SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) August 14, 1998
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HOMEFED CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 1-10153 33-0304982
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(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File No.) Identification No.)
529 East South Temple
Salt Lake City, Utah 84102
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(Address of principal executive offices) (Zip Code)
(801)521-1066
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(Registrant's telephone number, including area code)
N/A
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(Former name, former address and former fiscal year,
if changed since last report)
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Item 1. Change in Control of Registrant
Item 5. Other Events
As of August 14, 1998, HomeFed Corporation (the "Company")
entered into a Development Management Agreement ("Development
Agreement") with an indirect subsidiary of its then principal
shareholder, Leucadia National Corporation ("Leucadia"), to
develop a master-planned residential project in San Marcos, San
Diego County, California. In connection with the Development
Agreement, the Company also entered into a stock purchase
agreement ("Stock Purchase Agreement") with Leucadia pursuant to
which the Company has agreed to sell additional shares of its $.01
par value comon shares ("Common Stock") to Leucadia in July 1999
to increase Leucadia's interest in the Company from approximately
41.2% to approximately 87.5%. Pursuant to the Stock Purchase
Agreement, the Company increased the size of the Board of
Directors from three Directors to five Directors, and selected two
designees of Leucadia to fill the new Board seats. As of August
14, 1998, the Company and a subsidiary of Leucadia also entered
into an Amended and Restated Loan Agreement ("Amended Loan
Agreement"), pursuant to which the Company's outstanding 12%
Secured Convertible Note has been restructured. The Development
Agreement, the Stock Purchase Agreement and the Loan Agreement
were unanimously approved by the Company's two independent
Directors, Timothy M. Considine and Michael A. Lobatz. The
Company's third Director, Paul J. Borden, an affiliate of
Leucadia, abstained. These agreements, which are filed as
exhibits to this report, are described below.
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Stock Purchase Agreement
Pursuant to the Stock Purchase Agreement, the Company
agreed to sell approximately 37,056,000 additional shares of its
Common Stock to Leucadia to increase Leucadia's interest in the
Company from approximately 41.2% to approximately 87.5% at an
aggregate purchase price of approximately $6,670,000. Upon the
signing of the Stock Purchase Agreement, Leucadia advanced to the
Company $5,000,000 of the total purchase price, which amount is
refundable to Leucadia in the event the closing of the Stock
Purchase Agreement does not occur. The Stock Purchase Agreement
provides that the balance of the purchase price will be paid at
the closing and that the closing will occur on or after July 5,
1999, subject to the satisfaction of certain conditions.
The Stock Purchase Agreement includes an antidilution
provision to the effect that if the Company issues additional
shares to any person other than Leucadia, the number of shares of
Common Stock issued to Leucadia shall be increased to give
Leucadia an 87.5% interest in the Company on a fully diluted
basis. Under the Stock Purchase Agreement, Leucadia also has
certain registration rights pursuant to which it may require the
Company to register the shares of Common Stock of the Company
which Leucadia owns.
Pursuant to the Stock Purchase Agreement, on August 14, 1998
the Company also increased the size of its Board of Directors from
three Directors to five Directors and selected two persons
designated by Leucadia to fill the new board seats, with the
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result that three of the five Directors of the Company are now
affiliated with Leucadia. Mr. Borden, a Director and the
President of the Company since May, 1998, is also a Vice President
of Leucadia. The two new Directors designated by Leucadia are
Joseph S. Steinberg and Patrick D. Bienvenue. Mr. Steinberg, a
Director of the Company since August 14, 1998, has served as a
director of Leucadia since 1978 and as its President since 1979.
He is also a director of: Allcity Insurance Company, a
consolidated subsidiary of Leucadia which is a property and
casualty insurer; MK Gold Company, a public company which is an
international gold mining company, approximately 46% of the common
stock of which is beneficially owned by Leucadia; and Jordan
Industries, Inc., a public company which owns and manages
manufacturing companies, approximately 10% of the common stock of
which is beneficially owned by Leucadia. Mr. Bienvenue, also a
Director of the Company since August 14, 1998, has served as
President of Leucadia Financial Corporation ("LFC"), a subsidiary
of Leucadia which performs management and administrative services
for the Company, since June 1998, and as the President of another
Leucadia subsidiary engaged in real estate development since
February 1996. From 1992 to 1996, Mr. Bienvenue was the President
and Chief Executive Officer of Torwest, Inc., a private developer
of resort communities in the United States. Mr. Steinberg does
not beneficially own any shares of Common Stock other than by
virtue of the Trust Agreement (as defined below). Neither Mr.
Bienvenue nor Mr. Borden beneficially own any shares of Common
Stock.
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On August 14, 1998, Leucadia transferred its current
holdings of the Company's stock, plus the Stock Purchase
Agreement, to a Trust (the "Trust") created under a Trust
Agreement dated August 14, 1998 between Leucadia for the benefit
of its shareholders and Joseph A. Orlando, as Trustee (the "Trust
Agreement"). Pursuant to the terms of the Company's Restated
Certificate of Incorporation, the transfers of the shares of the
Company's Common Stock and the Stock Purchase Agreement were
approved by the Board of Directors of the Company, with Mr.
Borden, a Director of the Company affiliated with Leucadia,
abstaining.
The Trust Agreement provides that the Trustee may vote or
act with respect to the disposition of all Common Stock held in
the Trust as directed in a written notice jointly signed by Ian M.
Cumming, Chairman of Leucadia, and Mr. Steinberg, each of whom is
a beneficiary of the Trust, acting on behalf of all beneficiaries
of the Trust. On August 14, 1998, Leucadia announced that it had
declared a pro rata dividend of beneficial interests in the Trust
to its shareholders of record on August 25, 1998. Beneficial
interests in the Trust are not certificated, are not transferable,
except under the laws of descent and distribution, do not have
voting rights, are not entitled to receive dividends or interest
and do not represent any equity interest in the Company.
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Amended Loan Agreement
On August 14, 1998 the Company and LFC entered into the
Amended Loan Agreement, pursuant to which the Company and LFC
amended the original Loan Agreement dated July 3, 1995 and
restructured the Company's outstanding 12% Secured Convertible
Note due 2003 ("Original Note"), which is held by LFC. The
restructured Note, dated August 14, 1998, is in the principal
amount of approximately $26,462,380 (reflecting the original
$20,000,000 principal balance of the Original Note, together with
additions to principal resulting from accrued and unpaid interest
thereon to the date of the restructuring), extends the maturity
date from July 3, 2003 to December 31, 2004, reduces the interest
rate from 12% to 6% and eliminates the convertibility feature of
the Original Note.
Development Agreement
The Company entered into a Development Agreement with
Provence Hills Development Company, LLC ("Owner"), an indirect
subsidiary of Leucadia that owns certain real property located in
the City of San Marcos, County of San Diego, California, to
develop a master-planned residential project ("Project") on such
property. The Project, known as San Elijo Ranch, is intended to be
developed into a community of approximately 3,400 homes over the
next ten years.
The Development Agreement provides that the Company will act
as the development manager ("Development Manager"). As the
Development Manager for the Project, the Company will have
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responsibility for the overall management of the Project,
including arranging financing for all Project costs and acting as
the construction manager. The Company and Owner have jointly
agreed upon the budget for the Project as well as the Project
schedule and development plan.
The Company is also required to develop a marketing plan for
the Project to be approved by Owner and to negotiate the sale of
portions of the Project, subject to the prior approval of Owner.
All sales proceeds shall belong to Owner, except that Owner shall
pay the Company the fees described below.
The Development Agreement provides that the Company is
entitled to receive a project management fee, a field overhead
fee, a marketing and advertising fee and a success fee as
described below:
(a) Project Management Fee - an amount equal to 3%
of gross revenues (as defined in the Development Agreement), minus
any management fees paid to date or payable in the future by
Owner.
(b) Field Overhead Fee - an amount equal to 2.72% of
gross revenues, minus certain amounts incurred by Owner in
connection with the Project.
(c) Marketing and Advertising Fee - an amount equal
to 1.5% of gross revenues.
(d) Success Fee - a fee payable as portions of the
Project are sold, as set forth in Section 7.6 of the Development
Agreement.
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The Development Agreement may be terminated by Owner, upon
sixty (60) days' notice, with or without cause and without regard
to whether the Company is in default thereunder.
Item 7. Financial Statements and Exhibits
(c) The following exhibits are filed with this Report:
10.1 Stock Purchase Agreement between HomeFed
Corporation and Leucadia National Corporation dated
as of August 14, 1998.
10.2 Amended and Restated Loan Agreement between HomeFed
Corporation and Leucadia Financial Corporation
dated as of August 14, 1998.
10.3 Development Management Agreement between Provence
Hills Development Company, LLC and HomeFed
Corporation.
20 Press Release dated August 14, 1998.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
REGISTRANT:
HOMEFED CORPORATION
/s/ Corinne A. Maki
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Corinne A. Maki, Treasurer
Date: August 28, 1998
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STOCK PURCHASE AGREEMENT
BETWEEN
HOMEFED CORPORATION
AND
LEUCADIA NATIONAL CORPORATION
Dated as of August 14, 1998
<PAGE>
TABLE OF CONTENTS
Page
I. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
II. PURCHASE OF SECURITIES. . . . . . . . . . . . . . . . . . . . . . 2
2.1. Purchase of Securities. . . . . . . . . . . . . . . . . . . 2
2.2. Anti-dilution . . . . . . . . . . . . . . . . . . . . . . . 2
III. PURCHASE PRICE AND PAYMENT. . . . . . . . . . . . . . . . . . . . 2
3.1. Amount of Purchase Price. . . . . . . . . . . . . . . . . . 2
3.2. Payment of Purchase Price . . . . . . . . . . . . . . . . . 2
IV. THE COMPANY'S REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . 2
4.1. Organization. . . . . . . . . . . . . . . . . . . . . . . . 3
4.2. Due Authorization . . . . . . . . . . . . . . . . . . . . . 3
4.3. Authorized and Outstanding Shares of Capital Stock. . . . . 3
4.4. Authorization and Issuance of Securities. . . . . . . . . . 3
4.5. Subsidiary Organizations. . . . . . . . . . . . . . . . . . 4
4.6. No Other Rights . . . . . . . . . . . . . . . . . . . . . . 4
4.7. No Conflicts. . . . . . . . . . . . . . . . . . . . . . . . 4
4.8. No Consents . . . . . . . . . . . . . . . . . . . . . . . . 4
4.9. Litigation. . . . . . . . . . . . . . . . . . . . . . . . . 4
V. LUK's REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . 5
5.1. Organization. . . . . . . . . . . . . . . . . . . . . . . . 5
5.2. Due Authorization . . . . . . . . . . . . . . . . . . . . . 5
5.3. No Conflicts. . . . . . . . . . . . . . . . . . . . . . . . 5
5.4. LUK's Investment Intention. . . . . . . . . . . . . . . . . 6
VI. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.1. Board of Directors. . . . . . . . . . . . . . . . . . . . . 6
6.2. Tax Compliance. . . . . . . . . . . . . . . . . . . . . . . 6
6.3. Registration Rights . . . . . . . . . . . . . . . . . . . . 6
VII. CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . . . . 7
7.1. Conditions Precedent to Obligations of LUK. . . . . . . . . 7
7.2. Conditions Precedent to Obligations of the Company. . . . . 8
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VIII.CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
8.1. Closing Date . . . . . . . . . . . . . . . . . . . . . . . . 8
8.2. Liquidated Damages . . . . . . . . . . . . . . . . . . . . . 9
8.3. Specific Performance . . . . . . . . . . . . . . . . . . . . 9
IX. SECURITIES LAW MATTERS. . . . . . . . . . . . . . . . . . . . . . 9
9.1. Legends . . . . . . . . . . . . . . . . . . . . . . . . . . 9
X. INDEMNIFICATION AND EXPENSES. . . . . . . . . . . . . . . . . . . 10
10.1. Indemnification by the Company . . . . . . . . . . . . . . 10
10.2. Indemnification by LUK . . . . . . . . . . . . . . . . . . 10
XI. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . 10
11.1. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . 10
11.2. Binding Effect; Benefits . . . . . . . . . . . . . . . . . 12
11.3. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . 12
11.4. Amendment. . . . . . . . . . . . . . . . . . . . . . . . . 12
11.5. Assignability. . . . . . . . . . . . . . . . . . . . . . . 12
11.6. Applicable Law . . . . . . . . . . . . . . . . . . . . . . 13
11.7. Section and Other Headings . . . . . . . . . . . . . . . . 13
11.8. Severability . . . . . . . . . . . . . . . . . . . . . . . 13
11.9. Counterparts . . . . . . . . . . . . . . . . . . . . . . . 13
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of August 14, 1998, between
HomeFed Corporation, a Delaware corporation having an office at 529 East
South Temple, Salt Lake City, Utah 84012 (the "Company"), and Leucadia
National Corporation, a New York corporation having an office at 315
Park Avenue South, New York, New York 10010 ("LUK").
W I T N E S S E T H:
WHEREAS, the Company emerged from bankruptcy under the
United States Bankruptcy Code, pursuant to a plan of reorganization (the
"Plan") that became effective on July 3, 1995 (the "Effective Date");
and
WHEREAS, the Plan prohibits the Company from issuing any
additional shares of stock prior to the fourth anniversary of the
Effective Date; and
WHEREAS, currently LUK beneficially owns approximately 41%
of the issued and outstanding common stock, par value $.01 per share of
the Company (the "Common Stock"); and
WHEREAS, upon the terms and conditions hereinafter provided,
the Company has agreed to issue and sell to LUK shares of its Common
Stock, and LUK has agreed to purchase such shares upon the terms and
conditions hereinafter provided;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, it is agreed as follows:
I. DEFINITIONS
References to this "Agreement" shall mean this Stock Purchase
Agreement, including all amendments, modifications and supplements and
any exhibits or schedules to any of the foregoing, and shall refer to
this Agreement as the same may be in effect at the time such reference
becomes operative.
The words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole, including the
schedules and exhibits hereto, as the same may from time to time be
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amended or supplemented, and not to any particular section, subsection
or clause contained in this Agreement.
II. PURCHASE OF SECURITIES
2.1. Purchase of Securities. Upon the terms and subject to the
conditions set forth in this Agreement, on the Closing Date (as defined
herein) the Company shall issue, sell and deliver to LUK, and LUK shall
purchase from the Company 37,056,112 shares of Common Stock (the
"Securities").
2.2. Anti-dilution. Subject to the provisions of Section 7.2(c)
hereof, if the Company issues additional shares to any party other than
LUK, the number of shares of Common Stock constituting the Securities
shall be increased so that the Securities purchased on the Closing Date
will give LUK an 87.5% interest in the Company on a fully diluted basis.
III. PURCHASE PRICE AND PAYMENT
3.1. Amount of Purchase Price. The aggregate purchase price for
the Securities (the "Purchase Price") shall be $6,670,100; provided,
however, that if the number of shares constituting the Securities to be
purchased under this Agreement results in LUK's percentage share
ownership in the Company being below 87.5% pursuant to Section 7.2(c),
the Purchase Price shall be reduced accordingly.
3.2. Payment of Purchase Price. (a) On the date hereof, LUK shall
advance five million dollars ($5,000,000) of the Purchase Price,
against the aggregate Purchase Price (the "Advance").
(b) Upon the terms and subject to the conditions set forth
in this Agreement, on the Closing Date, LUK shall pay to the Company the
unpaid balance of the Purchase Price and the Company shall deliver to
LUK the Securities issued in the name of LUK or such other person or
persons as LUK shall direct.
(c) Payments of the Purchase Price shall be made by wire
transfer of immediately available funds into an account designated by
the Company.
IV. THE COMPANY'S REPRESENTATIONS AND WARRANTIES
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The Company makes the following representations and warranties to
LUK, each and all of which shall survive the execution and delivery of
this Agreement and the Closing (as defined herein) hereunder:
4.1. Organization. The Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the
State of Delaware with corporate power and authority to own, lease and
operate its properties and to conduct its business as currently being
and as proposed to be conducted. The Company is qualified as a foreign
corporation to transact business in California and in any other
jurisdiction where it is required to be so qualified, except where the
failure to be so qualified would not have a material adverse effect on
the condition, financial or otherwise, or the results of operations,
business or business prospects of the Company and its subsidiaries taken
as a whole (a "Material Adverse Effect").
4.2. Due Authorization. The Company has the requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly executed
and delivered by the Company and, assuming that this Agreement has been
duly executed and delivered by LUK, constitutes a legal, valid and
binding agreement of the Company, enforceable against the Company in
accordance with its terms, except as rights to indemnity hereunder may
be limited by federal or state securities laws and except as enforce-
ability may be limited by bankruptcy, insolvency, fraudulent conveyance,
moratorium, reorganization and similar laws relating to or affecting
creditors' rights generally and general principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity
or at law).
4.3. Authorized and Outstanding Shares of Capital Stock. The
authorized capital stock of the Company consists of one hundred million
(100,000,000) shares of Common Stock, of which ten million (10,000,000)
shares currently are issued and outstanding as of the date hereof. No
subscription, warrant, option or other right to purchase or acquire any
shares of any class of capital stock of Company or securities
convertible into such capital stock is authorized or outstanding, and
other than this Agreement there is no commitment of Company to issue any
such shares, warrants, options or other such rights or securities.
After giving effect to the issuance of the Securities pursuant to this
Agreement, an aggregate of 47,056,112 shares of Common Stock will be
outstanding, of which the Securities together with other shares of
Common Stock beneficially owned by LUK will represent approximately
87.5% of the outstanding shares of Common Stock, unless the number of
shares constituting the Securities is reduced pursuant to Section 7.2(c)
hereof.
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4.4. Authorization and Issuance of Securities. The issuance of
the Securities has been duly authorized and, upon delivery to LUK of
certificates therefor against payment in accordance with the terms
hereof, the Securities will have been validly issued and fully paid and
non-assessable, free and clear of all pledges, liens, encumbrances and
preemptive rights.
4.5. Subsidiary Organizations. Each subsidiary of the Company
has been duly organized and is validly existing and in good standing
under the laws of the State of California, has corporate power and
authority to own, lease and operate its properties and to conduct its
business as currently being and as proposed to be conducted and is not
required to be qualified as a foreign entity to transact business in any
jurisdiction. All of the issued and outstanding capital stock of each
such subsidiary has been duly authorized and validly issued, is fully
paid and nonassessable and is owned directly by the Company.
4.6. No Other Rights. The issuance of the Securities is not
subject to preemptive or other similar rights.
4.7. No Conflicts. Neither the Company nor any of its
subsidiaries is in violation of its charter or in default in the
performance or observance of any material obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage,
loan agreement, note, lease or other agreement or instrument to which
the Company or any of its subsidiaries is a party or by which it or any
of them may be bound, or to which any of the property or assets of the
Company or any of its subsidiaries is subject, the effect of which
default in performance or observance would have a Material Adverse
Effect. None of the execution and delivery of this Agreement will
conflict with or constitute a breach of, or default under, or result in
the creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any of its subsidiaries pursuant
to, any contract, indenture, mortgage, loan agreement, note, lease or
other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which it or any of them may be bound, or
to which any of the property or assets of the Company or any of its
subsidiaries is subject, nor will such action result in any violation of
the provisions of the certificate of incorporation or by-laws of the
Company or any applicable law, administrative regulation or
administrative or court decree.
4.8. No Consents. No authorization, approval or consent of, or
filing with, any court or governmental authority or agency is necessary
or required in connection with the sale of the Securities hereunder or
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under the certificate of incorporation of the Company or the execution,
delivery or performance of this Agreement or the Restated Certificate of
Incorporation.
4.9. Litigation. There is no action, suit or proceeding before
or by any court or governmental agency or body, domestic or foreign, now
pending or, to the best knowledge of the Company, threatened, against or
affecting the Company or any of its subsidiaries, which is reasonably
likely to have a Material Adverse Effect. There is no action, suit or
proceeding before or by any court or governmental agency or body,
domestic or foreign, now pending or, to the best knowledge of the
Company, threatened, which would materially and adversely affect the
consummation of the transactions contemplated by this Agreement.
V. LUK's REPRESENTATIONS AND WARRANTIES
LUK makes the following representations and warranties to the
Company, each and all of which shall survive the execution and delivery
of this Agreement and the Closing hereunder:
5.1. Organization. LUK has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of New York with corporate power and authority to own, lease and operate
its properties and to conduct its business as currently being and as
proposed to be conducted and to enter into and perform its obligations
under this Agreement. LUK is qualified as a foreign corporation to
transact business in each jurisdiction where it is required to be so
qualified, except where the failure to be so qualified would not have a
material adverse effect on the business, financial condition or results
of operation of LUK and its subsidiaries taken as a whole.
5.2. Due Authorization. LUK has the requisite corporate power
and authority to enter into this Agreement and consummate the
transactions contemplated hereby. This Agreement and the transactions
contemplated hereby have each been duly authorized, executed and
delivered by LUK, and this Agreement constitutes a legal, valid and
binding agreement of the Company, enforceable against LUK in accordance
with its terms, except as rights to indemnity hereunder may be limited
by federal or state securities laws and except as enforceability may be
limited by bankruptcy, insolvency, fraudulent conveyance, moratorium,
reorganization and similar laws relating to or affecting creditors'
rights generally and general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law).
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5.3. No Conflicts. LUK is not in violation of its certificate of
incorporation or in default in the performance or observance of any
material obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, loan agreement, note, lease or other
agreement or instrument to which LUK is a party or by which it may be
bound, or to which any of the property or assets of LUK or any of its
subsidiaries is subject, the effect of which default in performance or
observance would have a material adverse effect on the condition,
financial or otherwise, or the results of operations, business or
business prospects of LUK and its subsidiaries considered as one
enterprise. The execution and delivery of this Agreement will not
conflict with or constitute a breach of, or default under, or result in
the creation or imposition of any lien, charge or encumbrance upon any
property or assets of the LUK or any of its subsidiaries pursuant to any
contract, indenture, mortgage, loan agreement, note, lease or other
agreement or instrument to which LUK or any of its subsidiaries is a
party or by which it or any of them may be bound, or to which any of the
property or assets of LUK or any of its subsidiaries is subject, nor
will such action result in any violation of the provisions of the
certificate of incorporation or by-laws of LUK or any applicable law,
administrative regulation or administrative or court decree.
5.4. LUK's Investment Intention. LUK represents and warrants
that it is purchasing the Securities for its own account, for investment
purposes and not with a view to the distribution thereof, except in
compliance with the provisions of the Securities Act of 1933, as amended
(the "Act"). LUK agrees that it will not, directly or indirectly,
offer, transfer, sell, assign, pledge, hypothecate or otherwise dispose
of any of the Securities (or solicit any offers to buy, purchase, or
otherwise acquire or take a pledge of any of the Securities), except in
compliance with the Act and the rules and regulations thereunder.
5.5. Access to Data. LUK has had an opportunity to discuss the
Company's business, management, and financial affairs with its
management and to review the Company's records and facilities, and LUK
is relying for purposes of this Agreement upon its own due diligence
review of the Borrower, not on any representation or warranty of the
Borrower other than as expressly set forth in this Agreement.
VI. COVENANTS
6.1. Board of Directors. Upon the execution of this Agreement,
the number of directors constituting the Company's Board of Directors
shall be increased to five, and Messrs. Joseph Steinberg and Patrick
Bienvenue shall be nominated and duly elected to each serve as directors
on the Company's Board of Directors.
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6.2. Tax Compliance. The Company shall pay all transfer, excise
or similar taxes in connection with the issuance, sale, delivery or
transfer by the Company to LUK of the Securities and shall save LUK and
any other holder of the Securities harmless without limitation as to
time against any and all liabilities with respect to such taxes. The
Company shall not be responsible for any taxes in connection with the
transfer of the Securities by the holder thereof. The obligations of
Company under this Section 6.2 shall survive the payment, prepayment or
redemption of the Securities and the termination of this Agreement.
6.3. Registration Rights. At any time after the date hereof,
upon the written request of LUK that the Company effect the registration
under the Act (which shall be a shelf registration if requested by LUK)
of all or part of the shares of Common Stock (including the Securities
upon their issuance) owned by LUK (including any affiliate of LUK or any
trust for the benefit of LUK's shareholders) and specifying the intended
method or methods of disposition thereof, the Company shall cooperate
with LUK and effect the registration under the Act of such shares as
soon as practicable after receipt of such request.
VII. CONDITIONS PRECEDENT
7.1. Conditions Precedent to Obligations of LUK. The obligation
of LUK to purchase the Securities and to consummate the transactions
contemplated by this Agreement is subject to the following conditions:
(a) LUK shall have been furnished with certificates (dated the
Closing Date and in form and substance reasonably satisfactory to LUK)
executed by an officer of the Company certifying that (i) all
representations and warranties of the Company to LUK contained herein
are true and correct in all material respects as of the Closing Date,
with the same force and effect as if made as of the Closing Date; (ii)
the Company shall have performed and complied in all material respects
with the covenants and provisions of this Agreement required to be
performed or complied with by it, on or prior to the Closing Date; and
(iii) after giving effect to the sale of Securities contemplated hereby,
the Company will not be in default under or breach of any material
contract, indenture, mortgage, loan agreement, note, lease or other
agreement or instrument to which the Company or any of its subsidiaries
is a party.
