This Exhibit contains confidential information which has been omitted and
filed separately with the Securities and Exchange Commission pursuant to a
Confidential Treatment Request under Rule 24b-2 of the Securities Exchange
Act of 1934, as amended. The confidential information on pages 10, 15, 16, 17
and 44 of the Master Transaction Agreement, pages 3 and 4 of Exhibit C and
pages 1 and 3 of Exhibit E has been replaced with an asterisk.
EXECUTION COPY
MASTER TRANSACTION AGREEMENT
BY AND AMONG
MERITAGE CORPORATION,
MTH-HOMES NEVADA, INC.,
PERMA-BILT, A NEVADA CORPORATION,
AND
ZENITH NATIONAL INSURANCE CORP.
Dated October 7, 2002
TABLE OF CONTENTS
ARTICLE I DEFINITIONS.................................................................................1
1.1 Definitions....................................................................................1
ARTICLE II PURCHASE AND SALE OF ASSETS.................................................................8
2.1 Closing........................................................................................8
2.2 Assets to be Purchased.........................................................................8
2.3 Assets Not Being Transferred...................................................................8
2.4 Liabilities....................................................................................9
2.5 Purchase Price; Earn-Out; Adjustment; and Warranty and Reserves Administration................11
2.6 Allocation of Purchase Price..................................................................17
2.7 Risk of Loss..................................................................................18
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER.........................................18
3.1 Organization and Qualification................................................................18
3.2 Authority Relative to this Agreement..........................................................18
3.3 No Conflicts..................................................................................18
3.4 Sufficient Funds..............................................................................18
3.5 No Consents...................................................................................18
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLING PARTIES..........................................19
4.1 Organization and Qualification................................................................19
4.2 Authority Relative to this Agreement..........................................................19
4.3 [intentionally omitted].......................................................................19
4.4 No Conflicts..................................................................................19
4.5 No Consents...................................................................................20
4.6 Ownership Interests...........................................................................20
4.7 Financial Statements..........................................................................20
4.8 [intentionally omitted].......................................................................20
4.9 No Material Adverse Changes...................................................................20
4.10 Absence of Certain Developments...............................................................20
4.11 Permitted Liens; Good Title to and Condition of Acquired Assets...............................22
4.12 Legal Descriptions of Real Property...........................................................22
4.13 Real Property.................................................................................22
4.14 Acquired Contracts............................................................................25
4.15 Warranties....................................................................................26
4.16 Environmental Matters.........................................................................26
4.17 Tax Matters...................................................................................27
4.18 Restrictions on Business Activities...........................................................28
4.19 Intellectual Property.........................................................................28
4.20 Litigation....................................................................................28
4.21 Employees.....................................................................................28
4.22 Employee Benefit Plans........................................................................29
4.23 Insurance.....................................................................................29
4.24 Affiliate Transactions........................................................................30
4.25 Compliance with Laws..........................................................................30
4.26 Permits.......................................................................................30
4.27 Disclosure....................................................................................31
ARTICLE V CONDUCT OF SELLER PENDING THE CLOSING.....................................................31
5.1 Conduct of Business Pending the Closing.......................................................31
5.2 Business Relationships........................................................................33
5.3 Notification of Certain Matters...............................................................33
5.4 Required Approvals............................................................................33
ARTICLE VI ADDITIONAL AGREEMENTS.....................................................................33
6.1 Employment....................................................................................33
6.2 No Negotiations...............................................................................34
6.3 Public Announcements..........................................................................34
6.4 Confidentiality...............................................................................35
6.5 Further Assurances............................................................................36
6.6 Right to Enter and Inspect....................................................................36
6.7 Tax on Prior Sales............................................................................37
6.8 Transfer of Permits...........................................................................37
6.9 Landbanking...................................................................................37
6.10 Independent Auditors..........................................................................37
6.11 Charter Amendment.............................................................................37
ARTICLE VII CONDITIONS................................................................................37
7.1 Conditions to Obligation of Selling Parties...................................................37
7.2 Conditions to Obligations of Parent and Buyer.................................................38
ARTICLE VIII CLOSING...................................................................................40
8.1 Selling Parties' Obligations..................................................................40
8.2 Parent's or Buyer's Obligations...............................................................42
8.3 Transfer Fees, Title Costs, and Closing Costs and Other Fees; Prorations......................42
ARTICLE IX SURVIVAL AND INDEMNITIES..................................................................44
9.1 Survival of Representations and Warranties....................................................44
9.2 Nature of Statements..........................................................................44
9.3 Dispute Resolution............................................................................44
9.4 Indemnification Agreement.....................................................................44
ARTICLE X TERMINATION/REMEDIES......................................................................45
10.1 Termination...................................................................................45
10.2 Effect of Termination.........................................................................45
10.3 Specific Performance..........................................................................45
ARTICLE XI GENERAL PROVISIONS........................................................................45
11.1 Notices.......................................................................................45
11.2 Counterparts..................................................................................46
11.3 Governing Law.................................................................................46
11.4 Assignment....................................................................................46
11.5 Gender and Number.............................................................................46
11.6 Schedules and Exhibits........................................................................47
11.7 Waiver of Provisions..........................................................................47
11.8 Costs.........................................................................................47
11.9 Amendment.....................................................................................47
11.10 Severability..................................................................................47
11.11 Binding Effect................................................................................47
11.12 Construction..................................................................................47
11.13 Time Periods..................................................................................47
11.14 Headings......................................................................................48
11.15 Access to Records.............................................................................48
11.16 Entire Agreement..............................................................................48
11.17 Enforcement of Rights.........................................................................48
11.18 No Third Beneficiaries........................................................................48
Exhibits
--------
Exhibit A - Asset Agreement
Exhibit B - Real Property Agreement
Exhibit C - Indemnification Agreement
Exhibit D - Dispute Resolution Procedures
Exhibit E - Non-Disclosure and Non-Compete Agreement
Exhibit F - Form of Grant, Bargain, Sale Deed
Exhibit G - Assignment and Assumption Agreement
Exhibit H - Xxxx of Sale and Assignment Agreement
Exhibit I - Xxxxxxxx Employment Agreement
Exhibit J - Capital Charge Sample Calculation
Master Transaction Agreement Schedules
--------------------------------------
Schedule 2.3 - Excluded Assets
Schedule 2.4A - Seller Debt
Schedule 2.4D - Specific Reserves
Schedule 2.5B(1) - August 31, 2002 Balance Sheet
Schedule 2.5(B)(2) - Preliminary Closing Balance Sheet
Schedule 4.4 - Conflicts
Schedule 4.5 - Consents
Schedule 4.6 - Ownership Interests
Schedule 4.7A - Financial Statements
Schedule 4.7B - Undisclosed Liabilities
Schedule 4.9 - Material Adverse Changes
Schedule 4.10 - Certain Developments Since Balance Sheet Date
Schedule 4.11 - Permitted Liens
Schedule 4.12 - Legal Description of Owned Real Property
Schedule 4.13 - Disclosure for Owned Real Property
Schedule 4.13U - Flood Plain Maps
Schedule 4.13W - Noise Cone Disclosure
Schedule 4.14 - Material Contracts
Schedule 4.15 - Warranty Disclosure
Schedule 4.16 - Environmental Matters
Schedule 4.17 - Tax Matters
Schedule 4.19 - Intellectual Property
Schedule 4.20 - Litigation
Schedule 4.21 - Employee Information
Schedule 4.22 - Employee Benefit Plans
Schedule 4.23 - Insurance
Schedule 4.24 - Affiliate Transactions
Schedule 4.25 - Non-Compliance with Applicable Laws
Schedule 4.26 - Land Use Entitlements
Schedule 4.26B - Permits
Schedule 5.1 - Conduct of Business Pending Closing
Real Property Agreement Schedules
---------------------------------
Schedule 4.2 - Real Property Assets; Title Reports; Surveys
Schedule 4.2C - Disapproved Title Exceptions
MASTER TRANSACTION AGREEMENT
This MASTER TRANSACTION AGREEMENT (this "Agreement") is made as of
October 7, 2002, by and among MERITAGE CORPORATION, a Maryland corporation
("Meritage or Parent"); MTH-HOMES NEVADA, INC., an Arizona corporation
("Buyer"); PERMA-BILT, a Nevada Corporation ("Seller"); and ZENITH NATIONAL
INSURANCE CORP., a Delaware corporation ("Zenith"). Collectively, Seller and
Zenith are referred to herein as "Selling Parties."
RECITALS
1. Seller owns and operates the Perma-Bilt Homes land development,
homebuilding, and sales operations (the "Business").
2. Concurrently herewith, the Parties are entering into that
Agreement of Purchase and Sale of Assets in the form attached as Exhibit A
hereto ("Asset Agreement"), that Agreement of Purchase and Sale of Real
Property in the form attached as Exhibit B hereto ("Real Property Agreement")
and that Indemnification Agreement in the form attached as Exhibit C hereto
(the "Indemnification Agreement").
3. Pursuant to this Agreement, the Asset Agreement, and the Real
Property Agreement, Buyer will acquire the Business.
4. Selling Parties intend to transfer the economic benefits of the
Business after the Effective Date to the Buyer, subject to the liabilities and
other obligations of the Business arising after the Effective Date.
In consideration of the covenants and mutual agreements set forth
herein and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, and in reliance upon the representations and
warranties contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. The following terms will have the meanings set forth
below where used in this Agreement and identified with initial capital
letters.
"Accounting Arbitrator" will have the meaning set forth in Section
2.5B(4).
"Acquired Assets" will have the meaning set forth in Section 2.2.
"Acquired Contracts" means, collectively, the Real Property Acquired
Contracts and the Asset Acquired Contracts.
"Adjusted Book Value" will mean total equity of the Business as
reflected on the August Balance Sheet, Preliminary Closing Balance Sheet, and
the Final Closing Balance Sheet, as the case may be, which are to be prepared
in accordance with Adjusted GAAP.
"Adjusted GAAP" will mean generally accepted accounting principles,
consistently applied in accordance with past practices of Seller, provided
that (i) there will be appropriate reserves or accruals for vacation pay, sick
pay, severance obligations and other similar types of employment obligations,
(ii) reserves for Excluded Construction Claims will be as agreed upon by the
parties, subject to revision based only on fraud, concealment or mistake,
(iii) Excluded Assets and Excluded Liabilities (including any reserves or
accruals for federal income taxes) will be omitted, and (iv) any profit or
loss on the sale of real property to landbankers or model homes to investors,
which sales are approved by Seller pursuant to Section 6.9, will be
disregarded.
"Agreements" will have the meaning set forth in Section 11.16.
"Applicable Laws" will mean all federal, state, regional, local, or
other governmental or quasi-governmental statutes, laws, rules, regulations,
codes, ordinances, orders, plans, injunctions, decrees, rulings, or judicial
or administrative interpretations thereof, including without limitation
Environmental Laws, which are applicable to Seller, Buyer, the Business, or
the Acquired Assets or the use, development, or condition thereof or otherwise
applicable to any of the Acquired Assets.
"Approved Title Exceptions" will have the meaning set forth in
Section 4.2C of the Real Property Agreement.
"Asset Acquired Contracts" shall have the meaning set forth in
Section 1.2I of the Asset Agreement.
"Asset Intellectual Property" will have the meaning set forth in
Section 1.2E of the Asset Agreement.
"Assets" will have the meaning set forth in Section 1.2 of the Asset
Agreement.
"Assumed Liabilities" will have the meaning set forth in Section 2.4A.
"Assignment and Assumption Agreement" will have the meaning set forth
in Section 8.1A.
"August Balance Sheet" will have the meaning set forth in Section
2.5B(1).
"Balance Sheet Date" will have the meaning set forth in Section 4.7A.
"Basket Threshold" will have the meaning set forth in Section 4C of
the Indemnification Agreement.
"Xxxx of Sale and Assignment Agreement" will have the meaning set
forth in Section 8.1D.
"Bonds" will have the meaning set forth in Section 4.23.
"Book Value Target" will have the meaning set forth in Section 2.5A(1).
"Business" will have the meaning set forth in the recitals.
"Capital Charge" will have the meaning set forth in Section
2.5A(2)(a)(iii).
"Closing" will have the meaning set forth in Section 2.1.
"Closing Date" will have the meaning set forth in Section 2.1.
"Code" will mean the Internal Revenue Code of 1986, as amended.
"Construction Claims" will mean all claims, including, without
limitation, claims for breach of contract, claims for breach of express or
implied warranty, construction defect claims, claims for lost profits,
consequential damages, and incidental and other damages, and all losses, costs
and expenses relating to any work required to be done by Seller, or any
corrective work required to be done by Seller, on a completed Housing Unit
(including, without limitation, claims related to mold) or on streets,
gradings, landscaping and homeowners' association improvements and all other
similar subdivision work.
"Contracted Real Property" will have the meaning set forth in Section
1.2A of the Real Property Agreement.
"Deed" will have the meaning set forth in Section 8.1A.
"Determined Indemnification Claim" will mean Excluded Liabilities
that are not subject to reasonable dispute, or claims settled in accordance
with the Indemnification Agreement, or as to which Selling Parties consent to
liability (whether by action or inaction as provided thereunder) or as to
which liability is determined by a Governmental Authority.
"Disapproved Title Exceptions" will mean the exceptions to title set
forth on Schedule 4.2C of the Real Property Agreement.
"Dispute" will have the meaning set forth in Section 9.3.
"Earn-Out Accounting Arbitrator" will have the meaning set forth in
Section 2.5A(2)(e).
"Earn-Out Payments" will have the meaning set forth in Section 2.5A(2).
"Earn-Out Period" will mean for the first Earn-Out Period, the period
commencing on October 1, 2002 and ending on September 30, 2003; for the second
Earn-Out Period, the period commencing on October 1, 2003 and ending on
September 30, 2004; for the final Earn-Out Period, the period commencing on
October 1, 2004 and ending on September 30, 2005.
"Effective Date" will mean the Closing Date; provided, however, that
if the Closing occurs on or prior to October 7, 2002, the Effective Date will
mean September 30, 2002.
"Environmental Laws" will have the meaning set forth in Section 4.16A.
"ERISA" will mean the Employee Retirement Income Security Act of
1974, as amended.
"Escrow Agent" will have the meaning set forth in Section 4.1 of the
Real Property Agreement.
"Evaluation Information" will have the meaning set forth in Section
6.4.
"Excluded Assets" will have the meaning set forth in Section 2.3.
"Excluded Contracts" means all sales contracts for Housing Units or
real property or improvements thereon, fully performed and closed by all
parties thereto prior to the Effective Date.
"Excluded Construction Claims" means all Construction Claims related
to the property or improvements, which are the subject of Excluded Contracts,
whether brought before or after Effective Date, to the extent such claims
arise out of occurrences or omissions commencing on or prior to the Effective
Date, even if they do not become known until after such date.
"Excluded Liabilities" will have the meaning set forth in Section 2.4B.
"Final Closing Balance Sheet" will mean a balance sheet reflecting
the closing balances for the Business, prepared in accordance with Adjusted
GAAP, as of the Effective Date.
"Financial Statements" will have the meaning set forth in Section
4.7A.
"GAAP" will mean generally accepted accounting principles, including
but not limited to, appropriate reserves or accruals for vacation, sick pay,
severance obligations and other similar types of employment obligations.
"Governmental Authority" will mean any nation or government, any
state or other political subdivision or quasi-governmental authority thereof,
any entity exercising executive, legislative, judicial, regulatory, or
administrative functions of or pertaining to government, including, without
limitation, any government authority, agency, department, board, commission,
or instrumentality of the United States, any State of the United States, or
any political subdivision thereof, and any tribunal or arbitrator(s) of
competent jurisdiction, and any self-regulatory organizations.
"Housing Unit" will mean a residential dwelling constructed or to be
constructed on a lot, together with the associated lot.
"HSR Act" will mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, as amended.
"Indemnification Cap" will have the meaning set forth in Section 4B
of the Indemnification Agreement.
"Intellectual Property" means, collectively, the Real Property
Intellectual Property and the Asset Intellectual Property.
"Knowledge of Selling Parties" means the actual knowledge of any
officer of Selling Parties.
"Land Use Entitlements" will have the meaning set forth in Section
4.26B.
"Liability Reserves" will have the meaning set forth in Section 4C of
the Indemnification Agreement.
"Lien" means, with respect to any asset, any mortgage, deed of trust,
lien (statutory or otherwise), pledge, lease, easement, restriction, covenant,
charge, security interest or other encumbrance, of any kind or nature in
respect of such asset, whether or not filed, recorded or otherwise perfected
under applicable law, including any conditional sale or other title retention
agreement, and any lease in the nature thereof, any option or other agreement
to sell, and any filing of, or agreement to give, any financing statement
under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction.
"Material Adverse Effect" will have the meaning set forth in Section
4.4.
"Material Disclosed Contingencies" means those liabilities and
obligations disclosed (or which were known to any officer of a Selling Party
and should have been disclosed) on the Schedules hereto, including those
relating to environmental matters, that the parties, after reviewing the
Schedules, have identified as material by so indicating on the Schedules with
an asterisk (*) (or in the case of liabilities and obligations that should
have been disclosed, are identified by Buyer as material after they became
known).
"Material Contracts" means the following contracts and agreements to
which Seller is a party or by which Seller or any of the Acquired Assets are
bound:
(a) The contracts referenced in the Real Property Agreement at
Sections 1.2A(3), B(4) and C(5);
(b) All agreements or indentures relating to the borrowing by
Seller of money in excess of $25,000 or to mortgaging, pledging, or otherwise
placing a Lien over $25,000 on any of Seller's assets, or the guaranty by
Seller of any obligation of another person for borrowed money or any other
obligation of another person, other than endorsements made for collection;
(c) The Property Leases involving more than $25,000 in payments
due after the Effective Date;
(d) All other contracts or groups of related contracts with the
same party continuing over a period of more than six months from the date or
dates thereof or involving more than $25,000 per annum;
(e) All employment, consulting or similar agreements to which
Seller is a party;
(f) All agreements providing for any guarantee, bond or
indemnification by Seller; and
(g) All other agreements material to the Business or not entered
into in the ordinary course of business.
Notwithstanding the foregoing, the term "Material Contracts" will not
include home sales contracts or contracts with subcontractors, engineers,
signage suppliers or other consultants, in each case, in the ordinary course.
"NRS" will have the meaning set forth in Section 4.16B.
"Opening Cash Balance" will have the meaning set forth in Section
2.5A(1).
"Owned Real Property" will have the meaning set forth in Section 1.2A
of the Real Property Agreement.
"Permits" will have the meaning set forth in Section 4.26A.
"Permitted Liens" will have the meaning set forth in Section 4.11.
"Person" will mean any natural person, corporation, general or
limited partnership, limited liability company, trust, sole proprietorship, or
other entity, organization or association of any kind.
"Policies" will have the meaning set forth in Section 4.23.
"Pre-Closing Tax Obligations" will have the meaning set forth in
Section 2.4B(5).
"Pre-Tax Net Income" will have the meaning set forth in Section
2.5A(2)(a).
"Preliminary Closing Balance Sheet" will have the meaning set forth
in Section 2.5B(2).
"Premium" will have the meaning set forth in Section 2.5A(2)(a)(iv).
"Property Leases" means all personal and real property leases
pursuant to which Seller is the lessor or the lessee of any real or personal
property, or holds or operates any equipment, machinery, vehicle, or other
tangible personal property owned by a third party and used in connection with
the Business.
"Purchase Price" will have the meaning set forth in Section 2.5A.
"Purchase Price Allocation Schedule" will have the meaning set forth
in Section 2.6A.
"Real Property" will have the meaning set forth in Section 1.2A of
the Real Property Agreement.
"Real Property Acquired Contracts" will have the meaning set forth in
Section 1.2B of the Real Property Agreement.
"Real Property Assets" will have the meaning set forth in Section 1.2
of the Real Property Agreement.
"Real Property Intellectual Property" will have the meaning set forth
in Section 1.2 of the Real Property Agreement.
"Report" will have the meaning set forth in Section 4.2A of the Real
Property Agreement.
"Xxxxxxxx Employment Agreement" will have the meaning set forth in
Section 6.1A.
"SEC" will mean the Securities and Exchange Commission.
"Seller Debt" will have the meaning set forth in Section 2.4A.
"Services Fee" will have the meaning set forth in Section
2.5A(2)(a)(ii).
"Survey" will have the meaning set forth in Section 4.2A of the Real
Property Agreement.
"Taxes" will mean any and all federal, state, local or foreign
income, gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental (including taxes
under Code Section 59A), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, payroll, employment,
recapture, disability, real property, personal property, sales, use, transfer,
registration, value-added, alternative or add-on minimum, estimated,
"roll-back" any other taxes, assessments, or government charges of any kind
whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not.
"Tax Returns" will mean any return, declaration, report, claim to
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"Title Company" will have the meaning set forth in Section 4.1 of the
Real Property Agreement.
"Title Policy" will have the meaning set forth in Section 4.2D of the
Real Property Agreement.
"Transaction Agreements" means this Agreement, the Asset Agreement,
the Real Property Agreement, the Indemnification Agreement, the Non-Disclosure
and Non-Compete Agreement, the Xxxxxxxx Employment Agreement, the Assignment
and Assumption Agreement and the Xxxx of Sale and Assignment Agreement.
"Undisclosed Contingencies" means claims, losses, costs, expenses,
damages, fines, penalties or liabilities (including, without limitation,
interest which may be imposed in connection therewith, court costs, litigation
expenses, and reasonable attorneys' and accounting fees) (collectively,
"Claims") relating to periods prior to the Effective Date or arising out of
occurrences or omissions on or prior to the Effective Date, but not reflected
on the Final Closing Balance Sheet or disclosed on any of the Schedules
hereto. "Undisclosed Contingencies" also shall include Claims arising out of
activities carried on prior to the Effective Date that Buyer may continue to
carry on after the Effective Date until known or discovered (but not including
any such claims to the extent resulting from the action or omission of Buyer
after known or discovered and an appropriate curative period), which Claims or
activities were not reflected on the Final Closing Balance Sheet or disclosed
on any of the Schedules hereto.
"Undisclosed Environmental Contingencies" means Undisclosed
Contingencies relating to the subject matter of Section 4.16, without regard
to knowledge, materiality or Material Adverse Effect qualifications.
ARTICLE II
PURCHASE AND SALE OF ASSETS
2.1 Closing. The closing of the purchase and sale of the Business
(the "Closing") will take place at 10:00 A.M. local time on the 7th day of
October, 2002 at the offices of Xxxxx & Xxxxxx L.L.P., 0000 Xxxxxx Xxxxxx
Xxxxxxx, Xxxxx 0000, Xxx Xxxxx, XX 00000 or such other time and place as
agreed to between Parent and Seller no less than three business days prior to
an anticipated Closing. The day on which the Closing actually occurs is herein
sometimes referred to as the "Closing Date."
2.2 Assets to be Purchased. Upon the terms and subject to the
conditions set forth herein, and in reliance on the respective representations
and warranties of the parties contained herein, at the Closing, Seller agrees
to sell, convey, grant, assign, and transfer to Buyer and Buyer agrees to
purchase and acquire from Seller all of the Real Property Assets, all of the
Assets and all of Seller's right, title and interest in and to all other
assets, properties, or rights of every nature, kind, description, tangible and
intangible, whether real, personal or mixed, whether accrued, contingent or
otherwise and whether now existing or hereinafter acquired relating in any way
to or used or held for use in connection with the Business, other than the
Excluded Assets (the "Acquired Assets").
2.3 Assets Not Being Transferred. Seller will retain and Buyer will
not purchase the following ("Excluded Assets"):
A. All of Seller's right, title and interest under or related
to this Agreement and the other Transaction Agreements, including,
without limitation, the consideration delivered pursuant to this
Agreement;
B. Minute books, stock transfer ledgers and original accounting
records of Seller;
C. Cash and cash equivalents (including cash set aside as
self-insurance for Construction Claims or other liabilities, provided
that such cash will not then be treated as part of Liability
Reserves); provided, however, that (i) to the extent that following
the Closing Selling Parties receive any cash that constitutes an
Acquired Asset or relates to an Assumed Liability, Selling Parties
shall, as soon as practicable after receipt thereof, turn over such
cash to Buyer, and (ii) to the extent that following the Closing
Parent or Buyer receives any cash that constitutes an Excluded Asset
or relates to an Excluded Liability, Parent and Buyer shall, as soon
as practicable after receipt thereof, turn such cash over to Selling
Parties;
D. Deferred tax assets, if any, and any other assets that, as a
result of the acquisition, will be written off by Buyer, as
identified on Schedule 2.3, which will be prepared by Buyer;
E. Insurance policies relating to any Excluded Contracts or
Excluded Construction Claims;
F. Employee benefit plans maintained by Selling Parties;
G. Excluded Contracts; and
H. Any books, instruments, papers and records that relate
exclusively to Excluded Assets or Excluded Liabilities (for so long
as they are Seller's sole responsibility) or to any employees of
Seller not hired by Buyer.
2.4 Liabilities.
A. Assumed Liabilities; Loan Payments. Upon the terms and
subject to the conditions of this Agreement, at the Closing, Buyer
will assume and perform and pay when due, all liabilities,
obligations and expenses, whether fixed or contingent, known or
unknown, matured or unmatured, executory or non-executory, whether
arising out of occurrences prior to, on or after the Effective Date,
even if they do not become known until after such date, whether now
existing or hereafter arising, relating in any way to the Business,
other than the Excluded Liabilities (the "Assumed Liabilities"). At
the Closing, (i) Buyer shall either assume or pay off Seller's third
party bank debt outstanding as of the Closing, and (ii) Buyer shall
pay off all loans and related accrued interest due to Zenith as of
the Closing, each as set forth on Schedule 2.4A (such bank debt and
such loans and interest due Zenith, the "Seller Debt").
B. Excluded Liabilities. Notwithstanding any other provision of
this Agreement, neither Parent nor Buyer will assume, acquire, or be
responsible for any liabilities, obligations or expenses, whether
fixed or contingent, known or unknown, matured or unmatured,
executory or non-executory, relating to or consisting of
(collectively, the "Excluded Liabilities"):
(1) Excluded Contracts and Excluded Construction Claims;
(2) Material Disclosed Contingencies;
(3) Undisclosed Contingencies, including Undisclosed
Environmental Contingencies;
(4) Employee benefit plans and employment agreements maintained
by Selling Parties (including without limitation any
obligations under Xxxxxx Xxxxxxxx'x existing employment
agreement), except for those benefits described in Section
6.1C, accrued on the Final Closing Balance Sheet or accrued
thereafter absent the willful misconduct or gross
negligence of Selling Parties; and
(5) (i) Subject to Section 8.3D, Taxes incurred prior to the
Effective Date and (ii) income or franchise Taxes of Seller
arising out of the consummation of the transactions
contemplated by this Agreement (collectively, "Pre-Closing
Tax Obligations").
