Exhibit 10.1 to
Form 8-K
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
LEUCADIA NATIONAL CORPORATION
AND
HOMEFED CORPORATION
DATED AS OF OCTOBER 21, 2002
TABLE OF CONTENTS
PAGE
STOCK PURCHASE AGREEMENT..................................................................................................1
1. DEFINITIONS; INTERPRETATION....................................................................................1
1.1 Definitions..........................................................................................1
1.2 Interpretation.......................................................................................5
2. PURCHASE OF SECURITIES.........................................................................................5
2.1 Closing..............................................................................................5
2.2 Sale and Purchase. .................................................................................5
3. CONSIDERATION AND PAYMENT......................................................................................6
3.1 Consideration........................................................................................6
3.2 Adjustment to Consideration..........................................................................6
3.3 Payment of Consideration; Delivery of the Shares.....................................................6
4. CONDITIONS TO CLOSING..........................................................................................6
4.1 Conditions Precedent to Obligation of HomeFed........................................................6
4.2 Conditions Precedent to Obligation of LUK............................................................7
5. REPRESENTATIONS AND WARRANTIES OF LUK..........................................................................8
5.1 Corporate Existence..................................................................................8
5.2 Authorization; Enforcement...........................................................................9
5.3 Capital Stock of CDS; Ownership of the Shares........................................................9
5.4 No Conflict.........................................................................................10
5.5 Certificate of Incorporation and By-laws............................................................10
5.6 Consents............................................................................................11
5.7 Compliance with Law.................................................................................11
5.8 Litigation..........................................................................................11
5.9 Regulatory Filings..................................................................................11
5.10 Contracts...........................................................................................11
5.11 Finder's Fees.......................................................................................12
5.12 Assets and Properties...............................................................................12
5.13 Employee Benefits...................................................................................12
5.14 No Material Adverse Change..........................................................................12
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5.15 Intangible Property.................................................................................12
5.16 Insurance...........................................................................................13
5.17 Powers of Attorney; Guarantees; Required Insurance; Agents..........................................13
5.18 Disclosure..........................................................................................13
5.19 Environmental Protection............................................................................13
5.20 Financial Statements................................................................................13
5.21 Investment Purpose..................................................................................13
6. REPRESENTATIONS AND WARRANTIES OF HOMEFED.....................................................................14
6.1 Corporate Existence.................................................................................14
6.2 Authorization; Enforcement..........................................................................14
6.3 Capital Stock of HomeFed............................................................................14
6.4 No Conflict.........................................................................................14
6.5 Consents............................................................................................15
6.6 Litigation..........................................................................................15
6.7 Finder's Fees.......................................................................................15
6.8 Disclosure..........................................................................................15
6.9 Investment Purpose..................................................................................16
6.10 Authorization and Issuance of HomeFed Stock Consideration. ........................................16
6.11 No Material Adverse Change..........................................................................16
6.12 Reports. ..........................................................................................16
6.13 Financial Statements. .............................................................................17
7. COVENANTS, AGREEMENTS AND ACKNOWLEDGMENTS.....................................................................17
7.1 Conduct of Business of the Companies................................................................17
7.2 Restrictions........................................................................................17
7.3 Access to Information; Due Diligence; Confidentiality...............................................18
7.4 Payments of Intercompany Indebtedness; Liquidating Distributions. ..................................19
7.5 Approvals of Governmental Authorities...............................................................19
7.6 Further Assurances..................................................................................20
7.7 Notification of Changes. ...........................................................................20
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7.8 Performance of Conditions...........................................................................20
7.9 Publicity...........................................................................................21
7.10 Authority, Bank Accounts, Etc.......................................................................21
7.11 Delivery of Reports.................................................................................21
7.12 HomeFed Acknowledgments.............................................................................21
7.13 Delivery of Audited Financial Statements. .........................................................22
7.14 Security for Credit Enhancements....................................................................22
7.15 [Reserved]..........................................................................................22
7.16 Conduct of Business of HomeFed......................................................................22
7.17 Registration Rights for HomeFed Stock Consideration. ..............................................23
8. TAXES.........................................................................................................23
8.1 Tax Returns Filed and Taxes Paid by LUK.............................................................23
8.2 Post-Closing Access to Books and Records and Cooperation. .........................................23
8.3 Liability for Taxes and Related Matters.............................................................24
8.4 Termination of Tax Allocation Agreement. ..........................................................27
8.5 Section 338(h)(10) Election. .......................................................................27
8.6 Survival of Representations, Warranties and Obligations.............................................28
8.7 Transfer Taxes. ...................................................................................28
8.8 Indemnification Payments Net of any Tax Benefit. ..................................................28
9. INDEMNIFICATION...............................................................................................28
9.1 Indemnification by LUK. ............................................................................28
9.2 HomeFed's Obligation to Indemnify. .................................................................30
9.3 Right to Contest Third Party Claims. ...............................................................31
9.4 Indemnification for Taxes. .........................................................................32
9.5 Limitations on Indemnification. ....................................................................32
10. TERMINATION...................................................................................................33
10.1 Termination. ......................................................................................33
10.2 Effect of Termination...............................................................................33
11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES....................................................................33
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12. MISCELLANEOUS.................................................................................................33
12.1 Amendments and Waivers. ............................................................................33
12.2 Assignment..........................................................................................33
12.3 Entire Agreement....................................................................................33
12.4 Governing Law.......................................................................................34
12.5 Enforcement; Jurisdiction...........................................................................34
12.6 Notices.............................................................................................34
12.7 Counterparts........................................................................................35
12.8 Certain Fees and Expenses. ........................................................................35
12.9 No Joint Venture or Partnership Intended. ..........................................................35
12.10 Severability........................................................................................35
12.11 No Third Party Beneficiaries. ......................................................................35
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of October 21, 2002, between
HomeFed Corporation, a Delaware corporation having an office at 0000 Xxxxxx
Xxxxx, Xxxxx 000, Xxxxxxxx, Xxxxxxxxxx 00000 ("HomeFed"), and Leucadia National
Corporation, a New York corporation having an office at 000 Xxxx Xxxxxx Xxxxx,
Xxx Xxxx, Xxx Xxxx 00000 ("LUK").
W I T N E S S E T H:
WHEREAS, LUK is the record and beneficial owner of 1,000
shares (the "Shares") of common stock, $0.01 par value per share, of CDS Holding
Corporation, a Delaware corporation ("CDS"), representing all of the issued and
outstanding shares of capital stock of CDS; and
WHEREAS, LUK desires to sell, and HomeFed desires to buy,
all of the Shares;
NOW, THEREFORE, in consideration of the premises and of the
respective representations, warranties, covenants, agreements and conditions
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, on the terms and subject to the
conditions hereof, each of the parties hereto agrees as follows:
1. DEFINITIONS; INTERPRETATION.
1.1 DEFINITIONS. The terms defined in this Section 1.1,
whenever used in this Agreement, shall have the following meanings for all
purposes of this Agreement:
"Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Affiliate" of a specified Person means a Person that (at
the time when the determination is to be made) directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is under common
control with, the specified Person. As used in the foregoing sentence, the term
"control" (including, with correlative meaning, the terms "controlling",
"controlled by" and "under common control with") means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
"Asserted Liability" has the meaning set forth in Section
9.1(c).
"Balance Sheet" has the meaning set forth in Section 8.3.1.
"Bona Fide Settlement" has the meaning set forth in Section
9.3(c).
"Bonding Requirements" has the meaning set forth in Section
7.14.
"Bonds" has the meaning set forth in Section 7.14.
"Books and Records" means all of the books and records
(including all data and other information stored on discs, tapes or other media)
relating to the assets, Properties, business and operations of the Companies,
including all such items relating to the legal existence, stock ownership,
corporate management or other such corporate records.
"Business Day" means any day that is not a Saturday or a
Sunday or a day on which banks in the State of New York are authorized or
required by law to close.
"Cash Consideration" has the meaning set forth in Section
3.1.
"CDS" has the meaning set forth in the first Recital.
"CDS Material Adverse Effect" means a material adverse
effect on the assets, results of operations, business or condition (financial or
otherwise) of the Companies, taken as a whole.
"Closing" has the meaning set forth in Section 2.1.
"Closing Date" has the meaning set forth in Section 2.1.
"Code" means the Internal Revenue Code of 1986, as amended,
and the Treasury Regulations promulgated thereunder.
"Companies" means CDS and the Subsidiaries.
"Consideration" has the meaning set forth in Section 3.1.
"Contest" has the meaning set forth in Section 8.2.
"Contract" means any written agreement, instrument,
commitment or other contract.
"Credit Enhancements" has the meaning set forth in Section
7.14.
"Devco" means CDS Devco, Inc., a California corporation.
"Development Management Agreement" has the meaning set
forth in Section 7.3.
"Development Manager" has the meaning set forth in Section
7.3.
"Elections" has the meaning set forth in Section 8.5(a).
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"ERISA" means the Employee Retirement Income Security Act
of 1974, as amended, and the regulations promulgated thereunder.
"Extension Period" has the meaning set forth in Section
7.15.
"Filer" has the meaning set forth in Section 8.3.5(d).
"GAAP" means generally accepted accounting principles.
"Governmental Authority" means any foreign, federal, state,
local or other court, arbitration, administrative agency or commission,
insurance or securities regulatory or self-regulatory body or securities or
commodities exchange.
"HomeFed" has the meaning set forth in the first paragraph
of this Agreement.
"HomeFed Indemnitees" has the meaning set forth in Section
9.1(a).
"HomeFed Material Adverse Effect" means a material adverse
effect on the assets, results of operations, business or condition (financial or
otherwise) of HomeFed.
"HomeFed SEC Documents" has the meaning set forth in
Section 6.12.
"HomeFed Stock" has the meaning set forth in Section 3.1.
"HomeFed Stock Consideration" has the meaning set forth in
Section 3.1.
"Knowledge," "Knew" or "Known" means, with respect to any
representation or warranty in which such term is contained, to the actual
knowledge of any executive officer of the applicable person, without duty of
inquiry or investigation.
"Laws" has the meaning set forth in Section 5.7.
"LFC" has the meaning set forth in Section 7.15.
"Liability" means, with respect to any Person, any direct
or indirect indebtedness, liability, claim, loss, damage, deficiency, obligation
or responsibility (whether known, unknown, accrued, absolute, contingent,
unliquidated or otherwise) and regardless of when such liability or obligation
was or is asserted.
"Liable Party" has the meaning set forth in Section
8.3.5(d).
"Lien" means any lien, encumbrance, pledge, mortgage,
security interest, claim, charge, lease, option, right of first refusal,
easement, servitude, encumbrance, equity, claim or other third party right
(including a right of preemption), restriction or other limitation, in each case
of any nature whatsoever, except for liens of public record and liens created by
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the option and purchase agreements and escrow instructions with the merchant
builders for Phase I of the Project.
"Loss" and "Losses" have the meaning set forth in Section
9.1(b).
"LUK" has the meaning set forth in the first paragraph of
this Agreement.
"LUK Indemnitees" has the meaning set forth in Section
9.2(a).
"New York Court" has the meaning set forth in Section 12.5.
"Owned Properties" has the meaning set forth in Section
5.19.
"Person" means any individual, corporation, limited
liability company, partnership, firm, joint venture, association, trust,
unincorporated organization, Governmental Authority or other entity.
"Plan" means any "employee benefit plan" (as that term is
defined in Section 3(3) of ERISA), as well as any other written or unwritten
plan or Contract involving direct or indirect compensation, established,
maintained or contributed to by the Company , or under which the Company has any
present or future Liability on behalf of its employees or former employees or
their dependents or beneficiaries, including each retirement, pension,
profit-sharing, thrift, savings, target benefit or employee stock ownership
plan, cash or deferred, each other deferred or incentive compensation, bonus,
stock option, employee stock purchase, "phantom stock" or stock appreciation
right plan, each other program providing payment or reimbursement for or of
medical, dental or visual care, psychiatric counseling, or vacation, sick or
disability pay and each other "fringe benefit" plan or arrangement.
"Project" has the meaning set forth in Section 7.3.
"Property" means real, personal or mixed property, tangible
or intangible.
"Refusal Date" has the meaning set forth in Section 9.3(c).
"Registration Rights Agreement" has the meaning set forth
in Section 7.17.
"Scheduled Contracts" has the meaning set forth in Section
5.10.1.
"SEC" has the meaning set forth in Section 6.12.
"SERI" means San Elijo Ranch, Inc., a California
corporation.
"SERI Note" has the meaning set forth in Section 3.2.
"Shares" has the meaning set forth in the second recital of
this Agreement.
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"Subsidiaries" means Devco, SERI, San Elijo Hills
Development Company, a Delaware limited liability company, San Elijo Hills
Construction Company, a California corporation, SEH R LLC, a California limited
liability company, and SEH Copper Creek LLC, a Delaware limited liability
company.
"Stock Consideration Amount" has the meaning set forth in
Section 3.1.
"Taxes" means all United States federal, state, county,
local, foreign and other taxes, including income taxes, excise taxes, sales
taxes, use taxes, gross receipts taxes, franchise taxes, ad valorem taxes,
severance taxes, transfer taxes, employment and payroll-related taxes, property
taxes and other governmental charges and assessments, and includes interest,
additions to tax, penalties and reasonable attorneys' fees and accountants' fees
and disbursements with respect thereto.
"Tax Allocation Agreement" means that certain Tax
Allocation Agreement between LUK and certain of the Companies dated as of
December 29, 1994.
1.2 INTERPRETATION. When a reference is made in this
Agreement to a Section, Article, Schedule or Exhibit, such reference shall be to
a Section, Article, Schedule or Exhibit of this Agreement unless otherwise
indicated or unless the context shall otherwise require. The table of contents
and headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement. The
definitions of terms in this Agreement shall be applicable to both the plural
and the singular forms of the terms defined when either such form is used in
this Agreement. Whenever the words "include", "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation". The words "hereof", "herein" and "hereunder", and other words of
similar import, refer to this Agreement as a whole and not to any particular
Article, Section, subsection, paragraph or clause.
