Exhibit 10.1
SECURITY AGREEMENT AND STOCK PLEDGE
THIS SECURITY AGREEMENT AND STOCK PLEDGE ("Stock Pledge") is
entered into as of July 3, 1995, by and between HomeFed Corporation, a Delaware
corporation ("Borrower"), and Leucadia Financial Corporation, a Utah corporation
("Lender").
A. On October 22, 1992, Borrower filed in the United States
Court for the Southern District of California (the "Bankruptcy Court"), a
voluntary petition for relief under Chapter 11 of Title 11 of the United States
Bankruptcy Code, which was later consolidated with an involuntary bankruptcy
case initiated by certain holders of debentures on June 25, 1992, and is now
assigned Case No. 92-07591-A11 (the "Bankruptcy Case").
B. Borrower filed a Fourth Amended Plan of Reorganization (the
"Plan") in the Bankruptcy Case, which was approved by its creditors and
confirmed by the Bankruptcy Court by Order of Confirmation dated December 19,
1994 (which Confirmation Order was modified as of June 14, 1995), and this Stock
Pledge is made in order to facilitate implementation of the Plan.
C. Upon effectiveness of the Plan, Lender will be the largest
shareholder of Borrower. Lender worked with Borrower to create the Plan. It is
in the best interest of Lender and Borrower to enter into this Stock Pledge, and
to perform their other respective obligations under and otherwise act in
compliance with the Plan.
D. Upon the "Effective Date" of the Plan, Lender shall loan to
Borrower the sum of Twenty Million and 00/100 Dollars ($20,000,000) (the "Loan")
pursuant to the terms of a Loan Agreement between Lender and Borrower ("Loan
Agreement"), which the parties shall execute on the date first written above.
The Loan shall be evidenced by a Promissory Note ("Note") to be held by Lender.
E. This Stock Pledge is made pursuant to the Plan and the Loan
Agreement in order to provide security for timely repayment of the Loan
evidenced by the Note, and the performance by Borrower of its obligations under
the Loan Agreement.
F. Under the terms of the Loan Agreement, Lender shall have
the right to convert all or a portion of the Principal (as defined in the Loan
Agreement) into Common Stock (as defined in the Loan Agreement). Any such
conversion shall have no effect upon the enforceability of this Stock Pledge as
it relates to the Obligations (defined below).
G. This Stock Pledge, together with the Plan, the Loan
Agreement, the Note, the Payment Guaranties executed by each of the Subsidiaries
(defined below), the Security Agreements securing the Payment Guaranties, the
Deeds of Trust securing the performance of Borrower and the Subsidiaries, all
related financing statements, and all documents referred to herein or in any of
such other documents, are collectively referred to herein as the "Plan
Documents."
NOW, THEREFORE, in consideration of the above recitals and the
mutual agreements and promises contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound hereby, Borrower and Lender agree as follows:
Section 1.
Grant of Security Interest
--------------------------
Upon the terms of this Stock Pledge, for value received,
Borrower, whose name and mailing address are set forth above its signature at
the foot of this Stock Pledge, grants to Lender a security interest in the
Collateral (defined below), in order to secure the prompt payment and
performance in full of the Obligations (defined below) owed to Lender.
Section 2.
Definition of Collateral
------------------------
The term "Collateral" as used in this Stock Pledge shall mean
the property of Borrower described in both subparagraphs (a) and (b) below.
