Exhibit 10.2

EXECUTION VERSION

 

 

 

PLEDGE AND SECURITY AGREEMENT

Dated as of April 19, 2012

by and among

ENDURANCE SPECIALTY HOLDINGS LTD.,

VARIOUS DESIGNATED SUBSIDIARY BORROWERS,

DEUTSCHE BANK TRUST COMPANY AMERICAS,

as Collateral Agent

DEUTSCHE BANK TRUST COMPANY AMERICAS,

as Custodian

and

JPMORGAN CHASE BANK, N.A.

as Administrative Agent

 

 

 

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PLEDGE AND SECURITY AGREEMENT (as amended, modified and supplemented and as in
effect from time to time, this “Agreement”), dated as of April 19, 2012, by and
among the undersigned subsidiary Borrowers (each, a “Grantor” and, together with
any other entity that becomes a Grantor hereunder pursuant to Section 10.12
hereof, the “Grantors”), Deutsche Bank Trust Company Americas, as collateral
agent for the benefit of the Secured Creditors (as defined below) (in such
capacity, together with any successor Collateral Agent, the “Collateral Agent”),
Deutsche Bank Trust Company Americas, as Deposit Account Bank (as defined below)
and securities intermediary (as such term is defined in Section 8-102 of the
UCC) (in such capacity, together with any successor, the “Custodian”), and
JPMorgan Chase Bank, N.A., as administrative agent under the Credit Agreement
(as defined below) (in such capacity, together with any successor, the
“Administrative Agent”). Certain capitalized terms as used herein are defined in
Section 1 hereof. Except as otherwise defined herein, all capitalized terms used
herein and defined in the Credit Agreement (as defined below) shall be used
herein as therein defined.

W I T N E S S E T H :

WHEREAS, Endurance Specialty Holdings Ltd. (the “Parent Borrower”), various
Designated Subsidiary Borrowers, the lenders from time to time party thereto
(the “Lenders”), the Administrative Agent and each of the other agents and
arrangers party thereto, have entered into that certain Credit Agreement, dated
as of April 19, 2012 (as amended, modified, supplemented or amended and restated
from time to time, the “Credit Agreement”), providing for the making of Loans to
the Borrowers and the issuance of, and participation in, Letters of Credit for
the account of the Designated Subsidiary Borrowers, all as contemplated therein
(the Lenders, the Issuing Agent, the Issuing Lenders, the Limited Fronting
Lenders, the Administrative Agent, the Collateral Agent, the Custodian, each
other agent under the Credit Agreement and, with respect to any amounts owing in
respect of any Existing Letters of Credit, the Original Lenders (solely until
such time that such Existing Letters of Credit have been amended to replace the
Original Lenders pursuant to the Credit Agreement and all amounts owing to such
Original Lenders under Sections 2A.03 and 2A.08 of the Credit Agreement and all
interest related thereto shall have been paid in full) are herein called the
“Secured Creditors”);

WHEREAS, it is a condition precedent to the making of Loans to the Borrowers and
the issuance of, and participation in, Letters of Credit for the account of the
Designated Subsidiary Borrowers under the Credit Agreement that each Grantor
shall have executed and delivered to the Collateral Agent this Agreement; and

WHEREAS, each Grantor will obtain benefits from the incurrence of Loans and/or
the issuance of, and participation in, Letters of Credit for their respective
accounts under the Credit Agreement and, accordingly, desires to execute this
Agreement in order to satisfy the condition described in the preceding paragraph
and to induce the Lenders to make Loans to the Borrowers and issue, and/or
participate in, Letters of Credit for the account of the Designated Subsidiary
Borrowers;

NOW, THEREFORE, in consideration of the benefits accruing to each Grantor, the
receipt and sufficiency of which are hereby acknowledged, each Grantor hereby
makes the following representations and warranties (solely as to itself and its
Subsidiaries) to the Collateral

 

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Agent for the benefit of the Secured Creditors and hereby covenants and agrees
(solely as to itself and its Subsidiaries) with the Collateral Agent for the
benefit of the Secured Creditors as follows:

Section 1. Definitions. Terms defined in the Credit Agreement are used herein as
defined therein. In addition, as used in this Agreement, the following terms
have the following meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):

“Account Control Agreement” means the account control agreement, dated as of the
date of this Agreement, among the Custodian, the Grantors from time to time
party thereto and the Collateral Agent, as amended, modified and supplemented
and as in effect from time to time.

“Administrative Agent” has the meaning provided in the first paragraph of this
Agreement, and shall include any successor thereto.

“Administrative Agent’s Notice” has the meaning provided in Section 6.01(a).

“Adverse Claim” has the meaning assigned to such term in Section 8-102(a)(i) of
the UCC.

“Agency Securities” shall mean (i) single-class mortgage participation
certificates in book-entry form backed by single-family residential mortgage
loans, the full and timely payment of interest at the applicable certificate
rate and the ultimate collection of principal of which are guaranteed by the
Federal Home Loan Mortgage Corporation (excluding REMIC or other multi-class
pass-through certificates, collateralized mortgage obligations, pass-through
certificates backed by adjustable rate mortgages, securities paying interest or
principal only and similar derivative securities); (ii) single-class mortgage
pass-through certificates in book-entry form backed by single-family residential
mortgage loans, the full and timely payment of interest at the applicable
certificate rate and ultimate collection of principal of which are guaranteed by
the Federal National Mortgage Association (excluding REMIC or other multi-class
pass-through certificates, pass-through certificates backed by adjustable rate
mortgages, collateralized mortgage obligations, securities paying interest or
principal only and similar derivative securities); and (iii) single-class fully
modified pass-through certificates in book-entry form backed by single-family
residential mortgage loans, the full and timely payment of principal and
interest of which is guaranteed by the Government National Mortgage Association
(excluding REMIC or other multi-class pass-through certificates, collateralized
mortgage obligations, pass-through certificates backed by adjustable rate
mortgages, securities paying interest or principal only and similar derivatives
securities).

“Agreement” means this Pledge and Security Agreement, as amended, modified and
supplemented and as in effect from time to time.

“Borrowing Base Report” has the meaning provided in Section 6.01(b).

“Cash” means immediately available funds in Dollars.

 

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“Clearing Corporation” has the meaning assigned to such term in
Section 8-102(a)(5) of the UCC and includes, among other things, DTC.

“Close of Business” on any given date, means the time of closing of the Federal
funds wire in New York City on such date, or, with respect to any particular
reference herein to such term, such earlier time on such date as may be agreed
to by the Grantors, the Collateral Agent and the Custodian.

“Collateral” has the meaning provided in Section 4.01.

“Collateral Accounts” has the meaning provided in Section 4.02(a) and shall
include any successor accounts.

“Collateral Agent” has the meaning provided in the first paragraph of this
Agreement, and shall include any successor thereto.

“Collateral Deposit Accounts” has the meaning provided in Section 4.02(a) and
shall include any successor accounts.