2. PURCHASE OF SECURITIES
2.1 CLOSING. The closing of the purchase and sale of the
Shares (the "Closing") shall take place at the offices of Pillsbury Winthrop
LLP, El Xxxxxx Xxxx, Xxxxx 000, Xxx Xxxxx, Xxxxxxxxxx on October 21, 2002, or at
such other place, time or date as the parties may mutually determine in writing.
(The actual date the Closing occurs is referred to herein as the "Closing
Date".)
2.2 SALE AND PURCHASE. Upon the terms and subject to the
conditions set forth in this Agreement, on the Closing Date LUK shall sell and
deliver to HomeFed, free and clear of all liens, and HomeFed shall purchase from
LUK the Shares for the Consideration specified in Section 3.1.
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3. CONSIDERATION AND PAYMENT
3.1 CONSIDERATION. Consideration for the Shares (the
"Consideration") shall consist of (i) One million dollars ($1,000,000) in cash
(the "Cash Consideration") and (ii) a number shares of common stock, $0.01 par
value per share, of HomeFed (the "HomeFed Stock") obtained by dividing
$24,000,000 (the "Stock Consideration Amount") by $0.97, rounded to the nearest
whole number of shares. The HomeFed Stock delivered to LUK pursuant to this
Section 3.1 shall be referred to as the "HomeFed Stock Consideration".
3.2 ADJUSTMENT TO CONSIDERATION. In determining the number
of shares of HomeFed Stock to be delivered as the HomeFed Stock Consideration,
the Stock Consideration Amount shall be (a) reduced on a dollar-for-dollar basis
by the amount, if any, that $15,200,000 exceeds the amount owed by SERI to Devco
(including, but not limited to, bond interest) at the Closing Date pursuant to
the Optional Advance Convertible Promissory Note dated January 1, 1995 of SERI,
as amended (the "SERI Note"); provided, however, that the Stock Consideration
Amount shall only be reduced if and to the extent that amounts that are
distributed, dividended or otherwise transferred by Devco to CDS and by CDS to
Leucadia, in which event the Stock Consideration Amount shall be reduced by the
amount of such distributions, dividends or other transfers received by Leucadia
from CDS following the date hereof and (b) increased on a dollar-for-dollar
basis by the amount, if any, by which the amount owed by SERI to Devco
(including, but not limited to, bond interest) pursuant to the SERI Note exceeds
$15,200,000 at the Closing Date.
3.3 PAYMENT OF CONSIDERATION; DELIVERY OF THE SHARES. Upon
the terms and subject to the conditions set forth in this Agreement, on the
Closing Date, HomeFed shall deliver to LUK (i) the Cash Consideration by wire
transfer of immediately available funds to an account designated by LUK to
HomeFed at least one (1) Business Day prior to the Closing Date and (ii) the
HomeFed Stock Consideration, issued in the name of LUK or such other person or
persons as LUK shall direct; and LUK shall deliver to HomeFed the Shares issued
in the name of HomeFed or such other person or persons as HomeFed shall direct,
duly endorsed in blank or accompanied by duly executed instruments of transfer
reasonably acceptable to HomeFed and accompanied by all requisite stock transfer
tax stamps.
4. CONDITIONS TO CLOSING.
4.1 CONDITIONS PRECEDENT TO OBLIGATION OF HOMEFED. The
obligation of HomeFed to consummate the Closing is subject to satisfaction of
the following conditions on or prior to the Closing Date (unless expressly
waived in writing by HomeFed on or prior to the Closing Date):
4.1.1 COMPLIANCE BY LUK. All of the terms, covenants and
conditions of this Agreement to be complied with and performed by LUK on or
prior to the Closing Date shall have been complied with and performed by it in
all material respects, and the representations and warranties made by LUK in
6
this Agreement shall be true and correct in all material respects on and as of
the Closing Date (except that representations and warranties qualified by the
terms "material" or "CDS Material Adverse Effect" shall be true and correct in
all respects) with the same force and effect as though such representations and
warranties had been made on and as of the Closing Date, except as a result of
actions contemplated or permitted by this Agreement and except that any such
representations and warranties that are given as of a particular date and relate
solely to a particular date or period shall be true and correct as of such date
or period.
4.1.2 COMPLIANCE CERTIFICATE. LUK shall deliver to HomeFed
a certificate dated as of the Closing Date and signed by an executive officer of
LUK certifying that the conditions specified in Sections 4.1.1, 4.1.3 and 4.1.4
have been fulfilled.
4.1.3 NO INJUNCTIONS OR RESTRAINTS. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any Governmental Authority or other legal restraint or prohibition preventing
the consummation of the Closing shall be in effect.
4.1.4 CONSENTS AND APPROVALS. All consents, approvals,
authorizations, licenses, permits and orders of, and registrations and filings
with, and notices to, any Governmental Authority required to be obtained, made
or given prior to the Closing Date in connection with the consummation of the
transactions contemplated hereby shall have been duly obtained, made or given
and shall be in full force and effect at the Closing, without the imposition of
any conditions or limitations.
4.1.5 RESIGNATION OF OFFICERS AND DIRECTORS. HomeFed shall
have received the written resignation of each officer and director of each of
the Companies (except for Xxxxxx Xxxx and Xxxxx Xxxxx as directors of SERI),
effective as of the Closing Date.
4.1.6 CORPORATE ACTION. HomeFed shall have received from
LUK a certificate of its Secretary or Assistant Secretary certifying as to (i)
the resolutions of the Board of Directors of LUK approving this Agreement and
authorizing the consummation of the transactions contemplated hereby and (ii)
the incumbency and signatures of the officers of LUK executing this Agreement.
4.2 CONDITIONS PRECEDENT TO OBLIGATION OF LUK. The
obligation of LUK to consummate the Closing is subject to satisfaction of the
following conditions on or prior to the Closing Date (unless expressly waived in
writing by LUK on or prior to the Closing Date):
4.2.1 COMPLIANCE BY HOMEFED. All of the terms, covenants
and conditions of this Agreement to be complied with and performed by HomeFed on
or prior to the Closing Date shall have been complied with and performed by it
in all material respects, and the representations and warranties made by HomeFed
in this Agreement shall be true and correct in all material respects on and as
7
of the Closing Date (except that representations and warranties qualified by the
terms "material" or "HomeFed Material Adverse Effect" shall be true and correct
in all respects) with the same force and effect as though such representations
and warranties had been made on and as of the Closing Date, except as a result
of actions contemplated or permitted by this Agreement and except that any such
representations and warranties that are given as of a particular date and relate
solely to a particular date or period shall be true and correct as of such date
or period.
4.2.2 COMPLIANCE CERTIFICATE. HomeFed shall deliver to LUK
a certificate dated as of the Closing Date and signed by an executive officer of
HomeFed certifying that the conditions specified in Sections 4.2.1, 4.2.3 and
4.2.4 have been fulfilled.
4.2.3 NO INJUNCTIONS OR RESTRAINTS. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any Governmental Authority or other legal restraint or prohibition preventing
the consummation of the Closing shall be in effect.
4.2.4 CONSENTS AND APPROVALS. All consents, approvals,
authorizations, licenses, permits and orders of, and registrations and filings
with, and notices to, any Governmental Authority required to be obtained, made
or given prior to the Closing Date in connection with the consummation of the
transactions contemplated hereby shall have been duly obtained, made or given
and shall be in full force and effect at the Closing, without the imposition of
any conditions or limitations other than conditions customarily imposed by
insurance regulatory authorities in connection with similar transactions.
4.2.5 CORPORATE ACTION. LUK shall have received from
HomeFed a certificate of its Secretary or Assistant Secretary certifying as to
(i) the resolutions of the Board of Directors of HomeFed approving this
Agreement and authorizing the consummation of the transactions contemplated
hereby and (ii) the incumbency and signatures of the officers of HomeFed
executing this Agreement.
4.2.6 REGISTRATION RIGHTS AGREEMENT. The Registration
Rights Agreement referred to in Section 7.17 shall have been executed by HomeFed
and delivered to LUK.
5. REPRESENTATIONS AND WARRANTIES OF LUK.
Except to the extent that HomeFed has Knowledge of any
matter contained in this Article 5, LUK hereby represents and warrants to
HomeFed as follows:
5.1 CORPORATE EXISTENCE. Each of LUK and the Companies is a
corporation or other entity duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is organized. Each of
the Companies has full power and authority to own, lease and operate its assets
8
and Properties and to conduct its business as now being conducted. Except as
otherwise disclosed on Schedule 5.1, each of the Companies is licensed to
transact business and is in good standing in each of the respective
jurisdictions in which the nature of its respective business or the ownership or
leasing of its respective Properties makes such qualification necessary, except
where the failure to be qualified and/or licensed would not have a CDS Material
Adverse Effect.
5.2 AUTHORIZATION; ENFORCEMENT. LUK has the full corporate
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder. LUK has taken all necessary corporate action to duly and
validly authorize its execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby. This Agreement has been
duly executed and delivered by LUK. This Agreement, assuming due execution and
delivery by HomeFed, constitutes a valid and binding obligation of LUK,
enforceable against LUK in accordance with its terms, except to the extent
enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium
or other similar Laws affecting creditors' rights in general and subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
5.3 CAPITAL STOCK OF CDS; OWNERSHIP OF THE SHARES. The
authorized capital stock of CDS consists of 1,000 shares of common stock, par
value $0.01 per share, of which 1,000 are issued and outstanding and constitute
the Shares. All of the Shares have been duly authorized and validly issued, and
are fully paid and non-assessable. The Shares have not been issued in violation
of, and none of the Shares is subject to, any preemptive or subscription rights,
right of first refusal or any other right of any Person. Except as set forth
above, there are no shares of capital stock or other securities of CDS
outstanding. There are no outstanding warrants, options, Contracts, convertible
or exchangeable securities or other commitments (other than this Agreement)
pursuant to which LUK or CDS is or may be obligated to issue, sell, purchase,
return or redeem any shares of capital stock or other securities of CDS, and
there are no equity securities of CDS reserved for issuance for any purpose.
5.3.1 BENEFICIAL OWNERSHIP. LUK is the record and
beneficial owner of the Shares, free and clear of any Liens (other than
restrictions imposed by applicable Laws with respect to the offering,
distribution, acquisition and disposition of securities). Upon consummation of
the transactions contemplated by this Agreement, HomeFed will acquire record and
beneficial ownership of the Shares, free and clear of any Liens (other than
Liens created by, or permitted by this Agreement to be created by, HomeFed, and
other than restrictions imposed by applicable Laws with respect to the offering,
distribution, acquisition and disposition of securities). Other than this
Agreement, the Shares are not subject to any voting trust agreement or other
contract, agreement, arrangement, commitment or understanding, including any
such agreement, arrangement, commitment or understanding restricting or
otherwise relating to the voting, dividend rights or disposition of the Shares.
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5.3.2 SUBSIDIARIES. Except as set forth on Schedule 5.3.2,
(i) CDS does not directly or indirectly have (or possess any options or other
rights to acquire) any subsidiaries or any direct or indirect equity ownership
interest in any Person other than the Subsidiaries, (ii) all issued and
outstanding shares of capital stock of, or other ownership interests in each of
the Subsidiaries are duly authorized, validly issued, fully paid and
non-assessable and are not subject to pre-emptive rights and are owned directly
or indirectly by CDS, free and clear of all Liens (other than restrictions
imposed by applicable Laws with respect to the offering, distribution,
acquisition and disposition of securities), and (iii) none of the Subsidiaries
has any outstanding option, warrant, subscription or other right, agreement or
commitment which either (i) obligates any person to issue, sell, deliver or
transfer, repurchase, redeem or otherwise acquire or vote any share of capital
stock or other security of or ownership interest in any Subsidiary or (ii)
restricts the transfer of the Shares.
5.4 NO CONFLICT. Neither the execution, delivery and
performance by LUK of this Agreement nor the consummation of the transactions
contemplated by this Agreement will: (i) violate any provision of the
certificate of incorporation, by-laws or other charter or organizational
document of LUK or the Companies; (ii) violate, conflict with or result in the
breach of any of the terms of, result in any modification of the effect of,
otherwise give any other contracting party the right to terminate, or constitute
(or with notice or lapse of time or both constitute) a default under, any
Contract to which LUK or the Companies are a party or by or to which LUK, or to
the Knowledge of LUK, any of the Companies or their respective assets or
Properties is, to the Knowledge of LUK, bound or subject, except for such
violations, conflicts or breaches that individually or in the aggregate would
not have a CDS Material Adverse Effect; (iii) violate any order, judgment,
injunction, award or decree of any Governmental Authority against, or binding
upon, or any Contract with, or condition imposed by, any Governmental Authority
binding upon, LUK or, to the Knowledge of LUK, the Companies, or upon the
business, Properties or assets of LUK, or, to the Knowledge of LUK, the
Companies, except for such violations that individually or in the aggregate
would not have a CDS Material Adverse Effect; (iv) subject to making the filings
and obtaining the consents contemplated by Section 5.6 of this Agreement,
violate any statute, law or regulation of any jurisdiction as such statute, law
or regulation relates to LUK or, to the Knowledge of LUK, the Companies, or to
the business, Properties or assets of LUK or, to the Knowledge of LUK, the
Companies, except for such violations that individually or in the aggregate
would not have a CDS Material Adverse Effect; or (v) except for this Agreement,
result in the creation or imposition of any Lien on any of the Properties or
assets of LUK or, to the Knowledge of LUK, the Companies; provided, however, LUK
makes no representation or warranty as to any of (ii) through (v) above as
relating to (a) the Development Management Agreement or (b) the Project.
