Exhibit 10.2
PLEDGE AND SECURITY AGREEMENT
     THIS PLEDGE AND SECURITY AGREEMENT (as the same may be amended, restated,
supplemented or otherwise modified from time to time, this “Security Agreement”)
is entered into as of April 15, 2011 by and among PROASSURANCE CORPORATION (the
“Borrower”), any additional Persons which become parties to this Security
Agreement by executing a Supplement hereto in substantially the form of Annex I
(together with the Borrower, the “Grantors”), and U.S. BANK NATIONAL ASSOCIATION
in its capacity as administrative agent (the “Administrative Agent”) for the
lenders party to the below-defined Credit Agreement (collectively, the
“Lenders”).
PRELIMINARY STATEMENT
     The Borrower, the Administrative Agent and the Lenders are party to a
Credit Agreement dated as of April 15, 2011 (as the same may be amended,
restated, supplemented or otherwise modified from time to time, the “Credit
Agreement”). The Grantors are entering into this Security Agreement in order to
secure their obligations under and in connection with Loans made pursuant to the
Secured Borrowing Option under, and as defined in, Section 2.1.2 of the Credit
Agreement and to induce the Lenders to continue extending credit to the Borrower
pursuant to the Secured Borrowing Option under the Credit Agreement.
     ACCORDINGLY, the Grantors and the Administrative Agent, on behalf of the
Holders of Secured Obligations, hereby agree as follows:
ARTICLE I
DEFINITIONS
     1.1. Terms Defined in the Credit Agreement. All capitalized definitional
terms used herein and not otherwise defined shall have the meanings assigned to
such terms in the Credit Agreement.
     1.2. Terms Defined in Delaware UCC. Terms defined in the Delaware UCC which
are not otherwise defined in this Security Agreement are used herein as defined
in the Delaware UCC.
     1.3. Definitions of Certain Terms Used Herein. As used in this Security
Agreement, in addition to the terms defined in the Preliminary Statement, the
following terms shall have the following meanings:
     “Article” means a numbered article of this Security Agreement, unless
another document or the Delaware UCC is specifically referenced.

 

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     “Collateral” means account number 001050975707 maintained with U.S. Bank
National Association and all amounts and items on deposit in or credited
thereto, including, without limitation, all (i) cash, (ii) certificates of
deposit and money market mutual funds of the Borrower or the applicable Grantor,
in each case maintained with or issued by U.S. Bank National Association,
(iii) commercial paper (other than commercial paper issued by U.S. Bank National
Association), (iv) collateralized mortgage obligations or real estate mortgage
investment conduit pass through securities, in any case issued by the Federal
National Mortgage Association, the Government National Mortgage Association or
the Federal Home Loan Mortgage Corporation, (v) Instruments, issued by the
Federal National Mortgage Association, the Government National Mortgage
Association or the Federal Home Loan Mortgage Corporation, that entitles the
holder of, or beneficial owner under, the Instrument to the whole or any part of
the rights or entitlements of a mortgagee and any other rights or entitlements
in respect of a pool of mortgages or any money payable by mortgagors under those
mortgages in relation to real estate mortgages, and the money payable to the
holder of, or beneficiary owner under, the Instrument is based on actual or
scheduled payments on the underlying mortgages, (vi) short-term obligations of,
or fully guaranteed by, the United States of America, (vii) discount notes of
U.S. government sponsored enterprises, including Federal National Mortgage
Association, Federal Home Loan Mortgage Corporation, the Federal Home Loan Banks
and the Federal Farm Credit Banks and (viii) corporate or municipal bonds or
similar long term Indebtedness, in each case whether constituting Deposit
Accounts, Securities Accounts, Instruments, General Intangibles or Investment
Property, and in each case together with all proceeds thereof.
     “Control” shall have the meaning set forth in Article 8 or, if applicable,
in Section 9-104, 9-105, 9-106 or 9-107 of Article 9 of the Delaware UCC.
     “Default” means an event described in Section 5.1 hereof.
     “Delaware UCC” means the Delaware Uniform Commercial Code as in effect from
time to time.
     “Deposit Accounts” shall have the meaning set forth in Article 9 of the
Delaware UCC.
     “Exhibit” refers to a specific exhibit to this Security Agreement, unless
another document is specifically referenced.
     “General Intangibles” shall have the meaning set forth in Article 9 of the
Delaware UCC.
     “Holders of Secured Obligations” means the holders of the Secured
Obligations from time to time and shall include, without limitation, each
Lender, the Administrative Agent, and each of their Affiliates, together with
their respective successors and transferees and assigns.
     “Instruments” shall have the meaning set forth in Article 9 of the Delaware
UCC.
     “Section” means a numbered section of this Security Agreement, unless
another document is specifically referenced.