Collateral shall consist of "Stock Collateral" and "Non-Stock Collateral",
including any respective insurance payable by reason of loss or damage thereto,
described as follows:
(a) Stock Collateral shall consist of all of Borrower's right,
title and interest in and to (i) 400 shares of the outstanding common stock of
HomeFed Communities, Inc., a California corporation ("HomeFed Communities"),
which shares constitute all of the outstanding shares of HomeFed Communities and
are represented by a certificate of HomeFed Communities, and any and all
securities now or hereafter issued in substitution, exchange or replacement
therefor, or with respect thereto, and any and all warrants, options or other
rights to subscribe to or acquire any additional stock or securities of HomeFed
Communities; (ii) 20 shares of the outstanding common stock of HomeFed Resources
Corporation, a California corporation ("HomeFed Resources"), which shares
constitute all of the outstanding shares of HomeFed Resources and are
represented by a certificate of HomeFed Resources, and any and all securities
now or hereafter issued in substitution, exchange or replacement therefor, or
with respect thereto, and any and all warrants, options or other rights to
subscribe to or acquire any additional stock or securities of HomeFed Resources;
(iii) any and all other securities, and any and all warrants, options, or other
rights to subscribe to or acquire securities; and (iv) the cash and noncash
proceeds of the foregoing, including dividends. Collectively, HomeFed
Communities and HomeFed Resources, together with Northfork Communities, a
California general partnership ("Northfork") and Paradise Valley Communities No.
1, a California general partnership ("Paradise Valley"), are referred to herein
as the "Subsidiaries."
(b) Non-Stock Collateral shall consist of all of Borrower's
right, title and interest in and to any and all property of Borrower, including
partnership interests, other than that described in subparagraph (a), acquired
at any time, now existing or hereafter arising, and of any and all kinds
whatsoever, real or personal, tangible or intangible, or otherwise, and
including without limitation (i) accounts, deposit accounts, general
intangibles, chattel paper, instruments (whether negotiable or non--negotiable),
contract rights, and all rights of Borrower of every kind to the payment of
money, (ii) all cash and cash equivalents, bank accounts (whether special or
general), and collateral accounts, (iii) all equipment, furniture, fixtures,
machinery, tools, tooling, goods, inventory, raw materials, work in process,
finished goods and materials, and all accessories, parts, repossessions and
returns thereto or therefor, (iv) the cash and noncash proceeds, products,
increase, profits, additions, substitutions, replacements and accessions to,
for, of, and from all of the foregoing, including all cash and noncash proceeds
arising from the transfer of real property, and (v) all books and records of
Borrower with respect to all of the foregoing.
2
Section 3.
Definition of Obligations
-------------------------
The term "Obligations" as used in this Stock Pledge shall mean
all present and/or future obligations of Borrower under the Loan Agreement and
under the Note and of Borrower and the Subsidiaries under the other Plan
Documents, and all other obligations of every kind or nature of Borrower or any
of its Subsidiaries from time to time owed to Lender, whether due or to become
due, matured or unmatured, liquidated or unliquidated, contingent or
noncontingent, including obligations of performance as well as obligations of
payment and including, without limitation, any and all expenses (including,
without limitation, counsel fees and expenses) incurred by Lender in enforcing
its rights under the Plan Documents, as well as interest that accrues after the
commencement of the bankruptcy or insolvency proceeding by or against Borrower.
Section 4.
Warranties and Representations of Borrower
------------------------------------------
Borrower warrants and represents and covenants that all of the
following are true:
(a) Ownership of Collateral. Borrower owns all right, title
and interest in and to, and has unrestricted power to encumber, all Collateral.
The Bankruptcy Court has confirmed Borrower's authority to execute and deliver
this Stock Pledge. No dispute, right of setoff, counterclaim, or defense exists
with respect to any Collateral and no person other than Borrower and Lender has
or claims any title, lien, encumbrance or other interest in any Collateral,
except for (i) taxes not yet delinquent and (ii) any title, lien, encumbrance or
interest disclosed in writing to Lender and to which Lender has consented in
writing. No financing statement or deed of trust has been filed, and no other
security agreement has been made, covering the Collateral or any part thereof,
except as listed on Exhibit "A" attached hereto and incorporated herein by this
reference. The delivery of any of the Collateral at any time by Borrower to
Lender shall constitute a warranty and representation to the foregoing effect
with respect to such Collateral.
(b) No Other Interests. There is no outstanding right,
subscription, call, option or any agreement to acquire or otherwise receive from
Borrower any portion of the Collateral except as provided in the Plan Documents.