5.5 CERTIFICATE OF INCORPORATION AND BY-LAWS. LUK has made
available to HomeFed complete and correct copies of the certificate of
incorporation, charter or certificate of formation, as applicable, and the
by-laws, operating or similar agreements of the Companies and all amendments
thereof.
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5.6 CONSENTS. No consent, license, approval, order or
authorization of, or registration, declaration or filing with, any third party,
including any Governmental Authority, is required to be obtained, made or given
by or with respect to LUK or, to the Knowledge of LUK, the Companies in
connection with the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby other than those required
or appropriate in connection with the Elections contemplated under Section 8.5
of this Agreement.
5.7 COMPLIANCE WITH LAW. To the Knowledge of LUK, the
Companies have complied in all material respects with, and are now complying in
all material respects with, all material foreign, federal, state and local
statutes, laws, regulations, ordinances, judgments, injunctions, orders,
licenses, approvals, permits and other requirements (collectively, "Laws")
applicable to the Companies or their respective business, Properties or assets,
except for such failures to so comply that individually or in the aggregate
would not have a CDS Material Adverse Effect.
5.8 LITIGATION. Except as disclosed on Schedule 5.8 and as
related to the Development Management Agreement or the Project, there are no
actions, suits, proceedings, claims or legal, administrative or arbitration
proceedings or investigations pending or, to the Knowledge of LUK, threatened
(i) against or involving the Companies or its business, Properties or assets or
(ii) which question the validity of this Agreement or any action taken by LUK or
CDS pursuant to this Agreement or the transactions contemplated hereby.
5.9 REGULATORY FILINGS. To the Knowledge of LUK, the
Companies have filed all material reports, data, registrations, filings, other
information and applications required to be filed with or otherwise provided to
Governmental Authorities with jurisdiction over the Companies or their
respective business, Properties or assets, in each case except such failures to
file that individually or in the aggregate would not have a CDS Material Adverse
Effect.
5.10 CONTRACTS.
5.10.1 Set forth on Schedule 5.10.1 is a true, complete and
correct list of each Contract, other than any Contracts related to the Project
or entered into (i) with HomeFed's consent, (ii) pursuant to the Development
Management Agreement, or (iii) otherwise disclosed or Known to HomeFed, to which
any of the Companies is a party or by which any is bound that is currently in
effect and is not terminable without penalty or payment on less than 30 days
notice, in each case the aggregate payment under such Contract in excess of
$100,000 per agreement, including all transactions between Affiliates;
borrowings of money; purchases of materials, supplies, equipment, products or
services; the use of trademarks, trade names or copyrights; distribution of
products; or leases (capital or otherwise) (collectively, the "Scheduled
Contracts").
5.10.2 With respect to the Companies' performance of their
obligations under the Scheduled Contracts, to the Knowledge of LUK, no event of
default or non-compliance, or event which, with the passage of time, giving of
11
notice or both, would constitute such an event of default or non-compliance, has
occurred or is continuing under any such Scheduled Contract. With respect to the
performance by any other party of its obligations under the Scheduled Contracts,
to the Knowledge of LUK, no event of default or non-compliance, or event which,
with the passage of time, giving of notice or both, would constitute such an
event of default or non-compliance, has occurred or is continuing under any such
Scheduled Contract.
5.11 FINDER'S FEES. No broker or finder has acted directly
or indirectly for LUK or any of its Affiliates in connection with this Agreement
or the transactions contemplated hereby, nor has LUK or any of its Affiliates
taken any action in connection with this Agreement or the transactions
contemplated hereby so as to give rise to any valid claim against HomeFed or the
Companies for any broker's or finder's fee or other commission or compensation.
5.12 ASSETS AND PROPERTIES. To the Knowledge of LUK, except
(i) as related to the Development Management Agreement or the Project or (ii) as
set forth on Schedule 5.12, each of the Companies owns all assets and Properties
that it purports to own, free of any Liens, other than (a) Liens for Taxes not
yet due and payable, (b) restrictions imposed by applicable Laws with respect to
the offering, distribution, acquisition and disposition of securities and (c)
statutory Liens of landlords, carriers, warehousemen, mechanics, materialmen and
other Liens imposed by applicable Laws and created in the ordinary course of the
Business.
5.13 EMPLOYEE BENEFITS. As of the Closing Date, to the
Knowledge of LUK, the Companies will not have any Liabilities under any Plan,
ERISA or the minimum funding requirements of the Code.
5.14 NO MATERIAL ADVERSE CHANGE. Except as set forth on
Schedule 5.14 or as otherwise Known to HomeFed, except for changes in general
economic conditions, changes in prevailing interest rates and changes in
applicable law, since June 30, 2002, to LUK's Knowledge, there has been (a) no
change, or development involving a prospective change, in the general affairs,
management, shareholders' equity, assets, Liabilities Known to LUK, Properties,
business, operations, condition (financial or otherwise) or results of
operations of the Companies, that has resulted in or may reasonably be expected
to result in, either alone or in conjunction with all other such changes and
developments, a CDS Material Adverse Effect, other than those resulting from
matters relating to or contemplated under this Agreement, (b) no material change
in the manner in which the business of the Companies is conducted other than
those resulting from matters relating to or contemplated under this Agreement,
and (c) no event of the type prohibited by Section 7.2 of this Agreement that
has occurred in violation of Section 7.2.
5.15 INTANGIBLE PROPERTY. To the Knowledge of LUK, none of
the Companies has received any written notice that it is infringing (or is
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alleged to be infringing) on any trademark, trade name registration, copyright
or any application pending therefor.
5.16 INSURANCE. Schedule 5.16 sets forth a correct and
complete list of all policies or binders of errors and omissions, theft, life,
fidelity, fire, liability, products liability, workers' compensation, vehicular
and other insurance held by or on behalf of, or issued to, the Companies. All of
such policies and binders are, to LUK's Knowledge, in full force and effect;
there are no overdue premiums thereon; and none of the Companies has received
any notice of any proposed cancellation or non-renewal of any such policy or
binder; provided, however, that, effective as of December 31, 2002, LUK intends
to remove the Companies from future coverage under all insurance policies issued
to LUK.
5.17 POWERS OF ATTORNEY; GUARANTEES; REQUIRED INSURANCE;
AGENTS. Except (i) as set forth on Schedule 5.17 or (ii) for those given or owed
to HomeFed or any of its officers or employees, the Companies do not have any
outstanding powers of attorney or any Liability Known to LUK as guarantor,
surety, cosigner or endorser (other than for purposes of collection in the
ordinary course of business of the Companies). The Companies are not obligated
to maintain insurance for the benefit of any Person (including Persons named as
additional insureds), except as set forth on Schedule 5.17.
5.18 DISCLOSURE. To the Knowledge of LUK, neither the
representations or warranties made by LUK in this Agreement nor any certificate
or other document furnished by or on behalf of LUK to HomeFed pursuant hereto
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances in which they were made.
5.19 ENVIRONMENTAL PROTECTION. To the Knowledge of LUK, (a)
the Companies have received no notices from any Governmental Authority of any
violation of any applicable environmental protection laws with respect to any
real property currently owned by any of the Companies (the "Owned Properties")
other than notices for any such violation that heretofore has been cured, and
(b) no action or proceeding is pending or threatened by any Governmental
Authority concerning the enforcement of any applicable environmental protection
laws with respect to the Owned Properties.
5.20 FINANCIAL STATEMENTS. LUK has delivered to HomeFed an
unaudited consolidated balance sheet of CDS and its Subsidiaries as of September
30, 2002 and related unaudited statements of operations, changes in
shareholders' equity and cash flows of CDS and its Subsidiaries for the
nine-month period then ended.
5.21 INVESTMENT PURPOSE. LUK is buying the HomeFed Stock
for investment only and not with a view to resale in connection with any
distribution of any of the HomeFed Stock except in compliance with the Act and
all other applicable securities laws. LUK understands that the HomeFed Stock has
not been registered under the Act or under the securities laws of any state and
that the HomeFed Stock may not be sold, transferred, offered for sale, pledged,
hypothecated or otherwise disposed of in the absence of an effective
13
registration under the Act except pursuant to a valid exemption from such
registration.
6. REPRESENTATIONS AND WARRANTIES OF HOMEFED.
Except to the extent that LUK has Knowledge of any matter
contained in this Article 6, HomeFed hereby represents and warrants to LUK as
follows:
6.1 CORPORATE EXISTENCE. HomeFed is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. HomeFed has full power and authority to own, lease and operate its
assets and Properties and to conduct its business as now being conducted. Except
as otherwise disclosed on Schedule 6.1, HomeFed is licensed to transact business
and is in good standing in each of the jurisdictions in which the nature of its
business or the ownership or leasing of its Properties makes such qualification
necessary, except where the failure to be so qualified and/or licensed would not
have a HomeFed Material Adverse Effect.
6.2 AUTHORIZATION; ENFORCEMENT. HomeFed has the full
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder, to issue and deliver the HomeFed Stock
Consideration and to execute and deliver the Registration Rights Agreement.
HomeFed has taken all necessary corporate action to duly and validly authorize
its execution and delivery of this Agreement, the issuance and delivery of the
HomeFed Stock Consideration, its execution and delivery of the Registration
Rights Agreement, and the consummation of the transactions contemplated hereby.
This Agreement has been duly executed and delivered by HomeFed. This Agreement,
assuming due execution and delivery by LUK, constitutes a valid and binding
obligation of HomeFed, enforceable against HomeFed in accordance with its terms,
except to the extent enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar Laws affecting creditors' rights in
general and subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
6.3 CAPITAL STOCK OF HOMEFED. The authorized capital stock
of HomeFed consists of 250,000,000 shares of common stock, par value $0.01 per
share, of which 56,808,576 are issued and outstanding. Except as set forth on
Schedule 6.3, there are no outstanding warrants, options, Contracts, convertible
or exchangeable securities or other commitments (other than this Agreement)
pursuant to which HomeFed is or may be obligated to issue, sell, purchase,
return or redeem any shares of its capital stock or other securities, and there
are no equity securities of HomeFed reserved for issuance for any purpose.
6.4 NO CONFLICT. Neither the execution, delivery and
performance by HomeFed of this Agreement or the Registration Rights Agreement,
the issuance of the HomeFed Stock Consideration nor the consummation of the
transactions contemplated by this Agreement will: (i) violate any provision of
the charter or by-laws of HomeFed; (ii) violate, conflict with or result in the
breach of any of the terms of, result in any modification of the effect of,
14
otherwise give any other contracting party the right to terminate, or constitute
(or with notice or lapse of time or both constitute) a default under, any
Contract to which HomeFed is a party or by or to which it or its assets or
Properties may be bound or subject, except for such violations, conflicts or
breaches that individually or in the aggregate would not have a HomeFed Material
Adverse Effect on the validity or enforceability of this Agreement or on the
ability of HomeFed to perform its obligations under this Agreement in a timely
manner; (iii) violate any order, judgment, injunction, award or decree of any
Governmental Authority against, or binding upon, or any Contract with, or
condition imposed by, any Governmental Authority binding upon, HomeFed, or upon
the business, Properties or assets of HomeFed except for such violations that
individually or in the aggregate would not have a HomeFed Material Adverse
Effect on the validity or enforceability of this Agreement or on the ability of
HomeFed to perform its obligations under this Agreement in a timely manner; or
(iv) subject to making the filings and obtaining the consents contemplated by
Section 6.5 of this Agreement, violate any statute, law or regulation of any
jurisdiction as such statute, law or regulation relates to HomeFed, or to the
business, Properties or assets of HomeFed except for such violations that
individually or in the aggregate would not have a HomeFed Material Adverse
Effect on the validity or enforceability of this Agreement or on the ability of
HomeFed to perform its obligations under this Agreement in a timely manner.
6.5 CONSENTS. No consent, license, approval, order or
authorization of, or registration, declaration or filing with, any third party,
including any Governmental Authority, is required to be obtained, made or given
by or with respect to HomeFed in connection with the execution, delivery and
performance of this Agreement or the Registration Rights Agreement, the issuance
and delivery of the HomeFed Stock Consideration or the consummation of the
transactions contemplated by this Agreement and compliance with the provisions
of this Agreement other than those required or appropriate in connection with
the Elections contemplated under Section 8.5 of this Agreement.
6.6 LITIGATION. There are no actions, suits, proceedings,
claims or legal, administrative or arbitration proceedings or investigations
pending or, to the Knowledge of HomeFed, threatened which question the validity
of this Agreement or any action taken by HomeFed pursuant to this Agreement or
the transactions contemplated hereby.
6.7 FINDER'S FEES. No broker or finder has acted directly
or indirectly for HomeFed or any of its Affiliates in connection with this
Agreement or the transactions contemplated hereby, nor has HomeFed or any of its
Affiliates taken any action in connection with this Agreement or the
transactions contemplated hereby so as to give rise to any valid claim against
LUK for any broker's or finder's fee or other commission or compensation.
6.8 DISCLOSURE. To the Knowledge of HomeFed, neither the
representations or warranties made by HomeFed in this Agreement nor any
15
certificate or other document furnished by or on behalf of HomeFed to LUK
pursuant hereto contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained herein
or therein not misleading in light of the circumstances in which they were made.
6.9 INVESTMENT PURPOSE. HomeFed is buying the Shares for
investment only and not with a view to resale in connection with any
distribution of any of the Shares except in compliance with the Act and all
other applicable securities laws. HomeFed understands that the Shares have not
been registered under the Act or under the securities laws of any state and that
the Shares may not be sold, transferred, offered for sale, pledged, hypothecated
or otherwise disposed of in the absence of an effective registration under the
Act except pursuant to a valid exemption from such registration.