C. Notwithstanding the above, Seller's obligation to discharge
the Excluded Liabilities is subject to the following:
(1) Seller's obligation to discharge the Excluded
Liabilities will survive the Closing until * with
respect to the substantive matter at issue except that
Seller's obligation to discharge Material Disclosed
Contingences and Pre-Closing Tax Obligations will
survive the Closing *;
(2) *
(3) *
(4) *
Anything contained in this Agreement to the contrary
notwithstanding, except as provided in Sections 2.4C(2), (3) and (4)
above, Buyer will not assume the Excluded Liabilities, which Excluded
Liabilities will at and after the Effective Date remain the exclusive
responsibility of Seller. Except as provided in Sections 2.4C(2), (3)
and (4) above, Seller will, and each of Selling Parties agrees to
cause Seller to, discharge all Excluded Liabilities in accordance
with their terms (subject to Seller's right to contest obligations
believed in good faith not to be then due) and Applicable Laws.
D. Notwithstanding anything in this Agreement or the other
Transaction Agreements to the contrary, upon the expiration of the
survival period set forth in Section 9.1 with respect to claims based
upon or arising out of contingencies disclosed on Schedule 2.4D,
Buyer shall refund to Seller any and all remaining Liability Reserves
related to such contingencies disclosed on Schedule 2.4D; provided,
however, (i) Buyer or Parent may setoff or reduce any refund of the
remaining Liability Reserves for Determined Indemnification Claims of
the Parent or Buyer that Selling Parties fail to satisfy within 15
days of determination and (2) Parent and Buyer shall have no
obligation to refund to Seller any remaining Liability Reserves if
Selling Parties are in breach of any of the Transaction Agreements to
the extent of any Losses actually or reasonably expected to be
incurred by Parent and Buyer as a result of such breach or
attributable to indemnity claims against Selling Parties that remain
unresolved.
2.5 Purchase Price; Earn-Out; Adjustment; and Warranty and Reserves
Administration.
A. Purchase Price. At Closing, in addition to assuming the Assumed
Liabilities, Parent will cause Buyer to pay to Seller, in immediately
available funds, the following for the Acquired Assets ("Purchase Price"):
(1) (a) Buyer will pay to Seller an amount equal to
$36,400,000, less Seller's opening cash balances on the Closing Date
(the "Opening Cash Balance") (which will be paid to Seller at
Closing), subject, however, to adjustment as set forth in this
Section 2.5A; provided, however, that at the Closing, Seller will
have an Adjusted Book Value of at least $17,500,000, less the Opening
Cash Balance (the "Book Value Target"). In the event of any shortfall
or excess from the Book Value Target as set forth on the Preliminary
Closing Balance Sheet then (i) in the case of a shortfall in Adjusted
Book Value, Selling Parties will pay to Buyer cash in an amount equal
to the shortfall and (ii) in the case of excess Adjusted Book Value,
Buyer will pay to Seller cash in an amount equal to the excess. Such
payments will be made at Closing. In the event of any shortfall or
excess from the Book Value Target as set forth on the Final Closing
Balance Sheet (taking into account any payment made by Selling
Parties or Buyer at the Closing as described in the immediately
preceding sentence), then (i) in the case of a shortfall in Adjusted
Book Value, Selling Parties will pay to Buyer cash in an amount equal
to the shortfall and (ii) in the case of excess Adjusted Book Value,
Buyer will pay to Seller cash in an amount equal to the excess. The
parties expressly agree that any obligation of Selling Parties to pay
cash to Buyer under this Section 2.5A will not count against the
Indemnification Cap or be subject to the Basket Threshold set forth
in Section 4 of the Indemnification Agreement.
(b) In the event the Effective Date is September 30, 2002, the
Purchase Price will be increased or decreased, as the case may be, by
the amount by which the Opening Cash Balance is less than or exceeds,
respectively, $6,601,291. At Closing, Buyer shall reimburse Seller
for the prepayment penalty associated with the note identified in
item 2 of Schedule 2.4A.
(2) In addition to the foregoing, Zenith will receive from
Parent deferred payments, to the extent earned, of 10% of the Pre-Tax
Net Income of Buyer as determined in accordance with GAAP (the
"Earn-Out Payments"), subject to the provisions set forth below:
(a) "Pre-Tax Net Income" will mean the net income of the Buyer
before interest and income taxes determined in accordance with GAAP
and as reported in the Buyer's financial statements after giving
effect to the following (to the extent not already reflected in the
calculation of such net income of Buyer before income taxes):
(i) subtraction of salary and incentive bonus
compensation paid to Xxxxxx Xxxxxxxx, but not the pre-tax bonus
arrangements pursuant to the Xxxxxxxx Employment Agreement;
(ii) subtraction of a "Services Fee," which shall equal
any direct third-party costs paid by Parent in connection with
providing services to the Buyer; provided, however, that the
Services Fee will not include overhead costs;
(iii) subtraction of a "Capital Charge," which shall be a
charge equal to 10.5% on the Capital (i.e., equity,
intercompany borrowings and interest bearing liabilities due
third parties) provided to Buyer by Parent. "Capital" shall
mean (x) the aggregate book value of Buyer's assets (excluding
any assets not required to be reflected on the balance sheet)
beginning on the Effective Date and at the beginning of each
period thereafter that the charge is being computed, less (y)
all non-interest bearing liabilities due third parties. The
Capital Charge will be calculated on a monthly basis. To the
extent that the Business' assets include land greater than $50
million, the excess over $50 million will not be subject to a
Capital Charge. Other than the Capital Charge, no interest
(whether direct or indirect, whether paid, actually incurred or
allocated, and whether expensed, amortized to cost of sales,
capitalized or otherwise), will be deducted or amortized in
computing the Pre-Tax Net Income for any period. Exhibit J
hereto sets forth a sample calculation. In the event of a
conflict between the description of the calculation set forth
in this Section 2.5A(2)(a) and Exhibit J, Exhibit J shall
control;
(iv) an amount equal to the excess of the Purchase Price
over the Adjusted Book Value set forth on the Final Closing
Balance Sheet (i.e., the purchase price premium over the book
value of the assets and liabilities acquired) ("Premium") shall
(x) be excluded for purposes of computing the Capital Charge
from the "aggregate book value of the Buyer's assets at the
beginning of each period;" and (y) neither deducted nor
amortized in computing the Pre-Tax Net Income for any period;
(v) exclusion of all transaction costs of Parent and
Buyer with respect to or arising out of the consummation of the
transactions contemplated by the Agreements (including, without
limitation, all costs and expenses of arbitrators (as to the
calculation of the Purchase Price), accountants, legal counsel
and financial advisors of Parent or Buyer and, if required to
be paid by Parent or Buyer pursuant to the Agreements, of any
other parties hereto);
(vi) exclusion of all losses subject to indemnification
by Selling Parties pursuant to the Indemnification Agreement
that are paid by Selling Parties or are deducted from the
Liability Reserves, and exclusion of all payments made by
Selling Parties to Buyer pursuant to the Indemnification
Agreement; and
(vii) exclusion of all other charges against net income
or resulting from significant changes in accounting principles
that are not (y) consistent with Parent's or the Business'
practices, or (z) required by GAAP.
(b) There will be three Earn-Out Payments, one for each of the
three consecutive Earn-Out Periods following the Effective Date;
(c) Buyer will pay to Zenith 90% of each estimated Earn-Out
Payment for the previous (i.e., just ended) Earn-Out Period in cash on or
before the 30th day following the end of the last relevant Earn-Out Period.
Together with that payment, Buyer will deliver to Zenith a calculation notice,
setting forth the calculation in reasonable detail, of the estimated Pre-Tax
Net Income for such Earn-Out Period. Thereafter, within 90 days after
completion of each Earn-Out Period, Parent will deliver to Zenith a
calculation notice, setting forth the calculation in reasonable detail, of the
actual Pre-Tax Net Income for such Earn-Out Period and the remaining amount,
if any, of any Earn-Out Payment due, together with a check in the amount of
the balance due;
(d) During each Earn-Out Period, unless otherwise agreed to by
Zenith, Parent and Buyer agree to:
(i) operate the Business consistent with the past
practices of Business or Parent and with Buyer's proposed
post-Closing operations, provided that Buyer will have no
obligation to execute such proposed post-Closing operations;
(ii) maintain separate books and records for the
Business;
(iii) use reasonable commercial efforts, subject to the
fiduciary duty of the Parent's Board of Directors, to provide
sufficient capital to the Business to enable it to make capital
expenditures and otherwise operate in the ordinary course; and
(iv) maintain the Business as a separate entity and not
combine, merge or consolidate it (except together or with
Parent or another subsidiary of Parent; provided that with
respect to any such combination, merger or consolidation,
Parent will continue to maintain separate books and records for
the Business) or liquidate it or, except in the ordinary course
of business, sell or otherwise dispose of its assets (except to
the Parent or another subsidiary of Parent; provided that with
respect to any such sale, transfer or disposition, Parent will
continue to maintain separate books and records for the
Business);
(e) If Zenith disputes the calculation of the Earn-Out Payment and
Parent and Zenith are unable to resolve that dispute, the parties will
arbitrate the dispute in the manner provided in Section C of Exhibit D, except
as modified herein. There will be a single arbitrator (the "Earn-Out
Accounting Arbitrator") appointed by agreement of Parent and Zenith within 30
days of receipt by Parent of a notice from Zenith that the Earn-Out Payment
calculation is disputed, or if no timely agreement is reached, appointed by
the American Arbitration Association ("AAA"). Such Earn-Out Accounting
Arbitrator will be entitled to rely on an accounting firm of national repute
(other than the firms then currently serving as auditors for Parent or Buyer
or Zenith or Seller) as may be mutually agreed upon by Parent and Zenith. If
Parent and Zenith are unable to agree on such accounting firm within 10 days
of the appointment of the Earn-Out Accounting Arbitrator, on the request of
Parent or Zenith such accounting firm will be appointed by the AAA. The
arbitration award rendered by the Earn-Out Accounting Arbitrator will be final
and binding on all parties, and judgment on the arbitration award may be
enforced in any court having jurisdiction. If the Earn-Out Payment as
determined by the Earn-Out Accounting Arbitrator is within 5% of the amount
calculated by Parent, Selling Parties will pay all of the cost of the parties'
accounting and other professionals and will bear the fees and expenses of the
Earn-Out Accounting Arbitrator. Conversely, if the Earn-Out Payment as
determined by the Earn-Out Accounting Arbitrator is greater than the amount
calculated by Parent by more than 5%, or if it is conclusively determined by
the Earn-Out Accounting Arbitrator that the disputed difference is the result
of willful misconduct on the part of Parent, Parent will pay all of the cost
of the parties' accounting and other professionals and will bear the fees and
expenses of the Earn-Out Accounting Arbitrator; and
(f) The Earn-Out Payments may be setoff or reduced to satisfy
Determined Indemnification Claims of the Parent or Buyer. Buyer agrees to
provide Zenith written notice of any such setoff when the aggregate amount of
setoffs exceeds * in any Earn-Out Period, and updates thereafter of any
additional setoff whenever the incremental aggregate amount of additional
setoffs exceeds * in that Earn-Out Period, which notices shall specify
each Determined Indemnification Claim and the amount thereof.
B. Adjustment.
(1) Schedule 2.5B(1) sets forth a balance sheet of the Business
as of August 31, 2002, which to the Knowledge of Selling Parties is
prepared in accordance with Adjusted GAAP (the "August Balance
Sheet"), and reflects the Adjusted Book Value as of such date. The
parties hereby accept and agree to the August Balance Sheet, absent
fraud, mistake or concealment and subject to their respective rights
under the Indemnification Agreement.
(2) For the purpose of making an initial determination of
Adjusted Book Value, Seller will deliver to Parent, at least five
days prior to the Closing, a balance sheet, prepared on a basis
consistent with the August Balance Sheet and in accordance with
Adjusted GAAP, reflecting the estimated closing balances for the
Business as of the Effective Date and subject to tentative approval
of Parent and Buyer (the "Preliminary Closing Balance Sheet"). At
Closing, Buyer shall make any payment to Seller required by Section
2.5A(1) or Selling Parties shall make any payment to Parent required
by Section 2.5A(1). The Preliminary Closing Balance Sheet is attached
as Schedule 2.5B(2).
(3) No later than one month after the Closing Date, Parent will
deliver to Seller the Final Closing Balance Sheet reflecting its
determination of actual closing balances for the Business, prepared
on a basis consistent with the August Balance Sheet.
(4) The Final Closing Balance Sheet will become final and
binding on the parties, absent fraud, mistake or concealment and
subject to their respective rights under the Indemnification
Agreement, unless within 15 business days following delivery thereof
to Seller, Seller notifies Parent in writing that Seller objects
thereto. If Seller objects to the Final Closing Balance Sheet, and
after good faith consultation with respect to the objection, the
parties are unable to reach an agreement within 15 days, then the
parties will resolve the dispute in the manner provided in Exhibit D;
provided, however, that the arbitrator will be Deloitte & Touche or
another accounting firm of national repute (other than the firms
currently serving as auditor for Parent, Buyer, Zenith or Seller) as
may be mutually agreed upon by Parent and Seller (the "Accounting
Arbitrator"). The determination of the Accounting Arbitrator will be
final and binding on all parties, and judgment on the arbitration
award may be enforced in any court having jurisdiction. Parent and
Seller will each pay the cost of their own accounting and other
professionals and will bear equally the fees and expenses of the
Accounting Arbitrator. Upon determination of the Final Closing
Balance Sheet pursuant to this Section 2.5B, Buyer shall make any
payment to Parent required by Section 2.5A(1) or Selling Parties
shall make any payment to Parent required by Section 2.5A(1).
C. Warranty and Reserve Administration.
(1) Subject to the following, Buyer will administer all
Excluded Construction Claims, provided that Buyer will delegate such
right to Xxxxxx Xxxxxxxx so long as he is an employee of Buyer. In
administering Excluded Construction Claims, Buyer will use reasonable
commercial efforts, generally consistent with the manner in which
Parent and Buyer have administered their own claims in the past
(except that Parent and Buyer shall continue Seller's warranty
administration policies and methodology in effect at the Closing for
a period of not less than 6 months following the Closing, and the
overhead cost of administration shall be allocated ratably each month
between Seller and Buyer based on the number of houses subject to
warranty at the end of the immediately preceding month), provided,
however, Buyer will have no exposure to Seller for the manner in
which Buyer administers the Excluded Construction Claims except for
willful misconduct or action in material breach of this paragraph,
and, provided further, that Buyer shall give periodic written notice
to Selling Parties of Excluded Construction Claims, which notice
shall specify (to the extent known) in reasonable detail the amount
of such claim and the relevant facts and circumstances relating
thereto. Selling Parties will have the right to participate, with
counsel of their choice and at their expense, in the administration
of any Excluded Construction Claim. Notwithstanding the foregoing,
neither Parent nor Buyer will settle any Excluded Construction Claim,
or series of related Excluded Construction Claims, in excess of
* without the prior written consent of Seller, except as
provided in paragraph (2) below. With respect to any Excluded
Construction Claim, or any series of related Excluded Construction
Claims, of * or less and with respect to Excluded Construction
Claims, or any series of related Excluded Construction Claims, for
which Seller consents in writing to settlement, Seller will be deemed
to have agreed to the amount of such claim as resolved by Buyer. If
Seller's consent to settlement is required for an Excluded
Construction Claim and Seller does not approve of a settlement
proposal, within 15 days of Buyer giving written notice to Seller of
such proposal, which notice shall set forth in reasonable detail the
terms of such proposal and the amount thereof, Seller shall assume
all responsibility for handling the claim; provided, however, that if
Seller does not assume the handling of such claim within such period,
then Buyer may retain the defense of such claim, with fees of Buyer's
counsel and all settlements or judgments in respect thereof to be
paid by Seller.
(2) For any Excluded Construction Claim (or any series of
related Excluded Construction Claims) that is a class action claim
involving the project known as "Southern Terrace," in which Buyer has
potential liability exposure for at least 20% of the total claim,
Buyer may settle such a claim, even if it is in excess of *,
without the prior written consent of Seller; provided, however, that
Buyer and Seller shall agree to a prorated division of liability
based on the respective percentages of homes subject to the claims
sold by each party that is subject to the claim.
(3) In the event that the costs attributable to any Excluded
Construction Claims exceed Liability Reserves attributable to those
claims, Selling Parties will indemnify Parent or Buyer for such
shortfall in accordance with the Indemnification Agreement.
2.6 Allocation of Purchase Price.
A. Within 60 days after the Closing Date, Buyer will provide to
Seller copies of IRS Form 8594 and any required exhibits thereto (the
"Purchase Price Allocation Schedule") with Buyer's proposed
allocation of the Purchase Price (together with any assumed
liabilities). Within 30 days after the receipt of such Purchase Price
Allocation Schedule, Seller will propose to Buyer any changes to such
Purchase Price Allocation Schedule (and in the event no such changes
are proposed in writing to Buyer within such time period, the Seller
will be deemed to have agreed to, and accepted, the Purchase Price
Allocation Schedule). Buyer and Seller will endeavor in good faith to
resolve any differences with respect to the Purchase Price Allocation
Schedule within 15 days after Buyer's receipt of written notice of
objection from Seller.
B. The parties agree that the book value of the Acquired Assets
approximates their fair value and that the Purchase Price Allocation
will allocate Premium to goodwill. The parties further agree that for
purposes of the Declaration of Value and the Title Policies and Title
Commitments to be delivered at the Closing, the parties shall
allocate the portion of the Purchase Price allocable to the Real
Property based on the book value of the Real Property as of the
Closing Date.
C. Buyer and Seller each hereby agree to file their respective
Tax Returns, reports, and forms, including Internal Revenue Service
Form 8594, in a manner consistent with the Purchase Price Allocation
Schedule.
D. Buyer and Seller shall not (i) take any position in any Tax
Return, report, or form, including any amendments thereto, or (ii)
reach any settlement or agreement in respect of any audit which, in
either case, is inconsistent with the Purchase Price Allocation
Schedule, unless such inconsistency is mandated by applicable law. If
such inconsistency is mandated by applicable law, the party taking
such position shall provide timely and reasonable notice to the other
party of such inconsistency and its effect on the Purchase Price
Allocation Schedule.
2.7 Risk of Loss. All risk of loss with respect to the Acquired
Assets on or before the Closing Date will remain the sole risk of Seller.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER
Parent and Buyer hereby represent and warrant to Selling Parties, the
following:
3.1 Organization and Qualification. Each of Parent and Buyer is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of incorporation and has the requisite corporate
power and authority to own and operate its properties and to carry on its
business as now conducted in every jurisdiction where the failure to do so
would have a material adverse effect on its business, properties, or ability
to conduct the business currently conducted by it.
3.2 Authority Relative to this Agreement. Each of Parent and Buyer
has the requisite power and authority to enter into this Agreement and to
carry out its obligations hereunder. The execution and delivery of this
Agreement by each of Parent and Buyer and the consummation by each of Parent
and Buyer of the transactions to which it is a party that are contemplated
hereby (including execution of the other Transaction Agreements to which it is
a party) have been duly authorized by each of them, and no other actions or
proceedings, corporate or otherwise, on the part of Parent or Buyer are
necessary to authorize this Agreement and such transactions. This Agreement
has been duly executed and delivered by each of Parent and Buyer and (assuming
this Agreement constitutes a valid and binding obligation of the other parties
hereto) constitutes a valid and binding obligation of each of Parent and Buyer
enforceable against each of Parent and Buyer in accordance with its terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, or other similar laws relating to the enforcement of
creditors' rights generally and by general principles of equity.
3.3 No Conflicts. Neither Parent nor Buyer is subject to nor
obligated under (i) any provision of its articles of incorporation or bylaws;
(ii) any agreement, arrangement, or understanding; (iii) any license,
franchise, or permit; or (iv) any law, regulation, order, judgment, or decree,
which would be breached or violated by its execution, delivery, and
performance of this Agreement and the consummation by it of the transactions
contemplated hereby, except, in the case of clauses (ii), (iii) and (iv), for
any such breaches, violations, rights of termination or acceleration or
encumbrances which are not reasonably likely, individually or in the
aggregate, to have a material adverse effect on its business, properties,
condition (financial or otherwise) or results of operations or ability to
conduct the business currently conducted by it.
3.4 Sufficient Funds. Parent has available, and will furnish to Buyer
prior to the Closing, sufficient funds in cash to pay the Purchase Price and
the Seller Debt, to pay all fees and expenses related to the transactions
contemplated hereby and to consummate the transactions contemplated hereby.
3.5 No Consents. No authorization, consent, or approval of, or filing
with, any Governmental Authority is necessary on the part of Parent or Buyer
for the consummation by Parent or Buyer of the transactions to which it is a
party that are contemplated by this Agreement, except for any such
authorizations, consents, approvals or filings, the failure of which to obtain
or make is not reasonably likely, individually or in the aggregate, to have a
material adverse effect on its business, properties, condition (financial or
otherwise) or results of operations or ability to conduct the business
currently conducted by it.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF SELLING PARTIES
Zenith hereby represents and warrants as to itself and Seller, and
Seller hereby represents and warrants as to itself, as follows:
4.1 Organization and Qualification. Seller is a corporation duly
organized, validly existing, and in good standing under the laws of Nevada and
has the requisite corporate power and authority to own and operate its
properties and to carry on the Business as it is now being conducted, except
as is not reasonably likely to have a Material Adverse Effect. Zenith is a
corporation duly organized, validly existing, and in good standing under the
laws of Delaware.
4.2 Authority Relative to this Agreement. Such Selling Party has the
requisite power and authority to enter into this Agreement and to carry out
its obligations hereunder. The execution and delivery of this Agreement by
such Selling Party and the consummation by such Selling Party of the
transactions to which it is a party that are contemplated hereby (including
execution of the other Transaction Agreements to which such Selling Party is a
party) have been duly authorized by such Selling Party, and no other actions
or proceedings, corporate or otherwise, on the part of such Selling Party are
necessary to authorize this Agreement and such transactions. This Agreement
has been duly executed and delivered by such Selling Party and (assuming this
Agreement constitutes a valid and binding obligation of the other parties
hereto) constitutes a valid and binding obligation of such Selling Party
enforceable against such Selling Party in accordance with its terms, except as
the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, or other similar laws relating to the enforcement of
creditors' rights generally and by general principles of equity.
4.3 [intentionally omitted].
4.4 No Conflicts. Except as set forth in Schedule 4.4 and subject to
the authorizations, consents, approvals and filings referred to in Section 4.5
and on Schedule 4.5, such Selling Party is not subject to nor obligated under
(i) any provision of its articles of incorporation or bylaws; (ii) any
agreement, arrangement, or understanding; (iii) any license, franchise, or
permit; or (iv) any law, regulation, order, judgment, or decree, which would
be breached or violated, or in respect of which a right of termination or
acceleration would arise, or pursuant to which any encumbrance on any of its
assets would be created, by its execution, delivery, and performance of this
Agreement and the consummation by it of the transactions contemplated hereby,
except, in the case of clauses (ii), (iii) and (iv), for any such breaches,
violations, rights of termination or acceleration or encumbrances which are
not reasonably likely, individually or in the aggregate, to have a material
adverse effect on either the Business or the Acquired Assets (taken as a
whole) (a "Material Adverse Effect").
4.5 No Consents. Except as set forth in Schedule 4.5, no
authorization, consent, or approval of, or filing with, any Governmental
Authority or pursuant to any Acquired Contract is necessary on the part of
such Selling Party for the consummation by such Selling Party of the
transactions to which it is a party that are contemplated by this Agreement,
except for any such authorizations, consents, approvals or filings the failure
of which to obtain or make is not reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect.
4.6 Ownership Interests. Except as disclosed in Schedule 4.6, Seller
does not own any stock, partnership interest, joint venture interest, or any
other security issued by or equity interest in any other corporation,
organization, association, or entity.
4.7 Financial Statements.
A. Schedule 4.7A sets forth: (a) the audited financial
statements of Seller as of, and for the fiscal years ended, December
31, 2001, 2000, and 1999; and (b) the unaudited financial statements
of Seller as of, and for the eight month period ended, August 31,
2002 (the "Balance Sheet Date" and, the financial statements
described in the immediately preceding clauses (a) and (b),
collectively, the "Financial Statements"). Except as set forth on
Schedule 4.7A, the Financial Statements have been prepared in
accordance generally accepted accounting principles, consistently
applied in accordance with past practices of Seller in effect at the
time of such preparation applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes to the
Financial Statements) and fairly present in all material respects the
financial position of Seller as of the dates thereof and the results
of Seller's operations and cash flows for the periods then ended,
except for the absence of footnotes to the unaudited financial
statements.
There are no obligations or liabilities relating to or
affecting the Business or the Acquired Assets (whether accrued,
absolute, contingent, liquidated, unliquidated or otherwise, whether
due or to become due and regardless of when asserted), except (i)
liabilities reflected in the Financial Statements or disclosed in the
notes thereto, (ii) liabilities which have arisen in the ordinary
course of business after the Balance Sheet Date, (iii) liabilities
specifically disclosed in Schedule 4.7B, (iv) Excluded Liabilities,
and (v) liabilities which are not reasonably likely, individually or
in the aggregate, to have a Material Adverse Effect.
4.8 [intentionally omitted].
4.9 No Material Adverse Changes. Except as set forth in Schedule 4.9,
since the Balance Sheet Date, there has not been any change in the assets,
financial condition, or operating results, customer, employee, or supplier
relations, business condition, or financing arrangements of Seller, which has
had, or is reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect.