(c) Perfection of Interest. This Stock Pledge and the filing
of UCC-l Financing Statements with respect to the Collateral will create a
valid, enforceable and, to the full extent permissible under the Utah Uniform
Commercial Code (the "Commercial Code"), perfected security interest in the
Collateral, securing the payment and performance of the Obligations.
(d) Authorization. Borrower has obtained any and all necessary
consents, approvals and waivers as may be required by the Plan, the Plan
Documents or otherwise for the pledge of or creation of a security interest in
the Collateral pursuant hereto or for the execution, delivery or performance
hereof by Borrower, or for the exercise by Lender of the rights provided for
herein or the remedies in respect of the Collateral pursuant hereto.
(e) Execution. This Stock Pledge has been duly executed and
delivered by Borrower and constitutes the legal, valid and binding agreement of
Borrower enforceable against Borrower in accordance with its terms and
conditions.
(f) Offices. The chief executive office of Borrower is, for
now, located at 529 East South Temple, Salt Lake City, Utah 84012. Borrower has
no other place of business. Borrower shall give Lender ten (10) days' prior
written notice of any change of such office, or of the addition of any other
office(s).
3
Section 5.
Affirmative Covenants of Borrower
---------------------------------
So long as any Obligation remains unpaid or unperformed,
Borrower covenants and agrees to do all of the following:
(a) Preservation of Existence. Preserve and maintain its
existence and good standing as a corporation in the state of Delaware, and
qualify and remain qualified as a foreign corporation in California and each
other jurisdiction in which the failure to qualify would have a material adverse
effect on Borrower.
(b) Condition of and Title to Collateral. From time to time,
(1) promptly furnish Lender with any information or writings which Lender may
reasonably request concerning the Collateral; (ii) permit Lender to inspect at
reasonable hours all records of Borrower relating to the Collateral and to make
and take away copies of such records; (iii) promptly notify Lender of any change
in any fact or circumstances warranted or represented by Borrower in this Stock
Pledge or in any other writing furnished by Borrower to Lender in connection
with the Collateral or the Obligations; (iv) promptly notify Lender of any
claim, action, or proceeding affecting the Collateral, or any part thereof, or
any security interest therein, and, at the request of Lender, appear in and
defend, at Borrower's expense, any such action or proceeding; (v) pay to Lender
the amount of all court costs and attorneys' fees assessed by a court and
incurred by Lender following any default hereunder by Borrower; and (vi) except
to the extent prohibited by applicable law, pay any reasonable expenses incurred
in the custody, preservation, use, or operation of the Collateral.
(c) Preservation of Stock Collateral. At no time, without the
prior written consent of Lender: (i) sell, assign, transfer or exchange
Borrower's rights in the Stock Collateral; or (ii) create any other security
interest in or otherwise encumber the Stock Collateral, or any part thereof, or
permit the same to be or become subject to any lien attachment, execution,
sequestration, other legal or equitable process, or any encumbrance of any kind
or character, except the security interest herein.
(d) Preservation, Use and Location of Non-Stock Collateral.
Preserve, protect, and maintain all Non-Stock Collateral in good and salable
condition, other than any particular item that is of no material value, and (i)
use the Non-Stock Collateral lawfully, only in the ordinary business and
activities of Borrower and as permitted by insurance policies, (ii) keep all
Non-Stock Collateral at Borrower's chief executive office or at such other
location or locations as Lender may approve in writing, except in the case of
temporary removal for use in Borrower's business or for repairs, and keep all
Non-Stock Collateral separate and identifiable to the fullest extent possible,
(iii) promptly notify Lender of any claim, action, or proceeding affecting any
Non-Stock Collateral or the security interest therein and, unless Lender
requests otherwise, appear in and defend any such action or proceeding at
Borrower's expense, (iv) pay any reasonable expenses incurred by Borrower and,
except to the extent prohibited by applicable law, by Lender in the custody,
preservation, use or operation of the Non-Stock Collateral, and (v) pay and
discharge promptly all taxes, assessments and governmental charges or levies
imposed upon any Non-Stock Collateral.