6.10 AUTHORIZATION AND ISSUANCE OF HOMEFED STOCK
CONSIDERATION. The issuance of the HomeFed Stock Consideration has been duly
authorized and, upon delivery to LUK of certificates therefore against payment,
in accordance with the terms hereof, the HomeFed Stock will be validly issued
and fully paid and non-assessable, free and clear of all pledges, liens,
encumbrances and preemptive rights.
6.11 NO MATERIAL ADVERSE CHANGE. Except as set forth on
Schedule 6.11 or as otherwise Known to LUK, except for changes in general
economic conditions, changes in prevailing interest rates and changes in
applicable law, since June 30, 2002, to HomeFed's Knowledge, there has been (a)
no change, or development involving a prospective change, in the general
affairs, management, shareholders' equity, assets, Liabilities Known to HomeFed,
Properties, business, operations, condition (financial or otherwise) or results
of operations of the HomeFed or its subsidiaries, that has resulted in or may
reasonably be expected to result in, either alone or in conjunction with all
other such changes and developments, a HomeFed Material Adverse Effect, other
than those resulting from matters relating to or contemplated under this
Agreement, (b) no material change in the manner in which the business of HomeFed
or its subsidiaries is conducted other than those resulting from matters
relating to or contemplated under this Agreement, and (c) no event prohibited by
Section 7.16 of this Agreement that has occurred in violation of Section 7.16.
6.12 REPORTS. HomeFed has furnished to LUK an accurate and
complete copy of each registration statement and proxy statement filed by
HomeFed with the Securities and Exchange Commission (the "SEC") since December
31, 1999 (the "HomeFed SEC Documents"). Since December 31, 1999, HomeFed has
filed all required forms, reports and documents required to be filed by it
pursuant to the Securities Act of 1933, as amended and the Securities Exchange
Act of 1934, as amended and the rules and regulations thereunder. The HomeFed
SEC documents, including without limitation any financial statements or
schedules included therein, when filed, (a) did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading and (b) complied in all
16
material respects with the applicable respects with the applicable rules and
regulations thereunder.
6.13 FINANCIAL STATEMENTS. Other than as disclosed in
filings by HomeFed with the SEC, the financial statements of HomeFed (including
the related notes thereto) included in the HomeFed SEC Documents comply as to
form in all material respects with the applicable accounting requirements and
with the published rules and regulations of the SEC with respect thereto, and
have been prepared in accordance with GAAP applied on a consistent basis during
the periods involved (except as may be indicated in such financial statements or
in the notes thereto or, in the case of the unaudited financial statements, as
permitted by the requirements of Form 10-Q) and fairly present in accordance
with GAAP (subject, in the case of the unaudited financial statements, to normal
recurring audit adjustments) the consolidated financial position of HomeFed and
its consolidated subsidiaries as of the date thereof and the consolidated
results of operations and cash flows of HomeFed and its subsidiaries for the
periods then ended.
7. COVENANTS, AGREEMENTS AND ACKNOWLEDGMENTS.
7.1 CONDUCT OF BUSINESS OF THE COMPANIES. Except as
otherwise contemplated by this Agreement or specifically consented to in writing
by HomeFed or authorized by HomeFed under the Development Management Agreement,
from the date of this Agreement through the Closing Date, LUK shall cause the
Companies to (i) conduct their businesses only in the ordinary course consistent
with past practices, (ii) maintain insurance coverages; provided, however, that
consistent with past practices, the Companies shall reimburse LUK for the cost
of providing such insurance coverages, (iii) comply in all material respects
with all applicable Laws, and (iv) perform in all material respects their
obligations under all Contracts material to the operations of the Companies
taken as a whole to which they are parties or by which they are bound and shall
maintain all existing agreements and arrangements between or among LUK and the
Companies.
7.2 RESTRICTIONS.
7.2.1 Except as otherwise contemplated by this Agreement,
set forth on Schedule 7.2, specifically consented to in writing by HomeFed or
contemplated by the Development Management Agreement, and excluding any actions
taken in the ordinary course of business consistent with past practices, from
the date of this Agreement through the Closing Date, LUK shall not permit any of
the Companies to:
(i) amend its certificate of incorporation or
charter, as applicable, or by-laws;
(ii) declare or pay any dividend or make any other
distributions to LUK as a shareholder whether or not upon or
in respect of any shares of its capital stock unless such
17
declaration, payment or making would be pursuant to Section
7.4 and permitted under applicable Laws;
(iii) redeem or otherwise acquire any shares of its
capital stock or issue any capital stock or any option,
warrant or right relating thereto or any securities
convertible into or exchangeable for any shares of capital
stock;
(iv) subject to any Lien (other than for (i) Taxes
not yet due and payable and (ii) statutory Liens of landlords,
carriers, warehousemen, mechanics, materialmen and other Liens
imposed by applicable Laws and created in the ordinary course
of the Business) any of its Properties or assets;
(v) except for (i) intercompany payments relating to
Taxes and other operating expenses paid or advanced by LUK to
or on behalf of the Companies or (ii) pay, lend or advance any
amount to, or sell, transfer or lease any of its Properties or
assets to, or enter into any agreement or arrangement with,
LUK or any of its Affiliates;
(vi) acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of
the assets of, or by any other manner, any Person or division
thereof or otherwise acquire or agree to acquire any assets
that are material individually or in the aggregate to the
Companies;
(vii) sell, lease or otherwise dispose of, or agree
to sell, lease or otherwise dispose of, any of its Properties
or assets that are material, individually or in the aggregate,
to the Companies, except in the ordinary course of business
consistent with past practice;
(viii) enter into any material lease of Property; or
(ix) agree, whether in writing or otherwise, to do
any of the foregoing.
7.2.2 Except as specifically consented to in writing by
HomeFed, LUK shall not, and shall not permit any of the Companies to, take any
action or omit to take any action that would result in a breach of any
representation or warranty of LUK contained in this Agreement.
7.3 ACCESS TO INFORMATION; DUE DILIGENCE; CONFIDENTIALITY.
HomeFed acknowledges that it is the Development Manager (the "Development
Manager") of the Companies' San Elijo Hills project (the "Project") pursuant to
the Development Management Agreement dated as of August 14, 1998 between HomeFed
18
and San Elijo Hills Development Company, LLC (the "Development Management
Agreement") and in that capacity has material non-public information concerning
the Companies. If additional information concerning the Companies is required by
HomeFed, prior to the Closing Date, HomeFed shall be entitled, through its
employees, agents and representatives, to make such reasonable investigation of
the assets, liabilities, financial condition, Properties, business and
operations of the Companies as HomeFed may reasonably deem necessary or
appropriate, and for such purposes to have access to the Books and Records and
Contracts and facilities of the Companies, and access to the personnel of the
Companies, and LUK with respect to the Companies, including an examination of
the corporate records and minute books, financial statements and projections,
insurance department filings, reports and examinations, summaries of pending
litigation, tax returns, accounting methods, business plans and prospects, in
each case wherever located, of the Companies. Any such investigation, access and
examination shall be conducted during regular business hours upon reasonable
prior notice and under other reasonable circumstances, and LUK, the Companies
and their respective employees, agents and representatives, including their
respective counsel and independent public accountants, shall cooperate fully
with such employees and representatives in connection with such investigation,
access and examination. HomeFed shall hold such documents and other material,
including information concerning LUK and the Companies, in confidence. HomeFed
shall hold all documents and other material and information described in this
Section 7.3 relating to LUK's tax positions, information, analyses, returns,
filings, and similar matters in confidence in accordance with the terms and
conditions of this Section without regard to the term thereof, unless such
document, other material or information (i) was generally known and available in
the public domain at the time of disclosure or subsequently becomes generally
known and available in the public domain through no fault of HomeFed, (ii) was
received by HomeFed from a third party having no obligation of confidentiality
to LUK, or (iii) is required to be disclosed by operation of Law.
7.4 PAYMENTS OF INTERCOMPANY INDEBTEDNESS; LIQUIDATING
DISTRIBUTIONS. Notwithstanding Section 7.2 hereof, there shall be no restriction
on repayments of indebtedness by any of the Companies to any of their parent
entities, whether by way of dividend, distribution or otherwise; provided
however, any such dividend, distribution or otherwise to Leucadia shall be
considered a reduction of the amount owed by SERI to Devco under the SERI Note
and shall be included in determining the adjustment of the Stock Consideration
Amount pursuant to Section 3.2. If any such repayments are made by SERI or any
other of the Companies the recipient of any such repayment (and its respective
parent entities) shall have the right to distribute such funds to their
respective parent entities.
7.5 APPROVALS OF GOVERNMENTAL AUTHORITIES.
7.5.1 HomeFed shall take, and shall cause its Affiliates to
take, all reasonable steps necessary or appropriate, and shall use, and shall
cause its Affiliates to use, all commercially reasonable efforts, to obtain as
promptly as practicable all consents, approvals, authorizations, licenses and
19
orders of Governmental Authorities, if any, required to be obtained by HomeFed
or any of its Affiliates in connection with the consummation of the transactions
contemplated by this Agreement.
7.5.2 LUK shall cooperate with HomeFed and its Affiliates
in seeking to obtain all such consents, approvals, authorizations, licenses and
orders, and shall provide and shall cause their respective Affiliates to
provide, such information and communications to Governmental Authorities as such
Governmental Authorities, if any, may reasonably request in connection
therewith.
7.6 FURTHER ASSURANCES. On and after the Closing Date, each
of the parties shall execute, and shall cause their respective Affiliates to
execute, such reasonable documents, instruments and conveyances and take, and
cause their respective Affiliates to take, such further reasonable actions as
may be reasonably required or desirable to carry out the transactions
contemplated by this Agreement. From and after the Closing Date, any notice or
inquiries received by LUK on behalf of the Companies will be promptly forwarded
or referred to HomeFed.
7.7 NOTIFICATION OF CHANGES.
7.7.1 LUK shall promptly notify HomeFed in writing of any
event or the existence of any state of facts that LUK becomes aware of prior to
the Closing Date that would (i) make any of the representations and warranties
of HomeFed or LUK contained in this Agreement untrue or inaccurate in any
material respect or (ii) otherwise constitute a CDS Material Adverse Effect. LUK
shall also promptly notify HomeFed in writing of any breach by HomeFed of any
representation, warranty or covenant of HomeFed contained in this Agreement that
LUK becomes aware of prior to the Closing Date.
7.7.2 HomeFed acknowledges that in its capacity as
Development Manager it may acquire information, whether Known or not Known to
LUK concerning the Companies that could affect the representations and
warranties contained in this Agreement. HomeFed shall promptly notify LUK in
writing of any event or the existence of any state of facts that HomeFed becomes
aware of prior to the Closing Date that would (i) make any of the
representations and warranties of HomeFed or LUK contained in this Agreement
untrue or inaccurate in any material respect or (ii) otherwise constitute a
HomeFed Material Adverse Effect. HomeFed shall also promptly notify LUK in
writing of any breach by LUK of any representation, warranty or covenant of LUK
contained in this Agreement that HomeFed becomes aware of prior to the Closing
Date.
7.8 PERFORMANCE OF CONDITIONS. LUK shall, and shall cause
the Companies to, take all commercially reasonable steps necessary or
appropriate, and shall use all commercially reasonable efforts, to effect as
promptly as practicable the satisfaction of the conditions required to be
satisfied in order for HomeFed and LUK to consummate the transactions
contemplated by this Agreement, including all conditions set forth in Section
4.1 of this Agreement. HomeFed shall take all commercially reasonable steps
20
necessary or appropriate, and shall use all commercially reasonable efforts, to
effect as promptly as practicable the satisfaction of the conditions required to
be satisfied in order for HomeFed and LUK to consummate the transactions
contemplated by this Agreement, including all conditions set forth in Section
4.2 of this Agreement.
7.9 PUBLICITY. LUK and HomeFed agree that, from the date
hereof through the Closing Date, no public release or announcement concerning
the transactions contemplated hereby shall be issued by either party without the
prior written consent of the other party (which consent shall not be
unreasonably withheld), except such release or announcement as may be required
by law, in which case the party required to make the release or announcement
shall allow the other party three Business Days or such shorter amount of time
as is practicable under the circumstances to comment on such release or
announcement in advance of such issuance.
7.10 AUTHORITY, BANK ACCOUNTS, ETC. Resignations,
appropriately executed signature cards, and all other documentation needed in
preparation for closing bank and other investment accounts of any of the
Companies and deposits maintained by any of the Companies with any Governmental
Authority, or transferring signature authority therefor, will be provided to
HomeFed by LUK upon Closing. LUK will cooperate with and assist HomeFed in
obtaining, subsequent to Closing, any statutory or regulatory approvals required
to enable any of the Companies to make the appropriate closings or transfers,
including transfers of signature authorization, and in providing all notices
thereof as may be required by appropriate Governmental Authorities. From and
after the Closing, no agent or officer of LUK shall take any action with respect
to any such accounts or deposits other than as may be expressly authorized in
writing by HomeFed.
7.11 DELIVERY OF REPORTS. Not later than thirty (30) days
following the last day of each fiscal quarter of CDS after the Closing Date,
HomeFed will deliver to LUK the CDS Calculation of Excess Cash Flow Report
prepared on a basis consistent with the preparation of the CDS Calculation of
Excess Cash Flow Report as of the Closing Date.
7.12 HOMEFED ACKNOWLEDGMENTS.
7.12.1 NO REGISTRATION RIGHTS. HomeFed acknowledges that it
shall not be entitled to any registration rights with respect to the Shares.
7.12.2 FUNDING OF OPERATIONS. HomeFed acknowledges that
upon consummation of the transaction contemplated by this Agreement, LUK shall
have no obligation to fund any operations of any of the Companies.
7.12.3 MUNICIPAL BONDS. HomeFed acknowledges that LUK has
no obligation to purchase municipal bonds with respect to any of the Companies
or their respective operations.