“Collateral Release Request” means a duly completed request from any Grantor to
the Collateral Agent substantially in the form of Exhibit A.

“Collateral Securities Accounts” has the meaning provided in Section 4.02(a) and
shall include any successor accounts.

“Collateral Transfer” means a transfer, deposit or delivery of any Property to
be included as Collateral by or on behalf of any Grantor to the Collateral Agent
or the Custodian in accordance with Section 4.03.

“Credit Agreement” has the meaning provided in the recitals of this Agreement.

“Credit Event” means the issuance of any Tranche 1 Letter of Credit.

“Credit Transaction” means, collectively, all Collateral Transfers, all releases
of Collateral pursuant to Section 4.04 and the occurrence of any Credit Event.

“Custodian” has the meaning provided in the first paragraph of this Agreement
and shall include any successor thereto.

“Deposit Account” has the meaning assigned to such term in Section 9-102(a)(29)
of the UCC.

“Deposit Account Bank” shall mean a “bank” (as defined in Section 9-102(a)(8) of
the UCC) which maintains a Deposit Account.

“Derivative Security” means any security evidencing the right to receive
payments of principal only or interest only with respect to an underlying
Instrument or Security or otherwise evidencing a right to receive anything but
proportionate payments of the principal of and interest on any underlying
Instrument or Security, and any forward or futures contract, put, call, collar,
option or swap agreement in respect of any Security.

 

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“DTC” means The Depository Trust Company, its successors and assigns.

“Financial Asset” has the meaning assigned to such term in Section 8-102(a)(9)
of the UCC.

“Governmental Authority” means any nation or government, any state or other
political subdivision thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.

“Governmental Securities” means direct obligations of the United States of
America, or direct obligations of any agency or instrumentality thereof the
obligations of which are expressly backed by the full faith and credit of the
United States of America, or obligations fully and expressly guaranteed as to
principal and interest by the United States of America or any such agency or
instrumentality thereof which are expressly backed by the full faith and credit
of the United States of America, other than any Structured Finance Securities or
Derivative Securities.

“Grantor” has the meaning provided in the first paragraph of this Agreement and
shall include any successor thereto.

“Indemnitee” has the meaning provided in Section 10.04(b) of this Agreement.

“Instrument” has the meaning assigned to such term in Section 9-102(a)(47) of
the UCC.

“Investment Property” has the meaning assigned to such term in
Section 9-102(a)(49) of the UCC.

“Lenders” has the meaning provided in the recitals of this Agreement.

“Location” of any Grantor, means such Grantor’s “location” as determined
pursuant to Section 9-307 of the UCC.

“Market Value” of each Security at a particular time, means the fair market
value determined for such Security at the close of business on the last
preceding Business Day. For purposes of this definition, unpaid dividends and
other unpaid distributions on or in respect of Securities and accrued but unpaid
interest on Securities will be excluded from the determination of Market Value.
For purpose of the determination of any Market Value, the Custodian or the
Collateral Agent shall be entitled to rely on any independent pricing service
deemed reliable by it, and in the event no such pricing service exists, the
Market Value shall be provided by the Administrative Agent.

“NYSE” means the New York Stock Exchange.

“Parent Borrower” has the meaning provided in the recitals of this Agreement.

 

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“Primary Obligations” has the meaning provided in Section 8.04(b) of this
Agreement.

“Pro Rata Share” has the meaning provided in Section 8.04(b) of this Agreement.

“Proceeds” means all “proceeds” as such term is defined in Section 9-102(a)(64)
of the UCC and, in any event, shall include, without limitation, all interest on
or other income from the Cash from time to time on deposit in any Collateral
Account, and all collections and distributions (including, without limitation,
interest and dividends) with respect to any Security held in any Collateral
Account.

“Property” means any right or interest in or to property of any kind whatsoever,
whether real, personal or mixed and whether tangible or intangible.

“Registered Organization” has the meaning provided in the Uniform Commercial
Code as in effect in the State of New York.

“Requirements of Law” for any Person, means the Certificate of Incorporation and
By-Laws or other organizational or governing documents of such Person, and any
law, treaty, rule or regulation, or determination of an arbitrator or a court or
other Governmental Authority, in each case applicable to or binding upon such
Person or any of its property or to which such Person or any of its property is
subject.

“Secondary Obligations” has the meaning provided in Section 8.04(b) of this
Agreement.

“Secured Creditors” has the meaning provided in the recitals of this Agreement
and shall include any successor thereto.

“Secured Obligations” means, as to any Grantor (solely as to itself), all of the
following:

(i) the full and prompt payment when due (whether at stated maturity, by
acceleration or otherwise) of all obligations, liabilities and indebtedness
(including, without limitation, principal, premium, interest (including, without
limitation, all interest that accrues after the commencement of any case,
proceeding or other action relating to the bankruptcy, insolvency,
reorganization or similar proceeding of such Grantor at the rate provided for in
the respective documentation, whether or not a claim for post-petition interest
is allowed in any such proceeding), reimbursement obligations under Letters of
Credit, fees, costs and indemnities) of such Grantor to the Secured Creditors,
whether now existing or hereafter incurred under, arising out of, or in
connection with, the Credit Agreement and the other Credit Documents to which
such Grantor is a party and the due performance and compliance by such Grantor
with all of the terms, conditions and agreements contained in the Credit
Agreement and in such other Credit Documents;

(ii) any and all sums advanced by the Collateral Agent and/or the Custodian in
order to preserve the Collateral or preserve the Collateral Agent’s security
interest in the Collateral;

 

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(iii) in the event of any proceeding for the collection or enforcement of any
indebtedness, obligations, or liabilities of such Grantor referred to in clause
(i) above, after an Event of Default shall have occurred and be continuing, the
reasonable expenses of retaking, holding, preparing for sale or lease, selling
or otherwise disposing of or realizing on the Collateral, or of any exercise by
the Collateral Agent of its rights hereunder, together with reasonable
attorneys’ fees and court costs;

(iv) all amounts paid by any Indemnitee as to which such Indemnitee has the
right to reimbursement by such Grantor under Section 10.04(b) of this Agreement;
and

(v) all amounts owing by such Grantor to the Administrative Agent in connection
with Tranche 1 Letters of Credit pursuant to any of the Credit Documents in its
capacity as such;

Notwithstanding anything to the contrary contained in this definition, it is
understood and agreed that the “Secured Obligations” of each Grantor shall
(x) include obligations solely to the extent the Secured Obligations of such
Grantor consist of or are incurred in connection with Tranche 1 Letters of
Credit to such Grantor, (y) include extensions of credit to the respective
Grantor of the types described above in connection with the Tranche 1 Letters of
Credit, whether outstanding on the date of this Agreement or extended from time
to time after the date of this Agreement and (z) in the case of the Parent
Borrower, shall not include any obligations arising under the Parent Borrower
Guaranty.