(e) Maintenance of Insurance. Borrower will maintain, with
financially sound and reputable companies acceptable to Lender, insurance
policies (i) insuring its inventory and equipment against loss by fire,
explosion, theft and such other casualties as are usually insured against by
companies engaged in the same or similar businesses and (ii) insuring Borrower
and Lender against liability for personal injury and property damage relating to
such inventory and equipment, such policies to be in such amounts and against at
least such risks as are usually insured against in the same general area by
companies engaged in the same or similar businesses, naming Lender as an
additional insured with a lender loss payable clause in favor of Lender.
Borrower shall, if so requested by Lender, deliver to Lender as often as Lender
may reasonably request, a report of a reputable insurance broker satisfactory to
Lender with respect to the insurance on its inventory and equipment. All
insurance with respect to the inventory and equipment shall (i) contain a clause
which provides that Lender's interest under the policy will not be invalidated
by any act or omission of, or any breach of warranty by, the insured, or by any
change in the title, ownership or possession of the insured property, or by the
use of the property for purposes more hazardous than is permitted in the policy,
and (ii) provide that no cancellation, reduction in the amount or change in
coverage thereof shall be effective until at least ten days after receipt by
Lender of written notice thereof.
4
(f) Compliance with Warranties and Representations. Cause all
warranties and representations made by Borrower in this Stock Pledge to remain
true and promptly to notify Lender of any change in any fact or circumstances
warranted or represented by Borrower in this Stock Pledge.
(g) Compliance with Laws, Etc. Borrower will comply, in all
material respects, with all acts, rules, regulations, orders, decrees and
directions of any governmental authority, applicable to the Collateral or any
part thereof or to the operation of Borrower's business; provided, however, that
Borrower may contest any act, regulation, order, decree or direction in any
reasonable manner which shall not, in the sole opinion of Lender, adversely
affect Lender's rights hereunder or adversely affect the priority of its lien on
and security interest in the Collateral.
(h) Documentation. From time to time, if requested by Lender,
execute and deliver to Lender, in form and substance acceptable to Lender,
separate assignments, certificates, documents, financing statements,
supplemental writings, and further instruments and take any and all further
action as Lender may reasonably require in order to evidence, confirm, affirm,
maintain, perfect or further assure the hypothecation to Lender of the
Collateral or Lender's security interest therein, or to give any other person
notice of Lender's interest in the Collateral; and Lender may deliver to or
serve upon any other person or file in any appropriate public office any of the
foregoing.
Section 6.
Stock Collateral
----------------
(a) Voting Rights. So long as no Default (defined below)
occurs and remains continuing, and subject to the provisions of the Plan
Documents and the security interest granted herein, Borrower shall be entitled
to exercise any and all voting and other consensual rights pertaining to the
Stock Collateral.
(b) Distributions. So long as no Default (defined below)
occurs and remains continuing, and subject to the provisions of the Plan
Documents and the security interest granted herein, Borrower shall be entitled
to receive and to retain and use any and all dividends, distributions and other
amounts paid in respect of the Stock Collateral; provided, however, that any and
all such dividends, distributions and other amounts received in the form of
stock, bonds, certificated securities, warrants, options or rights to acquire
any of the foregoing, together with any certificates representing same, shall
become Stock Collateral and forthwith shall be delivered to Lender, and shall
further, if received by Borrower, be received in trust for the benefit of
Lender, be segregated from the other property of Borrower and forthwith be
delivered to Lender in the same form as received (with an assignment separate
from certificate and any other necessary endorsements).
(c) Dealings in Stock Collateral. Lender shall have no
responsibility for ascertaining any maturities, calls, conversions, exchanges,
offers, tenders or similar matters relating to the Stock Collateral or for
informing Borrower with respect to any of such matters (irrespective of whether
Lender actually has, or may be deemed to have, knowledge thereof). Lender shall
not be required to take any steps or actions with regard to the Stock Collateral
as may be requested or authorized by Borrower unless (i) such steps are
reasonable and will not adversely affect the value as collateral of the Stock
Collateral, and (ii) such request or authorization by Borrower is made in
writing and is actually received by Lender.
