EXHIBIT 7
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PLEDGE AND SECURITY AGREEMENT
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Agreement made this 2nd day of January 2004 by and between PRICE FAMILY
CHARITABLE FUND, a California non-profit public benefit corporation (the
"Creditor") and THE 520 GROUP, LLC, a California limited liability company (the
"Debtor").
NOW, THEREFORE, in consideration of the mutual covenants herein, the parties
hereto agree as follows:
1. CREATION OF SECURITY INTEREST. Debtor hereby grants to Creditor a security
interest in all of the Debtor's right, title, and interest now owned or acquired
in the future in and to the following described collateral (the "Collateral") in
order to secure the payment and performance of the obligations described in
paragraph 3 below:
Ten million four hundred fifty-one thousand ninety nine (10,451,099) Shares
of Price Legacy Series B junior convertible redeemable preferred stock.
Two million nine hundred five thousand four hundred five (2,905,405) shares
of Price Legacy common stock.
2. BROKERAGE ACCOUNT AND POSSESSION OF STOCK.
A) Debtor agrees that ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ("Holder") shall maintain an
account with ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
in the name of Holder, as Custodian for Debtor ("Broker Account"). Debtor shall
immediately deposit the Collateral to the Broker Account. Debtor acknowledges
and agrees that under the terms of the Broker Account only the Holder shall be
entitled to give instructions regarding the assets held in the Broker Account
and Debtor shall have no ability to withdraw the Collateral from the Broker
Account.
B) Holder agrees to maintain the Broker Account as the custodian of
Debtor and retain the Collateral in the Broker Account until either (i) this
Pledge terminates or (ii) he receives written notice from Creditor that an event
of default under the Promissory Note has occurred and Debtor has failed to cure
said default within five (5) business days from the date of occurrence.
C) In the event of a default, as provided in paragraph 6 herein, Debtor
shall have the right to direct Holder, and Holder shall be obligated at Debtor's
written direction, to sell the Collateral and pay to Creditor the lesser of (i)
the net proceeds of the sale or (ii) the full amount due under the Promissory
Note.
D) Creditor may at any time change the Holder, or appoint additional
Holders.
3. SECURED OBLIGATIONS OF DEBTOR. The Collateral secures and shall hereafter
secure the payment to Creditor of all indebtedness now or hereafter owed to
Creditor by Debtor under a promissory note of even date herewith (the
"Promissory Note") given by Debtor in the face amount of Forty Three Million
Dollars ($43,000,000), together with any interest thereon and extensions,
modifications, and renewals thereof.
4. CASH DISTRIBUTIONS. So long as no default, and no condition or event which
with notice or lapse of time, or both, would constitute a default, shall have
occurred or exist under this Agreement, Debtor shall be entitled to receive all
distributions (including cash and property) with respect to the Collateral;
provided, however, that any distributions from the liquidation of the Collateral
shall be paid to Creditor to the extent of unpaid principal and accrued unpaid
interest under the Promissory Note. Upon the occurrence of a default or any
condition or event which with notice or lapse of time, or both, would constitute
a default hereunder, Creditor shall thereafter receive and may apply all
distributions with respect to the Collateral against the indebtedness secured
hereunder.
5. REPRESENTATIONS AND WARRANTIES. Debtor represents that as of January 5,
2004 (A) Debtor is the owner of the Collateral and that Debtor has not otherwise
assigned or transferred, and agrees that Debtor shall not assign or transfer,
absolutely or for security, the Collateral or any interest therein to any other
person or entity; (B) there are no outstanding options, warrants or other
agreements with respect to the Collateral; and (C) the execution and delivery of
this Agreement by Debtor will not result in a violation of any mortgage,
indenture, material contract, instrument, judgment, decree, order, statute, rule
or regulation to which Debtor is subject.
6. DEFAULT AND REMEDIES. Any breach of or event of default under the
Promissory Note or any failure to comply with any of the terms under this
Agreement shall be a default hereunder. Upon any default hereunder, and failure
by Debtor to cure such default within ten (10) days after Creditor gives Debtor
written notice of such default,
Creditor shall have the right to exercise its remedies as a secured party with
respect to the Collateral, including, without limitation, the right to use all
or any portion of the Collateral in Creditor's sole and absolute discretion (a)
toward cure of the default; (b) to payment of principal (whether or not
otherwise accelerated) and/or interest; or (c) in such combination thereof as
Creditor may determine. Creditor shall in no event be required to use proceeds
of the Collateral to cure a default.
7. ADMINISTRATION OF COLLATERAL. The provisions set forth below shall govern
the administration of the Collateral:
(a) VOTING. Until there shall have occurred any default hereunder, Debtor
shall be entitled to vote or consent with respect to the Collateral in any
manner not inconsistent with this Agreement, to the extent the Collateral
carries any rights of voting or consent.
(b) FURTHER DOCUMENTS. Debtor will forthwith upon request by Creditor and
in confirmation of the security interest hereby created, execute and deliver to
Creditor such further assignments, transfers, assurances, instruments, notices
and agreements in form and substance as the Creditor shall reasonably request.
(c) REMEDIES. In addition to any rights and remedies otherwise available
in law or in equity, and in addition to the other provisions of this Agreement,
and any other documents or instruments delivered or to be delivered in
connection herewith or therewith, or any document or instrument now in
existence, or which may hereafter be made, with respect to the Promissory Note,
the provisions set forth below shall, to the extent permitted by applicable law,
govern Creditor's rights to foreclose on the Collateral upon a default
hereunder.