“Security” and “Securities” have the meaning provided in Section 8-102(a)(15) of
the UCC and shall in any event also include for all purposes under this
Agreement any certificates of deposit and money market deposits of any
commercial bank.

“Securities Account” has the meaning assigned to such term in Section 8-501(a)
of the UCC.

“Securities Intermediary” has the meaning assigned to such term in
Section 8-102(a)(14) of the UCC.

“Security Entitlement” has the meaning assigned to such term in
Section 8-102(a)(17) of the UCC.

“Structured Finance Securities” means (a) securities representing participations
in, or the payment of which is secured by, a pool of loans the repayment of
which is secured by a mortgage, deed of trust, other mortgage securities or
other fee or leasehold interest upon real estate or other assets, (b) securities
representing participations in, or the payment of which is secured by, a pool of
receivables (of any nature) or (c) any similar types of securities, other than,
in each case, Derivative Securities.

“Termination Date” has the meaning provided in Section 10.08.

“Transmitting Utility” has the meaning given such term in Section 9-102(a)(80)
of the UCC.

 

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“UCC” means the Uniform Commercial Code, as amended, and as in effect from time
to time in the State of New York, except that references to sections of the UCC
refer to the section numbers of such sections as of the date of this Agreement.

Section 2. Appointment of Custodian; Acceptance of Appointment by the Collateral
Agent.

Section 2.01 Appointment. Each Grantor and the Collateral Agent hereby appoint
the Custodian as custodian, bailee, Deposit Account Bank and Securities
Intermediary of all Eligible Securities and Cash at any time delivered to, or
deposited with, the Custodian in connection with any and all Credit Transactions
and as their agent to effect such Credit Transactions. The Custodian hereby
accepts the foregoing appointment as custodian, bailee, Deposit Account Bank,
Securities Intermediary and agent.

Section 2.02 Acceptance of Appointment by the Collateral Agent. The Collateral
Agent hereby accepts its appointment as such, pursuant to Section 11.01 of the
Credit Agreement.

Section 3. Representations and Covenants of each Grantor.

Section 3.01 Representations by each Grantor. Each Grantor (solely as to itself
and its Subsidiaries) represents, warrants and covenants (and each Grantor shall
be deemed to repeat each such representation and warranty on each date on which
a Primary Obligation is outstanding) that:

(a) it is the legal, beneficial and record owner of, and has good and marketable
title to, all of its Collateral consisting of one or more Collateral Accounts
and all Financial Assets, cash, instruments and Securities credited thereto and
Security Entitlements and credit balances carried therein and that it has
sufficient interest in all of its Collateral in which a security interest is
purported to be created hereunder for such security interest to attach (subject,
in each case, to no pledge, lien, mortgage, hypothecation, security interest,
charge, option, Adverse Claim or other encumbrance whatsoever, other than Liens
which are permitted under Section 8.03(a), (k) or (l) of the Credit Agreement
and which are not prior to the Liens created by this Agreement);

(b) it has full power, authority and legal right to pledge and charge all the
Collateral pledged by it pursuant to this Agreement;

(c) this Agreement has been duly authorized, executed and delivered by such
Grantor and constitutes a legal, valid and binding obligation of such Grantor
enforceable against such Grantor in accordance with its terms, except to the
extent that the enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors’ rights generally and by general equitable principles (regardless of
whether enforcement is sought in equity or at law);

(d) except to the extent already obtained or made, no consent of any other party
(including, without limitation, any stockholder, partner, member or creditor of
such Grantor or any of its Subsidiaries) and no consent, license, permit,
approval or authorization of, exemption by, notice or report to, or
registration, filing or declaration with, any governmental authority is required
to be obtained by such Grantor in connection with (a) the execution, delivery or
performance of this Agreement by such Grantor, (b) the validity or
enforceability of this Agreement against such Grantor, (c) the perfection or
enforceability of the Collateral Agent’s security interest in such Grantor’s
Collateral or (d) except for compliance with or as may be required by applicable
securities laws, the exercise by the Collateral Agent of any of its rights or
remedies provided herein;

 

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(e) neither the execution, delivery or performance by such Grantor of this
Agreement or the other Credit Documents to which it is a party nor compliance
with the terms and provisions thereof nor the consummation of the transactions
contemplated therein: (i) will contravene any applicable provision of any law,
statute, rule, regulation, order, writ, injunction or decree of any court or
governmental instrumentality; (ii) will conflict or be inconsistent with or
result in any breach of any of the terms, covenants, conditions or provisions
of, or constitute a default under, or result in the creation or imposition of
(or the obligation to create or impose) any Lien (except pursuant to the
Security Documents or pursuant to Section 4.02 of the Credit Agreement) upon any
of the property or assets of such Grantor or any of its Subsidiaries pursuant to
the terms of, any indenture, mortgage, deed of trust, loan agreement, credit
agreement, securities loan agreement, repurchase agreement or any other material
agreement or instrument to which such Grantor or any of its Subsidiaries is a
party or by which it or any of its property or assets are bound or to which it
may be subject; or (iii) will violate any provision of the certificate of
incorporation, by-laws or other organizational documents of such Grantor or any
of its Subsidiaries;

(f) to the best of such Grantor’s knowledge, all of such Grantor’s Collateral
consisting of Securities has been duly and validly issued, is fully paid and
non-assessable and is subject to no options to purchase or similar rights;

(g) “control” (as defined in Section 8-106 of the UCC) has been obtained by the
Collateral Agent over all of such Grantor’s Collateral consisting of Securities,
Security Entitlements and Securities Accounts;

(h) “control” (as defined in Section 9-104 of the UCC) has been obtained by the
Collateral Agent over all of such Grantor’s Collateral consisting of Deposit
Accounts;

(i) each Grantor covenants and agrees (solely as to itself) that it will defend
the Collateral Agent’s and its right, title and security interest in and to such
Grantor’s Collateral and the proceeds thereof against the claims and demands of
all persons whomsoever; and each Grantor covenants and agrees (solely as to
itself) that it will have like title to and right to pledge any other property
at any time hereafter pledged to the Collateral Agent by such Grantor as
Collateral hereunder and will likewise defend the right thereto and security
interest therein of the Collateral Agent and the other Secured Creditors;

 

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(j) this Agreement, together with the Account Control Agreement and the
transfer, deposit or delivery of any Collateral by or on behalf of such Grantor
to the Collateral Agent or its agent (including the Custodian), or to any
Collateral Account, will constitute, in favor of the Collateral Agent, a valid
first lien on and first priority perfected security interest in all of the
Collateral, subject to no other Lien other than Liens which are permitted under
Section 8.03(a), (k) or (l) of the Credit Agreement and which are not prior to
the Liens created by this Agreement, provided that the Custodian shall have no
obligation with respect to the validity and perfection of the security interest
otherwise than to act in accordance with the terms of this Agreement and the
Account Control Agreement; and