(b) LUK's receipt of certificates representing the Securities
registered in LUK's name or in the name of such persons as LUK shall
direct.
7
<PAGE>
(c) LUK's receipt of a copy of the Company's certificate of
incorporation, certified as of a recent date by the Secretary of State
of the State of Delaware, and a copy of the by-laws, certified by the
Secretary or Assistant Secretary of the Company as true and correct;
(d) LUK's receipt of governmental certificates or telegrams
evidencing that the Company is organized and in good standing in the
State of Delaware;
(e) The Company and Provence Hills Development Company, LLC have
entered into a Development Management Agreement, dated the date hereof
(the "Development Management Agreement"), a copy of which has been
delivered to LUK, and each of such entities shall have delivered a
certificate that such agreement is in full force and effect on the
Closing Date and neither party to such agreement has given notice of
termination to the other party to such agreement.
7.2. Conditions Precedent to Obligations of the Company. The
obligation of the Company to issue the Securities pursuant to this
Agreement is subject to the following conditions:
(a) The Company shall have been furnished with certificates
(dated the Closing Date and in form and substance reasonably
satisfactory to the Company) executed by an officer of LUK certifying
that (i) all representations and warranties of LUK to the Company
contained herein are true and correct in all material respects as of the
Closing Date, with the same force and effect as if made as of the
Closing Date; and (ii) LUK shall have performed and complied in all
material respects with the covenants and provisions of this Agreement
required to be performed or complied with by it, on or prior to the
Closing Date.
(b) Provence Hills Development Company, LLC shall have entered
into the Development Management Agreement.
(c) The Company shall have been furnished with an opinion of
Weil, Gotshal & Manges LLP dated the Closing Date to the effect that the
issuance of the Securities pursuant to this Agreement shall not result
in the application of any limitations under Section 382 or Section 383
of the Internal Revenue Code of 1986, as amended (the "Code"), on the
use of the Tax Benefits (as defined in the Company's Restated
Certificate of Incorporation); provided, however, that if the Company
fails to receive the foregoing opinion, the Company will be obligated to
deliver such lesser number of shares under Article 2 hereof, which
number shall constitute the Securities under this Agreement, as shall
8
<PAGE>
result in increases calculated under Sections 382(g)(1)(A) and (B) of
the Code aggregating 49.8 percentage points during the applicable
"testing period" as defined in Section 382 of the Code culminating on
the Closing Date, and the Company shall be furnished with an opinion of
Weil, Gotshal & Manges LLP to the effect that the issuance of the
Securities (as so adjusted) pursuant to this Agreement shall not result
in the application of any Section 382 limitation on the use of the Tax
Benefits.
VIII. CLOSING
8.1. Closing Date. (a) The closing of the sale and purchase of
the Shares provided for in Article III hereof (the "Closing") shall take
place at the offices of Weil, Gotshal & Manges LLP, New York, New York
at 10:00 a.m. (New York City time) (or at such time and at such place as
the parties may designate) on the second business day following the date
on which each of the conditions specified in Article VII hereof has been
fulfilled (or waived by the party entitled to waive that condition),
provided that in no event shall the Closing take place prior to July 5,
1999. The date on which the Closing occurs is referred to in this
Agreement as the "Closing Date".
(b) In the event that LUK fails to close because the conditions
set forth in Section 7.1 have not been satisfied, the Company shall
repay to LUK an amount equal to the Advance plus interest on the Advance
which shall accrue at the rate of 6% per annum from the date of deposit
of the Advance with the Company through the date such Advance is repaid
to LUK.
8.2. Liquidated Damages. If the Company fails to deliver the
Securities at the Closing (other than as a result of the exercise of its
rights under Section 7.2 hereof), then the Company shall be required to
pay the Advance to LUK and, at LUK's option, the Company shall either
(i) repurchase the shares of Common Stock owned by LUK at 200% of the
fair market value for such shares as of the Closing Date, but not less
than a price per share of $1; or (ii) pay LUK $10,000,000. The Company
and LUK agree that the payment obligation contained in the foregoing
sentence is an integral part of the transactions contemplated by this
Agreement and constitute liquidated damages and not a penalty. If the
Company fails to pay such amount to LUK, then the Company shall pay the
costs and expenses (including reasonable legal fees and expenses) in
connection with any action, including the filing of any lawsuit or other
legal action, taken to collect payment, together with interest on the
amount of any unpaid fee at the publicly announced prime rate of Chase
Manhattan Bank from the Closing Date to the date of prepayment.
9
<PAGE>
8.3. Specific Performance. The parties hereto acknowledge that
irreparable damage would result if this Agreement were not specifically
enforced, and they therefore consent that the rights and obligations of
the parties under this Agreement, including the Company's obligation to
sell the Securities to LUK, may be enforced by a decree of specific
performance issued by a court of competent jurisdiction. Such remedy
shall, however, not be exclusive and shall be in addition to any other
remedies which any party may have under this Agreement or otherwise.
IX. SECURITIES LAW MATTERS
9.1. Legends. Unless the Securities are the subject of an
effective registration statement, each certificate representing the
Securities shall bear a legend substantially in the following form:
"THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED ("THE ACT") OR ANY STATE
SECURITIES LAWS AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT OR AN EXEMPTION THEREFROM."
X. INDEMNIFICATION AND EXPENSES
10.1. Indemnification by the Company. The Company agrees to
indemnify, defend and hold LUK and its respective officers, directors,
employees, agents and controlling persons (collectively, the "LUK
Indemnitees") harmless from and against any and all expenses, losses,
claims, damages and liabilities which are incurred by or threatened
against the LUK Indemnitees, or any of them, including, without
limitation, reasonable attorneys' fees and expenses, caused by, or in
any way resulting from or relating to the Company's breach of any of the
representations, warranties, covenants or agreements of the Company set
forth in this Agreement.
10.2. Indemnification by LUK. LUK agrees to indemnify, defend
and hold harmless the Company and its respective officers, directors,
employees, agents, partners and controlling persons (collectively, the
"Company Indemnitees") harmless from and against any and all expenses,
losses, claims, damages and liabilities which are incurred by or
threatened against the Company Indemnitees, or any of them, including,
without limitation, reasonable attorneys' fees and expenses, caused by,
10
<PAGE>
or in any way resulting from or relating to LUK's breach of any of the
representations, warranties, covenants or agreements of LUK set forth in
this Agreement.
XI. MISCELLANEOUS
11.1. Notices. Whenever it is provided herein that any notice,
demand, request, consent, approval, declaration or other communication
shall or may be given to or served upon any of the parties by another,
or whenever any of the parties desires to give or serve upon another any
such communication with respect to this Agreement, each such notice,
demand, request, consent, approval, declaration or other communication
shall be in writing and either shall be delivered in person with receipt
acknowledged or by registered or certified mail, return receipt
requested, postage prepaid, or by telecopy and confirmed by telecopy
answerback addressed as follows:
If to Company at:
HomeFed Corporation
529 East South Temple
Salt Lake City, Utah 84012
Attn: Corrinne A. Maki
Telecopy Number: (801) 524-1761
With a copy to:
Pillsbury Madison & Sutro LLP
101 West Broadway
Suite 1800
San Diego, California 92101-8219
Attn: K. Michael Garrett
Telecopy Number: (619) 236-1995
If to LUK at:
Leucadia National Corporation
315 Park Avenue South
New York, New York 10010
Attn: Joseph S. Steinberg, President
Telecopy Number: (212) 598-3245
11
<PAGE>
with a copy to:
Weil, Gotshal & Manges, LLP
767 Fifth Avenue
New York, New York 10153
Attn: Stephen E. Jacobs
Telecopy Number: (212) 310-8007
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in
writing by the party entitled to receive such notice. Every notice,
demand, request, consent, approval, declaration or other communication
hereunder shall be deemed to have been duly given or served on the date
on which personally delivered, with receipt acknowledged, telecopied and
confirmed by telecopy answerback, or three (3) business days after the
same shall have been deposited with the United States mail.
11.2. Binding Effect; Benefits. Except as otherwise provided
herein, this Agreement shall be binding upon and inure to the benefit of
the parties to this Agreement and their respective successors,
transferees and permitted assigns. Except as expressly set forth
herein, nothing in this Agreement, express or implied, is intended or
shall be construed to give any person other than the parties to this
Agreement or their respective successors, transferees or permitted
assigns any legal or equitable right, remedy or claim under or in
respect of any agreement or any provision contained herein.
11.3. Waiver. Either party hereto may by written notice to the
other (a) extend the time for the performance of any of the obligations
or other actions of the other party under this Agreement; (b) waive
compliance with any of the conditions or covenants of the other party
contained in this Agreement; and (c) waive or modify performance of any
of the obligations of the other party under this Agreement. Except as
provided in the preceding sentence, no action taken pursuant to this
Agreement, including, without limitation, any investigation by or on
behalf of either party, shall be deemed to constitute a waiver by the
party taking such action, of compliance with any representations,
warranties, covenants or agreements contained herein. The waiver by
either party hereto of a breach of any provision of this Agreement shall
not operate or be construed as a waiver of any preceding or succeeding
breach and no failure by either party to exercise any right or privilege
hereunder shall be deemed a waiver of such party's rights or privileges
hereunder or shall be deemed a waiver of such party's rights to exercise
the same at any subsequent time or times hereunder.
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<PAGE>
11.4. Amendment. This Agreement may be amended, modified or
supplemented only by a written instrument executed by LUK and the
Company.
11.5. Assignability. Neither this Agreement nor any right,
remedy, obligation or liability arising hereunder or by reason hereof
shall be assignable by Company. Neither this Agreement nor any right,
remedy, obligation or liability arising hereunder or by reason hereof
shall be assignable by LUK without the prior written consent of the
Company; provided, however, that without the consent of the Company LUK
may assign this Agreement and any or all rights or obligations hereunder
(including, without limitation, LUK's rights to purchase the Securities
and LUK's rights to seek indemnification hereunder) to any affiliate of
LUK or to any trust for the benefit of LUK's shareholders. Upon any
such permitted assignment, the references in this Agreement to LUK shall
also apply to any such assignee unless the context otherwise requires;
provided, however, that the conditions set forth in Section 7.2 shall
continue to apply to LUK.
11.6. Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without
regard to the principles thereof regarding conflict of laws.
11.7. Section and Other Headings. The section and other headings
contained in this Agreement are for reference purposes only and shall
not affect the meaning or interpretation of this Agreement.
11.8. Severability. In the event that any one or more of the
provisions contained in this Agreement shall be determined to be
invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision or
provisions in every other respect and the remaining provisions of this
Agreement shall not be in any way impaired.
11.9. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original and all
of which together shall be deemed to be one and the same instrument.
[Remainder of Page Intentionally Left Blank]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
HOMEFED CORPORATION
By: /s/ Timothy M. Considine
------------------------------
Name: Timothy M. Considine
Title: Chairman of the Board
LEUCADIA NATIONAL CORPORATION
By: /s/ Joseph A. Orlando
------------------------------
Name: Joseph A. Orlando
Title: Vice President and Chief
Financial Officer
14
<PAGE>
AMENDED AND RESTATED
LOAN AGREEMENT
between
HOMEFED CORPORATION
a Delaware corporation,
as Borrower,
and
LEUCADIA FINANCIAL CORPORATION,
a Utah corporation,
as Lender
Dated as of August 14, 1998
<PAGE>
AMENDED AND RESTATED
LOAN AGREEMENT
This AMENDED AND RESTATED LOAN AGREEMENT, dated as of August
14, 1998, is entered into by and between HOMEFED CORPORATION, a Delaware
corporation, as Borrower, and LEUCADIA FINANCIAL CORPORATION, a Utah
corporation as Lender.
RECITALS
A. On October 22, 1992, Borrower filed in the United States
Court for the Southern District of California (the "Bankruptcy Court"),
a voluntary petition for relief under chapter 11 of Title 11 of the
United States Bankruptcy Code which was later consolidated with an
involuntary bankruptcy case initiated by certain holders of debentures
on June 25, 1992, and was assigned Case No. 92-07591-All (the
"Bankruptcy Case").
B. Borrower filed a Fourth Amended Plan of Reorganization (the
"Plan") in the Bankruptcy Case, which was approved by its creditors and
confirmed by the Bankruptcy Court by Order of Confirmation dated
December 19, 1994 (which Order of Confirmation was modified as of June
14, 1995).
C. Lender is the largest shareholder of Borrower, and Lender
worked with Borrower to create the Plan. It is in the best interest of
Lender to enter into this Loan Agreement, and to perform its other
obligations under and otherwise act in compliance with the Plan.
D. The original Loan Agreement, entered on the Effective Date
(the "Original Loan Agreement"), was required under the Plan. The
borrowing made under the Original Loan Agreement was evidenced by a
promissory note executed on the Effective Date by Borrower ("Original
Note"), and was secured by the Stock Pledge, the Guaranties, the
Security Agreements, the Deeds of Trusts, and related financing
statements, all of which documents are more fully described below in the
definition of "Original Plan Documents."
E. As an inducement to the Borrower to enter into a Development
Management Agreement with Provence Hills Development Company, LLC, a
Delaware limited liability company, Lender has agreed to restructure
certain of Borrower's obligations under the Original Loan Agreement and
the Original Note (the "Restructuring"), among other things, (a) to
extinguish the convertibility provisions thereof; (b) to increase the
principal amount outstanding by the amount of accrued but unpaid
interest to date; (c) to reduce the interest rate to 6% per year,
<PAGE>
compounded annually; and (d) to extend the term of the Original Note to
December 31, 2004. The terms of the Restructuring are reflected in the
amended and restated promissory note executed by Borrower as of the date
hereof (the "Note") and this Loan Agreement, the Stock Pledge, the
Guaranties, the Security Agreements, the Deeds of Trusts, and related
financing statements, all of which documents are more fully described
below in the definition of Restructured Plan Documents.
NOW, THEREFORE, in consideration of the above recitals and the
mutual covenants and agreements herein contained, the parties hereto
covenant and agree as follows:
ARTICLE 1
DEFINITIONS AND ACCOUNTING TERMS
1.1 Defined Terms. As used in this Loan Agreement, the
following terms shall have the meanings set forth respectively after
each:
"Affiliate" means, as to any Person, any other Person
which directly or indirectly controls, or is under common control
with, or is controlled by, such Person. As used in this
definition, "control" (and its correlative meanings, "controlled
by" and "under common control with") shall mean possession,
directly or indirectly, of power to direct or cause the direction
of management or policies (whether through ownership of securities
or partnership or other ownership interests, by contract or
otherwise), provided that, in any event, (i) any Person that owns,
directly or indirectly, 50% or more of the securities having
ordinary voting power for the election of directors or other
governing body of a corporation (other than securities having such
power only by reason of the happening of a contingency) will be
deemed to control such corporation, (ii) any Person who is a
general partner or an Affiliate of a general partner of a
partnership will be deemed to control such partnership, and (iii)
any Person who owns or controls 50% or more of either the voting
power as to any matters on which owners are permitted to vote or
of the value of the ownership interests of any other Person
(including a corporation or partnership), will be deemed to
control such other Person.
"Borrower" means HomeFed Corporation, a Delaware
corporation.
2
<PAGE>
"Business Day" means a day other than Saturday, Sunday or
other day on which commercial banks are authorized or required by
law to close under the laws of the States of California and/or
Utah.
"Cash" means, when used in connection with any Person, all
monetary and non-monetary items belonging to such Person that are
treated as cash in accordance with generally accepted accounting
principles, consistently applied.
"Cash Equivalent" means (i) securities with maturities of
one year or less from the date of the acquisition issued or fully
guaranteed or insured by the United States government or any
agency thereof, (ii) commercial paper of an issuer rated at least
"A-1" by Standard & Poor's Corporation or "P-1" by Moody's
Investors Service, Inc., or carrying an equivalent rating by a
nationally recognized rating agency if both of the two named
rating agencies cease publishing ratings of investments.
"Certificate of a Responsible Official" means a certificate signed
by a Responsible Official of the Person providing the certificate.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Common Stock" means the common stock, par value $.01 per
share, of Borrower.
"Contingent Obligation" means, as applied to any Person,
any direct or indirect liability, contingent or otherwise, of such
person with respect to any Indebtedness or contractual obligation
of another person, if the purpose or intent of such Person in
incurring the Contingent Obligation is to provide assurance to the
obligee of such Indebtedness or contractual obligation that such
Indebtedness or contractual obligation will be paid or discharged,
or that any agreement relating thereto will be complied with, or
that any holder of such Indebtedness or contractual obligation
will be protected (in whole or in part) against loss in respect
thereof. Contingent Obligations of a Person include, without
limitation, (a) the direct or indirect guarantee, endorsement
(other than for collection or deposit in the ordinary course of
business), co-making, discounting with recourse or sale with
recourse by such Person of an obligation of another Person, and
(b) any liability of such Person for an Obligation of another
3
<PAGE>
Person through any agreement (contingent or otherwise) (i) to
purchase, repurchase or otherwise acquire such obligation or any
security therefor, or to provide funds for the payment or
discharge of such obligation (whether in the form of a loan,
advance, stock purchase, capital contribution or otherwise), (ii)
to maintain the solvency or any balance sheet item, level of
income or financial condition of another Person, (iii) to make
take-or-pay or similar payments, if required, regardless of non-
performance by any other party or parties to an agreement, (iv) to
purchase, sell or lease (as lessor or lessee) property, or to
purchase or sell services, primarily for the purpose of enabling
the debtor to make payment of such obligation or to assure the
holder of such obligation against loss, or (v) to supply funds to
or in any other manner invest in such other Person (including,
without limitation, to pay for property or services irrespective
of whether such property is received or such services are
rendered), if in the case of any agreement described in subclause
(i), (ii), (iii), (iv), or (v) of this sentence the primary
purpose or intent thereof is as described in the preceding
sentence. The amount of any Contingent Obligation shall be equal
to the amount of the obligation so guaranteed or otherwise
supported.
"Default" means any Event of Default and/or any event
that, with the giving of notice or passage of time or both, would
be an Event of Default.
"dollars" or "$" means United States dollars.
"Effective Date" means July 3, 1995.
"Exchange Act" means the Securities Exchange Act of 1934,
as amended.
"Event of Default" shall have the meaning ascribed to it
in Section 8.1.
"GAAP" means United States generally accepted accounting
principles as established from time to time.
"Government Securities" means readily marketable direct
obligations of the United States of America or obligations fully
guaranteed by the United States of America.
4
<PAGE>
"Governmental Agency" means (a) any international,
foreign, federal, state, county or municipal government, or
political subdivision thereof, (b) any governmental or quasi-
governmental agency, authority, board, bureau, commission,
department, instrumentality or public body, or (c) any court,
administrative tribunal or public utility.
"Hazardous Materials" means flammable explosives,
radioactive materials, petroleum, asbestos, polychlorinated
biphenyls and hazardous substances, materials or wastes which are
defined as hazardous or toxic substances, materials or waste under
any applicable Law.
"Indebtedness" means, with respect to any Person (i) all
indebtedness of such Person for borrowed money, (ii) all
obligations of such Person evidenced by notes, bonds, debentures
or similar instruments, (iii) all indebtedness of such Person
created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such
Person (even though the rights and remedies of the seller or
Lender under such agreement in the event of default are limited to
repossession or sale of such property), (iv) all Contingent
Obligations of such Person, (v) all obligations of such Person to
purchase, redeem or otherwise acquire for value any stock or stock
equivalents of such Person, valued, in the case of redeemable
preferred stock, at the greater of its voluntary or involuntary
liquidation preference plus accrued and unpaid dividends, and
(vi) all Indebtedness referred to in clause (i), (ii), (iii), (iv)
or (v) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be
secured by) any lien upon or on property, and (vii) all
liabilities of such Person that would be shown on a balance sheet
of such Person prepared in conformity with GAAP.
"Interest Payment Date" means the last day of each
September, December, March and June to occur while the Note is
outstanding.
"Investment" means, when used in connection with any
Person, any investment by or of that Person, whether by means of
purchase or other acquisition of stock or other securities or by
means of loan, advance, capital contribution, guaranty or other
debt or equity participation or interest in any other Person, or
otherwise, and includes, without limitation, any partnership and
joint venture interests of such Person.
5
<PAGE>
"Laws" means, collectively, all international, foreign,
federal, state and local statutes, treaties, rules, regulations,
ordinances, codes and administrative or judicial precedents.
"Lender" means Leucadia Financial Corporation, a Utah
corporation, and any holder of the Note or any interest therein or
any one or more or all of their successors in interest, as the
context requires or permits.
"Lender's Office" means Lender's address as set forth on
the signature pages of this Loan Agreement, or such other address
as Lender hereafter may designate by written notice to Borrower.
"Lien" means any pledge, hypothecation, security interest,
encumbrance, lien or charge of any kind, whether voluntarily
incurred or arising by operation of Law or otherwise, affecting
any Property, including any agreement to give any of the
foregoing, any conditional sale or other title retention
agreement, any lease in the nature thereof, and/or the filing of
or agreement to give any financing statement under the Uniform
Commercial Code or comparable Law of any jurisdiction.
"Loan" means the principal amount outstanding under the
Original Loan Agreement as of the date hereof.
"Loan Agreement" means this Amended and Restated Loan
Agreement, either as originally executed or as it may from time to
time be supplemented, modified, amended, restated or extended.
"Material Adverse Effect" means a material adverse effect
on the business, operations or condition (financial or otherwise)
of Borrower and its Subsidiaries taken as a whole.
"Maturity Date" means December 31, 2004.
"Note" shall have the meaning set forth in Recital E and
shall be substantially in the form and substance of Exhibit A,
with all blanks properly completed, either as originally executed
or as the same may from time to time be supplemented, modified,
amended, renewed, extended or refinanced.
6
<PAGE>
"Obligations" means all present and/or future obligations
of every kind or nature of Borrower and its Subsidiaries at any
time and/or from time to time owed to Lender under any one or more
of the Plan Documents, whether due or to become due, matured or
unmatured, liquidated or unliquidated, or contingent or
noncontingent, including obligations of performance as well as
obligations of payment, and including, without limitation, any and
all expenses (including without limitation, counsel fees and
expenses) incurred by Lender in enforcing its rights under this
Loan Agreement as well as interest that accrues after the
commencement of any bankruptcy or insolvency proceeding by or
against Borrower or any Subsidiary or Affiliate of Borrower.
"Person" means any entity, whether an individual, trustee,
corporation, general partnership, limited partnership, joint stock
company, trust, unincorporated organization, bank, business
association, firm, joint venture, Governmental Agency, or
otherwise.
"Plan Documents" means all of the following documents, in
each case either as originally executed or as the same may from
time to time be supplemented, modified, amended, restated or
extended:
(a) this Loan Agreement;
(b) the Note;
(c) the Security Agreement and Stock Pledge ("Stock
Pledge"), dated July 3, 1995, between Borrower and Lender;
(d) the Payment Guaranty, dated July 3, 1995,
executed by HomeFed Communities, Inc., a California
corporation ("HomeFed Communities");
(e) the Security Agreement, dated July 3, 1995,
between HomeFed Communities and Lender;
(f) the Payment Guaranty, dated July 3, 1995,
executed by HomeFed Resources Corporation a California
corporation ("HomeFed Resources");
(g) the Security Agreement, dated July 3, 1995,
between HomeFed Resources and Lender;
7
<PAGE>
(h) the Deed of Trust, dated July 3, 1995,
executed by Paradise Valley Communities No. 1, a
California general partnership ("Paradise Valley");
(i) the Payment Guaranty, dated July 3, 1995,
executed by Paradise Valley in favor of Lender;
(j) the Security Agreement, dated July 3, 1995,
between Paradise Valley and Lender;
(k) the Payment Guaranty, dated July 3, 1995,
executed by Northfork in favor of Lender (collectively
with the Payment Guaranties of HomeFed Communities,
HomeFed Resources and Paradise Valley, the "Payment
Guaranties"); and
(l) the Security Agreement, dated July 3, 1995,
between Northfork and Lender (collectively with the
Security Agreements of HomeFed Communities, HomeFed
Resources and Paradise Valley, the "Security Agreements").
"Principal" means the outstanding principal amount of the
Loan, which shall equal $26,462,381.64.
"Property" means any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.
"Responsible Official" means:
(a) When used with reference to any Person other
than an individual, any corporate officer of such Person,
general partner of such Person, corporate officer of a
corporate general partner of such Person, or corporate
officer of a corporate general partner of a partnership
that is a general partner of such Person, or any other
responsible official thereof duly acting on behalf
thereof; and
(b) When used with reference to a Person who is an
individual, such Person.
"Right of Others" means, as to any Property in which a
Person has an interest, any legal or equitable claim, right, title
or other interest (other than a Lien) in or with respect to that
Property held by any other Person, and any option or right held by
any other Person to acquire any such claim, right, title or other
8
<PAGE>
interests including any option or right to acquire a Lien.
