GUARANTY AND COLLATERAL
AGREEMENT
dated as of November __,
2005
among
CPI CORP.
and
THE OTHER PARTIES
HERETO,
as Grantors,
and
LASALLE BANK NATIONAL
ASSOCIATION,
as the Administrative
Agent
1240906.04
GUARANTY AND COLLATERAL
AGREEMENT
THIS GUARANTY AND COLLATERAL
AGREEMENT dated as of November __, 2005 (this
“Agreement”) is entered into among CPI CORP., a
Delaware corporation (the “Company”) and each other
Person signatory hereto as a Grantor (the Company, together with
any other Person that becomes a party hereto as provided herein,
the “Grantors”) in favor of LASALLE BANK NATIONAL
ASSOCIATION, as the Administrative Agent for all the Lenders party
to the Credit Agreement (as hereafter defined).
The Lenders have severally agreed to
extend credit to the Company pursuant to the Credit Agreement. The
Company is affiliated with each other Grantor. The proceeds of
credit extended under the Credit Agreement will be used in part to
enable the Company to make valuable transfers to the Grantors in
connection with the operation of their respective businesses. The
Company and the other Grantors are engaged in interrelated
businesses, and each Grantor will derive substantial direct and
indirect benefit from extensions of credit under the Credit
Agreement. It is a condition precedent to each Lender’s
obligation to extend credit under the Credit Agreement that the
Grantors shall have executed and delivered this Agreement to the
Administrative Agent for the ratable benefit of all the
Lenders.
In consideration of the premises and
to induce the Administrative Agent and the Lenders to enter into
the Credit Agreement and to induce the Lenders to extend credit
thereunder, each Grantor hereby agrees with the Administrative
Agent, for the ratable benefit of the Lenders, as
follows:
1.1.
Unless otherwise defined herein, terms defined
in the Credit Agreement and used herein shall have the meanings
given to them in the Credit Agreement, and the following terms are
used herein as defined in the UCC: Accounts, Certificated Security,
Commercial Tort Claims, Deposit Accounts, Documents, Electronic
Chattel Paper, Equipment, Farm Products, Goods, Health Care
Insurance Receivables, Instruments, Inventory, Leases,
Letter-of-Credit Rights, Money, Payment Intangibles, Supporting
Obligations, Tangible Chattel Paper.
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1.2.
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When used herein the following terms
shall have the following meanings:
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Agreement has the meaning set forth in the preamble
hereto.
Assigned Agreements
means any agreement executed on or
after the date hereof related to an Acquisition by a
Grantor.
Chattel Paper
means all “chattel
paper” as such term is defined in Section 9-102(a)(11)
of the UCC and, in any event, including with respect to any
Grantor, all Electronic Chattel Paper and Tangible Chattel
Paper.
Collateral
means (a) all of the personal
property now owned or at any time hereafter acquired by any Grantor
or in which any Grantor now has or at any time in the future may
acquire any right, title or interest, including all of each
Grantor’s Accounts, Chattel Paper, Commercial Tort Claims,
Deposit Accounts, Documents, Equipment, Fixtures,
General
1240906.04
Intangibles, Health Care Insurance
Receivables, Farm Products, Goods, Instruments, Intellectual
Property (but excluding in all cases any Trademarks), Inventory,
Investment Property, Leases, Letter-of-Credit Rights, Money,
Supporting Obligations and Identified Claims, (b) all books
and records pertaining to any of the foregoing, (c) all
Proceeds, Insurance Proceeds, and products of any of the foregoing,
and (d) all collateral security and guaranties given by any
Person with respect to any of the foregoing. Where the context
requires, terms relating to the Collateral or any part thereof,
when used in relation to a Grantor, shall refer to such
Grantor’s Collateral or the relevant part thereof;
provided, however , that "Collateral" shall not include
rights under or with respect to any General Intangible, contract
rights, license, permit or authorization to the extent any such
General Intangible, contract rights, license, permit or
authorization, by its terms or by law, prohibits the assignment of,
or the granting of a Lien over the rights of a grantor thereunder
or which would be invalid or unenforceable upon any such assignment
or grant (the "Restricted Assets"), provided that (A) the Proceeds
of any Restricted Asset shall continue to be deemed to be
"Collateral", and (B) this provision shall not limit the grant of
any Lien on or assignment of any Restricted Asset to the extent
that the UCC or any other applicable law provides that such grant
of Lien or assignment is effective irrespective of any prohibitions
to such grant provided in any Restricted Asset (or the underlying
documents related thereto). Concurrently with any such Restricted
Asset being entered into or arising after the date hereof, the
applicable Grantor shall be obligated to obtain any waiver or
consent (in form and substance acceptable to the Administrative
Agent) necessary to allow such Restricted Asset to constitute
Collateral hereunder if the failure of such Grantor to have such
Restricted Asset would have a Material Adverse Effect.
Company Obligations
means all Obligations of the
Company.