4.10 Absence of Certain Developments. Except as set forth in Schedule
4.10 or except as contemplated in and consistent with the terms of this
Agreement, the Asset Agreement or the Real Property Agreement, since the
Balance Sheet Date, Seller has not, in respect of the Business:
A. Changed its accounting methods or practices (including any
change in depreciation or amortization policies or rates) or revalued
any of its assets;
B. Declared or paid any dividend or distributions (other than
dividends or distributions of cash and cash equivalents (including to
make quarterly tax payments)) from Seller to Zenith;
C. Borrowed any amount under existing lines of credit, or
otherwise incurred or become subject to any indebtedness, except in
the ordinary course of business and in a manner and in amounts that
are in keeping with past practices;
D. Discharged or satisfied any material Lien (other than Liens
arising as a matter of law for property taxes and assessments and
business and personal property taxes, mechanic's liens and similar
items discharged in the ordinary course of business consistent with
past practices);
E. Except as is reasonably necessary for the ordinary operation
of the Business and in a manner and in amounts that are in keeping
with past practices, mortgaged, pledged, or subjected to any Lien any
of its assets with a fair market value in excess of $25,000, except
Liens for current property taxes not yet delinquent;
F. Sold, assigned, or transferred (including, without
limitation, transfers to any employees, shareholders, or affiliates)
any material assets or canceled any material debts or claims, except,
in each case, in the ordinary course of business consistent with past
practices;
G. Sold, assigned, or transferred any patents, trademarks,
trade names, copyrights, trade secrets, or other intangible assets or
disclosed any proprietary or confidential information to any person
other than Parent or Buyer;
H. Suffered any extraordinary loss or waived any material right
or claim, including any write-off or compromise of any contract or
account receivable, except to the extent reserved in the Preliminary
Closing Balance Sheet;
I. Taken any other action or entered into any other material
transaction other than in the ordinary course of business consistent
with past practices, or entered into any transaction with an
employee, shareholder, partner, member or officer of either of
Selling Parties or their affiliates;
J. Suffered any theft, damage, destruction, or loss of or to
any property or properties owned or used by it, whether or not
covered by insurance, except for any such theft, damage, destruction
or loss that is not reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect;
K. Increased the annualized level of compensation of or granted
any extraordinary bonuses, benefits, or other forms of direct or
indirect compensation to any employee, officer, director, or
consultant that aggregate in excess of $25,000, or adopted, amended
or modified any employee benefit plans;
L. Except as is reasonably necessary for the ordinary operation
of the Business and in a manner and in amounts that are in keeping
with past practices, made any capital expenditures or commitments for
property, plant and equipment that aggregate in excess of $25,000;
M. Engaged or agreed to engage in any extraordinary
transactions or distributions, or, except as is reasonably necessary
for the ordinary operation of the Business and in keeping with past
practices, entered into any contract, written or oral, that involves
consideration or performance by it of a value exceeding $25,000 or a
term exceeding one year;
N. Made any loans or advances to, or guarantees for the benefit
of, any persons; or
O. Made charitable contributions or pledges which in the
aggregate exceed $10,000.
4.11 Permitted Liens; Good Title to and Condition of Acquired Assets.
To the Knowledge of Selling Parties, Seller's title to the Acquired Assets is
free and clear of all Liens other than those listed on Schedule 4.11 and
Approved Title Exceptions (collectively, the "Permitted Liens"). To the
Knowledge of Selling Parties, except as is not reasonably likely, individually
or in the aggregate, to have a Material Adverse Effect, all of the Acquired
Assets are in good condition and repair, ordinary wear and tear excepted, and
are usable in the ordinary course of business. The Acquired Assets represent
all of the assets of the Business and all of the assets necessary or required
by Buyer to continue to operate the Business as conducted prior to the Closing
Date. Seller owns, or leases under valid leases, all property, machinery,
equipment, and other tangible and intangible assets necessary for the conduct
of the Business. None of the assets attributable to, or necessary to the
operation of, the Business, as conducted immediately prior to the Closing
Date, are held or owned by an entity other than Seller. There are no parents,
shareholders or affiliates of Seller that directly own any assets, licenses,
permits or other authorizations relating to the Acquired Assets or the
Business.
4.12 Legal Descriptions of Real Property. Schedule 4.12 sets forth
Reports that to the Knowledge of the Selling Parties contain an accurate legal
description for each parcel of Owned Real Property.
4.13 Real Property. Except as set forth on Schedule 4.13:
A. To the Knowledge of Selling Parties, with respect to any
agreements, arrangements, contracts, leases, licenses, covenants,
conditions, deeds, deeds of trust, rights-of-way, easements,
mortgages, restrictions, surveys, title insurance policies, and other
documents granting to Seller title to or an interest in or right with
respect to the Owned Real Property, no breach or default by Seller
exists, and no event has occurred that, with the giving of notice,
the lapse of time, or both, would constitute a breach or event of
default by Seller or any other person.
B. Selling Parties are not subject to any pending or, to the
Knowledge of Selling Parties, threatened proceeding or other fact or
condition that is reasonably likely to limit or result in the
termination of necessary access to the Owned Real Property from
public highways, streets, or roads.
C. [intentionally omitted].
D. Selling Parties have not received any written notice from
any Governmental Authority of any pending or threatened condemnation,
eminent domain, or similar proceeding with respect to the Owned Real
Property, and none is pending or, to the Knowledge of Selling
Parties, is threatened with respect to any material portion of the
Owned Real Property.
E. Any buildings or improvements on the Owned Real Property to
the extent installed or constructed by Seller are in material
compliance with all Applicable Laws and do not violate, in any
material respect, (i) any set-back, (ii) zoning law, ordinance,
regulation, or statute, or other governmental restriction in the
nature thereof, or (iii) any restrictive covenant affecting any such
Owned Real Property.
F. To the Knowledge of Selling Parties, there are no parties in
possession of any portion of the Owned Real Property as lessees,
tenants at sufferance, or trespassers.
G. Except as incurred in the ordinary course of business after
the Balance Sheet Date, at Closing there will be no unpaid charges,
debts, liabilities, claims, or obligations arising from the
construction, occupancy, ownership, use, or operation of the Owned
Real Property by Seller.
H. No Owned Real Property is subject to any condition or
obligation to any Governmental Authority or other person requiring
the owner or any transferee thereof to donate land, money or other
property or to make off-site public improvements, other than as
disclosed in the Reports or contained in the Land Use Entitlements or
conditions for approval for such projects.
I. To the Knowledge of Selling Parties, except as set forth on
Schedule 4.7 or Schedule 4.12, no developer-related fees, charges,
community development district assessments, or other assessments for
public improvements or otherwise made against the Owned Real Property
or any lots included therein are due and unpaid, or will become due
in the future, including without limitation those for construction of
sewer lines, water lines, storm drainage systems, electric lines,
natural gas lines, streets (including perimeter streets), roads and
curbs, other than as may be required in the ordinary course of
completing such project from its current (incomplete) status or as
otherwise disclosed in the Reports or set forth in the conditions of
approval or contained in the Land Use Entitlements for such projects
provided to Buyer.
J. There is no moratorium applicable to the Owned Real Property
on (1) the issuance of building permits for the construction of
houses, or certificates of occupancy therefor, or (2) the purchase of
sewer or water taps.
K. Seller has delivered to Buyer copies of all soils reports in
Seller's possession relating to the Owned Real Property, and to the
Knowledge of Selling Parties, the soils reports delivered to Buyer
are materially accurate.
L. To the Knowledge of Selling Parties, except as set forth in
the Reports, Surveys or plats, the Owned Real Property: (i) does not
contain "wetlands," as defined, or subject to regulation by, the Army
Corps of Engineers or the Environmental Protection Agency; (ii) does
not have a level of radon above action levels of the U.S.
Environmental Protection Agency; (iii) is not located within a
"critical," "preservation," "conservation," "habitat conservation
area," or similar type of area subject to regulation under any
Environmental Laws; and (iv) is not "critical habitat" as defined in
the Federal Endangered Species Act, 16 U.S.C.ss.ss.1531 et seq. as
amended, or in the regulations promulgated thereunder, and does not
contain any "endangered species" or "threatened species" as defined
therein, or under any similar state or local Environmental Laws.
M. To the Knowledge of Selling Parties, the Owned Real Property
has not been used as a gravesite, landfill, or waste disposal area.
To the Knowledge of Selling Parties, there are no archeological
artifacts of any kind or any Indian ruins of any kind located on the
Owned Real Property.
N. [intentionally omitted].
O. Except as disclosed in the Reports or any Title Policy,
Seller has not granted to any person any contract or other right to
the use of any portion of the Owned Real Property or to the
furnishing or use of any facility or amenity on or relating to the
Owned Real Property.
P. Seller is not a "foreign person" within the meaning of
Sections 1445 and 7701 of the Code.
Q. Subject to the Liability Reserves, to the extent installed
or constructed by Seller or its agents or affiliates, all of the
Housing Units, improvements and buildings on the Owned Real Property
were constructed in a good and workmanlike manner, substantially
comply with Applicable Laws, are structurally sound, are in good and
proper working condition and repair, normal wear and tear, normal
maintenance and normal warranty and customer services matters
excepted, and are useful for their intended purposes.
R. To the Knowledge of Selling Parties: (i) any improvements
and buildings included within the Owned Real Property are located
within the boundary lines of the Owned Real Property and do not
encroach upon the land of any adjacent owner; (ii) no improvements of
any third Person encroach upon the Owned Real Property; and (iii) no
Person has any unrecorded right, title or interest in the real
property constituting the Owned Real Property, whether by right of
adverse possession, prescriptive easement or otherwise.
S. Selling Parties have not received any written notice to the
effect that the Owned Real Property is being developed or used in
violation of covenants, easements, or restrictions affecting the
Owned Real Property, and except as is not likely, individually, or in
the aggregate, to have Material Adverse Effect, all obligations of
Seller on the Owned Real Property with regard to such covenants,
easements, and restrictions have been and are being performed in a
proper and timely manner.
T. Except as disclosed in the Reports or any Title Policy,
Seller does not have any liability for any Taxes or for any Liens
caused by Seller, in each case against the Owned Real Property, other
than Liens or real property taxes, special taxes, and assessments
paid with taxes, in each case, not yet delinquent.
U. To the Knowledge of Selling Parties, the Owned Real Property
shown in the Federal Emergency Management Agency maps attached to
Schedule 4.13U as being in Zone "A" is within a 100 year flood plain
of the Federal Emergency Management Agency.
V. All work performed on or about the Owned Real Property or to
any improvements located thereon within six months prior to the date
of this Agreement has been paid for or will be accrued in good faith
in accordance with Seller's past practices on the Preliminary Closing
Balance Sheet.
W. To the Knowledge of Selling Parties, except as shown on the
map attached to Schedule 4.13W, no portion of the Owned Real Property
is situated within a "noise cone" such that the Federal Housing
Administration will not approve mortgages due to the noise level
classification of such real property.
4.14 Acquired Contracts.
A. Schedule 4.14 lists as of the date hereof all Acquired
Contracts that are Material Contracts. Prior to the date of this
Agreement, Seller has provided to Buyer a true and correct copy of
each Material Contract together with all amendments, waivers, or
other changes thereto.
B. Each of the Material Contracts is valid, binding, and in
full force and effect on Seller in all material respects and, to the
Knowledge of Selling Parties, is valid, binding, and in full force
and effect in all material respects on each of the other parties
thereto. Except as set forth on Schedule 4.14, no Material Contract
has been amended or supplemented and Seller has not, and to the
Knowledge of Selling Parties no other party thereto has, assigned any
of its rights or delegated any of its duties thereunder.
C. Except as set forth on Schedule 4.14, no breach or default
by Seller exists under any Material Contract and, to the Knowledge of
Selling Parties, no event has occurred with respect to Seller that
with the lapse of time or action or inaction by Seller would result
in a breach thereof or a default thereunder.
D. Except as specifically disclosed in Schedule 4.14, (1) since
the Balance Sheet Date, no supplier or materialman has indicated in
writing that it will stop or decrease the rate of business done with
Seller, except for changes in the ordinary course of business; (2)
Seller has performed in all material respects the obligations which
have been required to be performed by Seller under the Material
Contracts and Seller has not been advised of or received any claim of
default under any Material Contract; and (3) there has been no
material breach by Seller of any Material Contract and, to the
Knowledge of Selling Parties, there has been no breach of any
Material Contract by any other party thereto.
E. Upon the assignment of each Material Contract to Buyer
pursuant hereto, and subject to any consent requirements contained
therein, all rights of Seller with respect to each Material Contract
will inure to Buyer and each Material Contract will be enforceable by
Buyer in accordance with its terms.
F. [intentionally omitted].
G. Seller has paid all rental and other payments due under the
Property Leases under which Seller is the lessee in accordance with
its terms. With respect to each such Property Lease, Seller has been
in peaceable possession of the buildings, equipment, machinery, real
property, vehicles, or other tangible property covered thereby since
the commencement of the original term of such Property Lease. No
indulgence, postponement, or waiver of Seller's obligations under any
such Property Lease has been granted by the lessor. Subject to the
terms of the Property Leases, Seller possesses full right and power
to occupy or possess, as the case may be, all of the buildings,
equipment, machinery, real property, vehicles, and other tangible
property covered by such Property Leases.
H. To the Knowledge of Selling Parties, the representations and
warranties set forth in Sections 4.14B through G also are true with
respect to Acquired Contracts that are not Material Contracts.
4.15 Warranties. Except as set forth on Schedule 4.15, Seller has not
given or made any express warranties to third parties with respect to any
property or products sold or services performed by Seller and, to the
Knowledge of Selling Parties, there are no facts or the occurrence of any
event forming the basis of any present claim against Seller for liabilities
due to any express or implied warranty. Schedule 4.15 includes forms of
Seller's residential sales contracts containing applicable guaranty, warranty,
and indemnity provisions.
4.16 Environmental Matters.
A. Except as is not reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect, or as disclosed on
Schedule 4.16, (a) Seller, its properties, and the Acquired Assets
are in compliance with all federal, state, and local laws governing
pollution or the protection of human health or the environment
including but not limited to, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by the
Superfund Amendment and Reauthorization Act of 1986, 42 U.S.C.
Section 9601, et seq. (collectively "CERCLA"); the Solid Waste
Disposal Act, as amended by the Resource Conservation and Recovery
Act of 1976 and subsequent Hazardous and Solid Waste Amendments of
1984, 42 U.S.C. Sections 6901, et seq. (collectively "RCRA"); the
Hazardous Materials Transportation Act, as amended, 49 U.S.C.
Sections 1801, et seq.; the Clean Water Act, as amended, 33 U.S.C.
Section 1311, et seq.; the Clean Air Act, as amended, 42 U.S.C.
Section 7401-7642; the Toxic Substances Control Act, as amended, 15
U.S.C. Sections 2601, et seq.; the Federal Insecticide, Fungicide,
and Rodenticide Act as amended, 7 U.S.C. Section 136-136y ("FIFRA");
and the Emergency Planning and Community Right-to-Know Act of 1986 as
amended, 42 U.S.C. Sections 11001, et seq. (Title III of XXXX)
("EPCRA") (collectively, "Environmental Laws"), (b) Seller has not
received any written notice not subsequently resolved with respect to
the business of, or any property owned or leased by, Seller from any
Governmental Authority or third party alleging that Seller is not in
compliance with any Environmental Laws, and (c) Seller has not caused
a release of a Hazardous Substance, as that term is defined in
CERCLA, in excess of a reportable quantity on any real property owned
or leased by Seller.
B. Seller has not filed any application pursuant to Nevada
Revised Statutes ("NRS")ss. 459.634 to participate in a voluntary
cleanup and relief program ("program," as defined in NRSss. 459.624).
C. Except as is not reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect, to the Knowledge of
Selling Parties, Seller has never applied for and been denied
environmental impairment liability insurance coverage relating to the
Owned Real Property or property subject to Property Leases.
D. The representations and warranties contained in this Section
4.16 constitute the sole and exclusive representations and warranties
made by Seller concerning environmental matters.
4.17 Tax Matters.
A. Except as set forth in Schedule 4.17, and except for
non-delinquent real property taxes and assessments, all material
Taxes due and payable by Seller with respect to periods ending on or
as of the Effective Date (whether or not a Tax Return is due on such
date) have been paid or are accrued on the applicable Financial
Statements or will be accrued on the books and records of Seller as
of the Effective Date and all material Tax Returns relating thereto
have been filed.
B. Except as set forth on Schedule 4.17, with respect to each
taxable period for Seller ending prior to the Closing Date, (1) (x)
such taxable period has been audited by the relevant taxing authority
or (y) the time for assessing or collecting Taxes with respect to
each such taxable period has closed and each taxable period is not
subject to review by any relevant taxing authority; (2) there is no
outstanding deficiency or proposed adjustment for any material Taxes
asserted or assessed in writing by any taxing authority against
Seller; (3) Seller has not consented to extend the time in which any
material Taxes may be assessed or collected by any taxing authority;
(4) there is no action, suit, taxing authority proceeding, or audit
now in progress or pending with respect to Seller regarding any
material Taxes; and (5) there are no Liens on the assets of Seller
relating or attributable to Taxes (other than Liens for sales and
payroll Taxes not yet due and payable and liens for non-delinquent
real property taxes and assessments), and, to the Knowledge of
Selling Parties there is no reasonable basis for the assertion of any
claim relating or attributable to Taxes which, if adversely
determined, would result in any such Lien on the assets of Seller.
C. None of the Assumed Liabilities is an obligation to make a
payment that will not be deductible under section 280G of the Code.
4.18 Restrictions on Business Activities. With respect to the
Acquired Assets, there are no agreements (non-compete or otherwise),
arrangements, commitments, judgments, injunctions, orders, or decrees to which
Seller is party or which are otherwise binding on the Business or the Acquired
Assets that has prohibited or impaired, or is reasonably likely to prohibit or
impair, the operation of the Business as it is now being conducted.
4.19 Intellectual Property. Schedule 4.19 sets forth a description of
the material Intellectual Property which Seller has rights to use in the
conduct of the Business. To the Knowledge of Selling Parties, the conduct of
the Business as it is now being conducted and the conduct and the use and
exploitation of the Intellectual Property do not infringe or misappropriate
any rights held or asserted by any person, and, to the Knowledge of Selling
Parties, no person is infringing on the Intellectual Property. Except as set
forth in the Acquired Contracts, no payments are required for the continued
use of the Intellectual Property. None of the Intellectual Property has been
declared invalid or unenforceable by any Governmental Authority, or is the
subject of any pending or threatened action for opposition, cancellation,
declaration, infringement, invalidity, unenforceability, or misappropriation
or like claim, action, or proceeding. Except as set forth in Schedule 4.19 all
house plans used by the Business are owned outright by Seller or are licensed
to Seller without further payment of any fee and may be assigned to Buyer
without further costs due thereafter.
4.20 Litigation. Except as set forth on Schedule 4.20, there are no
suits, claims, actions, arbitrations, investigations, or proceedings entered
against, now pending, or, to the Knowledge of Selling Parties, threatened
against Seller, the Business, or the Acquired Assets before any Governmental
Authority which are reasonably likely, individually or in the aggregate, to
have a Material Adverse Effect. Except as set forth on Schedule 4.20 and
except as is not reasonably likely to have a Material Adverse Effect, Seller
is not subject to any continuing court or administrative order, writ,
injunction, or decree applicable to the Business, the Acquired Assets or to
its property or employees, and Seller is not in default under any order, writ,
injunction, or decree of any Governmental Authority applicable to the
Business.
4.21 Employees. Attached as Schedule 4.21 is a list of names, current
annual rates of salary, bonus, employee benefits, accrued vacation and sick
time, sick pay, and other compensation and benefits and perquisites, including
the provision of company owned automobiles, of all the employees and agents of
Seller whose work relates, directly or indirectly, to the Business. To the
Knowledge of Selling Parties, no key employee of Seller, and no group of
Seller's employees, has any plans to terminate his, her, or their employment.
Seller is not a party to any collective bargaining agreement with any labor
union or association. There are no discussions, negotiations, demands, or
proposals that are pending or that have been conducted or made with or by any
labor union or association, and there are no pending or, to the Knowledge of
Selling Parties, threatened labor disputes, strikes, or work stoppages that
may effect Seller, the Acquired Assets, or the Business. Seller is in
compliance in all material respects with all federal and state laws respecting
employment and employment practices, terms and conditions of employment, and
wages and hours, and are not engaged in any unfair labor practices. Except as
accrued on the Preliminary Closing Balance Sheet or as set forth in Schedule
4.21, Seller may terminate any employee, with or without cause, without
liability or obligation, other than for salary, bonuses, vacation, sick time
and similar obligations accrued through the date of any such termination and
for the obligations of Selling Parties under employee benefit plans of Selling
Parties referred to in Section 4.22 below.
4.22 Employee Benefit Plans.
A. With respect to all employees and former employees of
Seller, except as set forth in Schedule 4.22, Seller does not
presently maintain, contribute to, or have any liability (including
current or potential multi-employer plan withdrawal liability under
Title IV of ERISA) under any: (1) retirement plan or arrangement that
is an "employee pension benefit plan" as such term is defined in
Section 3(2) of ERISA; (2) "multi-employer plan" as such term is
defined in Section 3(37) of ERISA; (3) medical, health, or life
insurance plan or arrangement maintained for the benefit of employees
or retirees that is an "employee welfare benefit plan" as such term
is defined in Section 3(1) of ERISA, except as required by Section
4980B of the Code or Sections 601 through 609 of ERISA; or (4) any
other material employee welfare benefit plan. With respect to each of
the employee benefit plans listed in Schedule 4.22, Seller has
furnished to Buyer, as applicable, true and complete copies of the
plan documents.
B. With respect to each plan listed in Schedule 4.22, except as
set forth on Schedule 4.22, Seller has performed all material
obligations required to be performed by it under each such plan and
each such plan has been established and maintained in accordance with
its terms and in material compliance with all applicable laws,
statutes, rules, and regulations, including but not limited to the
Code and ERISA.
4.23 Insurance. Schedule 4.23 lists and briefly describes each
material insurance policy (collectively, the "Policies") and fidelity bond,
including performance improvement bonds, maintenance bonds, labor and material
bonds and other bonds related to the Owned Real Property (collectively, the
"Bonds"), maintained by Seller with respect to its properties or the Business,
and sets forth the date of expiration of each such Policy. All of such
Policies and Bonds are in full force and effect and Seller is not in default
with respect to its obligations under any of such Policies or Bonds. Except as
set forth on Schedule 4.23, there is no claim of Seller pending under any of
such Policies or Bonds as to which coverage has been questioned, denied, or
disputed by the underwriters of such Policies or Bonds and, to the Knowledge
of Selling Parties, there has been no threatened termination of, or material
premium increase with respect to, any of such Policies. To the Knowledge of
Selling Parties, the insurance coverage of Seller is customary for entities of
similar size engaged in similar lines of business.
4.24 Affiliate Transactions. Except as set forth on Schedule 4.24 and
except for the transactions contemplated by this Agreement, neither Seller nor
any employee, officer, director, shareholder or affiliate of Seller, or any
member of their immediate family, or any entity in which any of such persons
owns any beneficial interest (other than a publicly held corporation whose
stock is traded on a national securities exchange or in the over-the-counter
market and less than 1% of the stock of which is beneficially owned by any of
such persons) has any agreement with Seller or (other than Zenith) any
interest in any property (real, personal, or mixed, tangible or intangible)
used in or pertaining to the Business. For purposes of the preceding sentence,
the members of the immediate family of a person will consist of the spouse,
parents, children, siblings, mothers- and fathers-in-law, sons- and
daughters-in-law, and brothers- and sisters-in-law of such person.
4.25 Compliance with Laws. Seller is not conducting the Business in
violation of any Applicable Laws which affect the Business or the Acquired
Assets, except for any such violations that are not reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect. Seller
has received no notice of any claims against Seller alleging a violation of
any Applicable Laws, except as set forth in Schedule 4.25 or except for such
claims that are not reasonably likely, individually or in the aggregate, to
have a Material Adverse Effect. Without limiting the generality of the
foregoing, Seller is not in violation of, and has not received a notice or
charge asserting any violation of, OSHA, or any other state or federal acts
(including rules and regulations thereunder) regulating or otherwise affecting
employee health and safety, except for such violations that are not reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect.
Seller has not given or agreed to give any money, gift, or similar benefit
(other than incidental gifts of articles of nominal value) to any actual or
potential customer, supplier, governmental employee, or any other person in a
position to assist or hinder Seller in connection with any actual or proposed
transaction.
4.26 Permits.
A. Seller possesses all approvals, authorizations,
certificates, consents, franchises, licenses, and permits of
Governmental Authorities necessary for the lawful conduct of the
Business, as it is now being conducted, except for such approvals,
authorizations, certificates, consents, franchises, licenses, and
permits the absence of which is not reasonably likely, individually
or in the aggregate, to have a Material Adverse Effect (collectively,
the "Permits"). Such Permits are in full force and effect in all
material respects, Seller is in compliance with the terms thereof,
except for such failures to comply which are not reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect,
and to the Knowledge of Selling Parties, no basis exists for any
limitation, revocation or withdrawal of any Permit.
B. Seller also possesses (or there have been granted by the
applicable Governmental Authorities with respect to the Owned Real
Property) the subdivision, development, construction and sale
permits, and other authorizations, approvals, and entitlements set
forth in Schedule 4.26 (collectively "Land Use Entitlements"). To the
Knowledge of Selling Parties, except as set forth on Schedule 4.26B,
with respect to the Owned Real Property, (i) no approvals are
required as of the Closing from any Governmental Authority to
complete the development and construction of homes and the sale
thereof in the respective Owned Real Property, and (ii) there are in
full force and effect validly issued building permits for each home
under construction or completed on the Owned Real Property. No
decision-making body has denied or withheld any Land Use Entitlements
except for such denials as are not reasonably likely, individually or
in the aggregate, to have a Material Adverse Effect.
4.27 Disclosure. Neither this Agreement nor any of the Schedules or
Exhibits hereto contains any untrue statement of a material fact or, to the
Knowledge of Selling Parties, omits to state a material fact necessary to make
the statements contained herein or therein, in light of the circumstances in
which they were made, not misleading, and there is no fact which has not been
disclosed to Parent or Buyer which is reasonably likely to have a Material
Adverse Effect.
ARTICLE V
CONDUCT OF SELLER PENDING THE CLOSING
Seller hereby covenants and agrees that from the date hereof to the
Closing Date:
5.1 Conduct of Business Pending the Closing. Except as set forth on
Schedule 5.1 or as contemplated by this Agreement, (a) Seller will carry on
the Business in the ordinary course, in accordance with all Applicable Laws
and in substantially the same manner as previously conducted, and (b) without
the prior written consent of Parent (which consent shall not be unreasonably
withheld), Seller will not, directly or indirectly, and Zenith will not permit
Seller to, directly or indirectly:
A. Cancel or terminate or permit to be canceled or terminated
Seller's current insurance (or reinsurance) policies or permit any of
the coverage thereunder to lapse, unless simultaneous with such
termination, cancellation, or lapse, replacement policies providing
coverage equal to or greater than the coverage under the canceled,
terminated, or lapsed policies for substantially similar premiums are
in full force and effect;
B. Sell, lease, encumber, or otherwise dispose of any of the
Acquired Assets other than, in the case of lots and homes held for
sale in the ordinary course, the sale of such lots or homes in the
ordinary course of business as previously conducted;
C. Acquire or enter into any option or other agreement to
acquire any real property or other material assets;
D. Intentionally default under any Material Contract;
E. Intentionally violate or fail to comply in any material
respect with any Applicable Laws;
F. Fail to maintain and repair the Acquired Assets in
accordance with the ordinary course of business;
G. Except as contemplated by this Agreement or in the ordinary
course of business, enter into any employment, severance, or similar
agreements or arrangements with, or adopt, modify or amend any bonus,
profit sharing, compensation, stock option, pension, retirement,
deferred compensation, employment, severance or other benefit plan,
trust, fund, or group arrangement resulting in a material increase in
benefits to employees, officers, directors or consultants of Seller;
H. Except in the ordinary course of business, consistent with
past practices, modify or terminate any of the Acquired Contracts or
enter into any new contracts;
I. Acquire (by merger, exchange, consolidation, acquisition of
stock or assets, or otherwise) any corporation, partnership, joint
venture, or other business organization or division or material
assets thereof;
J. Issue or create any additional shares of Seller;
K. Except as contemplated by this Agreement, enter into any
obligations, subscriptions, options, or other commitments under which
any additional shares of Seller might be directly or indirectly
authorized, issued, or transferred, or incur any indebtedness for
borrowed money or issue any debt securities except the borrowing of
working capital in the ordinary course of business and consistent
with past practice;
L. Except in the ordinary course of business, consistent with
past practices, pay any material obligation or liability, fixed or
contingent, other than current liabilities;
M. Waive or compromise any right or claim (other than as
required to resolve any pending or threatened litigation disclosed in
the Schedules attached hereto) or warranty claims;
N. Pay any dividends or make any distributions (other than
dividends or distributions of cash and cash equivalents (including to
make quarterly tax payments)) from Seller to Zenith;
O. Start more spec homes than is consistent with past
practices;
P. Commit any act described in Section 4.10; or
Q. Agree to do any of the actions described in the preceding
clauses A through P.