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     “Secured Obligations” means all Obligations corresponding with the Loans
made pursuant to the Secured Borrowing Option, including, without limitation,
all unpaid principal of and accrued and unpaid interest on such Loans, all
accrued and unpaid fees and all expenses, reimbursements, indemnities and other
obligations in respect thereof, in each case owing to one or more Lenders or
their respective Affiliates.
     “Securities Accounts” shall have the meaning set forth in Article 8 of the
Delaware UCC.
     “Unliquidated Obligations” means, at any time, any Secured Obligations (or
portion thereof) that are contingent in nature or unliquidated at such time,
including any Secured Obligation that is: (i) an obligation to reimburse a bank
for drawings not yet made under a letter of credit issued by it; (ii) any other
obligation (including any guarantee) that is contingent in nature at such time;
or (iii) an obligation to provide collateral to secure any of the foregoing
types of obligations.
     The foregoing definitions shall be equally applicable to both the singular
and plural forms of the defined terms.
ARTICLE II
GRANT OF SECURITY INTEREST
     Each of the Grantors hereby pledges, assigns and grants to the
Administrative Agent, on behalf of and for the ratable benefit of the Holders of
Secured Obligations, a security interest in all of such Grantor’s right, title
and interest, whether now owned or hereafter acquired, in and to the Collateral
to secure the prompt and complete payment and performance of the Secured
Obligations.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
     The Borrower represents and warrants on the date of this Agreement and on
any date on which representations or warranties are made or re-made under the
Credit Agreement to the Administrative Agent and the Holders of Secured
Obligations, and each Grantor that becomes a party to this Security Agreement
pursuant to the execution of a Supplement in substantially the form of Annex I
represents and warrants on the date of such supplement (after giving effect to
supplements to each of the Exhibits hereto with respect to such subsequent
Grantor as attached to such Supplement), that:
     3.1. Title, Authorization, Validity and Enforceability. Such Grantor has
good and valid rights in or the power to transfer the Collateral owned by it and
title to such owned Collateral with respect to which it has purported to grant a
security interest hereunder, free of all Liens except for Liens permitted under
Section 4.1.6 hereof, and has full corporate, limited liability company,
partnership or other entity, power and authority to grant to the Administrative
Agent the security interest in such Collateral pursuant hereto. The execution
and delivery by such Grantor of this Security Agreement have been duly
authorized by proper corporate, limited liability company, partnership or, as
applicable, other proceedings, and this Security Agreement

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constitutes a legal, valid and binding obligation of such Grantor and creates a
security interest which is enforceable against such Grantor in all Collateral it
now owns or hereafter acquires, except as enforceability may be limited by
bankruptcy, insolvency or similar laws affecting the enforcement of creditors’
rights generally.
     3.2. Conflicting Laws and Contracts. Neither the execution and delivery by
such Grantor of this Security Agreement, the creation and perfection of the
security interest in the Collateral granted hereunder, nor compliance with the
terms and provisions hereof will violate (i) any law, rule, regulation, order,
writ, judgment, injunction, decree or award binding on such Grantor, or
(ii) such Grantor’s charter, articles, partnership agreement or by-laws (or
similar constitutive documents), or (iii) the provisions of any indenture,
instrument or agreement to which such Grantor is a party or is subject, or by
which it, or its Property is bound, or conflict with or constitute a default
thereunder, or result in or require the creation or imposition of any Lien in,
of or on the property of such Grantor pursuant to the terms of any such
indenture, instrument or agreement (other than any Lien of the Administrative
Agent on behalf of the Holders of Secured Obligations).
     3.3. Principal Location. Such Grantor’s mailing address and the location of
its place of business (if it has only one) or its chief executive office (if it
has more than one place of business), is disclosed in Exhibit “A”; such Grantor
has no other places of business except those set forth in Exhibit “A”.
     3.4. No Other Names; Etc. Within the last five (5) years, such Grantor has
not conducted business under any legal name, changed its jurisdiction of
formation, merged with or into or consolidated with any other corporation,
except as disclosed in Exhibit “A”. The name in which such Grantor has executed
this Security Agreement is the exact name as it appears in such Grantor’s
organizational documents as filed with such Grantor’s jurisdiction of
organization as of the date hereof.
     3.5. No Default. No Default or Event of Default exists.
     3.6. Filing Requirements. None of the Collateral owned by such Grantor is
of a type for which security interests or liens may be perfected by filing under
any federal statute.
     3.7. No Financing Statements. No valid financing statement describing all
or any portion of the Collateral which has not lapsed or been terminated naming
such Grantor as debtor has been filed in any proper jurisdiction except
financing statements (i) naming the Administrative Agent on behalf of the
Holders of Secured Obligations as the secured party and (ii) in respect of Liens
permitted by Section 6.16 of the Credit Agreement; provided, that nothing herein
shall be deemed to constitute an agreement to subordinate any of the Liens of
the Administrative Agent under the Loan Documents to any Liens otherwise
permitted under Section 6.16 of the Credit Agreement.
     3.8. Federal Employer Identification Number; State Organization Number;
Jurisdiction of Organization. Such Grantor’s federal employer identification
number is, and if such Grantor is a registered organization, such Grantor’s
State of organization, type of

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organization and State of organization identification number is, as follows:

                      Federal Employer       State of   State     Identification
  Type of   Organization or   Organization Grantor   Number   Organization  
Incorporation   Number
ProAssurance
Corporation
  [                    ]   corporation   Delaware   [                    ]