Contract Rights
means all of the Grantors’
rights and remedies with respect to the Assigned
Agreements.
Copyrights
means all copyrights arising under
the laws of the United States, any other country or any political
subdivision thereof, whether registered or unregistered and whether
published or unpublished, including those listed on
Schedule 5 , all registrations and recordings thereof,
and all applications in connection therewith, including all
registrations, recordings and applications in the United States
Copyright Office, and the right to obtain all renewals of any of
the foregoing.
Copyright Licenses
means all written agreements naming
any Grantor as licensor or licensee, including those listed on
Schedule 5 , granting any right under any Copyright,
including the grant of rights to manufacture, distribute, exploit
and sell materials derived from any Copyright.
Credit Agreement
means the Amended and Restated
Credit Agreement of even date herewith among the Company, the
Lenders a party thereto from time to time, and the Administrative
Agent, as amended, supplemented, restated or otherwise modified
from time to time.
Fixtures means all of the following, whether now owned or
hereafter acquired by a Grantor: Fixtures (as defined in the UCC),
plant fixtures; business fixtures; other fixtures and
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1240906.04
storage facilities, wherever
located; and all additions and accessories thereto and replacements
therefor.
General Intangibles
means all “general
intangibles” as such term is defined in
Section 9-102(a)(42) of the UCC and, in any event, including
with respect to any Grantor, all Payment Intangibles, all
contracts, agreements, instruments and indentures in any form, and
portions thereof, to which such Grantor is a party or under which
such Grantor has any right, title or interest or to which such
Grantor or any property of such Grantor is subject, as the same
from time to time may be amended, supplemented or otherwise
modified, including, without limitation, (a) all rights of
such Grantor to receive moneys due and to become due to it
thereunder or in connection therewith, (b) all rights of such
Grantor to damages arising thereunder and (c) all rights of
such Grantor to perform and to exercise all remedies thereunder;
provided , that the foregoing limitation shall not affect,
limit, restrict or impair the grant by such Grantor of a security
interest pursuant to this Agreement in any Receivable or any money
or other amounts due or to become due under any such Payment
Intangible, contract, agreement, instrument or
indenture.
Guarantor Obligations
means, collectively, with respect to
each Guarantor, all Obligations of such Guarantor.
Guarantors
means the collective reference to
each Grantor other than the Company, if any.
Identified Claims
means the Commercial Tort Claims
described on Schedule 6 as such schedule shall be
supplemented from time to time.
Intellectual Property
means the collective reference to
all rights, priorities and privileges relating to intellectual
property, whether arising under United States, multinational or
foreign laws or otherwise, including the Copyrights, the Copyright
Licenses, the Patents, the Patent Licenses, the Trademarks and the
Trademark Licenses, and all rights to sue at law or in equity for
any infringement or other impairment thereof, including the right
to receive all proceeds and damages therefrom.
Intercompany Note
means any promissory note evidencing
loans made by any Grantor to any other Grantor.
Investment Property
means the collective reference to
(a) all “investment property” as such term is
defined in Section 9-102(a)(49) of the UCC (other than the
equity interest of any foreign Subsidiary excluded from the
definition of Pledged Equity), (b) all “financial
assets” as such term is defined in Section 8-102(a)(9)
of the UCC, and (c) whether or not constituting
“investment property” as so defined, all Pledged Notes
and all Pledged Equity.
Issuers means the collective reference to each issuer of
any Investment Property.
Patents means (a) all letters patent of the United
States, any other country or any political subdivision thereof, all
reissues and extensions thereof and all goodwill associated
therewith, including any of the foregoing referred to in
Schedule 5 , (b) all applications for letters
patent of the United States or any other country and all divisions,
continuations and continuations-in-part
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1240906.04
thereof, including any of the
foregoing referred to in Schedule 5 , and (c) all
rights to obtain any reissues or extensions of the
foregoing.
Patent Licenses
means all agreements, whether
written or oral, providing for the grant by or to any Grantor of
any right to manufacture, use or sell any invention covered in
whole or in part by a Patent, including any of the foregoing
referred to in Schedule 5 .
Pledged Equity
means the equity interests listed on
Schedule 1 together with any other equity interests,
certificates, options or rights of any nature whatsoever in respect
of the equity interests of any Person that may be issued or granted
to, or held by, any Grantor while this Agreement is in effect;
provided that in no event shall more than 65% of the total
outstanding equity interests of any foreign Subsidiary be required
to be pledged hereunder; and provided further ,
however , the equity of the Dormant Entities shall not be
pledged hereunder.
Pledged Notes
means all promissory notes listed on
Schedule 1 , all Intercompany Notes at any time issued
to any Grantor and all other promissory notes issued to or held by
any Grantor (other than (a) promissory notes issued in
connection with extensions of trade credit by any Grantor in the
ordinary course of business and (b) any individual promissory
note which is less than $100,000 in principal amount, up to an
aggregate of $250,000 for all such promissory notes excluded under
this clause (b)).