"Securities Act" means the Securities Act of 1933, as
amended.
"Subsidiary" means HomeFed Communities, HomeFed Resources,
Northfork, Paradise Valley and, after the date hereof, any other
corporation, association, partnership business trust or other
business entity of which Borrower shall at any time own directly
or indirectly through one or more Subsidiaries at least a majority
(by number of votes) of the outstanding voting stock of such
entity.
"to the best knowledge of" means, when modifying a
representation, warranty or other statement of any Person, that
the fact or situation described therein is known by the Person
(or, in the case of a Person other than a natural Person, known by
a Responsible Official of that Person) making the representation,
warranty or other statement, or with the exercise of reasonable
due diligence under the circumstances (in accordance with the
standard of what a reasonable Person in similar circumstances
would have done) should have been known by the Person (or, in the
case of a Person other than a natural Person, should have been
known by a Responsible Official of that Person).
1.2 Use of Defined Terms. Any defined term used in the plural
shall refer to all members of the relevant class, and any defined term
used in the singular shall refer to any one or more of the members of
the relevant class.
1.3 Accounting Terms. All accounting terms not specifically
defined in this Loan Agreement shall be construed in conformity with,
and all financial data required to be submitted by this Loan Agreement
shall be prepared in conformity with, GAAP applied on a consistent
basis, as in effect on the date hereof, except as otherwise specifically
prescribed herein.
1.4 Exhibits. Any and all exhibits to this Loan Agreement,
either as originally existing or as the same may from time to time be
supplemented, modified or amended, are incorporated herein by this
reference.
ARTICLE 2
NONREVOLVING LOAN
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2.1 The Loan. The Loan shall be evidenced by the Note of even
date herewith, which shall be executed and delivered by Borrower.
2.2 Non-revolving. To the extent the Loan from time to time
shall be repaid by Borrower as permitted by Section 3.5, the Loan may
not be reborrowed.
2.3 Use of Proceeds. The Borrower has used the proceeds of
the Loan to finance the Plan. No part of the proceeds of the Loan was
used for the purpose of "purchasing" or "carrying" any "margin stock"
within the respective meanings of each of the quoted terms under
Regulation U of the Board of governors of the Federal Reserve System as
now and from time to time in effect ("Regulation U").
ARTICLE 3
PAYMENTS
3.1 Payment Terms. Commencing on September 30, 1998, only
interest on the outstanding Principal shall be payable quarterly in
arrears on each Interest Payment Date, through the Maturity Date,
interest calculated at the rate of 6% per annum; and on the Maturity
Date, all unpaid Principal shall be due and payable.
3.2 Non-Business Days. If any payment to be made by Borrower
or any other party under any Plan Document shall come due on a day other
than a Business Day, payment shall be made on the next succeeding
Business Day and the extension of time shall be reflected in computing
interest.
3.3 Manner and Treatment of Payments.
(a) Each payment hereunder or on the Note or under any
other Plan Document shall be made to Lender, at Lender's Office or
at such other place as Lender may designate, for the account of
Lender, in immediately available funds not later than 12 noon Utah
time on the day of payment (which must be a Business Day). All
payments shall be made in lawful money of the United States of
America.
(b) Each payment of any amount payable by Borrower under
this Loan Agreement and/or any other Plan Document shall be made
free and clear of, and without reduction by reason of, any taxes,
assessments or other charges imposed by any Governmental Agency,
central bank or comparable authority.
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3.4 Payment of Overdue Principal and Interest. The Borrower
shall pay interest on overdue Principal at the rate borne by the Note;
it shall pay interest on the overdue installments of interest at the
same rate to the extent lawful, such interest being due and payable on
demand of Lender.
3.5 Prepayments. The Note shall be prepayable in whole, or in
part, without penalty or charge, upon 30 days prior written notice to
Lender.
3.6 Limitation on Interest. All agreements between Borrower
and Lender are hereby expressly limited so that in no contingency or
event whatsoever shall the amount paid or agreed to be paid to Lender
for the use, forbearance or retention of the indebtedness evidenced
hereby exceed the maximum amount which Lender is permitted to receive
under applicable law. If, from any circumstances whatsoever,
fulfillment of any provision hereto, at the time performance of such
provision shall be due, shall involve exceeding such amount, then the
obligation to be fulfilled shall automatically be reduced to the limit
of such validity, and if from any circumstance Lender should ever
receive as interest an amount which would exceed such maximum amount,
such amount which would be excessive interest shall be applied to the
reduction of the Principal balance evidenced hereby and not to the
payment of interest. As used herein, the term "applicable law" shall
mean the law in effect as of the date hereof, provided, however, that in
the event there is a change in the law which results in a higher
permissible rate of interest, then the Note shall be governed by such
new law as of its effective date. This provision shall control every
provision of all agreements between Borrower and Lender.
3.7 Failure to Charge Not Subsequent Waiver. Any decision by
Lender not to require payment of any interest, fee, cost or other amount
payable under any Plan Document on any occasion shall in no way limit or
be deemed a waiver of Lender's right to require full payment of any
interest, fee cost or other amount payable under any Plan Document on
any other or subsequent occasion.
3.8 Survivability. All of Borrower's obligations under this
Article 3 shall survive until the Loan shall have been fully paid.
ARTICLE 4
COLLATERAL SECURITIES AND GUARANTIES
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4.1 Security of Borrower. All of the Obligations are to be
secured by a perfected first priority security interest (except as set
forth in Section 6.4 of this Agreement) in all of the assets of Borrower
whether now owned or hereafter acquired, including any capital stock
held by Borrower, pursuant to the terms of the Stock Pledge.
4.2 Guaranties and Security of the Subsidiaries. The
Obligations shall also be guaranteed pursuant to the terms of the
Payment Guaranties. All of the obligations of the Subsidiaries under
their respective Payment Guaranties shall be in turn secured by a
perfected first priority security interest (except as set forth in
Section 6.4 of this Agreement, and as revealed by title insurance
policies issued to Lender as of July 3, 1995 covering real Property that
shall as of July 3, 1995 be encumbered by the Deeds of Trust) in all of
the assets of such Subsidiary, whether now owned or hereafter acquired
pursuant to the terms of the Plan Documents to which such Subsidiary is
a party.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BORROWER
Borrower represents and warrants to Lender, as of the date
hereof, that:
5.1 Existence and Qualification; Power; Compliance With Laws.
Borrower is a corporation duly formed, validly existing and in good
standing under the Laws of Delaware. The chief executive offices of
Borrower are in Salt Lake City, Utah. Borrower is duly qualified or
registered to transact business and is in good standing in California
and in each other jurisdiction in which the conduct of its business or
the ownership or leasing of its Property makes such qualification or
registration necessary where the failure to be so qualified would have a
Material Adverse Effect. Borrower has all requisite power and authority
to conduct its business, to own and lease its Property and to execute,
deliver and perform all of its Obligations under the Plan Documents.
All outstanding Common Stock of Borrower is duly authorized, validly
issued, fully paid and non-assessable and issued in compliance with all
applicable state and federal securities and other Laws. Borrower is in
compliance with all Laws and other legal requirements applicable to its
business, has obtained all authorizations, consents, approvals, orders,
licenses and permits from, and has accomplished all filings,
registrations and qualifications with, or obtained exemptions from any
of the foregoing from, any Governmental Agency that are necessary for
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the transaction of its business as now conducted, except where the
failure so to comply, file, register, qualify or obtain exemptions would
not have a Material Adverse Effect.
5.2 Authority; Compliance with Other Agreements and
Instruments and Government Regulations. The execution delivery and
performance by Borrower of the Loan Agreement has been duly authorized
by all necessary action on the part of Borrower, and do not and will
not:
(a) Require any consent or approval not heretofore
obtained of any director, stockholder, security holder, partner or
creditor of Borrower;
(b) Violate or conflict with any provision of Borrower's
charter, certificate or articles of incorporation or bylaws, or
amendments thereto, as applicable;
(c) Result in or require the creation or imposition of
any Lien or Right of Others upon or with respect to any Property
now owned or leased or hereafter acquired by Borrower;
(d) Violate any provision of any Law, order, writ,
judgment, injunction, decree, determination or award presently in
effect and having applicability to Borrower; or
(e) Result in a breach of or constitute a default under,
or cause or permit the acceleration of any obligation owed under,
any indenture or loan or credit agreement or any other material
agreement, lease or instrument to which Borrower is a party or by
which such Borrower or any of its Property is bound or affected;
and neither Borrower, nor any Affiliate of Borrower is in default under
any Law, order, writ, judgment, injunction, decree, determination or
award, or any indenture, agreement, lease or instrument described in
Section 5.2(e), in any respect that is materially adverse to the
interests of Lender or that would have any Material Adverse Effect.
5.3 No Governmental Approvals Required. The Original Loan
Agreement was approved by the Bankruptcy Court in conjunction with the
Plan, and no additional authorization, consent, approval, order, license
or permit from, or filing, registration or qualification with, or
exemption from any of the foregoing from, any Governmental Agency is or
will be required to authorize or permit under applicable Law the
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execution, delivery and performance by Borrower of and under any of the
Plan Documents.
5.4 Subsidiaries. Borrower holds 400 shares of the
outstanding Common Stock of HomeFed Communities, which shares constitute
all of the outstanding shares of HomeFed Communities and are represented
by a certificate of HomeFed Communities. Borrower also holds 20 shares
of the outstanding Common Stock of HomeFed Resources, which shares
constitute all of the outstanding shares of HomeFed Resources and are
represented by a certificate of HomeFed Resources. HomeFed Resources
and HomeFed Communities comprise all of the partners of Northfork and
Paradise Valley.
5.5 Title to and Location of Property. Borrower and the
Subsidiaries have good and valid title to all the Property reflected in
the Financial Statements, other than Property subsequently sold in the
ordinary course of business, free and clear of all Liens and Rights of
Others other than Liens or Rights of Others permitted pursuant to
Section 6.4.
5.6 Investment Company Act of 1940. Borrower is not an
"investment company" within the meaning of the Investment Company Act of
1940.
5.7 Litigation. Except as described in the Borrower Reports
there are no actions, suits or proceedings pending or, to the best
knowledge of Borrower, threatened against or affecting Borrower or any
Property of Borrower in any court of Law or before any Governmental
Agency.
5.8 Binding Obligations. Each of the Plan Documents will
continue to constitute the legal, valid and binding obligation of
Borrower, enforceable against Borrower in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency,
reorganization arrangement, moratorium or other similar Laws relating to
or affecting creditors' rights generally or equitable principles
relating to the granting of specific performance and other equitable
remedies as a matter of judicial discretion.
5.9 No Default. No event has occurred and is continuing that
is an Event of Default.
5.10 Disclosure. No written statement made by Borrower to
Lender in connection with this Loan Agreement or the Loan contains any
untrue statement of a material fact or omits a material fact necessary
to make the statement made not misleading. There is no fact which
Borrower has not disclosed to Lender in writing which materially and
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adversely affects nor, so far as Borrower can now foresee, is reasonably
likely to prove to affect materially and adversely the business,
operations, Property, prospects, profits or condition (financial or
otherwise) of Borrower, or the ability of Borrower to perform its
obligations under the Plan Documents.
5.11 Tax Liability. Borrower has filed all income tax returns
which are required to be filed, and has paid, or made provision for the
payment of, all taxes due for the transactions or periods covered by
such returns, except such taxes, if any, as are being contested in good
faith and as to which adequate reserves have been provided.
5.12 Insurance Coverage. There is in full force and effect one
or more policies of insurance issued by insurers of nationally
recognized responsibility insuring Borrower and its Property and
business against losses and risks and in such amounts as are adequate
for the business of Borrower and as are customarily carried by Persons
engaged in the same or similar business.
5.13 Access to Data. Lender has had an opportunity to discuss
Borrower's business, management, and financial affairs with its
management and to review Borrower's records and facilities, and Lender
is relying for purposes of this Agreement upon its own due diligence
review of Borrower, not on any representation or warranty of Borrower
other than as expressly set forth in this Agreement.
ARTICLE 6
COVENANTS OF BORROWER
From the date of this Agreement and for so long as any of the Loan
remains unpaid, or any other sums, of any kind, due and payable by
Borrower under this Loan Agreement or due and payable by Borrower to
Lender under any other debt security, instrument, loan or other
agreement, remain unpaid, Borrower shall, and shall, if appropriate,
cause each of its Subsidiaries to, unless Lender otherwise consents in
writing:
6.1 Payment of Principal and Interest. Duly and punctually
pay the Principal and interest on the Note in accordance with its terms
and the terms of this Loan Agreement.
6.2 Existence. Do or cause to be done all things necessary
to preserve and keep in full force and effect its existence and the
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existence of the Subsidiaries, rights (charter and statutory) and
franchises; provided, however, that it shall not be required to preserve
any such right or franchise if its Board of Directors shall determine
that the preservation thereof is no longer desirable in the conduct of
its business and that the loss thereof does not have a Material Adverse
Effect.
6.3 Maintenance of Property. Cause all Property used or
useful in the conduct of its business to be maintained and kept in good
condition, repair and working order and supplied with all necessary
equipment, and prohibit waste and cause to be made all necessary
repairs, renewals, replacements, betterments and improvements thereof,
all as in its judgment may be necessary so that the business carried on
in connection therewith may be properly and advantageously conducted at
all times; provided, however, that nothing in this Section shall prevent
discontinuing the operation or maintenance of any of such Property if
such discontinuance does not have a Material Adverse Effect and is, in
its judgment, desirable in the conduct of its business.
6.4 Payment of Taxes and Other Claims. Pay or discharge or
cause to be paid or discharged, before the same shall become delinquent,
(1) all taxes, assessments and governmental charges levied or imposed
upon it or upon its income, profits or Property, and (2) any and all
Liens and any and all lawful claims for labor, materials and supplies
which, if unpaid, might by law become a Lien; provided, however, that it
shall not be required (i) to terminate that certain financing statement
(California Federal Bank, secured party) filed with the California
Secretary of State at no. 910092913, (ii) [to terminate those certain
financing statements (Brock HomeFed Communities La Quinta, debtor;
Community Bank, secured party) filed with the California Secretary of
State at nos. 90209536, 90209538, and 90261832, which financing
statements are due to expire in 1995, or (iii)] to pay or discharge or
cause to be paid or discharged any such tax, assessment, charge, Lien or
claim whose amount, applicability or validity is being contested in good
faith by appropriate proceedings and for which adequate reserves are
maintained.
6.5 Margin Stock. Refrain from "purchasing" or "carrying" any
"margin stock" within the respective meanings of each of the quoted
terms under Regulation U.
6.6 No Plan Amendments, Etc. Refrain from amending any Plan
Documents without the prior written consent of Lender except as
specifically contemplated by this Agreement.
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6.7 Preservation of Tax Attributes. Take all reasonable steps
necessary to preserve the existence and availability for federal income
tax purposes of Borrower's net operating losses.
6.8 Conversion Reinstatement. Upon the written request of the Lender,
the Company agrees that it shall submit for shareholder approval a
proposal to amend its Restated Certificate of Incorporation to eliminate
the restriction contained in Article 4A thereof and to reinstate Article
5 of the Original Loan Agreement and any related provisions of the
Original Loan Agreement necessary to provide the Lender or its permitted
assignees conversion privileges to convert the Note into not more than
54,000,000 shares of Common Stock at a conversion price of $0.45 per
share, as such number of shares and purchase price may be adjusted from
time to time in accordance with the terms of the Original Loan
Agreement.
ARTICLE 7
INFORMATION AND REPORTING REQUIREMENTS
7.1 Financial and Business Information. From the date of this
Loan Agreement and for so long as the Loan remains unpaid or any other
sums of any kind due and payable by Borrower under this Loan Agreement
or due and payable by Borrower to Lender under any other debt security,
instrument, loan or under any other agreement, remain unpaid Borrower
shall, unless Lender shall otherwise consent in writing, deliver to
Lender, at Borrower's sole expense:
(a) As soon as practicable, and in any event within
twenty (20) days after the end of each fiscal month of Borrower,
(i) consolidated balance sheets of Borrower and its Subsidiaries
as at the end of such month, setting forth in comparative form the
corresponding figures as at the end of the corresponding month of
their preceding fiscal year and (ii) consolidated statements of
income, shareholders' equity, and cash flows of Borrower and its
Subsidiaries for such month and for the portion of their fiscal
year ended with such month, setting forth in comparative form the
corresponding figures for the corresponding periods of their
preceding fiscal year, all in reasonable detail, including
footnotes. The preceding financial statements shall be certified
by a Responsible Official of Borrower as fairly presenting in all
material respects the financial condition, results of operations
and changes in financial position of Borrower and its Subsidiaries
in accordance with generally accepted accounting principles,
consistently applied, as at such date and for such periods,
subject only to normal year- end audit adjustments.
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(b) As soon as practicable, and in any event within
thirty (30) days after the end of each fiscal quarter of Borrower
(including the last fiscal quarter of each fiscal year, provided
that with respect to such last quarter the financial statements
required hereby may be in preliminary form, prior to year-end
audit adjustments), (i) consolidated balance sheets of Borrower
and its Subsidiaries as at the end of such quarter, setting forth
in comparative form the corresponding figures as at the end of the
corresponding quarter of their preceding fiscal year and (ii)
consolidated statements of income, shareholders' equity, and cash
flows of Borrower and its Subsidiaries for such quarter and for
the portion of their fiscal year ended with such quarter, setting
forth in comparative form the corresponding figures for the
corresponding periods of their preceding fiscal year, all in
reasonable detail, including footnotes. The preceding financial
statements shall be certified by a Responsible Official of
Borrower as fairly presenting in all material respects the
financial condition, results of operations and changes in
financial position of Borrower and its Subsidiaries in accordance
with generally accepted accounting principles, consistently
applied, as at such date and for such periods, subject only to
normal year-end audit adjustments.
(c) As soon as practicable, and in any event within
ninety (90) days after the close of each fiscal year of Borrower,
(i) consolidated balance sheets of Borrower and its Subsidiaries
as at the end of such fiscal year, setting forth in comparative
form the corresponding figures as at the end of their preceding
fiscal year, and (ii) consolidated statements of income,
shareholders' equity, and cash flows of Borrower and its
Subsidiaries for such fiscal year, setting forth in comparative
form the corresponding figures for their previous fiscal year, all
in reasonable detail. Such balance sheets and statements shall be
prepared in accordance with generally accepted accounting
principles, consistently applied, and such consolidated balance
sheet and consolidated statements shall be accompanied by a report
and opinion of independent public accountants selected by Borrower
and reasonably satisfactory to Lender which report and opinion
shall be prepared in accordance with generally accepted auditing
principles as at such date.
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(d) As soon as practicable, and in any event within
thirty (30) days after the end of each fiscal month of Borrower, a
Certificate of a Responsible Official of Borrower setting forth a
schedule of Investments made by Borrower and/or its Subsidiaries
during such month, and during their fiscal year to date,
separately for Borrower and each of its Subsidiaries, and in
reasonable detail.
(e) As soon as practicable, and in any event within
thirty (30) days after filing, copies of any report or other
document filed by Borrower or any of its Subsidiaries with any
Governmental Agency.
(f) Promptly after the same are available, copies of
each annual report, proxy or financial statement or other report
or communication sent to the shareholders of Borrower, and copies
of all annual, regular, periodic and special reports and
registration statements which Borrower may file or be required to
file with any Governmental Agency or with any securities exchange.
(g) Promptly upon (and in no event later than five (5)
Business Days after) becoming aware of the existence of any
condition or event which constitutes a Default, a written notice
specifying the nature and period of existence thereof and what
action Borrower or its Subsidiaries are taking or propose to take
with respect thereto.
(h) Promptly upon becoming aware that any Person asserts
a claim against Borrower or any of its Subsidiaries in excess of
$25,000 and that such Person has given notice or taken any other
action with respect to a claimed default or event of default, a
written notice specifying the notice given or action taken by such
Person and the nature of the claimed default or event of default
and what action Borrower or its Subsidiaries are taking or propose
to take with respect thereto.
(i) Promptly upon any change in the name of Borrower or
any Subsidiary or a change in Borrower's organizational structure,
a written notice specifying such change.
(j) Promptly upon the occurrence of any uninsured or
partially insured loss (including the deductible amount) as a
result of fire, theft, liability or Property damage in excess of
an aggregate of $25,000, a written notice specifying the nature
and amount of such loss.
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(k) Such other data and information as from time to time
may be reasonably requested by Lender, including environmental
audit reports prepared by recognized California environmental
consultants retained by Borrower with the approval of Lender.
7.2 Compliance Certificates. So long as the loan remains
unpaid or any other Obligation remains unpaid or unperformed in whole or
in part, Borrower shall, upon the reasonable request of Lender, deliver
to Lender, at Borrower's sole expense, not later than 45 days after the
end of each fiscal quarter of Borrower, a Certificate of a Responsible
Official of Borrower setting forth computations or other appropriate
information showing, in detail satisfactory to Lender, whether any
Default exists and, if so, the nature of the Default.
ARTICLE 8
EVENTS OF DEFAULT AND REMEDIES UPON EVENT OF DEFAULT
8.1 Events of Default. The existence or occurrence of any one
or more of the following events, whatever the reason therefor, shall
constitute an Event of Default;
(a) Borrower fails to pay any installment of Principal
or interest of any indebtedness on the Note or any portion
thereof, or to pay any fee or any other amount due Lender under
any Plan Document within five (5) Business Days after such payment
is due and payable; or
(b) Any failure to comply with Section 7.1(g); or
(c) Any failure to perform or observe any other term,
covenant or agreement contained in any Plan Document to be
performed or observed by Borrower or a Subsidiary which is not
cured within ten (10) calendar days; or
(d) Borrower or any of its Subsidiaries (i) fails to pay
the principal, or any principal installment, of any present or
future Indebtedness or in connection with the purchase or lease of
Property, or any guaranty of present or future Indebtedness for
borrowed money or issued in connection with the Purchase or lease
of Property, on its part to be paid, when due (or within any
stated grace period), whether at the stated maturity, upon
acceleration, by reason of required prepayment or otherwise, or
(ii) fails to perform or observe any other term, covenant or
agreement on its part to be performed or observed in connection
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with any present or future Indebtedness for borrowed money or in
connection with the purchase or lease of Property, or of any
guaranty of present or future Indebtedness for borrowed money or
issued in connection with the purchase or lease of Property, if as
a result of such failure any holder or holders thereof (or an
agent or trustee on its or their behalf) has the right to declare
such Indebtedness due before the date on which it otherwise would
become due; or
(e) Any Plan Document, at any time and for any reason
other than the agreement of Lender or satisfaction in full of all
the Obligations, ceases to be in full force and effect or is
declared by a court of competent jurisdiction to be null and void,
invalid or unenforceable in any respect which, in the reasonable
opinion of Lender, is materially adverse to the interests of
Lender; or any party thereto other than Lender denies that it has
any or further liability or obligation under any Plan Document, or
purports to revoke, terminate or rescind same; or
(f) Borrower or any of its Subsidiaries is the subject
of an order for relief in a bankruptcy case, or is unable or
admits in writing its inability to pay its debts as they mature,
or makes an assignment for the benefit of creditors; or applies
for or consents to the appointment of any receiver, trustee,
custodian, conservator, liquidator, rehabilitator, or similar
officer for it or for all or any part of its Property; or any
receiver, trustee, custodian, conservator, liquidator,
rehabilitator or similar officer is appointed without the
application or consent of that Person and the appointment
continues undischarged or unstayed for thirty (30) calendar days;
or institutes or consents to any bankruptcy, insolvency,
reorganization, arrangement, readjustment of debt, dissolution,
custodianship, conservatorship, liquidation, rehabilitation or
similar case or proceedings relating to it or to all or any part
of its Property under the Laws of any jurisdiction; or any similar
case or proceeding is instituted without the consent of that
Person and continues undismissed or unstayed for thirty (30)
calendar days; or any judgment, writ, warrant of attachment or
execution or similar process is issued or levied against all or
any material part of the Property of any such Person and is not
released, vacated or fully bonded within thirty (30) calendar days
after its issue or levy; or
(g) Borrower or any Subsidiary thereof is dissolved or
liquidated or all or substantially all of the assets of Borrower
or any Subsidiary of Borrower are sold or otherwise transferred in
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violation of the provisions of this Loan Agreement without the
written consent of Lender; provided, however, that Borrower shall
be entitled to dissolve or liquidate any of Borrower's
Subsidiaries in the ordinary course of business if such act does
not have a Material Adverse Effect or (i) all of the proceeds of
such dissolution or liquidation go to Borrower, and (ii) such
dissolution or liquidation results in no breach of any obligations
of Borrower or such Subsidiary to any Person; or
(h) The revocation or nonrenewal of any permit or
license, authorization, consent, order or other approval from any
Governmental Agency necessary for the conduct of Borrower's
business that has a Material Adverse Effect; or
(i) Any judgment or order for the payment of money in
excess of $50,000 to the extent not fully covered by insurance
shall be rendered against Borrower or any of its Subsidiaries and
either, (i) enforcement proceedings shall have been commenced by
any creditor upon such judgment or order, or (ii) there shall be
any period of ten (10) consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect.