ARTICLE IV
COVENANTS
     From the date of this Security Agreement and thereafter until this Security
Agreement is terminated, the Borrower agrees, and from and after the effective
date of any Supplement hereto substantially in the form of Annex I applicable to
any Grantor (and after giving effect to supplements to each of the Exhibits
hereto with respect to such subsequent Grantor as attached to such Supplement)
and thereafter until this Security Agreement is terminated, each such subsequent
Grantor agrees:
     4.1. General.
     4.1.1 Inspection. Each Grantor will permit the Administrative Agent or any
Holder of Secured Obligations, by its representatives and agents (i) to inspect
the Collateral, (ii) to examine and make copies of the books of accounts and
other financial records of such Grantor relating to the Collateral and (iii) to
discuss the Collateral and the related records of such Grantor with, and to be
advised as to the same by, such Grantor’s officers, at such reasonable times and
intervals as the Administrative Agent or such Holder of Secured Obligations may
designate.
     4.1.2 Taxes. Each Grantor will timely file complete and correct United
States federal and applicable foreign, state and local tax returns required by
law and pay when due all taxes, assessments and governmental charges and levies
upon the Collateral owned by such Grantor, except those which are being
contested in good faith by appropriate proceedings and with respect to which
adequate reserves have been set aside in accordance with GAAP.
     4.1.3 Records and Reports; Notification of Default. Each Grantor shall keep
proper books of record and account in which full, true and correct entries are
made with respect to the Collateral owned by such Grantor, and furnish to the
Administrative Agent, with sufficient copies for each of the Holders of Secured
Obligations, such reports relating to the Collateral as the Administrative Agent
shall from time to time reasonably request. Each Grantor will give prompt notice
in writing to the Administrative Agent and the Lenders of the occurrence of any
Default.

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     4.1.4 Financing Statements and Other Actions; Defense of Title. Each
Grantor hereby authorizes the Administrative Agent to file, and if requested
will execute and deliver to the Administrative Agent, all financing statements
describing the Collateral owned by such Grantor and other documents and take
such other actions as may from time to time reasonably be requested by the
Administrative Agent in order to grant or maintain a first perfected security
interest in and, if applicable, Control of, the Collateral owned by such
Grantor, subject to Liens permitted under Section 6.16 of the Credit Agreement,
provided that nothing herein shall be deemed to constitute an agreement to
subordinate any of the Liens of the Administrative Agent under the Loan
Documents to any Liens otherwise permitted under Section 6.16 of the Credit
Agreement. Such financing statements may describe the Collateral in the same
manner as described herein or may contain an indication or description of
collateral that describes such property in any other manner as the
Administrative Agent may determine, in its reasonable discretion, is necessary,
advisable or prudent to ensure the perfection of the security interest in the
Collateral granted to the Administrative Agent herein. Each Grantor will take
any and all actions necessary to defend title to the Collateral owned by such
Grantor against all persons and to defend the security interest of the
Administrative Agent in such Collateral and the priority thereof against any
Lien not expressly permitted hereunder.
     4.1.5 Disposition of Collateral. No Grantor will sell, lease or otherwise
dispose of the Collateral owned by such Grantor except such Grantor may make
sales, leases, transfers and dispositions that are permitted under the Credit
Agreement until such time as a Default has occurred and is continuing.
     4.1.6 Liens. No Grantor will create, incur, or suffer to exist any Lien on
the Collateral owned by such Grantor except Liens permitted pursuant to
Section 6.16 of the Credit Agreement; provided, that nothing herein shall be
deemed to constitute an agreement to subordinate any of the Liens of the
Administrative Agent under the Loan Documents to any Liens otherwise permitted
under Section 6.16 of the Credit Agreement.
     4.1.7 Change in Corporate Existence, Type or Jurisdiction of Organization,
Location, Name. Each Grantor will (except as otherwise permitted hereunder or
under the Credit Agreement):

  (i)   preserve its existence in effect on the date hereof or such other date
on which such Grantor becomes a party to this Security Agreement;     (ii)   not
change its jurisdiction of organization;     (iii)   not maintain its place of
business (if it has only one) or its chief executive office (if it has more than
one place of business) at a location other than a location specified on Exhibit
“A;” and     (iv)   not (i) change its name or taxpayer identification number or
(ii) change its mailing address,

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      unless, in each such case, such Grantor shall have given the
Administrative Agent not less than 30 days’ prior written notice of such event
or occurrence and the Administrative Agent shall have either (x) reasonably
determined that such event or occurrence will not adversely affect the validity,
perfection or priority of the Administrative Agent’s security interest in the
Collateral, or (y) taken such steps (with the cooperation of such Grantor to the
extent necessary or advisable) as are necessary or advisable to properly
maintain the validity, perfection and priority of the Administrative Agent’s
security interest in the Collateral owned by such Grantor.