Proceeds means all “proceeds” as such term is
defined in Section 9-102(a)(64) of the UCC and, in any event,
shall include all dividends or other income from the Investment
Property, collections thereon or distributions or payments with
respect thereto and all other proceeds of any kind or
nature.
Real Estate Collateral
means all real and personal property
on which a Lien is granted to Administrative Agent under any of the
Mortgages.
Receivable
means any right to payment for goods
sold or leased or for services rendered, whether or not such right
is evidenced by an Instrument or Chattel Paper and whether or not
it has been earned by performance (including any
Accounts).
Secured Obligations
means, collectively, the Company
Obligations and Guarantor Obligations.
Securities Act
means the Securities Act of 1933, as
amended.
Seller Undertakings
means, collectively, all
representations, warranties, covenants and agreements in favor of
any Grantor, and all indemnifications for the benefit of any
Grantor relating thereto, pursuant to the Assigned
Agreements.
Trademarks
means (a) all trademarks, trade
names, corporate names, the Company names, business names,
fictitious business names, trade styles, service marks, logos and
other source or business identifiers, and all goodwill associated
therewith, now existing or hereafter adopted or acquired, all
registrations and recordings thereof, and all applications in
connection therewith, whether in the United States Patent and
Trademark Office or in any similar office or agency of the United
States, any State thereof or any other country or any political
subdivision
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1240906.04
thereof, or otherwise, and all
common-law rights related thereto, including any of the foregoing
referred to in Schedule 5 , and (b) the right to
obtain all renewals thereof.
Trademark Licenses
means, collectively, each agreement,
whether written or oral, providing for the grant by or to any
Grantor of any right to use any Trademark, including any of the
foregoing referred to in Schedule 5 .
UCC means the Uniform Commercial Code as in effect
on the date hereof and from time to time in the State of Illinois,
provided that if by reason of mandatory provisions of law,
the perfection or the effect of perfection or non-perfection of the
security interests in any Collateral or the availability of any
remedy hereunder is governed by the Uniform Commercial Code as in
effect on or after the date hereof in any other jurisdiction,
“UCC” means the Uniform Commercial Code as in effect in
such other jurisdiction for purposes of the provisions hereof
relating to such perfection or effect of perfection or
non-perfection or availability of such remedy.
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SECTION 2.
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GUARANTY.
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2.1.
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Guaranty.
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(a)
Each of the Guarantors hereby,
jointly and severally, unconditionally and irrevocably, as a
primary obligor and not only a surety, guaranties to the
Administrative Agent, for the ratable benefit of the Lenders and
their respective successors, indorsees, transferees and assigns,
the prompt and complete payment and performance by the Company when
due (whether at the stated maturity, by acceleration or otherwise)
of the Company Obligations.
(b)
Anything herein or in any other Loan
Document to the contrary notwithstanding, the maximum liability of
each Guarantor hereunder and under the other Loan Documents shall
in no event exceed the amount which can be guarantied by such
Guarantor under applicable federal and state laws relating to the
insolvency of debtors (after giving effect to the right of
contribution established in Section 2.2 ).
(c)
Each Guarantor agrees that the
Secured Obligations may at any time and from time to time exceed
the amount of the liability of such Guarantor hereunder without
impairing the guaranty contained in this SECTION 2 or
affecting the rights and remedies of the Administrative Agent or
any Lender hereunder.
(d)
The guaranty contained in this
SECTION 2 shall remain in full force and effect until all of
the Secured Obligations shall have been Paid in Full.
(e)
No payment made by the Company, any
of the Guarantors, any other guarantor or any other Person or
received or collected by the Administrative Agent or any Lender
from the Company, any of the Guarantors, any other guarantor or any
other Person by virtue of any action or proceeding or any set-off
or appropriation or application at any time or from time to time in
reduction of or in payment of the Secured Obligations shall be
deemed to modify, reduce, release or otherwise affect the liability
of any Guarantor hereunder which shall, notwithstanding any such
payment (other than any payment made by such Guarantor in respect
of the Secured Obligations or any payment received or collected
from such Guarantor in respect
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1240906.04
of the Secured Obligations), remain
liable for the Secured Obligations up to the maximum liability of
such Guarantor hereunder until the Secured Obligations are Paid in
Full.
2.2.
Right of Contribution.
Each Guarantor hereby
agrees that to the extent that a Guarantor shall have paid more
than its proportionate share of any payment made hereunder, such
Guarantor shall be entitled to seek and receive contribution from
and against any other Guarantor hereunder which has not paid its
proportionate share of such payment. Each Guarantor’s right
of contribution shall be subject to the terms and conditions of
Section 2.3 . The provisions of this
Section 2.2 shall in no respect limit the obligations
and liabilities of any Guarantor to the Administrative Agent and
the Lenders, and each Guarantor shall remain liable to the
Administrative Agent and the Lenders for the full amount guarantied
by such Guarantor hereunder.