5.2 Business Relationships. Selling Parties will exercise their
commercially reasonable efforts to:
A. Preserve intact the Acquired Assets;
B. Maintain all facilities and equipment in good condition,
ordinary wear and tear excepted;
C. Keep available the services of Seller's officers and
employees as a group; and
D. Maintain satisfactory relationships with material suppliers,
distributors, customers, and others having material business
relationships with Seller.
5.3 Notification of Certain Matters. Selling Parties will:
X. Xxxxxx on a regular basis with representatives of Parent and
Buyer and report operational matters and the general status of
ongoing operations;
B. Notify Parent of any material adverse change in the normal
course of its business or in the operation of its properties and of
any Governmental Authority or third party complaints, investigations,
or hearings (or communications indicating that the same may be
contemplated);
C. Not take any action which would render, or which reasonably
may be expected to render, any representation or warranty made by it
in this Agreement untrue at, or at any time prior to, the Closing;
and
D. Promptly notify Parent if Selling Parties discover that any
representation or warranty made by such party in this Agreement was
when made, or has subsequently become, untrue.
5.4 Required Approvals. As promptly as practicable after the date of
this Agreement, Parent, Buyer, and Seller will cooperate in making all filings
required by Applicable Laws in order to consummate the transactions
contemplated by this Agreement. The parties also will cooperate with each
other in obtaining all consents required by Section 7.2B.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Employment. Seller shall pay at the Closing all compensation,
benefits, perquisites and other payments earned by Seller's employees for
periods prior to the Closing Date (other than payments accrued on the
Preliminary Closing Balance Sheet) and remaining unpaid as of the Closing
Date, in accordance with the terms of the agreements, plans or policies
governing such payments, as applicable. To the extent Seller makes any such
payments after the Closing, Buyer shall promptly reimburse Seller for such
payments.
A. Immediately after the Closing, Buyer will offer to employ
all employees of Seller on an "at will" basis and Seller will
cooperate with Buyer to that end; provided, however, that Buyer
hereby agrees to engage Xxxxxx Xxxxxxxx as an employee of Buyer and
as President of Buyer pursuant to the terms of that certain
employment agreement, to be entered into, by and between Parent,
Buyer and Xxxxxx Xxxxxxxx, in the form attached hereto as Exhibit I
(the "Xxxxxxxx Employment Agreement"). Notwithstanding anything in
this Agreement, all employees of Seller shall remain employees of
Seller through the Closing for all purposes (including COBRA).
B. Buyer shall use reasonable commercial efforts, without
incurring any material incremental monetary obligation, to credit all
employees hired pursuant to this Section 6.1 with service with Seller
for purposes of seniority, eligibility and vesting under all employee
benefit plans, programs or arrangements of Buyer under which such
employees may be eligible to participate.
C. Buyer shall use reasonable commercial efforts, without
incurring any material incremental monetary obligation, to waive all
limitations as to preexisting condition exclusions and waiting
periods with respect to participation and coverage requirements
applicable to the employees of Buyer under any welfare benefit plans
that such employees are eligible to participate in after the Closing,
other than to the extent that exclusions or waiting periods already
in effect with respect to such employees have not been satisfied as
of the Closing under any welfare benefit plan maintained for such
employees immediately prior to the Closing.
6.2 No Negotiations. Selling Parties will not, directly or
indirectly, through any officer, director, agent, member, shareholder,
affiliate or otherwise, solicit, initiate, or encourage submission of any
proposal or offer from any person or entity (including any of its officers,
directors, partners, employees, or agents) relating to any liquidation,
dissolution, recapitalization, merger, consolidation, or acquisition or
purchase of all or part of the Acquired Assets, or any equity interest in
Seller, or other similar transaction or business combination involving Seller
or the Acquired Assets or the Business, or participate in any negotiations
regarding, or furnish to any other person any information with respect to, or
otherwise cooperate in any way with, or assist, participate in, facilitate, or
encourage, any effort or attempt by any other person or entity to do or seek
any of the foregoing. Selling Parties will promptly notify Parent if any such
proposal or offer, or any inquiry from or contact with any person with respect
thereto, is made and will promptly provide Parent with such information
regarding such proposal, offer, inquiry, or contact as Parent may request.
6.3 Public Announcements. Up to and including Closing, Parent and
Selling Parties will agree on the form and content of the initial press
release regarding the transactions contemplated hereby and the parties hereto
will not issue any press release or public announcement, including
announcements by any party for general reception by or dissemination to
employees, agents, or customers, with respect to this Agreement and the other
transactions contemplated by this Agreement without the prior written consent
of the other parties hereto (which consent will not be withheld unreasonably);
provided, however, that each of Parent and Zenith may make any disclosure or
announcement that, in the opinion of its counsel, it is obligated to make
pursuant to Applicable Laws (including federal securities laws) or pursuant to
applicable regulation of the New York Stock Exchange or any national
securities exchange, as applicable. In the event that Parent or Zenith is
requested pursuant to, or required by, applicable regulation of the New York
Stock Exchange or any national securities exchange or Applicable Laws
(including federal securities laws) to make any disclosure or announcement
concerning Parent, Buyer, Selling Parties or the transactions contemplated
hereby, each of Parent and Zenith, respectively, agrees that it shall provide
the other parties hereto with prompt notice of such request and shall use its
reasonable best efforts to disclose or announce only the information which it
is advised by counsel is legally required.
6.4 Confidentiality. Except as otherwise required by Applicable Laws
or the rules of any exchange on which any securities of a party are or will be
listed, all non-public, proprietary and confidential information (oral,
written or otherwise) concerning a party provided to the other party in
connection with this Agreement and the transactions contemplated hereby,
including all documents and copies of documents or papers containing
proprietary information, all notes, analyses, compilations, studies,
interpretations and other documents and materials prepared by any of the
parties hereto containing or based upon, in whole or in part, any such
furnished information or reflecting any party's review or evaluation of the
transactions contemplated hereby ("Evaluation Information") will be kept in
confidence by the receiving party and will not be disclosed to any other
person other than its representatives who are actively and directly assisting
in the consummation of the transactions contemplated hereby or who otherwise
need to know such information for the purpose of consummating the transactions
contemplated hereby. The party receiving such Evaluation Information will take
reasonable steps necessary to ensure the confidentiality and nondisclosure of
the Evaluation Information by itself, its employees, agents, consultants,
advisors, members, shareholders and affiliates. Evaluation Information does
not include information that (i) is or becomes generally available to the
public other than as a result of an unauthorized disclosure by the receiving
party or its affiliates or representatives; (ii) was within or comes into the
receiving party's possession prior to its being furnished to the receiving
party by the disclosing party, provided that the source of such information
was not, to the best of the receiving party's knowledge after reasonable
inquiry, bound by a confidentiality agreement with, or other contractual,
legal, or fiduciary obligation of confidentiality to the party providing the
information; (iii) is disclosed by the receiving party to others with the
consent of the disclosing party; or (iv) is independently developed by the
receiving party based on non-Evaluation Information. All Evaluation
Information will be returned to the applicable disclosing party or destroyed
by the receiving party if the Closing does not occur. Nothing in this Section
6.4 will preclude either party from competing with the other party. In the
event that a receiving party is requested pursuant to, or required by,
Applicable Laws, regulation or rules of any securities exchange or by legal
process to disclose any Evaluation Information or any other information
concerning any of the other parties hereto or the transactions contemplated
hereby, the receiving party agrees that it shall provide the disclosing party
with prompt notice of such request or requirement in order to enable the
disclosing party to seek an appropriate protective order or other remedy, to
consult with the receiving party with respect to the disclosing party taking
steps to resist or narrow the scope of such request or legal process, or to
waive compliance, in whole or in part, with the terms of this Section 6.4. In
the event that no such protective order or other remedy is obtained, or that
the disclosing party waives compliance with the terms of this Section 6.4, the
receiving party shall use its reasonable best efforts to disclose only that
portion of any Evaluation Information which the receiving party is advised by
counsel is legally required and shall exercise all reasonable efforts to
ensure that all Evaluation Information so disclosed shall be accorded
confidential treatment in accordance with this Section 6.4.
6.5 Further Assurances. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its commercially reasonable
efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper, or advisable to consummate and make
effective as promptly as practicable the transactions contemplated by the
Transaction Agreements, including using its commercially reasonable efforts in
obtaining all necessary waivers, consents, and approvals and effecting all
necessary registrations and filings and submissions of information requested
by Governmental Authorities. Selling Parties, Parent and Buyer agree that
they, at any time before or after the Closing, at the requesting parties'
expense, will execute, acknowledge, and deliver any further consents, deeds,
assignments, assumptions, conveyances, other assurances, documents, and
instruments of transfer or receipt either necessary to consummate the sale,
transfer, assignment, assumption, grant, or conveyance of the Acquired Assets
and assumption of the Assumed Liabilities as contemplated in the Transaction
Agreements and at the requesting parties' expense, will take any other action
consistent with the terms of the Transaction Agreements that may reasonably be
requested for the purpose of assigning, assuming, transferring, granting,
conveying, and confirming to Buyer or Seller, or reducing to possession, any
or all property to be conveyed and transferred by and all liabilities to be
assumed pursuant to the Transaction Agreements, provided, however, that if
Selling Parties were required pursuant to Section 8.1 to make a proper
delivery at the Closing and failed to do so, Selling Parties agree that they
will, after the Closing, and at their expense, deliver such document to Parent
and Buyer, provided, further, that (i) Selling Parties shall use their
commercially reasonable efforts to obtain (but Selling Parties shall not be
obligated to obtain), at their expense after the Closing, the consents set
forth on Schedule 4.5 that are not marked with an "X", and (ii) Parent and
Buyer shall use their commercially reasonable efforts to replace, at their
expense as soon as practicable after the Closing, all Bonds that may not be
assigned or transferred to Buyer by Seller at the Closing. After the Closing,
the parties will cooperate in good faith and use commercially reasonable
efforts to resolve any issues which may arise in the transition of the
Business.
6.6 Right to Enter and Inspect. From time to time prior to the
Closing, upon reasonable notice, subject to applicable law, Parent and Buyer
will have reasonable access, during normal business hours, to enter the Owned
Real Property with Parent's or Buyer's representatives and agents to examine
the Owned Real Property and the Acquired Assets, conduct environmental studies
(not including soil or groundwater or other testing unless agreed to in
writing by Seller), engineering feasibility studies, and other tests and
studies reasonable and customary for a transaction of the type contemplated
hereby, and otherwise to evaluate, inspect and examine the Acquired Assets and
the Business and affairs of Seller. Parent and Buyer, jointly and severally,
shall indemnify and defend Selling Parties, their officers, directors,
employees, representatives and agents, from all losses, costs, damages, harm,
claims and liabilities, and mechanics' and materialmens' liens which may be
asserted against Selling Parties, or any of the foregoing indemnified parties,
as a result of any negligent or willful misconduct in connection with the
access, examination, evaluation, inspection, investigation and tests and
studies made by Parent, Buyer or their representatives or agents.
6.7 Tax on Prior Sales. To the extent such certificates are prepared
by the applicable state taxing authority, if applicable, Selling Parties agree
to furnish to Buyer when available certificates from the state taxing
authorities and any related certificates that Buyer may reasonably request as
evidence that all sales and use tax liabilities of Seller accruing before the
Closing Date have been fully satisfied or provided for.
6.8 Transfer of Permits. Selling Parties will use their commercially
reasonable efforts to assist Buyer to effect the assignment or other transfer
of Permits and Bonds, to the extent such Permits and Bonds are transferable,
from Seller to Buyer as of or as soon as practicable after the Closing Date.
6.9 Landbanking. Seller will cooperate with Parent and Buyer with
respect to arrangements to, and immediately prior to Closing will enter into
arrangements to, sell at or immediately prior to Closing to such landbankers
or property investors, approved by Parent, any real property or model homes
designated by Parent on terms and conditions acceptable to Parent and
reasonably approved by Seller. Buyer and Parent agree to pay for any costs
incurred by Seller in connection with such activities.
6.10 Independent Auditors. Seller agrees to use commercially
reasonable efforts to cause its independent auditors to (i) assist Buyer in
preparing financial statements in compliance with GAAP and Regulation S-X
promulgated by the Securities and Exchange Commission ("SEC"), (ii) include
consents to their reports in Parent's filings with the SEC, and (iii) provide
any necessary comfort letters in respect of financings by Parent.
Notwithstanding the foregoing, nothing shall require Selling Parties or their
independent auditors to violate the Xxxxxxxx-Xxxxx Act of 2002.
6.11 Charter Amendment. Selling Parties agree to amend their
respective charters within 30 days after the Closing, deleting all references
to "Perma-Bilt," and any variations thereof.
ARTICLE VII
CONDITIONS
7.1 Conditions to Obligation of Selling Parties. The obligations of
Selling Parties to close this transaction are subject to their reasonable
satisfaction (or waiver by them in writing) of the following conditions on and
as of the Closing:
A. Absence of Certain Actions and Events.
(1) There will not be threatened, instituted, or pending any
action or proceeding, before any Governmental Authority: (a)
challenging or seeking to make illegal, or to delay or otherwise
directly or indirectly to restrain or prohibit, the consummation of
the transactions contemplated hereby, or seeking to obtain damages in
connection therewith; (b) seeking to impose or confirm limitations on
the ability of Parent or Buyer effectively to exercise directly or
indirectly full rights of ownership of any of the Acquired Assets; or
(c) invalidating or rendering unenforceable any material provision of
this Agreement (including, without limitation, the Exhibits or
Schedules hereto); and
(2) There will not be any action taken, or any statute, rule,
regulation, judgment, order, or injunction proposed, enacted,
entered, enforced, promulgated, issued, or deemed applicable to the
transactions contemplated hereby by any Governmental Authority, which
may, directly or indirectly, prohibit consummation of the
transactions contemplated hereby.
B. Truthfulness of Representations and Warranties. The
representations and warranties of Parent and Buyer set forth in Article
III of this Agreement will be true and correct in all material respects as
of the Closing Date as if made at and as of the Closing Date (it being
understood that with respect to determining satisfaction of this
condition, representations and warranties containing "material adverse
effect" qualifications and other qualifications based on the word
"material" or similar phrases shall be true and correct in all respects,
taking into account such "material adverse effect" qualifications and
other qualifications based on the word "material" or similar phrases, as
of the Closing Date as if made at and as of the Closing Date).
C. Compliance. Parent and Buyer will in all material respects have
performed each obligation and agreement and complied with each covenant to
be performed and complied with by it hereunder at or prior to the Closing.
D. Consents and Approvals. Seller will have obtained all consents and
approvals set forth in Schedule 4.5 hereto, except such consents and
approvals as to which the failure to obtain, individually or in the
aggregate, would not reasonably be expected to impair or delay the
consummation of Closing or have a Material Adverse Effect.
7.2 Conditions to Obligations of Parent and Buyer. Parent's and Buyer's
obligations to close this transaction are subject to their reasonable
satisfaction (or waiver by Parent in writing) of the following conditions on
and as of the Closing:
A. Schedules. Seller will have delivered updated Schedules to Parent
immediately prior to Closing.
B. Consents and Approvals. Seller will have obtained all consents and
approvals marked with an "X" on Schedule 4.5 hereto.
C. Absence of Material Adverse Developments. After the date hereof,
neither Parent nor Buyer will have discovered any fact or circumstance not
disclosed herein regarding the Business, the Acquired Assets, or the
properties, condition (financial or otherwise), results of operations, or
prospects of Seller which is or could be, individually or in the aggregate
with other such facts and circumstances, materially adverse to the
Business or the Acquired Assets.
D. No Damage or Destruction. After the date hereof, there will have
been no damage, destruction, or loss of or to any of the Acquired Assets,
whether or not covered by insurance, which is reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect. This
Section 7.2D is intended as an express provision with respect to
destruction and eminent domain which supersedes the provisions of the
Nevada Uniform Vendor and Purchaser Risk Act.
E. Environmental Assessments. Parent will be satisfied with the
results of all environmental assessments.
F. Title Insurance. The Title Company will be prepared to issue each
Title Policy (and endorsement thereto as Parent may reasonably require) as
required by Section 4.2 of the Real Property Agreement, subject to no
exceptions other than Approved Title Exceptions.
G. Preliminary Closing Balance Sheet. Parent will have received, at
least five days prior to the Closing, the Preliminary Closing Balance
Sheet, which will comply with Section 2.5B(2).
H. Absence of Certain Actions and Events.
(1) There will not be threatened, instituted, or pending any
action or proceeding, before any Governmental Authority: (a)
challenging or seeking to make illegal, or to delay or otherwise
directly or indirectly to restrain or prohibit, the consummation of
the transactions contemplated hereby, or seeking to obtain damages in
connection therewith; (b) seeking to prohibit direct or indirect
ownership or operation by Buyer of all or a material portion of the
Business or the Acquired Assets or the Assumed Liabilities, or to
compel Parent or Buyer or any of their subsidiaries to divest of or
to hold separately all or a material portion of the business or the
Acquired Assets as a result of the transactions contemplated hereby;
(c) seeking to impose or confirm limitations on the ability of Parent
or Buyer effectively to exercise directly or indirectly full rights
of ownership of any of the Acquired Assets; or (d) invalidating or
rendering unenforceable any material provision of this Agreement
(including, without limitation, the Exhibits or Schedules hereto);
(2) There will not be any action taken, or any statute, rule,
regulation, judgment, order, or injunction proposed, enacted,
entered, enforced, promulgated, issued, or deemed applicable to the
transactions contemplated hereby by any Governmental Authority, which
may, directly or indirectly, prohibit consummation of the
transactions contemplated hereby; and
(3) There will not have occurred any of the following events
having a material adverse effect on Parent or Buyer: (a) a
declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States or any limitation by United
States authorities on the extension of credit by lending
institutions; or (b) a commencement of war, armed hostilities,
terrorist attack, or other international or national calamity
directly or indirectly involving the United States.
I. Truthfulness of Representations and Warranties. The representations
and warranties of Selling Parties in this Agreement will be true and
correct in all material respects as of the Closing Date as if made at and
as of the Closing Date (it being understood that with respect to
determining satisfaction of this condition, representations and warranties
containing "Material Adverse Effect" qualifications and other
qualifications based on the word "material" or similar phrases shall be
true and correct in all respects, taking into account such Material Adverse
Effect qualifications and other qualifications based on the word "material"
or similar phrases, as of the Closing Date as if made at and as of the
Closing Date).
J. Compliance. Selling Parties will in all material respects have
performed each obligation and agreement and complied with each covenant to
be performed and complied with them hereunder at or prior to the Closing.
K. Non-Compete Agreement. Parent will have received a Non-Disclosure
and a Non-Compete Agreement executed by Zenith in the form of Exhibit E
attached hereto (the "Non-Disclosure and Non-Compete Agreement").
L. Releases. Parent or Title Company will have received, or
be irrevocably entitled to receive, releases of all Seller Debt paid off
by Buyer at Closing in form and substance reasonably acceptable to
Parent or Title Company and recordable reconveyance instruments for
any deeds of trust, UCC Amendments terminating any UCC Financing
Statements and other instruments of release that Parent or Title
Company may reasonably require to reconvey, terminate and otherwise
release any and all security interests, liens and other encumbrances
that secure any of such paid-off loans.
ARTICLE VIII
CLOSING
8.1 Selling Parties' Obligations. In addition to any other documents
required to be delivered by Selling Parties at Closing pursuant to this
Agreement, Selling Parties will deliver to Escrow Agent or Parent, as
appropriate, at Closing the following:
A. Deed. A Grant, Bargain, Sale Deed ("Deed") for each parcel
comprising the Owned Real Property owned by Seller in fee, in form
substantially similar to Exhibit F hereto, and an Assignment and
Assumption Agreement ("Assignment and Assumption Agreement") for each
parcel comprising the Contracted Real Property in which Seller has an
interest, in form substantially similar to Exhibit G hereto.
B. Declaration of Value. A Declaration of Value for the Owned
Real Property as required by law, consistent with the allocation of
the Purchase Price to the Owned Real Property in accordance with
Section 2.6.
C. FIRPTA Affidavit. An Affidavit, signed and acknowledged by
Seller under penalties of perjury, certifying that Seller is not a
foreign corporation within the meaning of Sections 1445 and 7701 of
the Code.
D. Xxxx of Sale. An executed Xxxx of Sale and Assignment
Agreement ("Xxxx of Sale and Assignment Agreement") dated as of the
Closing Date, signed by Seller in the form attached hereto as Exhibit
H.
E. Acquired Contracts. Executed assignments and assumptions of
all Acquired Contracts with consents required pursuant to Section
7.2B.
F. Lease Assignments. Lease assignments with respect to each
parcel of real estate or any item of personal property which is leased
by Seller and which is to be assumed by Buyer hereunder, properly
executed (and, if appropriate, acknowledged) by Seller, and
accompanied with any consents and estoppels of lessors obtained prior
to the Closing with respect thereto.
G. Permits. Executed assignments of all assignable Permits
issued to Seller by any Governmental Authority or vendor, to the
extent assignable.
H. Books and Records. All books, records, and other data
relating to the Business and/or Acquired Assets (other than minutes
books and stock transfer books of Seller except as set forth in
Sections 2.3 and 2.4B of this Agreement).
I. Resolutions. Copies of the texts of the resolutions by which
the corporate action on the part of Seller and its shareholders
necessary to approve this Agreement and the transactions contemplated
hereby were taken and certificates executed on behalf of Seller by its
corporate secretary certifying to Parent and Buyer that such copies
are true, correct and complete copies of such corporate action or
resolutions and that such corporate action and resolutions were duly
adopted and have not been amended or rescinded.
J. Consents. The consents contemplated by Section 7.2B.
K. Legal Opinion. Parent and Buyer will have received opinions
from Xxxxxx Xxxxxx & Xxxxxxx with respect to Seller and, for certain
matters, Zenith, and Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP with
respect to Zenith, addressed to Parent and Buyer, in a form reasonably
acceptable to Parent and its counsel.
L. Title Policies. The Title Policies contemplated by Section
4.2 of the Real Property Agreement, or an irrevocable commitment on
the part of the Title Company to deliver the same post-Closing.
M. Transaction Agreements. Executed copies of each of the
Transaction Agreements.
N. Other Documents. Such other documents as Parent or Buyer or
its counsel or any lender of Parent or Buyer may reasonably request
prior to the Closing in order to effectuate the transactions
contemplated under this Agreement.
8.2 Parent's or Buyer's Obligations. In addition to any other
documents required to be delivered by Parent and Buyer at Closing pursuant to
this Agreement, Parent or Buyer will deliver to Escrow Agent or Seller, as
appropriate, at Closing the following:
A. Purchase Price. The Purchase Price contemplated by Section
2.5, to the extent payable at Closing.
B. Declaration of Value. A Declaration of Value for the Owned
Real Property as required by law, consistent with the allocation of
the Purchase Price to the Owned Real Property in accordance with
Section 2.6.
C. Acquired Contacts. Executed assignments and assumptions of
all Acquired Contracts.
D. Lease Assumptions. Lease assumptions with respect to each
parcel of real estate or any item of personal property which is leased
by Seller and which is to be assumed by Buyer hereunder, properly
executed (and, if appropriate, acknowledged) by Buyer.
E. Resolutions. Copies of the text of the resolutions by which
the corporate action on the part of Buyer and its shareholders
necessary to approve this Agreement and the transactions contemplated
hereby were taken and certificates executed on behalf of Buyer by its
corporate secretary certifying to Selling Parties that such copies are
true, correct and complete copies of such corporate action or
resolutions and that such corporate action or resolutions are duly
adopted and have not been amended or rescinded.
F. Transaction Agreements. Executed copies of each of the
Transaction Agreements.
G. Other Documents. Such other documents as Seller or Seller's
counsel may reasonably request prior to the Closing in order to
effectuate the transactions contemplated under this Agreement.
8.3 Transfer Fees, Title Costs, and Closing Costs and Other
Fees; Prorations.
A. Title Policy Fees. Selling Parties will pay the premium for
standard coverage under each Title Policy and Parent and Buyer will
pay the costs of extended coverage and endorsements as set forth in
Section 4.2 of the Real Property Agreement.
B. Transfer Taxes. Buyer will pay any documentary transfer tax,
stamp tax, real estate conveyance tax or similar tax or fee due and
payable in connection with this transaction.
C. Recording and Other Fees. Selling Parties will pay all
recording fees for each Deed. Selling Parties will also pay all fees
and expenses, including assumption and transfer fees actually incurred
by Selling Parties in obtaining any consents and approvals required to
be obtained by Selling Parties under this Agreement or otherwise in
consummating the transactions contemplated by this Agreement (provided
nothing herein shall require Selling Parties to pay any costs or incur
any expense with respect to (1) either Parent's or Buyer's HSR Act
requirements (which expenses will be borne by Parent or Buyer), or (2)
Buyer's organizational approvals or consents; provided further, that
wherever this Agreement may require exercise of "reasonable best
efforts" or "commercially reasonable efforts" to obtain a consent it
shall not be deemed to impose upon Selling Parties a duty to pay any
consideration, fee or other sum of such nature as an inducement to
such party beyond that set forth in any agreement between the
parties).