     4.1.8 Other Financing Statements. No Grantor will suffer to exist or
authorize the filing of any valid financing statement naming it as debtor
covering all or any portion of the Collateral owned by such Grantor, except any
financing statement authorized under Section 4.1.4 hereof.
     4.2. Instruments. Upon the Administrative Agent’s request, after the
occurrence and during the continuance of an Event of Default, each Grantor will
deliver to the Administrative Agent (and thereafter hold in trust for the
Administrative Agent upon receipt and immediately deliver to the Administrative
Agent) the originals of all Instruments constituting Collateral, marked with
such legends and assigned as the Administrative Agent shall specify. The rights
of the Administrative Agent under any allonge delivered in connection with any
Instrument constituting Collateral shall be exercised only upon the occurrence
and during the continuance of an Event of Default.
     4.3. Updating of Exhibits to Security Agreement. Each Grantor will provide
to the Administrative Agent, concurrently with the delivery of the certificate
of a financial officer of the Borrower as required by Section 6.1(ii) of the
Credit Agreement, updated versions, as necessary, of the Exhibits to this
Security Agreement. Each Grantor, in its discretion, may also from time to time
provide additional updates to the Exhibits to this Security Agreement. Updated
versions of Exhibits shall replace the prior versions thereof being updated. For
the avoidance of doubt, the receipt of such updated Exhibits by the
Administrative Agent shall not be understood to permit any action prohibited
hereunder or constitute a waiver of any provision contained herein.
ARTICLE V
DEFAULT
     5.1. The occurrence of any one or more of the following events shall
constitute a Default:
     5.1.1 Any representation or warranty made or deemed made by a Grantor
herein or which is contained in any certificate, document or financial or other
statement furnished by such Grantor at any time under or in connection with this
Security Agreement shall prove to have been incorrect, false or misleading in
any material respect on or as of the date made or deemed made.

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     5.1.2 The breach by any Grantor of any of the terms or provisions of
Sections 4.1.5 or 4.1.6 or Article VII.
     5.1.3 The breach by any Grantor (other than a breach which constitutes a
Default under Section 5.1.1 or 5.1.2 hereof) of any of the terms or provisions
of this Security Agreement which is not remedied within 30 days after the giving
of written notice to such Grantor by the Administrative Agent.
     5.1.4 Any material portion of the Collateral shall be transferred or
otherwise disposed of, in any manner not permitted by Section 4.1.5 or 8.6
hereof.
     5.1.5 The occurrence of any “Event of Default” under, and as defined in,
the Credit Agreement.
     5.2. Acceleration and Remedies. Upon the acceleration of payment of any
principal, interest or other obligations owing under or in connection with the
Loan Documents, pursuant to Article VIII of the Credit Agreement, all principal,
interest, fees and other amounts owing or outstanding under the Credit
Agreement, and, to the extent provided for under any other Loan Documents, such
obligations owing or outstanding under such Loan Documents, shall immediately
become due and payable without presentment, demand, protest or notice of any
kind, all of which are hereby expressly waived, and the Administrative Agent
may, with the concurrence or at the direction of the Required Lenders, exercise
any or all of the following rights and remedies:
     5.2.1 Those rights and remedies provided in this Security Agreement, the
Credit Agreement, or any other Loan Document, provided that this Section 5.2.1
shall not be understood to limit any rights or remedies available to the
Administrative Agent and the Holders of Secured Obligations prior to a Default.
     5.2.2 Those rights and remedies available to a secured party under the
Delaware UCC (whether or not the Delaware UCC applies to the affected
Collateral) or under any other applicable law (including, without limitation,
any law governing the exercise of a bank’s right of setoff or bankers’ lien)
when a debtor is in default under a security agreement.
     5.2.3 Without notice except as specifically provided in Section 8.1 hereof
or elsewhere herein, sell, lease, assign, grant an option or options to purchase
or otherwise dispose of the Collateral or any part thereof in one or more
parcels at public or private sale, for cash, on credit or for future delivery,
and upon such other terms as the Administrative Agent may deem commercially
reasonable.
The Administrative Agent, on behalf of the Holders of Secured Obligations, may
comply with any applicable state or federal law requirements in connection with
a disposition of the Collateral, and such compliance will not be considered to
adversely affect the commercial reasonableness of any sale of the Collateral.
Notwithstanding the foregoing, the Administrative Agent and Lenders will be
subject to those limitations on rights and remedies set forth in Article VIII of
the Credit Agreement.

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     5.3. Grantors’ Obligations Upon Default. Upon the request of the
Administrative Agent after the occurrence and during the continuance of a
Default, each Grantor will:
     5.3.1 Assembly of Collateral. Assemble and make available to the
Administrative Agent the Collateral and all records relating thereto at any
place or places specified by the Administrative Agent.
     5.3.2 Secured Party Access. Permit the Administrative Agent, by the
Administrative Agent’s representatives and agents, to enter any premises where
all or any part of the Collateral, or the books and records relating thereto, or
both, are located, to take possession of all or any part of the Collateral and
to remove all or any part of the Collateral.
ARTICLE VI
WAIVERS, AMENDMENTS AND REMEDIES
     No delay or omission of the Administrative Agent or any Holder of Secured
Obligations to exercise any right or remedy granted under this Security
Agreement shall impair such right or remedy or be construed to be a waiver of
any Default or an acquiescence therein, and any single or partial exercise of
any such right or remedy shall not preclude any other or further exercise
thereof or the exercise of any other right or remedy. No waiver, amendment or
other variation of the terms, conditions or provisions of this Security
Agreement whatsoever shall be valid unless in writing signed by the
Administrative Agent with the concurrence or at the direction of the (a)
Required Lenders (or, if required under Section 8.3 of the Credit Agreement, all
Lenders) and (b) each Grantor, and then only to the extent in such writing
specifically set forth, provided that the addition of any Subsidiary as a
Grantor hereunder by execution of a Supplement hereto in the form of Annex I
(with such modifications as shall be acceptable to the Administrative Agent)
shall not require receipt of any consent from or execution of any documentation
by the Required Lenders or any other Grantor party hereto. All rights and
remedies contained in this Security Agreement or by law afforded shall be
cumulative and all shall be available to the Administrative Agent and the
Holders of Secured Obligations until the Secured Obligations (excluding
Unliquidated Obligations not then due) have been paid in full.
ARTICLE VII
PROCEEDS; COLLECTION OF RECEIVABLES
     7.1. Special Collateral Account. At any time after the occurrence and
during the continuance of a Default, the Administrative Agent may require all
cash proceeds of the Collateral to be deposited in a special non-interest
bearing cash collateral account with the Administrative Agent and held there as
security for the Secured Obligations. No Grantor shall have any control
whatsoever over said cash collateral account. The Administrative Agent shall
apply the collected balances in said cash collateral account promptly to the
payment of the Secured Obligations whether or not the Secured Obligations shall
then be due.