(k) The exact legal name of each Grantor, the type of organization of such
Grantor, whether or not such Grantor is a Registered Organization, the
jurisdiction of organization of such Grantor, such Grantor’s Location, the
organizational identification number (if any) of such Grantor and whether or not
such Grantor is a Transmitting Utility are listed on Annex A hereto for such
Grantor. Such Grantor shall not change its legal name, its type of organization,
its status as a Registered Organization (in the case of a Registered
Organization), its status as a Transmitting Utility or as a Person which is not
a Transmitting Utility, as the case may be, its jurisdiction of organization,
its Location or its organizational identification number (if any) from that set
forth on Annex A hereto, except that any such changes shall be permitted (so
long as same do not involve (x) a Registered Organization ceasing to constitute
same or (y) such Grantor changing its jurisdiction of organization or Location
from the United States or a State thereof to a jurisdiction of organization or
Location, as the case may be, outside the United States or a State thereof) if
(i) it shall have given to the Collateral Agent not less than fifteen (15) days’
prior written notice of each change to the information listed on Annex A (as
adjusted for any subsequent changes thereto previously made in accordance with
this sentence), together with a supplement to Annex A which shall correct all
information contained therein for such Grantor, and (ii) in connection with the
respective such change or changes, it shall have taken all action reasonably
requested by the Collateral Agent to maintain the security interests of the
Collateral Agent in the Collateral intended to be granted hereby at all times
fully perfected and in full force and effect. In addition, to the extent that
such Grantor does not have an organizational identification number on the date
hereof and later obtains one, such Grantor shall promptly thereafter notify the
Collateral Agent of such organizational identification number and shall take all
actions reasonably satisfactory to the Administrative Agent to the extent
necessary to maintain the first priority security interest of the Collateral
Agent in the Collateral intended to be granted hereby fully perfected and in
full force and effect.

Section 4. Collateral; Establishment of Collateral Accounts.

Section 4.01 Pledge, Grant of Security Interest. As security for the prompt and
complete payment and performance when due of all of its Secured Obligations,
each Grantor does hereby severally (and not jointly) assign and transfer unto
the Collateral Agent, and does hereby severally (and not jointly) pledge, charge
and grant to the Collateral Agent, for the benefit of the Secured Creditors, a
continuing security interest in all of the right, title and interest of such
Grantor in, to and under all of the following property (and all rights therein)
of such Grantor, or in which or to which such Grantor has any rights, in each
case whether now existing or hereafter from time to time acquired (all of which
is hereinafter collectively referred to as the “Collateral”):

(a) each Collateral Account of, or in the name of, such Grantor;

(b) all Cash, Securities, Security Entitlements, Investment Property, Financial
Assets and other assets and Property and all Instruments, in each case from time
to time deposited or held in or transferred or credited to or carried in any
Collateral Account of such Grantor from time to time;

 

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(c) all Securities, moneys or Property representing a dividend on any of the
assets of such Grantor described in clause (b) of this Section 4.01, or
representing a distribution or return of capital upon or in respect of any of
such assets, or resulting from a split-up, revision, reclassification or other
like change of any of such assets of such Grantor or otherwise received in
exchange therefor, and any subscription warrants, rights or options issued to
the holders of, or otherwise in respect of, any of such assets of such Grantor;

(d) all Proceeds of any and all of the foregoing (including, without limitation,
all causes of action, claims and warranties now or hereafter held by such
Grantor in respect of any of the items listed above), all interest on or other
income from the Cash and other Property from time to time held in any Collateral
Account of such Grantor, and all collections and distributions with respect to
any of the assets of such Grantor described in clauses (a) through (c) of this
Section 4.01; and

(e) to the extent related to any property described in the preceding clauses of
this Section 4.01, all books, correspondence, credit files, records and other
papers.

Section 4.02 Establishment of Collateral Accounts. (a) On or prior to the
Effective Date and upon any Person becoming a Grantor hereunder, each such
Grantor shall have established with the Custodian, and at all times thereafter
until the Secured Obligations of such Grantor shall have been irrevocably and
indefeasibly paid in full and this Agreement is terminated in accordance with
its terms, such Grantor shall maintain with the Custodian:

(i) each Deposit Account listed opposite such Grantor’s name in Part A of
Schedule I hereto (each of which shall be maintained by the Custodian in the
name of such Grantor) (each, a “Collateral Deposit Account”);

(ii) each Securities Account listed opposite such Grantor’s name in Part B of
Schedule I hereto (each of which shall be maintained by the Custodian in the
name of such Grantor) (each a “Collateral Securities Account” and, together with
each Collateral Deposit Account, the “Collateral Accounts”).

(b) The Custodian shall credit any Cash or Securities deposited, delivered or
transferred by or on behalf of the respective Grantor to the Custodian in
connection with any Credit Transaction in accordance with Section 4.03 to (x) in
the case of Cash, such Grantor’s Collateral Deposit Account and (y) in the case
of Securities, such Grantor’s Collateral Securities Account.

 

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Section 4.03 Procedures for Depositing Cash and Crediting Securities to
Collateral Accounts.

(a) In General. Each Grantor (i) may, prior to 12:00 noon New York City time, on
the last Business Day of any calendar month, transfer, deliver or deposit or
cause to be transferred, delivered or deposited, as the case may be, (x) Cash to
such Grantor’s Deposit Account or (y) Securities to such Grantor’s Securities
Account, for application to such Grantor’s Deposit Account or Securities
Account, as applicable, the following Business Day and (ii) shall, on any date,
transfer, deliver or deposit or cause to be transferred, delivered or deposited,
as the case may be, Cash and/or Cash Equivalents to such Grantor’s Deposit
Account or Securities Account, as applicable, as may be required by, and in
accordance with, Section 4.02 or 4.03, as applicable, of the Credit Agreement.
For the avoidance of doubt, it is understood and agreed that the purchase or
sale by any Grantor or its agent, of Cash or Securities in the ordinary course
of business on a “delivery versus payment” basis is excluded for the purposes of
a transfer, delivery or deposit of Cash or Securities, as contemplated in
Section 4.03(a) and with respect to such purchases or sales, the respective
Grantor shall not be required to deliver a notice in the form of Exhibit B, as
contemplated in Section 4.03(b), but shall provide, in reasonable detail, a
description of the Securities (and the respective fair market value thereof as
of the date of such Collateral Transfer), including the category applicable to
such Securities for purposes of determining the applicable Advance Rate (which
category the Collateral Agent shall confirm).

