Exhibit 10.38
AGREEMENT AND GUARANTY
AGREEMENT, dated as of October 1, 2002, between Leucadia National
Corporation, a New York corporation ("LUK") and CDS Holding Corporation, a
Delaware corporation ("Holdings").
W I T N E S S E T H:
WHEREAS, LUK is the record and beneficial owner of all of the issued and
outstanding shares of capital stock of Holdings; and
WHEREAS, Holdings is the record owner of 80% of the issued and outstanding
shares of capital stock of CDS Devco, a California corporation ("Devco"); and
WHEREAS, Devco is the record owner of 85% of the issued and outstanding
shares of capital stock of San Elijo Ranch, Inc., a California corporation
("SERI"); and
WHEREAS, SERI is the owner of certain real property located in San Elijo
Hills, San Diego County, California being developed as a residential real estate
project (the "Project"); and
WHEREAS, 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"); and
WHEREAS, LUK, either directly or through an affiliate, currently provides
and in the past has provided certain guarantees or other credit enhancements to
third parties and for which LUK has not charged a fee to either Holdings or SERI
(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"); and
WHEREAS, pursuant to the Agreement between LUK and SERI dated as of October
__, 2002 (the "SERI Agreement"), SERI is obligated to pay or reimburse LUK or a
LUK affiliate (together, the "LUK Entities") for (i) all amounts, including, but
not limited to, all costs and expenses, incurred by or charged to the LUK
Entities by any party as a result of a draw under any Bond issued to or for the
benefit of SERI under the Credit Enhancements, plus interest at a rate of 12%
per annum calculated on the basis of a 360 day year for the actual number of
days elapsed from the date of any such draw to the date of repayment in full of
such draw by SERI to LUK, or if paid by SERI to such party, the date of
repayment in full of such draw by such party to LUK and (ii) all out-of-pocket
third party costs incurred by or charged to the LUK Entities in connection with
the issuance by such third parties of any Bond issued to or for the benefit of
SERI under the Credit Enhancements, plus interest at a rate of 12% per annum
calculated on the basis of a 360 day year for the actual number of days elapsed
from the date that is 30 days following the date SERI is billed for any such
cost incurred by or charged to the LUK Entities to the date of payment in full
of such cost (collectively, the "SERI Obligations"); and
WHEREAS, LUK and Holdings each want LUK to continue to provide the Credit
Enhancements in the future for so long as necessary to complete the development
of the Project, on the same terms and conditions as currently provided by LUK,
subject to the terms of this Agreement; and
NOW, THEREFORE, for 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. CREDIT ENHANCEMENTS. Upon the request of Holdings, the LUK Entities will
continue to provide the Credit Enhancements, on the same terms and conditions as
previously provided by the LUK Entities and without charging Holdings any fee,
as may be requested by Holdings and as are necessary to enable SERI to obtain
Bonds; provided, however, that Holdings shall pay or reimburse the LUK Entities
for any out-of-pocket third party costs incurred by or charged to the LUK
Entities in connection with the issuance by such third parties of the Bonds to
or for the benefit of SERI, plus interest at a rate of 12% per annum calculated
on the basis of a 360 day year for the actual number of days elapsed from the
date that is 30 days following the date that Holdings is billed for any such
cost incurred by or charged to the LUK Entities to the date of payment in full
of such cost; provided, further, that such Bonds shall be of the same type as,
and on terms and conditions consistent with, Bonds previously obtained through
the LUK Entities or their affiliates by or for the benefit of SERI in connection
with the Project; and provided, further that the SERI Obligations shall at all
times be in full force and effect and shall be binding obligations of SERI.
2. GUARANTY.
(a) Holdings hereby guarantees (the "Guaranty") irrevocably and
unconditionally the punctual payment and performance of the SERI Obligations to
the LUK Entities under the SERI Agreement. Should SERI default in the payment or
performance of any of the SERI Obligations as and when they become due, the LUK
Entities shall provide five (5) business day's written notice to Holdings at the
address specified in Section 4.5 below that the obligations of Holdings
hereunder in respect of such payment or performance shall become immediately due
and payable as of the date stated in such notice.
(b) The liability of Holdings under this Guaranty shall be unconditional
irrespective of (i) any lack of enforceability of any SERI Obligation, (ii) any
change in the time, manner or place of payment, or any other term of any SERI
Obligation, (iii) any law, regulation or order of any jurisdiction affecting any
terms of any SERI Obligation or the LUK Entities' rights with respect thereto,
and (iv) any other circumstance which might otherwise constitute a defense
available to, or a discharge of SERI or Holdings other than the irrevocable
payment and satisfaction in full in cash of all of the SERI Obligations.