(d) Other Provisions. The terms of this Stock Pledge
concerning affirmative covenants of Borrower, Default and related matters set
forth additional provisions concerning the Stock Collateral.
5
Section 7.
Default, Remedies, and Certain Waivers
--------------------------------------
(a) Default. For purposes of this Stock Pledge, the term
"Default" means the existence or occurrence of any one or more of the events
constituting an Event of Default under the Loan Agreement.
(b) Stock Collateral Voting Rights. With respect to any Stock
Collateral, so long as a Default has occurred and is continuing:
(i) At the option of Lender, all rights of Borrower to
exercise the voting and other consensual rights which Borrower would otherwise
be entitled to exercise, and to receive the dividends and distributions which
Borrower would otherwise be authorized to receive and retain, shall cease, and
all such rights thereupon shall become vested in Lender which thereupon shall
have the sole right to exercise such voting and other consensual rights and to
receive and to hold as Collateral such dividends and distributions.
(ii) All dividends and other distributions which are received
by Borrower contrary to the provisions of this Stock Pledge shall be received in
trust for the benefit of Lender, shall be segregated from other funds of
Borrower and forthwith shall be paid over to Lender as Collateral in the same
form as so received (with an assignment separate from certificate and any other
necessary endorsements).
(c) Remedies. Upon the occurrence of a Default, in addition to
any and all other rights and remedies which it may then have hereunder, or at
law or in equity, or under the Commercial Code, Lender at its option may: (i)
declare the entire unpaid balance of principal of and all accrued interest on
the Obligations immediately due and payable, without notice, demand, or
presentment, which are hereby waived; (ii) reduce its claims to judgment,
foreclose or otherwise enforce its security interest in all or any part of the
Collateral by any available judicial procedure; (iii) after any notification
required by this Stock Pledge, sell, or otherwise dispose of, at the office of
Lender, or elsewhere as chosen by Lender, all or any part of the Collateral, and
any such sale or other disposition may be as a unit or in parcels, by public or
private proceedings, and by way of one or more contracts (it being agreed that
the sale of all or any part of the Collateral shall not exhaust Lender's power
of sale, but sales may be made from time to time until all of the Collateral has
been sold or until the Obligations have been paid in full) and at any such sale
it shall not be necessary to exhibit the Collateral; (iv) in its discretion,
retain the Collateral in satisfaction of the Obligations whenever the
circumstances are such that Lender is entitled to do so under the Commercial
Code; (v) apply by appropriate judicial proceedings for appointment of a
receiver for the Collateral, or any part thereof, and Borrower hereby consents
to any such appointment; (vi) buy the Collateral at any public sale; and (vii)
buy the Collateral at any private sale if the Collateral is of a type
customarily sold in a recognized market or is of a type which is the subject of
widely distributed standard price quotations. Lender shall be entitled to apply
the proceeds of any sale or other disposition of the Collateral in the following
order: first, to the payment of all its reasonable costs incurred in storing,
preparing for sale, or selling all or any part of the Collateral and to the
payment of attorneys' fees as provided for herein or in the Loan Agreement; and
next, toward repayment of the Loan as provided in the Loan Agreement and Note.
Lender shall account to Borrower for any surplus. If the proceeds are not
sufficient to pay the Obligations in full, Borrower shall remain liable for any
deficiency.
6
(d) Notice. Reasonable notification of time and place of any
public sale of the Collateral or reasonable notification of the time after which
any private sale or other intended disposition of the Collateral is to be made
shall be sent to Borrower and to any other person entitled under the Commercial
Code to notice; provided, that if the Collateral is perishable or threatens to
decline speedily in value or is of a type customarily sold on a recognized
market, Lender may sell or otherwise dispose of such Collateral without
notification, advertisement, or other notice of any kind. It is agreed that
notice sent or given not less than five calendar days prior to the taking of the
action to which the notice relates is reasonable notification and notice.
(e) Stock Collateral. By virtue of the Securities Act of 1933,
as amended ("1933 Act"), or any other laws or regulations, legal restrictions or
limitations peculiar to securities may apply and affect Lender in any attempts
to dispose of all or any portion of the Stock Collateral in the enforcement of
Lender's rights and remedies hereunder. For these reasons, Lender is hereby
authorized by Borrower, but is not obligated, in the event of any Default giving
rise to Lender's rights to sell or otherwise dispose of any Stock Collateral, to
sell all or any part of the Stock Collateral at private sale, subject to
investment letter restrictions or in any other manner which will not require the
Stock Collateral, or any part thereof, to be registered in accordance with the
1933 Act, as amended, or the rules and regulations promulgated thereunder, or
any other law or regulation ("Registration"), at the best price reasonably
obtainable by Lender at any such private sale or other disposition in any manner
mentioned above. Lender is hereby further authorized by Borrower, but is not
obligated, in the event of any Default giving rise to Lender's rights to sell or
otherwise dispose of Collateral, to sell all or any part of the Stock Collateral
at a public sale at the best price obtainable by Lender at any such public sale.
A commercially reasonable public sale of Stock Collateral shall be deemed to
include, but not be limited to, the following: (1) Lender shall publish a notice
of the sale in a newspaper of general circulation in the county of the office of
Lender or the county of the place of sale chosen by Lender if not at its office,
and elsewhere as chosen by Lender; (ii) the notice of sale shall state that
Lender reserves the right to bid for and purchase the Stock Collateral; (iii)
all Stock Collateral of the same issuer shall be sold only as a block and shall
not be sold jointly or broken down; (iv) the purchaser of the Stock Collateral
shall provide an investment letter; (v) the certificate(s) for the shares of the
Stock Collateral sold shall bear a legend to the effect that the shares are
restricted and may not be sold or transferred without registration under the
1933 Act and under applicable state securities laws or under a valid exemption
from the 1933 Act and from applicable state securities laws; and (vi) any other
procedures or restrictions necessary to sell or dispose of the Stock Collateral
or any part thereof, without Registration of the Stock Collateral or to comply
with any other express requirements of the Commercial Code. Lender is also
hereby authorized by Borrower, but is not obligated, to take such actions, give
such notices, obtain such consents, and do such other things as Lender may deem
required or appropriate in the event of a sale or disposition of any of the
Stock Collateral. Borrower understands that Lender may in its discretion
approach a restricted number of potential purchasers for a private sale and that
a sale under such circumstances may yield a lower price for the Stock
Collateral, or any part or parts thereof, than would otherwise be obtainable if
the same were subject to an effective Registration and sold in the open market.
Borrower also understands that a public sale of the Stock Collateral in any
manner that will not require Registration may yield a lower price for the Stock
Collateral than would otherwise be obtainable if the same were subject to an
effective Registration and sold in the open market. Borrower agrees (i) that in
the event Lender shall upon any Default sell the Stock Collateral, or any
portion thereof, at such private sale or sales or at such public sale, or in
connection with any sale that is pursuant to effective Registration, Lender
shall have the right to rely upon the advice and opinion of any member firm of a
national securities exchange as to the best price reasonably obtainable upon
such private sale or public sale thereof, and (ii) that such reliance shall be
conclusive evidence that Lender handled such matter in a commercially reasonable
manner under the Commercial Code.
(f) No Waivers by Lender. The acceptance by Lender at any time
and from time to time of partial payment of the aggregate amount due under the
Note upon conversion of all or any portion of the Principal into Common Stock
pursuant to the terms of the Loan Agreement, shall not be deemed to be a waiver
of any Default then existing. No waiver by Lender of any Default shall be deemed
to be a waiver of any other subsequent Default, nor shall any such waiver by
Lender be deemed to be a continuing waiver. No delay or omission by Lender in
exercising any right or power hereunder, or under any other writings executed by
Borrower as security for or in connection with the Obligations, shall impair any
such right or power or be construed as a waiver thereof or an acquiescence
therein, nor shall any single or particular exercise of any such right or power
preclude other or further exercise thereof, or the exercise of any other right
or power of Lender hereunder or under such other writings.
7
(g) Remedies Cumulative. All rights and remedies of Lender
under this Stock Pledge are cumulative of each other and every other right or
remedy which Lender may otherwise have at law or in equity or under any other
writing for the enforcement of the security interest herein or the collection of
the Obligations, and the exercise or failure to exercise of one or more rights
or remedies shall not prejudice or impair the concurrent or subsequent exercise
of other rights or remedies. Should any person other than Borrower have
heretofore executed or hereafter execute in favor of Lender any deed of trust,
mortgage, or security agreement to secure the payment of the Obligations or any
part thereof or should Borrower have heretofore executed or hereafter execute in
favor of Lender any deed of trust, any mortgage or any other security agreement:
(i) the lien or security interest therein created and all rights, powers,
privileges and remedies vested in Lender by the terms hereof shall exist
concurrently with the security interest herein created and all rights, powers,
privileges, and remedies vested in Lender by the terms hereof, and (ii) the
exercise or failure to exercise by Lender of any right or power conferred upon
it in any such instrument shall not prejudice or impair Lender's rights, titles,
liens and powers existing hereunder.
Section 8.
Other Rights of Lender
----------------------
(a) Filings. Lender shall have the right at any time to
execute and file the original or a copy of this Stock Pledge as a financing
statement, but the failure of Lender to do so shall not impair the validity or
enforceability of this Stock Pledge.
(b) Actions With Respect to Collateral. Concerning the
indebtedness to Lender comprising the Obligations, Lender, in its sole
discretion without in any manner impairing Lender's rights and powers hereunder,
may, at any time and from time to time, without further consent of or notice to
Borrower, and with or without valuable consideration, (i) make loans or advances
to Borrower, or otherwise incur or acquire obligations of Borrower; (ii) renew
or extend the maturity of or accept partial payments upon the Obligations or any
part thereof; (iii) release any person primarily or secondarily liable in
respect thereof; (iv) alter in any manner that Lender may elect the terms of any
instrument evidencing the Obligations or any part thereof either as to the
maturity thereof, rate of interest, method of payment, parties thereto or
otherwise; (v) renew, extend, or accept partial payments upon, release or permit
substitutions for or withdrawals of, any security at any time directly or
indirectly, immediately or remotely, securing the payment of the Obligations or
any part thereof; and (vi) release or pay to any person otherwise entitled
thereto, any amount paid or payable in respect of any such other direct or
indirect security for the Obligations, or any part thereof.
(c) Limits on Obligations of Lender. Lender shall never be
liable for its failure to use due diligence in the satisfaction of the
Obligations, or any part thereof, or for its failure to give notice to Borrower
of a Default or of a default in the payment of or upon any Collateral, whether
pledged hereunder or otherwise. Lender shall have no duty to fix or preserve
rights against prior parties to the Collateral, and shall never be liable for
its failure to use diligence to collect any amount payable in respect of the
Collateral, but shall be liable only to account to Borrower for what it may
actually collect or receive thereon. Without limiting the generality of the
immediately preceding sentence, Lender shall not be, required to take any steps
or actions with regard to Collateral as may be requested or authorized by
Borrower unless (i) Lender shall determine, in its sole discretion, that such
steps or actions will not adversely affect the value of the Collateral as
collateral, and (ii) such request or authorization by Borrower is made in
writing and is actually received by Lender.
(d) Assignment. The rights, powers, and interest held by
Lender under this Stock Pledge and the Loan Agreement and Note, together with
all interest in and to the Collateral, may be transferred and assigned by
Lender, in whole or in part, at such time and upon such terms as it may deem
advisable. Borrower shall not be permitted to transfer or assign its rights or
obligations under this Stock Pledge, or the other Plan Documents.
(e) Limitation on Interest. No provision herein or in the Loan
Agreement or Note, any of the other Plan Documents, or any other promissory
note, agreement or document executed by Borrower evidencing the Obligations,
shall require the payment or permit the collection of interest in excess of the
maximum permitted by law. If any excess of interest in such respect is provided
for herein or in the Note or the Loan Agreement, or in any of the Plan Documents
or other promissory note, agreement or document, the provisions of this
Paragraph shall govern, and Borrower shall not be obligated to pay the amount of
such interest to the extent that it is in excess of the amount permitted by law.