8.2 Remedies Upon Event of Default. Without limiting any
other rights or remedies of Lender provided for elsewhere in this Loan
Agreement, the Plan Documents, or by applicable Law, or in equity, or
otherwise:
(a) Upon the occurrence of any Event of Default other
than an Event of Default described in Section 11.1(f) Lender may
declare all or any part of the unpaid Principal of the Note, all
interest accrued and unpaid thereon and all other amounts payable
under the Plan Documents to be forthwith due and payable,
whereupon the same shall become and be forthwith due and payable,
without protest, presentment, notice of dishonor, demand or
further notice of any kind, all of which are expressly waived by
Borrower.
(b) Upon the occurrence of any Event of Default
described in Section 8.1(f):
(1) all obligations of Lender and all rights of
Borrower under the Plan Documents shall terminate without
notice to or demand upon Borrower, which are expressly
waived by Borrower; provided, however, that Lender may
waive the Event of Default or, without waiving, determine,
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upon terms and conditions satisfactory to Lender, to
extend the Maturity Date; and
(2) the unpaid Principal of the Note, all interest
accrued and unpaid thereon and all other amounts payable
under the Plan Documents shall be forthwith due and
payable, without protest, presentment, notice of dishonor,
demand or further notice of any kind, all of which are
expressly waived by Borrower.
(c) Upon the occurrence of any Event of Default, Lender,
without notice to or demand upon Borrower, which are expressly
waived by Borrower, may proceed to protect, exercise and enforce
its rights and remedies under the Plan Documents against Borrower
and such other rights and remedies as are Provided by Law or
equity.
(d) The order and manner in which Lender's rights and
remedies are to be exercised shall be determined by Lender in its
sole discretion, and all payments received by Lender shall be
applied first to the costs and expenses (including attorneys' fees
and disbursements) of Lender, and thereafter paid to Lender.
Regardless of how Lender may treat payments for the purpose of its
own accounting, for the purpose of computing Borrower's
Obligations hereunder and under the Note, payments shall be
applied, first, to the costs and expenses of Lender, as set forth
above, second, to the payment of accrued and unpaid interest due
under any Plan Document to and including the date of such
application (ratably, and without duplication, according to the
accrued and unpaid interest due under each of the Plan Documents),
third, to the payment of all unpaid Principal amounts due under
any Plan Document (including, for the purposes hereof, Principal
due under the Note), and fourth, to the payment of all other
amounts (including fees) then owing to Lender under the Plan
Documents. No application of payments will cure any Event of
Default, or prevent acceleration, or continued acceleration, of
amounts payable under the Plan Documents, or prevent the exercise,
or continued exercise, of rights or remedies of Lender hereunder
or thereunder or at Law or in equity.
(e) Upon the occurrence of any event that would be an
Event of Default under Section 11.1(f) with the passage of time,
Lender may take such action as Lender may deem necessary to
23
<PAGE>
protect the interests of Lender under the Plan Documents.
ARTICLE 9
MISCELLANEOUS
9.1 Cumulative Remedies; No Waiver. The rights, powers,
privileges and remedies of Lender provided herein and in the Note and
every other Plan Document are cumulative and not exclusive of any right,
power, privilege or remedy provided by Law or equity. No failure or
delay on the part of Lender in exercising any right, power, privilege or
remedy may be, or may be deemed to be, a waiver thereof; nor may any
single or partial exercise of any right, power, privilege or remedy
preclude any other or further exercise of the same or any other right,
power, privilege or remedy.
9.2 Amendments; Consents. No amendment, modification,
supplement, extension, termination or waiver of any provision of this
Loan Agreement or any other Plan Document, no approval or consent
thereunder, and no consent to any departure therefrom by Borrower or any
other party to the Plan Documents other than Lender, may in any event be
effective (except as otherwise provided in any other Plan Document)
unless in writing signed by the Parties hereto.
9.3 Nature of Lender's Obligations. Nothing contained in this
Loan Agreement or any other Plan Document and no action taken by Lender
pursuant hereto or thereto may, or may be deemed to, make Borrower and
Lender a partnership, an association, a joint venture or other entity,
either between themselves or with any Affiliate of Borrower. The
relationship between Borrower and Lender is, and shall at all times
remain, solely that of a borrower and Lender; Lender shall under no
circumstance be construed to be a partner or joint venturer of Borrower
or its Affiliates; Lender shall under no circumstance be deemed to be in
a relationship of confidence or trust or a fiduciary relationship with
Borrower or its Affiliates, or to owe any fiduciary duty to Borrower or
its Affiliates; Lender undertakes or assumes no responsibility or duty
to Borrower or its Affiliates to select, review, inspect, supervise,
pass judgment upon or inform Borrower or its Affiliates of any matter in
connection with their Property, or the operations of Borrower or its
Affiliates; Borrower and its Affiliates shall rely entirely upon their
own judgment with respect to such matters; and any review, inspection,
supervision, exercise of judgment or supply of information undertaken or
24
<PAGE>
assumed by Lender in connection with such matters is solely for the
protection of Lender and neither Borrower nor any other Person is
entitled to rely thereon.
9.4 Survival of Representations and Warranties and Covenants.
All representations and warranties contained herein or in any other Plan
Document, or in any certificate or other writing delivered by or on
behalf of Borrower, will survive the making and repayment of the loan
hereunder and the execution and delivery of the Note and have been or
will be relied upon by Lender, notwithstanding any investigation made by
Lender. All affirmative and negative covenants contained herein will
survive the payment of the Loan hereunder until all indebtedness of
Borrower to Lender under any other security debt instrument, loan or
other agreement is satisfied in full.
9.5 Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including, without
limitation, telegraphic, telex, telecopy or cable communication) and
mailed, telegraphed, telecopied, or delivered by hand, if to the
Borrower, at its address at 529 East South Temple, Salt Lake City, Utah
84012 (telecopy number: (801) 524-1761) (telephone number: (801) 521-1049);
and if to Lender, at its address at 529 East South Temple, Salt
Lake City, Utah 84012 (telecopy number: (801-524-1761) (telephone
number: (801-521-1049), Attention: Corrinne A. Maki; with a copy to
Weil, Gotshal & Manges, 767 Fifth Avenue, New York, New York 10153
(telecopy number 212-310-8007) (telephone number 212-310-8000),
Attention: Stephen E. Jacobs, Esq.; or, at such other address as shall
be designated by such party in a written notice to the other party. All
such notices and communications shall, when mailed, telegraphed,
telecopied or delivered, be effective when deposited in the mails,
delivered to the telegraph company, telecopied with confirmation of
receipt, or delivered by hand to the addressee.
9.6 Execution of Loan Agreements. This Loan Agreement may be
executed in any number of counterparts and any party hereto or thereto
may execute any counterpart, each of which when executed and delivered
will be deemed to be an original and all of which counterparts of this
Loan Agreement, as the case may be, when taken together will be deemed
to be but one and the same instrument. The execution of this Loan
Agreement by any party hereto or thereto will not become effective until
counterparts hereof or thereof, as the case may be, have been executed
by all the parties hereto or thereto
9.7 Binding Effect; Assignment. This Loan Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and
thereto and their respective successors and assigns, except that
25
<PAGE>
Borrower and/or its Affiliates may not assign their rights hereunder or
thereunder or any interest herein or therein without the prior written
consent of Lender. Lender may assign its rights and obligations
hereunder without the consent of Borrower.
9.8 Statements Required in Certificate. Each certificate with
respect to compliance with a condition or covenant provided for in the
Note or this Loan Agreement shall include:
(a) a statement that each Person making such certificate
has read such covenant or condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements contained
in such certificate are based;
(c) a statement that, in the opinion of each such
Person, he or she has made such examination or investigation as is
necessary to enable him or her to express an informed opinion as
to whether or not such covenant or condition has been complied
with; and
(d) a statement as to whether or not, in the opinion of
each such Person, such covenant or condition has been complied
with.
9.9 Indemnity by Borrower. Borrower agrees to indemnify, save
and hold harmless Lender and each of its directors, officers, agents,
attorneys and employees (collectively the "Indemnitees") from and
against: (a) any and all claims, demands, actions or causes of action
that are asserted against any Indemnitee by any Person (other than
Lender) if the claim, demand, action or cause of action directly or
indirectly relates to a claim, demand, action or cause of action that
such Person has or asserts against Borrower, any Subsidiary of Borrower
or any of their respective officers, directors, agents, attorneys,
employees or shareholders; (b) any and all claims, demands, actions or
causes of action that are asserted against any Indemnitee if the claim,
demand, action or cause of action arises out of or relates to the
relationship between Borrower and Lender under any of the Plan Documents
or the transactions contemplated thereby; (c) any and all administrative
or investigative proceedings by any Governmental Agency arising out of
or related to any claim, demand, action or cause of action described in
clauses (a) or (b) above; and (d) any and all liabilities, losses, costs
or expenses (including attorneys' fees and disbursements and other
26
<PAGE>
professional services) that any Indemnitee suffers or incurs as a result
of the assertion of any of the foregoing; provided that no Indemnitee
shall be entitled to indemnification for any loss caused by its own
gross negligence or willful misconduct. Each Indemnitee is authorized
to employ counsel of its own choosing in enforcing its rights hereunder
and in defending against any claim, demand, action, cause of action or
administrative or investigative proceeding covered by this Section 9.9;
provided that each Indemnitee shall endeavor, in connection with any
matter covered by this Section 9.9 which also involves other
Indemnitees, to use reasonable efforts to avoid unnecessary duplication
of effort by counsel for all Indemnitees. Any obligation or liability
of Borrower to any Indemnitee under this Section 9.9 shall be and hereby
is covered and secured by the Plan Documents, and shall survive the
expiration or termination of this Loan Agreement and the repayment of
the Loan and the payment and performance of all other Obligations owed
to Lender.
9.10 No Third Parties Benefited. This Loan Agreement is made
for the purpose of defining and setting forth certain obligations,
rights and duties of Borrower and Lender in connection with the Loan,
and is made for the sole protection of Borrower and Lender, and Lender's
successors and assigns, and no other Person shall have any rights of any
nature hereunder or by reason hereof.
9.11 Further Assurances. Borrower and its Subsidiaries shall,
at their expense and without expense to Lender, do, execute and deliver
such further acts and documents as Lender from time to time reasonably
requires for the assuring and confirming unto Lender of the rights
hereby created or intended now or hereafter so to be, or for carrying
out the intention or facilitating the performance of the terms of any
Plan Document, or for assuring the validity, perfection, priority or
enforceability of any Lien under any Plan Document.
9.12 Integration. This Loan Agreement, together with the other
Plan Documents, comprises the complete and integrated agreement of the
parties on the subject matter hereof and supersedes all prior
agreements, written or oral, on the subject matter hereof. In the event
of any conflict between the provisions of this Loan Agreement and those
of any other Plan Document, the provisions of this Loan Agreement shall
control and govern; provided that the inclusion of supplemental rights
or remedies in favor of Lender in any other Plan Document shall not be
deemed a conflict with this Loan Agreement. Each Plan Document was
drafted with the joint participation of the respective parties thereto
27
<PAGE>
and shall be construed neither against nor in favor of any party, but
rather in accordance with the fair meaning thereof.
9.13 Governing Law. This Loan Agreement and, except to the
extent otherwise provided therein each Plan Document, shall be governed
by, and construed and enforced in accordance with, the internal Laws of
the State of Utah (without regard to choice of law or conflict of law
provisions).
9.14 Severability of Provisions. Any provision in any Plan
Document that is held to be inoperative, unenforceable or invalid as to
any party or in any jurisdiction shall, as to that party or
jurisdiction, be inoperative, unenforceable or invalid without affecting
the remaining provisions or the operation, unenforceability or validity
of that provision as to any other party or in any other jurisdiction,
and to this end the provisions of all Plan Documents are declared to be
severable.
9.15 Headings. Article and Section headings in this Loan
Agreement and the other Plan Documents are included for convenience of
reference only and are not part of this Loan Agreement or the other Plan
Documents for any other purpose.
9.16 Submission to Jurisdiction; Service of Process.
(a) Any legal action or proceeding with respect to the
Note or this Loan Agreement or any document related thereto may be
brought in the courts of the State of Utah or of the United States
of America for the District of Utah, and, by execution and
delivery of the Note and this Loan Agreement, Borrower hereby
accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. The
parties hereto hereby irrevocably waive any objection, including,
without limitation, any objection to the laying of venue or based
on the ground of forum non conveniens, which any of them may now
or hereafter have to the bringing of any such action or proceeding
in such respective jurisdictions.
(b) The Borrower irrevocably consents to the service of
process of any of the aforesaid courts in any such action or
proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to Borrower at its address
provided herein.
(c) Nothing contained in this Section shall affect the
right of Lender or any holder of the Note to serve process in any
28
<PAGE>
other manner permitted by law or commence legal proceedings or
otherwise proceed against Borrower in any other jurisdiction.
9.17 Certification. Except as otherwise specifically provided
herein, any requirement that any document or certificate be signed or
executed by any Person requires that such document or certificate be
signed or executed by a Responsible Official of such Person, and that
the Responsible Official signing or executing such document or
certificate on behalf of such Person shall be authorized to do so by all
necessary corporate, partnership and/or other action.
[Remainder of Page Intentionally Left Blank]
29
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Loan Agreement to be duly executed as of the date first above written.
BORROWER:
HomeFed Corporation,
a Delaware Corp.
By /s/ Timothy M. Considine
------------------------------
Chairman of the Board
-------------------------------
[Print Name and Title]
Address: 529 East South Temple
Salt Lake City, Utah 84012
Telecopier: (801-524-1761)
Telephone: (801-523-1049)
Lender:
Leucadia Financial Corporation,
a Utah corporation
By /s/ Joseph A. Orlando
------------------------------------
Vice President and Chief Financial
Officer
-------------------------------------
[Print Name and Title]
Address: 529 East South Temple
Salt Lake City, Utah 84012
Telecopier: (801-524-1751)
Telephone: (801-521-1049)
30
<PAGE>
EXHIBIT "A"
TO Loan Agreement
AMENDED AND RESTATED 6% SECURED NOTE
DUE DECEMBER 31, 2004
Salt Lake City, Utah
August 14, 1998
For value received, the undersigned HomeFed corporation, a
Delaware corporation ("Borrower"), unconditionally promises to pay to
the order of Leucadia Financial Corporation, a Utah corporation
("Lender"), at Lender's principal place of business or at such other
place as may be designated in writing by Lender, in lawful money of the
United States of America and in immediately available funds, the
principal sum of $26,462,381.64 plus interest.
This Note is made pursuant to that certain Amended and
Restated Loan Agreement of even date herewith between Borrower and
Lender ("Loan Agreement"). Capitalized terms not otherwise defined
herein shall have the meanings set forth in the Loan Agreement.
Interest on this Note shall be payable quarterly in arrears on each
Interest Payment Date. Interest on this Note shall be calculated at the
rate of 6% per annum. This Note is due and payable on December 31,
2004. There are no conversion rights under this Note.
This Note is being issued in replacement and substitution
for the Note dated as of July 3, 1995 in the aggregate principal amount
of TWENTY MILLION AND 00/100 DOLLARS ($20,000,000), as such amount has
been increased pursuant to the Amended and Restated Loan Agreement dated
August 14, 1998.
This Note is secured by, among other things, the
following:
(i) that certain Security Agreement and Stock Pledge
dated July 3, 1995, executed by Borrower;
(ii) that certain Payment Guaranty dated July 3, 1995,
executed by HomeFed Communities, Inc., a California corporation
("HomeFed Communities"), which Payment Guaranty is secured by a
Security Agreement of even date herewith, executed by HomeFed
Communities;
(iii) that certain Payment Guaranty dated July 3, 1995,
executed by HomeFed Resources Corporation, a California
<PAGE>
corporation ("HomeFed Resources"), which Payment Guaranty is
secured by a Security Agreement of even date herewith, executed by
HomeFed Resources; and
(iv) that certain Payment Guaranty and Deed of Trust
dated July 3, 1995, each executed by Paradise Valley Communities
No. I, a California general partnership (and related financing
statements).
If an Event of Default shall occur and be continuing, all
Principal and all interest accrued and other amounts due hereunder may
be declared due and payable in the manner and with the effect provided
in the Loan Agreement.
If any attorney is engaged by Lender to enforce or defend
any provision of this Note or the Loan Agreement, or as a consequence of
any Default, with or without the filing of any legal action or
proceeding, then Borrower shall pay to Lender immediately upon demand
reasonable attorneys' fees and costs incurred by Lender in connection
therewith, together with interest thereon from the date of such demand
until paid at the rate of interest applicable to the Principal as if
such unpaid attorneys' fees and costs had been added to Principal.
No previous waiver and no failure or delay by Lender in
acting with respect to the terms of this Note or the Loan Agreement
shall constitute a waiver of any breach, default, or failure of
condition under this Note or the Loan Agreement. A waiver of any term
of this Note or the Loan Agreement must be made in writing and shall be
limited to the express written terms of such waiver. In the event of
any inconsistencies between the terms of this Note and the terms of any
other document related to the Loan, the terms of the Loan Agreement and
this Note shall prevail.
Except as may otherwise be provided in the Loan Agreement,
Borrower waives: presentment; demand; notice of dishonor; notice of
default or delinquency; notice of acceleration; notice of protest and
nonpayment; notice of costs, expenses or losses and interest thereon;
notice of late charges; and diligence in taking any action to collect
any sums owing under this Note or in proceeding against any of the
rights or interests in or to properties, if any, securing payment of
this Note.
Time is of the essence with respect to every provision
hereof. This Note shall be construed and enforced in accordance with
<PAGE>
the internal laws of the State or Utah, except to the extent that
Federal laws preempt the laws of the State of Utah.
Any legal action or proceeding with respect to this Note
or any document related hereto may be brought in the courts of the State
of Utah or of the United States of America for the District of Utah,
and, by execution and delivery of this Note, the Borrower hereby accepts
for itself and in respect of its Property, generally and
unconditionally, the jurisdiction of the aforesaid courts. The Borrower
hereby irrevocably waives any objection, including, without limitation,
any objection to the laying of venue or based on the ground of forum non
conveniens, which Borrower may now or hereafter have to the bringing of
any such action or proceeding in such respective jurisdictions.
The Borrower irrevocably consents to the service of
process of any of the aforesaid courts in any such action or proceeding
by the mailing of copies thereof by registered or certified mail,
postage prepaid, to the Borrower at its address provided in the Loan
Agreement.
Nothing contained in this Note shall affect the right of
Lender to serve process in any other manner permitted by law or commence
legal proceedings or otherwise proceed against the Borrower in any other
jurisdiction.
BORROWER:
HomeFed Corporation,
a Delaware corporation
By
------------------------------
------------------------------
[Print Name and Title]
Address: 529 East South Temple
Salt Lake City, UT 84102
Telecopier: (801) 524-1751
Telephone: (801) 521-1049
<PAGE>
Each of the parties to the Plan
Documents, by signing below, confirms in
favor of the Lender that it (i) consents
to the terms and conditions of this
Amended and Restated Loan Agreement,
(ii) agrees that all references in each
of the Plan Documents to the Loan
Agreement shall refer to this Amended
and Restated Loan Agreement and the Note
executed in connection therewith, and
(iii) agrees it has no defense, offset,
claim, counterclaim or recoupment with
respect to any of its obligations or
liabilities under its respective
Guaranty, Security Document and/or its
Deed of Trust and that all terms of such
Guaranty, Security Document or Deed of
Trust shall continue in full force and
effect, subject to the terms thereof and
shall continue to secure the Loan as
amended thereby.
HOMEFED CORPORATION
By:_______________________________
Name:
Title:
HOMEFED COMMUNITIES, INC.
By:_______________________________
Name:
Title:
HOMEFED RESOURCES CORPORATION
By:_______________________________
Name:
Title:
<PAGE>
PARADISE VALLEY COMMUNITIES NO. 1
By:_______________________________
Name:
Title:
NORTHFORK COMMUNITIES
By:_______________________________
Name:
Title:
<PAGE>
DEVELOPMENT MANAGEMENT AGREEMENT
BETWEEN
PROVENCE HILLS DEVELOPMENT COMPANY, LLC
("OWNER")
AND
HOMEFED CORPORATION
("DEVELOPMENT MANAGER")
<PAGE>
TABLE OF CONTENTS
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II ENGAGEMENT; STANDARDS OF PERFORMANCE. . . . . . . . . . . . . 7
2.1 Engagement. . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2 Standard of Performance . . . . . . . . . . . . . . . . . . . 7
2.3 Development Manager's Personnel . . . . . . . . . . . . . . . 7
2.4 Owner's Representatives . . . . . . . . . . . . . . . . . . . 8
2.5 Access to Work. . . . . . . . . . . . . . . . . . . . . . . . 8
2.6 Other Services. . . . . . . . . . . . . . . . . . . . . . . . 8
2.7 Licensing Requirements. . . . . . . . . . . . . . . . . . . . 8
2.8 Bank Account. . . . . . . . . . . . . . . . . . . . . . . . . 8
2.9 Project Financing . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE III DEVELOPMENT OF THE PROJECT. . . . . . . . . . . . . . . . . . 9
3.1 Budgets . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.1.1 Approval of Budgets. . . . . . . . . . . . . 9
3.1.2 Conformity with Budget. . . . . . . . . . . . 9
3.1.3 Reserves.. . . . . . . . . . . . . . . . . . . 9
3.2 Project Schedule and Development Plan . . . . . . . . . . . .10
3.2.1 Approved Project Schedule and Development
Plan. . . . . . . . . . . . . . . . . . . . .10
3.2.2 Delay. . . . . . . . . . . . . . . . . . . . .10
3.2.3 Notification by Development Manager. . . . . .10
3.3 Project Phasing . . . . . . . . . . . . . . . . . . . . . . .10
3.4 Entitlements. . . . . . . . . . . . . . . . . . . . . . . . .10
3.5 Formation of Districts. . . . . . . . . . . . . . . . . . . .11
3.6 Risk Management . . . . . . . . . . . . . . . . . . . . . . .11
3.7 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . .11
3.8 Development Manager's Other Duties. . . . . . . . . . . . . .11
3.8.1 Overall Project Management . . . . . . . . . .12
3.8.2 Plans and Specifications . . . . . . . . . . .12
3.8.3 Third Party Contracts. . . . . . . . . . . . .12
3.8.4 Construction Management. . . . . . . . . . . .12
3.8.5 Supervision of Third Parties . . . . . . . . .12
3.8.6 Governmental Inspections and Approval. . . . .13
3.8.7 Applications for Payment . . . . . . . . . . .13
3.8.8 Change Orders. . . . . . . . . . . . . . . . .13
3.8.9 Project Meetings . . . . . . . . . . . . . . .13
3.8.10 Loan Administration. . . . . . . . . . . . . .13
3.8.11 Books and Records . . . . . . . . . . . . . .13
3.8.12 Liens and Stop Notices . . . . . . . . . . . .13
3.8.13 Utilities . . . . . . . . . . . . . . . . . .13
3.8.14 Adjoining Landowners . . . . . . . . . . . . .13
(i)
<PAGE>
3.8.15 Bonds and Deposits . . . . . . . . . . . . . .13
3.8.16 Other Services . . . . . . . . . . . . . . . .14
3.9 Inspections . . . . . . . . . . . . . . . . . . . . . . . . .14
3.10 Approvals by Owner. . . . . . . . . . . . . . . . . . . . . .14
3.11 Land Maintenance and Protection . . . . . . . . . . . . . . .14
3.12 Ownership of Plans and Materials. . . . . . . . . . . . . . .14
ARTICLE IV SALE OF PROJECT . . . . . . . . . . . . . . . . . . . . . . .15
4.1 Duties of Development Manager . . . . . . . . . . . . . . . .15
4.1.1 Marketing Materials . . . . . . . . . . . . . . . .15
4.1.2 Co-op Marketing and Advertising Program . . . . . .15
4.1.3 Disclosure Program. . . . . . . . . . . . . . . . .15
4.1.4 Master Association. . . . . . . . . . . . . . . . .15
4.1.5 Selection of Purchasers . . . . . . . . . . . . . .16
4.1.6 Purchase Documents. . . . . . . . . . . . . . . . .16
4.1.7 Closings. . . . . . . . . . . . . . . . . . . . . .16
4.1.8 Purchaser Defaults. . . . . . . . . . . . . . . . .16
4.1.9 Post Closing Matters. . . . . . . . . . . . . . . .16
4.1.10 Other Services. . . . . . . . . . . . . . . . . . .16
4.2 Sale of the Project . . . . . . . . . . . . . . . . . . . . .16
4.3 No Representations. . . . . . . . . . . . . . . . . . . . . .17
4.4 Price List. . . . . . . . . . . . . . . . . . . . . . . . . .17
4.5 Sales Reports . . . . . . . . . . . . . . . . . . . . . . . .17
ARTICLE V PROGRESS MEETINGS; REPORTING REQUIREMENTS. . . . . . . . . . . . .17
5.1 Progress Meetings . . . . . . . . . . . . . . . . . . . . . .17
5.2 Reporting Requirements. . . . . . . . . . . . . . . . . . . .17
5.3 Third Party Information . . . . . . . . . . . . . . . . . . .18
5.4 Books and Records . . . . . . . . . . . . . . . . . . . . . .18
ARTICLE VI INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
6.1 Insurance General . . . . . . . . . . . . . . . . . . . . . .18
6.2 Evidence of Insurance . . . . . . . . . . . . . . . . . . . .19
6.3 Workers' Compensation Insurance . . . . . . . . . . . . . . .19
6.4 Commercial General Liability Insurance. . . . . . . . . . . .19
6.5 Automobile Liability Insurance. . . . . . . . . . . . . . . .19
6.6 Umbrella/Excess Coverage. . . . . . . . . . . . . . . . . . .19
6.7 Additional Insured. . . . . . . . . . . . . . . . . . . . . .19
6.8 Project Property Insurance. . . . . . . . . . . . . . . . . .20
6.9 Additional Named Insured. . . . . . . . . . . . . . . . . . .20
6.10 Lender Requirements. . . . . . . . . . . . . . . . . . . . .20
6.11 OCIP Policy . . . . . . . . . . . . . . . . . . . . . . . . .20
ARTICLE VII PAYMENTS TO DEVELOPMENT MANAGER . . . . . . . . . . . . . . . .20
(ii)
<PAGE>
7.1 Fees to Development Manager . . . . . . . . . . . . . . . . .20
7.2 Project Management Fee. . . . . . . . . . . . . . . . . . . .20
7.3 Field Overhead Fee. . . . . . . . . . . . . . . . . . . . . .20
7.4 Marketing and Advertising Fee . . . . . . . . . . . . . . . .21
7.5 Payment of Fees . . . . . . . . . . . . . . . . . . . . . . .21
7.6 Success Fee . . . . . . . . . . . . . . . . . . . . . . . . .21
ARTICLE VIII FUNDING FOR PROJECT . . . . . . . . . . . . . . . . . . . . . .23
8.1 Costs to be Borne by Owner. . . . . . . . . . . . . . . . . .23
8.2 Costs to be Borne by Development Manager. . . . . . . . . . .24
ARTICLE IX TERMINATION; DEFAULT. . . . . . . . . . . . . . . . . . . . . . .24
9.1 Right of Termination for Convenience. . . . . . . . . . . . .24
9.2 Termination Claim . . . . . . . . . . . . . . . . . . . . . .25
9.3 Full Payment. . . . . . . . . . . . . . . . . . . . . . . . .25
9.4 Termination By Reason of Default. . . . . . . . . . . . . . .25
9.5 Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . .27
9.6 Development Manager's Responsibility Upon Termination . . . .27
9.7 Termination By Development Manager. . . . . . . . . . . . . .27
ARTICLE X MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . .28
10.1 Remedies Cumulative. . . . . . . . . . . . . . . . . . . . .28
10.2 Nonwaiver. . . . . . . . . . . . . . . . . . . . . . . . . .28
10.3 Successors and Assigns . . . . . . . . . . . . . . . . . . .28
10.4 Written Notice . . . . . . . . . . . . . . . . . . . . . . .29
10.5 Severability . . . . . . . . . . . . . . . . . . . . . . . .29
10.6 No Third-Party Beneficiaries . . . . . . . . . . . . . . . .30
10.7 Exhibits and Headings . . . . . . . . . . . . . . . . . . .30
10.8 Oral Agreements. . . . . . . . . . . . . . . . . . . . . . .30
10.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . .30
10.10 Governing Law. . . . . . . . . . . . . . . . . . . . . . . .30
10.11 Special Exculpation. . . . . . . . . . . . . . . . . . . . .30
10.12 Lenders. . . . . . . . . . . . . . . . . . . . . . . . . . .30
10.13 Time . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
10.14 Independent Contractor . . . . . . . . . . . . . . . . . . .31
10.15 Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . .31
10.15.3 Applicability of Indemnity . . . . . . . . . . . .32
10.16 Merger . . . . . . . . . . . . . . . . . . . . . . . . . . .32
10.17 Alternative Dispute Resolution . . . . . . . . . . . . . . .32
10.18 Attorney's Fees. . . . . . . . . . . . . . . . . . . . . . .32
10.19 Non-Discrimination . . . . . . . . . . . . . . . . . . . . .32
10.20 Confidentiality. . . . . . . . . . . . . . . . . . . . . . .32
10.21 Advice of Counsel. . . . . . . . . . . . . . . . . . . . . .33
(iii)
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DEVELOPMENT MANAGEMENT AGREEMENT
THIS DEVELOPMENT MANAGEMENT AGREEMENT (the "Agreement") is made
effective as of the 14th day of August, 1998, by and between Provence
Hills Development Company, LLC, a Delaware limited liability company (the
"Owner"), and HomeFed Corporation, a Delaware corporation (the
"Development Manager").