2.3.
No Subrogation.
Notwithstanding any
payment made by any Guarantor hereunder or any set-off or
application of funds of any Guarantor by the Administrative Agent
or any Lender, no Guarantor shall be entitled to be subrogated to
any of the rights of the Administrative Agent or any Lender against
the Company or any other Guarantor or any collateral security or
guaranty or right of offset held by the Administrative Agent or any
Lender for the payment of the Secured Obligations, nor shall any
Guarantor seek or be entitled to seek any contribution or
reimbursement from the Company or any other Guarantor in respect of
payments made by such Guarantor hereunder, until all of the Secured
Obligations are Paid in Full. If any amount shall be paid to any
Guarantor on account of such subrogation rights at any time when
all of the Secured Obligations shall not have been Paid in Full,
such amount shall be held by such Guarantor in trust for the
Administrative Agent and the Lenders, segregated from other funds
of such Guarantor, and shall, forthwith upon receipt by such
Guarantor, be turned over to the Administrative Agent in the exact
form received by such Guarantor (duly indorsed by such Guarantor to
the Administrative Agent, if required), to be applied against the
Secured Obligations, whether matured or unmatured, in such order as
the Administrative Agent may determine.
2.4.
Amendments, etc. with respect to
the Secured Obligations. Each Guarantor shall remain
obligated hereunder notwithstanding that, without any reservation
of rights against any Guarantor and without notice to or further
assent by any Guarantor, any demand for payment of any of the
Secured Obligations made by the Administrative Agent or any Lender
may be rescinded by the Administrative Agent or such Lender and any
of the Secured Obligations continued, and the Secured Obligations,
or the liability of any other Person upon or for any part thereof,
or any collateral security or guaranty therefor or right of offset
with respect thereto, may, from time to time, in whole or in part,
be renewed, extended, amended, modified, accelerated, compromised,
waived, surrendered or released by the Administrative Agent or any
Lender, and the Credit Agreement and the other Loan Documents and
any other documents executed and delivered in connection therewith
may be amended, modified, supplemented or terminated, in whole or
in part, as the Administrative Agent (or the Required Lenders or
all the Lenders, as the case may be) may deem advisable from time
to time. Neither the Administrative Agent nor any Lender shall have
any obligation to protect, secure, perfect or insure any Lien at
any time held by it as security for the Secured Obligations or for
the guaranty contained in this SECTION 2 or any property
subject thereto.
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The Administrative Agent or any
Lender may, from time to time, at its sole discretion and without
notice to any Guarantor (or any of them), take any or all of the
following actions: (a) retain or obtain a security interest in
any property to secure any of the Secured Obligations or any
obligation hereunder, (b) retain or obtain the primary or
secondary obligation of any obligor or obligors, in addition to the
undersigned, with respect to any of the Secured Obligations,
(c) extend or renew any of the Secured Obligations for one or
more periods (whether or not longer than the original period),
alter or exchange any of the Secured Obligations, or release or
compromise any obligation of any of the undersigned hereunder or
any obligation of any nature of any other obligor with respect to
any of the Secured Obligations, (d) release any guaranty or
right of offset or its security interest in, or surrender, release
or permit any substitution or exchange for, all or any part of any
property securing any of the Secured Obligations or any obligation
hereunder, or extend or renew for one or more periods (whether or
not longer than the original period) or release, compromise, alter
or exchange any obligations of any nature of any obligor with
respect to any such property, and (e) resort to the
undersigned (or any of them) for payment of any of the Secured
Obligations when due, whether or not the Administrative Agent or
such Lender shall have resorted to any property securing any of the
Secured Obligations or any obligation hereunder or shall have
proceeded against any other of the undersigned or any other obligor
primarily or secondarily obligated with respect to any of the
Secured Obligations.
2.5.
Waivers. Each Guarantor waives any and all
notice of the creation, renewal, extension or accrual of any of the
Secured Obligations and notice of or proof of reliance by the
Administrative Agent or any Lender upon the guaranty contained in
this SECTION 2 or acceptance of the guaranty contained in
this SECTION 2 ; the Secured Obligations, and any of them,
shall conclusively be deemed to have been created, contracted or
incurred, or renewed, extended, amended or waived, in reliance upon
the guaranty contained in this SECTION 2 , and all dealings
between the Company and any of the Guarantors, on the one hand, and
the Administrative Agent and the Lenders, on the other hand,
likewise shall be conclusively presumed to have been had or
consummated in reliance upon the guaranty contained in this
SECTION 2 . Each Guarantor waives (a) diligence,
presentment, protest, demand for payment and notice of default,
dishonor or nonpayment and all other notices whatsoever to or upon
the Company or any of the Guarantors with respect to the Secured
Obligations, (b) notice of the existence or creation or
non-payment of all or any of the Secured Obligations and
(c) all diligence in collection or protection of or
realization upon any Secured Obligations or any security for or
guaranty of any Secured Obligations .