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7.13 DELIVERY OF AUDITED FINANCIAL STATEMENTS. Not later
than sixty (60) days after the Closing Date, LUK will use its commercially
reasonable efforts to deliver to HomeFed audited financial statements consisting
of a balance sheet and related audited statements of operations, changes in
shareholders' equity and cash flows of CDS and its Subsidiaries at December 31,
1999, 2000 and 2001 and for each of the years then ended, prepared in accordance
with GAAP applied on a consistent basis throughout the periods covered and
otherwise conforming to the rules and regulations of the SEC as applied to
companies required to register under the Securities and Exchange Act of 1934, as
amended.
7.14 SECURITY FOR CREDIT ENHANCEMENTS. HomeFed acknowledges
that: (i) SERI is the owner of certain real property located in San Elijo Hills,
San Diego County, California being developed as the Project; (ii) in connection
with the Project, SERI is required to satisfy certain governmental bonding
requirements relating to development of an infrastructure for the Project (the
"Bonding Requirements"); (iii) LUK, either directly or through an Affiliate,
currently provides and has in the past provided certain guarantees or other
credit enhancements to third parties at no cost to CDS (the "Credit
Enhancements") to enable SERI to satisfy its Bonding Requirements through the
issuance by third parties of improvement bonds, warranty bonds and other bonds
required to meet the Bonding Requirements ("Bonds"); (iv) pursuant to the
Agreement (the "SERI Agreement") dated as of October 1, 2002, LUK and SERI have
documented their existing agreement that SERI shall reimburse LUK for certain
costs and expenses incurred by or charged to LUK in connection with the issuance
of Bonds or a draw thereon; and (v) pursuant to the Agreement and Guaranty (the
"CDS Guaranty") dated as of October 1, 2002, CDS has guaranteed the obligations
of SERI to LUK. At LUK's option, LUK shall have the right to secure (a) SERI's
performance of its obligations under the SERI Agreement and (b) CDS's
obligations under the CDS Guaranty by obtaining a pledge of all of the
outstanding stock of CDS pursuant to documents acceptable to LUK.
7.15 [RESERVED]
7.16 CONDUCT OF BUSINESS OF HOMEFED.
7.16.1 Except as otherwise contemplated by this Agreement
or specifically consented to in writing by LUK or authorized under the
Development Management Agreement, from the date of this Agreement through the
Closing Date, HomeFed shall (i) conduct its business and the business of its
subsidiaries only in the ordinary course consistent with past practices, (ii)
maintain insurance coverages, (iii) comply in all material respects with all
applicable Laws, and (iv) perform in all material respects their obligations
under all Contracts material to the operations of HomeFed and its subsidiaries
taken as a whole, to which they are parties or by which they are bound.
7.16.2 Except as specifically consented to in writing by
LUK, HomeFed shall not, and shall not permit any of its subsidiaries to, take
22
any action or omit to take any action that would result in a breach of any
representation or warranty of HomeFed contained in this Agreement.
7.17 REGISTRATION RIGHTS FOR HOMEFED STOCK CONSIDERATION.
HomeFed and LUK shall enter into a Registration Rights Agreement in the form
attached hereto as Exhibit A, pursuant to which HomeFed will xxxxx XXX
registration rights with respect to the HomeFed Stock Consideration.
8. TAXES.
8.1 TAX RETURNS FILED AND TAXES PAID BY LUK. LUK represents
and warrants to HomeFed that except as set forth on Schedule 8.1: (i) all
material Tax Returns required to be filed by LUK and the Companies on or before
the Closing Date with respect to any of the Companies have been or will be filed
in a timely manner (taking into account all extensions of due dates) and all
such Tax Returns are complete and correct in all material respects; (ii) all
Taxes shown due on such Tax Returns have been or will be timely paid, or
properly accrued or adequately reserved on the books of the relevant Company in
accordance with applicable accounting practices consistently applied; (iii) no
deficiencies for any material Taxes for which the Companies may be liable has
been asserted by a taxing authority in a writing received by LUK or any of the
Companies or assessed by a taxing authority against any of the Companies which
remain unpaid; (iv) none of the Companies has been notified in writing by any
taxing authority of any audit or investigation with respect to any liability for
Taxes imposed on the income, operations or assets of the Companies and with
respect to which the applicable statute of limitations has not expired; (v)
there are no agreements in effect to extend the period of limitations for the
assessment or collection of any Tax imposed on the income, operations or assets
of any of the Companies; (vi) LUK is currently the parent of the Companies and
will file a federal consolidated income tax return on behalf of the Companies
which will include the operations of the Companies through the Closing Date; and
(vii) the Tax Allocation Agreement is the only tax sharing agreement or similar
arrangement currently in effect between the Companies and LUK.
8.2 POST-CLOSING ACCESS TO BOOKS AND RECORDS AND
COOPERATION. HomeFed will cause each of the Companies after the Closing to
afford, or will itself afford, to LUK and its representatives and agents
reasonable access during normal business hours (on terms not unreasonably
disruptive to the business, operations or employees of HomeFed and the
Companies) to the Books and Records pertaining to periods (or portions thereof)
ending on or prior to the Closing Date and to the Companies' employees and
auditors for the purpose of obtaining information relating to periods (or
portions thereof) ending on or prior to the Closing Date: (i) to prepare and
complete any Tax or other regulatory filings made by LUK after the Closing Date
(including any refund claim filed in accordance with Section 8.3.1 of this
Agreement); (ii) to prosecute or defend on behalf of the Companies any inquiry,
assessment, contest, proceeding or litigation ("Contest") controlled by LUK
under Section 8.3.6 of this Agreement; (iii) to comply with requests made of LUK
by any Tax or other regulatory authority in the conduct of any Contest relating
to the Companies' activities during periods ending on or prior to the Closing
23
Date; and (iv) to satisfy any other request of LUK which is reasonable under the
circumstances. LUK will hold all information provided to it pursuant to this
Section 8.2 (and any information derived therefrom) in confidence (except to the
extent it otherwise becomes public other than through actions of LUK) and will
not disclose any such information other than (i) as is reasonably necessary in
connection with the Contest or (ii) as required by applicable law or regulation.
HomeFed will hold LUK's requests for information, and the contents of HomeFed's
responses thereto, in confidence (except to the extent such information
otherwise becomes public other than through the actions of HomeFed) and will not
disclose any such information other than (i) to directors, officers, employees,
and agents of HomeFed who need to know such information for the purposes for
which it was requested or provided and (ii) as required by applicable law or
regulation.
8.3 LIABILITY FOR TAXES AND RELATED MATTERS.
8.3.1 LUK'S LIABILITY FOR TAXES. Except as otherwise
provided in this Agreement, LUK shall be liable for and shall indemnify HomeFed
for all Taxes (including any obligation imposed on the Companies to contribute
to the payment of a Tax determined on a consolidated, combined or unitary basis
with respect to a group of corporations that includes or included the Companies
for any period prior to the Closing Date, and Taxes resulting from CDS ceasing
to be LUK's subsidiary) to the extent, and only to the extent, any such Tax is
imposed on the Companies or for which the Companies may otherwise be liable (1)
for any taxable year or period that ends on or before the Closing Date, (2) with
respect to any taxable year or period beginning before and ending after the
Closing Date, for the portion of such taxable year or period ending on the
Closing Date as determined in accordance with the principles set forth in
Section 8.3.3 of this Agreement, (3) arising out of a breach or inaccuracy of
any representation or warranty made by LUK contained in Section 8.1 of this
Agreement, or (4) arising out of a breach of any covenant made by LUK contained
in this Article 8; provided, however, that in the case of any such Tax, LUK's
liability shall be limited to the amount in excess of the aggregate amounts
reserved for Taxes on the September 30, 2002 unaudited consolidated balance
sheet of CDS and its Subsidiaries (the "Balance Sheet"). HomeFed may not,
without LUK's consent, amend any Tax Return of or with respect to any of the
Companies for any taxable period including any portion of time on or prior to
the Closing Date. LUK shall be entitled to any refund of Taxes attributable to
any of the Companies with respect to any taxable year or period ending on or
before the Closing Date and may file and control a refund claim with respect to
such periods and HomeFed shall cooperate with LUK and provide to LUK any
necessary powers of attorney to LUK to pursue such refund claims.
8.3.2 HOMEFED'S LIABILITY FOR TAXES. HomeFed shall be
liable for and shall indemnify LUK for the Taxes of any of the Companies (i) for
any taxable year or period that begins after the Closing Date, (ii) with respect
to any taxable year or period beginning before and ending after the Closing
Date, for the portion of such taxable year beginning after the Closing Date as
determined in accordance with the principles set forth in Section 8.3.3 of this
Agreement, and (iii) arising out of a breach of any covenant made by HomeFed
24
contained in this Article 8. HomeFed shall be entitled to any refund of Taxes of
any of the Companies for the periods referred to in clauses (i) and (ii) of the
preceding sentence.
8.3.3 TAXES FOR SHORT TAXABLE YEAR. LUK and HomeFed shall
close the taxable period of the Companies as of the close of business on the
Closing Date, unless such action is prohibited by Law. In any case where
applicable law prohibits any of the Companies from closing its taxable year on
the Closing Date then, for purposes of Sections 8.3.1, 8.3.2 and 8.3.6 of this
Agreement, the determination of the Taxes of the Companies for the portion of
the year or period ending on, and the portion of the year or period beginning
after, the Closing Date shall be determined on the basis of an interim closing
of the books as of the close of business on the Closing Date, except that
exemptions, allowances or deductions that are calculated on an annual basis,
such as the deduction for depreciation, shall be ratably apportioned on a time
basis.
8.3.4 ADJUSTMENT TO CONSIDERATION. Any payment by HomeFed
or LUK under Article 8 or Article 9 shall be treated for Tax purposes as an
adjustment to Consideration.
8.3.5 TAX RETURNS.
(a) LUK shall (i) timely prepare and file all Tax Returns
required to be filed by the Companies prior to the Closing Date and (ii) timely
pay or cause to be paid any Tax shown due thereon. LUK shall prepare such Tax
Returns on a basis consistent with past practices. With respect to Tax Returns
required to be filed by the Companies after the Closing Date relating to taxable
periods ending on or before the Closing Date, LUK shall prepare, and HomeFed
shall timely file (or cause to be timely filed), such Tax Returns. LUK shall
prepare the Tax Returns described in this Section 8.3.5 on a basis consistent
with past practices, unless otherwise required by Laws. Notwithstanding this
Section 8.3.5, liability for the Taxes due on such Tax Returns shall be
determined in accordance with the other provisions of this Article 8.
(b) HomeFed shall (i) timely prepare and file all Tax
Returns required to be filed by or on behalf of the Companies for any taxable
period beginning after the Closing Date and (ii) timely pay or cause to be paid
any Tax due thereon.
(c) HomeFed and LUK shall jointly prepare and HomeFed shall
file all Tax Returns required to be filed by or on behalf of the Companies for
any taxable period beginning prior to the Closing Date and ending after the
Closing Date. Liability for the Taxes due on such Tax Returns and allocable to
the Companies shall be determined in accordance with the principles set forth in
Section 8.3.3 of this Agreement.
(d) The provisions of this Section 8.3.5(d) shall apply to
all Taxes and Tax Returns covered by this Article 8. HomeFed and LUK shall share
information and cooperate in all matters (including securing proper signatures)
related to the filing of Tax Returns. In cases where one party files a Tax
Return (the "Filer") but another party is liable for part of the Tax on such Tax
25
Return (the "Liable Party"), the Filer shall pay the appropriate amount of Tax
to the taxing authority and provide written notice requesting payment of the
portion of Tax due from the Liable Party. Such notice shall be provided at least
10 Business Days prior to the due date of the Tax Return (including any
extensions for the filing thereof) and shall include the Tax Return together
with such Tax information reasonably relevant to such Tax Return, including
supporting schedules, workpapers and information as to the method of computing
separate taxable income or other relevant measure of income of the Companies.
Payment from the Liable Party to the Filer shall be made within 7 Business Days
of the receipt of such written notice, provided, however, that payment shall not
be due prior to three Business Days before the time the Tax payment is due to
the taxing authority. Any late payment of Tax from the Liable Party to the Filer
shall bear interest at the overpayment rate set forth in Section 6621(a)(1) of
the Code. Notwithstanding anything to the contrary herein, the Liable Party must
approve the Tax Return and any supporting schedules as well as the amount due to
the Filer from the Liable Party with such approval made at or prior to the time
payment is due, and the parties shall attempt to resolve any disagreement
regarding the Tax Return prior to the due date for filing thereof. In the event
that the dispute is not resolved prior to the due date, the Liable Party shall
pay the amount that it believes is due to the Filer from the Liable Party in
respect of such Tax Return and, thereafter, the parties shall resolve any
disagreement as to the amount not so paid by the Liable Party.
8.3.6 CONTEST PROVISIONS. HomeFed shall promptly notify LUK
in writing upon receipt by HomeFed, any of the Companies, or any of HomeFed's
Affiliates or Subsidiaries of notice of any pending or threatened Tax audits or
assessments which may affect the Tax liabilities of the Companies for which LUK
could be required to indemnify HomeFed pursuant to Section 8.3.1 of this
Agreement (assuming, for this purpose, no exception to or limitation on such
indemnity obligation attributable to the existence of any reserve for Taxes on
the Balance Sheet), provided that failure to comply with this provision shall
not affect HomeFed's right to indemnification hereunder except to the extent (i)
such failure results in an increase in the amount for which LUK is liable under
Section 8.3.1 of this Agreement, (ii) LUK is prejudiced by such failure or (iii)
such failure otherwise results in a Loss to LUK or a LUK Affiliate. LUK shall
have the sole right to represent and control the Companies' interests in any
Contest relating to taxable periods ending on or before the Closing Date, or
relating to any claim for Taxes which could be subject to indemnification by LUK
pursuant to Section 8.3.1 of this Agreement, and to employ counsel of its choice
at its expense. HomeFed and the Companies shall cooperate with LUK in any such
Contest or claim, including but not limited to signing any powers of attorney
and extensions of statutes of limitations requested by LUK.