(d) CONDUCT OF SALE. Upon giving written notice of default to Debtor
pursuant to the terms of this Agreement, Creditor may sell as much of the
Collateral as is required to produce net funds sufficient to pay Creditor the
full amount of the Promissory Note.
(e) SALE OR DISPOSITION. Upon any sale or disposition, Creditor shall have
the right to deliver, assign, and transfer to the purchaser thereof the
Collateral so sold or disposed. Each purchaser at any such sale or other
disposition shall hold the Collateral free from any claim or right of whatever
kinds, including any equity or right of redemption of the Debtor. The Debtor
specifically waives all rights of redemption, stay or appraisal which it has or
may hereafter have under any rule of law or statute now existing or hereafter
adopted.
(f) ATTORNEY-IN-FACT. Creditor or its designee is hereby appointed
attorney-in-fact for Debtor for the purpose of carrying out the provisions of
this Agreement and taking any action in executing any instrument which Creditor
reasonably may deem necessary and advisable to accomplish the purposes hereof,
which appointment as attorney-in-fact is irrevocable and one coupled with an
interest.
8. MISCELLANEOUS.
(a) TERMINATION. This Agreement shall terminate upon Debtor's payment in
full and the performance of the Promissory Note.
(b) AGREEMENT BINDING. This Agreement shall be binding upon Debtor and its
heirs, executors, personal representatives and successors, and shall inure to
the benefit of, and be enforceable by, Creditor and its successors and assigns.
Debtor hereby represents and warrants to Creditor that it has full legal
authority to enter into this Agreement, to pledge the Collateral and to carry
out the provisions hereof and no consent or approval from any other person or
entity is necessary to enter into this Agreement or carry out its terms.
(c) SEVERABILITY. If any provision of this Agreement shall be deemed or
held to be invalid or unenforceable for any reason, such provision shall be
adjusted, if possible, rather than voided, so as to achieve the intent of the
parties to the fullest extent possible. In any event, such provision shall be
severable from, and shall not be construed to have any effect on, the remaining
provisions of this Agreement, which shall continue in full force and effect.
(d) GOVERNING LAW; JURISDICTION. This Agreement shall be governed by and
construed in accordance with the laws of the State of California applicable to
contracts, between residents thereof, to be wholly performed within the State of
California. Debtor hereby irrevocably consents to the jurisdiction of the Courts
of the State of California located in San Diego County and of any Federal Court
located in San Diego County, California in connection with any action or
proceeding arising out of or relating to this Agreement.
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(e) RIGHTS CUMULATIVE; NO WAIVER. Creditor's options, powers, rights,
privileges, and immunities specified herein or arising hereunder are in addition
to, and not exclusive of, those otherwise created or existing now or at any
time, whether by contract, by statute or by rule of law. Creditor shall not, by
any act, delay, omission or otherwise, be deemed to have modified, discharged or
waived any of Creditor's options, powers, or rights in respect of this
Agreement, and no modification, discharge or waiver of any such option, power,
or right shall be valid unless set forth in writing signed by Creditor or
Creditor's authorized agent, and then only to the extent therein set forth. A
waiver by Creditor of any right or remedy hereunder on any one occasion shall be
effective only in the specific instance and for the specific purpose for which
given, and shall not be construed as a bar to any right or remedy that Creditor
would otherwise have on any other occasion.
(f) ENTIRE AGREEMENT. This Agreement contains the entire agreement between
Debtor and Creditor with respect to the subject matter herein, and supersedes
all prior communications relating thereto, including, without limitation, all
oral statements or representations. No supplement to or modification of this
Agreement shall be binding unless executed in writing by Debtor and Creditor.
(g) COSTS OF ENFORCEMENT. Debtor shall upon demand pay to Creditor the
amount of any and all reasonable expenses, including the reasonable fees and
disbursements of counsel and/or any experts and agents, that Creditor may incur
in connection with (a) the administration of this Agreement, (b) the exercise or
enforcement of any of the rights of Creditor hereunder (including the defense of
any claims or counterclaims asserted against Creditor arising out of this
Agreement or the transactions contemplated hereby) or under any judgment awarded
to Creditor in respect of its rights hereunder (which obligation shall be
severable from the remainder of this Agreement and shall survive the entry of
any such judgment), or (c) the failure by Debtor to perform or observe any of
the provisions hereof. The foregoing shall include any and all expenses and fees
incurred by Creditor in connection with a bankruptcy, reorganization,
receivership, or similar debtor-relief proceeding by or affecting Debtor or the
Collateral.
(h) NOTICES. All notices, demands and other communications required or
permitted hereunder shall be in writing, addressed to the parties at the
following addresses:
Creditor: Price Family Charitable Fund
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Debtor: The 520 Group, LLC
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or to such other address as may be designated from time to time by notice to the
other parties in the manner set forth herein.
IN WITNESS WHEREOF, this Agreement is executed by the parties set forth below as
of the date first above written.
CREDITOR: DEBTOR:
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PRICE FAMILY CHARITABLE FUND THE 520 GROUP, LLC
By /s/ ▇▇▇▇ ▇▇▇▇▇▇▇ by /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇▇▇ - Exec. Vice Pres ▇▇▇▇▇ ▇▇▇▇▇▇▇ - Manager
by /s/ ▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇▇ - Manager
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