2.6.
Payments. Each Guarantor hereby guaranties
that payments hereunder will be paid to the Administrative Agent
without set-off or counterclaim in Dollars at the office of the
Administrative Agent specified in the Credit Agreement.
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SECTION 3.
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GRANT OF SECURITY
INTEREST.
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3.1.
Grant. Each Grantor hereby assigns and
transfers to the Administrative Agent, and hereby grants to the
Administrative Agent, for the ratable benefit of the Lenders and
(to the extent provided herein) their Affiliates, a continuing
security interest in all of its Collateral, as collateral security
for the prompt and complete payment and performance when due
(whether at the stated maturity, by acceleration or otherwise) of
the Company Obligations or the Guarantor Obligations, as the case
may be.
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1240906.04
3.2.
Collateral Assignment of
Rights under the Assigned Agreements . Each Grantor hereby irrevocably
authorizes and empowers the Administrative Agent or its agents, in
their sole discretion, to assert, either directly or on behalf of
any Grantor, at any time that an Event of Default is in existence,
any claims any Grantor may from time to time have against any
person or entity or any of their affiliates with respect to any and
all of the Contract Rights or with respect to any and all payments
or other obligations due from the sellers or any of their
affiliates to the Company under or pursuant to the Assigned
Agreements (“ Payments ”), and to receive and
collect any damages, awards and other monies resulting therefrom
and to apply the same on account of the Secured Obligations. After
the occurrence of any Event of Default and during the continuance
thereof, the Administrative Agent may provide notice to the sellers
or any of their affiliates under any Assigned Agreement that all
Payments shall be made to or at the direction of the Administrative
Agent for so long as such Event of Default shall be continuing.
Following the delivery of any such notice, the Administrative Agent
shall promptly notify the sellers and their affiliates, as the case
may be, under the Assigned Agreement upon the termination or waiver
of any such Event of Default. Each Grantor hereby irrevocably
makes, constitutes and appoints the Administrative Agent (and all
officers, employees, or agents designated by the Administrative
Agent) as such Grantor’s true and lawful attorney (and
agent-in-fact) for the purpose of enabling the Administrative Agent
or its agents to assert and collect such claims and to apply such
monies in the manner set forth hereinabove, which appointment,
being coupled with an interest, is irrevocable.
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SECTION 4.
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REPRESENTATIONS AND
WARRANTIES.
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To induce the Administrative Agent
and the Lenders to enter into the Credit Agreement and to induce
the Lenders to make their respective extensions of credit to the
Company thereunder, each Grantor jointly and severally hereby
represents and warrants to the Administrative Agent and each Lender
that:
4.1.
Title; No Other Liens.
Except for Permitted
Liens, the Grantors own each item of the Collateral free and clear
of any and all Liens or claims of others. No financing statement or
other public notice with respect to all or any part of the
Collateral is on file or of record in any public office, except
filings evidencing Permitted Liens and filings for which
termination statements have been delivered to the Administrative
Agent.
4.2.
Perfected First Priority
Liens. The
security interests and Liens granted pursuant to this Agreement
(a) upon completion of the filings and other actions specified
on Schedule 2 (which, in the case of all filings and
other documents referred to on Schedule 2 , have been
delivered to the Administrative Agent in completed and duly
executed form) will constitute valid perfected security interests
and Liens in all of the Collateral in favor of the Administrative
Agent, for the ratable benefit of the Lenders, as collateral
security for each Grantor’s Obligations, enforceable in
accordance with the terms hereof against all creditors of each
Grantor and any Persons purporting to purchase any Collateral from
each Grantor, and (b) are prior to all other Liens on the
Collateral in existence on the date hereof except for Permitted
Liens for which priority is accorded under applicable law. The
filings and other actions specified on Schedule 2
constitute all of the filings and other actions necessary to
perfect all security interests granted hereunder.
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1240906.04
4.3.
Grantor Information.
On the date hereof,
Schedule 3 sets forth (a) each Grantor’s
jurisdiction of organization, (b) the location of each
Grantor’s chief executive office, (c) each
Grantor’s exact legal name as it appears on its
organizational documents and (d) each Grantor’s
organizational identification number (to the extent a Grantor is
organized in a jurisdiction which assigns such numbers) and federal
employer identification number.
4.4.
Collateral Locations.
On the date hereof,
Schedule 4 sets forth and indicates (a) each place
of business of each Grantor (including its chief executive office),
(b) all locations where any books or records of any Grantor
are located, (c) all locations where the Inventory and the
Equipment owned by each Grantor is kept, except for Inventory in
transit in the ordinary course of business and except that up to
$250,000 (in the aggregate for all Grantors) in fair market value
of Inventory and Equipment may be kept at locations other than the
locations listed on Schedule 4 , and (d) whether each
such Collateral location and place of business (including each
Grantor’s chief executive office) is owned or leased (and if
leased, specifies the complete name and notice address of each
lessor). No Collateral is located outside the United States or in
the possession of any lessor, bailee, warehouseman or consignee,
except as indicated on Schedule 4 .