8.3.7 LUK may not agree to settle any such Tax claim which
would materially adversely affect the Tax liability of HomeFed or the Companies
for any year or period ending after the Closing Date, without the prior written
consent of HomeFed, which consent shall not be unreasonably withheld, and shall
not be necessary to the extent that LUK has indemnified HomeFed against the
effect of any such settlement. HomeFed shall have the sole right to represent
26
the Companies' interests in the defense of any claim for Taxes imposed on the
Companies and not covered by the preceding sentences of this Section 8.3.6.
Notwithstanding the foregoing, HomeFed shall not be entitled to settle after the
Closing Date, either administratively or after the commencement of litigation,
any claim for Taxes (including a claim for refund) which would materially
adversely affect the liability for Taxes of LUK pursuant to Section 8.3.1 of
this Agreement (including, but not limited to, the imposition of income tax
deficiencies, the reduction of asset basis or cost adjustments, the lengthening
of any amortization or depreciation periods, the denial of amortization or
depreciation deductions or the reduction of loss or credit carryforwards) or any
claim for refund or credits relating to periods ending on or prior to the
Closing Date without the prior written consent of LUK, which consent shall not
be unreasonably withheld, and shall not be necessary to the extent that HomeFed
has indemnified LUK against the effects of any such settlement.
8.4 TERMINATION OF TAX ALLOCATION AGREEMENT. The Tax
Allocation Agreement shall be terminated as of the Closing Date and the parties
agree to promptly settle all amounts due thereunder for all periods (or portions
thereof) ending on or prior to the Closing Date, but in any event, within ninety
(90) days after the Closing Date; provided, however, that the Companies shall
not be obligated to pay any such amount to the extent it is attributable to the
Elections.
8.5 SECTION 338(H)(10) ELECTION.
(a) HomeFed and LUK shall make a joint election under
Section 338(h)(10) of the Code and under any comparable or equivalent provisions
of state or local law with respect to the purchase of the Shares by HomeFed, as
well as the deemed purchases of the stock of each of Devco and SERI (the
"Elections"). LUK and HomeFed shall report, in connection with the determination
of Taxes, the transactions contemplated by this Agreement in a manner consistent
with the Elections, including the reasonable determination of the fair market
value of the assets of the Companies and the allocation of the deemed purchase
price among the assets of the Companies within the meaning of Section 338(h)(10)
of the Code.
(b) HomeFed and LUK will cooperate in timely and properly
preparing and filing of all forms and other documents required or necessary in
connection with the Elections.
(c) HomeFed shall comply with all of the requirements of
Section 338(h)(10) of the Code. Neither LUK nor HomeFed shall take any action
which is inconsistent with the requirements for filing the Elections under the
Code.
(d) To the extent permitted by state or local laws, the
principles and procedures of this Section 8.5 shall also apply with respect to
Section 338(h)(10) Elections or equivalent or comparable provision under state
or local law.
27
(e) Except as provided in Section 8.7 of this Agreement,
HomeFed shall have no liability to LUK for, and shall not be deemed to have
indemnified, under any provision of this Agreement or otherwise, LUK from and
against, for or in respect of, any Taxes which may be imposed upon or assessed
against LUK as a result of the Elections.
8.6 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
OBLIGATIONS. The representations, warranties and obligations of the parties set
forth in this Article 8 shall survive the Closing, shall be unconditional and
absolute and shall remain in effect, in each case, until termination of the
applicable period of limitations with respect to Taxes.
8.7 TRANSFER TAXES. HomeFed shall be liable for and shall
pay all excise, sales, use, transfer (including real property transfer or
gains), stamp, documentary, filing, recordation and other similar taxes which
may be imposed in connection with the transactions contemplated by this
Agreement (other than any transfer taxes imposed by reason of the Section
338(h)(10) Elections which shall be borne equally by LUK and HomeFed), together
with any interest, additions or penalties with respect thereto. Each party
hereto hereby agrees to file all necessary documentation (including, but not
limited to, all Tax Returns) with respect to all such amounts in a timely
manner.
8.8 INDEMNIFICATION PAYMENTS NET OF ANY TAX BENEFIT.
Notwithstanding anything contained herein to the contrary, if any payment by one
party to the other party with respect to a single item under this Article 8 or
under Article 9 hereof exceeds (or would exceed but for this Section 8.8)
$25,000 and is not treated for Tax purposes as an adjustment to Consideration,
the amount of such payment shall be reduced by the amount of any tax benefit
actually realized or reasonably expected to be realized by the payee as a result
of either the payment or the circumstances underlying or giving rise to the
payment, provided, however, any such tax benefit shall be reduced by any tax
cost resulting to the payee as a result of the receipt of such indemnity
payment.
9. INDEMNIFICATION.
9.1 INDEMNIFICATION BY LUK.
(a) Subject to the provisions of this Section, Sections 9.3
and 9.5 and Article 11 of this Agreement, LUK hereby agrees to indemnify, defend
and hold harmless HomeFed and its officers, directors, employees, Affiliates,
agents, successors and assigns (collectively, the "HomeFed Indemnitees") from
and against, for and in respect of any and all Losses which any of them may
sustain based upon, arising out of or otherwise in respect of (i) any inaccuracy
in or breach of any representation or warranty of LUK contained in this
Agreement or in any schedule, certificate, instrument or other document
delivered pursuant hereto (other than the representations and warranties of LUK
contained in Article 8, the indemnification obligations of which are governed by
Article 8) (assuming that each representation and warranty qualified by the
terms "material" or "CDS Material Adverse Effect" were not so qualified and
without regard to the Knowledge of LUK), and (ii) any breach of any covenant or
agreement of LUK contained in this Agreement (other than the covenants of LUK
28
contained in Article 8, the indemnification obligations of which are governed by
Article 8). Notwithstanding anything in Article 8 or this Article 9 to the
contrary, in no event shall LUK be obligated to indemnify, defend or hold
harmless any HomeFed Indemnitee with respect to any Losses arising as a result
of (i) any acts, errors or omissions by HomeFed or any officer, director,
employee, Affiliate, agent, successor or assign of HomeFed, (ii) any inaccuracy
in or breach of any representation or warranty of HomeFed or any breach of any
covenant or agreement of HomeFed under this Agreement or the Development
Management Agreement, (iii) any breach of any representation or warranty of LUK
made in this Agreement if HomeFed Knew or should have Known of such breach,
whether by virtue of its role as Development Manager of the Project or
otherwise, or (iv) construction of the Project.
(b) For purposes hereof, "Loss" and/or "Losses" shall mean
any and all losses, liabilities, damages, deficiencies, costs or expenses,
including interest, penalties and reasonable attorneys' and accountants' fees
and disbursements, after deducting all amounts received by the indemnified party
as a recovery under any insurance policy or bond.
(c) Promptly after receipt by HomeFed of notice of (i) any
demand, claim or circumstances which, with the lapse of time, would give rise to
a Loss with respect to which a HomeFed Indemnitee would be entitled to
indemnification pursuant to this Section 9.1 or (ii) any claim or the
commencement (or threatened commencement) of any action, proceeding or
investigation (an "Asserted Liability") that may result in a Loss with respect
to which a HomeFed Indemnitee would be entitled to indemnification pursuant to
this Section 9.1, HomeFed shall give notice thereof to LUK, describing in
reasonable detail such demand, claim, circumstances or Asserted Liability, the
provision or provisions under this Agreement under which the right to
indemnification is asserted and the specific circumstances thereof, and
indicating the amount (estimated, if necessary) of the Loss that has been or may
be suffered by such HomeFed Indemnitee in connection therewith. HomeFed's
failure to give notice of any such demand, claim, circumstances or Asserted
Liability to LUK in a prompt manner will not be deemed a waiver of the HomeFed
Indemnitee's right to indemnification hereunder for Losses in connection
herewith, but the amount of indemnification to which the HomeFed Indemnitee is
entitled shall be reduced by the amount, if any, by which the HomeFed
Indemnitee's Losses would have been less had such notice been given promptly.
(d) Limitation on Indemnification. No claim for
indemnification under this Section 9.1 may be made unless and until the HomeFed
Indemnitees would have incurred Losses which would otherwise be indemnifiable
under this Section 9.1 in excess of $100,000 in the aggregate, at which time all
Losses may be claimed under this Section 9.1. In no event shall LUK be liable
under any circumstances for indemnification under this Section 9.1 in an
aggregate amount in excess of $1,000,000.
29
(e) Payment of Losses. In the event that LUK shall be
liable for indemnification under this Section 9.1, LUK shall satisfy such
obligation with a number of shares of HomeFed Stock obtained by dividing the
amount of such obligation by the average closing price of HomeFed Stock as
reported on the National Association of Securities Dealers, Inc. Over the
Counter Bulletin Board System for the period of five (5) Business Days ending on
the second Business Day immediately preceding the date of the satisfaction of
such obligation, rounded to the nearest whole number of shares.
9.2 HOMEFED'S OBLIGATION TO INDEMNIFY.
(a) Subject to the provisions of this Section, Sections 9.3
and 9.5 and Article 11 of this Agreement, HomeFed hereby agrees to indemnify,
defend and hold harmless LUK and LUK's officers, directors, employees,
Affiliates, agents, successors and assigns (collectively, the "LUK Indemnitees")
from and against, for and in respect of any and all Losses which any of them may
sustain based upon, arising out of or otherwise in respect of (i) any inaccuracy
in or breach of any representation or warranty of HomeFed contained in this
Agreement or in any schedule, certificate, instrument or other document
delivered pursuant hereto (other than the representations and warranties of
HomeFed contained in Article 8, the indemnification obligations of which are
governed by Article 8) (assuming that each representation and warranty qualified
by the terms "material" or "HomeFed Material Adverse Effect" were not so
qualified and without regard to the Knowledge of HomeFed), or (ii) any breach of
any covenant or agreement of HomeFed contained in this Agreement (other than the
covenant of HomeFed contained in Article 8, the indemnification obligations of
which are governed by Article 8).
(b) Promptly after receipt by LUK of notice of (i) any
demand, claim or circumstances which, with the lapse of time, would give rise to
a Loss with respect to which a LUK Indemnitee would be entitled to
indemnification pursuant to this Section 9.2 or (ii) an Asserted Liability that
may result in a Loss with respect to which a LUK Indemnitee would be entitled to
indemnification pursuant to this Section 9.2, LUK shall give notice thereof to
HomeFed, describing in reasonable detail such demand, claim, circumstances or
Asserted Liability, the provision or provisions under this Agreement under which
the right to indemnification is asserted and the specific circumstances thereof,
and indicating the amount (estimated, if necessary) of the Loss that has been or
may be suffered by such LUK Indemnitee in connection therewith. LUK's failure to
give notice of any such demand, claim, circumstances or Asserted Liability to
HomeFed in a prompt manner will not be deemed a waiver of the LUK Indemnitee's
right to indemnification hereunder for Losses in connection herewith, but the
amount of indemnification to which the LUK Indemnitee is entitled shall be
reduced by the amount, if any, by which the LUK Indemnitee's Losses would have
been less had such notice been given promptly.
(c) Limitation on Indemnification. No claim for
indemnification under this Section 9.2 may be made unless and until the LUK
Indemnitees would have incurred Losses which would otherwise be indemnifiable
under this Section 9.2 in excess of $100,000 in the aggregate, at which time all
Losses in excess of such $100,000 may be claimed under this Section 9.2. In no
30
event shall HomeFed be liable under any circumstances for indemnification under
this Section 9.2 in an aggregate amount in excess of $1,000,000.
9.3 RIGHT TO CONTEST THIRD PARTY CLAIMS.
(a) Defense (including the right to settle or compromise)
of any Asserted Liability, including selection of counsel (subject to the
consent of HomeFed, for all HomeFed Indemnitees or of LUK, for all LUK
Indemnitees, as applicable, which consent shall not be unreasonably withheld)
and the sole power to direct, investigate and control such defense, shall be by
the indemnifying party, if within 30 days after receiving the notice required
under Section 9.1(c) or Section 9.2(b) of this Agreement, as the case may be,
the indemnifying party gives written notice to HomeFed on behalf of all HomeFed
Indemnitees, or LUK on behalf of all LUK Indemnitees, as the case may be,
stating that the indemnifying party intends to dispute and defend against such
Asserted Liability at its own cost and expense. The indemnified party shall make
no payment in respect of such Asserted Liability to any third party as long as
the indemnifying party is conducting a good faith and diligent defense.
(b) Notwithstanding the foregoing, the indemnified party
shall at all times have the right to fully participate in such defense at its
own cost and expense directly or through counsel. If no such notice of intent to
dispute and defend is given by the indemnifying party, or if such diligent good
faith defense is not being or ceases to be conducted, HomeFed on behalf of all
HomeFed Indemnitees, or LUK on behalf of all LUK Indemnitees, as applicable, (x)
shall, at the expense of the indemnifying party, undertake the defense of such
Asserted Liability with one counsel selected by HomeFed on behalf of all HomeFed
Indemnitees, or LUK on behalf of all LUK Indemnitees, as applicable, and (y)
shall have the right to compromise or settle the same exercising reasonable
business judgment with the consent of the indemnifying party, which consent
shall not be unreasonably withheld.
(c) Except as provided herein, HomeFed on behalf of all
HomeFed Indemnitees, and LUK on behalf of all LUK Indemnitees, as applicable,
shall have the right to consent to any settlement or compromise of any Asserted
Liability, which consent shall not be withheld unreasonably. If the indemnified
party refuses to consent to a bona fide compromise or settlement that the
indemnifying party desires to agree to (the "Bona Fide Settlement"), the
indemnified party may continue to pursue the defense of such Asserted Liability,
free of any participation by the indemnifying party and at the sole expense of
the indemnified party; provided that in such event, the obligation of the
indemnifying party to the indemnified party will equal the lesser of (i) the
amount of such Bona Fide Settlement or (ii) the actual out-of-pocket amount that
the indemnified party is obligated to pay as a result of the indemnified party's
continued defense of such Asserted Liability, plus the reasonable out-of-pocket
expenses incurred by the indemnified party after the date of notice from the
indemnified party of its refusal to consent to a Bona Fide Settlement (the
"Refusal Date") in connection with such Asserted Liability, minus the reasonable
out-of-pocket expenses of the indemnifying party incurred after the Refusal Date
31
by the indemnifying party in connection with such Asserted Liability. The
indemnifying party shall give the indemnified party such notice of the Bona Fide
Settlement as is reasonable under then existing circumstances and the
indemnified party shall notify the indemnifying party of its consent or lack of
consent to such Bona Fide Settlement within a reasonable period of time under
then existing circumstances. Notwithstanding anything herein to the contrary,
the indemnifying party shall have the right to settle all claims of third
parties for which indemnification is payable hereunder without the consent of
the indemnified party so long as such settlement releases the indemnified party
from all liability for or in connection with such action, is exclusively on
monetary terms, does not materially and adversely impair the ability of the
indemnified party to carry on its business and does not contain any admission of
wrongdoing on the part of the indemnified party.
(d) The indemnified party shall make available all
information and assistance that the indemnifying party may reasonably request
and shall cooperate with the indemnifying party in such defense. Any failure to
make available such information and/or to cooperate shall reduce the amount, if
any, by which the indemnified party's Losses would have been reduced had such
information been made available or such cooperation been provided.
9.4 INDEMNIFICATION FOR TAXES. Notwithstanding anything in
this Article 9 to the contrary, any indemnifiable Loss or third party claims
based on, attributable to or resulting from any misrepresentation or the breach
or inaccuracy of any representation or warranty made by LUK in Article 8, or the
failure to comply with any covenant or agreement on the part of the parties
hereto contained in Article 8, will be governed exclusively by Article 8 and the
last sentence of Section 9.1(a).
9.5 LIMITATIONS ON INDEMNIFICATION.
(a) If any party seeking indemnification under this Article
9 (an "indemnified party") recovers from any third party (including insurers)
all or any part of any amount paid to it by an indemnifying party (herein so
called) pursuant to Section 9.1 or 9.2 of this Agreement, such indemnified party
shall promptly pay over to the indemnifying party the amount so recovered (after
deducting therefrom the full amount of the expenses incurred by it in procuring
such recovery, including any taxes and net of any tax benefit resulting from
such recovery and payment), but not in excess of any amount previously so paid
by the indemnifying party. If an indemnified party recovers from any third party
(including insurers) any amount as to which indemnification may be claimed
pursuant to Section 9.1 or 9.2, such indemnified party shall have no right to
claim indemnification for such amount from the indemnifying party.
(b) The indemnified party shall prosecute diligently and in
good faith any claim for indemnification with any applicable third party
(including insurers), but such attempt shall not be a condition precedent to the
indemnified party seeking to collect any indemnification payment pursuant to
Section 9.1 or 9.2.
32
10. TERMINATION.
10.1 TERMINATION. This Agreement may be terminated at any
time prior to the Closing: (i) by mutual written consent of LUK and HomeFed or
(ii) by either HomeFed or LUK if the Closing shall not have occurred on or
before November 30, 2002; provided, however, that the right to terminate this
Agreement under this Section 10.1(ii) will not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Closing to occur on or before such date.
10.2 EFFECT OF TERMINATION. If this Agreement is terminated
pursuant to Section 10.1, this Agreement shall become void and of no effect with
no liability on the part of any party hereto, except with respect to Section
12.8 and the confidentiality provisions set forth in Section 7.3 of this
Agreement, and except that nothing herein will relieve any party from liability
for any prior breach of this Agreement.
11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
Each of the representations and warranties of LUK and
HomeFed under this Agreement will survive the execution and delivery of this
Agreement and the Closing and remain in effect until the expiration of the one
year period immediately following the Closing Date, except that the
representations and warranties of LUK contained in Article 8 shall survive the
Closing and remain in effect for the period set forth in Article 8.
12. MISCELLANEOUS.
12.1 AMENDMENTS AND WAIVERS. This Agreement may not be
amended, and none of its provisions may be modified, except expressly by an
instrument signed by the parties hereto. No failure or delay of a party in
exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. No waiver by a party of any provision of this Agreement or
consent to any departure therefrom shall in any event be effective unless the
same shall be in writing and signed by such party, and then such waiver or
consent shall be effective only in the specific instance and for the purpose for
which given.
12.2 ASSIGNMENT. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by either of the
parties hereto without the prior written consent of the other party. This
Agreement shall be binding upon and shall inure to the benefit of each of the
parties hereto and its respective successors and permitted assigns.
12.3 ENTIRE AGREEMENT. This Agreement (including the
Schedules hereto) constitutes the entire agreement between the parties with
respect to the subject matter hereof and supersedes all other prior
33
negotiations, commitments, agreements and understandings, both written and oral,
between the parties or any of them with respect to the subject matter hereof.
12.4 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
12.5 ENFORCEMENT; JURISDICTION. The parties agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions of this Agreement in any court of
the United States located in the State of New York or any state court sitting in
The City of New York, New York (any such federal or state court, a "New York
Court"), this being in addition to any other remedy to which they are entitled
to in law or in equity. Each of the parties hereto (i) consents to submit itself
to the personal jurisdiction of any such New York Court, in the event any
dispute arises out of this Agreement or any of the transactions contemplated by
this Agreement, (ii) agrees that it will not attempt to deny or defeat such
personal jurisdiction or venue by motion or other request for leave from any
such New York Court and (iii) agrees that it will not bring any action relating
to this Agreement or any of the transactions contemplated by this Agreement in
any court other than a New York Court.
12.6 NOTICES. All written notices required under this
Agreement shall be given in writing and shall be deemed to have been given upon
(i) transmitter's confirmation of a receipt of a facsimile transmission, (ii)
confirmed delivery by a standard overnight carrier or when delivered by hand or
(iii) the expiration of five Business Days after the day when mailed by
certified or registered mail, postage prepaid, addressed at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to LUK, to:
Leucadia National Corporation
000 Xxxx Xxxxxx Xxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: President
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
With a copy to: Weil, Gotshal & Xxxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
34
(b) if to HomeFed, to:
HomeFed Corporation
0000 Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Attention: Xxxx X. Xxxxxx
With a copy to: Pillsbury Winthrop LLP
00000 Xx Xxxxxx Xxxx
Xxxxx 000
Xxx Xxxxx, XX 00000
Attention: K. Xxxxxxx Xxxxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
12.7 COUNTERPARTS. This Agreement may be executed by the
parties hereto in separate counterparts, each of which shall be deemed to be an
original, but all of which shall constitute one and the same instrument.
12.8 CERTAIN FEES AND EXPENSES. Whether or not the
transactions contemplated hereby are consummated, all costs and expenses
incurred in connection with this Agreement and transactions contemplated hereby,
including all fees and expenses of agents, representatives, counsel, actuaries
and accountants, shall be paid by the party incurring such costs or expenses;
provided, however, that HomeFed shall pay any filing fees required by the State
of New York.
12.9 NO JOINT VENTURE OR PARTNERSHIP INTENDED.
Notwithstanding anything herein to the contrary, the parties hereby acknowledge
and agree that it is their intention and understanding that the transactions
contemplated hereby do not in any way constitute or imply the formation of a
joint venture or partnership between HomeFed, on the one hand, and LUK, on the
other hand.
12.10 SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, each of LUK and HomeFed direct that such court
interpret and apply the remainder of this Agreement in the manner that it
determines most closely effectuates their intent in entering into this
Agreement, and in doing so particularly take into account the relative
importance of the term, provision, covenant or restriction being held invalid,
void or unenforceable.
12.11 NO THIRD PARTY BENEFICIARIES. Except as otherwise
specifically provided in Article 9, nothing in this Agreement is intended or
shall be construed to give any Person, other than the parties hereto, their
35
successors and permitted assigns, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision contained herein.
[Remainder of this page is intentionally left blank.]
36
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed on its behalf by its officers thereunto duly
authorized, all as of the day and year first above written.
LEUCADIA NATIONAL CORPORATION
By: /s/ Xxxxxx X. Orlando
---------------------------------
Name: Xxxxxx X. Orlando
Title: Vice President
HOMEFED CORPORATION
By: /s/ Xxxx X. Xxxxxx
---------------------------------
Name: Xxxx X. Xxxxxx
Title: President
37
Exhibit A
REGISTRATION RIGHTS AGREEMENT
-----------------------------
Registration Rights Agreement, dated as of October 21,
2002, by and among HomeFed Corporation, a Delaware corporation ("Company") and
Leucadia National Corporation, a New York Corporation ("Purchaser").
W I T N E S S E T H :
WHEREAS, Company and Purchaser have entered into that
certain Stock Purchase Agreement, dated as of October 21, 2002 (the "Purchase
Agreement"), pursuant to which, among other things, Purchaser has agreed to sell
and deliver to Company 1,000 shares of common stock of CDS Holding Corporation
(the "CDS Shares") for consideration including, but not limited to, the HomeFed
Stock Consideration (as defined in the Purchase Agreement); and
WHEREAS, in order to induce Purchaser to enter into the
Purchase Agreement and to receive the HomeFed Stock Consideration in partial
consideration for the CDS Shares, Company has agreed to provide registration
rights with respect to the HomeFed Stock Consideration;
NOW, THEREFORE, in consideration of the premises and the
covenants hereinafter contained, it is agreed as follows:
1. Definitions. Unless otherwise defined herein, terms
defined in the Purchase Agreement are used herein as therein defined, and the
following shall have (unless otherwise provided elsewhere in this Agreement) the
following respective meanings (such meanings being equally applicable to both
the singular and plural form of the terms defined):
"Agreement" shall mean this Registration Rights Agreement,
including all amendments, modifications and supplements and any exhibits or
schedules to any of the foregoing, and shall refer to the Agreement as the same
may be in effect at the time such reference becomes operative.
"Business Day" shall mean any day that is not a Saturday, a
Sunday or a day on which banks are required or permitted to be closed in the
State of New York.
"Commission" shall mean the Securities and Exchange
Commission or any other federal agency then administering the Securities Act and
other federal securities laws.
"Common Stock" shall mean the Company common stock, $0.01
par value per share.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, or any successor federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect
from time to time.
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"Holder" shall mean the holder of Registrable Securities.
"Majority Holders" shall mean Holders holding at the time,
shares of Common Stock representing more than 50% of the then outstanding shares
of Common Stock issued pursuant to the Purchase Agreement.
"NASD" shall mean the National Association of Securities
Dealers, Inc., or any successor corporation thereto.
"Prospectus" shall mean any preliminary prospectus or final
prospectus (as such may be amended or supplemented) which constitutes Part I of
a Registration Statement filed with the Commission.
"Registrable Securities" shall mean the shares of Common
Stock owned by Purchaser or its permitted transferees and all Common Stock
hereafter acquired by Purchaser or which Purchaser hereafter obtains the right
to acquire pursuant to the terms of the Purchase Agreement or otherwise. As to
any particular Registrable Securities held by any Holder (other than (C) which
shall not apply to Purchaser), such securities shall cease to constitute
Registrable Securities when (A) a registration statement with respect to the
sale of such securities shall have been declared effective under the Securities
Act and such securities shall have been disposed of in accordance with the plan
of distribution contemplated by the registration statement, (B) such securities
shall have been sold in satisfaction of all applicable conditions to the resale
provisions of Rule 144 under the Securities Act (or any successor provision
thereto), (C) all Registrable Securities held by such Holder may be sold
pursuant to Rule 144(k) of the Securities Act, or (D) such securities shall have
ceased to be issued and outstanding.
"Registration Statement" shall mean the form and documents
required to be filed by an issuer in connection with the registration of
securities of such issuer under the Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
2. Demand Registration. After receipt of a written request
from the holders of Registrable Securities requesting that Company effect a
registration under the Securities Act covering at least 20% of the Registrable
Securities initially outstanding or having a minimum anticipated aggregate
offering price of $3,000,000, and specifying the intended method or methods of
disposition thereof, Company shall promptly notify all Holders in writing of the
receipt of such request and each such Holder, in lieu of exercising its rights
under Section 3 may elect (by written notice sent to Company within ten (10)
Business Days from the date of such Holder's receipt of the aforementioned
Company's notice) to have Registrable Securities included in such registration
thereof pursuant to this Section 2. Thereupon Company shall, as expeditiously as
is possible, use its commercially reasonable efforts to effect the registration
under the Securities Act of all shares of Registrable Securities which Company
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has been so requested to register by such Holders for sale, all to the extent
required to permit the disposition (in accordance with the intended method or
methods thereof, as aforesaid) of the Registrable Securities so registered;
provided, however, that Company shall not be required to effect more than three
(3) registrations of any Registrable Securities pursuant to this Section 2.
Except as otherwise agreed to in writing by Holders holding a majority of
Registrable Securities to be included in such registration, no securities other
than Registrable Securities shall be included in such registration statement.
Except as otherwise provided in Section 5, all expenses of such registration
shall be borne by Company.