(b) Collateral Transfer. (i) Concurrently with, or prior to, any Collateral
Transfer to the Custodian for inclusion in the respective Grantor’s Borrowing
Base, the respective Grantor shall (x) deliver customary forms provided by the
Custodian (completed to the satisfaction of the Custodian) in respect of such
Collateral Transfer and (y) notify the Collateral Agent and the Administrative
Agent of such Collateral Transfer in writing, which notice shall be
substantially in the form of Exhibit B and shall set forth (i) the date of such
Collateral Transfer, (ii) in reasonable detail, a description of the Securities
(and the respective fair market value thereof as of the date of such Collateral
Transfer), including the category applicable to such Securities for purposes of
determining the applicable Advance Rate (which category the Collateral Agent
shall confirm), (iii) the Borrowing Base of such Grantor both before and after
giving effect to such Collateral Transfer and (iv) an officer’s certificate
certified by an Authorized Officer that the Cash and/or Securities subject to
such Collateral Transfer constitutes Collateral of such Grantor under this
Agreement and is subject to security interests granted herein. Each Collateral
Transfer shall be made in accordance with customary procedures of the Custodian,
which procedures shall be deemed to be incorporated by reference in this
Agreement as if set forth in full herein.

(c) Upon the occurrence of each Credit Transaction, the Parent Borrower and the
respective Grantor shall be deemed to represent and warrant to the Collateral
Agent with respect to each item of Property subject to such Collateral Transfer
or otherwise constituting Collateral of such Grantor that:

(i) if such Property is a Security, it is an Eligible Security;

(ii) such Grantor has noted on its books and records that such Property is
pledged to the Collateral Agent under this Agreement;

 

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(iii) the Borrowing Base of such Grantor is equal to or exceeds 100% of the
amount of the Secured Obligations of such Grantor on and as of the date of such
Collateral Transfer; and

(iv) with respect to each such Property (and all other Property theretofore
transferred to the Collateral Agent and included in the Collateral hereunder),
this Agreement, the Account Control Agreement and the delivery of such Property
to the respective Collateral Account creates a valid first Lien on and first
priority perfected security interest in such Property in favor of the Collateral
Agent, subject to no other Liens other than Liens which are permitted under
Section 8.03(a), (k) or (l) of the Credit Agreement and which are not prior to
the Liens created by this Agreement, and enforceable as such against all other
creditors of such Grantor.

(d) Form of Transfer. The Grantor shall transfer each item of Collateral to the
Custodian in a form and manner sufficient to create a perfected first priority
security interest therein in favor of the Collateral Agent under the UCC, and
otherwise in a form and manner reasonably acceptable to the Collateral Agent and
the Custodian.

(e) Rights of the Collateral Agent. Notwithstanding anything to the contrary in
this Agreement, the Collateral Agent and/or the Custodian shall have the right
to reject or return any Security transferred to any Collateral Account to the
extent that it has determined, with the advice of its counsel (which may be
in-house counsel), that acceptance of such Security as Collateral or otherwise,
would violate or conflict with any law, treaty, rule or regulation or
determination of any Governmental Authority or other requirements of law binding
upon the Collateral Agent or the Custodian.

(f) Further Assurances. In connection with any Collateral Transfer under this
Section 4.03 or otherwise in respect hereof, each Grantor shall take such
action, at its own expense, as the Collateral Agent may reasonably request
(including, without limitation, to the extent that the Collateral Agent may
reasonably request, delivering undated bond powers or other instruments of
transfer or entering into one or more control agreements on terms reasonably
satisfactory to the Collateral Agent) for the purpose of ensuring that the
Collateral Agent will have a perfected first priority security interest with
respect to each item of Collateral so transferred. In addition, each Grantor
will furnish to the Administrative Agent and the Collateral Agent from time to
time statements and schedules identifying and describing the Collateral
(including, without limitation, each Borrowing Base Certificate delivered
pursuant to Section 7.01(h) of the Credit Agreement) with respect to such
Grantor and such other reports in connection with such Collateral as the
Collateral Agent may reasonably request, all in reasonable detail.

Section 4.04 Procedures for Requesting Releases of Collateral from Collateral
Accounts.

(a) In General. Each Grantor may, prior to 12:00 noon New York City time, on the
Business Day prior to the last Business Day of any calendar month, deliver to
the Collateral Agent and the Custodian a request for release of Collateral on
the following Business Day from one or more of its Collateral Accounts in
accordance with the procedures set forth in Section 4.04(b). For the avoidance
of doubt, it is understood and agreed that the purchase or sale by any Grantor
or its agent, of cash or securities in the ordinary course of business on a
“delivery versus payment” basis shall not be considered a release of collateral,
as contemplated in Section 4.04(a) and Section 4.04(b).

 

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(b) Collateral Release Request. Prior to each release by the Collateral Agent
and the Custodian of Collateral to the respective Grantor, such Grantor shall
deliver to the Collateral Agent and the Custodian a Collateral Release Request
substantially in the form of Exhibit A (appropriately completed) with respect
thereto. Each Collateral Release Request shall be delivered in writing together
with such customary documents as may be required by the Custodian and/or the
Collateral Agent in accordance with their customary procedures which shall be
reasonably acceptable to such Grantor, which procedures shall be deemed to be
incorporated by reference in this Agreement as if set forth in full herein.

(c) Notwithstanding anything to the contrary contained in this Agreement or any
other Credit Document, no Collateral shall be released by the Custodian or the
Collateral Agent on behalf of any Grantor pursuant to any Collateral Release
Request (i) if, immediately before or after giving effect thereto, the Borrowing
Base of such Grantor would be less than 100% of the amount of the Secured
Obligations of such Grantor on and as of the date of such Collateral Release
Request or (ii) if a Default or an Event of Default has occurred and is
continuing, unless, in each case, in the reasonable determination of the
Collateral Agent, such release is (x) of Securities against simultaneous deposit
of Cash by such Grantor to such Grantor’s Deposit Account in an amount equal to
the aggregate Market Value of the released Securities or (y) made simultaneously
with the transfer or delivery by such Grantor to the Custodian of Securities (to
be credited to such Grantor’s Securities Account) having an aggregate Market
Value at least equal to the aggregate Market Value of the released Securities;
provided that, in each case under clauses (i) and (ii) of this paragraph, the
Administrative Agent has provided notice to the Custodian and the Collateral
Agent of such deficiency or such Default or Event of Default in accordance with
Section 10.02.

(d) Neither the Collateral Agent nor the Custodian shall have any liability
whatsoever to any other Secured Creditor as the result of any release of
Collateral by it in accordance with (or which the Collateral Agent reasonably
believes to be in accordance with) this Section 4.04.

Section 5. Effecting Credit Events.

Section 5.01 Effecting the Making of a Loan or the Issuance of a Letter of
Credit. Notwithstanding anything to the contrary, no Lender nor the Issuing
Agent or any Issuing Lender shall be required to issue any Tranche 1 Letter of
Credit on behalf of a Borrower whose Borrowing Base immediately upon giving
effect to such Credit Event would be less than 100% of the Secured Obligations
of such Grantor as confirmed by the Custodian and the Collateral Agent (in each
case, upon the written request of such Grantor) to the Administrative Agent
immediately prior to such Credit Event. In confirming whether such Borrowing
Base is less than 100% of the Secured Obligations of such Grantor, the Custodian
and the Collateral Agent shall be entitled to rely on any information provided
by the Administrative Agent concerning the amount of Secured Obligations then
outstanding.