4.5.
Certain Property.
None of the Collateral
constitutes, or is the Proceeds of, (a) Farm Products,
(b) Health Care Insurance Receivables or (c) vessels,
aircraft or any other property subject to any certificate of title
or other registration statute of the United States, any State or
other jurisdiction, except for personal vehicles owned by the
Grantors and used by employees of the Grantors in the ordinary
course of business.
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4.6.
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Investment
Property.
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(a)
The Pledged Equity pledged by each
Grantor hereunder constitute all the issued and outstanding equity
interests of each Issuer owned by such Grantor or, in the case of
any foreign Subsidiary, 65% of all issued and outstanding equity
interests of such foreign Subsidiary.
(b)
All of the Pledged Equity (other
than any preferred stock of Prints Plus, Inc.) has been duly and
validly issued and is fully paid and nonassessable. To the
knowledge of each Grantor, all of the Pledged Equity that is
preferred stock of Prints Plus, Inc. has been duly and validly
issued and is fully paid and nonassessable.
(c)
Each of the Pledged Notes, if any,
constitutes the legal, valid and binding obligation of the obligor
with respect thereto, enforceable in accordance with its terms
(subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors’ rights generally, general
equitable principles (whether considered in a proceeding in equity
or at law) and an implied covenant of good faith and fair
dealing).
(d)
Schedule 1
lists all Investment Property owned
by each Grantor. Each Grantor is the record and beneficial owner
of, and has good and valid title to, the Investment Property
pledged by it hereunder, free of any and all Liens or options in
favor of, or claims of, any other Person, except Permitted
Liens.
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1240906.04
(a)
No material amount payable to such
Grantor under or in connection with any Receivable is evidenced by
any Instrument or Chattel Paper which has not been delivered to the
Administrative Agent as required by the terms of this
Agreement.
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(b)
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No obligor on any material
Receivable is a governmental authority.
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(c)
The amounts represented by such
Grantor to the Lenders from time to time as owing to such Grantor
in respect of the Receivables (to the extent such representations
are required by any of the Loan Documents) will at all such times
be accurate.
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4.8.
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Intellectual
Property.
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(a)
Schedule 5
lists all registered Intellectual
Property and all other material Intellectual Property owned by such
Grantor in its own name on the date hereof.
(b)
On the date hereof, all material
Intellectual Property owned by any Grantor is valid, subsisting,
unexpired and enforceable and has not been abandoned.
(c)
Except as set forth in
Schedule 5 , none of the material Intellectual Property
is the subject of any licensing or franchise agreement pursuant to
which such Grantor is the licensor or franchisor.
(d)
Each Grantor owns and possesses or
has a license or other right to use all Intellectual Property as is
necessary for the conduct of the businesses of such Grantor,
without any infringement upon rights of others which could
reasonably be expected to have a Material Adverse
Effect.
4.9.
Depositary and Other
Accounts. All
principal depositary and other accounts maintained by each Grantor
are maintained with the Administrative Agent as required by the
Credit Agreement.
Each Grantor covenants and agrees
with the Administrative Agent and the Lenders that, from and after
the date of this Agreement until the Secured Obligations shall have
been Paid in Full:
5.1.
Delivery of Instruments,
Certificated Securities and Chattel Paper. If any amount payable under or in
connection with any of the Collateral in excess of $100,000 (in the
aggregate for all Grantors) shall be or become evidenced by any
Instrument, Certificated Security or Chattel Paper, such
Instrument, Certificated Security or Chattel Paper shall be
promptly delivered to the Administrative Agent, duly indorsed in a
manner reasonably satisfactory to the Administrative Agent, to be
held as Collateral pursuant to this Agreement. In the event that an
Event of Default shall have occurred and be continuing, upon the
request of the Administrative Agent, any Instrument, Certificated
Security or Chattel Paper not theretofore delivered to the
Administrative Agent and at such time being held by any Grantor
shall be
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promptly delivered to the
Administrative Agent, duly indorsed in a manner reasonably
satisfactory to the Administrative Agent, to be held as Collateral
pursuant to this Agreement.
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5.2.
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Maintenance of Perfected Security
Interest; Further Documentation.
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(a)
Such Grantor shall maintain the
security interest and Liens created by this Agreement as a
perfected security interest and Lien having at least the priority
described in Section 4.2 and shall defend such security
interest against the claims and demands of all Persons
whomsoever.
(b)
Such Grantor will furnish to the
Administrative Agent and the Lenders from time to time statements
and schedules further identifying and describing the assets and
property of such Grantor and such other reports in connection
therewith as the Administrative Agent may reasonably request, all
in reasonable detail.