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     7.2. Application of Proceeds. Any proceeds of Collateral received by the
Administrative Agent shall be applied pursuant to Section 2.1.2 of the Credit
Agreement.
ARTICLE VIII
GENERAL PROVISIONS
     8.1. Notice of Disposition of Collateral; Condition of Collateral. Each
Grantor hereby waives notice of the time and place of any public sale occurring
during the continuance of a Default or the time after which any private sale or
other disposition of all or any part of the Collateral may be made during the
continuance of a Default. To the extent such notice may not be waived under
applicable law, any notice made shall be deemed reasonable if sent to the
Borrower, addressed as set forth in Article IX hereof, at least ten days prior
to (i) the date of any such public sale or (ii) the time after which any such
private sale or other disposition may be made. The Administrative Agent shall
have no obligation to clean-up or otherwise prepare the Collateral for sale.
     8.2. Secured Party Performance of Grantor’s Obligations. Without having any
obligation to do so, the Administrative Agent may perform or pay any obligation
which any Grantor has agreed to (and failed to) perform or pay in this Security
Agreement and such Grantor shall reimburse the Administrative Agent for any
reasonable amounts paid by the Administrative Agent pursuant to this
Section 8.2. Each Grantor’s obligation to reimburse the Administrative Agent
pursuant to the preceding sentence shall be a Secured Obligation payable on
demand.
     8.3. Authorization for Secured Party to Take Certain Action. Each Grantor
irrevocably authorizes the Administrative Agent at any time and from time to
time in the sole discretion of the Administrative Agent and appoints the
Administrative Agent as its attorney-in-fact (i) to execute on behalf of such
Grantor as debtor and to file financing statements necessary or desirable in the
Administrative Agent’s sole discretion to perfect and to maintain the perfection
and priority of the Administrative Agent’s security interest in the Collateral,
(ii) to indorse and collect any cash proceeds of the Collateral, (iii) to file a
carbon, photographic or other reproduction of this Security Agreement or any
financing statement with respect to the Collateral as a financing statement and
to file any other financing statement or amendment of a financing statement
(which does not add new collateral or add a debtor) in such offices as the
Administrative Agent in its sole discretion deems necessary or desirable to
perfect and to maintain the perfection and priority of the Administrative
Agent’s security interest in the Collateral, (iv) subject to the terms of
Section 4.1.5 hereof, to enforce payment of the Instruments in the name of the
Administrative Agent or such Grantor, (v) to apply the proceeds of any
Collateral received by the Administrative Agent to the Secured Obligations as
provided in Article VII and (vi) to discharge past due taxes, assessments,
charges, fees or Liens on the Collateral (except for such Liens as are
specifically permitted hereunder or under any other Loan Document or which are
being contested in good faith pursuant to any other Loan Document), and each
Grantor agrees to reimburse the Administrative Agent on demand for any
reasonable payment made or any reasonable expense incurred by the Administrative
Agent in connection therewith, provided that this authorization shall not
relieve any Grantor of any of its obligations under this Security Agreement or
under the Credit Agreement.