D. Taxes and Assessments; Prorations. Seller shall pay, prior to
delinquency, all due and payable real estate taxes, personal property
taxes and assessments by any Governmental Authority in respect of the
Owned Real Property and other Assets. At the Closing, the Escrow Agent
shall prorate taxes and assessments as of the Effective Date. Seller
shall receive a credit for all real property taxes and assessments
levied against the Owned Real Property and personal property taxes
levied against the other Assets, in each case, in the amount that has
been prepaid as of the Effective Date, and Buyer shall assume the
obligation to thereafter pay all such taxes and assessments affecting
the Acquired Assets. Escrow Agent shall prorate on the basis of the
most current information available to Escrow Agent. In the event that
the amounts of such taxes and assessments are not liquidated at the
Closing, or in the event that after the Closing taxes are
retroactively assessed (to a date prior to the Effective Date) against
the Owned Real Property and/or other Assets by a Governmental
Authority with jurisdiction and authority to do so, then at such time
as the actual or retroactively assessed real estate taxes, personal
property taxes and assessments by any Governmental Authority in
respect of the Owned Real Property and other Assets are known, a cash
settlement will be made between Buyer and Seller based on such actual
amounts within 30 days of such determination. If the Owned Real
Property is not separately assessed or taxed, then (i) taxes and
assessments shall be allocated between the Owned Real Property and any
other property with which it is assessed or taxed based upon the
relative taxable assessed values of the respective properties, as
reasonably agreed upon by the parties, and (ii) Seller shall receive a
Purchase Price credit in an amount equal to Seller's allocable share
of such taxes and assessments that have been prepaid, and (iii) Buyer
shall timely pay the full amount of taxes and assessments to the
appropriate Governmental Authority. All prorations and/or adjustments
called for in this Agreement will be made on the basis of a 30-day
month unless otherwise specifically instructed in writing by Seller
and Parent.
E. Taxes. Selling Parties and Buyer will each pay 50% of any
sales or similar taxes or assessments relating to the sale of the
Acquired Assets by Seller to Buyer.
F. Other Fees. Except as otherwise specifically provided in this
Agreement, each party will bear its own legal and accounting fees and
other expenses relating to the transactions contemplated by this
Agreement.
ARTICLE IX
SURVIVAL AND INDEMNITIES
9.1 Survival of Representations and Warranties. Subject to the
provisions of Section 4.28, but otherwise regardless of any investigation
at any time made by or on behalf of any party hereto, or of any information
any party may have in respect thereof, all representations, and warranties
made hereunder or pursuant hereto or in connection with the transactions
contemplated hereby will survive the Closing and, execution, delivery, and
recordation of any applicable deeds for a period of two years.
Notwithstanding the foregoing, (i) any claims based upon or arising out of
fraud or intentional misstatement will survive the Closing Date until *,
(ii) all claims based upon or arising out of Excluded Liabilities will
survive the Closing Date to the extent set forth in Sections 2.4B and C,
and (ii) the representations and warranties contained in:
A. Section 4.7 (Financial Statements) will survive the Closing
Date *; and
B. Section 4.2 (Authority) and Section 4.17 (Tax Matters) will
survive * and Section 4.16 (Environmental Matters) will survive the
Closing Date until *.
9.2 Nature of Statements. No representations or warranties are made by
Parent or Buyer or by Selling Parties in connection with this Agreement or the
other Transaction Agreements or the transactions contemplated hereby or thereby
except as expressly set forth in Articles III and IV of this Agreement or in
certificates executed by such party and delivered to the other parties hereto
pursuant to the Transaction Agreements.
9.3 Dispute Resolution. Except as provided in Section 2.5 herein, all
claims, disputes and other matters in controversy (except for matters related
to fraud, the Xxxxxxxx Employment Agreement or breach of any covenant not to
compete contained in the Non-Disclosure and Non-Compete Agreement) arising
directly or indirectly out of or relating to the Transaction Agreements, or the
breach, termination or validity of the Transaction Agreements, whether
contractual or non-contractual, and whether during the term or after the
termination of this Agreement (each a "Dispute"), shall be resolved exclusively
in accordance with the Dispute Resolution Procedures attached as Exhibit D.
Notwithstanding the foregoing, nothing herein will prohibit the parties from
pursuing equitable remedies.
9.4 Indemnification Agreement. Except as provided in Article X, the
sole remedies for breach of the Transaction Agreements are specified in the
Indemnification Agreement.
ARTICLE X
TERMINATION/REMEDIES
10.1 Termination. This Agreement will be considered terminated at any
time:
A. By mutual written consent of duly authorized officers of
Parent and Buyer and Seller;
B. By either Parent and Buyer, on the one hand, or Seller, on
the other hand, if the other party breaches any of its material
representations, warranties, or covenants contained herein.
C. After December 31, 2002, if not closed by then.
10.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 10.1, this Agreement will become void and
there will be no liability or further obligation hereunder on the part of
Parent, Buyer or Selling Parties or their respective shareholders, members,
officers, or directors, except each party will remain obligated for its
obligations under Section 6.4.
10.3 Specific Performance. The parties to this Agreement will have the
right to obtain specific performance of the other parties' obligations to close
in the event that such parties fail to close this Agreement in accordance with
the provisions hereof and this Agreement has not been terminated pursuant to
Section 10.1; provided, however, that the party seeking specific performance
cannot be in material breach of this Agreement. The party who is entitled to
specific performance must file and serve an action within 10 business days of
the Closing Date or waive any right to seek specific performance.
ARTICLE XI
GENERAL PROVISIONS
11.1 Notices. All notices, consents, and other communications
hereunder will be in writing and deemed to have been duly given when (a)
delivered by hand, (b) sent by telecopier (with receipt confirmed), or (c) when
received by the addressee, if sent by Express Mail, Federal Express, or other
express delivery service (with delivery confirmation), in each case to the
appropriate addresses and telecopier numbers set forth below (or to such other
addresses and telecopier numbers as a party may designate as to itself by
notice to the other):
If to Buyer: Meritage Corporation
0000 Xxxxx Xxxxxxxxxx Xxxx,
Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
Attn: Chief Financial Officer
With a copy to: Xxxxx & Xxxxxx L.L.P.
Xxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Phone: (000) 000-0000
Fax: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxx, Esq.
If to Selling Parties Zenith National Insurance Corp.
00000 Xxxxxx Xxxxxx
Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
Attn: Xxxxxxx X. Xxx
With a copy to: Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
Attn: Xxxxxx X. Xxxxxx, Esq.
11.2 Counterparts. The Agreements, as defined in Section 11.16, may be
executed in any number of counterparts, and each counterpart will constitute an
original instrument, but all such separate counterparts will constitute one and
the same agreement.
11.3 Governing Law. The validity, construction, and enforceability of
this Agreement will be governed in all respects by the laws of the State of
Nevada, without regard to its conflict of laws rules.
11.4 Assignment. This Agreement will not be assigned by operation of
law or otherwise, (a) except that Buyer may assign all or any portion of its
rights under this Agreement to any wholly owned subsidiary, but no such
assignment will relieve Buyer or its successor or Parent of its primary
liability for all obligations of Buyer and Parent, respectively, hereunder, and
(b) except that this Agreement may be assigned by operation of law to any
corporation or entity with or into which Buyer may be merged or consolidated or
to which Buyer transfer all or substantially all of its assets, and such
corporation or entity assumes this Agreement and all obligations and
undertakings of Buyer hereunder, but no such assignment will relieve Buyer or
its successor or Parent of their liability for the respective obligations of
Buyer and Parent, hereunder. Any assignment in violation of the provisions of
this Agreement will be null and void.
11.5 Gender and Number. The masculine, feminine, or neuter pronouns
used herein will be interpreted without regard to gender, and the use of the
singular or plural will be deemed to include the other whenever the context so
requires.
11.6 Schedules and Exhibits. The Schedules and Exhibits referred to in
this Agreement and attached to this Agreement are incorporated in this
Agreement by such reference as if fully set forth in the text of this
Agreement.
11.7 Waiver of Provisions. The terms, covenants, representations,
warranties, and conditions of this Agreement may be waived only by a written
instrument executed by the party waiving compliance. The failure of any party
at any time to require performance of any provisions hereof will, in no manner,
affect the right at a later date to enforce the same. No waiver by any party of
any condition, or breach of any provision, term, covenant, representation, or
warranty contained in this Agreement, whether by conduct or otherwise, in any
one or more instances, will be deemed to be or construed as a further or
continuing waiver of any such condition or waiver of the breach of any other
provision, term, covenant, representation, or warranty of this Agreement.
11.8 Costs. Except as otherwise provided in this Agreement, if any
legal action or any arbitration or other proceeding is brought for the
enforcement of this Agreement, or because of an alleged dispute, breach,
default, or misrepresentation in connection with any of the provisions of this
Agreement, the successful or prevailing party or parties will be entitled to
recover reasonable attorneys' fees, accounting fees, and other costs incurred
in that action or proceeding, in addition to any other relief to which it or
they may be entitled.
11.9 Amendment. This Agreement may not be amended except by an
instrument in writing approved by the parties to this Agreement and signed on
behalf of each of the parties hereto.
11.10 Severability. If any term, provision, covenant, or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
void, or unenforceable, the remainder of the terms, provisions, covenants, and
restrictions of this Agreement will remain in full force and effect and will in
no way be affected, impaired, or invalidated and the court will modify this
Agreement or, in the absence thereof, the parties will negotiate in good faith
to modify this Agreement to preserve each party's anticipated benefits under
this Agreement.
11.11 Binding Effect. Subject to the provisions and restrictions of
Section 11.4, the provisions of this Agreement are binding upon and will inure
to the benefit of the parties and their respective heirs, personal
representatives, successors and assigns.
11.12 Construction. References in this Agreement to "Sections,"
"Articles," "Exhibits," and "Schedules" are to the Sections and Articles in,
and the Exhibits and Schedules to, this Agreement, unless otherwise noted.
11.13 Time Periods. Except as expressly provided for in this
Agreement, the time for performance of any obligation or taking any action
under this Agreement will be deemed to expire at 5:00 o'clock p.m. (Las Vegas,
Nevada time) on the last day of the applicable time period provided for in this
Agreement. If the time for the performance of any obligation or taking any
action under this Agreement expires on a Saturday, Sunday or legal holiday, the
time for performance or taking such action will be extended to the next
succeeding day which is not a Saturday, Sunday or legal holiday.
11.14 Headings. The headings of this Agreement are for purposes of
reference only and will not limit or define the meaning of any provision of
this Agreement.
11.15 Access to Records. Buyer will provide Seller with reasonable
access to books, records, and documents transferred to Buyer pursuant to
Section 1.2 of the Asset Purchase Agreement for period of four years from the
Closing or such longer time as Seller notifies Buyer that Seller may require
for tax purposes.
11.16 Entire Agreement. This Agreement, the other Transaction
Agreements and all certificates, schedules and other documents attached to or
deliverable under such agreements (collectively, the "Agreements") constitute
the entire agreement, including with respect to representations and warranties,
between the parties pertaining to the subject matter contained in the
Agreements. All prior and contemporaneous agreements, representations and
understandings of the parties, oral or written, are superseded by and merged in
the Agreements. No supplement, modification or amendment of the Agreements will
be binding unless in writing and executed by the parties thereto.
11.17 Enforcement of Rights. Parent's and Buyer's rights under, and
the remedies to enforce, this Agreement are joint and several as to Selling
Parties. Parent and Buyer are completely free to enforce any or all of their
rights under this Agreement against any of Selling Parties with or without the
concurrence or joinder of any other Selling Party. Selling Parties' rights
under, and the remedies to enforce, this Agreement are joint and several as to
Parent and Buyer. Selling Parties are completely free to enforce any or all of
their rights under this Agreement against any of Parent or Buyer with or
without the concurrence or joinder of Parent or Buyer, as applicable.
11.18 No Third Beneficiaries. Except as otherwise set forth in
Sections 1 and 2 of the Indemnification Agreement and except as specifically
provided in Section 11.4 of this Agreement and similar provisions in the other
Transaction Agreements, neither this Agreement nor any other Transaction
Agreement is intended to, and none of them shall, create any rights in any
other Person other than the parties to such agreements. Without limiting the
generality of the foregoing, nothing herein or in any other Transaction
Agreement is intended to create, nor shall it create, in the Title Company or
any title insurer any right of subrogation to any rights of Parent or Buyer
arising from any representation or warranty of any Selling Party.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed on the date first written above by their respective officers
thereunder duly authorized.
MERITAGE CORPORATION,
a Maryland corporation
By: /s/ Xxxxxx X. Xxxxxx
----------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Co-Chief Executive Officer
MTH-HOMES NEVADA, INC.,
an Arizona corporation
By: /s/ Xxxxxx X. Xxxxxx
----------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Co-Chief Executive Officer
PERMA-BILT, a Nevada Corporation
By: /s/ Xxxxxx Xxxxxxxx
----------------------------------------
Name: Xxxxxx Xxxxxxxx
Title: President and Chief Executive Officer
ZENITH NATIONAL INSURANCE CORP.,
a Delaware corporation
By: /s/ Xxxxxxx X. Xxx
----------------------------------------
Name: Xxxxxxx X. Xxx
Title: President
[Signature Page to Master Transaction Agreement]
Exhibit A
AGREEMENT OF PURCHASE AND SALE OF ASSETS
BY AND AMONG
MERITAGE CORPORATION,
MTH-HOMES NEVADA, INC.,
PERMA-BILT, A NEVADA CORPORATION
AND
ZENITH NATIONAL INSURANCE CORP.
Dated October 7, 2002
AGREEMENT OF PURCHASE AND SALE OF ASSETS
This AGREEMENT OF PURCHASE AND SALE OF ASSETS (this "Agreement") is
made as of October 7, 2002, by and among MERITAGE CORPORATION, a Maryland
corporation ("Meritage or Parent"); MTH-HOMES NEVADA, INC., an Arizona
corporation ("Buyer"); PERMA-BILT, A NEVADA CORPORATION ("Seller"); and ZENITH
NATIONAL INSURANCE CORP., a Delaware corporation ("Zenith"). Collectively,
Seller and Zenith are referred to herein as "Selling Parties."
RECITALS
1. Pursuant to this Agreement and the Master Agreement (as defined
below), Buyer will acquire the Business.
2. The parties to this Agreement have concurrently entered into a
Master Transaction Agreement ("Master Agreement"), Agreement of Purchase and
Sale of Real Property ("Real Property Agreement"), and Indemnification
Agreement, all described in the Master Agreement. All capitalized terms
contained herein but not otherwise defined will have the meaning ascribed to it
in the Master Agreement.
In consideration of the covenants and mutual agreements set forth
herein and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, and in reliance upon the representations and
warranties contained herein, the parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1 Agreement. This Agreement, together with the Master Agreement and
Indemnification Agreement, each incorporated herein by reference, will
constitute a binding contract on the part of Seller to sell and Buyer to
purchase the assets of the Business, unrelated to real property.
1.2 Assets to be Purchased. Upon the terms and subject to the
conditions set forth herein and in the Master Agreement, and in reliance on the
respective representations and warranties of the parties contained in the
Master Agreement, at the Closing, Seller agrees to sell, convey, grant, assign,
and transfer to Buyer and Buyer agrees to purchase, assume and acquire from
Seller all of the Assets, held by Seller. The "Assets" are the following,
provided, however, that the Assets shall not include any Excluded Assets:
A. All assets disclosed on the Final Closing Balance Sheet,
except for the Real Property Assets (as defined in and to be conveyed
pursuant to the Real Property Agreement);
B. Any current assets, accounts receivable and notes receivable,
and bank accounts, but excluding cash and cash equivalents; provided,
however, that (i) to the extent that following the Closing Selling
Parties receive any cash that constitutes an Acquired Asset or relates
to an Assumed Liability, Selling Parties shall, as soon as practicable
after receipt thereof, turn over such cash to Buyer, and (ii) to the
extent that following the Closing Parent or Buyer receives any cash
that constitutes an Excluded Asset or relates to an Excluded
Liability, Parent and Buyer shall, as soon as practicable after
receipt thereof, turn such cash over to Selling Parties.
C. All prepaid expenses, the right to refunds, buyins or
deposits relating to utilities and infrastructure improvements,
deposits or assets relating to performance bonds;
D. All equipment, furniture, furnishings, inventory, machinery,
software, supplies, tools, vehicles, and other personal property owned
or leased by Seller;
E. All rights and benefits in all (1) processes, know-how,
technical data, and other trade secrets; (2) sales forms and
promotional and advertising materials; (3) copyrights, whether
registered or not, patents, trademarks, whether registered or not, and
applications, registrations, and renewals with respect thereto; (4)
customer, supplier and contractor lists; (5) software licensing and
equipment rental agreements associated with computers or data
processing; and (6) goodwill associated therewith. Additionally,
Seller hereby grants to Buyer an exclusive perpetual license in
Seller's right to use the names "Perma-Bilt Homes" and "Perma-Bilt,"
and all variations of or derivations from such names and any and all
logos used in connection therewith; provided, however, Selling
Parties' shall have the right to use the name "Perma-Bilt" for
corporate purposes for a period of up to 30 days after the Closing.
The foregoing is hereinafter referred to as the "Asset Intellectual
Property";
F. All of the books, instruments, papers, and records of
whatever nature and wherever located, whether in written form or
another storage medium, including without limitation (1) copies of
accounting and financial records; (2) property records and reports;
(3) environmental records and reports; (4) personnel and labor
relations records; and (5) property, sales, or transfer tax records
and returns; provided, however, that (x) Seller shall retain the
original accounting and financial records and (y) such books,
instruments, papers, and records will exclude any documents relating
exclusively to the Excluded Assets or the Excluded Liabilities (for so
long as they are Seller's sole responsibility) or to any employees of
Seller not hired by Buyer;
G. To the extent transferable, all the right, title, and
interest in all approvals, authorizations, certificates, consents,
franchises, licenses, permits, rights, variances, subdivision maps,
plans, entitlements, and waivers acquired, being acquired, applied
for, or used, and all agreements with, and any waivers, licenses,
permits, and approvals from or to any Governmental Authority,
department, board, commission, bureau or any other entity or
instrumentality, and other authorities in the nature thereof, all as
related to the Assets;
H. All rights and benefits in, to and under all vendor, supplier
and equipment lessor agreements concerning any supplies, services,
equipment and furniture utilized for office purposes;
I. All contracts, agreements or understandings to which Seller
is a party or by which Seller or any of its assets are bound,
excluding those contracts included in Real Property Assets pursuant to
Section 1.2B of the Real Property Agreement and excluding Excluded
Contracts (the "Asset Acquired Contracts"); and
J. The interests in any projects (and related joint venture,
partnership, or other interests) to the extent any exist.
1.3 Purchase Price. The Purchase Price to be paid by Buyer for the
Assets will be as provided in Section 2.5 of the Master Agreement.
1.4 Closing. Articles VII and VIII of the Master Agreement are
incorporated herein by reference as applicable.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER
2.1 Incorporation by Reference. The representations and warranties
contained in Article III of the Master Agreement are incorporated herein by
reference.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLING PARTIES
3.1 Incorporation by Reference. The representations and warranties
contained in Article IV of the Master Agreement are incorporated herein by
reference.
ARTICLE IV
FURTHER ASSURANCES
4.1 Incorporation by Reference. Section 6.5 of the Master Agreement is
incorporated herein by reference.
ARTICLE V
GENERAL PROVISIONS
5.1 Notices. All notices, consents, and other communications hereunder
will be in writing and deemed to have been duly given when (a) delivered by
hand, (b) sent by telecopier (with receipt confirmed, or (c) when received by
the addressee, if sent by Express Mail, Federal Express, or other express
delivery service (with delivery confirmation), in each case to the appropriate
addresses and telecopier numbers set forth below (or to such other addresses
and telecopier numbers as a party may designate as to itself by notice to the
other):
If to Buyer: Meritage Corporation
0000 Xxxxx Xxxxxxxxxx Xxxx,
Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
Attn: Chief Financial Officer
With a copy to: Xxxxx & Xxxxxx L.L.P.
Xxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Phone: (000) 000-0000
Fax: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxx, Esq.
If to Selling Parties Zenith National Insurance Corp.,
00000 Xxxxxx Xxxxxx
Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
Attn: Xxxxxxx X. Xxx
With a copy to: Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
Attn: Xxxxxx X. Xxxxxx, Esq.
5.2 Counterparts. This Agreement may be executed in any number of
counterparts, and each counterpart will constitute an original instrument, but
all such separate counterparts will constitute one and the same agreement.
5.3 Governing Law. The validity, construction, and enforceability of
this Agreement will be governed in all respects by the laws of the State of
Nevada, without regard to its conflict of laws rules.
5.4 Assignment. This Agreement will not be assigned by operation of
law or otherwise, (a) except that Buyer may assign all or any portion of its
rights under this Agreement to any wholly owned subsidiary, but no such
assignment will relieve Buyer or its successor or Parent of its primary
liability for all obligations of Buyer and Parent, respectively, hereunder, and
(b) except that this Agreement may be assigned by operation of law to any
corporation or entity with or into which Buyer may be merged or consolidated or
to which Buyer transfers all or substantially all of its assets, and such
corporation or entity assumes this Agreement and all obligations and
undertakings of Buyer hereunder, but no such assignment will relieve Buyer or
its successor or Parent of their liability for the respective obligations of
Buyer and Parent, respectively, hereunder. Any assignment in violation of the
provisions of this Agreement will be null and void.
5.5 Gender and Number. The masculine, feminine, or neuter pronouns
used herein will be interpreted without regard to gender, and the use of the
singular or plural will be deemed to include the other whenever the context so
requires.
5.6 Schedules and Exhibits. The Schedules and Exhibits referred to in
this Agreement and attached to this Agreement are incorporated in this
Agreement by such reference as if fully set forth in the text of this
Agreement.
5.7 Waiver of Provisions. The terms, covenants, representations,
warranties, and conditions of this Agreement may be waived only by a written
instrument executed by the party waiving compliance. The failure of any party
at any time to require performance of any provisions hereof will, in no manner,
affect the right at a later date to enforce the same. No waiver by any party of
any condition, or breach of any provision, term, covenant, representation, or
warranty contained in this Agreement, whether by conduct or otherwise, in any
one or more instances, will be deemed to be or construed as a further or
continuing waiver of any such condition or waiver of the breach of any other
provision, term, covenant, representation, or warranty of this Agreement.
5.8 Costs. Except as otherwise provided in the Master Agreement, if
any legal action or any arbitration or other proceeding is brought for the
enforcement of this Agreement, or because of an alleged dispute, breach,
default, or misrepresentation in connection with any of the provisions of this
Agreement, the successful or prevailing party or parties will be entitled to
recover reasonable attorneys' fees, accounting fees, and other costs incurred
in that action or proceeding, in addition to any other relief to which it or
they may be entitled.
5.9 Amendment. This Agreement may not be amended except by an
instrument in writing approved by the parties to this Agreement and signed on
behalf of each of the parties hereto.
5.10 Severability. If any term, provision, covenant, or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
void, or unenforceable, the remainder of the terms, provisions, covenants, and
restrictions of this Agreement will remain in full force and effect and will in
no way be affected, impaired, or invalidated and the court will modify this
Agreement or, in the absence thereof, the parties will negotiate in good faith
to modify this Agreement to preserve each party's anticipated benefits under
this Agreement. 5.11 Binding Effect. Subject to the provisions and restrictions
of Section 5.4, the provisions of this Agreement are binding upon and will
inure to the benefit of the parties and their respective heirs, personal
representatives, successors and assigns.
5.12 Construction. References in this Agreement to "Sections,"
"Articles," "Exhibits," and "Schedules" are to the Sections and Articles in,
and the Exhibits and Schedules to, this Agreement, unless otherwise noted.
5.13 Time Periods. Except as expressly provided for in this Agreement,
the time for performance of any obligation or taking any action under this
Agreement will be deemed to expire at 5:00 o'clock p.m. (Las Vegas, Nevada
time) on the last day of the applicable time period provided for in this
Agreement. If the time for the performance of any obligation or taking any
action under this Agreement expires on a Saturday, Sunday or legal holiday, the
time for performance or taking such action will be extended to the next
succeeding day which is not a Saturday, Sunday or legal holiday.
5.14 Headings. The headings of this Agreement are for purposes of
reference only and will not limit or define the meaning of any provision of
this Agreement.
5.15 Entire Agreement. This Agreement, the other Transaction
Agreements and all certificates, schedules and other documents attached to or
deliverable under such agreements (collectively, the "Agreements") constitute
the entire agreement, including with respect to representations and warranties,
between the parties pertaining to the subject matter contained in the
Agreements. All prior and contemporaneous agreements, representations and
understandings of the parties, oral or written, are superseded by and merged in
the Agreements. No supplement, modification or amendment of the Agreements will
be binding unless in writing and executed by the parties to the Agreements.
5.16 Dispute Resolution. All Disputes shall be resolved exclusively in
accordance with the Dispute Resolution Procedures attached as Exhibit D to the
Master Agreement. Notwithstanding the foregoing, nothing herein will prohibit
the parties from pursuing equitable remedies.
5.17 No Third Beneficiaries. Except as otherwise set forth in Sections
1 and 2 of the Indemnification Agreement and except as specifically provided in
Section 5.4 of this Agreement and similar provisions in the other Transaction
Agreements, neither this Agreement nor any other Transaction Agreement is
intended to, and none of them shall, create any rights in any other Person
other than the parties to such agreements. Without limiting the generality of
the foregoing, nothing herein or in any other Transaction Agreement is intended
to create, nor shall it create, in the Title Company or any title insurer any
right of subrogation to any rights of Parent or Buyer arising from any
representation or warranty of any Selling Party.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed on the date first written above by their respective officers
thereunder duly authorized.
MERITAGE CORPORATION,
a Maryland corporation
By:
--------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Co-Chief Executive Officer
MTH-HOMES NEVADA, INC.,
an Arizona corporation
By:
--------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Co-Chief Executive Officer
PERMA-BILT, a Nevada corporation
By:
--------------------------------------
Name: Xxxxxx Xxxxxxxx
Title: President and Chief Executive Officer
ZENITH NATIONAL INSURANCE CORP., a Delaware
corporation
By:
--------------------------------------
Name: Xxxxxxx X. Xxx
Title: President
[Signature Page to Asset Agreement]
Exhibit B
AGREEMENT OF PURCHASE AND SALE OF REAL PROPERTY
BY AND AMONG
MERITAGE CORPORATION,
MTH-HOMES NEVADA, INC.,
PERMA-BILT, A NEVADA CORPORATION
AND
ZENITH NATIONAL INSURANCE CORP.
Dated October 7, 2002
AGREEMENT OF PURCHASE AND SALE OF REAL PROPERTY
This AGREEMENT OF PURCHASE AND SALE OF REAL PROPERTY (the
"Agreement") is made as of October 7, 2002, by and among MERITAGE CORPORATION,
a Maryland corporation ("Meritage or Parent"); MTH-HOMES NEVADA, INC., an
Arizona corporation ("Buyer"); PERMA-BILT, a Nevada corporation ("Seller") and
ZENITH NATIONAL INSURANCE CORP., a Delaware corporation ("Zenith").
Collectively, Seller and Zenith are referred to herein as "Selling Parties."
RECITALS
1. Pursuant to this Agreement, the Asset Agreement (as defined below)
and the Master Agreement (as defined below), Buyer will acquire the Business.
2. The parties to this Agreement have concurrently entered into a
Master Transaction Agreement ("Master Agreement"), Agreement of Purchase and
Sale of Assets ("Asset Agreement"), and Indemnification Agreement, all
described in the Master Agreement. All capitalized terms contained herein but
not otherwise defined will have the meaning ascribed to them in the Master
Agreement.
In consideration of the covenants and mutual agreements set forth
herein and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, and in reliance upon the representations and
warranties contained herein, the parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF REAL PROPERTY
1.1 Agreement. This Agreement, together with the Master Agreement and
Indemnification Agreement, each incorporated herein by reference, will
constitute a binding contract on the part of Seller to sell and Buyer to
purchase the real property assets of the Business.
1.2 Real Property Assets to be Purchased. Upon the terms and subject
to the conditions set forth herein and in the Master Agreement, and in reliance
on the respective representations and warranties of the parties contained in
the Master Agreement, at the Closing, Seller agrees to sell, convey, grant,
assign, and transfer to Buyer and Buyer agrees to purchase, assume, and acquire
from Seller all of the Real Property Assets. The "Real Property Assets" are the
following, provided, however, that the Real Property Assets shall not include
any Excluded Assets:
A. All of Seller's right, title, and interest in and to all real
property assets, whether or not disclosed on the Final Closing Balance
Sheet, including all of Seller's right, title, and interest in and to
all (1) land, and buildings, fixtures, and improvements located
thereon or attached thereto; (2) lots under development and finished
lots, and all houses under development, completed homes, and model
homes (collectively, those assets under Clauses (1) and (2) are the
"Owned Real Property"); (3) purchase contracts, and option agreements
for the purchase of lots or land for development and related escrow
instructions and deposits (the "Contracted Real Property"); and (4) to
the extent transferable, easements, franchises, licenses, permits, and
rights-of-way appurtenant to or otherwise benefiting, and all
development rights, mineral rights, water rights, utility capacity
reservations, and other rights and appurtenances affecting or
pertaining to, the items described in Clauses (1), (2) and (3)
(collectively, with the Owned Real Property and the Contracted Real
Property, the "Real Property"). Schedule 4.2 as referenced in Section
4.2 sets forth the Reports or a listing of the Reports in respect of
the Real Property;
B. To the extent transferable, all of Seller's rights, title,
and interest in and to all rights and benefits in, to and under all
(1) the contracts referred to in Section 1.2A(3) above; (2) sale
agreements or other contracts and related escrow instructions and
escrow deposits relating to the sale of lots, homes or other aspects
of the Real Property; (3) contracts with suppliers, materialmen,
contractors, subcontractors and others furnishing any work or
materials to or for any of the Real Property; (4) reimbursement and
indemnity agreements pertaining to or of any improvement, performance,
payment, maintenance, fidelity, lien release, or other bonds,
undertakings or similar sureties; (5) contracts with architects,
designers, engineers, planners, environmental consultants, surveyors,
and other consultants; (6) commission, listing and brokerage
agreements; (7) office and storage leases; (8) management service and
construction supervisor contracts or agreements; (9) model home
furniture, fixtures and equipment leases and any model home lease or
sale agreements; and (10) all rights under all contracts, agreements
or understandings to which Seller is a party or by which Seller or any
of its assets are bound that relate to Real Property Assets, excluding
Excluded Contracts (collectively, the "Real Property Acquired
Contracts");
C. To the extent transferable, all of Seller's rights, title,
and interest in and to all (1) architectural, building, and
engineering designs, drawings, specifications, and plans; (2) all
proprietary information or rights including any and all plans, and
other project related information of prior and currently active real
estate projects; (3) copyrights, whether registered or not, patents,
trademarks, whether registered or not, and applications,
registrations, and renewals with respect thereto; (4) goodwill
associated therewith; and (5) all agreements or licenses relating
thereto. The foregoing is hereinafter referred to as the "Real
Property Intellectual Property;"
D. To the extent transferable, all of Seller's right, title, and
interest in and to all approvals, authorizations, certificates,
consents, franchises, licenses, permits, rights, variances,
subdivision maps, plans, entitlements, and waivers acquired, being
acquired, applied for, or used, and all agreements with all
environmental, feasibility, archeological, engineering, soils, and
other reports of tests or inspections in respect of the Real Property,
and any waivers, and approvals from or to any Governmental Authority,
department, board, commission, bureau or any other entity or
instrumentality, and other authorities in the nature thereof, all as
related to the Real Property; and
E. To the extent transferable, all of Seller's rights, title and
interest in and to any manufacturer's, subcontractor's, supplier's,
merchant's, repairmen's, or other third-party warranties, guarantees,
and service or replacement programs relating to Assumed Construction
Claims.
1.3 Purchase Price. The purchase price to be paid by Buyer for the
Real Property Assets will be as provided in Section 2.5 of the Master
Agreement.
1.4 Closing. Articles VII and VIII of the Master Agreement are
incorporated herein by reference as applicable.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER
2.1 Incorporation by Reference. The representations and warranties
contained in Article III of the Master Agreement are incorporated herein by
reference.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF SELLING PARTIES
3.1 Incorporation by Reference. The representations and warranties
contained in Article IV of the Master Agreement are incorporated herein by
reference.
ARTICLE IV
TITLE MATTERS ON EXISTING PROPERTY
4.1 Escrow. An escrow for the Real Property portion of transactions
described in the Master Agreement (the "Escrow") will be established with
Xxxxxxx Title Company in Las Vegas (the "Escrow Agent" or "Title Company"), and
Buyer and Seller shall share equally the cost thereof. The date that the
executed copies of this Agreement and the Master Agreement are delivered to
Escrow Agent is referred to in this Agreement as the "Opening Date." This
Agreement and the provisions of the Master Agreement referenced herein
constitute escrow instructions to Escrow Agent. If Escrow Agent, Seller or
Buyer requires the execution of additional escrow instructions, Seller and
Buyer agree to execute reasonable additional escrow instructions; provided,
however, those instructions will be construed as applying only to Escrow
Agent's engagement. If there are any conflicts between the terms of this
Agreement or the Master Agreement, respectively, and the terms of the printed
escrow instructions, the terms of this Agreement or the Master Agreement will
control. If there are any conflicts between the terms of the Master Agreement,
on the one hand, and the terms of this Agreement or any of the other
Transaction Agreements, on the other hand, the terms of the Master Agreement
will control.
4.2 Title Matters.
A. Title Report. Schedule 4.2 sets forth a copy of the current
preliminary title reports or a list thereof (individually, a "Report,"
or collectively, the "Reports") for each parcel or parcels of Owned
Real Property. Schedule 4.2 also lists each survey (the "Survey") in
Seller's possession for the Real Property, a copy of which has been
provided to Buyer.
B. Title Supplements. If, prior to Closing, Escrow Agent issues
a supplemental Report showing additional exceptions to title, other
than exceptions arising in the ordinary course of the passage of time
or the conduct of business, or arising due to acts or omissions of
Parent or Buyer, or as set forth on any prior Report (a "Title Report
Supplement"), Parent will have 10 days (a "Supplemental Title Review
Period") from the date of receipt of the Title Report Supplement and a
copy of each document referred to in the Title Report Supplement in
which to give notice of dissatisfaction as to any additional
exceptions to Seller. If Parent has not notified Seller of its
dissatisfaction prior to the close of business on the 10th day
following Parent's receipt of the Title Report Supplement, Parent and
Buyer will be deemed to have accepted title subject to such additional
exceptions.
C. Approved Title Exceptions. Except for the list of title or
survey objections shown by Parent or Buyer on Schedule 4.2C (the
"Disapproved Title Exceptions"), the exceptions to title disclosed in
each Report, and in any Title Report Supplement accepted by Parent
pursuant to Section 4.2B, are referred to in this Agreement as the
"Approved Title Exceptions." Nothing contained herein or in any other
Transaction Agreement shall require any Selling Party to cure any
Disapproved Title Exceptions.
D. Title Policies. On the Closing Date, Seller will cause the
Title Company or its title insurer to provide Buyer with (or to be
irrevocably committed to provide to Buyer post-Closing) (i) a standard
coverage owner's title policy (a "Title Policy") for the Owned Real
Property, and (ii) a standard coverage owner's title commitment (a
"Title Commitment") for the Contracted Real Property, in each case,
issued by the Title Company or its title insurer, effective as of the
Closing, naming Buyer as insured, in the amount of that portion of the
Purchase Price allocated to such portion of the Real Property in
accordance with the Master Agreement, insuring that the estate or
interest described as the insured estate in each Report is vested in
Buyer (in the case of the Owned Real Property) or is vested in the
optionor or seller (in the case of the Contracted Real Property).
Selling Parties will pay the premium of a standard coverage title
policy for each Title Policy, and any nominal cost for obtaining each
Title Commitment. Parent and Buyer will be responsible for the
difference in premium between the standard coverage policy and any
extended coverage that Buyer requires, as well as for the premium
relating to any endorsements that Buyer or Parent is able to obtain.
The Title Policy will include such endorsements issued by the Title
Company as Parent may reasonably require, and Buyer shall obtain such
endorsements as may be available from the Title Company without ALTA
surveys at a commercially reasonable price to insure over the matters
described in Section 4.13R of the Master Agreement, the cost of all of
which endorsements will be borne by Buyer. Seller will use reasonable
good faith efforts to satisfy all of the Title Company's customary
requirements for the issuance of the Title Policies (at Seller's
expense) and extended coverage and endorsements (at Buyer's expense),
other than those, if any, within Buyer's or Parent's control.
E. Title Insurance Indemnity. Seller agrees to deliver or cause
Title Company to deliver to Buyer, prior to Closing, copies of all
indemnities, affidavits or other agreements or documents executed
and/or delivered or to be delivered by Selling Parties to the Title
Company to induce the Title Company (i) to delete any exception to
title shown in Schedule B to any Report, (ii) to remove any policy
conditions or stipulations or exclusions from coverage as any may
appear or be shown on the policy jacket or Schedule B of any Title
Policy, or (iii) to issue any other endorsement or affirmative
coverage of any nature with respect to any such exception to title,
conditions or stipulations to coverage or any exclusions from
coverage.
ARTICLE V
TITLE MATTERS AND OTHER MATTERS ON NEWLY ACQUIRED PROPERTIES
Section 5.1 of the Master Agreement is incorporated herein by
reference as applicable.
5.1 Additional Real Property. Selling Parties hereby covenant and
agree with Buyer and Parent that from the date hereof to the earlier of (i)
Closing Date or (ii) termination of this Agreement Seller will not acquire or
enter into any option or other agreement to acquire any real property.
ARTICLE VI
GENERAL PROVISIONS
6.1 Notices. All notices, consents, and other communications hereunder
will be in writing and deemed to have been duly given when (a) delivered by
hand, (b) sent by telecopier (with receipt confirmed), or (c) when received by
the addressee, if sent by Express Mail, Federal Express, or other express
delivery service (with delivery confirmation), in each case to the appropriate
addresses and telecopier numbers set forth below (or to such other addresses
and telecopier numbers as a party may designate as to itself by notice to the
other):
If to Buyer: Meritage Corporation
0000 Xxxxx Xxxxxxxxxx Xxxx,
Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
Attn: Chief Financial Officer
With a copy to: Xxxxx & Xxxxxx L.L.P.
Xxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Phone: (000) 000-0000
Fax: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxx, Esq.
If to Selling Parties: Zenith National Insurance Corp.
00000 Xxxxxx Xxxxxx
Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
Attn: Xxxxxxx X. Xxx
With a copy to: Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
Attn: Xxxxxx X. Xxxxxx, Esq.
6.2 Counterparts. This Agreement may be executed in any number of
counterparts and each counterpart will constitute an original instrument, but
all such separate counterparts will constitute one and the same agreement.
6.3 Governing Law. The validity, construction, and enforceability of
this Agreement will be governed in all respects by the laws of the State of
Nevada, without regard to its conflict of laws rules.
6.4 Assignment. This Agreement will not be assigned by operation of
law or otherwise, (a) except that Buyer may assign all or any portion of its
rights under this Agreement to any wholly owned subsidiary, but no such
assignment will relieve Buyer or its successor or Parent of its primary
liability for all obligations of Buyer and Parent, respectively, hereunder, and
(b) except that this Agreement may be assigned by operation of law to any
corporation or entity with or into which Buyer may be merged or consolidated or
to which Buyer transfers all or substantially all of its assets, and such
corporation or entity assumes this Agreement and all obligations and
undertakings of Buyer hereunder, but no such assignment will relieve Buyer or
its successor or Parent of their liability for the respective obligations of
Buyer and Parent, respectively, hereunder. Any assignment in violation of the
provisions of this Agreement will be null and void.
6.5 Gender and Number. The masculine, feminine, or neuter pronouns
used herein will be interpreted without regard to gender, and the use of the
singular or plural will be deemed to include the other whenever the context so
requires.
6.6 Waiver of Provisions. The terms, covenants and conditions of this
Agreement may be waived only by a written instrument executed by the party
waiving compliance. The failure of any party at any time to require performance
of any provisions hereof will, in no manner, affect the right at a later date
to enforce the same. No waiver by any party of any condition, or breach of any
provision, term or covenant contained in this Agreement, whether by conduct or
otherwise, in any one or more instances, will be deemed to be or construed as a
further or continuing waiver of any such condition or waiver of the breach of
any other provision, term or covenant of this Agreement.
6.7 Costs. Except as otherwise provided in the Master Agreement, if
any legal action or any arbitration or other proceeding is brought for the
enforcement of this Agreement, or because of an alleged dispute, breach,
default, or misrepresentation in connection with any of the provisions of this
Agreement, the successful or prevailing party or parties will be entitled to
recover reasonable attorneys' fees, accounting fees, and other costs incurred
in that action or proceeding, in addition to any other relief to which it or
they may be entitled.
6.8 Amendment. This Agreement may not be amended except by an
instrument in writing approved by the parties to this Agreement and signed on
behalf of each of the parties hereto.
6.9 Severability. If any term, provision, covenant, or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
void, or unenforceable, the remainder of the terms, provisions, covenants, and
restrictions of this Agreement will remain in full force and effect and will in
no way be affected, impaired, or invalidated and the court will modify this
Agreement or, in the absence thereof, the parties will negotiate in good faith
to modify this Agreement to preserve each party's anticipated benefits under
this Agreement.
6.10 Binding Effect. Subject to the provisions and restrictions of
Section 6.4, the provisions of this Agreement are binding upon and will inure
to the benefit of the parties and their respective heirs, personal
representatives, successors and assigns.
6.11 Construction. References in this Agreement to "Sections" and
"Articles" are to the Sections and Articles in this Agreement, unless otherwise
noted.
6.12 Time Periods. Except as expressly provided for in this Agreement,
the time for performance of any obligation or taking any action under this
Agreement will be deemed to expire at 5:00 o'clock p.m. (Las Vegas, Nevada
time) on the last day of the applicable time period provided for in this
Agreement. If the time for the performance of any obligation or taking any
action under this Agreement expires on a Saturday, Sunday or legal holiday, the
time for performance or taking such action will be extended to the next
succeeding day which is not a Saturday, Sunday or legal holiday.
6.13 Headings. The headings of this Agreement are for purposes of
reference only and will not limit or define the meaning of any provision of
this Agreement.
6.14 Entire Agreement. This Agreement, the other Transaction
Agreements and all certificates, schedules and other documents attached to or
deliverable under such agreements (collectively, the "Agreements") constitute
the entire agreement, including with respect to representations and warranties,
between the parties pertaining to the subject matter contained in the
Agreements. All prior and contemporaneous agreements, representations and
understandings of the parties, oral or written, are superseded by and merged in
the Agreements. No supplement, modification or amendment of the Agreements will
be binding unless in writing and executed by the parties to the Agreements.
6.15 Dispute Resolution. All Disputes shall be resolved exclusively in
accordance with the Dispute Resolution Procedures attached as Exhibit D to the
Master Transaction Agreement. Notwithstanding the foregoing, nothing herein
will prohibit the parties from pursuing equitable remedies.
6.16 No Third Beneficiaries. Except as otherwise set forth in Sections
1 and 2 of the Indemnification Agreement and except as specifically provided in
Section 6.4 of this Agreement and similar provisions in the other Transaction
Agreements, neither this Agreement nor any other Transaction Agreement is
intended to, and none of them shall, create any rights in any other Person
other than the parties to such agreements. Without limiting the generality of
the foregoing, nothing herein or in any other Transaction Agreement is intended
to create, nor shall it create, in the Title Company or any title insurer any
right of subrogation to any rights of Parent or Buyer arising from any
representation or warranty of any Selling Party.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed on the date first written above by their respective officers
thereunder duly authorized.
MERITAGE CORPORATION,
a Maryland corporation
By:
--------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Co-Chief Executive Officer
MTH-HOMES NEVADA, INC.,
an Arizona corporation
By:
--------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Co-Chief Executive Officer
PERMA-BILT, a Nevada corporation
By:
--------------------------------------
Name: Xxxxxx Xxxxxxxx
Title: ____President and Chief Executive Officer
ZENITH NATIONAL INSURANCE CORP., a Delaware
corporation
By:
--------------------------------------
Name: Xxxxxxx X. Xxx
Title: President
[Signature Page to Real Property Agreement]
Exhibit C
INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT (this "Agreement") is effective as of
October 7, 2002, by and among MERITAGE CORPORATION, a Maryland corporation
("Meritage or Parent"); MTH-HOMES NEVADA, INC., an Arizona corporation
("Buyer"); PERMA-BILT, a Nevada corporation ("Seller"); and ZENITH NATIONAL
INSURANCE CORP., a Delaware corporation ("Zenith"). Collectively, Seller and
Zenith are referred to herein as "Selling Parties."
RECITALS
A. As of the date hereof, Parent, Buyer and Selling Parties entered
into a Master Transaction Agreement (the "Master Agreement"), pursuant to
which Buyer has agreed to purchase from Seller and Seller has agreed to sell
to Buyer the Business. Capitalized terms not otherwise defined shall have the
meanings ascribed to them in the Master Agreement.
B. As a material condition to the consummation of the Master
Agreement, Selling Parties, Buyer and Parent are willing to enter into this
Indemnification Agreement.
AGREEMENT
NOW THEREFORE, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Selling Parties and Parent and
Buyer agree as follows:
1. Indemnification of Parent and Buyer by Selling Parties. Subject to
the limitations set forth in Section 4 of this Agreement, Selling Parties will
indemnify and defend Parent and Buyer and their direct and indirect parent
companies, subsidiaries, and affiliates, and their respective officers,
directors, shareholders, successors and assigns, from and against any and all
costs, expenses, losses, damages, fines, penalties, or liabilities (including,
without limitation, interest which may be imposed in connection therewith,
court costs, litigation expenses, and reasonable attorneys' and accounting
fees) (collectively, "Losses") incurred by them, directly or indirectly, with
respect to, in connection with, or arising from, the following:
A. A breach by any Selling Party of any representation, warranty,
covenant, restriction or agreement made by any Selling Party in the Master
Agreement or in any of the Transaction Agreements or in any certificate or
other closing document delivered by such parties to Parent or Buyer thereunder;
B. Any Excluded Liabilities (except to the extent provided in
Sections .4C(2), (3) and (4) of the Master Agreement); and
C. Any gross negligence or willful misconduct by Selling Parties in
their operation of the Business between the Effective Date and the Closing.
2. Indemnification of Selling Parties by Buyer and Parent. Buyer and
Parent each, jointly and severally, will indemnify and defend Selling Parties
and their direct and indirect parent companies, subsidiaries and affiliates,
and their respective officers, directors, shareholders, successors and assigns
from and against any Losses incurred by them, directly or indirectly, with
respect to, in connection with, or arising from, the following:
A. A breach by Buyer or Parent of any representation, warranty,
covenant, restriction or agreement made by Buyer or Parent in the Master
Agreement or in any of the Transaction Agreements or in any certificate or
other closing document delivered by Buyer or Parent to the Selling Parties
thereunder;
B. Any Assumed Liabilities;
C. Any Excluded Liabilities (solely to the extent provided in
Sections 2.4C(2), (3) and (4) of the Master Agreement); and
D. The operation of the Business by Buyer or Parent, or Buyers' or
Parent's ownership, operation or use of the assets and liabilities of the
Business, following the Effective Date (except for matters that constitute
Excluded Liabilities retained by Selling Parties or for which Selling Parties
have agreed to indemnify Buyer and Parent hereunder).
3. Procedure for Indemnification.
A. Subject to the following provisions of this Section 3, the party
which is entitled to be indemnified hereunder (the "Indemnified Party") shall
give notice (the "Notice") hereunder to the party required to indemnify (the
"Indemnifying Party") promptly, but in no event later than 15 days following
such Indemnified Party's receipt of written notice of any claim as to which
recovery may be sought against the Indemnifying Party because of the indemnity
in Section 1 or Section 2 hereof, as applicable, which Notice shall specify (to
the extent known) in reasonable detail the amount of such claim and the
relevant facts and circumstances relating thereto. Notwithstanding the
foregoing, the right to indemnification hereunder shall not be affected by any
failure of an Indemnified Party to give such notice, or delay by an Indemnified
Party in giving such notice, unless, and then only to the extent that, the
rights and remedies of the Indemnifying Party shall have been prejudiced as a
result of the failure to give, or delay in giving, such notice. If the
Indemnifying Party wishes to assume the defense of any claim or litigation by a
third party, it shall promptly, but in no event later than 15 days following
receipt of Notice from the Indemnified Party of such claim or litigation,
notify the Indemnified Party of its election. Failure by an Indemnifying Party
to notify an Indemnified Party of its election to defend any such claim or
action by a third party within 15 days after receipt of the Indemnified Party's
Notice of such claim shall be deemed a waiver by the Indemnifying Party of its
right to defend such claim or action. If the Indemnifying Party assumes the
defense of any claim or litigation by a third party, the Indemnified Party
shall cooperate in the defense thereof, which cooperation shall include, to the
extent reasonably requested by the Indemnifying Party, the retention of and
provision to the Indemnifying Party of records and information reasonably
relevant to such claim or litigation, and making employees of Buyer available
on a mutually convenient basis to provide additional information and
explanation of any materials provided hereunder.
B. If the Indemnifying Party assumes the defense of a claim or
litigation by a third party, the Indemnifying Party will take all steps
necessary in the defense or settlement of such claim or litigation, and will
hold the Indemnified Party harmless from and against any and all damages caused
by or arising out of any settlement approved by the Indemnifying Party or any
judgment in connection with such claim or litigation. If the Indemnifying Party
assumes the defense of any claim or litigation by a third party, the
Indemnified Party shall agree to any settlement, compromise or discharge of
such claim or litigation that the Indemnifying Party may recommend and that, by
its terms, discharges the Indemnified Party from the full amount of liability
in connection with such claim or litigation; provided, however, that the
Indemnifying Party shall not consent to, and the Indemnified Party shall not be
required to agree to, the entry of any judgment or any settlement that (i)
provides for injunctive or other non-monetary relief affecting the Indemnified
Party or (ii) does not include as an unconditional term thereof the giving by
the claimant or the plaintiff to the Indemnified Party of a release from all
liability in respect of such claim or litigation.
C. Except for Excluded Construction Claims and * Non-Construction
Claims, which are addressed in paragraphs D and E below, if the
Indemnifying Party does not assume the defense of any such claim or
litigation by a third party within 15 days after receipt of notice from the
Indemnified Party to do so pursuant to this Agreement, the Indemnified
Party may defend against such claim or litigation in such manner as it
deems appropriate, and the Indemnified Party may settle such claim or
litigation on such terms as it may deem appropriate and the Indemnifying
Party shall promptly reimburse the Indemnified Party for the amount of such
settlement and for all damages incurred by the Indemnified Party in
connection with the defense against or settlement of such claim or
litigation.
D. Notwithstanding the general right of an Indemnifying Party to
defend third party claims subject to indemnification, Parent or Buyer may
(other than in the case of any claim in respect of Pre-Closing Tax
Obligations or, to the extent provided in Section 2.5C of the Master
Agreement, Excluded Construction Claims), in its discretion, upon written
notice to Selling Parties, which notice shall specify (to the extent known)
in reasonable detail the amount of such claim and the relevant facts and
circumstances relating thereto, undertake at Selling Parties' cost and
expense, the defense of any claim seeking damages of less than * for which
Selling Parties are responsible hereunder with respect to any lots, land,
rights to purchase lots or land, project, or subdivision purchased by Buyer
from Seller (the "$100K Non-Construction Claims"). In the case of any *
Non-Construction Claims, Selling Parties will have the right to
participate, with counsel of their choice and at their expense, in the
administration of any * Non-Construction Claims by Parent or Buyer. Neither
Parent nor Buyer shall settle any * Non-Construction Claim without the
prior written consent of Seller which consent shall not be unreasonably
withheld. If Seller does not approve of a settlement proposal of a *
Non-Construction Claim, within 15 days of Buyer giving written notice of
such proposal, which notice shall set forth in reasonable detail the terms
of such proposal and the amount thereof, Seller shall assume all
responsibility for handling the claim, provided, however, that if Seller
does not assume the responsibility for handling such claim within such
period, then Buyer may retain the defense of such claim with fees of
Buyer's counsel and all settlements or judgments in respect thereof to be
paid by Selling Parties.
E. Notwithstanding the foregoing, the parties will handle Excluded
Construction Claims in accordance with Section 2.5C of the Master Agreement.
F. The Indemnifying Party shall promptly reimburse the Indemnified
Party for the amount of any Losses (for which the Indemnifying Party is
required to indemnify the Indemnified Party pursuant to Section 1 or 2 of this
Agreement, as the case may be) incurred by the Indemnified Party in respect to
any claim or litigation, whether or not resulting from, arising out of, or
incurred with respect to, the act of a third party.
G. Anything in this Section 3 to the contrary notwithstanding, the
party not primarily responsible for the defense of a third party claim or
litigation may, with counsel of its choice and at its expense, participate in
the defense of any such claim or litigation.
4. Limits on Indemnity; Certain Procedures and Provisions.
A. For purposes of determining any amounts that are subject to
indemnification pursuant to Section 1, any qualifications relating to
materiality, Material Adverse Effect, or the like will be disregarded.
B. The parties agree that the indemnification obligation of the
Selling Parties under Section 1 will be capped at a total amount of * (the
"Indemnification Cap"); provided, however, notwithstanding anything in this
paragraph to the contrary, the Indemnification Cap will not apply (i) in the
event of fraud or intentional misstatement or omission, (ii) *, or (iii) to a
breach by a Selling Party of the Non-Disclosure and Non-Compete Agreement.
C. Notwithstanding anything to the contrary set forth in this
Agreement (but subject to the terms of this Section 4C), the Selling Parties
shall have no obligation to Parent or Buyer under Section 1:
(i) for any Losses until Buyer has exhausted all reserves
accrued on the Final Closing Balance Sheet with respect to such Losses (the
"Liability Reserves" and; the difference between the amount of such Losses and
the Liability Reserve applicable to such Losses, hereinafter referred to as the
"Unreserved Losses"); and
(ii) for any Unreserved Losses unless and until, and only to
the extent that, the aggregate amount of Unreserved Losses exceeds * in the
aggregate (the "Basket Threshold"); *
D. Any Determined Indemnification Claims hereunder may be
satisfied at Parent and Buyers' option from the Earn-Out Payments set forth in
Section 2.5A(2) of the Master Agreement. Buyer agrees to provide Zenith written
notice of any such setoff when the aggregate amount of setoffs exceeds *
in any Earn-Out Period, and updates thereafter of any additional setoff
whenever the aggregate incremental amount of additional setoffs exceeds
* in that Earn-Out Period, which notices shall specify each Determined
Indemnification Claim and the amount thereof.
E. Buyer shall give the Selling Parties quarterly notice of any
Losses to be satisfied out of the Liability Reserves and of any Losses to be
counted against the Basket Threshold, which notice, in each case, shall specify
each Loss and the amount thereof.
F. Any Losses relating to Real Property will be measured after
Buyer and Parent have used commercially reasonable efforts to obtain relief for
their claims, rights and remedies under all Title Policies and other title
insurance related to the Real Property Assets.
G. Upon the expiration of the survival period set forth in Section
9.1 of the Master Agreement with respect to claims based upon or arising out of
contingencies disclosed on Schedule 2.4D to the Master Agreement, Buyer shall
refund to Seller any and all remaining Liability Reserves related to such
contingencies provided, however, (i) Buyer or Parent may setoff or reduce any
refund of the remaining Liability Reserves for Determined Indemnification
Claims of the Parent or Buyer that Selling Parties fail to satisfy within 15
days of determination and (2) Parent and Buyer shall have no obligation to
refund to Seller any remaining Liability Reserves if Selling Parties are in
breach of any of the Transaction Agreements to the extent of any Losses
actually or reasonably expected to be incurred by Parent and Buyer as a result
of such breach or attributable to indemnity claims against Selling Parties that
remain unresolved.
5. Dispute Resolution. All Disputes shall be resolved exclusively
in accordance with the Dispute Resolution Procedures attached as Exhibit D to
the Master Agreement. Notwithstanding the foregoing, nothing herein will
prohibit the parties from pursuing equitable remedies.
6. Notices. All notices, consents, and other communications hereunder
will be in writing and deemed to have been duly given when (a) delivered by
hand, (b) sent by telecopier (with receipt confirmed), or (c) when received by
the addressee, if sent by Express Mail, Federal Express, or other express
delivery service (with delivery confirmation), in each case to the appropriate
addresses and telecopier numbers set forth below (or to such other addresses
and telecopier numbers as a party may designate as to itself by notice to the
other):
If to Parent or Buyer: Meritage Corporation
0000 Xxxxx Xxxxxxxxxx Xxxx,
Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
Attn: Chief Financial Officer
With a copy to: Xxxxx & Xxxxxx L.L.P.
Xxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Phone: (000) 000-0000
Fax: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxx, Esq.
If to Selling Parties Zenith National Insurance Corp.
00000 Xxxxxx Xxxxxx
Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
Attn: Xxxxxxx X. Xxx
With a copy to: Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
Attn: Xxxxxx X. Xxxxxx, Esq.
7. Assignment. This Agreement will not be assigned by operation of law
or otherwise, (a) except that Buyer may assign all or any portion of its rights
under this Agreement to any wholly owned subsidiary, but no such assignment
will relieve Buyer or its successor or Parent of its primary liability for all
obligations of Buyer and Parent, respectively, hereunder, and (b) except that
this Agreement may be assigned by operation of law to any corporation or entity
with or into which Buyer may be merged or consolidated or to which Buyer
transfer all or substantially all of its assets, and such corporation or entity
assumes this Agreement and all obligations and undertakings of Buyer hereunder,
but no such assignment will relieve Buyer or its successor or Parent of their
liability for the respective obligations of Buyer and Parent, hereunder. Any
assignment in violation of the provisions of this Agreement will be null and
void.
8. Construction. Captions and References in this Agreement to
"Sections," "Exhibits," and "Schedules" are to the Sections and Articles in,
and the Exhibits and Schedules to, this Agreement, unless otherwise noted.
9. Gender and Number. The masculine, feminine, or neuter pronouns used
herein will be interpreted without regard to gender, and the use of the
singular or plural will be deemed to include the other whenever the context so
requires.
10. Entire Agreement. This Agreement, the other Transaction Agreements
and all certificates, schedules and other documents attached to or deliverable
under such agreements (collectively, the "Agreements" constitute the entire
agreement, including with respect to representations and warranties, between
the parties pertaining to the subject matter contained in the Agreements. All
prior and contemporaneous agreements, representations and understandings of the
parties, oral or written, are superseded by and merged in the Agreements. No
supplement, modification or amendment of the Agreements will be binding unless
in writing and executed by the parties thereto.
11. Counterparts. This Agreement may be executed in any number of
counterparts, and by facsimile and each counterpart or facsimile will
constitute an original instrument, but all such separate counterparts and
facsimiles will constitute one and the same agreement.
12. Governing Law. The validity, construction, and enforceability of
this Agreement will be governed in all respects by the laws of the State of
Nevada, without regard to its conflict of laws rules.
13. Waiver of Provisions. The terms, covenants and conditions of this
Agreement may be waived only by a written instrument executed by the party
waiving compliance. The failure of any party at any time to require performance
of any provisions hereof will, in no manner, affect the right at a later date
to enforce the same. No waiver by any party of any condition, or breach of any
provision, term, covenant, representation, or warranty contained in this
Agreement, whether by conduct or otherwise, in any one or more instances, will
be deemed to be or construed as a further or continuing waiver of any such
condition or waiver of the breach of any other provision, term, covenant,
representation, or warranty of this Agreement.
14. Costs. Except as otherwise provided in this Agreement or in the
Master Agreement, if any legal action or any arbitration or other proceeding is
brought for the enforcement of this Agreement, or because of an alleged
dispute, breach, default, or misrepresentation in connection with any of the
provisions of this Agreement, the successful or prevailing party or parties
will be entitled to recover reasonable attorneys' fees, accounting fees, and
other costs incurred in that action or proceeding, in addition to any other
relief to which it or they may be entitled.
15. Amendment. This Agreement may not be amended except by an
instrument in writing approved by the parties to this Agreement and signed on
behalf of each of the parties hereto.
16. Severability. If any term, provision, covenant, or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
void, or unenforceable, the remainder of the terms, provisions, covenants, and
restrictions of this Agreement will remain in full force and effect and will in
no way be affected, impaired, or invalidated and the court will modify this
Agreement or, in the absence thereof, the parties will negotiate in good faith
to modify this Agreement to preserve each party's anticipated benefits under
this Agreement.
17. Binding Effect. Subject to the provisions and restrictions of
Section 7, the provisions of this Agreement are binding upon and will inure to
the benefit of the parties and their respective heirs, personal
representatives, successors and assigns.
18. Headings. The headings of this Agreement are for purposes of
reference only and will not limit or define the meaning of any provision of
this Agreement.
19. No Third Beneficiaries. Except as otherwise set forth in Sections
1 and 2 of this Agreement and except as specifically provided in Section 7 of
this Agreement and similar provisions in the other Transaction Agreements,
neither this Agreement nor any other Transaction Agreement is intended to, and
none of them shall, create any rights in any other Person other than the
parties to such agreements. Without limiting the generality of the foregoing,
nothing herein or in any other Transaction Agreement is intended to create, nor
shall it create, in the Title Company or any title insurer any right of
subrogation to any rights of Parent or Buyer arising from any representation or
warranty of any Selling Party.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed on the date first written above by their respective officers
thereunder duly authorized.
MERITAGE CORPORATION,
a Maryland corporation
By:
------------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Co-Chief Executive Officer
MTH-HOMES NEVADA, INC.,
an Arizona corporation
By:
------------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Co-Chief Executive Officer
PERMA-BILT, a Nevada corporation
By:
------------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: ___ President and Chief Executive Officer
ZENITH NATIONAL INSURANCE CORP., a Delaware
corporation,
By:
------------------------------------------
Name: Xxxxxxx X. Xxx
Title: President
[Signature page to Indemnification Agreement]
Exhibit D
DISPUTE RESOLUTION PROCEDURES
For the purpose of these Dispute Resolution Procedures, Parent and
Buyer will act and be treated as one party and Selling Parties will act and be
treated as one party.
A. Negotiation. The parties will first attempt to settle a Dispute by
a meeting of two designated representatives of each party within five days
after receipt by a party of a request from the other party for such a meeting
("Request").
B. Mediation. If such Dispute cannot be settled at such meeting either
party within five (5) days of such meeting (or within ten days of receipt of a
Request if no meeting takes place) may give a written notice (a "Mediation
Notice") to the other party requesting mediation and setting forth the nature
of the Dispute. The mediation will be held in Las Vegas, Nevada under the
Commercial Mediation Rules of the AAA in effect on the date of the Mediation
Notice ("Mediation Rules"). The parties will select a person who will act as
the mediator under this Paragraph B within 60 days of the date of the execution
of this Agreement. If a mediator has not been selected or if the mediator so
selected is unable or unwilling to serve, the parties shall have ten (10) days
from receipt by a party of a Mediation Notice to agree on a mediator. Failing
such timely agreement, the mediator shall be appointed by the AAA in accordance
with the Mediation Rules. If the Dispute has not been resolved by mediation as
provided above within thirty (30) days after the appointment of the mediator
(or within sixty (60) days of the receipt of a Mediation Notice, whichever
comes sooner), then, on the Request of any Party the Dispute will be determined
by arbitration in accordance with the provisions of Paragraph C hereof.
C. Arbitration. Any Dispute that is not timely settled through
mediation as provided in Paragraph B above will be finally and exclusively
resolved by arbitration in Las Vegas, Nevada. The arbitration shall be
administered by the AAA under its Commercial Arbitration Rules in effect on the
date of the Dispute Notice (the "Rules"), as modified by the provisions of this
Section C. There shall be three neutral and impartial arbitrators, of whom one
shall be appointed by Seller and one shall be appointed by Buyer within 30 days
of receipt by respondent of the demand for arbitration. The two arbitrators so
appointed shall select the chair of the arbitral tribunal within 30 days of the
appointment of the second arbitrator. If any arbitrator is not appointed within
the time limits provided herein, such arbitrator shall be appointed by the AAA
in accordance with the listing, striking and ranking procedure in the Rules.
Any arbitrator appointed by the AAA shall be a retired judge or a practicing
attorney with no less than fifteen years of experience with large commercial
cases and an experienced arbitrator. The arbitration shall be governed by the
Federal Arbitration Act, 9 U.S.C. 1 et seq. The arbitrators shall base the
award on applicable law and judicial precedent. The arbitrators are not
empowered to award damages in excess of compensatory damages, and each party
hereby irrevocably waives any right to recover punitive, exemplary or similar
damages with respect to any Dispute. The award shall be in writing and shall
include the findings of fact and conclusions of law upon which the award is
based. Judgment on the award rendered by the arbitrators may be entered in any
court having jurisdiction thereof.
Notwithstanding the foregoing:
(a) Upon the application by either party to a court for an order
confirming, modifying or vacating the award within sixty (60) days of receipt
thereof, the court shall have the power to review whether, as a matter of law
based on the findings of fact determined by the arbitrators, the award should
be confirmed, modified or vacated in order to correct any errors of law made by
the arbitrators. In order to effectuate such judicial review limited to issues
of law, the parties agree (and will stipulate to the court) that the findings
of fact made by the arbitrators will be final and binding on the parties and
will serve as the facts to be submitted to and relied on by the court in
determining the extent to which the award should be confirmed, modified or
vacated. For the purpose of this section permitting judicial review of the
award, the parties submit to the exclusive jurisdiction of the Federal and
State courts located in Las Vegas, Nevada.
(b) By agreeing to arbitration, the parties do not intend to
deprive any court of its jurisdiction to issue a pre-arbitral injunction,
pre-arbitral attachment, or other provisional order in aid of arbitration
proceedings and the enforcement of any award (including but not limited to a
preliminary injunction enforcing the ownership or confidentiality provisions
contained in this Agreement and the other Transaction Agreements). Without
prejudice to such provisional remedies as may be available under the
jurisdiction of a national court, the arbitral tribunal shall have full
authority to grant provisional remedies and to direct the parties to request
that any court modify or vacate any temporary or preliminary relief issued by
such court, and to award damages for the failure of any party to respect the
arbitrators' orders to that effect.
D. Costs and Attorneys' Fees. If either party fails to proceed with
arbitration as provided herein or unsuccessfully seeks to stay such
arbitration, or if no appeal of an award is timely filed in accordance with
Section C(a) herein fails to comply with any arbitration award within thirty
(30) days of receipt thereof, or is unsuccessful in vacating or modifying the
award pursuant to a petition or application for judicial review, the other
party will be entitled to be awarded costs, including reasonable attorneys'
fees, paid or incurred by such other party in successfully compelling
arbitration or defending against an attempt to stay such arbitration defending
against an attempt to vacate or modify an arbitration award and/or
successfully enforcing such award.
E. Tolling of Statute of Limitations. All applicable statutes of
limitations and defenses based upon the passage of time will be tolled while
the procedures specified in Sections A and B of this Exhibit D are pending.
The parties will take such action, if any, required to effectuate such
tolling.
F. No Amendment of Agreement. In no event shall the arbitrators
have the power or jurisdiction to amend, modify or vary the terms of this
Agreement or any of the other Transaction Agreements.
Exhibit E
NON-DISCLOSURE AND NON-COMPETE AGREEMENT
This AGREEMENT (this "Agreement"), is made as of October 7, 2002 (the
"Effective Date"), by and between MERITAGE CORPORATION, a Maryland corporation
("Meritage"), MTH-HOMES NEVADA, INC., an Arizona corporation (the "Company"),
ZENITH NATIONAL INSURANCE CORP., a Delaware corporation ("Zenith"), and
PERMA-BILT, a Nevada corporation ("Seller" and, together with Zenith, "Selling
Parties").
R E C I T A L S
Seller is engaged in homebuilding and home sales operations.
Zenith indirectly owns all of the outstanding shares of capital stock
of Seller.
The Business will be acquired by the Company pursuant to a Master
Transaction Agreement, dated as of October 7, 2002 (the "Master Agreement").
Capitalized terms not otherwise defined shall have the meanings ascribed to
them in the Master Agreement.
Selling Parties have intimate knowledge of the business practices of
the Business, which, if exploited by Selling Parties in contravention of this
Agreement, would seriously, adversely, and irreparably affect the ability of
the Company to continue the businesses previously conducted by Seller.
To induce the Company to enter into the Master Agreement, Selling
Parties have agreed to execute this Agreement.
In consideration of the premises, the mutual promises and covenants
of the parties set forth herein, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Selling Parties,
intending to be legally bound, agree as follows:
1. Noncompetition.
(a) For the period beginning on the Effective Date and
ending on the * anniversary thereof (the "Restriction Period"), neither
Selling Parties nor any subsidiary, sister entity, or parent will, directly
or indirectly, either as a partner or owner or in any other capacity:
(i) engage in the homebuilding or home sales business within
100 miles of the Las Vegas metropolitan area (a "Competing Business");
(ii) recruit, hire or discuss employment for a Competing
Business with any person who is, or within the six month period preceding the
date of such activity was, an employee of the Company or Meritage (other than
as a result of a general solicitation for employment); or
(iii) solicit any customer or supplier of the Company for a
Competing Business or otherwise attempt to induce any such customer or supplier
to discontinue its relationship with the Company.
(b) Selling Parties represent to the Company and Meritage, and
Selling Parties acknowledge, that:
(iv) they are willing and able to engage in a business that
is not a Competing Business;
(v) enforcement of the restrictions set forth in this Section
1 would not be unduly burdensome to Selling Parties;
(vi) the period of time provided for in this Section 1 and
the territorial restrictions and other provisions and restrictions set forth
herein are reasonable and necessary to protect the Company and its successors
and assigns in the use and employment of the goodwill of the business conducted
by Perma-Bilt Homes prior to the Effective Date; and
(vii) damages cannot compensate the Company in the event of a
violation of this Section 1, and that if such violation should occur,
injunctive relief shall be essential for the protection of the Company and its
successors and assigns.
Accordingly, Selling Parties hereby covenant and agree that, in the
event any of the provisions of this Section 1 shall be violated or breached,
the Company shall be entitled to obtain injunctive relief against the party or
parties violating such covenants, without bond but upon due notice, in
addition to such further or other relief as may be available at equity or law.
Obtainment of such an injunction by the Company shall not be considered an
election of remedies or a waiver of any right to assert any other remedies
which the Company has at law or in equity. No waiver of any breach or
violation hereof shall be implied from forbearance or failure by the Company
to take action thereof. Zenith agrees to pay any and all reasonable costs and
expenses, including attorneys' fees, incurred by the Company in enforcing this
provision if it is determined that Selling Parties breached this Agreement.
(c) Selling Parties hereby agree that upon becoming a partner,
member, owner or investor of another enterprise or any third-party during the
period in which the terms of this Section 1 are in effect, each shall promptly
disclose to such new enterprise or third-party the terms of this Section 1, and
shall cause such enterprise or third-party to maintain such information in
confidence. Selling Parties further agree and authorize the Company to notify
others, including customers of the Company and any such future enterprise or
third-party to which either Zenith or Seller may become a partner, member,
owner or investor, of the terms of this Section 1 and of their obligations
hereunder.
(d) Selling Parties hereby agree that the period of time in
which this Section 1 is in effect shall be extended for a period equal to the
duration of any breach of this Section 1(a) by Selling Parties.
(e) Nothing contained in this Agreement shall prohibit Selling
Parties or their affiliates or associates, any of their directors, officers or
employees, or any of their representatives from investing in stocks, bonds, or
other securities of any entity that engages in a Competing Business, provided,
however, that in the case of capital stock, such securities are listed on a
national securities exchange or traded in the over-the-counter market or
registered under Section 12(g) of the Securities Exchange Act of 1934, and such
investment does not exceed, in the case of any class of the capital stock of
any one issuer, three percent of the issued and outstanding voting power at the
time of such investment. In addition, nothing contained herein shall prevent
any officer or director of the Selling Parties or their affiliates or
associates from serving as a director or trustee of any Competing Business.
2. Protection of Information. Selling Parties recognize and
acknowledge that the Company's trade secrets and all other confidential and
proprietary information of a business, financial or other nature, including
without limitation, proprietary information of the Company, as it exists from
time to time (collectively, "Confidential Information"), are valuable and
unique assets of the Company and therefore agree that, during the Restriction
Period, except as otherwise required by Applicable Laws, or the rules of any
exchange on which any securities of Zenith are or will be listed, they will
not, and will use their best efforts to ensure that their directors, officers,
employees, advisers, agents and consultants do not, disclose any Confidential
Information concerning the Company and/or its subsidiaries or affiliates, to
any person, firm, corporation, association or other entity, for any reason
whatsoever, unless previously authorized in writing to do so by Meritage. It is
understood that Confidential Information shall not include any information that
is or becomes generally available to the public other than as a result of an
unauthorized disclosure by Selling Parties or that is disclosed by Selling
Parties in accordance with the terms of a prior written consent of Meritage.
For the purpose of enforcing this provision, the Company may resort to any
remedy available to it under the law. In the event that any Selling Party is
requested pursuant to, or required by, Applicable Laws, regulation or rules of
any securities exchange or by legal process to disclose any Confidential
Information or any other information concerning the Company, the Selling
Parties agree that they shall provide the Company with prompt notice of such
request or requirement in order to enable the Company to seek an appropriate
protective order or other remedy, to consult with the Selling Parties with
respect to the Company taking steps to resist or narrow the scope of such
request or legal process, or to waive compliance, in whole or in part, with the
terms of this Section 2. In the event that no such protective order or other
remedy is obtained, or that the Company waives compliance with the terms of
this Section 2, Selling Parties shall use their reasonable best efforts to
disclose only that portion of any Confidential Information which Selling
Parties are advised by counsel is legally required and shall exercise all
reasonable efforts to ensure that all Confidential Information so disclosed
shall be accorded confidential treatment in accordance with this Section 2.
3. Severability. In the event that a court of competent
jurisdiction determines that the Restriction Period is unenforceable, the
Restriction Period shall mean *. Additionally, if any provision of this
Agreement is held to be illegal, invalid or unenforceable under any
applicable law, then such provision will be deemed to be modified to the
minimum extent necessary to render it legal, valid and enforceable, and if
no such modification will render it legal, valid and enforceable, then this
Agreement will be construed as if not containing the provision held to be
invalid, and the rights and obligations of the parties will be construed
and enforced accordingly.
4. Waiver. The waiver by either party of a breach of any provision of
this Agreement by the other shall not operate or be construed as a waiver of
any subsequent breach.
5. Injunctive Relief. Selling Parties acknowledge and agree that
Meritage and the Company would be irreparably harmed by any violation of
Selling Parties' obligations under Sections 1 and 2 hereof and that, in
addition to all other rights or remedies available at law or in equity, the
Company will be entitled to injunctive and other equitable relief to prevent or
enjoin any such violation.
6. Assignment by Company. Nothing in this Agreement shall preclude
Zenith, Seller, Meritage or the Company from consolidating or merging into or
with, or transferring all or substantially all of its assets to, another
corporation or entity that assumes this Agreement and all obligations and
undertakings hereunder. Upon such consolidation, merger or transfer of assets
and assumption, the terms "Zenith," "Seller," "Meritage" and "Company,"
respectively, as used herein shall mean such other corporation or entity, as
appropriate, and this Agreement shall continue in full force and effect. For
purposes of Sections 1 and 2 hereof, the term "Company" shall mean all joint
ventures (50% or more owned by Company), subsidiaries and parent companies of
Company (whether corporate, partnership or other form), including the
subsidiary that operates the Business as a division of Meritage Corporation.
7. Entire Agreement. This Agreement embodies the complete agreement of
the parties hereto with respect to the subject matter hereof and supersedes any
prior written, or prior or contemporaneous oral, understandings or agreements
between the parties that may have related in any way to the subject matter
hereof. This Agreement may be amended only in writing executed by Meritage and
Selling Parties.
8. Governing Law. This Agreement and all questions relating to its
validity, interpretation, performance and enforcement, shall be governed by and
construed in accordance with the internal laws, and not the law of conflicts,
of the State of Nevada.
9. Notice. All notices, consents, and other communications hereunder
will be in writing and deemed to have been duly given when (a) delivered by
hand, (b) sent by telecopier (with receipt confirmed), or (c) when received by
the addressee, if sent by Express Mail, Federal Express, or other express
delivery service (with delivery confirmation), in each case to the appropriate
addresses and telecopier numbers set forth below (or to such other addresses
and telecopier numbers as a party may designate as to itself by notice to the
other):
If to the Company: Meritage Corporation
0000 Xxxxx Xxxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
Attention: Chief Financial Officer
With a copy to: Xxxxx & Xxxxxx L.L.P.
Xxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Phone: (000) 000-0000
Fax: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxx, Esq.
If to Selling Parties: Zenith National Insurance Corp.
00000 Xxxxxx Xxxxxx
Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxx
With a copy to: Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
Attn: Xxxxxx X. Xxxxxx, Esq.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
MERITAGE CORPORATION, a Maryland corporation
By:
------------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Co-Chief Executive Officer
MTH-HOMES NEVADA, INC., an Arizona corporation
By:
------------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Co-Chief Executive Officer
ZENITH NATIONAL INSURANCE CORP.,
a Delaware corporation
By:
------------------------------------------
Name: Xxxxxxx X. Xxx
Title: President
PERMA-BILT, A NEVADA CORPORATION
By:
------------------------------------------
Name: Xxxxxx Xxxxxxxx
Title: President and Chief Executive Officer
[Signature Page to Non-Disclosure and Non-Compete Agreement]
Exhibit F
FORM OF GRANT, BARGAIN, SALE DEED
APN NOS. _____________
MAIL TAX STATEMENTS AND
WHEN RECORDED MAIL RETURN TO:
MTH-Homes Nevada, Inc.
0000 Xxxxxxx Xxxxx
Xxx Xxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxx
GRANT, BARGAIN, SALE DEED
-------------------------
This GRANT, BARGAIN, SALE DEED is made the 7th day of October, 2002,
by Perma-Bilt, A Nevada Corporation, as GRANTOR, to MTH-Homes Nevada, Inc., an
Arizona corporation, whose address is 0000 Xxxxxxx Xxxxx, Xxx Xxxxx, Xxxxxx
00000, as GRANTEE.
Witness that Grantor, for good and valuable consideration, receipt
and sufficiency of which is hereby acknowledged, grants, bargains and sells to
Grantee all that real property located in the County of Xxxxx, State of
Nevada, more particularly described as follows:
SEE EXHIBIT "A" ATTACHED HERETO AND MADE A PART HEREOF
Together with all tenements, hereditaments and appurtenances thereto; subject
to current real property taxes, zoning and other governmental restrictions,
and all other covenants, conditions, restrictions, easements, rights-of-way
and other matters of record.
SUBJECT TO: the permitted exceptions set forth on Exhibit "B" attached
hereto and by this reference made a part hereof.
To have and to hold, all and singular, the premises aforementioned
unto said Grantee, its successors and assigns forever.
IN WITNESS WHEREOF, Grantor has set its hand the day and year first
above written.
PERMA-BILT, A NEVADA CORPORATION
By:
------------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: President and Chief Executive Officer
STATE OF NEVADA )
):ss
COUNTY OF XXXXX )
This instrument was acknowledged before me on October ___, 2002, by ,
as of , a .
____________________________________
Notary Public
My commission expires: _______________
EXHIBIT "A"
Legal Description
-----------------
EXHIBIT "B"
Permitted Exceptions
--------------------
Exhibit H
XXXX OF SALE AND ASSIGNMENT AGREEMENT
KNOW ALL MEN BY THESE PRESENTS, that Perma-Bilt, A Nevada Corporation
("Seller"), does hereby sell, convey, transfer, assign and set over unto MTH
Homes Nevada, Inc., an Arizona corporation ("Buyer"), and its successors and
assigns the following (collectively, the "Conveyed Assets"): (i) all of
Seller's rights, title, and interest in and to the Assets (as that term is
defined in that certain Master Transaction Agreement by and among Meritage
Corporation, a Maryland corporation ("Parent"), Buyer, Seller and Zenith
National Insurance Corp., dated October 7, 2002 (the "Master Agreement")) OTHER
THAN the Non-Exclusive Assets (as hereinafter defined); and (ii) a
non-exclusive co-ownership interest with LM Las Vegas, LLC, a Delaware limited
liability company, in the following (collectively, the "Non-Exclusive Assets"):
all of Seller's right, title, and interest in and to the rights described in
clause (ii) of Section 2(a) of that certain Partial Assignment and Assumption
Agreement by and between LM Las Vegas, LLC and MTH-Homes Nevada, Inc., dated
October 7, 2002. Capitalized terms used herein and not otherwise defined will
have the same meaning as set forth in the Master Agreement.
The representations and warranties contained in Article IV of the
Master Agreement that relate to the Conveyed Assets are incorporated herein by
reference for the time periods and subject to all the terms set forth therein,
and except for such representations and warranties, the conveyances made hereby
are made without any representation or warranty of Selling Parties, whether
implied, statutory, or otherwise.
This Xxxx of Sale and Assignment will inure to the benefit of, and
will bind Seller and its successors and assigns.
IN WITNESS WHEREOF, the undersigned parties have executed this Xxxx of
Sale and Assignment to be effective as of the 7th day of October, 2002.
SELLER:
PERMA-BILT, A NEVADA CORPORATION
By:
------------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: President and Chief Executive Officer
Exhibit I
XXXXXXXX EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") is effective as of
October 1, 2002 by and among MTH-HOMES NEVADA, INC., an Arizona corporation
(the "Company") and XXXXXX XXXXXXXX ("Employee"). All capitalized terms used
herein and not otherwise defined shall have the same meaning as set forth in
the Master Transaction Agreement between the Company, Meritage Corporation, a
Maryland corporation ("Parent"), Perma-Bilt, A Nevada Corporation and Zenith
National Insurance Corp. a Delaware corporation ("Zenith") dated October 7,
2002 ("Master Agreement").
RECITALS
1. Pursuant to the Master Agreement, the Company will acquire all or
substantially all assets of the Business.
2. The Company desires to obtain the consultation, coordination and
management services of Employee, and Employee desires to provide such services
to the Company, in accordance with the terms, conditions and provisions of this
Agreement.
3. The Company requires, as a condition to the Closing and payment of
the Purchase Price, that Employee provide to the Company the non-competition
and confidentiality protections set forth herein.
In consideration of the covenants and mutual agreements set forth
herein and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, and in reliance upon the representations,
covenants and mutual agreements contained herein, the Company and Employee
agree as follows:
1. Employment. Subject to the terms and conditions of this Agreement,
during the first two years of the term of this Agreement, the Company agrees
to employ Employee as President of the Company, and Employee agrees to
diligently perform the duties associated with such position, including, but
not limited to the duties and responsibilities listed on Exhibit A attached
hereto. Employee will devote substantially all of his business time, attention
and energies to the business of the Company and will comply with the
non-discriminatory policies and guidelines established by Parent from time to
time applicable to its senior management executives. During the third year of
the term of this Agreement, the Company agrees to employ Employee as President
Emeritus of the Company during which time Employee agrees to devote part of
this business time, attention and energies to the business of the Company.
2. Term. Employee will be employed under this Agreement for a term
beginning on October 1, 2002 (the "Effective Date") and ending on the third
anniversary of the Effective Date unless Employee's employment is terminated
earlier pursuant to Section 7.
3. Base Salary and Benefits. The Company will pay Employee the Base
Salary (as defined below). For purposes of this Agreement, the term "Base
Salary" shall mean an amount equal to $250,000 per year, pro rated as
appropriate. Salary will be payable bi-weekly in accordance with the payroll
practices of the Company in effect from time to time. All of Employee's
compensation under this Agreement will be subject to deduction and withholding
authorized or required by applicable law. In addition, Employee will be
eligible during the term of this Agreement to participate in all ordinary and
customary benefit plans and programs afforded Parent's other division
presidents; provided, however, that notwithstanding anything to the contrary
herein, during the term hereof Employee will in any event receive those
benefits described in Exhibit B attached hereto.
4. Incentive Compensation. Employee will be entitled to incentive
compensation based on the achievement of certain performance targets specified
in Exhibit C hereto, pro rated as appropriate. The incentive compensation
shall be paid by the Company within thirty days following the end of each
calendar year.
5. Pre-Tax Bonus. Employee will be entitled to receive from the
Company bonus payments of 10% of the Pre-Tax Net Income of the Company as
determined in accordance with GAAP (the "Pre-Tax Bonus"), subject to the
provisions set forth below.
A. "Pre-Tax Net Income" will mean the net income of the Company
before interest and income taxes determined in accordance with GAAP and as
reported in the Company's financial statements after giving effect to the
following (to the extent not already reflected in the calculation of such net
income of the Company before income taxes):
(1) subtraction of compensation paid to Employee, but not the
Pre-Tax Bonus.
(2) subtraction of a "Services Fee," which shall equal any direct
third-party costs paid by Parent in connection with providing services to the
Company; provided, however, that the Services Fee will not include overhead
costs.
(3) subtraction of a "Capital Charge," which shall be a charge
equal to 10.5% on the Capital (i.e., equity, intercompany borrowings and
interest bearing liabilities due third parties) provided to the Company by
Parent. "Capital" shall mean (x) the aggregate book value of the Company's
assets (excluding any assets not required to be reflected on the balance
sheet) at the beginning of each period that the charge is being computed,
less (y) all non-interest bearing liabilities due third parties. The Capital
Charge will be calculated on a monthly basis. To the extent that the
Business' assets include land greater than $50 million, the excess over $50
million will not be subject to a Capital Charge. Other than the Capital
Charge, no interest (whether direct or indirect, whether paid, actually
incurred or allocated, and whether expensed, amortized to cost of sales,
capitalized or otherwise), will be deducted or amortized in computing the
Pre-Tax Net Income for any period. Exhibit D hereto sets forth a sample
calculation. In the event of a conflict between the description of the
calculation set forth in this Section 5A and Exhibit D, Exhibit D shall
control.
(4) an amount equal to the excess of the Purchase Price over the
Adjusted Book Value set forth on the Final Closing Balance Sheet (i.e., the
purchase price premium over the book value of the assets and liabilities
acquired) ("Premium") shall (A) be excluded for purposes of computing the
Capital Charge from the "aggregate book value of the Company's assets at the
beginning of each period;" and (B) neither deducted nor amortized in
computing the Pre-Tax Net Income for any period.
(5) exclusion of all transaction costs of Parent and the Company
with respect to or arising out of the consummation of the transactions
contemplated by the Agreements (including, without limitation, all costs and
expenses of arbitrators (as to the calculation of the Purchase Price),
accountants, legal counsel and financial advisors of Parent or the Company
and, if required to be paid by Parent or the Company pursuant to the
Agreements, of any other parties hereto).
(6) exclusion of all losses subject to indemnification by Selling
Parties pursuant to the Indemnification Agreement that are paid by Selling
Parties or are deducted from Liability Reserves, and exclusion of all
payments made by Selling Parties to the Company pursuant to the
Indemnification Agreement.
(7) exclusion of all other charges against net income or resulting
from significant changes in accounting principles that are not (y)
consistent with Parent's or the Business' past practices, or (z) required by
GAAP.
B. There will be three Pre-Tax Bonus payments, one for each of the
three consecutive Bonus Periods following the Closing Date.
C. The Company will pay to Employee 90% of each estimated Pre-Tax
Bonus payment for the previous (i.e., just ended) Bonus Period in cash on or
before the 30th day following the end of the last relevant Bonus Period.
Together with that payment, the Company will deliver to Employee a
calculation notice, setting for the calculation in reasonable detail, of the
estimated Pre-Tax Net Income for such Bonus Period. Thereafter, within 90
days after completion of each Bonus Period, Parent will deliver to Employee
a calculation notice, setting forth the calculation in reasonable detail, of
the Pre-Tax Net Income for such Bonus Period and the remaining amount, if
any, of any Pre-Tax Bonus Payment due, together with a check in the amount
of the balance due.
D. "Bonus Period" will mean for the first Bonus Period, the period
commencing on October 1, 2002 and ending on September 30, 2003; for the
second Bonus Period, the period commencing on October 1, 2003 and ending on
September 30, 2004; for the final Bonus Period, the period commencing on
October 1, 2004 and ending on September 30, 2005.
E. During each Bonus Period, unless otherwise agreed to by
Employee, the Parent and the Company agree to:
(1) operate the Business consistent with the past practices of
Business or Parent and with the Company's proposed post-Closing operations,
provided that the Company will have no obligation to execute such proposed
post-Closing operations;
(2) maintain separate books and records for the Business;
(3) use reasonable commercial efforts, subject to the fiduciary
duty of the Parent's Board of Directors, to provide sufficient capital to
the Business to enable it to make capital expenditures and otherwise operate
in the ordinary course; and
(4) maintain the Business as a separate entity and not combine,
merge or consolidate it (except together or with Parent or another
subsidiary of Parent; provided that with respect to any such combination,
merger or consolidation, Parent will continue to maintain separate books and
records for the Business) or liquidate it or, except in the ordinary course
of business, sell or otherwise dispose of its assets (except to Parent or
another subsidiary of Parent; provided that with respect to any such sale,
transfer or disposition, Parent will continue to maintain separate books and
records for the Business).
F. If Employee's employment is terminated prior to the third
anniversary of this Agreement, payment of the Pre-Tax Bonus is subject to
the following:
(1) Terminated by the Company without Cause. Employee is entitled
to be paid the Pre-Tax Bonus for each of the three Bonus Periods if his
employment is terminated by the Company without Cause;
(2) Death or Disability. Employee is not be entitled to any
Pre-Tax Bonus payment if his employment is terminated by reason of death or
Disability (as defined in Section 7D of this Agreement) prior to the first
anniversary of this Agreement. If Employee's employment with the Company is
terminated by reason of death of Disability at any time after the first
anniversary, he is entitled to be paid (or his estate or personal
representative is entitled to be paid if Employee is deceased) the Pre-Tax
Bonus for each of the three Bonus Periods;
(3) Terminated by the Company with Cause. Employee is not entitled
to any remaining Pre-Tax Bonus if his employment is terminated for Cause (as
defined in Section 7D of this Agreement); and
(4) Terminated Voluntarily by Employee. Employee is not entitled
to any remaining Pre-Tax Bonus if he voluntarily terminates his employment
(other than as a result of a material breach of this Agreement by the
Company which is not cured within thirty days written notice thereof by
Employee).
G. Any disputes regarding the Parent's computation of the Pre-Tax
Bonus will be resolved pursuant to the procedures set forth in Section 16B
of this Agreement.
6. Option Grant. On the Closing Date of the Master Agreement and on
the following two anniversaries thereof (each a "Grant Date"), Parent will
grant Employee an option to purchase 10,000 shares of common stock of Parent
at an exercise price that is equal to the market price of the Parent's
listed stock on the respective Grant Date. The option will vest in
accordance with terms generally applied under the Parent's "division
president stock option program." Attached hereto as Exhibit E is the form of
Stock Option Agreement that will be entered into by Parent and Employee.
7. Termination.
A. If Employee voluntarily terminates his employment with the
Company (other than as a result of a material breach of this Agreement by
the Company which is not cured within thirty days written notice thereof by
Employee) or if the Company discharges Employee for Cause (as defined
below), then the Company's obligations to pay the Base Salary and incentive
compensation under this Agreement will terminate immediately, except for the
payment of the Base Salary through the Date of Termination and the incentive
compensation for the year in which such voluntary termination or discharge
for Cause occurs, prorated through the Date of Termination. For purposes
hereof, a termination of Employee's employment hereunder because of
Employee's death or Disability shall not be considered a voluntary
termination.
B. If Employee's employment with the Company is terminated by the
Company without Cause, then the Company will be obligated to pay Employee's
then current Base Salary pursuant to Section 3 for one year and incentive
compensation pursuant to Section 4 for that year.
C. If Employee's employment with the Company is terminated as a
result of Employee's death or Disability then the Company will be obligated
to pay Employee's then current Base Salary pursuant to Section 3 for one
year and Employee's incentive compensation pursuant to Section 4 for that
year.
D. For purposes of this Agreement,
"Cause" is defined to mean (i) Employee's wrongful
misappropriation of any money or other assets or properties of the Business
(before or after the Closing Date), or any subsidiary or affiliate of the
Company, resulting, or intended to result, directly or indirectly, in
substantial personal gain or enrichment to Employee; (ii) the conviction of
Employee for any felony; (iii) engagement by Employee in conduct involving
fraud, moral turpitude, dishonest, gross misconduct, embezzlement, theft, or
similar matters that are detrimental to the Company or Business (before or
after the Closing Date); or (iv) Employee's willful disregard of his primary
duties to the Company (except for reasons beyond Employee's reasonable
control) which continues for more than thirty days after written notice by
Company to Employee describing in reasonable detail the primary duties which
Employee allegedly has willfully disregarded.
"Disability" means a disability (as reasonably determined by
a physician mutually acceptable to both parties) that results in Employee
being unable to fulfill his duties under this Agreement for 90 consecutive
days.
"Date of Termination" shall mean (i) if the Agreement is
terminated as a result of Employee's death, the date of Employee's death,
(ii) if the Agreement is terminated by Employee, the date on which he
delivers a notice of termination to the Company, (iii) if this Agreement is
terminated as a result of Disability, the date a notice of termination is
given, (iv) if Employee's employment is terminated by the Company for any
other reason, the date on which a notice of termination is given to
Employee; or (v) upon Employee's voluntary resignation.
E. The Company shall have no obligation to pay Employee any
amounts after the Date of Termination, other than his Base Salary through
the Date of Termination, if Employee is in breach of any provision in
Section 8 of this Agreement which continues for more than thirty days after
written notice by Company to Employee to cure or cease the offending
activities.
8. Restrictive Covenant. In consideration of Employee's employment
and as an inducement for Company to enter the Master Agreement, Employee
hereby agrees to the following:
A. For a period of three years from the date of this
Agreement (the "Restriction Period"), Employee will not, directly or
indirectly, either as an employee, partner, owner, director, adviser or
consultant or in any other capacity:
(1) engage in the homebuilding, home sales, land banking, or
land development businesses within 100 miles of the Las Vegas metropolitan
area (a "Competing Business");
(2) recruit, hire or solicit any person who is, or within the
six month period preceding the date of such activity was, an employee of the
Company or Parent (other than as a result of a general solicitation for
employment); or
(3) solicit any customer or supplier of the Company or Parent
for a Competing Business or otherwise attempt to induce any such customer or
supplier to discontinue its relationship with the Company or Parent.
B. Employee represents to the Company that he is willing and
able to engage in businesses that are not Competing Businesses hereunder and
that enforcement of the restrictions set forth in this Section 8 would not
be unduly burdensome to Employee. Employee hereby agrees that the period of
time provided for in this Section 8 and other provisions and restrictions
set forth herein are reasonable and necessary to protect the Company and its
successors and assigns in the use and employment of the goodwill of the
business conducted by Employee. Employee further agrees that damages cannot
compensate the Company in the event of a violation of this Section 8 and
that, if such violation should occur, injunctive relief shall be essential
for the protection of the Company and its successors and assigns.
Accordingly, Employee hereby covenants and agrees that, in the event any of
the provisions of this Section 8 shall be violated or breached, the Company
shall be entitled to obtain injunctive relief against the party or parties
violating such covenants, without bond but upon due notice, in addition to
such further or other relief as may be available at equity or law.
Obtainment of such an injunction by the Company shall not be considered an
election of remedies or a waiver of any right to assert any other remedies
which the Company has at law or in equity. No waiver of any breach or
violation hereof shall be implied from forbearance or failure by the Company
to take action thereof.
C. Employee hereby agrees that the period of time in which
this Section 8 is in effect shall be extended for a period equal to the
duration of any breach of this Section 8 by Employee.
9. Confidential Information and Non-Disclosure.
A. It is understood that in the course of Employee's employment
with Company, Employee will become acquainted with Company Confidential
Information (as defined in subsection 9(d) below). Employee recognizes that
Company Confidential Information has been developed or acquired at great
expense, is proprietary to the Company, and is and shall remain the
exclusive property of the Company. Accordingly, Employee agrees that, except
as required by applicable law or as otherwise provided herein, he will not,
without the express written consent of the Company, during Employee's
employment with the Company and thereafter until such time as Company
Confidential Information becomes generally known, or readily ascertainable
by proper means, by persons unrelated to the Company other than Employee,
disclose to others, copy, make any use of, or remove from Company's premises
any Company Confidential Information, except as Employee's duties may
require. Notwithstanding anything to the contrary herein, at any time after
the third anniversary of the Effective Date, employee may use Company
Confidential Information (other than trade secrets) in connection with his
activities (whether as owner, principal, partner, employee, consultant or
otherwise) in any activities that are not a Competing Business.
B. Employee acknowledges and agrees that a breach by Employee of
the provisions of this Section 9 will cause Company irreparable injury and
damage that cannot be reasonably or adequately compensated by damages at
law. Employee expressly agrees that Company shall be entitled, without
posting any bond, to injunctive or other equitable relief to prevent a
threatened breach, breach or continued breach of this Section 9 in addition
to any other remedies legally available to it.
C. Upon termination, whether for Cause or not, Employee shall
promptly deliver to the Company the originals and all copies of any and all
materials, documents, notes, manuals, or lists containing or embodying
Company Confidential Information, or relating directly or indirectly to the
business of the Company, in the possession or control of Employee.
D. "Company Confidential Information" shall mean confidential,
proprietary information or trade secrets of Company and Parent and their
affiliates (collectively, the "Consolidated Group") including without
limitation the following: (1) customer lists and customer information as
compiled by the Consolidated Group; (2) the Consolidated Group's internal
practices and procedures; (3) the Consolidated Group's financial condition
and financial results of operation to the extent not generally available to
the public; (4) supply of materials information, including sources and
costs; (5) information relating to designs or other subject matter related
to the Consolidated Group's business, strategic planning, manufacturing,
engineering, purchasing, finance, marketing, promotion, distribution, and
selling activities, whether now existing, or acquired, developed, or made
available anytime in the future to the Consolidated Group; (6) all
information which Employee has a reasonable basis to consider confidential
or which is treated by the Consolidated Group as confidential; and (7) any
and all information having independent economic value to the Consolidated
Group that is not generally known to, and not readily ascertainable by
proper means by, persons who can obtain economic value from its disclosure
or use. Employee acknowledges that such information is Company Confidential
Information.
10. Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any applicable law, then such
provision will be deemed to be modified to the minimum extent necessary to
render it legal, valid and enforceable, and if no such modification will
render it legal, valid and enforceable, then this Agreement will be
construed as if not containing the provision held to be invalid, and the
rights and obligations of the parties will be construed and enforced
accordingly.
11. Injunctive Relief. Employee acknowledges and agrees that the
Company would be irreparably harmed by any violation of Employee's
obligations under Sections 7 and 8 hereof and that, in addition to all other
rights or remedies available at law or in equity, the Company will be
entitled to injunctive and other equitable relief to prevent or enjoin any
such violation.
12. Assignment by Company. Nothing in this Agreement shall preclude
the Company from consolidating or merging into or with, or transferring all
or substantially all of its assets to, another corporation or entity that
assumes this Agreement and all obligations and undertakings hereunder;
provided, however, that no such consolidation, merger, transfer or
assumption shall relieve the Company from its primary liability hereunder.
Upon such consolidation, merger or transfer of assets and assumption, the
term "Company" as used herein shall mean such other corporation or entity,
as appropriate, and this Agreement shall continue in full force and effect.
13. Entire Agreement. This Agreement embodies the complete
agreement of the parties hereto with respect to the subject matter hereof
and supersedes any prior written, or prior or contemporaneous oral,
understandings or agreements between the parties that may have related in
any way to the subject matter hereof. This Agreement may be amended only in
writing executed by the Company and Employee.
14. Governing Law. This Agreement and all questions relating to its
validity, interpretation, performance and enforcement, shall be governed by
and construed in accordance with the internal laws, and not the law of
conflicts, of the State of Nevada.
15. Notice. Any notice required or permitted under this Agreement
must be in writing and will be deemed to have been given when delivered
personally or by overnight courier service or three days after being sent by
U.S. certified or registered mail, postage prepaid, at the address indicated
below or to such changed address as such person may subsequently give such
notice of:
If to the Company or Parent: Meritage Corporation
0000 Xxxxx Xxxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
Attention: Chief Financial Officer
With a copy to: Xxxxx & Xxxxxx L.L.P.
Xxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Phone: (000) 000-0000
Fax: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxx, Esq.
If to Employee: Xxxxxx Xxxxxxxx
With a copy to: Irell & Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxx, Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Phone: (000) 000-0000
Fax: (000) 000-0000
Attn: Xxx Xxxxxxxx, Esq.
16. Arbitration.
A. Except as set forth in paragraph B below, any dispute,
controversy, or claim, whether contractual or non-contractual, between the
parties hereto arising directly or indirectly out of or connected with this
Agreement, relating to the breach or alleged breach of any representation,
warranty, agreement, or covenant under this Agreement, unless mutually
settled by the parties hereto, shall be resolved by binding arbitration
before a single arbitrator, in accordance with this Section 16 and the then
most applicable rules of the American Arbitration Association (the "AAA").
The resolution of the dispute by the arbitrator shall be final, binding,
nonappealable, and fully enforceable by a court of competent jurisdiction
under the Federal Arbitration Act. Judgment upon any award rendered by the
arbitrator may be entered by any state or federal court having jurisdiction
thereof. Such arbitration shall be administered by the AAA. Except as
provided in Sections 8 and 9, arbitration shall be the exclusive remedy for
determining any such dispute, regardless of its nature. The arbitration
award shall be in writing and shall include a statement of the reasons for
the award. Unless otherwise mutually agreed by the parties, the arbitration
shall be held in Las Vegas, Nevada.
In the event the parties are unable to agree upon an
arbitrator, the parties shall select a single arbitrator from a list of nine
arbitrators drawn by the parties at random from the "independent" (or "gold
card") list of retired judges or, at Employee's option, from a list of nine
persons from the employment panel provided by the AAA. If the parties are
unable to agree upon an arbitrator from the list of nine so drawn, then the
parties shall each strike names alternatively from the list, with the first
to strike being determined by lot. After each party has used four strikes,
the remaining name on the list shall be the arbitrator. If such person is
unable to serve for any reason, the parties shall repeat this process until
an arbitrator is selected.
This agreement to resolve any disputes by binding arbitration
shall extend to claims against any parent, subsidiary or affiliate of each
party, and, when acting within such capacity, any officer, shareholder,
employee or agent of each party, or of any of the above, and shall apply as
well to claims arising out of state and federal statutes and local
ordinances as well as to claims arising under the common law. In the event
of a dispute subject to this paragraph the parties shall be entitled to
reasonable discovery subject to the discretion of the arbitrator. The
remedial authority of the arbitrator shall be the same as, but no greater
than, would be the remedial power of a court having jurisdiction over the
parties and their dispute. The arbitrator shall, upon an appropriate motion,
dismiss any claim without an evidentiary hearing if the party brining the
motion establishes that he or it would be entitled to summary judgment if
the matter had been pursued in court litigation. In the event of a conflict
between the applicable rules of the AAA and these procedures, the provisions
of these procedures shall govern.
B. If Zenith disputes Parent's computation of an Earn-Out
Payment (as defined in the Master Agreement) within 90 days after the end of
the relevant Earn-Out Period: (i) Employee may not dispute the computation
of the corresponding Pre-Tax Bonus payment, and (ii) any increase in the
amount of the disputed Earn-Out Payment, either by mutual agreement of
Zenith and Parent or otherwise pursuant to the provisions of Section
2.5A(2)(e) of the Master Agreement, shall result in a dollar for dollar
increase, as the case may be, in the corresponding Pre-Tax Bonus payment. If
Zenith does not dispute Parent's computation of an Earn-Out Payment
computation within such 90-day period, then Employee may within the 90-day
period thereafter dispute Parent's computation of the corresponding Pre-Tax
Bonus payment pursuant to the procedure set forth in Section 2.5A(2)(e) of
the Master Agreement, including the provision that would require Employee to
pay the cost of the parties accounting and other professionals and fees and
expenses of the Earn-Out Accounting Arbitrator if the Pre-Tax Bonus Payment
as determined by the Earn-Out Accounting Arbitrator is within 5% of the
amount calculated by Parent, except that (i) all references in such
paragraph to Zenith shall be deemed to refer to Employee, (ii) all
references in such paragraph to Earn-Out Payment shall refer to Pre-Tax
Bonus and (iii) the dispute will be arbitrated in the manner provided in
this Section 16A (and not in the manner provided in Section C of Exhibit D
to the Master Agreement). Notwithstanding any other provision in this
Section 16B, Employee and Zenith may agree between themselves agree to
arbitrate the dispute together pursuant to the procedure set forth in
Section 2.5A(2)(e) of the Master Agreement; provided, however, Employee and
Zenith agree to be responsible any costs of the parties accounting and other
professionals and fees and expenses of the Earn-Out Accounting Arbitrator
that would otherwise be owed by Zenith if it had arbitrated the dispute
alone.
C. Any filing or administrative fees shall be borne initially
by the party requesting arbitration. The prevailing party in such
arbitration, as determined by the arbitrator, and in any enforcement or
other court proceedings, shall be entitled, to the extent permitted by law,
to reimbursement from the other party for all of the prevailing party's
costs (including but not limited to the arbitrator's compensation),
expenses, and attorneys' fees.
17. Withholding; Release. Employee acknowledges and agrees that
the Company may withhold against payments due Employee any such amounts
required under the withholding laws, as well as any other amounts payable by
Employee to Company.
The Company's obligation to make any payments hereunder on or
after the Date of Termination, other than salary payments and expense
reimbursements through the Date of Termination, shall be subject to receipt
by the Company from Employee of an appropriate release applicable to matters
and obligations arising under this Agreement to which such payments relate
in form and substance reasonably acceptable to the Company and its
affiliates, directors, officers and employees.
IN WITNESS WHEREOF, the Company and Employee have executed and
delivered this Agreement as of the date first above written.
MTH-HOMES NEVADA, INC., an Arizona corporation
By:
------------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Co-Chief Executive Officer
EMPLOYEE
------------------------------------------
Xxxxxx Xxxxxxxx
Agreed and Accepted:
Meritage Corporation
agrees to be bound to the
provisions contained in
Sections 5 and 6 as if it
was a party to this Agreement.
MERITAGE CORPORATION, a Maryland corporation
By:
------------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Co-Chief Executive Officer
[Signature page to Xxxxxx Xxxxxxxx Employment Agreement]