(c)
At any time and from time to time,
upon the written request of the Administrative Agent in
Administrative Agent’s reasonable discretion, and at the sole
expense of such Grantor, such Grantor will promptly and duly
execute and deliver, and have filed or recorded, and at any time
and from time to time, permit Administrative Agent to have filed or
recorded, such further instruments and documents and take such
further actions as the Administrative Agent may reasonably request
for the purpose of obtaining or preserving the full benefits of
this Agreement and of the rights and powers herein granted,
including (i) filing any financing or continuation statements,
including, without limitation fixture filings, under the UCC (or
other similar laws) in effect in any jurisdiction with respect to
the security interests created hereby and (ii) in the case of
Investment Property and any other relevant Collateral, taking any
actions necessary to enable the Administrative Agent to obtain
“control” (within the meaning of the applicable UCC)
with respect thereto.
5.3.
Changes in Locations, Name,
etc. Such
Grantor shall not, except upon 30 days’ prior written
notice to the Administrative Agent and delivery to the
Administrative Agent of (a) all additional financing
statements and other documents reasonably requested by the
Administrative Agent as to the validity, perfection and priority of
the security interests provided for herein and (b) if
applicable, a written supplement to Schedule 4 showing
any additional location at which Inventory or Equipment shall be
kept:
(i)
permit any of the Inventory or
Equipment to be kept at a location other than those listed on
Schedule 4 ; provided, that up to $250,000 (in the
aggregate for all Grantors) in fair market value of any such
Inventory and Equipment may be kept at other locations;
(ii)
change its jurisdiction of
organization or the location of its chief executive office from
that specified on Schedule 3 or in any subsequent
notice delivered pursuant to this Section 5.3 ;
or
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(iii)
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change its name, identity or
corporate structure.
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5.4.
Notices. Such Grantor will advise the
Administrative Agent and the Lenders promptly, in reasonable
detail, of:
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(a)
any Lien (other than Permitted
Liens) on any of the Collateral or on any of the Real Estate
Collateral with an aggregate value greater than $250,000 which
would adversely affect the ability of the Administrative Agent to
exercise any of its remedies hereunder; and
(b)
the occurrence of any other event
which could reasonably be expected to have a material adverse
effect on the aggregate value of the Collateral or the Real Estate
Collateral or on the Liens created hereby.
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5.5.
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Investment
Property.
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(a)
If such Grantor shall become
entitled to receive or shall receive any certificate, option or
rights in respect of the equity interests of any Issuer, whether in
addition to, in substitution of, as a conversion of, or in exchange
for, any of the Pledged Equity, or otherwise in respect thereof,
such Grantor shall accept the same as the agent of the
Administrative Agent and the Lenders, hold the same in trust for
the Administrative Agent and the Lenders and deliver the same
forthwith to the Administrative Agent in the exact form received,
duly indorsed by such Grantor to the Administrative Agent, if
required, together with an undated instrument of transfer covering
such certificate duly executed in blank by such Grantor to be held
by the Administrative Agent, subject to the terms hereof, as
additional Collateral for the Secured Obligations. Upon the
occurrence and during the continuance of an Event of Default unless
otherwise expressly permitted by the Credit Agreement, (i) any
sums paid upon or in respect of the Investment Property upon the
liquidation or dissolution of any Issuer shall be paid over to the
Administrative Agent to be held by it hereunder as additional
Collateral for the Secured Obligations, and (ii) in case any
distribution of capital shall be made on or in respect of the
Investment Property or any property shall be distributed upon or
with respect to the Investment Property pursuant to the
recapitalization or reclassification of the capital of any Issuer
or pursuant to the reorganization thereof, the property so
distributed shall, unless otherwise subject to a perfected Lien in
favor of the Administrative Agent, be delivered to the
Administrative Agent to be held by it hereunder as additional
Collateral for the Secured Obligations. Upon the occurrence and
during the continuance of an Event of Default, if any sums of money
or property so paid or distributed in respect of the Investment
Property shall be received by such Grantor, such Grantor shall,
until such money or property is paid or delivered to the
Administrative Agent, hold such money or property in trust for the
Lenders, segregated from other funds of such Grantor, as additional
Collateral for the Secured Obligations.
(b)
Without the prior written consent of
the Administrative Agent, such Grantor will not (i) vote to
enable, or take any other action to permit, any Issuer to issue any
equity interests of any nature or to issue any other securities or
interests convertible into or granting the right to purchase or
exchange for any equity interests of any nature of any Issuer,
except, in each case, as permitted by the Credit Agreement,
(ii) sell, assign, transfer, exchange, or otherwise dispose
of, or grant any option with respect to, the Investment Property or
Proceeds thereof (except pursuant to a transaction expressly
permitted by the Credit Agreement) other than, with respect to
Investment Property not constituting Pledged Equity or Pledged
Notes, any such action which is not prohibited by the Credit
Agreement, (iii) create, incur or permit to exist any Lien or
option in favor of, or any claim of any Person with respect to, any
of the Investment Property or Proceeds thereof, or any interest
therein, except for Permitted Liens, or (iv) enter into any
agreement or undertaking restricting the right or ability of such
Grantor or the
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Administrative Agent to sell, assign
or transfer any of the Investment Property or Proceeds thereof,
except, with respect to such Investment Property,
shareholders’ agreements entered into by such Grantor with
respect to Persons in which such Grantor maintains an ownership
interest of 50% or less and any such restrictions expressly
provided for in the Credit Agreement.