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     8.4. Specific Performance of Certain Covenants. Each Grantor acknowledges
and agrees that a breach of any of the covenants contained in Sections 4.1.5,
4.1.6, 4.2, 5.3, or 8.6 or in Article VII hereof will cause irreparable injury
to the Administrative Agent and the Holders of Secured Obligations, that the
Administrative Agent and Holders of Secured Obligations have no adequate remedy
at law in respect of such breaches and therefore agrees, without limiting the
right of the Administrative Agent or the Holders of Secured Obligations to seek
and obtain specific performance of other obligations of the Grantors contained
in this Security Agreement, that the covenants of the Grantors contained in the
Sections referred to in this Section 8.4 shall be specifically enforceable
against the Grantors.
     8.5. Entry onto Certain Premises. Upon the occurrence and during the
continuance of a Default, the Administrative Agent shall be entitled, in its
reasonable discretion, to enter any premises owned or leased by the Grantors
where any of the Collateral or any records relating to the Collateral are
located until the Secured Obligations are paid or the Collateral or records
relating thereto are removed therefrom, whichever first occurs, without any
obligation to pay any Grantor for such entry.
     8.6. Dispositions Not Authorized. No Grantor is authorized to sell or
otherwise dispose of the Collateral except as set forth in Section 4.1.5 hereof
and notwithstanding any course of dealing between any Grantor and the
Administrative Agent or other conduct of the Administrative Agent, no
authorization to sell or otherwise dispose of the Collateral (except as set
forth in Section 4.1.5 hereof) shall be binding upon the Administrative Agent or
the Holders of Secured Obligations unless such authorization is in writing
signed by the Administrative Agent with the consent or at the direction of the
Required Lenders.
     8.7. Benefit of Agreement. The terms and provisions of this Security
Agreement shall be binding upon and inure to the benefit of the Grantors, the
Administrative Agent and the Holders of Secured Obligations and their respective
successors and permitted assigns (including all persons who become bound as a
debtor to this Security Agreement), except that the Grantors shall not have the
right to assign their rights or delegate their obligations under this Security
Agreement or any interest herein, without the prior written consent of the
Administrative Agent.
     8.8. Survival of Representations. All representations and warranties of the
Grantors contained in this Security Agreement shall survive the execution and
delivery of this Security Agreement.
     8.9. Taxes and Expenses. Taxes, costs, fees and expenses in respect of this
Security Agreement shall be paid by the Grantors as required by Section 9.6 of
the Credit Agreement (with the understanding and agreement of each Grantor that,
for purposes hereof, each Grantor shall have the same payment and reimbursement
obligations as the Borrower under Section 9.6 even though such Grantor is not
specifically referenced in Section 9.6). Any and all costs and expenses incurred
by the Grantors in the performance of actions required pursuant to the terms
hereof shall be borne solely by the Grantors.
     8.10. Headings. The title of and section headings in this Security
Agreement are for convenience of reference only, and shall not govern the
interpretation of any of the terms and provisions of this Security Agreement.

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     8.11. Termination. This Security Agreement shall continue in effect
(notwithstanding the fact that from time to time there may be no Secured
Obligations outstanding) until (i) the Credit Agreement has terminated (subject
to the survival of those terms that survive termination) pursuant to its express
terms and (ii) all of the Secured Obligations have been paid in full in cash and
performed in full and no commitments of the Administrative Agent or the Holders
of Secured Obligations which would give rise to any Secured Obligations are
outstanding.
     8.12. Entire Agreement. This Security Agreement embodies the entire
agreement and understanding between the Grantors and the Administrative Agent
relating to the Collateral and supersedes all prior agreements and
understandings between the Grantors and the Administrative Agent relating to the
Collateral.
     8.13. Choice of Law; Consent to Jurisdiction; Waiver of Jury Trial.
          8.13.1 CHOICE OF LAW. THIS SECURITY AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (WITHOUT REGARD TO THE CONFLICT OF LAWS
PROVISIONS) OF THE STATE OF DELAWARE, BUT GIVING EFFECT TO FEDERAL LAWS
APPLICABLE TO NATIONAL BANKS.
          8.13.2 CONSENT TO JURISDICTION. EACH GRANTOR HEREBY IRREVOCABLY
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR STATE
COURT SITTING IN DELAWARE IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS SECURITY AGREEMENT AND EACH GRANTOR HEREBY IRREVOCABLY AGREES THAT ALL
CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN
ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE
AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT
OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE
RIGHT OF THE ADMINISTRATIVE AGENT OR ANY HOLDER OF SECURED OBLIGATIONS TO BRING
PROCEEDINGS AGAINST ANY GRANTOR IN THE COURTS OF ANY OTHER JURISDICTION. ANY
JUDICIAL PROCEEDING BY ANY GRANTOR AGAINST THE ADMINISTRATIVE AGENT OR ANY
HOLDER OF SECURED OBLIGATIONS OR ANY AFFILIATE OF THE ADMINISTRATIVE AGENT OR
ANY HOLDER OF SECURED OBLIGATIONS INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER
IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS SECURITY AGREEMENT
SHALL BE BROUGHT ONLY IN A COURT IN DELAWARE.
          8.13.3 WAIVER OF JURY TRIAL. EACH GRANTOR, THE ADMINISTRATIVE AGENT
AND EACH HOLDER OF SECURED OBLIGATIONS HEREBY WAIVES TRIAL BY JURY IN ANY
JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER
SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO,
OR CONNECTED WITH THIS SECURITY AGREEMENT OR THE RELATIONSHIP ESTABLISHED
HEREUNDER.