RECITALS
A. Owner owns that certain real property located in the City of
San Marcos, County of San Diego, State of California, more particularly
described in Exhibit "A" attached hereto and by this reference
incorporated herein (the "Property").
B. The Property is part of a master-planned residential community
commonly known as "San Elijo Ranch" ("San Elijo Ranch Community" or
"Project") which has been and continues to be developed by Owner. Owner
currently anticipates that the Project will be developed in five (5) major
construction phases.
C. Owner obtained approval from the City of San Marcos of
Tentative Subdivision Map No. 400 pursuant to Resolution No. 98-5025
adopted on May 12, 1998, covering a majority of the Property. Owner
intends to process (and, upon execution of this Agreement, will cause
Development Manager to process) final subdivision maps to subdivide the
Property into legal parcels that may be conveyed to Buyers (as defined
below) in accordance with the California Subdivision Map Act ("Final
Map(s)").
D. The San Elijo Ranch Community is subject to the San Elijo
Ranch Specific Plan (the "Specific Plan") and the First Amended and
Restated Development Agreement and Owner Participation Agreement between
the City of San Marcos, the San Marcos Redevelopment Agency and San Elijo
Ranch, Inc., dated August 15, 1997, and recorded in the Official Records
of San Diego County on August 15, 1997, as File No. 97-0395018 (the
"Development Agreement"). Owner is processing (and, upon execution of
this Agreement, will cause the Development Manager to process) certain
other discretionary approvals relating to the development of the San Elijo
Ranch Community. In satisfaction of various conditions(s) of approval or
in order to comply with growth regulation of the City of San Marcos or in
order to receive discretionary or other approvals or as a result of voter
initiatives or other governmental action, Owner may enter into agreements
with the State of California, County of San Diego, City of San Marcos, and
other governmental agencies. Such agreements may relate to the
establishment of bonus densities or density transfers, the provision of
on-site or off-site facilities or services for the benefit of the San
Elijo Ranch Community and to serve the public facility needs of the San
Elijo Ranch Community, the creation of assessment, facilities benefit or
other community facilities assessment districts relating to the San Elijo
Ranch Community or other matters relating to the development of the San
Elijo Ranch Community.
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E. Development Manager is experienced in the development,
management and sale of real estate development projects similar to the
Project.
F. Owner and Development Manager desire to enter into this
Agreement subject to the terms of which Development Manager, on behalf of
Owner as agent and representative of Owner and independent contractor for
Owner, shall undertake those development, construction management and
sales activities more particularly described herein.
NOW, THEREFORE, in consideration of the foregoing Recitals and the
mutual promises and covenants contained herein, Owner and Development
Manager agree as follows:
ARTICLE I
DEFINITIONS
-----------
For the purposes of this Agreement, the following terms shall have
the respective meanings set forth below:
"Affiliate" shall mean a person or entity controlled by, under
common control with or controlling another person or entity. For purposes
of the definition of the "Initial Owner Payment Amount" and Section 8.1.5,
the term "Affiliate" shall include any person or entity who is an
Affiliate on the date of this Agreement even if they are no longer an
Affiliate at any time thereafter.
"Agreement" shall mean this Development Management Agreement, as the
same may be amended, modified or supplemented from time to time.
"Application for Payment" shall mean the Application for Payment
customarily used by Owner from time to time.
"Budget" shall mean the pro forma cash flow analysis for the Project
(and each Phase thereof) attached hereto as Exhibit B, as it may be
amended and/or updated from time to time, setting forth the anticipated
costs, expenses, and income and other relevant financial projections.
"Building Permits" shall mean such grading and building permits as
may be necessary for the construction of the Improvements.
"Business Day" shall mean any day other than a Saturday, Sunday or
other than a holiday on which businesses in San Diego County, California
are generally closed for business.
"Buyer(s)" shall mean any purchaser(s) of all or any part of the
Property from Owner.
"City" shall mean the City of San Marcos, California.
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"Claims" shall mean any and all claims, liabilities, losses,
damages, costs or expenses, including, without limitation, actual
attorneys' fees and costs, court costs, demands, debts, causes of action,
fines, judgments and penalties.
"Commercial Property" shall mean the portions of the Project planned
for commercial development under the Specific Plan and the other
Entitlements.
"Construction Management Services" shall mean the construction
management services to be performed by Development Manager under this
Agreement in connection with construction of the Improvements by Third
Parties.
"Consultants" shall mean the architects, engineers, consultants or
designers engaged by Owner and/or Development Manager on behalf of Owner
for the Project.
"Contractor(s)" shall mean one or more licensed general contractors
to be engaged by Owner to construct all or a portion of the Improvements.
"Co-op Marketing and Advertising Program" shall mean the Development
Manager's strategy for marketing the Project and/or any property that
comprises the San Elijo Ranch Community to the general public on behalf of
Buyers.
"Costs" or "costs" means any costs, fees or expenses.
"Day" shall mean a calendar day unless specifically referenced as a
Business Day.
"Development Management Fee" shall refer collectively to the Field
Overhead Fee, the Project Management Fee, and the Marketing and
Advertising Fee.
"Development Plan" shall mean the Owner's general plan for
development of the Project consisting of the product type and size, site
plan and density of development and Project amenities, which Development
Plan shall be consistent with the Specific Plan and the other
Entitlements.
"Development Services" shall mean the obligations of Development
Manager under this Agreement with respect to the development, marketing
and sale of the Project as set forth herein, including, without
limitation, the processing of all applications, plans and maps required to
obtain the Entitlements for the Project.
"District(s)" shall mean any assessment, facilities benefit,
community facilities districts or other financing districts relating to
the San Elijo Ranch Community that Owner may elect to form.
"Entitlements" shall mean the Specific Plan, the Development
Agreement, the Tentative Maps, the Final Maps, the Building Permits and
all other governmental agreements, permits and entitlements required from
time to time for the development and sale of the Project to Buyers,
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including, without limitation, the governmental agreements and
governmental approvals described in Recital D above.
"Field Overhead Fee" shall mean the fee described in Section 7.3
below.
"Final Map" shall mean a final subdivision map subdividing all or a
portion of the Property in substantial conformance with the Tentative
Maps.
"Gross Revenues" shall mean the total amount of revenues from the
Property.
"Improvements" shall mean the onsite and offsite grading,
subdivision and other improvements to be constructed in connection with
the development of the Project as set forth in the Plans and
Specifications, as the same may be amended, modified or supplemented from
time to time pursuant to the terms hereof.
"Initial Owner Payment Amount" shall mean the sum of (x) all amounts
due from and payable by Owner in connection with the release of Trust
Deeds encumbering portions of the Property that have been sold or
conveyed, and the payment or reimbursement of fees, costs and expenses
incurred in connection with the release of such Trust Deeds and (y) all
amounts payable by Owner to any Affiliate of Owner, including the 12%
preferred return earned on any advances to Owner from such Affiliates.
"Lender" shall mean the construction lender for the Project or any
other lender making a loan to Owner, if any, whether secured or unsecured,
the proceeds of which are used to pay any portion of the costs of
developing or constructing the Project.
"Line Items" shall mean the cost accounting categories set forth in
the Budget for each of the construction trades for the construction of the
Improvements and for any separate material categories or other development
costs, including costs to obtain Entitlements.
"Litigation" shall mean any existing or future litigation against
Owner relating to the Project, including, without limitation, the actions
described in Schedule "1" attached hereto and incorporated herein.
"Marketing and Advertising Fee" shall mean the fee described in
Section 7.4 below.
"Marketing Materials" shall mean brochures, property profiles,
fliers, newspaper advertisements and other marketing materials and
promotional items for the Project.
"Marketing Plan" shall mean Development Manager's strategy for
marketing the Project to Buyers.
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"Merchant Builder" shall mean a person or entity that will acquire
a portion of the Project for the development and sale of Residences
thereon.
"Net Revenues" shall mean the excess of (x) Gross Revenues received
by Owner after the date of this Agreement over (y) Project Costs incurred
after the date of this Agreement.
"Notice of Termination" shall mean a written notice of termination
of this Agreement delivered by Owner to Development Manager.
"Phase" shall mean the phase or phases of development for the
Project. Owner currently anticipates that the Project will be developed
in five (5) major construction Phases.
"Plans and Specifications" shall mean the grading plans and the
architectural and engineering plans and specifications for the
Improvements including the improvement plans that may be approved by the
City in connection with the Final Maps, the geotechnical report, if any,
for the Project (the "Geotechnical Report"), the plot plans showing the
proposed location of the Improvements and appurtenances, and such other
plans and specifications as may be necessary for the construction of the
Improvements.
"Price List" shall mean the selling prices for parcels within each
Phase to be sold to Buyers.
"Prime Rate" shall mean the reference rate quoted from time to time
by Bank of America NT&SA, or, if Bank of America NT&SA is no longer in
existence, the reference rate quoted by the successor to Bank of America
NT&SA.
"Project Costs" shall mean all costs incurred by Owner and/or by
Development Manager on behalf of Owner in connection with the Property
and/or the Project, in accordance with the Budget or otherwise approved by
Owner. However, Project Costs shall exclude the Success Fee, the Costs
described in Section 8.2 below, the Initial Owner Payment Amount and any
income, franchise or similar taxes applicable to Gross Revenues.
"Project Management Fee" shall mean the fee described in Section 7.2
below.
"Project Schedule" shall mean a schedule to be prepared by
Development Manager and approved by Owner showing the dates of
commencement and completion of the Project and each Phase, and the
anticipated date for the final sale to a Buyer for each Phase in the
Project, which schedule shall be updated by Development Manager as
provided in this Agreement.
"Residence" shall mean each of the residences, including single
family residences, condominiums and apartments, to be developed by
Merchant Builders as contemplated by the Specific Plan and the other
Entitlements.
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"Sales Entitlements" shall mean all governmental permits and
entitlements required for the sale of portions of the Project to Buyers,
and, to the extent applicable to Owner, the sale of Residences by Merchant
Builders to members of the home buying public including, without
limitation, preliminary and final subdivision public reports from the
California Department of Real Estate, and FHA/VA approvals.
"Sales Report" shall mean a report to be prepared by Development
Manager showing the progress of the sale of each Phase of the Project,
which report shall be updated by Development Manager as provided in this
Agreement.
"Services" shall mean the Development Services, the Construction
Management Services and any other services contemplated to be performed by
Development Manager under this Agreement.
"Sold," "sold" or "sale" shall mean, with respect to any portion of
the Property, the recordation of the grant deed in the Official Records of
San Diego County, California, transferring fee title to a Buyer.
"Subcontractor" shall mean a person or organization who has a direct
contract with a Contractor to perform any work or to provide any
materials, equipment or supplies for the Project and, as used herein,
unless the context otherwise requires, shall include sub-subcontractors.
"Success Fee" shall mean the fee to be paid to Development Manager
as described in Section 7.6 below.
"Tentative Maps" shall mean Tentative Subdivision Map No. 400
approved by the City for a portion of the Project and any other tentative
map(s) for any portion of the Project.
"Third Party or Parties" shall mean individually or collectively, as
applicable, any Consultants, Contractor, Subcontractor, vendor, supplier
or any other person or entity providing services or materials to the
Project, other than the Development Manager.
"Third Party Contract" shall mean a contract between Owner (or
Development Manager on behalf of Owner) and any Third Party.
"Trust Deeds" shall mean the deeds of trust that currently encumber
all or any portion of the Property as described on Schedule "2" attached
hereto and incorporated herein.
"Unavoidable Delay" means any prevention, delay or stoppage in the
Services required of Development Manager pursuant to the Agreement caused
by acts of God, war, inability to obtain labor or materials or reasonable
substitutes therefor, newly enacted governmental regulations or controls
or the application to the Project of existing regulations or controls in
a manner which Development Manager could not have reasonably foreseen or
other matters or causes beyond the reasonable control of Development
Manager, which shall extend the time within which this Agreement requires
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certain acts to be performed for a period equal to any such prevention,
delay or stoppage.
ARTICLE II
ENGAGEMENT; STANDARDS OF PERFORMANCE
------------------------------------
2.1 Engagement. Subject to the terms and conditions set forth in
this Agreement, Owner hereby engages Development Manager, and Development
Manager hereby agrees to use commercially reasonable efforts to perform
the Services, including using commercially reasonable efforts to
(i) preserve all existing Entitlements and obtain and preserve all other
Entitlements required from time to time for the Project, (ii) negotiate on
behalf of Owner contracts with all Third Parties, (iii) oversee and manage
construction of the Improvements by Third Parties pursuant to approved
Plans and Specifications, (iv) obtain all Sales Entitlements for the
Project, (v) market the Project for sale to prospective Buyers and
negotiate on behalf of Owner agreements for the sale of portions of the
Project, (vi) develop, manage and implement the Co-op Marketing and
Advertising Program and the Marketing Plan, (vii) take actions necessary
to form the Districts and thereafter implement the financing plan
contemplated by the Districts, (viii) manage, prosecute and defend the
Litigation and make recommendations to Owner in connection therewith,
(ix) obtain the acceptance of the applicable Improvements by the relevant
government agencies, (x) manage the Project in a manner that minimizes
Owner's potential liabilities related to the development of the Project,
including making recommendations to Owner regarding, and thereafter
implementing, construction management procedures, insurance programs and
other risk management strategies, (xi) obtain financing for development of
the Project, and (xii) otherwise provide all services necessary for
completion of the development, marketing and sale of the Project, all
within the Budget and Project Schedule as the same may be modified from
time to time. Nothing contained in this Agreement shall be deemed or
construed to be a representation by Development Manager that the
Entitlements or the Sales Entitlements relating to the Project can be
obtained by Development Manager, that the Project will be sold at the
prices set by Owner or within the time frame set forth in the Project
Schedule (subject, however, to the provisions of Section 3.2), or that the
Project can be completed for the amounts set forth in the Budget.
2.2 Standard of Performance. Development Manager accepts the
relationship of trust and confidence established between Development
Manager and Owner by this Agreement. Development Manager covenants with
Owner to furnish its skill and judgment and to cooperate with Owner, and
the Third Parties performing work on the Project or providing services
relating to the Project. Development Manager shall perform its duties and
obligations under this Agreement in a reasonably efficient, expeditious
and economical manner, consistent with the best interests of Owner, and in
accordance with the applicable Project Schedule (subject, however, to the
provisions of Section 3.2) and within the amounts set forth in the Budget.
2.3 Development Manager's Personnel. Development Manager shall
provide adequate and experienced personnel to perform the duties and
obligations of Development Manager described in this Agreement, including
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competent construction management personnel reasonably approved by Owner
and qualified and competent employees who are licensed to sell real estate
in California. All such personnel shall be employees of Development
Manager and not Owner. Development Manager shall directly supervise the
time and manner of the work and services to be performed by its employees
and personnel. Development Manager shall be responsible for hiring,
compensating, supervising and training all of Development Manager's
employees and staff members performing services relating to the Project.
Development Manager shall comply with all applicable laws, rules and
regulations relating to the duties and obligations of Development Manager
under this Agreement and/or relating to Development Manager's employees.
The persons designated by Development Manager as its representatives
("Representatives") shall represent Development Manager as its agents and
all written communications given to or by those Representatives shall be
as if given to or by Development Manager. Development Manager's
Representatives and its other key personnel shall not be changed by
Development Manager without consultation with Owner. Development Manager
and its employees shall at all times perform Development Manager's
obligations hereunder in a good and workmanlike manner. Any employee of
Development Manager working on the Project who, in the opinion of Owner,
does not perform its work in a skillful manner or appears to be
incompetent or to act in a disorderly or intemperate manner shall, at the
written request of Owner, be removed from work on the Project immediately,
provided that Owner shall indemnify and hold Development Manager harmless
from any reasonable costs incurred as a result of such removal, excluding
from such indemnity however any costs or liabilities arising from
Development Manager's failure to effect such removal in accordance with
applicable law or from other acts or omissions of Development Manager not
directly related to such removal.
2.4 Owner's Representatives. Those persons designated by Owner,
in writing, as its representatives shall represent Owner as its agents and
all written communications given to or by those representatives shall be
deemed given to or by Owner. Owner's representatives may be changed from
time to time by Owner by delivery of written notice thereof to Development
Manager.
2.5 Access to Work. Owner, Development Manager and their
respective officers, managers, members, representatives, agents and
employees shall at all times have access to the Project and the work
wherever it is in preparation or progress.
2.6 Other Services. In addition to the specific duties described
in this Agreement, Development Manager shall perform, at Owner's expense,
such other reasonable services as Owner may request from time to time, in
connection with the Project.
2.7 Licensing Requirements. Development Manager shall promptly
apply for and shall use all reasonable efforts to obtain a California real
estate broker's license. In any case, Development Manager shall obtain
such license prior to performing any Services which require a broker's
license under California law.
2.8 Bank Account. Development Manager shall establish one or more
bank accounts in Owner's name with banks designated by Owner in which
revenues and income from the Project shall be deposited and from which
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disbursements of expenses and reimbursements for authorized expenditures
shall be withdrawn. Development Manager shall not commingle the funds of
Owner with the funds of any other person. Development Manager and the
authorized representatives of Owner shall each have separate signature
authority over any such bank accounts and each shall be separately
authorized to issue checks drawn on such bank accounts; provided, however,
that Development Manager shall only have the authority to issue checks or
make withdrawals from such accounts to pay Project Costs to Third Parties
and shall not be authorized to do so to pay any amounts due to Development
Manager under this Agreement. If withdrawals from any bank account are,
with respect to any period, anticipated to exceed the balance therein,
Development Manager shall provide adequate prior notice thereof to Owner
and Development Manager shall arrange for financing to provide funds for
deposit into the account in order that withdrawals reasonably anticipated
may be made.
2.9 Project Financing. Development Manager shall on behalf of
Owner arrange financing for all Project Costs. Development Manager shall
negotiate the terms of such loans on behalf of Owner and make
recommendations to Owner with respect to such loans. In addition, in its
sole discretion, Development Manager may elect, but shall not be
obligated, to provide financing for any Project Costs directly or
indirectly to Owner. The decision as to whether Development Manager shall
provide financing to Owner shall be made by Development Manager in its
sole discretion.
ARTICLE III
DEVELOPMENT OF THE PROJECT
--------------------------
3.1 Budgets.
3.1.1 Approval of Budgets. Owner and Development Manager have
jointly agreed upon each component of the Budget with respect to the
Project. Development Manager shall advise Owner if Development Manager
determines that the amounts set forth in the applicable Budget will be
exceeded. All material changes to the Budget shall be subject to Owner's
approval. Based on the Budget, and in consultation with Owner,
Development Manager shall prepare annual budgets for Owner's approval.
3.1.2 Conformity with Budget. Development Manager shall use
its commercially reasonable efforts to enable the Project to be completed
substantially in conformity with the Budget; provided, however, in no
event shall Development Manager be required to extend credit or expend
funds with respect to the Project except as specifically required by this
Agreement.
3.1.3 Reserves. Development Manager shall make
recommendations to Owner regarding reserves to be held and established to
pay Project Costs and other potential liabilities associated with the
Project, including any reserves to be established upon the completion
and/or sale of the Project.
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3.2 Project Schedule and Development Plan.
3.2.1 Approved Project Schedule and Development Plan. Owner
and Development Manager have jointly agreed upon the Project Schedule and
Development Plan. Development Manager shall provide Owner such reports
as Owner may reasonably request with respect to the progress of the
Services.
3.2.2 Delay. Development Manager shall proceed with
reasonable diligence to perform the Services in accordance with the
Development Plan, the Project Schedule and the Budget. If any delay in
completion of the Services in accordance with the Project Schedule (or
other applicable time period as specified herein) occurs due to an
Unavoidable Delay, Owner shall grant appropriate extensions of the
applicable Project Schedule. Development Manager shall not be liable for
any costs, expenses, damages, losses, or lost profits arising from any
delays except to the extent caused by Development Manager's gross
negligence, willful misconduct or willful and persistent failure to
perform its material obligations under this Agreement.
