Exhibit 10.6
EXECUTION COPY
AGREEMENT REGARDING
PURCHASE PRICE AND INDEMNIFICATION
This AGREEMENT REGARDING PURCHASE PRICE AND INDEMNIFICATION (this
"Agreement"), dated as of October 7, 2002, is made by and among Zenith
National Insurance Corporation, a Delaware corporation ("Zenith"),
Perma-Bilt, a Nevada Corporation ("Seller" and, together with Zenith, the
"Selling Parties"), and Xxxxxx Xxxxxxxx ("Xx. Xxxxxxxx"). Capitalized terms
used but not defined herein have the respective meanings set forth in the
Master Agreement (as defined below).
RECITALS
WHEREAS, it is a condition to the Selling Parties' willingness to
consummate the transactions contemplated by (i) the Master Transaction
Agreement, dated as of the October 7, 2002, by and among Meritage
Corporation, a Maryland corporation ("Parent"), MTH-Homes Nevada, Inc., an
Arizona corporation ("Buyer"), and the Selling Parties (the "Master
Agreement"), (ii) the Indemnification Agreement, dated as of October 7,
2002, by and among Parent, Buyer and the Selling Parties (the
"Indemnification Agreement") and (iii) the other Transaction Agreements,
that this Agreement be executed and delivered;
WHEREAS, the Selling Parties have agreed to indemnify Parent and
Buyer for Excluded Construction Claims, other Excluded Liabilities and the
other matters set forth in Section 1 of the Indemnification Agreement, in
accordance with the terms, conditions and limitations set forth in the
Master Agreement and in the Indemnification Agreement (the "Indemnification
Obligations"); and
WHEREAS, in accordance with the Restated Employment Agreement,
dated as of October 1, 1998, as amended (the "Employment Agreement"),
between Seller and Xx. Xxxxxxxx, Seller has proposed to pay to Xx. Xxxxxxxx
40% of the "premium" over net book value of Seller's assets that Seller will
receive pursuant to the Master Agreement (less transaction costs of the
Selling Parties and less a reserve for Indemnification Obligations, as
described below), and, accordingly, Xx. Xxxxxxxx is willing to be severally
liable for 40% of the Excluded Construction Claims, other Excluded
Liabilities and other Indemnification Obligations, subject to the terms and
conditions of this Agreement.
NOW THEREFORE, in consideration of the mutual premises set forth
herein and other good and valuable consideration, the sufficiency of which
is hereby acknowledged, the parties intending to be legally bound hereby,
agree as follows:
ARTICLE I
PAYMENTS; INDEMNITY RESERVE
Section 1.1 Payment of Salary. Immediately prior to the Closing,
Seller shall pay to Xx. Xxxxxxxx an amount in cash equal to Xx. Xxxxxxxx'x
accrued and unpaid Salary (as defined in the Employment Agreement) as of the
Effective Date (the "Closing Date Salary"), based on Seller's estimate of
Income Before Taxes, As Adjusted (as defined in the Employment Agreement),
calculated in a manner consistent with the Preliminary Closing Balance
Sheet, for the year-to-date period ending on the Effective Date (the
"Estimated Pre-Tax Income"). Upon determination of the Final Closing Balance
Sheet in accordance with Section 2.5B of the Master Agreement, if Income
Before Taxes, As Adjusted, calculated in a manner consistent with the
finally determined Final Closing Balance Sheet, for the year-to-date period
ending on the Effective Date (the "Actual Pre-Tax Income"), is less than
Estimated Pre-Tax Income, Xx. Xxxxxxxx will pay to Seller an amount in cash
equal to 40% of such shortfall, and if Actual Pre-Tax Income is greater than
Estimated Pre-Tax Income, Seller will pay to Xx. Xxxxxxxx an amount in cash
equal to 40% of such excess.
Section 1.2 Indemnity Reserve. Prior to making the distribution of
the Premium (as defined in the Master Agreement) contemplated by Section
1.3, Seller shall withhold from the Premium an amount to be determined by
the board of directors of Seller in its discretion (the "Indemnity
Reserve"), for purposes of satisfying Excluded Construction Claims, other
Excluded Liabilities and other Indemnification Obligations. Seller may
release, as and when determined by the board of directors of Seller in its
discretion, all or any part of the Indemnity Reserve (including interest
earned by Seller thereon) not applied to satisfy Excluded Construction
Claims, other Excluded Liabilities or other Indemnification Obligations, and
Seller shall distribute any such released amount 60% to Zenith and 40% to
Xx. Xxxxxxxx.
Section 1.3 Distribution of Purchase Price. At Closing, following
payment of the Purchase Price by Buyer to Seller, Seller shall distribute to
Zenith an amount in cash equal to the net book value of the Business at the
Effective Date, an amount equal to the opening cash balance of Seller on the
Closing Date, and an amount necessary to repay all loans and related
interest due to Zenith at Closing. As and when determined by the board of
directors of Seller, Seller shall distribute the Premium (after withholding
the Indemnity Reserve and after withholding transaction costs of the Selling
Parties) and any returned Liability Reserves, 60% to Zenith and 40% to Xx.
Xxxxxxxx.
ARTICLE II
INDEMNIFICATION
Section 2.1 Indemnification Obligations of Xx. Xxxxxxxx and Selling
Parties. Xx. Xxxxxxxx shall be severally liable for, and shall indemnify and
hold harmless the Selling Parties and their direct and indirect parent
companies, subsidiaries, and affiliates, and their respective officers,
directors, shareholders, successors and assigns, from and against, 40% of
the Excluded Construction Claims, other Excluded Liabilities and other
Indemnification Obligations. Likewise, Selling Parties shall indemnify and
hold harmless Xx. Xxxxxxxx and his heirs, personal representatives,
successors and assigns, from and against, 60% of the Excluded Construction
Claims, other Excluded Liabilities and other Indemnification Obligations.
Section 2.2 Payment of Indemnification Obligations. Seller shall
satisfy Excluded Construction Claims, other Excluded Liabilities and Selling
Parties' other Indemnification Obligations first out of the Indemnity
Reserve. To the extent that the Indemnity Reserve is insufficient to satisfy
any Excluded Construction Claims, other Excluded Liabilities or other
Indemnification Obligations, Selling Parties shall be severally liable for
60% of such Excluded Construction Claims, other Excluded Liabilities and
Indemnification Obligations, and Xx. Xxxxxxxx shall be severally liable for
40% of such Excluded Construction Claims, other Excluded Liabilities and
other Indemnification Obligations.
Section 2.3 Notice of Indemnification. Selling Parties shall give
notice (the "Notice") to Xx. Xxxxxxxx promptly following Selling Parties'
receipt of written notice from Buyer or Parent seeking indemnification under
the Indemnification Agreement, which Notice shall include a copy of such
written notice received from Buyer or Parent. If Selling Parties
participate, pursuant to the Indemnification Agreement, in the defense of
any claim, Xx. Xxxxxxxx also shall have the right (but not the obligation)
in his discretion, to participate, at his cost and expense, with Selling
Parties in such defense, it being understood that Selling Parties, in their
discretion, shall select counsel and shall control such defense.
Section 2.4 Limit on Indemnity. The parties agree that the
obligations of Xx. Xxxxxxxx to indemnify and hold harmless Selling Parties
and their direct and indirect parent companies, subsidiaries, and
affiliates, and their respective officers, directors, shareholders,
successors and assigns from and against, and to be severally liable for, 40%
of Excluded Construction Claims, other Excluded Liabilities and other
Indemnification Obligations shall be capped at a total amount equal to the
sum of (a) the amount of distributions made to Xx. Xxxxxxxx pursuant to
Sections 1.2 and 1.3 and (b) the aggregate of all Salary (in excess of
$250,000 per year) and bonuses previously paid by Seller to Xx. Xxxxxxxx.
ARTICLE III
BOARD REPRESENTATION;
TERMINATION OF EMPLOYMENT AGREEMENT; MUTUAL RELEASE
Section 3.1 Board Representation. The board of directors of Seller
initially shall consist of Xxxxxxx Xxx, Xx. Xxxxxxxx and a third individual
to be designated by Xx. Xxx, until thereafter changed in accordance with the
bylaws of Seller.
Section 3.2 Termination of Employment Agreement. Effective as of
the Effective Date, Seller and Xx. Xxxxxxxx shall terminate the Employment
Agreement and execute a mutual release in the form attached as Exhibit A
hereto.
ARTICLE IV
MISCELLANEOUS
Section 4.1 Notices. All notices, consents, and other
communications hereunder shall be in writing and deemed to have been duly
given when (a) delivered by hand, (b) sent by facsimile (with receipt
confirmed and with recipient having been previously informed by telephone
that such a facsimile was being sent), or (c) when received by the
addressee, if sent by Express Mail, Federal Express, or other express
delivery service (with confirmation of delivery), 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 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
If to Xx. Xxxxxxxx:* Xxxxxx Xxxxxxxx
0000 Xxxxxxx Xxxxx
Xxx Xxxxx, Xxxxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
* All notices to Xx. Xxxxxxxx shall be marked
"PERSONAL AND CONFIDENTIAL."
Section 4.2 Assignment. Except as otherwise provided in Section
4.12 hereof, this Agreement shall not be assigned by operation of law or
otherwise. Any assignment in violation of the provisions of this Agreement
will be null and void.
Section 4.3 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.
Section 4.4 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.
Section 4.5 Entire Agreement. This Agreement, the 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 hereto 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.
Section 4.6 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.
Section 4.7 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.
Section 4.8 Waiver of Provisions. The provisions 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 or breach of any provision 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 such
provision or breach of any other provision of this Agreement.
Section 4.9 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.
Section 4.10 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.
Section 4.11 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.
Section 4.12 Binding Effect. 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.
Section 4.13 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.
Section 4.14 No Third Party Beneficiaries. Except as specifically
provided in Section 4.12 hereof, this Agreement is not intended to, and
shall not, create any rights in any person other than the parties to this
Agreement. Without limiting the generality of the immediately preceding
sentences, Parent and Buyer shall have no rights under this Agreement.
[signature page follows]
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.
Perma-Bilt Homes,
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
/s/ Xxxxxx Xxxxxxxx
------------------------------------------
Xxxxxx Xxxxxxxx
[Signature page to Agreement Regarding
Purchase Price and Indemnification]
EXHIBIT A
MUTUAL RELEASE
This MUTUAL RELEASE (this "Release") is made as of October 1, 2002
(the "Effective Date") by and among Zenith National Insurance Corporation, a
Delaware corporation ("Zenith"), Perma-Bilt, a Nevada Corporation ("Seller"
and, together with Zenith, the "Selling Parties"), and Xxxxxx Xxxxxxxx ("Xx.
Xxxxxxxx").
WHEREAS, effective as of the Effective Date, Seller and Xx.
Xxxxxxxx terminated the Restated Employment Agreement, dated as of October
1, 1998 (the "Employment Agreement"), between Seller and Xx. Xxxxxxxx; and
WHEREAS, in connection therewith, the parties hereto desire to
execute mutual releases with respect thereto.
NOW THEREFORE, in consideration of the mutual premises set forth
herein and other good and valuable consideration, the sufficiency of which
is hereby acknowledged, the parties intending to be legally bound hereby,
agree as follows:
1. Mutual Release. (a) (i) Xx. Xxxxxxxx forever releases, waives
and discharges Selling Parties, their respective parent and subsidiary
corporations, their respective affiliates, and their respective past and
present officers, directors, shareholders, partners, members, managers,
agents and employees, and each of their respective successors and assigns
(collectively, "Seller Released Parties"), and (ii) Selling Parties forever
release, waive and discharge Xx. Xxxxxxxx, his affiliates and their
respective heirs, personal representatives, successors and assigns
(collectively, the "Xxxxxxxx Released Parties"), in each case, from any and
all claims, charges, complaints, liens, demands, suits, claims, counts,
manner and causes of action, liens, obligations, damages and liabilities,
losses, fees, costs, expenses, demands and any other forms of liability
whatsoever in law or in equity, known or unknown, suspected or unsuspected,
that Xx. Xxxxxxxx, on the one hand, or Selling Parties, on the other hand,
had, now have, or may hereafter claim to have against the other, arising out
of or relating in any way to Xx. Xxxxxxxx'x hiring by, employment with, or
separation from Seller or otherwise relating to any of the Selling Parties
or Xx. Xxxxxxxx, respectively, from the beginning of time through the
Effective Date; provided, however, that notwithstanding anything to the
contrary contained herein, this release does not apply to or affect in any
manner the respective rights and obligations of Xx. Xxxxxxxx and Selling
Parties under that certain Agreement Regarding Purchase Price and
Indemnification entered into by and among them and dated as of October 8,
2002. This release specifically extends to, without limitation, claims or
causes of action for wrongful termination, impairment of ability to compete
in the open labor market, breach of an express or implied contract, breach
of the covenant of good faith and fair dealing, breach of fiduciary duty,
fraud, misrepresentation, defamation, slander, infliction of emotional
distress, discrimination, harassment, disability, loss of future earnings,
and claims under the Nevada constitution, the United States Constitution,
and applicable state and federal fair employment laws, applicable state and
federal equal employment opportunity laws, and applicable state and federal
labor statutes and regulations, including but not limited to, the Civil
Rights Act of 1964, as amended, the Fair Labor Standards Act, as amended,
the National Labor Relations Act, as amended, the Labor-Management Relations
Act, as amended, the Worker Retraining and Notification Act of 1988, as
amended, the Americans With Disabilities Act of 1990, as amended, the
Rehabilitation Act of 1973, as amended, and the Employee Retirement Income
Security Act of 1974, as amended and the Age Discrimination in Employment
Act of 1967, as amended.
[Signature page to Mutual Release]
(b) Selling Parties and Xx. Xxxxxxxx each acknowledge and agree
that, as a condition of this Release, each of Selling Parties and Xx.
Xxxxxxxx, respectively, expressly releases all rights and claims that such
party knows about or suspects as well as those he may not know about or
suspect. For the purpose of implementing a full and complete release and
discharge of the Xxxxxxxx Released Parties and the Seller Released Parties,
as expressed in Section 1(a), above, each of Selling Parties and Xx.
Xxxxxxxx, respectively expressly acknowledges that the release above in this
Release is intended to include and does include in its effect, without
limitation, all claims which such party does not know or suspect to exist in
such party's favor against the Xxxxxxxx Released Parties and the Seller
Released Parties, respectively, at the time this Release is signed, and that
this Release expressly contemplates the extinguishments of all such claims,
including, but not limited to, any and all claims under any applicable
federal, state or local law.
2. Governing Law. The validity, construction, and enforceability of
this Release will be governed in all respects by the laws of the State of
Nevada, without regard to its conflict of laws rules.
2. Counterparts. This Release 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.
[signature page follows]
IN WITNESS WHEREOF, the parties have caused this Release to be
executed on the date first written above by their respective officers
thereunder duly authorized.
Perma-Bilt Homes,
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
------------------------------------------
Xxxxxx Xxxxxxxx
[Signature page to Mutual Release]