3. Incidental Registration. If Company at any time proposes
to file on its behalf and/or on behalf of any of its security holders other than
Holders (the "Demanding Security Holders") a Registration Statement under the
Securities Act on any form (other than a Registration Statement on Form S-4 or
S-8 or any successor form for securities to be offered in a transaction of the
type referred to in Rule 145 under the Securities Act or to employees of Company
pursuant to any employee benefit plan, respectively) for the general
registration of securities, it will give written notice to all Holders at least
thirty (30) days before the initial filing with the Commission of such
Registration Statement, which notice shall set forth the intended method of
disposition of the securities proposed to be registered by Company. The notice
shall offer to include in such filing the aggregate number of shares of
Registrable Securities as such Holders may request.
Each Holder desiring to have Registrable Securities
registered under this Section 3 shall advise Company in writing within twenty
(20) days after the date of receipt of such offer from Company, setting forth
the amount of such Registrable Securities for which registration is requested.
Company shall thereupon include in such filing the number of shares of
Registrable Securities for which registration is so requested, subject to the
next sentence, provided that Company may in its sole discretion determine to
abandon any such registration. If the managing underwriter of a proposed public
offering shall advise Company in writing that, in its opinion, the distribution
of the Registrable Securities requested to be included in the registration
concurrently with the securities being registered by Company or such Demanding
Security Holders would materially and adversely affect the distribution of such
securities by Company or such Demanding Security Holders, then all selling
security holders (including the Demanding Security Holders and Holders, but not
including Company) shall reduce the amount of securities each intended to
distribute through such offering on a pro rata basis. Except as otherwise
provided in Section 5, all expenses of such registration shall be borne by
Company.
4. Registration Procedures. If Company is required by the
provisions of Section 2 or 3 to use its commercially reasonable efforts to
effect the registration of any of its securities under the Securities Act,
Company will, as expeditiously as possible:
(a) prepare and file with the Commission a Registration
Statement with respect to such securities and use its commercially reasonable
efforts to cause such Registration Statement to become and remain effective for
A-3
a period of time required for the disposition of such securities by the holders
thereof, but not to exceed one hundred and eighty (180) days;
(b) prepare and file with the Commission such amendments
and supplements to such Registration Statement and the prospectus used in
connection therewith as may be necessary to keep such Registration Statement
effective and to comply with the provisions of the Securities Act with respect
to the sale or other disposition of all securities covered by such Registration
Statement until the earlier of such time as all of such securities have been
disposed of in a public offering or the expiration of one hundred and eighty
(180) days;
(c) furnish to such selling security holders such number of
copies of a summary prospectus or other prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and such
other documents, as such selling security holders may reasonably request;
(d) use its commercially reasonable efforts to register or
qualify the securities covered by such Registration Statement under such other
securities or blue sky laws of such jurisdictions within the United States and
Puerto Rico as each holder of such securities shall request (provided, however,
that Company shall not be obligated to qualify as a foreign corporation to do
business under the laws of any jurisdiction in which it is not then qualified or
to file any general consent to service or process), and do such other reasonable
acts and things as may be required of it to enable such holder to consummate the
disposition in such jurisdiction of the securities covered by such Registration
Statement;
(e) furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to Sections 2 or 3, on the date
that such shares of Registrable Securities are delivered to the underwriters for
sale pursuant to such registration or, if such Registrable Securities are not
being sold through underwriters, on the date that the Registration Statement
with respect to such shares of Registrable Securities becomes effective, (1) an
opinion, dated such date, of the independent counsel representing Company for
the purposes of such registration, addressed to the underwriters, if any, and if
such Registrable Securities are not being sold through underwriters, then to the
Holders making such request, in customary form and covering matters of the type
customarily covered in such legal opinions; and (2) a comfort letter dated such
date, from the independent certified public accountants of Company, addressed to
the underwriters, if any, and if such Registrable Securities are not being sold
through underwriters, then to the Holder making such request and, if such
accountants refuse to deliver such letter to such Holder, then to Company, in a
customary form and covering matters of the type customarily covered by such
comfort letters and as the underwriters or such Holder shall reasonably request;
(f) (i) notify each Holder of any Registrable Securities
covered by such Registration Statement (a "Selling Holder"), at any time when a
Prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event as a result of which the Prospectus contained
A-4
in such Registration Statement, as then in effect, includes any untrue statement
of a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading in the light
of the circumstances then existing, and (ii) at the request of any such Selling
Holder prepare and furnish to such Selling Holder a reasonable number of copies
of any supplement to or amendment of such Prospectus that may be necessary so
that, as thereafter delivered to the purchasers of such shares, such Prospectus
shall not include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(g) enter into customary agreements (including an
underwriting agreement in customary form) and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of such
Registrable Securities; and
(h) otherwise use its commercially reasonable efforts to
comply with all applicable rules and regulations of the Commission, and make
available to its security holders, as soon as reasonably practicable, but not
later than eighteen (18) months after the effective date of the Registration
Statement, an earnings statement covering the period of at least twelve (12)
months beginning with the first full month after the effective date of such
Registration Statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act.
It shall be a condition precedent to the obligation of
Company to take any action pursuant to this Agreement in respect of the
securities which are to be registered at the request of any Holder that such
Holder shall (i) furnish to Company such information regarding the securities
held by such Holder and the intended method of disposition thereof as Company
shall reasonably request and as shall be required in connection with the action
taken by Company and (ii) in connection with an underwritten offering, enter
into customary agreements (including an underwriting agreement and a lock-up
agreement with respect to such Holder's equity securities of Company as may be
requested by the managing underwriter).
5. Expenses. All expenses incurred in complying with this
Agreement, including, without limitation, all registration and filing fees
(including all expenses incident to filing with the NASD), printing expenses,
fees and expenses of counsel for Company, the reasonable fees and expenses of
counsel for the Selling Holders (selected by those holding a majority of the
securities being registered), all accounting fees and all expenses of complying
with the securities or blue sky laws of any jurisdiction pursuant to Section
4(d), shall be paid by Company; provided, however, that Company shall not be
liable for any fees, discounts or commissions to any underwriter in respect of
the securities sold by such Holder.
A-5
6. Indemnification and Contribution.
(a) In the event of any registration of any Registrable
Securities under the Securities Act pursuant to this Agreement, Company shall
indemnify and hold harmless the Holder of such Registrable Securities, such
Holder's directors and officers, and each other person (including each
underwriter) who participated in the offering of such Registrable Securities and
each other person, if any, who controls such Holder or such participating person
within the meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which such Holder or any such director or
officer or participating person or controlling person may become subject under
the Securities Act or any other statute or at common law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon (i) any alleged untrue statement of any material fact
contained, on the effective date thereof, in any Registration Statement under
which such securities were registered under the Securities Act, any Prospectus
contained therein, or any amendment or supplement thereto, or (ii) any alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and shall reimburse
such Holder or such director, officer or participating person or controlling
person for any legal or any other expenses reasonably incurred by such Holder or
such director, officer or participating person or controlling person in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that Company shall not be liable in any
such case to the extent that any such loss, claim, damage or liability arises
out of or is based upon any actual or alleged untrue statement or actual or
alleged omission made in such Registration Statement, Prospectus, or amendment
or supplement in reliance upon and in conformity with written information
furnished to Company by such Holder specifically for use therein or (in the case
of any registration pursuant to Section 2) so furnished for such purposes by any
underwriter. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Holder or such director, officer
or participating person or controlling person, and shall survive the transfer of
such securities by such Holder.
(b) Each Holder, by acceptance hereof, agrees to indemnify
and hold harmless Company, its directors and officers and each other person, if
any, who controls Company within the meaning of the Securities Act against any
losses, claims, damages or liabilities, joint or several, to which Company or
any such director or officer or any such person may become subject under the
Securities Act or any other statute or at common law, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon information provided in writing to Company by such Holder
specifically for use in the following documents and contained, on the effective
date thereof, in any Registration Statement under which securities were
registered under the Securities Act at the request of such Holder, any
Prospectus contained therein, or any amendment or supplement thereto, but in an
amount not to exceed the net proceeds received by such Holder in the offering.
(c) If the indemnification provided for in this Section 6
from the indemnifying party is unavailable to an indemnified party hereunder in
A-6
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information supplied by, such indemnifying party or
indemnified parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of the losses, claims, damages, liabilities
and expenses referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such party in connection with any
investigation or proceeding. The liability of any holder of Registrable
Securities hereunder shall not exceed the net proceeds received by it in the
offering.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 6(c) were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
7. Sale without Registration; Legend.
(a) The Holders agree to comply in all respects with the
provisions of this Section 7(a) so long as each certificate representing the
shares of Registrable Securities by them is required to bear one or more legends
as set forth in Section 7(b) hereof. Prior to any proposed transfer of any
Registrable Securities by any Holder which shall not be registered under the
Securities Act, such Holder shall give written notice to Company of its
intention to effect such transfer, accompanied by: (i) such information as is
reasonably necessary in order to establish that such transfer may be made
without registration under the Securities Act; and (ii) at the expense of such
Holder's transferee, an unqualified opinion of counsel, satisfactory in form and
substance to Company, to the effect that such transfer may be made without
registration under the Securities Act. Notwithstanding the foregoing, no opinion
of counsel shall be necessary for a transfer by a Holder in compliance with Rule
144(k) (or any successor provision) under the Securities Act so long as Company
is furnished with satisfactory evidence of compliance with such rule.
(b) Each certificate representing Registrable Securities
shall be stamped or otherwise imprinted with a legend in the following form (in
addition to any legend required under applicable state securities laws):
A-7
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. SUCH SHARES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION UNLESS THE
COMPANY RECEIVES AN OPINION OF COUNSEL OR OTHER EVIDENCE
REASONABLY ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER
IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF SAID ACT.
The Holders consent to Company making a notation on its
records and giving instructions to any transfer agent of the Registrable
Securities in order to implement the restrictions on transfer established in
this Section 7.
8. Certain Limitations on Registration Rights.
Notwithstanding the other provisions of this Agreement:
(a) Company shall not be obligated to register the
Registrable Securities of any Holder if, in the opinion of counsel to Company
reasonably satisfactory to the Holder and its counsel (or, if the Holder has
engaged an investment banking firm, to such investment banking firm and its
counsel), the sale or other disposition of all of such Holder's Registrable
Securities, in the manner proposed by such Holder (or by such investment banking
firm), may be effected without registering such Registrable Securities under the
Securities Act in reliance upon Rule 144(k) under the Securities Act; and
(b) Company shall not be obligated to register the
Registrable Securities of any Holder pursuant to Section 2 if Company has had a
registration statement, under which such Holder had a right to have its
Registrable Securities included pursuant to Section 2 or 3, declared effective
within one year prior to the date of the request pursuant to Section 2.
(c) Company shall have the right to delay the filing or
effectiveness of a registration statement required pursuant to Section 2 hereof
during one or more periods aggregating not more than one hundred and twenty
(120) days in any twelve-month period in the event that (i) Company would, in
accordance with the advice of its counsel, be required to disclose in the
Prospectus information not otherwise then required by law to be publicly
disclosed and (ii) in the judgment of Company's Board of Directors, there is a
reasonable likelihood that such disclosure, or any other action to be taken in
connection with the Prospectus, would materially and adversely affect any
existing or prospective material business situation, transaction or negotiation
or otherwise materially and adversely affect Company.
9. Selection of Managing Underwriters. The managing
underwriter or underwriters for any offering of Registrable Securities to be
registered pursuant to Section 2 shall be selected by Company and shall be
reasonably acceptable to Purchaser.
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10. Miscellaneous.
(a) No Inconsistent Agreements. Company will not hereafter
enter into any agreement with respect to its securities which is inconsistent
with the rights granted to the Holders in this Agreement.
(b) Remedies. Each Holder, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement. Company
agrees that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of the provisions of this Agreement and
hereby agrees to waive the defense in any action for specific performance that a
remedy at law would be adequate. In any action or proceeding brought to enforce
any provision of this Agreement or where any provision hereof is validly
asserted as a defense, the successful party shall be entitled to recover
reasonable attorneys' fees in addition to any other available remedy.
(c) Amendments. This Agreement and all other Agreements may
be amended or modified with the written consent of Company and the Majority
Holders.
(d) Notice Generally. Any notice, demand, request, consent,
approval, declaration, delivery or other communication hereunder to be made
pursuant to the provisions of this Agreement shall be sufficiently given or made
if in writing and either delivered in person with receipt acknowledged or sent
by registered or certified mail, return receipt requested, postage prepaid, or
by telecopy and confirmed by telecopy answerback, addressed as follows:
(i) If to any Holder, at its last known address
appearing on the books of Company maintained for such purpose.
(ii) If to Company, at
HomeFed Corporation
0000 Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxx
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
with a copy (which shall not constitute notice) to:
Pillsbury Winthrop LLP
00000 Xx Xxxxxx Xxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Attention: K. Xxxxxxx Xxxxxxx
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
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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, delivery 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
in the United States mail.
(e) Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which shall be deemed to be an
original, but all of which shall constitute one and the same instrument.
(f) Rule 144. So long as Company is subject to the
reporting requirements under the Exchange Act, it shall comply with such
requirements so as to permit sales of Registrable Securities by the Holders
thereof pursuant to Rule 144 under the Securities Act.
(g) Successors and Assigns. This Agreement shall inure to
the benefit of and be binding upon the successors and assigns of each of the
parties hereto including any person to whom Registrable Securities are
transferred.
(h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(i) Governing Law; Jurisdiction. This Agreement shall be
governed by, construed and enforced in accordance with the laws of the State of
New York without giving effect to the conflict of laws principles thereof.
(j) Severability. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
(k) Entire Agreement. This Agreement, together with the
Purchase Agreement, represents the complete agreement and understanding of the
parties hereto in respect of the subject matter contained herein and therein.
This Agreement supersedes all prior agreements and understandings between the
parties with respect to the subject matter hereof.
[Remainder of this page is intentionally left blank.]
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
HOMEFED CORPORATION
By:
-------------------------------------
Name:
Title:
LEUCADIA NATIONAL CORPORATION
By:
-------------------------------------
Name:
Title:
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