3.2.3 Notification by Development Manager. After Development
Manager becomes aware that (i) any action or performance shown in the
Project Schedule will be delayed more than ten (10) days beyond the start
or completion date that is specified for such action or performance or
(ii) any changes to the Development Plan are necessary or advisable, and
at such other times as Owner may request, Development Manager shall
furnish to Owner proposed additional or revised schedules with variance
explanations and/or revisions to the Development Plan. If requested by
Owner, Development Manager shall submit a written remedial plan of action
for recapturing such schedule slippage, together with supporting
documentation therefor. Owner shall review the proposal with Development
Manager and Development Manager shall make any necessary revisions thereto
as mutually agreed upon during the review.
3.3 Project Phasing. Development Manager shall submit to Owner
all Budgets, Development Plans and Project Schedules required pursuant to
this Agreement on both an overall Project basis and a Phase-by-Phase basis.
Budgets and schedules shall set forth Development Manager's
estimates of the proper allocation to particular Phases of those items
which impact more than one Phase of the Project.
3.4 Entitlements. Development Manager shall take all actions
reasonably necessary to comply with the requirements of, and otherwise
preserve the effect of, all existing Entitlements. In addition,
Development Manager shall work with Owner and all appropriate governmental
authorities to obtain the other Entitlements and the Sales Entitlements
necessary for the Project. Development Manager shall make recommendations
to Owner regarding revisions to any Entitlements and/or the Sales
Entitlements that may be necessary or appropriate to respond to changes in
market conditions or to other Project changes. To the extent approved by
Owner, Development Manager shall attempt to obtain such revisions to the
Entitlements and/or the Sales Entitlements. In obtaining such
Entitlements and Sales Entitlements, Development Manager shall prepare (or
cause Third Parties to prepare) in consultation with Owner as necessary
all Tentative Maps, Final Maps, subdivision improvement agreements, bonds,
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utility agreements, maps, studies, drawings, applications and other
necessary or appropriate items of every description. All applications for
approval of Tentative Maps, Final Maps, subdivision improvement
agreements, licenses, permits, bond, utility agreements and other
Entitlements and Sales Entitlements shall be in the name of Owner.
Development Manager shall coordinate with the City and other governmental
agencies and shall attend meetings and hearings relating to the Project.
Development Manager shall keep Owner informed of material developments
relating to the Entitlements and Sales Entitlements. In connection with
such efforts, Development Manager shall coordinate with legal counsel,
engineering firms and other applicable Third Parties selected by
Development Manager in consultation with Owner.
3.5 Formation of Districts. Development Manager shall make
recommendations to Owner regarding the Districts and work with Owner and
all appropriate governmental authorities to form and implement the
Districts. In consultation with Owner, Development Manager shall prepare
and submit (or cause Third Parties to prepare and submit) all necessary
applications, financing plans, financial analyses, disclosure provisions
and other documents and analysis and take other actions as may be
necessary to form and maintain the Districts. Development Manager shall
take all necessary action to implement the financing plans contemplated by
the Districts, including applying on behalf of Owner for financing and/or
reimbursement from the Districts for any Project Costs and complying with
and satisfying (and causing all Third Parties to comply with and satisfy)
all requirements applicable to any such financing and/or reimbursement.
Development Manager shall keep Owner informed of material developments
relating to the Districts. In connection with such efforts, Development
Manager shall coordinate with legal counsel, financial consultants and
other applicable Third Parties selected by Development Manager in
consultation with Owner.
3.6 Risk Management. Development Manager shall make
recommendations to Owner regarding risk management plans to limit Owner's
potential liability for Claims by owners of Residences, Buyers, homeowners
associations, Third Parties and other persons in connection with the
Project, including construction management procedures, quality assurance
programs, peer review programs (including peer review of construction by
Owner or a licensed Contractor engaged by Owner) appropriate selection of
Third Parties, and insurance programs. Development Manager shall
implement all such plans approved by Owner and shall cause all Third
Parties to comply with such plans. Development Manager shall cause all
Third Party Contracts and contracts with Buyers to include alternate
dispute resolution provisions and other provisions required by Owner.
3.7 Litigation. Development Manager shall manage, defend and
prosecute on behalf of Owner any Litigation pending or threatened now or
in the future, including participating in settlement discussions approved
by Owner. Development Manager shall keep Owner reasonably informed of
material developments in connection with any Litigation, and shall make
recommendations to Owner regarding such Litigation. In connection with
such efforts, Development Manager shall coordinate with legal counsel and
other applicable Third Parties selected by Owner.
3.8 Development Manager's Other Duties. Development Manager shall
be the construction manager for the Project and shall perform all services
normally performed by construction managers performing services for
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similar residential projects in Southern California, including, without
limitation, the following:
3.8.1 Overall Project Management. Performing business,
management, administrative and related services and functions that a
prudent Owner developing a residential project similar to the Project
would normally perform.
3.8.2 Plans and Specifications. Coordinating with Third
Parties to prepare the Plans and Specifications setting forth the
requirements for construction of the Improvements in detail sufficient to
enable trade contractors and suppliers to bid their respective portions of
the work and to enable workers of ordinary skill to construct such work.
Making recommendations to Owner in connection with the proposed Plans and
Specifications and any changes thereto; provided, however, that such
recommendations shall not constitute a guarantee or a representation or
warranty by Development Manager regarding the Plans and Specifications.
3.8.3 Third Party Contracts. In consultation with Owner,
selecting Third Parties, negotiating Third Party Contracts and submitting
to Owner for its review, approval and execution, all applicable bids and
all Third Party Contracts necessary for the development and sale of the
Project, in conformance with the approved Budget.
3.8.4 Construction Management. Providing administrative,
construction management and related services as required to coordinate the
construction of the Improvements by Third Parties engaged by Owner. If
any field changes or modifications are made to the Plans and
Specifications during the course of construction, such changes shall be
noted on the Plans and Specifications or the appropriate change order,
shall be approved by Development Manager (and, if such change would result
in a material increase to the costs and expenses in the Budget, by Owner),
all applicable governmental agencies and the architect or engineer of
record, and a copy delivered to Owner for its records.
3.8.5 Supervision of Third Parties. Coordinating, managing
and supervising the work of the Third Parties. Using reasonable efforts
to manage construction and to confirm that the Third Parties perform their
obligations under the Third Party Contracts in a good and workmanlike
manner and complete the Improvements substantially in accordance with the
Plans and Specifications except for typical field modifications.
Notifying Owner of any known material defect in any work performed by any
Third Party or any known material breach by any Third Party. Using
reasonable efforts to inspect the work of Third Parties and to discover
possible defects or errors therein. Development Manager shall not be
liable for any costs, expenses, damages, losses, or lost profits arising
from any default by a Third Party under a Third Party Contract except to
the extent caused by Development Manager's gross negligence, willful
misconduct or willful and persistent failure to perform its material
obligations under this Agreement.
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3.8.6 Governmental Inspections and Approval. Arranging for
all necessary inspections and obtaining all necessary approvals of the
Plans and Specifications and the Improvements from the City and any other
governmental agencies, including the Districts. Using reasonable efforts
to enforce the obligations of the Third Parties to correct any work
rejected by the City or any other applicable governmental agency or
otherwise found to be defective or not in compliance with applicable
governmental requirements.
3.8.7 Applications for Payment. Reviewing applications for
payment from Third Parties and making recommendations to Owner as to
whether any Third Party is entitled to payment under the applicable Third
Party Contract. Obtaining and reviewing conditional and unconditional
lien waivers and releases as appropriate in connection with all such
applications for payment.
3.8.8 Change Orders. Reviewing and approving any change
orders under the Third Party Contracts; provided that if such change
orders result in a material increase in the costs and expenses in the
Budget, Development Manager shall make recommendations to Owner regarding
such change orders, which shall be subject to Owner's approval.
3.8.9 Project Meetings Scheduling and attending regular
meetings with the Third Parties and with Owner as Owner deems appropriate.
3.8.10 Loan Administration. Coordinating with any
Lenders and administering draw requests under any loans.
3.8.11 Books and Records. Maintaining books and records
pertaining to the Project.
3.8.12 Liens and Stop Notices. Making recommendations to
Owner to remove the effect of any liens or stop notices affecting the
Project.
3.8.13 Utilities. Submitting, prosecuting and
negotiating (on Owner's behalf) with utility companies, governmental
authorities and all other necessary parties or entities with respect to
utility and sewer easements, relocations and service; and implement and
coordinate Owner's construction obligations under agreements with such
utility companies, governmental authorities and other parties or entities.
3.8.14 Adjoining Landowners. Negotiating with adjoining
landowners with respect to any matters required for the development of the
Project.
3.8.15 Bonds and Deposits. Preparing necessary documents
and instruments required for the posting of any bonds, deposit agreements,
letters of credit, deposits or other forms of security required by any
governmental entities in connection with the Project and necessary
documents and instruments required for the timely exoneration, release or
reimbursement of such security when satisfied.
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3.8.16 Other Services. Performing all other functions
which may be reasonably necessary to properly coordinate, supervise and
assist Owner in the development and completion of the Project.
3.9 Inspections. Owner shall have the right, but not the
obligation, to inspect the progress and quality of all work performed by
the Third Parties in connection with the Project, to require the
replacement of any defective or improper work and to refuse payment of any
funds related to such particular work until such matters have been
remedied. Inspections by Owner shall not in any manner constitute Owner
approval or acceptance of the progress or quality of the work. The
failure of Owner to inspect shall not relieve Development Manager of its
duties under this Agreement.
3.10 Approvals by Owner. The approval by Owner of any plans,
specifications, designs or other items relating to the Project or other
matters relating to Development Manager's performance pursuant to this
Agreement shall be construed only as an approval of conformity with the
Budget and other general aesthetic plans for the Project. Such documents
and other items will not be approved for engineering, architectural,
design, safety, structural adequacy or compliance with laws or
regulations, and Owner, by its approval of any item, assumes no liability
or responsibility therefor or for any defect in any Improvement made
pursuant thereto. If Owner withholds its approval of any matter, and
Development Manager revises its request for approval to conform to Owner's
objections, such change shall not be considered a direction by the Owner.
Such revised request shall be deemed to be with the Development Manager's
consent unless Development Manager expressly states in writing in its
request that Development Manager is not in agreement with the proposal,
and Owner acknowledges in writing that it is directing Development Manager
to act in the proposed manner.
3.11 Land Maintenance and Protection. During the term of this
Agreement, Development Manager shall maintain (or cause Third Parties to
maintain) the Property in a reasonably safe condition and reasonably free
of debris and toxic or hazardous substances with the exception of what is
legal, reasonable, sufficient and prudent to operate equipment and to
construct the Improvements. In addition, Development Manager shall
reasonably protect the Project and all Improvements, whether or not
completed, from being damaged by the work of Development Manager or any
Third Party or other persons or cause including, but not limited to,
vandals and the elements.
3.12 Ownership of Plans and Materials. As between Owner and
Development Manager, all Plans and Specifications, the Marketing Plan, the
Co-op Marketing and Advertising Program and all other marketing and sales
materials, including advertising and promotional materials prepared in
connection with the Project by or for Development Manager shall, at all
times, be solely the property of Owner. Upon any termination of
Development Manager or this Agreement, Development Manager shall provide
all such materials in its possession to Owner.
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ARTICLE IV
SALE OF PROJECT
---------------
4.1 Duties of Development Manager. Development Manager shall
develop a Marketing Plan for the Project to be approved by Owner.
Development Manager shall use commercially reasonable efforts to sell the
Project to Buyers and otherwise implement the Marketing Plan for the
Project. Development Manager shall make recommendations to Owner
regarding any proposed changes to the Marketing Plan as circumstances may
require. Without limiting the foregoing, Development Manager's duties
with respect to the marketing and sale of the Project shall include the
following:
4.1.1 Marketing Materials. Prepare, in consultation with
Owner, the Marketing Materials. Publish and distribute the Marketing
Materials in accordance with the Marketing Plan.
4.1.2 Co-op Marketing and Advertising Program. Administer and
implement the Co-op Marketing and Advertising Program, including
collecting fees from Buyers for the Co-op Marketing and Advertising
Program. Development Manager shall be entitled to retain and use any such
fees collected from the Buyers to pay costs relating to the Co-op
Marketing and Advertising Program. Review and oversee the marketing
programs of the Buyers.
4.1.3 Disclosure Program. Administer and implement a
disclosure program for the Project that will require Buyers to disclose to
prospective purchasers various matters regarding the Project, including
the existence of any Districts, environmental issues, amenities serving
the Project, school facilities, matters or disclosures required by the
City or the Entitlements, and matters that the California Department of
Real Estate may require to be disclosed. Development Manager shall submit
to Owner the form of disclosures and any changes to the approved form of
disclosures. Development Manager shall take reasonable measures to ensure
that the Buyers comply with the requirements of the disclosure program for
the Project.
4.1.4 Master Association. Prepare, make recommendations to
Owner regarding, and submit to Owner for its approval, the declaration of
covenants, conditions and restrictions (the "Master Declaration") for the
Project, documents relating to the formation and existence of the master
homeowners association for the Project ("Master Association") and any
amendments or changes thereto. Development Manager shall cause the Master
Association to be formed (if not already formed) and, in consultation with
Owner shall take actions in connection with the Master Association,
including performing and exercising Declarant's rights and obligations
under the Master Declaration and causing Development Manager's employees
approved by Owner to serve on the board of directors of the Master
Association and any architectural or similar committee. Development
Manager shall review and approve or disapprove any subassociations that
any Buyer may propose.
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4.1.5 Selection of Purchasers. Make recommendations to Owner
regarding offers to purchase from prospective Buyers and negotiate and
submit to Owner for its review, approval and execution any binding letters
of intent for the purchase and sale of portions of the Project.
4.1.6 Purchase Documents. Negotiate and submit to Owner for
its review, approval and execution purchase and sale agreements and
related agreements with Buyers, all using the forms of agreements approved
by Owner (the "Purchase Documents"). Negotiate and submit to Owner for
its review, approval and execution any amendments to the Purchase
Documents.
4.1.7 Closings. Take actions within Development Manager's
control necessary to close the transactions contemplated by the Purchase
Documents, including preparing escrow instructions, preparing and
delivering closing documents and taking actions to satisfy conditions to
closing on behalf of and with the cooperation of Owner.
4.1.8 Purchaser Defaults. Advise Owner with respect to any
default under the Purchase Documents and make recommendations to Owner
regarding any necessary actions in connection with such defaults.
4.1.9 Post Closing Matters. Administer any post closing
obligations of Owner, and enforcing on behalf of Owner any post closing
obligations of the Buyers, under the Purchase Documents, including
collecting any maintenance fees, marketing fees, and price participation
and/or profit participation payments, reviewing matters submitted by any
Buyer under any development declaration of covenants, conditions and
restrictions or similar instrument and enforcing any rights of first
refusal and/or repurchase rights of Owner.
4.1.10 Other Services. Provide such other services as
are reasonably related to the marketing and sale of the Project and are
agreed to by Owner and Development Manager.
4.2 Sale of the Project. Development Manager is being retained by
Owner pursuant to the provisions of this Agreement to negotiate the sale
of portions of the Project. All of the proceeds from any such sale shall
be the property of Owner and Development Manager shall not have any right
or interest with respect thereto except that Owner shall pay Development
Manager the Development Management Fee and the Success Fee as provided
herein and that Development Manager shall have the right to retain and use
fees paid by Buyers for the Co-op Marketing and Advertising Program as
provided in Section 4.1.2 above. In no event shall Development Manager
sell any portion of the Project without the prior written consent of
Owner, which consent may be withheld in Owner's sole and absolute
discretion. Development Manager shall use commercially reasonable efforts
to sell the Project. Development Manager shall provide experienced
marketing, brokerage, administrative and professional personnel to
undertake the services of Development Manager as described in this
Article. All of the Marketing Materials prepared by or for Development
Manager shall be and remain the property of Owner.
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4.3 No Representations. Other than as approved or required by
Owner, Development Manager shall not make any representations or
warranties regarding the Project, including the condition of the Property,
the compliance of the Project with any applicable building, zoning,
environmental or other laws or regulations of any federal, state or local
entity or any other matter to any Buyer. Notwithstanding the foregoing,
Development Manager shall make such disclosures as are required by the
California Department of Real Estate or the California Business and
Professions Code and other similar laws and regulations.
4.4 Price List. Prior to offering any Phase of the Project for
sale to Buyers, Development Manager shall submit to Owner for prior
approval in Owner's sole and absolute discretion, a proposed Price List
with respect to all parcels in the Phase of the Project. If Development
Manager shall recommend any sales incentives in connection with the sale
of any parcels in addition to any sales incentive set forth in the Budget,
Development Manager shall consult with Owner regarding details concerning
the proposed sales incentives.
4.5 Sales Reports. At Owner's request, Development Manager shall
provide Sales Reports to Owner setting forth the status of the marketing
and sale of the Project, including a list of parcels, Buyers, purchase
prices and other material terms of all sales that are under negotiation,
in escrow or closed.
ARTICLE V
PROGRESS MEETINGS; REPORTING REQUIREMENTS
-----------------------------------------
5.1 Progress Meetings. At Owner's request, Development Manager
shall schedule and attend meetings with Owner to discuss the progress of
the development, construction and sale of the Project. At such meetings
Development Manager shall provide Owner with any updated Project
Schedules, Budget, Development Plan, Marketing Plan and Sales Reports
requested by Owner.
5.2 Reporting Requirements. At Owner's request, Development
Manager shall deliver the following updated reports (as applicable based
upon the performance of the Services) to Owner, all of which shall be in
form and substance satisfactory to Owner:
5.2.1 Project Schedule, Development Plan and Marketing Plan;
5.2.2 Budget (Development Manager shall also prepare and
deliver to Owner a quarterly review of the Budget);
5.2.3 Sales Report; and
5.2.4 such other reports as the parties shall mutually agree.
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5.3 Third Party Information. Development Manager shall furnish to
Owner, from time to time during the term of this Agreement, promptly after
Owner's request, a current list of all of Third Parties employed in
connection with the Project.
5.4 Books and Records. There shall be kept at the principal
office of Development Manager correct and complete books of account and
business records in which all transactions of the Project shall be
entered. Such accounts and records shall be kept by Development Manager
on an accrual basis and in all respects in a manner consistent with
generally accepted accounting principles and practices consistently
applied. Unless otherwise directed by Owner, the books shall be kept on
the basis of a fiscal year ending December 31. Development Manager shall
preserve all such records and upon the expiration or earlier termination
of this Agreement, shall deliver all such records to Owner. Such books
shall be open at all reasonable times for inspection or copying by Owner
and its agents, employees, members and representatives. The books shall
be audited as directed by Owner. The cost of such audit shall be borne by
Owner; provided, however, that if any audit reveals errors or
discrepancies caused by Development Manager's gross negligence or willful
misconduct in the performance of the Services, Development Manager shall
correct the same at its sole expense.
ARTICLE VI
INSURANCE
---------
6.1 Insurance General.
(a) Development Manager shall not commence any Services
under this Agreement until it obtains all insurance required to be
obtained by Development Manager under this Agreement. Development Manager
will not permit any Third Party to commence work on the Project until
(i) all insurance requirements described in the applicable Third Party
Contract have also been complied with by such Third Party or unless
Development Manager has approved any lesser insurance for such Third Party
consistent with Development Manager's standard business practices and
(ii) Owner has been named as an additional insured as provided below.
(b) Except as otherwise approved by Owner, all insurance
described under this Article to be carried by Development Manager will be
maintained by Development Manager during the term of this Agreement with
insurance carriers having a general policyholders' rating of not less than
an "A-" and financial rating of not less than "VI" in the most current
Best's Key Rating Guide. Development Manager may provide the insurance
described in this Article, in whole or in part, through a policy or
policies covering other liabilities and projects of Development Manager
provided that Development Manager obtains a "per project, per location"
endorsement.
(c) Premiums for all policies of insurance required to be
maintained by Development Manager hereunder (excluding Workers'
Compensation Insurance, the cost of which shall be paid by Development
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Manager) shall be paid by Owner to the extent properly allocable to the
Project.
6.2 Evidence of Insurance. As evidence of Development Manager's
specified insurance coverage, Owner shall accept certificates issued by
Development Manager's insurance carrier acceptable to Owner showing such
policies in force for the specified period. Such evidence shall be
delivered to Owner promptly upon execution of this Agreement or prior to
commencement of Services, whichever earliest occurs. Each policy and
certificate shall be subject to reasonable approval by Owner and shall
provide that such policy shall not be subject to cancellation without
thirty (30) days notice in writing to be delivered by registered mail to
Owner and Lender. Development Manager shall also allow Owner to inspect
such evidence of insurance as Development Manager obtains from its
Subcontractors, but Owner shall have no obligation to inspect such
evidence of insurance.
6.3 Workers' Compensation Insurance. Development Manager shall
maintain, at its expense, Workers' Compensation Insurance (statutory
limit), including Employer's Liability (limit of Five Hundred Thousand
Dollars ($500,000.00)) for all persons whom it employs in carrying out the
Services under this Agreement. Such insurance shall be in strict
accordance with the requirements of the most current and applicable
Workers' Compensation Insurance Laws in effect from time to time.
6.4 Commercial General Liability Insurance. Development Manager
shall maintain Commercial General Liability Insurance on an "occurrence"
basis, with reasonably acceptable deductibles, with a combined single
limit for bodily injury and property damage of One Million Dollars
($1,000,000.00) covering operations, independent contractors, products and
completed operations, broad form property damage (including completed
operations), severability of interest, personal injury and explosion,
collapse and underground hazards (X,C,U).
6.5 Automobile Liability Insurance. Development Manager shall
maintain owned, hired and nonowned automobile liability insurance covering
all use of all automobiles, trucks and other motor vehicles utilized by
Development Manager in connection with this Agreement, with a combined
single limit for bodily injury and property damage of One Million Dollars
($1,000,000.00).
6.6 Umbrella/Excess Coverage Development Manager shall maintain
umbrella/excess liability coverage on an "occurrence" basis, with a
combined single limit for bodily injury and property damage of Five
Million Dollars ($5,000,000.00) covering general liability and automobile
liability.
6.7 Additional Insured. To the extent available with respect to
insurance required to be obtained by Third Parties pursuant to the
provisions of Third Party Contracts, Development Manager shall use
diligent efforts to have Third Parties include Owner as an additional
insured under such coverage.
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6.8 Project Property Insurance. Development Manager shall
maintain an "all risk" (excluding earthquake and flood) builder's risk
policy covering loss or damage to Property which becomes a full part of
the Project in the amount of the full replacement cost thereof. Such
policy shall cover the interest of Owner and Development Manager. The per
occurrence deductible and all uninsured loss shall be the responsibility
of the party whose negligence causes the loss, or, if no one is negligent,
shall be a Project Cost.
6.9 Additional Named Insured. With respect to insurance required
to be obtained by Development Manager pursuant to the provisions of
Section 6.7 of this Agreement, Development Manager shall name Owner and
any Lender as an additional named insured with respect to the Project.
6.10 Lender Requirements. Development Manager shall maintain any
additional insurance required by any Lender as a Project Cost to the
extent allocable to the Project.
6.11 OCIP Policy. Owner may elect, in its sole and absolute
discretion, to obtain an owner controlled insurance policy ("OCIP Policy")
for the Project providing such coverages as Owner may deem advisable for
liability, professional errors and omissions and builder's risk on behalf
of Owner, Development Manager, the Contractors and other parties involved
in the Project. If Owner elects to obtain the OCIP Policy, the parties
agree that Sections 6.4, 6.6, 6.8 and 6.9 shall be deleted and replaced
with provisions reflecting the terms of the OCIP Policy, which terms shall
be subject to Development Manager's approval, which shall not be
unreasonably withheld. The parties also agree to make such revisions to
this Article as may be necessary to reflect the terms of the OCIP Policy.
ARTICLE VII
PAYMENTS TO DEVELOPMENT MANAGER
-------------------------------
7.1 Fees to Development Manager. In consideration of its services
hereunder, Development Manager shall be entitled to payment from Owner of
the Project Management Fee, the Field Overhead Fee, the Marketing and
Advertising Fee and the Success Fee as provided in this Article.
7.2 Project Management Fee. The Development Manager shall be paid
a Project Management Fee in an amount equal to (a) three percent (3.0%) of
Gross Revenues minus (b) any management fees paid to date, or payable in
the future, by Owner to Accretive Investments, LLC. The Project
Management Fee shall be paid as provided in Section 7.5.
7.3 Field Overhead Fee. The Development Manager shall be paid a
Field Overhead Fee in an amount equal to (a) two and seventy two one-hundreds
percent (2.72%) of Gross Revenues minus (b) any amounts incurred
by Owner for construction peer review by Owner or its Contractor pursuant
to Section 3.6 above. The Field Overhead Fee shall be paid as provided in
Section 7.5.
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7.4 Marketing and Advertising Fee. The Development Manager shall
be paid a Marketing and Advertising Fee in an amount equal to one and one-half
percent (1.5%) of Gross Revenues. The Marketing and Advertising Fee
shall be paid as provided in Section 7.5.