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     8.14. Indemnity. Each Grantor hereby agrees, jointly with the other
Grantors and severally, to indemnify the Administrative Agent and the Holders of
Secured Obligations, and their respective successors, assigns, agents and
employees (the “Indemnified Parties”), from and against any and all liabilities,
damages, penalties, suits, costs, and reasonable expenses of any kind and nature
(including, without limitation, all reasonable expenses of litigation or
preparation therefor whether or not an Indemnified Party is a party thereto)
imposed on, incurred by or asserted against an Indemnified Party arising out of
this Security Agreement, or arising out of or relating to the manufacture,
purchase, acceptance, rejection, ownership, delivery, lease, possession, use,
operation, condition, sale, return or other disposition of any Collateral
(including, without limitation, latent and other defects, whether or not
discoverable by an Indemnified Party or any Grantor), provided that such
indemnity shall not, as to any indemnitee, be available to the extent that such
losses, claims, damages, penalties, liabilities or related expenses are
determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence, bad faith or willful
misconduct of such indemnitee; provided, that with respect to fees and expenses
in respect of counsel for the Indemnified Parties in connection with any of the
foregoing, the Grantors shall only be required to pay (on a joint and several
basis) for the reasonable fees and expenses of one outside counsel (and up to
one local counsel in each applicable local jurisdiction and any applicable
regulatory counsel) for the Indemnified Parties, unless the Administrative Agent
or a Holder of Secured Obligations (or its counsel) determines that it would
create actual or potential conflicts of interest to not have individual counsel,
in which case the Administrative Agent and such Holder of Secured Obligations
may have its own counsel which may be reimbursed in connection with the
foregoing.
     8.15. Subordination of Intercompany Indebtedness. Each Grantor agrees that
any and all claims of such Grantor against any other Grantor (each an “Obligor”)
with respect to any “Intercompany Indebtedness” (as hereinafter defined), any
endorser, obligor or any other guarantor of all or any part of the Secured
Obligations, or against any of its properties shall be subordinate and subject
in right of payment to the prior payment, in full and in cash, of all Secured
Obligations; provided that, and not in contravention of the foregoing, so long
as no Default has occurred and is continuing, such Grantor may make loans to and
receive payments with respect to Intercompany Indebtedness from each such
Obligor to the extent not prohibited by the terms of this Security Agreement and
the other Loan Documents. Notwithstanding any right of any Grantor to ask,
demand, sue for, take or receive any payment from any Obligor, all rights, liens
and security interests of such Grantor, whether now or hereafter arising and
howsoever existing, in any assets of any other Obligor shall be and are
subordinated to the rights of the Holders of Secured Obligations and the
Administrative Agent in those assets. No Grantor shall have any right to
foreclose upon any such asset, whether by judicial action or otherwise, unless
and until all of the Secured Obligations (other than Unliquidated Obligations)
shall have been fully paid and satisfied (in cash) and all Commitments of the
Lenders under the Credit Agreement have terminated or expired. If all or any
part of the assets of any Obligor, or the proceeds thereof, are subject to any
distribution, division or application to the creditors of such Obligor, whether
partial or complete, voluntary or involuntary, and whether by reason of
liquidation, bankruptcy, arrangement, receivership, assignment for the benefit
of creditors or any other similar action or proceeding, or if the business of
any such Obligor is dissolved or if substantially all of the assets of any such
Obligor are sold (except to the extent not prohibited by the Loan Documents),
then, and in any such event (such event being herein referred to as an

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“Insolvency Event”), any payment or distribution of any kind or character,
either in cash, securities or other property, which shall be payable or
deliverable upon or with respect to any Indebtedness of such Obligor to any
Grantor (“Intercompany Indebtedness”) shall be paid or delivered directly to the
Administrative Agent for application on any of the Secured Obligations, due or
to become due, until such Secured Obligations (other than Unliquidated
Obligations) shall have first been fully paid and satisfied (in cash). Should
any payment, distribution, security or instrument or proceeds thereof be
received by the applicable Grantor upon or with respect to the Intercompany
Indebtedness after any Insolvency Event and prior to the satisfaction of all of
the Secured Obligations (other than Unliquidated Obligations) and the
termination or expiration of all Commitments of the Lenders have been terminated
or expired, such Grantor shall receive and hold the same in trust, as trustee,
for the benefit of the Holders of Secured Obligations and shall forthwith
deliver the same to the Administrative Agent, for the benefit of the Holders of
Secured Obligations, in precisely the form received (except for the endorsement
or assignment of the Grantor where necessary), for application to any of the
Secured Obligations, due or not due, and, until so delivered, the same shall be
held in trust by the Grantor as the property of the Holders of Secured
Obligations. If any such Grantor fails to make any such endorsement or
assignment to the Administrative Agent, the Administrative Agent or any of its
officers or employees is irrevocably authorized to make the same. Each Grantor
agrees that until the Secured Obligations (other than Unliquidated Obligations)
have been paid in full (in cash) and satisfied and all Commitments of the
Lenders have terminated or expired, no Grantor will assign or transfer to any
Person (other than the Administrative Agent or the Borrower or another Grantor)
any claim any such Grantor has or may have against any Obligor.
     8.16. Severability. Any provision in this Security Agreement that is held
to be inoperative, unenforceable, or invalid in any jurisdiction shall, as to
that jurisdiction, be inoperative, unenforceable, or invalid without affecting
the remaining provisions in that jurisdiction or the operation, enforceability,
or validity of that provision in any other jurisdiction, and to this end the
provisions of this Security Agreement are declared to be severable.
     8.17. Counterparts. This Security Agreement may be executed in counterparts
(and by different parties hereto in different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a
single contract. Delivery of an executed counterpart of a signature page of this
Security Agreement by telecopy or electronic mail (PDF) shall be effective as
delivery of a manually executed counterpart of this Security Agreement.
     8.18. Release of Collateral. Notwithstanding Article VI hereof or anything
to the contrary set forth herein, if Collateral is permitted to be sold,
transferred or assigned by a Grantor pursuant to or in connection with a
transaction permitted hereunder or under the Credit Agreement (such as, but not
limited to, a permitted asset sale or a permitted sale of a Subsidiary), then
the Administrative Agent shall release such Collateral from its Lien thereon;
provided, that the Borrower shall deliver a written certificate to the
Administrative Agent (upon which the Administrative Agent shall be entitled to
conclusively rely) certifying that such transaction is permitted under the
Credit Agreement, and providing evidence that reasonably supports such
certification, prior to any such release. The Administrative Agent, at the
Grantors’ sole cost and expense, shall deliver such documents and make such
filings reasonably requested of it to further evidence such release. The
security interest in the Collateral granted hereunder shall be released as
provided under and in accordance with the terms of the Credit Agreement.