The intention of the parties being to conform strictly to the usury laws now in
force, all of the Plan Documents and all promissory notes, agreements or
documents executed by Borrower evidencing the Obligations shall be held subject
to reduction to the amount allowed under said usury laws as now or hereafter
construed by the courts having jurisdiction.
8
Section 9.
Miscellaneous
-------------
(a) Binding Effect. This Stock Pledge shall be binding on
Borrower and Borrower's legal representatives, successors and assigns, and shall
inure to the benefit of Lender, its legal representatives, successors and
assigns.
(b) Term. Until the Obligations shall have been paid and
performed in full, all rights granted to Lender under this Stock Pledge shall
continue to exist and may be exercised at any time irrespective of the fact that
any of the Obligations or rights hereunder may have become barred by any statute
of limitations, the benefits of which are hereby expressly waived by Borrower.
Conversion of all or a portion of the Principal into Common Stock pursuant to
the Loan Agreement shall not release Borrower from the terms of this Stock
Pledge unless and until all Obligations are irrevocably satisfied in full.
(c) Governing Law. This Stock Pledge shall be governed by, and
construed and enforced in accordance with, the internal laws of the State of
Utah, excluding conflict of law provisions.
(d) Counterparts. This Stock Pledge may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(e) Severability. If any provision of this Stock Pledge is
found by any court or arbitral tribunal of competent jurisdiction to be invalid
or unenforceable, the invalidity of such provision shall not affect the other
provisions of this Stock Pledge and all provisions not affected by the
invalidity shall remain in full force and effect.
(f) Number and Gender; Headings. Each number and gender shall
be deemed to include each other number and gender, as the context may require.
The headings and captions contained in this Stock Pledge shall not constitute a
part thereof and shall not be used in its construction or interpretation.
(g) Submission to Jurisdiction; Service of Process. Borrower
and Lender agree to the following: (i) Any legal action or proceeding with
respect to this Stock Pledge or any document related thereto may be brought in
the courts of the State of Utah or of the United States of America for the
District of Utah, and, by execution and delivery of this Stock Pledge, Borrower
hereby accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. Borrower hereby
irrevocably waives any objection, including, without limitation, any objection
to the laying of venue or based on the grounds of forum non conveniens, which
Borrower may now or hereafter have to the bringing of any such action or
proceeding in such respective jurisdictions. (ii) Borrower irrevocably consents
to the service of process of any of the aforesaid courts in any such action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to Borrower at its address provided herein. (iii) Nothing
contained in this Section shall affect the right of Lender to serve process in
any other manner permitted by law or commence legal proceedings or otherwise
proceed against Borrower in any other jurisdiction.
(h) Amendment and Modification. This Stock Pledge may be
amended or modified only by a writing executed by each party.
9
BORROWER ACKNOWLEDGES RECEIPT OF A COPY OF THIS SECURITY
AGREEMENT AND STOCK PLEDGE EXECUTED BY BORROWER ON THE DATE FIRST ABOVE STATED.
BORROWER:
HOMEFED CORPORATION, a Delaware
corporation
529 East South Temple
Salt Lake City, Utah 84102
By: /s/ Patricia A. Wood
---------------------------
Patricia A. Wood, President
---------------------------
[Print Name and Title]
LENDER:
LEUCADIA FINANCIAL CORPORATION,
a Utah corporation
529 East South Temple
Salt Lake City, Utah 84102
By: /s/ Joseph A. Orlando
---------------------------
Joseph A. Orlando, V.P.
---------------------------
[Print Name and Title]
10
EXHIBIT "A"
FINANCING STATEMENTS
The financing statements described in Section 8.4 of the Loan
Agreement are incorporated herein by this reference.
All encumbrances of record listed on title insurance policies
issued to Lender as of the date hereof covering real property that shall as of
the date hereof be encumbered by the Deeds of Trust, are hereby incorporated
herein by this reference.
11