(c) Holdings hereby waives promptness, diligence, presentment, demand,
protest, notice of acceptance and all other notices with respect to any SERI
Obligation and this Guaranty, all defenses which may be available by virtue of
any valuation, stay, moratorium law or similar law now or hereafter in effect,
any requirement that the LUK Entities exhaust any right or take any action
against SERI and all suretyship defenses generally.
(d) This is a continuing guaranty and shall remain in full force and effect
until the irrevocable payment and satisfaction in full in cash of all of the
SERI Obligations. This Guaranty shall continue to be effective or be reinstated,
notwithstanding the foregoing, if at any time a court of proper jurisdiction
orders any payment made with respect to any SERI Obligation to be returned to
SERI by the LUK Entities upon the insolvency, bankruptcy or reorganization of
SERI; or otherwise, all as though such payment had not been made or received.
(e) Until the irrevocable payment and satisfaction in full in cash of all
of the SERI Obligations, Holdings (i) shall not exercise any rights against the
LUK Entities arising as a result of payment by SERI hereunder, by way of
subrogation, reimbursement, restitution or contribution, (ii) will assign to the
LUK Entities the proceeds of any claim in respect of any payment hereunder in
any bankruptcy, insolvency or reorganization case or proceeding of any nature in
which SERI is the debtor, and (iii) will not claim any setoff, recoupment or
counterclaim against SERI for any payment made hereunder in respect of any
liability of Holdings to SERI.
(f) The LUK Entities' books and records shall be prima facie evidence
(absent manifest error) of any claim the LUK Entities may make under this
Guaranty.
3. TERMINATION. The obligations of the LUK Entities to provide the Credit
Enhancements shall continue in full force and effect until the earliest to occur
of (i) the termination by Holdings upon five days' notice to LUK, (ii) the
completion by SERI of the Project, (iii) the sale by SERI of all or
substantially all of the Project and (iv) the draw by any party on any Bond
issued under the Credit Enhancements; provided, however, that if Holdings and/or
SERI shall have the right to reinstate such Bond, termination under clause (iv)
shall not be effective unless Holdings and/or SERI or LUK (at no cost to LUK)
have failed to reinstate such Bond within five (5) business days of the draw on
the Bond; provided further, that even though not terminated, LUK's obligation to
provide Credit Enhancements under this Agreement for any future Bonds shall be
suspended during such five (5) business day period. Notwithstanding the
termination of the obligation of the LUK Entities to provide the Credit
Enhancements under Section 1 hereof, Holdings shall continue to be obligated to
pay or reimburse the LUK Entities for all amounts provided in Section 1 in
respect of any Bond that is issued under the Credit Enhancement for so long as
such Bond remains outstanding.
4. MISCELLANEOUS.
4.1 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.
4.2 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.
4.3 Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
other prior negotiations, commitments, agreements and understandings, both
written and oral, between the parties or any of them with respect to the subject
matter hereof.
4.4 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
4.5 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 (5) 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
315 Park Avenue South
20th Floor
New York, NY 10010
Attention: President
Facsimile: (212) 598-3245
Telephone: (212) 460-1900
With a copy to:
Weil, Gotshal & Manges, LLP
767 Fifth Avenue New York, NY 10153
Attention: Andrea A. Bernstein
Facsimile: (212) 310-8007
Telephone: (212) 310-8000
(b) if to Holdings, to:
CDS Holding Corporation
1903 Wright Place, Suite 220
Carlsbad, CA 92008
Attention: President
Facsimile: (760) 918-8210
Telephone: (760) 918-8200
4.6 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.
4.7 No Third Party Beneficiaries. Nothing in this Agreement is intended or
shall be construed to give any individual, corporation, limited liability
company, partnership, firm, joint venture, association, trust, unincorporated
organization, governmental authority or other entity, other than the parties
hereto, SERI, and their respective successors and permitted assigns, any legal
or equitable right, remedy or claim under or in respect of this Agreement or any
provision contained herein. This Agreement is intended to memorialize the
arrangements between LUK and Holdings and nothing in this Agreement is intended
to limit the right of Holdings or Devco to charge fees in respect of the
arrangements set forth in this Agreement.
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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/ Joseph A. Orlando
--------------------------
Name: Joseph A. Orlando
Title: Vice President
CDS HOLDING CORPORATION
By: /s/ Joseph A. Orlando
-------------------------
Name: Joseph A. Orlando
Title: President