FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to __________
Commission file number 1-10153
HOMEFED CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 33-0304982 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) |
1903 Wright Place, Suite 220, Carlsbad, California 92008
(Address of principal executive offices) (Zip Code)
(760) 918-8200
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. On August 11, 2000, there were 56,807,826 outstanding shares of the Registrant's Common Stock, par value $.01 per share.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
June 30, December 31,
2000 1999
----------- ----------
(Unaudited)
ASSETS
Land and real estate held for development and sale $ 22,584 $ 23,707
Cash and cash equivalents 1,632 2,795
Restricted cash 291 868
Deposits and other assets 907 158
--------- ---------
TOTAL $ 25,414 $ 27,528
========= =========
LIABILITIES
Note payable to Leucadia Financial Corporation $ 21,392 $ 20,552
Recreation center liability 376 970
Accounts payable and accrued liabilities 1,348 1,905
--------- ---------
Total liabilities 23,116 23,427
--------- ---------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST 11,708 11,208
--------- ---------
STOCKHOLDERS' DEFICIT
Common Stock, $.01 par value; 100,000,000 shares authorized;
56,807,826 and 56,557,826 shares outstanding 568 566
Additional paid-in capital 355,055 354,833
Deferred compensation pursuant to stock incentive plans (202) --
Accumulated deficit (364,831) (362,506)
--------- ---------
Total stockholders' deficit (9,410) (7,107)
--------- ---------
TOTAL $ 25,414 $ 27,528
========= =========
|
See notes to interim consolidated financial statements.
For the Three For the Six
Month Period Ended Month Period Ended
June 30, June 30,
------------------ -------------------
2000 1999 2000 1999
---- ---- ---- ----
REVENUES:
Sales of residential properties $ 1,575 $ -- $ 1,575 $ 2,250
Marketing, field overhead and management service
fee income from San Elijo Hills 260 -- 1,138 --
Equity in losses from Otay Land Company, LLC -- (266) -- (523)
------- ------- ------- -------
1,835 (266) 2,713 1,727
------- ------- ------- -------
EXPENSES:
Cost of sales 1,544 -- 1,544 2,218
Provision for losses on real estate investments -- -- -- 255
Interest expense relating to Leucadia Financial Corporation 621 596 1,235 1,180
General and administrative expenses 875 609 1,756 1,177
Management fees to Leucadia Financial Corporation 67 74 141 148
------- ------- ------- -------
3,107 1,279 4,676 4,978
------- ------- ------- -------
Loss from operations (1,272) (1,545) (1,963) (3,251)
Other income 78 50 153 102
------- ------- ------- -------
Loss before income taxes and minority interest (1,194) (1,495) (1,810) (3,149)
Income tax expense (6) (12) (15) (20)
------- ------- ------- -------
Loss before minority interest (1,200) (1,507) (1,825) (3,169)
Minority interest (250) -- (500) --
------- ------- ------- -------
Net loss $(1,450) $(1,507) $(2,325) $(3,169)
======= ======= ======= =======
Basic loss per common share $ (0.03) $ (0.15) $ (0.04) $ (0.32)
======= ======= ======= =======
Diluted loss per common share $ (0.03) $ (0.15) $ (0.04) $ (0.32)
======= ======= ======= =======
|
See notes to interim consolidated financial statements.
Deferred
Common Compensation
Stock Additional Pursuant to Total
$.01 Par Paid-In Stock Incentive Accumulated Stockholders'
Value Capital Plans Deficit Deficit
-------- ---------- ---------------- ----------- -----------
Balance, January 1, 1999 $100 $346,919 $(355,224) $ (8,205)
Net loss (3,169) (3,169)
---- -------- ============= --------- ---------
Balance, June 30, 1999 $100 $346,919 $(358,393) $ (11,374)
---- -------- ============= --------- ---------
Balance, January 1, 2000 $566 $354,833 $(362,506) $ (7,107)
Issuance of 250,000 shares of
Common Stock 2 186 $(188)
Amortization related to restricted
stock grants 20 20
Grant of 50,000 stock options 36 (36)
Amortization related to stock options 2 2
Net loss (2,325) (2,325)
---- -------- ------------ --------- -------
Balance, June 30, 2000 $568 $355,055 $(202) $(364,831) $(9,410)
==== ======== ============ ========= =======
|
See notes to interim consolidated financial statements.