7.5 Payment of Fees. Owner will pay the Development Management
Fee applicable to each sale of a portion of the Project to Development
Manager within ten (10) days after the closing of such sale. Prior to the
first sale of a portion of the Property, Owner, in its sole discretion,
may make advances to Development Manager of up to (a) $958,000 against the
Field Overhead Fee, (b) $1,350,000 against the Project Management Fee and
(c) $284,000 against the Marketing and Advertising Fee (in each case, such
amounts shall be reduced for any payments made by Owner to any party other
than Development Manager with respect to the applicable fee category).
Any such advances shall be offset against the next payment(s) of the
Development Management Fee becoming due to Development Manager under this
Agreement. A final reconciliation shall be after the sale of the last
portion of the Project, and, within ten (10) days thereafter, Owner will
pay any underpayment of the Development Management Fee, or Development
Manager shall pay to Owner any overpayment of such fees.
7.6 Success Fee. The parties believe that the ultimate success of
the Project will largely depend on the efforts and abilities of
Development Manager. Owner desires to incentivize Development Manager to
maximize the profitability of the Project. In addition, the parties
recognize that the long-term commitments required to be made by
Development Manager under this Agreement and the risks undertaken by
Development Manager under this Agreement, including risks relating to
construction management and to Development Manager's obligation to arrange
financing for the Project, warrant additional compensation to Development
Manager. Therefore, as a material part of the consideration to
Development Manager, Owner shall pay to Development Manager a Success Fee
in the following manner:
Step 1: all Net Revenues initially shall be used by Owner to pay
the Owner Initial Payment Amount;
Step 2: next, the remaining Net Revenues (if any) will be paid
to Development Manager in an amount equal to such Owner
Initial Payment Amount;
Step 3: thereafter, fifty percent (50%) of the remaining Net
Revenues (if any) will be paid to Development Manager;
and
Step 4: provided, however, that in no event shall the Success
Fee payable to Development Manager exceed sixty-eight
percent (68%) of an amount equal to (a) the Net Revenues
minus (b) the Owner Initial Payment Amount (the "Success
Fee Limit").
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Owner shall pay portions of the Success Fee to Development Manager from
time to time when, in Owner's reasonable judgment, Owner has sufficient
funds, after providing reserves for potential liabilities associated with
the Project in amounts determined by Owner, to make such payment in light
of the then existing and reasonably anticipated future expenses and
liabilities relating to the Project. In addition, to the extent Owner
determines that sufficient funds are available to make payments of the
Success Fee, Owner may reserve amounts that Owner deems necessary to
ensure that the payments of the Success Fee will not exceed the Success
Fee Limit. A final reconciliation shall be made after the sale of the
last portion of the Project, and Owner shall promptly pay any remaining
Success Fee to Development Manager, or Development Manager shall pay to
Owner any overpayment of the Success Fee (including any amount paid to
Development Manager that exceeds the Success Fee Limit). Notwithstanding
the foregoing, Development Manager acknowledges and agrees that it shall
be entitled to payment of the Success Fee only if the amount of the Net
Revenues exceed the amount of the Owner Initial Payment Amount, and then
only to the extent of such excess amount and subject to the Success Fee
Limit. Owner has made no representations or warranties regarding the
amount of the Success Fee that may be payable. Neither Owner nor any of
its shareholders, members, managers, officers, directors or Affiliates
shall be liable to Development Manager if no Success Fee is payable or if
the amount of the Success Fee is less than the amount anticipated by the
Budget or any other projections.
For purposes of illustration only, the following examples are
provided:
Example 1:
Net Revenues = $400,000,000
Step 1: Owner Initial Payment Amount = $50,000,000
Step 2: Initial payment to Development Manager = $50,000,000
Step 3: 50% of remainder to Development Manager = $150,000,000 (50%
of $300,000,000)
Step 4: Cap = 68% of $350,000,000 = $238,000,000
Success Fee = $200,000,000 ($50,000,000 plus $150,000,000 from
Steps 2 and 3)
Example 2:
Net Revenues = $120,000,000
Step 1: Owner Initial Payment Amount = $50,000,000
Step 2: Initial payment to Development Manager = $50,000,000
Step 3: 50% of remainder to Development Manager = $10,000,000 (50%
of $20,000,000)
Step 4: Cap = 68% of $70,000,000 = $47,600,000
Success Fee = $47,600,000 (based on 68% cap)
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Example 3:
Net Revenues = $50,000,000
Step 1: Owner Initial Payment Amount = $50,000,000
Step 2: Success Fee = $0
ARTICLE VIII
FUNDING FOR PROJECT
-------------------
8.1 Costs to be Borne by Owner. Owner shall pay all Project
Costs. To the extent feasible, Owner (or Development Manager on behalf of
Owner) shall pay all Project Costs directly to the appropriate Third
Parties. Project Costs shall include the following general categories of
work to the extent incurred by Owner and/or Development Manager in
accordance with the Budget:
8.1.1 All costs for architectural, legal, accounting,
engineering and other consultant services (other than marketing and
advertising consultants and consultants who are engaged by Development
Manager to perform any of Development Manager's obligations hereunder) and
for soils, geological, and toxic and hazardous waste studies;
8.1.2 All construction costs, including labor and material
costs and equipment rental and repair, and the costs to maintain the
Property as provided in this Agreement;
8.1.3 All governmental licenses and fees relating to the
Project, costs to process and maintain the Entitlements, all real and
personal property taxes imposed against the Property and Project and all
bonds or deposits required in connection with the development of the
Project;
8.1.4 All costs of sale including but not limited to
commissions, escrow and title charges, and other closing costs;
8.1.5 Financing costs, including interest payments, for loans
from non-Affiliate Lenders;
8.1.6 The Development Management Fees;
8.1.7 The premiums on any insurance required to be carried by
Development Manager pursuant to Article VI to the extent properly
allocable to the Project (but excluding workers' compensation insurance);
and
8.1.8 All other costs incurred in connection with the Project
that are not expressly excluded under Section 8.2.
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Subject to the indemnification obligations of Development Manager
pursuant to Section 10.15 and Development Manager's obligation to arrange
financing for the Project, Development Manager shall have no
responsibility to fund any Project Costs under this Agreement.
8.2 Costs to be Borne by Development Manager. Notwithstanding any
other provision of this Agreement, in no event shall Owner be responsible
for any of the following costs incurred by Development Manager in
connection with the Services, all of which shall be borne by Development
Manager:
8.2.1 Any and all costs or expenses incurred by Development
Manager prior to the date of this Agreement;
8.2.2 Any marketing and advertising expenses relating to the
administration or implementation of the Marketing Plan and/or the Co-op
Marketing and Advertising Program;
8.2.3 The costs for Development Manager's employees for
salaries, fringe benefits, payroll taxes, F.I.C.A., worker's compensation
premiums, health insurance premiums, retirement benefits, bonuses and
similar personnel costs;
8.2.4 Overhead expenses of Development Manager, which shall be
limited to salaries and other payments or benefits to principals,
shareholders, and officers, and the cost of maintaining off-site offices
and any on-site construction field offices, and costs of operating
Development Manager's business;
8.2.5 Business licenses, real estate broker's license and fees
of Development Manager, except as required specifically for the Project by
governmental entities having jurisdiction thereof;
8.2.6 Costs of any consultants engaged by Development Manager
to perform any of its obligations hereunder; and
8.2.7 Any costs, liabilities, damages or expenses for which
Development Manager is responsible for indemnifying Owner pursuant to
Section 10.15.
ARTICLE IX
TERMINATION; DEFAULT
--------------------
9.1 Right of Termination for Convenience. The performance of all
or any portion of the Services under this Agreement may be terminated by
Owner, in whole or in part, whenever Owner shall determine that such
termination is in its best interest, with or without cause and without
regard to whether Development Manager is in default hereunder. Any such
termination shall be effected by delivery to Development Manager of a
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Notice of Termination specifying the extent to which performance of
Services under the Agreement is terminated and the date (the "Termination
Date") upon which such termination shall become effective, which shall not
be less than sixty (60) days after the date of the Notice of Termination.
9.2 Termination Claim. Upon termination of this Agreement by
Owner without cause, Owner shall pay to Development Manager the following
amounts:
9.2.1 All Project Costs incurred and payable by Owner to
Development Manager pursuant to the provisions of this Agreement through
the Termination Date. Owner shall pay such amount to Development Manager
within twenty (20) days after the Termination Date; and
9.2.2 The accrued but unpaid portion of the Development
Management Fee and the Success Fee. The accrued Development Management
Fee shall only include the fee for sales to Buyers that have already
closed escrow or that are in escrow for sale on the Termination Date and
actually close pursuant to such escrow within 120 days after the
Termination Date. Owner shall make a reasonable determination of the
amount of the accrued Success Fee payable to Development Manager with
respect to such sales that have closed on or before the date that is 120
days after the Termination Date based upon Owner's reasonable estimates of
the then existing Net Revenues and the Owner Initial Payment Amount.
Within one hundred fifty (150) days after the Termination Date, Owner
shall pay to Development Manager any Development Management Fee and
Success Fee payable to Development Manager or Development Manager shall
pay to Owner any overpayment in the Development Management Fee and the
Success Fee. To the extent that any advances of the Development
Management Fee paid to Development Manager pursuant to Section 7.5 exceed
the amount of the accrued Development Management Fee as of the Termination
Date as provided in this Section, Development Manager will repay to Owner
such excess amount of the advances upon termination of this Agreement.
9.3 Full Payment. Development Manager acknowledges and agrees
that the amounts set forth in this Article represent the entire amount
payable by Owner to Development Manager upon the termination of this
Agreement and in no event shall Development Manager be entitled to any
other or future fees, costs of other expenses arising out of this
Agreement or the termination thereof.
9.4 Termination By Reason of Default. Development Manager shall
be in default and breach of this Agreement, and this Agreement shall
terminate at the election of Owner in its reasonable discretion, without
notice except as expressly provided to the contrary, upon the occurrence
of any of the events set forth in Sections 9.4.1 through 9.4.7, inclusive.
9.4.1 Development Manager shall admit in writing its inability
to pay its debts when due, or shall make an assignment for the benefit of
creditors; or shall apply for or consent to the appointment of any
receiver, trustee or similar officer for Development Manager, or for all
or any substantial part of its property; or Development Manager shall
institute (by petition, application, answer, consent or otherwise) any
bankruptcy, insolvency, reorganization, arrangement, readjustment of
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debts, dissolution, liquidation, or similar proceedings relating to
Development Manager, or under the laws of any jurisdiction; or
9.4.2 A receiver, trustee or similar officer shall be
appointed for Development Manager or for all or any substantial part of
its property without the application or consent of Development Manager,
and such appointment shall continue undischarged for a period of ninety
(90) Days (whether or not consecutive); or any bankruptcy, insolvency,
reorganization, arrangements, readjustment of debt, dissolution,
liquidation or similar proceedings shall be instituted (by petition,
application or otherwise) against Development Manager and shall remain
undismissed for a period of ninety (90) Days (whether or not consecutive);
or
9.4.3 Subject to Development Manager's right to reasonably
contest, Development Manager fails to make proper payment to any party
performing services or providing materials or labor to Development Manager
in connection with this Agreement after fifteen (15) Business Days notice
thereof and of Owner's intent to terminate this Agreement, unless
Development Manager's nonpayment is due to the other party's default in
its obligations; or
9.4.4 Development Manager violates any laws, ordinances, rules
and regulations or orders of any public authority having jurisdiction and
fails to cure the applicable violation within fifteen (15) Days following
notice of any violation thereof from Owner or the applicable governmental
agency and following notice of Owner's intent to terminate this Agreement,
or, if the default cannot with due diligence be cured within such fifteen
(15) Day period, Development Manager fails to commence a cure within such
fifteen (15) Day period or thereafter fails to diligently prosecute such
cure to completion as soon as possible; or
9.4.5 Development Manager fails to arrange for financing for
the Project as required by this Agreement; or
9.4.6 Development Manager persistently fails to comply with
the applicable Project Schedule or other time period specified herein and
persistently fails to perform the Services for the Project with such
diligence as will cause the Services to be completed in accordance with
the applicable Project Schedule or other time period specified herein and
such failure continues after fifteen (15) Days notice thereof and of
Owner's intent to terminate this Agreement or, if the default cannot with
due diligence be cured within such fifteen (15) Day period, Development
Manager fails to commence a cure within such fifteen (15) Day period or
thereafter fails to diligently prosecute such cure to completion within a
reasonable time; or
9.4.7 Development Manager fails to observe any other material
terms, provisions, conditions, covenants or agreements in this Agreement
to be observed and performed on the part of Development Manager and fails
promptly to cure such default within fifteen (15) Days following notice
thereof to Development Manager by Owner and notice of Owner's intent to
terminate this Agreement, or, if the default is not a monetary default and
cannot with due diligence be cured within said fifteen (15) Day period,
Development Manager fails to commence cure within such fifteen (15) Day
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period or thereafter fails to diligently prosecute such cure to completion
within a reasonable time.
9.5 Remedies. Upon Development Manager's default hereunder, Owner
shall have such rights and remedies as are provided herein and such
additional remedies as may be available at law or in equity.
Notwithstanding the foregoing, or anything else to the contrary contained
herein, if Development Manager fails to perform its obligations to arrange
financing in accordance with this Agreement, Owner's sole remedy against
Development Manager shall be to terminate this Agreement and Development
Manager shall not be liable for damages or subject to specific performance
or other remedies on account thereof.
9.6 Development Manager's Responsibility Upon Termination.
9.6.1 After receipt of a Notice of Termination and except as
otherwise directed by Owner in the Notice of Termination or otherwise,
Development Manager shall:
9.6.1.1 Stop work under this Agreement;
9.6.1.2 At Owner's request and, if the Notice of
Termination is delivered pursuant to Section 9.1, at Owner's expense,
either terminate all orders and agreements to the extent that they relate
to the performance of Work terminated by the Notice of Termination or
otherwise or assign such orders and agreements to Owner, as Owner directs.
9.6.1.3 Assign to Owner, in the manner, at the
times, and to the extent directed by Owner, all of the right, title and
interest of Development Manager under the orders and agreements so
terminated;
9.6.1.4 Transfer title and deliver to Owner as
directed by Owner: (a) work in process, completed work, supplies, and
other material procured as a part of, or acquired in connection with the
performance of, the work terminated by the Notice of Termination or
otherwise, (b) information and other property which, if this Agreement had
not been terminated, would have been required to be furnished to Owner,
and (c) all books, records and documents relating to the Project; and
9.6.1.5 At Owner's expense take such action as may
be necessary, or as Owner may direct, for the protection and preservation
of the property related to the Agreement which is in the possession of
Development Manager and in which Owner had or may acquire an interest.
9.7 Termination By Development Manager. Owner shall be in default
and breach of this Agreement, and this Agreement shall terminate at the
election of Development Manager, upon the occurrence of any of the events
set forth in Sections 9.7.1 through 9.7.3, inclusive.
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9.7.1 Owner shall admit in writing its inability to pay its
debts when due, or shall make an assignment for the benefit of creditors;
or shall apply for or consent to the appointment of any receiver, trustee
or similar officer for Owner, or for all or any substantial part of its
property; or Owner shall institute (by petition, application, answer,
consent or otherwise) any bankruptcy, insolvency, reorganization,
arrangement, readjustment of debts, dissolution, liquidation, or similar
proceedings relating to Owner, or under the laws of any jurisdiction; or
9.7.2 A receiver, trustee or similar officer shall be
appointed for Owner or for all or any substantial part of its property
without the application or consent of Owner, and such appointment shall
continue undischarged for a period of ninety (90) Days (whether or not
consecutive); or any bankruptcy, insolvency, reorganization, arrangements,
readjustment of debt, dissolution, liquidation or similar proceedings
shall be instituted (by petition, application or otherwise) against Owner
and shall remain undismissed for a period of ninety (90) Days (whether or
not consecutive); or
9.7.3 Owner fails to observe any of the material terms,
provisions, conditions, covenants or agreements in this Agreement to be
observed and performed on the part of Owner and fails promptly to cure
such default within fifteen (15) Days following notice thereof to Owner by
Development Manager and notice of Development Manager's intent to
terminate this Agreement, or, if the default is not a monetary default and
cannot with due diligence be cured within said fifteen (15) Day period,
Owner fails to commence cure within such fifteen (15) Day period or
thereafter fails to diligently prosecute such cure to completion within a
reasonable time.
ARTICLE X
MISCELLANEOUS PROVISIONS
------------------------
10.1 Remedies Cumulative. No remedy herein reserved to Owner is
intended to be exclusive of any other remedy, but each and every such
remedy shall be cumulative and shall be in addition to any other given in
this Agreement or as now or hereafter existing or at law, equity or by
statute.
10.2 Nonwaiver. The failure of either party to notify the other of
any default under this Agreement shall not be deemed to be a waiver of any
continuing default of any term, covenant or condition set forth in this
Agreement, nor of such party's right to declare a default for any such
continuing breach, and the failure of either party to insist upon strict
performance of any of the terms, covenants or conditions of this
Agreement, or to exercise any option in this Agreement in any one or more
instances, shall not be construed as a waiver or relinquishment of any
such terms, covenants, conditions or options, but the same shall be and
remain in full force and effect.
10.3 Successors and Assigns. Development Manager shall not assign
this Agreement in whole or in part, or any interest herein, without
Owner's prior written consent, which may be withheld in Owner's sole and
absolute discretion. Any assignment by Development Manager without
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Owner's consent shall be void and of no effect. The rights and
obligations of the parties hereunder shall, subject to the limitations on
assignment contained in this Section, be binding upon, and inure to the
benefit of, the successors and assigns of Owner and Development Manager.
10.4 Written Notice. For purposes of this Agreement, notices will
be deemed to have been given upon personal delivery thereof, three
(3) Business Days after having been deposited in the United States mail,
postage prepaid and properly addressed, one (1) Business Day after having
been sent by Federal Express or other similar overnight delivery service
or upon confirmation if sent by facsimile. Any party hereto may from time
to time, by written notice to the other, designate a different address
which shall be substituted for the one set forth below.
Owner: Provence Hills Development Company, LLC
2111 Palomar Airport Road, Suite 250
Carlsbad, CA 92009
Attn: R. Randy Goodson, Vice President
Facsimile No.: (760) 431-8915
With a copy to: Provence Hills Development Company, LLC
315 Park Avenue South, 20th Floor
New York, NY 10010-3607
Attn: Paul Borden, President
Facsimile No.: (212) _____________
With an additional copy to:
Luce, Forward, Hamilton & Scripps LLP
600 West Broadway, Suite 2600
San Diego, California 92101-3391
Attn: David M. Hymer, Esq.
Facsimile No.: (619) 645-5334
Development Manager:HomeFed Corporation
529 East South Temple
Salt Lake City, Utah 84102
Attn: Ms. Corinne Maki
Facsimile No.: (801) 524-1761
With a copy to: Pillsbury, Madison & Sutro LLP
101 West Broadway, Suite 1800
San Diego, CA 92101
Attn: K. Michael Garrett, Esq.
Facsimile No.: (619) 236-1995
10.5 Severability. In case any one or more provisions set forth in
this Agreement shall for any reason be held invalid, illegal or
unenforceable in any respect, any such invalidity, illegality, or
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unenforceability shall not affect any other provision of this Agreement,
and this Agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been incorporated therein provided that
the deletion of such provision does not materially alter this Agreement.
10.6 No Third-Party Beneficiaries. This Agreement is not intended
and shall not be deemed or construed to confer any rights, powers or
privileges on any person, firm, partnership, corporation or other entity
not a party hereto except as may be expressly provided herein to the
contrary.
10.7 Exhibits and Headings. The Exhibits attached or to be
attached hereto shall be construed with and as integral parts of this
Agreement to the same extent as if the same had been set forth verbatim
herein. The titles and headings of articles and sections of this
Agreement are intended for convenience only and shall not in any way
affect the meaning or construction of any provision of this Agreement.
10.8 Oral Agreements. No oral order, objection, claim or notice by
any party to the other shall affect or modify any of the terms or
obligations contained in this Agreement, and none of the provisions of
this Agreement shall be held to be waived or modified by reason of any act
whatsoever, other than by an express waiver or modification thereof in
writing, and no evidence shall be introduced in any proceeding of any
other waiver or modification.
10.9 Counterparts. This Agreement may be executed in any number of
counterparts, and each of such counterparts for all purposes shall be
deemed to be an original, and all of such counterparts should constitute
one and the same agreement.
10.10 Governing Law. This Agreement shall be governed by the
internal laws of the State of California without regard to choice of law
rules.
10.11 Special Exculpation. Except for payment for Services
performed in accordance with this Agreement, the liability of Owner
hereunder shall be limited to its interest in the Project, and in no event
shall any other assets of Owner or any constituent member of Owner be
subject to any claim arising out of or in connection with this Agreement.
10.12 Lenders. Upon Development Manager's receipt of the applicable
provisions thereof, Development Manager shall cooperate with all Lenders
and shall comply with all terms of the loan agreements pertaining to the
Services or the Project and the delivery of information to such Lenders
with respect thereto, including, without limitation, Lender's right to
approve Third Parties, any Third Party Contracts and all conditions
precedent to the disbursement of loan proceeds thereunder. Development
Manager agrees that, if requested by Owner, it shall advise all of the
Third Parties in writing of the identity of all Lenders. Development
Manager will cooperate with and permit all Lenders or their
representatives to enter upon the Project at reasonable times for the
purpose of inspecting the Project and all materials, fixtures and articles
to be used in the Project, and to examine all Plans and Specifications
which are or may be kept at the Project. Notwithstanding the foregoing,
any references in this Agreement to specific inspection or approval rights
of any Lender shall only apply if and to the extent such Lender elects to
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exercise such rights by agreement with Owner or by written notice to Owner
or Development Manager.
10.13 Time. Time is of the essence of this Agreement and each
provision hereof of which time is an element.
10.14 Independent Contractor. It is expressly understood and agreed
that Development Manager will act as an independent contractor and as an
agent of Owner in the performance of its duties and responsibilities set
forth in this Agreement. No provisions of this Agreement shall be
intended to create a partnership or joint venture or other similar
relationship between Owner and Development Manager with respect to the
Project, and neither party shall have the power to bind or obligate the
other party, except as expressly set forth in this Agreement. Neither
this Agreement nor any communication or other action between the parties
relating to the Project, is intended or shall be construed to create a
joint venture, partnership or other similar relationship between
Development Manager and Owner.
10.15 Indemnity.
10.15.1 Development Manager shall defend (with legal counsel
reasonably acceptable to Owner), indemnify, protect and hold harmless
Owner and its employees, officers, directors, members, managers,
affiliates, agents and representatives, and its and their respective
successors and assigns (collectively, the "Owner Indemnitees") from any
and all Claims to the extent arising from or relating to (a) the gross
negligence or willful misconduct of Development Manager, or its agents,
employees, consultants, subcontractors, suppliers, anyone employed
directly or indirectly by any of them or for whose acts they may be liable
or any or all of them arising from or relating to Development Manager's
obligations under this Agreement; (b) any and all liens, stop notices and
charges of any type, nature, kind or description which may at any time be
filed or claimed against the Project site or any portion thereof, or the
Owner or Owner's Lender as a consequence of acts or omissions of
Development Manager, or its agents, employees, consultants,
subcontractors, suppliers, anyone employed directly or indirectly by any
of them or for whose acts they may be liable or any or all of them;
(c) Development Manager's breach of its obligations under the Agreement;
or (d) violation of any local, state or federal law, regulation or code by
Development Manager or by any of Development Manager's employees, agents,
consultants, subcontractors or suppliers; provided, however, Development
Manager shall not be obligated to indemnify a party to the extent such
damages are the result of the negligence or willful misconduct of the
party to be indemnified. The indemnity set forth in this Section shall
apply during the term of this Agreement (or Development Manager's
performance thereof) and shall survive the expiration or termination of
this Agreement until such time as action against the Owner Indemnitees on
account of any matter covered by such indemnity is barred by the
applicable statute of limitations.
10.15.2 Owner shall defend (with counsel reasonably
acceptable to Development Manager), indemnify, protect, and hold harmless
Development Manager and its employees, officers, directors, shareholders,
agents and representatives, and its and their respective successors and
assigns (collectively, the "Development Manager Indemnitees"), from and
against any and all Claims, of any nature whatsoever, arising out of, in
connection with or incidental to: (i) the negligence or willful
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misconduct of Owner or any of its managers, members, officers, directors,
separate contractors, agents or employees; (ii) the failure by Owner to
comply with its obligations under this Agreement; (iii) any failure by
Owner to comply with any laws, statutes, ordinances, or regulations of any
governmental or quasi-governmental agency or authority except and to the
extent such compliance was the obligation of Development Manager under
this Agreement; or (iv) work performed after the Termination Date and
without Development Manager's participation. This Indemnity shall survive
the expiration or termination of this Agreement until an action against
the Development Manager Indemnitees on account of any matter covered by
such indemnity is barred by the applicable statute of limitation.
10.15.3 Applicability of Indemnity. Notwithstanding the
foregoing, if Owner elects to obtain an OCIP Policy, the parties agree
that the indemnity obligations under Sections 10.15.1 and 10.15.2 shall
only apply to the extent the matter is not covered by such OCIP Policy and
each party waives all claims against the other to the extent covered by
such insurance.
10.16 Merger. All prior understandings and agreements between the
parties respecting this relationship, are merged into this Agreement,
which Agreement fully and completely expresses the agreement of the
parties, and there are no representations, warranties or agreements except
as specifically and expressly set forth herein and in the Exhibits annexed
hereto.
10.17 Alternative Dispute Resolution. All claims, disputes and
other matters as to which the parties disagree arising out of this
Agreement or the interpretation or breach or alleged breach thereof, shall
be decided in accordance with the terms of the Alternative Dispute
Resolution Addendum attached hereto as Exhibit C and incorporated herein.
10.18 Attorney's Fees. If any action, arbitration or judicial
reference proceeding is instituted between Owner and Development Manager
in connection with this Agreement, the party prevailing in such action
will be entitled to recover from the other party all of its costs of
action, including reasonable attorneys' fees and costs, experts' fees and
costs and fees and costs incurred in connection with any appeals or to
enforce any judgment. If either party files an action against the other
in connection with this Agreement and subsequently dismisses or withdraws
such action, with or without prejudice, except in connection with a
settlement agreement between Owner and Development Manager, the other
party shall be deemed to be the prevailing party and shall be entitled to
recover its fees and costs in connection therewith.
10.19 Non-Discrimination. There shall be no discrimination against
or segregation of any person, or group of persons on account of sex, race,
color, creed, national origin or ancestry in the sale, lease, sublease,
transfer, use, occupancy, tenure or enjoyment of the land, nor shall the
transferee himself, or any person claiming under or through him establish
or permit any such practice or practices of discrimination or segregation
with reference to the selection, location, number, use or occupancy of
tenants, lessees, subtenants, sublessees or vendees of the land.
10.20 Confidentiality. Unless otherwise agreed to by Owner,
Development Manager will keep confidential all documents, contracts,
prices, plans, specifications, strategies, marketing programs, financial
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statements, reports or other information provided to, or generated by
Owner relating to the Project and will not disclose any such information
to any person other than (i) those employees and agents of Development
Manager directly participating in providing the Services; (ii) those who
are actively and directly participating in the development of the Project,
and (iii) governmental, administrative, regulatory or judicial authorities
in the investigation of the compliance of the Project with applicable
legal requirements. However, Development Manager agrees that it will not
disclose any code compliance, environmental or other regulatory matters to
governmental or other authorities without the prior approval by Owner
unless required by law, in which case Development Manager shall promptly
notify Owner thereof. Upon any termination of this Agreement for any
reason, Development Manager will promptly return to Owner copies of all
documents or other information pertaining to the Project provided to
Development Manager by Owner. The provisions of this Section will survive
the Closing or earlier termination of this Agreement.
10.21 Advice of Counsel. Each party represents and warrants that it
has received the advice of independent counsel of its own choosing with
respect to the meaning and effect of this Agreement. No provision of this
Agreement shall be construed in favor of or against any party on the
ground that such party or its counsel drafted the provision.
IN WITNESS WHEREOF, the undersigned have executed this instrument
effective as of the date set forth above.
OWNER: DEVELOPMENT MANAGER:
PROVENCE HILLS DEVELOPMENT HOMEFED CORPORATION, a Delaware
COMPANY, LLC, a Delaware limited corporation
liability company
By: /s/ Paul Borden By: /s/ Timothy M. Considine
--------------------------- --------------------------------
Paul Borden, President Timothy M. Considine, Chairman
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EXHIBITS
EXHIBIT A . . . . . . . . . . . . . . . . . . . . . . . . . Legal Description
EXHIBIT B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Budget
EXHIBIT C. . . . . . . . . . . . . . . . Alternate Dispute Resolution Addendum
SCHEDULES
SCHEDULE 1 . . . . . . . . . . . . . . . . . . . . . . . . Existing Litigation
SCHEDULE 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trust Deeds
<PAGE>
EXHIBIT C
ALTERNATE DISPUTE RESOLUTION ADDENDUM
1. DISPUTE RESOLUTION PROCEDURE FOR DISPUTES. All claims,
disputes and other matters as to which the parties disagree arising out
of this Agreement or the interpretation or breach thereof ("Disputes")
and all Related Disputes (as defined below) shall be resolved pursuant
to the terms of this Addendum. In the event that a Related Dispute is
initiated during the pendency of a Disputes proceeding ("Pending
Proceeding"), such Pending Proceeding shall be stayed until the Related
Dispute has been finally resolved or, at the option of Owner, the
Related Dispute shall be removed from such Pending Proceeding and
resolved pursuant to the terms of the Addendum. If the claims in the
Pending Proceeding include both Related Disputes and other causes of
action that are not Related Disputes then, in the discretion of the
referee, the claims that are not Related Disputes may proceed to final
resolution in the Pending Proceeding.
2. Definitions. The term "Homeowner/Association Dispute" shall
mean any action or claim by, between or among (a) Owner, Development
Manager or any Buyer or any director, officer, partner, member, manager,
affiliate, employee or agent of Owner, Development Manager or any Buyer,
or any contractor, subcontractor, design professional, engineer or
supplier who provided labor, services or materials to the Project and
who is bound or has agreed to be bound to the following dispute
notification and resolution procedure (collectively, the "Owner
Parties") and (b) either the Master Association that has been or will be
formed with respect to the Project (the "Master Association") or any
homeowner ("Homeowner"), relating to or arising out of the Project, this
Agreement, the governing documents for the Master Association, any other
agreements between the Owner Parties and a Homeowner or the Master
Association (unless any such agreement specifies another form of dispute
resolution), the sale of any portion of the Project, the use or
condition of the Project or the design or construction of or any
condition on or affecting the Project, including, but not limited to,
construction defects, surveys, soils conditions, grading,
specifications, installation of improvements or disputes which allege
breach of implied or express warranties as to the condition of the
Project or the Project where the amount in controversy is greater than
$25,000 or in which non-monetary relief is sought that cannot be granted
by a Municipal Court in the State of California as of January 1, 1998.
The term "Related Disputes" shall mean a Homeowner/Association Dispute
which arises out of the same transaction, occurrence, or series of
transactions or occurrences as a Dispute. The term "Homeowner" shall
mean and refer to one or more persons or entities who are alone or
collectively the record owner of a residential lot, condominium or
apartment.
3. ADR Provisions. All Disputes and all Related Disputes shall
be resolved shall be subject to the provisions set forth below.
3.1 Notice. Any person with a Dispute claim shall notify
Owner in writing of the claim, which writing shall describe the nature
of the claim and any proposed remedy (the "Claim Notice").
<PAGE>
3.2 Right to Inspect and Right to Corrective Action.
Within a reasonable period after receipt of the Claim Notice, which
period shall not exceed sixty (60) days, Owner and the claimant shall
meet at a mutually-acceptable place within or near the San Elijo Ranch
Community to discuss the Dispute. At such meeting or at such other
mutually-agreeable time, Owner and Owner's representatives shall have
full access to the property that is subject to the Dispute and shall
have the right to conduct inspections, testing and/or destructive or
invasive testing of the same in a manner deemed appropriate by Owner,
which rights shall continue until such time as the Dispute is resolved.
The parties to the Dispute shall negotiate in good faith in an attempt
to resolve the Dispute. If Owner elects to take any corrective action,
Owner and Owner's representatives and agents shall be provided full
access to the Project that is subject to the Dispute to take and
complete corrective action.
3.3 Civil Code Sections 1368.4 and 1375. Nothing
contained herein shall be deemed a waiver or limitation of the
provisions of California Civil Code Sections 1368.4 and 1375.
3.4 Mediation. If the parties to the Dispute cannot
resolve the claim, the matter shall be submitted to mediation pursuant
to the mediation procedures adopted by the American Arbitration
Association (except as such procedures are modified by the provisions of
this Section) or any successor thereto or to any other entity offering
mediation services that is acceptable to such parties. No person shall
serve as a mediator in any Dispute in which the person has any financial
or personal interest in the result of the mediation, except by the
written consent of all parties to the Dispute participating in the
mediation. Prior to accepting any appointment, the prospective mediator
shall disclose any circumstances likely to create a presumption of bias
or to prevent a prompt commencement of the mediation process.
3.5 Position Memoranda; Pre-Mediation Conference. Within
ten (10) days of the selection of the mediator, each party to the
Dispute participating in the mediation shall submit a brief memorandum
setting forth its position with regard to the issues that need to be
resolved. The mediator shall have the right to schedule a pre-mediation
conference and all parties to the Dispute participating in the mediation
shall attend unless otherwise agreed. The mediation shall be commenced
within ten (10) days following the submittal of the memoranda and shall
be concluded within fifteen (15) days from the commencement of the
mediation unless the parties to the Dispute participating in the
mediation mutually agree to extend the mediation period. The mediation
shall be held in the county in which the Project is located or such
other place as is mutually acceptable to the parties to the Dispute
participating in the mediation.
3.5.1 Conduct of Mediation. The mediator has
discretion to conduct the mediation in the manner in which the mediator
believes is most appropriate for reaching a settlement of the Dispute.
The mediator is authorized to conduct joint and separate meetings with
the parties to the Dispute participating in the mediation and to make
oral and written recommendations for settlement. Whenever necessary,
the mediator may also obtain expert advice concerning technical aspects
of the Dispute, provided the parties to the Dispute participating in the
mediation agree and assume the expenses of obtaining such advice. The
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mediator does not have the authority to impose a settlement on the
parties to the Dispute participating in the mediation.
3.5.2 Exclusion Agreement. Prior to the commencement
of the mediation session, the mediator and all parties to the Dispute
participating in the mediation shall execute an agreement pursuant to
California Evidence Code Section 1152.5(e) or successor statute in order
to exclude the use of any testimony or evidence produced at the
mediation in any subsequent dispute resolution forum, including, but not
limited to, court proceedings, reference proceedings or arbitration
hearings. Pursuant to California Evidence Code Section 1152.5(a), the
agreement shall specifically state that evidence of anything said or of
any admission made in the course of the mediation is not admissible
evidence, and disclosure of any such evidence shall not be compelled in
any civil action in which, pursuant to law, testimony can be compelled
to be given. Unless the document provides otherwise, no document
prepared for the purpose of, or in the course of, or pursuant to, the
mediation, or copy thereof, is admissible in evidence; and disclosure of
any such document shall not be compelled in any civil action in which,
pursuant to law, testimony can be compelled to be given. The provisions
of California Evidence Code Sections 1115 through 1128 shall also be
applicable to such mediation process.
3.5.3 Parties Permitted at Sessions. Persons other
than the parties to the Dispute participating in the mediation, their
representatives and the mediator may attend mediation sessions only with
the permission of such parties to the Dispute participating in the
mediation and the consent of the mediator. Confidential information
disclosed to a mediator by the parties or by witnesses in the course of
the mediation while serving in such capacity shall be confidential.
There shall be no stenographic record of the mediation process.
3.5.4 Expenses. The expenses of witnesses for either
side shall be paid by the party producing such witnesses. All other
expenses of the mediation, including, but not limited to, the fees and
costs charged by the mediator and the expenses of any witnesses or the
cost of any proof or expert advice produced at the direct request of the
mediator, shall be borne equally by the parties to the Dispute
participating in the mediation unless they agree otherwise. Each party
to the Dispute participating in the mediation shall bear its own
attorneys' fees and costs in connection with such mediation.
3.6 Judicial Reference. Should mediation described above not be
successful in resolving any Dispute, such Dispute shall be resolved by
general judicial reference pursuant to Code of Civil Procedure
Sections 638 and 641 through 645.1, and as modified or as otherwise
provided in this Section. The parties to the Dispute shall cooperate in
good faith to ensure that all necessary and appropriate parties are
included in the judicial reference proceeding. Owner shall not be
required to participate in the judicial reference proceeding if all
parties against whom Owner would have necessary or permissive cross-claims or
counterclaims will not or cannot be joined in the judicial
reference proceeding, including, but not limited to, the Owner Parties.
Subject to the limitations set forth in this Section, the general
referee shall have the authority to try all issues, whether of fact or
law, and to report a statement of decision to the court. The referee
shall be the only trier of fact or law in the reference proceeding, and
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shall have no authority to further refer any issues of fact or law to
any other party, without the mutual consent of all parties to the
judicial reference proceeding.
3.6.1 Place. The proceedings shall be heard in San Diego
County.
3.6.2 Referee. The referee shall be an attorney or retired
judge with experience in relevant real estate matters. The referee
shall not have any relationship to the parties to the Dispute or
interest in the Project. The parties to the Dispute participating in
the judicial reference shall meet to select the referee within ten (10)
days after service of the initial complaint on all defendants named
therein. Any dispute regarding the selection of the referee shall be
promptly resolved by the judge to whom the matter is assigned, or if
there is none, to the presiding judge of the Superior Court of San Diego
County who shall select the referee.
3.6.3 Commencement and Timing of Proceeding. The referee
shall promptly commence the proceeding at the earliest convenient date
in light of all of the facts and circumstances and shall conduct the
proceeding without undue delay.
3.6.4 Pre-hearing Conferences. The referee may require one
or more pre-hearing conferences.
3.6.5 Discovery. The parties to the judicial reference
proceeding shall be entitled only to limited discovery, consisting of
the exchange between such parties of only the following matters:
(i) witness lists; (ii) expert witness designations; (iii) expert
witness reports; (iv) exhibits; (v) reports of testing or inspections of
the property subject to the Dispute, including but to limited to,
destructive or invasive testing; and (vi) trial briefs. Such parties
shall also be entitled to conduct further tests and inspections as
provided in Section above. Any other discovery provided for in the
California Code of Civil Procedure shall be permitted by the referee
upon a showing of good cause or based on the mutual agreement of the
parties to the judicial reference proceeding. The referee shall oversee
discovery and may enforce all discovery orders in the same manner as any
trial court judge.
3.6.6 Limitation on Remedies. The referee shall not have
the power to award punitive damages. In addition, as further provided
below, the right to punitive damages is waived. The referee shall have
the power to grant all other legal and equitable remedies and award
compensatory damages in the judicial reference proceeding.
3.6.7 Motions. The referee shall have the power to hear and
dispose of motions, including motions relating to provisional remedies,
demurrers, motions to dismiss, motions for judgment on the pleadings and
summary adjudication motions, in the same manner as a trial court judge,
except the referee shall also have the power to adjudicate summarily
issues of fact or law including the availability of remedies, whether or
not the issue adjudicated could dispose of an entire cause of action or
defense. Notwithstanding the foregoing, if prior to the selection of
the referee as provided herein, any provisional remedies are sought by
the parties to the Dispute, such relief may be sought in the Superior
Court of San Diego County.
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3.6.8 Rules of Law. The referee shall apply the laws of the
State of California except as expressly provided herein including the
rules of evidence, unless expressly waived by all parties to the
judicial reference proceeding.
3.6.9 Record. A stenographic record of the hearing shall be
made, provided that the record shall remain confidential except as may
be necessary for post-hearing motions and any appeals.
3.6.10 Statement of Decision. The referee's statement
of decision shall contain findings of fact and conclusions of law to the
extent required by law if the case were tried to a judge. The decision
of the referee shall stand as the decision of the court, and upon filing
of the statement of decision with the clerk of the court, judgment may
be entered thereon in the same manner as if the Dispute had been tried
by the court.
3.6.11 Post-hearing Motions. The referee shall have the
authority to rule on all post-hearing motions in the same manner as a
trial judge.
3.6.12 Appeals. The decision of the referee shall be
subject to appeal in the same manner as if the Dispute had been tried by
the court.
3.6.13 Expenses. The fees and costs of any judicial
reference proceeding hereunder shall be paid as agreed by the parties to
the judicial reference proceeding. If such parties cannot agree on the
payment of such costs and fees, including ongoing costs and fees, then
these costs and fees shall be paid as determined by the referee, with
the overall costs and fees of the proceeding ultimately to be borne as
determined by the referee. Each party to the judicial reference
proceeding shall bear its own attorneys' fees and costs in connection
with such proceeding.
3.7 WAIVERS AND AMENDMENT. OWNER AND DEVELOPMENT MANAGER AGREE
TO HAVE ANY DISPUTE RESOLVED ACCORDING TO THE PROVISIONS OF THIS
ADDENDUM AND WAIVE THEIR RESPECTIVE RIGHTS TO PURSUE ANY DISPUTE IN ANY
MANNER OTHER THAN AS PROVIDED IN THIS ADDENDUM SUCH PARTIES ACKNOWLEDGE
THAT BY AGREEING TO RESOLVE ALL DISPUTES AS PROVIDED IN THIS ADDENDUM,
THEY WILL NOT HAVE ANY RIGHT TO HAVE SUCH DISPUTES TRIED BEFORE A JURY
AND FURTHER WAIVE THEIR RESPECTIVE RIGHTS TO AN AWARD OF PUNITIVE
DAMAGES BY THE REFEREE RELATING TO SUCH DISPUTES, THEREBY GIVING UP ANY
RIGHTS SUCH PARTIES MAY POSSESS TO SUCH REMEDIES.
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SCHEDULE "1"
Existing Litigation
1. CARE v. City of San Marcos (Supreme Court Case No. N74070).
Final EIR and CUP - briefing complete on appeal;
2. City of San Marcos, et al. v. County of San Diego (Riverside
County Case No. 272265). Landfill litigation - ruling by court of
appeal decided against the County; ongoing enforcement of landscaping
and other issues pertaining to the landfill; and
3. County of San Diego v. City of San Marcos, et al. (Riverside
County Case No. 292531). Regarding the County's claim for an accounting
and refund of mitigation fees imposed by the City against the County in
connection with the Landfill. San Elijo is not a party to this lawsuit.
SCHEDULE "1"
<PAGE>
SCHEDULE "2"
Trust Deeds
1. Short Form Deed of Trust and Assignment of Rents made by ABQ
DEVELOPMENT CORPORATION, a New Mexico corporation, as trustor, in favor
of SAN MARCOS LAKE-OCEAN VIEW PARTNERSHIP, a California general
partnership, dated April 11, 1990, and recorded in the Official Records
of San Diego County, California on May 1, 1990, as Document Number 90-237220,
as modified by a Modification Agreement and Modification of Deed
of Trust dated as of December 1, 1994, and recorded in the Official
Records of San Diego County, California on December 29, 1994, as
Document Number 94-0738748.
2. Short Form Deed of Trust and Assignment of Rents made by ABQ
DEVELOPMENT CORPORATION, a New Mexico corporation, as trustor, in favor
of LAKE SAN MARCOS-153 PARTNERSHIP, a California general partnership,
dated April 11, 1990, and recorded in the Official Records of San Diego
County, California on May 1, 1990, as Document Number 90-237219, as
modified by a Modification Agreement and Modification of Deed of Trust
dated as of December 1, 1994, and recorded in the Official Records of
San Diego County, California on December 29, 1994, as Document Number
94-0738747.
3. Short Form Deed of Trust and Assignment of Rents made by ABQ
DEVELOPMENT CORPORATION, a New Mexico corporation, as trustor, in favor
of MARRON RANCH-S.E. 18 ASSOCIATES, a California general partnership,
dated April 11, 1990, and recorded in the Official Records of San Diego
County, California on May 1, 1990, as Document Number 90-237217, as
modified by a Modification Agreement and Modification of Deed of Trust
dated as of December 1, 1994, and recorded in the Official Records of
San Diego County, California on December 29, 1994, as Document Number
94-0738746.
4. Short Form Deed of Trust and Assignment of Rents made by ABQ
DEVELOPMENT CORPORATION, a New Mexico corporation, as trustor, in favor
of MARRON RANCH-N.E. 40 ASSOCIATES, a California general partnership,
dated April 11, 1990, and recorded in the Official Records of San Diego
County, California on May 1, 1990, as Document Number 90-237222, as
modified by a Modification Agreement and Modification of Deed of Trust
dated as of December 1, 1994, and recorded in the Official Records of
San Diego County, California on December 29, 1994, as Document Number
94-0738750.
5. Short Form Deed of Trust and Assignment of Rents made by ABQ
DEVELOPMENT CORPORATION, a New Mexico corporation, as trustor, in favor
of LAKE SAN MARCOS-605 PARTNERSHIP, a California general partnership,
dated April 11, 1990, and recorded in the Official Records of San Diego
County, California on May 1, 1990, as Document Number 90-237216, as
modified by a Modification Agreement and Modification of Deed of Trust
dated as of December 1, 1994, and recorded in the Official Records of
San Diego County, California on December 29, 1994, as Document Number
94-0738745.
SCHEDULE "2"
<PAGE>
6. Short Form Deed of Trust and Assignment of Rents made by ABQ
DEVELOPMENT CORPORATION, a New Mexico corporation, as trustor, in favor
of GARY HUFBAUER, or any applicable successor trustee, as Trustee under
Declaration of Trust dated March 29, 1973, and recorded in the Official
Records of San Diego County, California on May 1, 1990, as Document
Number 90-237221, as modified by a Modification Agreement and
Modification of Deed of Trust dated as of December 1, 1994, and recorded
in the Official Records of San Diego County, California on December 29,
1994, as Document Number 94-0738749.
7. Short Form Deed of Trust and Assignment of Rents made by ABQ
DEVELOPMENT CORPORATION, a New Mexico corporation, as trustor, in favor
of CALVIN L. FOSS, Trustee of the Calvin L. Foss 1986 Trust; CHARLES W.
FROEHLICH, JR. and MILLICENT FROEHLICH; DANIEL A. GRANT and VIRGINIA
BAKER GRANT, Trustees of the Declaration of Trust dated October 5, 1989,
Trust No. 2; JAMES E. ORBAN, JAMES E. ORBAN, Trustee of the Orban Family
Trust, JEANINE ORBAN, Trustee of the Duncan Family Trust, THOMAS R.
ORBAN; BYRON F. WHITE and IRL R. ROBINSON, co-trustees of the White and
Robinson, A Professional Corporation Combination Retirement Plan as
Document Number 90-237215 and recorded in the Official Records of San
Diego County, California as Document Number 94-0738744.
8. Short Form Deed of Trust and Assignment of Rents made by
ABQ DEVELOPMENT CORPORATION, a New Mexico corporation, as trustor, in
favor of the Beneficiaries named therein dated April 11, 1990, and
recorded in the Official Records of San Diego County, California on
May 1, 1990, as Document Number 90-237223, as modified by a Modification
Agreement and Modification of Deed of Trust dated as of December 1,
1994, and recorded in the Official Records of San Diego County,
California on December 29, 1994, as Document Number 94-0738757.
9. Short Form Deed of Trust and Assignment of Rents made by
ABQ DEVELOPMENT CORPORATION, a New Mexico corporation, as trustor, in
favor of the Eileen Slaugher and Laura Kolb dated April 11, 1990, and
recorded in the Official Records of San Diego County, California on
May 31, 1990, as Document Number 90-297451.
SCHEDULE "2"
HOMEFED CORPORATION
ANNOUNCES DEVELOPMENT MANAGEMENT AGREEMENT,
CONTRACT TO ISSUE NEW SHARES
AND RESTRUCTURING OF OUTSTANDING DEBT
Salt Lake City, Utah -- August 14, 1998. HomeFed Corporation
(OTC (Non - NASDAQ): "HFDC") announced today that to expand its
existing operations it has entered into a development management
agreement with a subsidiary of Leucadia National Corporation, the
owner of approximately 41% of the Company's outstanding common stock
("Leucadia") to develop a master planned residential project in San
Marcos, San Diego County, California. The project, known as San Elijo
Ranch, is intended to be developed into a community of approximately
3,400 homes over the next ten years.
In connection with this management agreement, the Company today
also has entered into a stock purchase agreement with Leucadia and
restructured its outstanding 12% Secured Convertible Note due 2003
(the "Note") held by a subsidiary of Leucadia.
Pursuant to the stock purchase agreement, the Company has agreed
to sell additional shares of common stock to Leucadia in 1999 to
increase Leucadia's interest in the Company to 87.5%. Based upon the
number of shares of common stock currently outstanding, Leucadia would
purchase approximately 37,056,000 shares of common stock at an
aggregate purchase price of approximately $6,670,000. Upon the
signing of the agreement, Leucadia advanced to the Company $5,000,000
of the total purchase price, which amount is refundable in the event
the stock purchase does not occur. Also under the stock purchase
agreement, the Company increased the size of the Board of Directors
from three Directors to five Directors and selected two designees of
Leucadia to fill the new Board seats.
The restructured Note is dated August 14, 1998 in the principal
amount of approximately $26,462,380 (reflecting the original loan
outstanding, together with additions to principal resulting from
accrued and unpaid interest thereto to the date of the restructuring),
and extends the maturity date to December 31, 2004, reduces the
interest rate to 6% and eliminates the convertibility feature of the
Note.