 

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Section 6. Notices and Reports.

Section 6.01 Notices and Reports; Recordkeeping.

(a) Notices from Administrative Agent. On each Business Day, the Administrative
Agent may, but shall have no obligation to, deliver to the Collateral Agent a
notice (the “Administrative Agent’s Notice”) of the aggregate amount of the
outstanding Secured Obligations of each Grantor. The Collateral Agent may
conclusively rely without further investigation on each Administrative Agent’s
Notice for purposes of determining whether the aggregate amount of the Secured
Obligations of each Grantor exceeds the Borrowing Base of such Grantor and for
preparing the Borrowing Base Report in respect of such Grantor. The
Administrative Agent’s Notice shall have no purpose other than to enable the
Collateral Agent to make such determination and to prepare such Borrowing Base
Reports, shall not be conclusive evidence of the amount of any Grantor’s Secured
Obligations and may not evidence any claim or assertion by any Grantor of the
amount of its Secured Obligations. Any failure by the Administrative Agent to
deliver an Administrative Agent’s Notice shall not constitute a breach or
default by the Administrative Agent, and the Collateral Agent may rely on the
last Administrative Agent’s Notice delivered to the Collateral Agent. The
Administrative Agent shall have no liability whatsoever to the Collateral Agent,
any Grantor or any other Person relating to the information in any
Administrative Agent’s Notice or to any delivery or failure to deliver any
Administrative Agent’s Notice.

(b) Borrowing Base Report. By 3:00 P.M. (New York time) on each Business Day,
the Collateral Agent shall deliver to the Administrative Agent a report (a
“Borrowing Base Report”) containing (i) the Market Value of all Collateral,
(ii) the product of the Market Value of each item of Collateral and the
applicable Advance Rate, and (iii) the amount by which the Borrowing Base of
each Grantor exceeds or is less than the Secured Obligations of such Grantor, in
each case, determined (x) with respect to any determination of the Secured
Obligations, on the basis of the most recent Administrative Agent’s Notice
delivered to the Collateral Agent in respect of such Grantor and (y) with
respect to any determination of the Market Value of any Collateral, as of 5:00
P.M. (New York time) on the Business Day prior to the date of delivery of such
Borrowing Base Report. If the Collateral Agent receives an Administrative
Agent’s Notice by 1:00 P.M. (New York time) on any Business Day, then the
Collateral Agent shall prepare its Borrowing Base Report for that Business Day
using the information in respect of the Secured Obligations contained in such
Administrative Agent’s Notice. If the Collateral Agent does not receive an
Administrative Agent’s Notice by 1:00 P.M. (New York time) on any Business Day,
then the Collateral Agent shall prepare its Borrowing Base Report for that
Business Day using the information in respect of the Secured Obligations
contained in the last Administrative Agent’s Notice that was received by the
Collateral Agent.

(c) Record keeping. The Collateral Agent and the Custodian shall maintain books
and records necessary to enable them to determine at any time all Collateral
Transfers and all releases of Collateral which have occurred on or prior to such
time. Each Grantor agrees that such books and records of the Custodian and the
Collateral Agent shall be conclusive as to the matters contained therein absent
manifest error.

 

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Section 6.02 Rights of Collateral Agent with Respect to Calculations.

(a) Notices, Reports, Requests, etc. In making the calculations in connection
with any notice, request or report or otherwise, (i) the Collateral Agent shall
be entitled (but not obligated) to rely on the Custodian, (ii) the
Administrative Agent shall be entitled to rely on the Custodian and/or the
Collateral Agent, and (iii) the Collateral Agent and the Custodian shall be
entitled to rely on any independent pricing service in the determination of the
Market Value with respect to the Eligible Securities described therein.

(b) Agency Securities. In producing the Borrowing Base Report, the Collateral
Agent (and the Custodian in furnishing any Market Values therefor) shall not be
required to consider or recognize any reduction in the principal amount of any
Agency Securities held as Collateral until after the Collateral Agent has
received written notice (including electronic communications) of such reduction
by or behalf of the issuer of such Agency Securities.

(c) Dispute. The Collateral Agent and/or the Administrative Agent upon a
reasonable basis may disagree with and dispute any request for a Collateral
Transfer, any Collateral Release Request, Borrowing Base Report, or other notice
or information at any time.

(d) Limitation on Liability. In no event shall the Collateral Agent, the
Custodian or the Administrative Agent be liable to any Grantor or any other
Person for the accuracy of its determination of the aggregate amount of the
Grantor’s Secured Obligations, the Grantor’s Borrowing Base or the Market Value
of any item of Collateral, for any determination regarding the eligibility of
any Securities for inclusion in the Borrowing Base or for any other
determination or calculation except in the case of its gross negligence or
willful misconduct (as determined in a court of competent jurisdiction in a
final and non-appealable decision).

Section 7. Additional Covenants of the Grantors. In furtherance of the grant of
the pledge and security interest pursuant to Section 4.01 hereof, each Grantor
(solely as to itself) hereby agrees with the Collateral Agent as follows:

Section 7.01 Delivery and Other Perfection. Each Grantor shall:

(a) take such action as the Administrative Agent or the Collateral Agent shall
deem necessary or appropriate to duly record the Lien created hereunder in the
Collateral with respect to such Grantor;

(b) give, authorize, execute, deliver, file and/or record any financing
statement, notice, instrument, document, agreement or other papers that may be
necessary or desirable (in the reasonable judgment of the Administrative Agent
or the Collateral Agent) to create, preserve, perfect or validate the pledge and
security interest granted pursuant hereto or to enable the Collateral Agent to
exercise and enforce its rights hereunder with respect to such pledge and
security interest, including, without limitation, (i) causing any or all of the
Collateral with respect to such Grantor to be transferred of record into the
name of the Collateral Agent or the Custodian or the Collateral Agent’s nominee
(and the Collateral Agent agrees that if any such Collateral is transferred into
its name or the name of its nominee, the Collateral Agent will thereafter
promptly give to such Grantor copies of any notices and communications received
by it with respect to such Collateral), (ii) in the case of any Securities to be
included in the Collateral that are held on the books of any Clearing
Corporation, causing such Securities to be credited to an account of a
Securities Intermediary designated by the Collateral Agent maintained with such
Clearing Corporation, and (iii) entering into one or more control agreements;

 

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(c) if (i) such Grantor is not entitled to receive from the Collateral Agent
distributions with respect to any Collateral pursuant to Section 7.04(a),
(ii) any distribution in respect of any of such Collateral shall be evidenced
by, or any of such Collateral shall otherwise be converted to, any Instrument
and (iii) such Instrument is transferred to such Grantor or otherwise at its
direction (other than to the Collateral Agent) in a physical form, such Grantor
shall immediately transfer, or cause to be transferred, such Instrument to the
Custodian for credit to such Grantor’s Collateral Account, and the Custodian
shall credit such Instrument to such Grantor’s Collateral Account, duly endorsed
in a manner reasonably satisfactory to the Collateral Agent and the Custodian,
to be held as Collateral with respect to such Grantor pursuant to this
Agreement, and such Grantor shall transfer any cash distributions or interest
received by such Grantor immediately to the Custodian for credit to such
Grantor’s Collateral Account, and the Custodian shall promptly credit such
Instrument to such Grantor’s Collateral Account; and

(d) keep full and accurate books and records relating to the Collateral with
respect to such Grantor, and stamp or otherwise mark such books and records in
such manner as the Collateral Agent may reasonably require in order to reflect
the security interests granted by this Agreement.

Section 7.02 Other Financing Statements and Liens. No Grantor shall file or
permit to be on file, or authorize or permit to be filed or to be on file, in
any jurisdiction, any financing statement or like instrument with respect to the
Collateral in which the Collateral Agent is not named as the sole secured party
or be a party to any control agreement related to the Collateral except in favor
of the Collateral Agent, and shall not otherwise create or permit to exist any
Lien or any other interest of any kind upon or with respect to any of such
Collateral, except Liens which are permitted under Section 8.03(a), (k) or
(l) of the Credit Agreement and which are not prior to the Liens created by this
Agreement.

Section 7.03 Maintenance of Borrowing Base Percentage. Subject to Section 4.02
of the Credit Agreement, each Grantor will take all such actions as shall be
necessary to cause the Borrowing Base of such Grantor at all times to be at
least 100% of the Secured Obligations of such Grantor.

Section 7.04 Voting Rights; Dividends; etc. (a) So long as no Default or Event
of Default shall have occurred and be continuing, each Grantor shall be entitled
(i) to exercise or refrain from exercising any or all voting and other
consensual rights in respect of such respective Grantor’s Collateral or any part
thereof for all purposes not inconsistent with the provisions of this Agreement
and (ii) to receive from the Custodian any cash dividend, interest or other cash
distribution with respect to the respective Grantor’s Collateral actually
received by the Custodian (except for any distribution specified by the issuer
in a writing delivered or otherwise notified to the Collateral Agent as a
special, extraordinary or liquidating dividend), net of withholding for any tax,
assessment, charge or levy. In order to release such dividend, interest or
distribution, the respective Grantor may execute an appropriate Collateral
Release Request in respect thereof, subject to its Borrowing Base being equal to
at least 100% of such Grantor’s Secured Obligations upon the release thereof.

 

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(b) The Collateral Agent shall notify each Grantor of such rights or
discretionary actions or of the date or dates by when such rights must be
exercised or such action must be taken provided that the Custodian has received,
from the issuer or the relevant depository (with respect to Securities issued in
the United States) or from the relevant subcustodian, depository or a nationally
or internationally recognized bond or corporate action service to which the
Custodian subscribes, timely notice of such rights or discretionary corporate
action and of the date or dates such rights must be exercised or such action
must be taken. Absent actual receipt of such notice, the Collateral Agent and
the Custodian shall have no liability for failing to so notify a Grantor.

(c) Whenever Securities (including, but not limited to, warrants, options,
tenders, options to tender or non-mandatory puts or calls) confer optional
rights on a Grantor or provide for discretionary action or alternative courses
of action by such Grantor, such Grantor shall be responsible for making any
decisions relating thereto and for directing the Collateral Agent. In order for
the Collateral Agent to act, it must receive the Grantor’s written instructions
at its offices, addressed as the Collateral Agent may from time to time request,
not later than noon (New York time) at least two (2) Business Days prior to the
last scheduled date to act with respect to such Securities (or such earlier date
or time as the Collateral Agent may notify the Grantor). Absent the Collateral
Agent’s timely receipt of such written instructions, the Collateral Agent shall
not be liable for failure to take any action relating to or to exercise any
rights conferred by such Securities.

(d) Except as provided in Section 7.04(e), all voting rights with respect to
Securities, however registered, shall be exercised by the Grantor or its
designee. For Securities issued in the United States, the Collateral Agent’s
only duty shall be to mail to the respective Grantor any documents (including
proxy statements, annual reports and signed proxies) received by the Collateral
Agent relating to the exercise of such voting rights. With respect to Securities
issued outside of the United States, the Collateral Agent’s only duty shall be
to provide the respective Grantor with access to a provider of global proxy
services at such Grantor’s request. Such Grantor shall be responsible for all
costs associated with its use of such services.

(e) Upon the occurrence of a Default or Event of Default, (i) each Grantor shall
hold any dividends, interest or other distributions which it receives with
respect to its respective Collateral in trust for the Collateral Agent, separate
from all other moneys of such Grantor, and forthwith transfer such dividends,
interest or other distributions to the Custodian for crediting to the relevant
Collateral Accounts, (ii) the Collateral Agent shall be entitled to register all
or any item of such Collateral in its own name or in the name of its nominee or
designee and (iii) the Collateral Agent shall be entitled to exercise all voting
rights, and to give any and all consents in connection with, any and all
Securities, and each Grantor hereby grants the Collateral Agent an irrevocable
proxy and irrevocably appoints the Collateral Agent its attorney-in-fact coupled
with an interest to vote or otherwise act in furtherance of the purposes hereof.
Upon request from any Grantor, the Collateral Agent shall forthwith make and
deliver to such Grantor

 

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such powers of attorney, consents or waivers as such Grantor shall reasonably
request in order to permit such Grantor to exercise its rights under this
Section 7.04. Upon request, each Grantor shall forthwith make and deliver to the
Collateral Agent such powers of attorney, consents and waivers (in addition to
the power of attorney and consent set forth in this Section 7.04(e)) as the
Collateral Agent shall reasonably request in order to permit the Collateral
Agent to exercise its rights under this Section 7.04 and this Agreement.
Notwithstanding the foregoing, no Grantor may take any action under this
Section 7.04 with respect to any Collateral that, in the Administrative Agent’s
reasonable judgment, (i) would in any way adversely affect the Lien created
under this Agreement with respect to an item of Collateral or impair the
interest or rights of the Collateral Agent therein, except as permitted by
Section 4.04, or (ii) would otherwise be inconsistent with the provisions of
this Agreement or result in a violation hereof. No Grantor shall give any
consent or waiver, authorize any assumption, make any modification and
supplement, or take other action with respect to any Collateral in any manner
inconsistent with the manner in which such Grantor acts with respect to
investments of the same type held by such Grantor for its own account.

(f) With respect to the duties of the Collateral Agent, the provisions of
paragraphs (b), (c) and (d) of this Section that are applicable to each Grantor
shall apply to the Collateral Agent in any exercise of its rights under
paragraph (e) of this Section.