2000 1999
----- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(2,325) $(3,169)
Adjustments to reconcile net loss to net cash used in operating activities:
Provision for losses on real estate investments -- 255
Minority interest 500 --
Amortization of deferred compensation pursuant to stock incentive plans 22 --
Accrued interest added to note payable to Leucadia Financial Corporation 395 --
Amortization of debt discount on note payable to Leucadia Financial Corporation 445 393
Equity in losses from Otay Land Company, LLC -- 523
Changes in operating assets and liabilities:
Land and real estate held for development and sale 1,123 1,850
Deposits and other assets (749) (157)
Recreation center liability (594) --
Accounts payable and accrued liabilities (557) 230
Decrease (increase) in restricted cash 577 (194)
------- -------
Net cash used in operating activities (1,163) (269)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Contributions to Otay Land Company, LLC -- (725)
Decrease in investments -- 79
------- -------
Net cash used in investing activities -- (646)
------- -------
Net decrease in cash and cash equivalents (1,163) (915)
Cash and cash equivalents, beginning of period 2,795 3,120
------- -------
Cash and cash equivalents, end of period $ 1,632 $ 2,205
======= =======
|
See notes to interim consolidated financial statements.
HOMEFED CORPORATION AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
1. The unaudited interim consolidated financial statements, which reflect all adjustments (consisting only of normal recurring items) that management believes are necessary to present fairly the financial position, results of operations and cash flows, should be read in conjunction with the audited consolidated financial statements for HomeFed Corporation for the year ended December 31, 1999 which are included in the Company's Annual Report on Form 10-K, as amended by Form 10-K/A, for such year (the "1999 10-K"). Results of operations for interim periods are not necessarily indicative of annual results of operations. The consolidated balance sheet at December 31, 1999 was derived from the Company's audited consolidated financial statements in the 1999 10-K, and does not include all disclosures required by generally accepted accounting principles for annual financial statements.
During the third quarter of 1999, the limited liability agreement governing Otay Land Company, LLC ("Otay Land Company") was amended and as a result, the Company now has the ability to control Otay Land Company. Accordingly, effective September 20, 1999, Otay Land Company has been included in the Company's consolidated financial statements. The Company previously had accounted for this investment under the equity method of accounting; the noncash effects on the consolidated financial statements were a decrease in the investment in Otay Land Company of $9,988,000, an increase in minority interest of $10,928,000 and an increase in land and real estate held for development and sale of $20,976,000.
2. As of August 14, 1998, the Company and Leucadia Financial Corporation ("LFC"), a wholly-owned subsidiary of Leucadia National Corporation ("Leucadia") entered into an Amended and Restated Loan Agreement, pursuant to which the Company and LFC amended the original loan agreement dated July 3, 1995 and restructured the outstanding 12% Secured Convertible Note due 2003 held by LFC. The Restructured Note has a principal amount of approximately $26,462,000 (reflecting the original $20,000,000 principal balance of the Convertible Note, together with additions to principal resulting from accrued and unpaid interest thereon to the date of the restructuring, as allowed under the terms of the Convertible Note), extends the maturity date from July 3, 2003 to December 31, 2004, reduces the interest rate from 12% to 6% and eliminates the convertibility feature of the Convertible Note. Interest only on the Restructured Note is paid quarterly and all unpaid principal is due on the maturity date. During the six-month periods ended June 30, 2000 and June 30, 1999, interest of approximately $790,000 and $787,000, respectively, was expensed for the Restructured Note. As a result of the restructuring of the Convertible Note, the Restructured Note was recorded at fair value and the approximate $7,015,000 difference between such amount and the carrying value of the Convertible Note was reflected as additional paid-in capital. The $7,015,000 difference between the fair value of the Restructured Note and the carrying value of the Convertible Note will be amortized over the term of the Restructured Note using the interest method. Approximately $445,000 and $393,000, respectively, was amortized as interest expense during the six-month periods ended June 30, 2000 and June 30, 1999.
3. Basic loss per share of Common Stock for the three and six-month periods ended June 30, 2000 was calculated by dividing the net loss by the 56,807,826 and 56,715,793, respectively, weighted average shares of Common Stock outstanding. Basic loss per share of Common Stock for all 1999 periods was calculated by dividing the net loss by 10,000,000 shares of Common Stock.