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ARTICLE IX
NOTICES
     9.1. Sending Notices. Any notice required or permitted to be given under
this Security Agreement shall be sent (and deemed received) in the manner and to
the addresses set forth in Section 13.1 of the Credit Agreement. Any notice
delivered to the Borrower shall be deemed to have been delivered to all of the
Grantors.
     9.2. Change in Address for Notices. Each of the Grantors, the
Administrative Agent and the Lenders may change the address for service of
notice upon it by a notice in writing to the other parties in accordance with
Section 9.1.
ARTICLE X
THE ADMINISTRATIVE AGENT
     U.S. Bank National Association has been appointed Administrative Agent for
the Holders of Secured Obligations hereunder pursuant to Article X of the Credit
Agreement. It is expressly understood and agreed by the parties to this Security
Agreement that any authority conferred upon the Administrative Agent hereunder
is subject to the terms of the delegation of authority made by the Holders of
Secured Obligations to the Administrative Agent pursuant to the Credit
Agreement, and that the Administrative Agent has agreed to act (and any
successor Administrative Agent shall act) as such hereunder only on the express
conditions contained in such Article X. Any successor Administrative Agent
appointed pursuant to Article X of the Credit Agreement shall be entitled to all
the rights, interests and benefits of the Administrative Agent hereunder.
[SIGNATURE PAGES TO FOLLOW]

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     IN WITNESS WHEREOF, each of the Grantors and the Administrative Agent have
executed this Security Agreement as of the date first above written.

                  PROASSURANCE CORPORATION, as a Grantor
 
           
 
  By:
Name:    
 
   
 
  Title:        

Signature Page to Pledge and Security Agreement

 

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U.S. BANK NATIONAL
ASSOCIATION, as Administrative Agent

         
By:
Name:
   
 
   
Title:
       

Signature Page to Pledge and Security Agreement

 

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EXHIBIT “A”
(See Sections 3.3 and 3.4 of Security Agreement)
Prior names, jurisdiction of formation, place of business (if Grantor has only
one place of business), chief executive office (if Grantor has more than one
place of business), mergers and mailing address:
[________]
[_________]
[_________]
[_________]
[_________]

 

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ANNEX I
to
SUBSIDIARY
SECURITY AGREEMENT
          Reference is hereby made to the Pledge and Security Agreement (the
“Agreement”), dated as of April 15, 2011 made by PROASSURANCE CORPORATION (the
“Borrower”, and together with any additional Persons, including the undersigned,
which become parties thereto by executing a Supplement in substantially the form
hereof and after giving effect to any Persons released from the Agreement as
permitted by the Agreement, the “Grantors”), in favor of the Administrative
Agent. Capitalized terms used herein and not defined herein shall have the
meanings given to them in the Agreement. By its execution below, the
undersigned, [NAME OF NEW GRANTOR], a [__________________________]
[corporation/limited liability company/other] agrees to become, and does hereby
become, a Grantor under the Agreement and agrees to be bound by such Agreement
as if originally a party thereto. By its execution below, the undersigned hereby
pledges, assigns and grants to the Administrative Agent, on behalf of and for
the ratable benefit of the Holders of Secured Obligations and (to the extent
specifically provided the Agreement) their Affiliates, a security interest in
all of its right, title and interest, whether now owned or hereafter acquired,
in and to the Collateral to secure the prompt and complete payment and
performance of the Secured Obligations. The undersigned hereby represents and
warrants as to itself that all of the representations and warranties contained
in the Agreement are true and correct in all respects as of the date hereof.
Except as modified pursuant to Schedule A hereto (to the extent such
modifications are permitted under the Agreement), [NAME OF NEW GRANTOR]
represents and warrants that the supplements to the Exhibits to the Agreement
attached hereto are true and correct in all respects and such supplements set
forth all information required to be scheduled under the Agreement. To the
extent required under the Agreement, [NAME OF NEW GRANTOR] shall take all steps
necessary to perfect, in favor of the Administrative Agent, a security interest
in and lien against [NAME OF NEW GRANTOR]’s Collateral, including to the extent
so required delivering all certificated Securities to the Administrative Agent,
and taking all steps necessary to properly perfect the Administrative Agent’s
interest in any uncertificated equity or membership interests.
     IN WITNESS WHEREOF, [NAME OF NEW GRANTOR], a [__________________]
[corporation/limited liability company/other] has executed and delivered this
Annex I counterpart to the Agreement as of this ___________ day of ____________,
___.

                  [NAME OF NEW GRANTOR]    
 
           
 
  By:    
 
   
 
  Title: