Exhibit 10.5
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 1 and 3 has
been replaced with an asterisk.
EXECUTION COPY
NON-DISCLOSURE AND NON-COMPETE AGREEMENT
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:
(i) they are willing and able to engage in a business that is
not a Competing Business;
(ii) enforcement of the restrictions set forth in this Section
1 would not be unduly burdensome to Selling Parties;
(iii) 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
(iv) 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: /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
ZENITH NATIONAL INSURANCE CORP.,
a Delaware corporation
By: /s/ Xxxxxxx X. Xxx
-----------------------------------
Name: Xxxxxxx X. Xxx
Title: President
PERMA-BILT, a Nevada Corporation
By: /s/ Xxxxxx Xxxxxxxx
-----------------------------------
Name: Xxxxxx Xxxxxxxx
Title: President and Chief Executive Officer
[Signature Page to Non-Disclosure and Non-Compete Agreement]