Diluted loss per share of Common Stock was calculated as described above. The number of weighted average shares used to calculate diluted loss per share for the three and six-month periods ending June 30, 2000 was 56,807,826 and 56,715,793, respectively. For all 1999 periods 10,000,000 shares of Common Stock was used in the calculation of diluted loss per share. The calculation of diluted loss per share does not include Common Stock equivalents of 180,000 and 46,557,826 for all 2000 and 1999 periods, respectively, which are antidilutive.
4. As of October 14, 1998, the Company and Leucadia formed Otay Land Company. The Company has contributed $11,300,000 as capital and Leucadia has contributed $10,000,000 as a preferred capital interest. The Company is the manager of Otay Land Company. Otay Land Company has acquired, for approximately $19,500,000, approximately 4,935 acres of land which is part of a 22,900 acre project located south of San Diego, California, known as Otay Ranch.
Notes to Interim Consolidated Financial Statements, (continued)
5. Pursuant to administrative service agreements, LFC provides administrative services to the Company, including providing the services of two of the Company's executive officers. Effective March 1, 2000, the Company and LFC entered into a new one year administrative services agreement pursuant to which the Company pays LFC an administrative fee of $276,000. For the three-month and six-month periods ended June 30, 2000, the Company expensed $67,000 and $141,000, respectively. For the three-month and six-month periods ended June 30, 1999, the Company expensed $74,000 and $148,000 respectively.
The Company's corporate office is in part of an office building subleased from Leucadia for a monthly amount equal to its share of Leucadia's cost for such space and furniture. For the three-month and six-month periods ended June 30, 2000, the Company expensed $58,000 and $105,000, respectively, for rentals from Leucadia. For the three-month and six-month periods ended June 30, 1999, the Company expensed $53,000 and $90,000, respectively, for rentals from Leucadia.
6. On March 8, 2000, options to purchase an aggregate of 180,000 shares of Common Stock were granted to eligible participants under the Company's 1999 Stock Incentive Plan (the "1999 Plan") at an exercise price of $.75 per share (market price) and an aggregate of 250,000 shares of restricted Common Stock were issued to eligible participants under the 1999 Plan, subject to certain forfeiture provisions. Of the 180,000 options granted, 50,000 were granted to non-employees, resulting in deferred compensation of $36,000 based upon the estimated fair value of these options at the time of grant, using the modified Black Scholes model. This amount will be amortized over the five-year vesting period of the options. In connection with the issuance of restricted stock, the Company recorded deferred compensation of $188,000 representing the value of stock on the date of issuance based upon market price. This amount will be amortized over the three-year vesting period of the restricted stock at which time all remaining forfeiture provisions will end.
7. On July 12, 2000, options to purchase an aggregate of 6,000 shares of Common Stock were granted to members of the Board of Directors under the 1999 Plan at an exercise price of $.70 per share, the then current market price per share.
On July 12, 2000, the Company's Stockholders approved the Company's 2000 Stock Incentive Plan pursuant to which options to purchase an aggregate of 1,000,000 shares of Common Stock were granted to two key employees on April 27, 2000 at an exercise price of $.61 per share, the then current market price per share. The options are subject to achievement of performance goals as determined by the Board of Directors and are exercisable over a six-year period. Options and any stock issued on exercise of an option are subject to forfeiture if the performance goals are not met within three years from the date of grant.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Interim Operations.
The following should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations contained in the Company's 1999 10-K.
LIQUIDITY AND CAPITAL RESOURCES
For the six-month periods ended June 30, 2000 and June 30, 1999, net cash was used in operating activities, principally to fund interest and general and administrative expenses. The Company's principal sources of funds are dividends or borrowings from its subsidiaries, and any fee income earned from the San Elijo Hills project. The Company is dependent upon the cash flow, if any, from the sale of real estate and management fees in order to pay its expenses, including debt service payments.
The Company expects that its cash on hand, together with cash generated from sales of real estate will be sufficient to meet its cash flow needs for the foreseeable future. However, the Company's ability to fund the cost of providing services required under the Development Agreement for San Elijo Hills will depend significantly upon the receipt of fees under the Development Agreement as described below. If, at any time in the future, the Company's cash flow is insufficient to meet its then current cash requirements, the Company could sell real estate projects held for development or seek to borrow funds. However, because all of the Company's assets are pledged to LFC to collateralize its $26,462,000 borrowing from LFC, it may be unable to obtain financing at favorable rates from sources other than LFC.
The Development Agreement provides that the Company will receive certain fees in connection with the project. These fees consist of marketing, field overhead and management service fees. These fees are based on a fixed percentage of gross revenues of the project, less certain expenses allocated to the project, and are expected to cover the Company's cost of providing services under the Development Agreement. The Development Agreement also provides for a success fee to the Company out of the project's net cash flow, if any, as described below, up to a maximum amount. Whether the success fee, if it is earned, will be paid to the Company prior to the conclusion of the project will be at the discretion of the project owner.
To determine "net cash flow" for purposes of calculating the success fee, all cash expenditures of the project will be deducted from total revenues of the project. Examples of "expenditures" for these purposes include land development costs, current period operating costs, and indebtedness, either collateralized by the project ($30,565,000 at June 30, 2000, which is non-interest bearing), or owed by the project's owner to Leucadia ($68,792,000 at June 30, 2000) (collectively, "Indebtedness"). As a success fee, the Company is entitled to receive payments out of net cash flow, if any, up to the aggregate amount of the Indebtedness. The balance of the net cash flow, if any, will be paid to the Company and the project owner in equal amounts. However, the amount of the success fee cannot be more than 68% of net cash flow minus the amount of Indebtedness. There can be no assurance, however, that the Company will receive any success fee at all for this project. The Company believes that any success fee that it may receive will be its principal source of revenue earned through its participation in the San Elijo Hills project pursuant to the Development Agreement.
As of June 30, 2000, the Company owed $26,462,000 principal amount to LFC. This amount is payable on December 31, 2004 and bears interest at 6% per year. This obligation is reflected in the consolidated balance sheet, net of discount, at $21,392,000 as of June 30, 2000. During the six months ended June 30, 2000, the Company paid to LFC $395,000 in interest and accrued $395,000 in interest to LFC.
In April 2000, the Company sold two clustered housing development sites at the Paradise Valley project for net proceeds of $1,494,000. The Company has certain continuing obligations with respect to this project, including the obligation to construct a recreation center. The Company estimates that construction of the recreation center for the Paradise Valley Community will be completed at a cost of approximately $1,200,000. Construction of the recreation center began in 1999 and is expected to be completed in 2000. Cash of $1,000,000 was deposited in an escrow account that is being drawn upon as the recreation center is being completed. At June 30, 2000, $291,000 remained in escrow.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Interim Operations,(continued)
In connection with an indemnity agreement to a third party surety entered in 1990 in connection with the construction of infrastructure improvements in a development located in LaQuinta, California, a subsidiary of the Company is required to maintain a minimum net worth of $5,000,000 and a minimum cash balance of $400,000. Failure to meet both of these requirements would trigger the subsidiary's obligation to provide an irrevocable letter of credit of approximately $460,000 based upon current estimates. The subsidiary currently meets the minimum cash balance requirement.
RESULTS OF OPERATIONS
During the three-month and six-month periods ended June 30, 2000, as a result of the sale of certain lots in the San Elijo Hills project, the Company recognized $260,000 and $1,138,000, respectively, of marketing, field overhead and management service fee income in accordance with the terms of the Development Agreement. During the three-month and six-month periods ended June 30, 1999, no sales occurred in the San Elijo Hills project and no fee income was recognized.
Sales of residential properties increased in the three-month period and decreased in the six-month period ended June 30, 2000 as compared to the same periods ended June 30, 1999. There were no sales of real estate during the first quarter of 2000. During the second quarter of 2000, the Company sold two clustered housing development sites at the Paradise Valley project. During the first quarter of 1999, the Company sold 75 residential lots in the Paradise Valley project. There were no sales of real estate during the second quarter of 1999. Cost of sales recorded during these periods reflects the level of sales activity.
Interest expense for the three-month and six-month periods ended June 30, 2000 reflects $395,000 and $790,000, respectively, paid to LFC on the Restructured Note and $226,000 and $445,000, respectively, resulting from the amortization of a portion of the difference between the fair value of the Restructured Note and the carrying value of the Convertible Note. Interest expense for the three-month and six-month periods ended June 30, 1999 reflects interest of $396,000 and $787,000, respectively, paid to LFC on the Restructured Note and $200,000 and $393,000, respectively, resulting from the amortization of a portion of the difference between the fair value of the Restructured Note and the carrying value of the Convertible Note.
General and administrative expenses increased in both the three-month and six-month periods ended June 30, 2000 as compared to the same periods in 1999 due to increased operating activities in connection with the San Elijo Hills project and Otay Ranch project.
Income tax expense for all periods presented principally relates to state franchise taxes. The Company has not recorded federal income tax benefits for its operating losses due to the uncertainty of sufficient future taxable income which is required in order to record such tax benefits.
CAUTIONARY STATEMENT FOR FORWARD-LOOKING INFORMATION
Statements included in Management's Discussion and Analysis of Financial Condition and Results of Interim Operations may contain forward-looking statements. Such forward-looking statements are made pursuant to the safe- harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements may relate, but are not limited, to projections of revenues, income or loss, capital expenditures, plans for growth and future operations, competition and regulation as well as assumptions relating to the foregoing. Forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted or quantified. When used in Management's Discussion and Analysis of Financial Condition and Results of Interim Operations the words "estimates", "expects", "anticipates", "believes", "plans", "intends" and variations of such words and similar expressions are intended to identify forward-looking statements that involve risks and uncertainties. Future events and actual results could differ materially from those set forth in, contemplated by or underlying the forward-looking statements. The factors that could cause actual results to differ materially from those suggested by any such statements include, but are not limited to those discussed or identified from time to time in the Company's public filings, including changes in general economic and market conditions, changes in domestic laws and government regulations
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Interim Operations, (continued)
or requirements (including those relating to the environment), changes in real estate pricing environments, regional or general changes in asset valuation, demographic and economic changes in the United States generally and California in particular, increases in real estate taxes and other local government fees, significant competition from other real estate developers and homebuilders, decreased consumer spending for housing, delays in construction schedules and cost overruns, availability and cost of land, materials and labor, increased development costs beyond the Company's control, damage to properties or condemnation of properties, the occurrence of significant natural disasters, the inability to insure certain risks economically, the adequacy of loss reserves, changes in prevailing interest rate levels and changes in the composition of the Company's assets and liabilities through acquisitions or divestitures. Undue reliance should not be placed on these forward-looking statements, which are applicable only as of the date hereof. The Company undertakes no obligation to revise or update these forward-looking statements to reflect events or circumstances that arise after the date of this Report or to reflect the occurrence of unanticipated events.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
1. Exhibits.
10.1 Administrative Services Agreement dated as of March 1, 2000 among HomeFed Corporation, HomeFed Resources Corporation, HomeFed Communities, Inc. and Leucadia Financial Corporation.
27 Financial Data Schedule
2. Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
HOMEFED CORPORATION
/s/ Corinne A. Maki
CORINNE A. MAKI, Treasurer
(Authorized Signatory and Principal Financial
and Accounting Officer)
Date: August 14, 2000
|
INDEX TO EXHIBITS
Exhibits
10.1 Administrative Services Agreement dated as of March 1, 2000 among HomeFed Corporation, HomeFed Resources Corporation, HomeFed Communities, Inc. and Leucadia Financial Corporation.
27 Financial Data Schedule.
EXECUTION COPY
ADMINISTRATIVE SERVICES AGREEMENT
THIS ADMINISTRATIVE SERVICES AGREEMENT ("Agreement") is entered into as of the 1st day of March, 2000 between Leucadia Financial Corporation, a Utah corporation ("Leucadia"), HomeFed Corporation, a Delaware corporation ("HomeFed"), HomeFed Resources Corporation, a California corporation ("HomeFed Resources") and HomeFed Communities, Inc., a California corporation ("HomeFed Communities").
HomeFed, HomeFed Resources and HomeFed Communities are referred to herein as the "HomeFed Group."
WHEREAS, the directors of HomeFed unaffiliated with Leucadia or its parent company, Leucadia National Corporation, have determined that for reasons of cost savings and otherwise, it is in the best interests of the HomeFed Group to obtain certain services from Leucadia on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1. Retention of Leucadia. As of the effective date of this Agreement, Leucadia is retained to provide the services described in this Agreement in consideration of the payment of the compensation described herein.
2. Scope of Work. At the request of HomeFed and under the direction of HomeFed, Leucadia shall provide the following administrative services required by the HomeFed Group in connection with the ongoing operation of its businesses:
a. Receive, deposit and withdraw certain funds received from the operations of the HomeFed Group;
b. Establish and maintain books of account in accordance with generally accepted accounting practices;
c. Prepare HomeFed consolidated quarterly unaudited financial statements meeting the requirements of Form 10Q of the Securities and Exchange Commission (the "SEC");
d. Provide, to the extent possible and based upon available revenues, for the orderly payment of certain accounts payable incurred by a member of the HomeFed Group;
e. Supervise the annual audit of the financial records of each member of the HomeFed Group, and prepare consolidated annual financial statements meeting the requirements of Form 10K of the SEC;
f. Subject to their election by the Board of Directors of HomeFed, provide the services of Paul Borden as President and Corinne Maki as
NY2:\884953\05\$Y%105!.DOC\76830.0194
Secretary and Treasurer. As officers of HomeFed, Mr. Borden and Ms. Maki shall be under the direction of the Board of Directors of HomeFed. As President, Mr. Borden shall report to the Board of Directors of HomeFed; as Secretary/Treasurer, Ms. Maki shall report to the President of HomeFed;
g. Prepare annual income tax returns;
h. Provide certain additional administrative services and support as may reasonably be requested by HomeFed.
Leucadia shall provide all personnel necessary to carry out the services specified in this Agreement. The number of personnel providing services at any one time and the number of hours such personnel devote to the specified services shall not be fixed and shall at all times be determined by Leucadia in its sole judgment, but shall at all times be adequate to properly and promptly perform and discharge the specified services.
3. Compensation. As compensation for the services provided under this Agreement, Leucadia shall be paid at an annual rate of $276,000, payable in monthly installments of $23,000 on the first day of each month, plus any additional amounts that may be agreed upon by HomeFed and Leucadia.
4. Term and Termination. The term of this Agreement shall commence on the effective date set forth in the preamble to this Agreement and continue until February 28, 2001, unless extended in writing by mutual agreement of the parties. HomeFed shall have the right to terminate this Agreement, without restriction or penalty, upon 30 days prior written notice to Leucadia. In all events, the provisions of Section 7. "Indemnification" shall survive the termination of this Agreement, whether as a result of the passage of time or the election of HomeFed or otherwise.
5. Inspection Rights of HomeFed Group. During the term of this Agreement, each member of the HomeFed Group shall have the right to appoint a person (other than an employee or officer of Leucadia or any of its affiliates) who shall have the right to inspect at reasonable times and upon reasonable notice all books and records maintained by Leucadia pertaining to each member of the HomeFed Group.
6. Relationship of Parties. The relationship of Leucadia to each member of the HomeFed Group shall be that of independent contractor and principal. This Agreement does not create an employer/employee relationship, or a partnership, joint venture or other agency relationship between the parties.
7. Relationship with HomeFed. At all times, the personnel provided under this Agreement to serve as officers of HomeFed (the "Designated Officers") shall work under the sole direction and supervision of HomeFed in accordance with the practices and policies of HomeFed. Accordingly, HomeFed shall be fully responsible for the acts and omissions of the Designated Officers within the scope of the services and responsibilities provided in accordance with this Agreement and shall indemnify the Leucadia Parties (as defined herein) therefor. Except to the extent that Leucadia agrees in this Agreement to indemnify the HomeFed Group, no Leucadia Party (as defined herein) shall have or suffer any Damages (as defined herein) as a result of any act or omission,
condition or circumstance associated with this Agreement or performance hereunder.
8. Indemnification .
(a) The HomeFed Group shall indemnify, defend and hold harmless Leucadia, its parent entities and their respective directors, officers, agents and permitted assigns (collectively, the "Leucadia Parties") from and against all liabilities, claims, damages, losses and expenses (including, but not limited to, court costs and reasonable attorneys' fees) (collectively, "Damages") of any kind or nature, to third parties caused by, relating to, or arising in connection with this Agreement, other than as a result of the wilfull misconduct of any of the Leucadia Parties. Not in limitation of the foregoing, HomeFed shall indemnify and hold harmless the Leucadia Parties from and against any Damages arising from any acts or omissions of any and all Designated Officers, as well as from HomeFed's own acts or omissions or violations of law with respect to the Designated Officers.
(b) Subject to the limitations contained in this Section,
Leucadia shall indemnify, defend and hold harmless the HomeFed Group, its parent
entities and their respective directors, officers, agents and permitted assigns
(collectively, the "HomeFed Parties") from and against all Damages of any kind
or nature, caused by, relating to, or arising in connection with the wilfull
misconduct of any of the Leucadia Parties. Leucadia's liability under this
Section shall not exceed $276,000.
9. Severability. Each provision of this Agreement shall be viewed as separate and divisible, and in the event any provision shall be held by a court of competent jurisdiction to be invalid, void, or unenforceable, the remaining provisions shall continue in full force and effect.
10. Waiver. The waiver by any party of a breach or violation of any provision of this Agreement shall not operate as or be construed to be a waiver of any subsequent breach.
11. Governing Law. This Agreement shall be construed in accordance with and governed by the laws of the State of New York.
12. Assignment. No party hereto shall have the right to assign any of its rights, duties or obligations under this Agreement without the prior written consent of the other parties.
13. Notices. All notices and other communications under this Agreement shall be in writing and shall be deemed to have been duly given on the date of service if personally served on the party to whom the notice is to be given, or 72 hours after mailing, if mailed to the party to whom notice is to be given by first class mail, postage prepaid and properly addressed to the party at its address set forth on the signature page of this Agreement or any other address that such party may designate by written notice to the other parties.
14. Successors and Assigns. Subject to the restrictions on assignment set forth hereinabove, this Agreement shall be binding upon and inure to the benefit of the legal representatives, successors and assigns of the parties hereto.
[Remainder of page intentionally left blank.]
15. IN WITNESS WHEREOF, this Agreement has been executed as of the date first hereinabove written.
LEUCADIA FINANCIAL CORPORATION, a Utah corporation Address: 529 East South Temple Salt Lake City, UT 84102
By: /s/ Corinne Ann Maki
------------------------------------------------
Name: Corinne Ann Maki
Title: Vice President
HOMEFED CORPORATION, a Delaware corporation
Address: 1903 Wright Place, Suite 220
Carlsbad, CA 92008
By: /s/ Paul J. Borden
------------------------------------------------
Name: Paul J. Borden
Title: President
HOMEFED RESOURCES CORPORATION, a California corporation
Address: 1903 Wright Place, Suite 220
Carlsbad, CA 92008
By: /s/ Paul J. Borden
------------------------------------------------
Name: Paul J. Borden
Title: President
|
HOMEFED COMMUNITIES, INC., a California
corporation
Address: 1903 Wright Place, Suite 220
Carlsbad, CA 92008
By: /s/ Paul J. Borden
------------------------------------------------
Name: Paul J. Borden
Title: President
|
| ARTICLE 5 |
| This Schedule contains summary financial information extracted from the financial statements contained in the body of the accompanying Form 10-Q and is qualified in its entirety by reference to such financial statements. |
| MULTIPLIER: 1,000 |
| PERIOD TYPE | 6 MOS |
| FISCAL YEAR END | DEC 31 1999 |
| PERIOD END | JUN 30 2000 |
| CASH | 1,632 |
| SECURITIES | 0 |
| RECEIVABLES | 0 |
| ALLOWANCES | 0 |
| INVENTORY | 0 |
| CURRENT ASSETS | 0 |
| PP&E | 0 |
| DEPRECIATION | 0 |
| TOTAL ASSETS | 25,414 |
| CURRENT LIABILITIES | 0 |
| BONDS | 21,392 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| COMMON | 568 |
| OTHER SE | (9,978) |
| TOTAL LIABILITY AND EQUITY | 25,414 |
| SALES | 0 |
| TOTAL REVENUES | 2,866 |
| CGS | 1,544 |
| TOTAL COSTS | 1,544 |
| OTHER EXPENSES | 1,897 |
| LOSS PROVISION | 0 |
| INTEREST EXPENSE | 1,235 |
| INCOME PRETAX | (1,810) |
| INCOME TAX | 15 |
| INCOME CONTINUING | (1,825) |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | (2,325) |
| EPS BASIC | (.04) |
| EPS DILUTED | (.04) |