(c)
In the case of each Grantor which is
an Issuer, such Issuer agrees that (i) it will be bound by the
terms of this Agreement relating to the Investment Property issued
by it and will comply with such terms insofar as such terms are
applicable to it, (ii) it will notify the Administrative Agent
promptly in writing of the occurrence of any of the events
described in Section 5.2(a) with respect to the
Investment Property issued by it and (iii) the terms of
Sections 6.3(c) and 6.7 shall apply to such
Grantor with respect to all actions that may be required of it
pursuant to Section 6.3(c) or 6.7 regarding the
Investment Property issued by it.
(a)
Other than in the ordinary course of
business consistent with its past practice and in amounts which are
not material to such Grantor, such Grantor will not (i) grant
any extension of the time of payment of any Receivable,
(ii) compromise or settle any Receivable for less than the
full amount thereof, (iii) release, wholly or partially, any
Person liable for the payment of any Receivable, (iv) allow
any credit or discount whatsoever on any Receivable or
(v) amend, supplement or modify any Receivable in any manner
that could adversely affect the value thereof.
(b)
Such Grantor will deliver to the
Administrative Agent a copy of each material demand, notice or
document received by it that questions or calls into doubt the
validity or enforceability of more than 5% of the aggregate amount
of the then outstanding Receivables for all Grantors.
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5.7.
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Intellectual
Property.
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(a)
Such Grantor (either itself or
through licensees) will, subject to the Sears Agreements
(i) continue to use each Trademark material to its business in
order to maintain such Trademark in full force free from any claim
of abandonment for non-use, (ii) maintain as in the past the
quality of products and services offered under such Trademark,
(iii) use such Trademark with the appropriate notice of
registration and all other notices and legends required by
applicable law, (iv) not adopt or use any mark which is
confusingly similar or a colorable imitation of such Trademark
unless the Administrative Agent, for the ratable benefit of the
Lenders, shall obtain a perfected security interest in such mark
pursuant to this Agreement, and (v) not (and not permit any
licensee or sublicensee thereof to) do any act or knowingly omit to
do any act whereby such Trademark may become invalidated or
impaired in any way.
(b)
Such Grantor (either itself or
through licensees) will not do any act, or omit to do any act,
whereby any Patent material to its business may become forfeited,
abandoned or dedicated to the public.
(c)
Such Grantor (either itself or
through licensees) (i) will employ each Copyright material to
its business and (ii) will not (and will not permit any
licensee or sublicensee thereof to) do any act or knowingly omit to
do any act whereby any material portion
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of such Copyrights may become
invalidated or otherwise impaired. Such Grantor will not (either
itself or through licensees) do any act whereby any material
portion of such Copyrights may fall into the public
domain.
(d)
Such Grantor (either itself or
through licensees) will not do any act that knowingly uses any
Intellectual Property material to its business to infringe the
intellectual property rights of any other Person.
(e)
Such Grantor will notify the
Administrative Agent and the Lenders immediately if it knows, or
has reason to know, that any application or registration relating
to any Intellectual Property material to its business may become
forfeited, abandoned or dedicated to the public, or of any adverse
determination or development (including the institution of, or any
such determination or development in, any proceeding in the United
States Patent and Trademark Office, the United States Copyright
Office or any court or tribunal in any country) regarding, such
Grantor’s ownership of, or the validity of, any Intellectual
Property material to its business or such Grantor’s right to
register the same or to own and maintain the same.
(f)
Whenever such Grantor, either by
itself or through any agent, employee, licensee or designee, shall
file an application for the registration of any Intellectual
Property with the United States Patent and Trademark Office, the
United States Copyright Office or any similar office or agency in
any other country or any political subdivision thereof, such
Grantor shall report such filing to the Administrative Agent
concurrently with the next delivery of financial statements of the
Company pursuant to Section 10.1 of the Credit
Agreement. Upon the request of the Administrative Agent, such
Grantor shall execute and deliver, and have recorded, any and all
agreements, instruments, documents, and papers as the
Administrative Agent may reasonably request to evidence the
Administrative Agent’s and the Lenders’ security
interest in any Copyright, Patent or Trademark and the goodwill and
general intangibles of such Grantor relating thereto or represented
thereby which is material to its business.
(g)
Such Grantor will take al