Section 7.05 No Removals, etc. Without at least thirty (30) days’ prior written
notice to the Collateral Agent, no Grantor shall maintain any of its books and
records with respect to any Collateral at any office or maintain its principal
place of business at any place other than at the notice address indicated to the
Administrative Agent pursuant to the Credit Agreement.

Section 7.06 U.S. Securities. The Securities delivered, contained and maintained
in the Securities Accounts shall be Securities that are primarily cleared and
settled within the United States.

Section 8. Remedies; Distribution of Collateral.

Section 8.01 Remedies. Each Grantor agrees that, if any Event of Default shall
have occurred and be continuing, then and in every such case, the Collateral
Agent, in addition to any rights now or hereafter existing under applicable law
and under the other provisions of this Agreement, shall have all rights as a
secured creditor under the UCC, and such additional rights and remedies to which
a secured creditor is entitled under the laws in effect in all relevant
jurisdictions and when directed by the Administrative Agent may:

(a) personally, or by agents or attorneys, immediately take possession of the
Collateral or any part thereof, from such Grantor or any other Person who then
has possession of any part thereof (including, without limitation, the
Custodian) with or without notice or process of law, and for that purpose may
enter upon such Grantor’s premises where any of the Collateral is located and
remove the same and use in connection with such removal any and all services,
supplies, aids and other facilities of such Grantor;

 

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(b) instruct the obligor or obligors on any agreement, instrument or other
obligation constituting the Collateral to make any payment required by the terms
of such agreement, instrument or other obligation directly to the Collateral
Agent and may exercise any and all remedies of such Grantor in respect of such
Collateral;

(c) instruct the Custodian to transfer all Collateral of such Grantor held by
the Custodian to the Collateral Agent for the benefit of the Secured Creditors;

(d) sell, assign or otherwise liquidate any or all of such Grantor’s Collateral
or any part thereof in accordance with Section 8.02, or direct such Grantor or
the Custodian to sell, assign or otherwise liquidate any or all of such
Grantor’s Collateral or any part thereof, and, in each case, take possession of
the proceeds of any such sale or liquidation;

(e) take possession of the Collateral or any part thereof, by directing such
Grantor and/or the Custodian in writing to deliver the same to the Collateral
Agent at any reasonable place or places designated by the Collateral Agent
(including, without limitation, to an account or accounts in the name of the
Collateral Agent designated by the Collateral Agent), in which event such
Grantor and/or the Custodian shall at such Grantor’s expense:

(x) forthwith cause the same to be moved, held, transferred, credited or
deposited to the place or places (or account or accounts) so designated by the
Collateral Agent and there delivered to the Collateral Agent; and

(y) store and keep any Collateral so delivered to the Collateral Agent at such
place or places pending further action by the Collateral Agent as provided in
Section 8.02;

(f) apply any monies constituting Collateral or proceeds thereof in accordance
with the provisions of Section 8.04;

(g) set-off any and all Collateral of such Grantor against any and all Secured
Obligations of such Grantor, and to withdraw any and all Cash or other
Collateral from any and all such Grantor’s Collateral Accounts and to apply such
Cash and other Collateral to the payment of any and all Secured Obligations of
the respective Grantor;

(h) vote all or any part of such Grantor’s Collateral (whether or not
transferred into the name of the Collateral Agent) and give all consents,
waivers and ratifications in respect of such Grantor’s Collateral and otherwise
act with respect thereto as though it were the outright owner thereof (each
Grantor hereby irrevocably constituting and appointing the Collateral Agent the
proxy and attorney-in-fact of such Grantor, with full power of substitution to
do so), in each case subject to the terms and conditions of Section 7.04(f);

(i) receive all amounts payable in respect of the Collateral otherwise payable
to the respective Grantor under Section 7.04;

 

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(j) take any other action as specified in clauses (1) through (5), inclusive, of
Section 9-607(a) of the UCC; and

(k) take the actions referred to in Sections 8.04(h) and 8.05;

it is understood and agreed that each Grantor’s obligation so to deliver the
Collateral is of the essence of this Agreement and that, accordingly, upon
application to a court of equity having jurisdiction, the Collateral Agent shall
be entitled to a decree requiring specific performance by such Grantor of said
obligation. By accepting the benefits of this Agreement and each other Security
Document, the Secured Creditors expressly acknowledge and agree that this
Agreement and each other Security Document may be enforced only by the action of
the Collateral Agent acting upon the instructions of the Majority Tranche 1
Lenders and that no other Secured Creditor shall have any right individually to
seek to enforce or to enforce this Agreement or to realize upon the security to
be granted hereby, it being understood and agreed that such rights and remedies
may be exercised by the Collateral Agent for the benefit of the Secured
Creditors upon the terms of this Agreement and the other Security Documents.

Section 8.02 Disposition of the Collateral. If any Event of Default shall have
occurred and be continuing, then any Collateral may be sold, assigned or
otherwise disposed of under one or more contracts or as an entirety, and without
the necessity of gathering at the place of sale the property to be sold, and in
general in such manner, at such time or times, at such place or places and on
such terms as the Administrative Agent or the Collateral Agent, at the direction
of the Administrative Agent, may, in compliance with any mandatory requirements
of applicable law, determine to be commercially reasonable (including, without
limitation, on the NYSE or any other established market). Any such sale, lease
or other disposition may be effected by means of a public disposition or private
disposition, effected in accordance with the applicable requirements (in each
case if and to the extent applicable) of Sections 9-610 through 9-613 of the UCC
and/or such other mandatory requirements of applicable law as may apply to the
respective disposition. The Administrative Agent may direct the Collateral
Agent, without notice or publication, to adjourn any public or private
disposition or cause the same to be adjourned from time to time by announcement
at the time and place fixed for the disposition, and such disposition may be
made at any time or place to which the disposition may be so adjourned. To the
extent permitted by any such requirement of law, the Collateral Agent, at the
direction of the Administrative Agent, may bid for and become the purchaser (and
may pay all or any portion of the purchase price by crediting Secured
Obligations of the respective Grantor against the purchase price) of such
Grantor’s Collateral or any item thereof, offered for disposition in accordance
with this Section 8.02 without accountability to the relevant Grantor. If, under
applicable law, the Collateral Agent shall be permitted to make disposition of
such Grantor’s Collateral within a period of time which does not permit the
giving of notice to the relevant Grantor as hereinabove specified, the
Collateral Agent need give such Grantor only such notice of disposition as shall
be required by such applicable law. Each Grantor agrees to do or cause to be
done all such other acts and things as may be reasonably necessary to make such
disposition or dispositions of all or any portion of such Grantor’s Collateral
valid and binding and in compliance with any and all applicable laws (including,
without limitation, any state or federal securities laws), regulations, orders,
writs, injunctions, decrees or awards of any and all courts, arbitrators or
governmental instrumentalities, domestic or foreign, having jurisdiction over
any such sale or sales, all at such Grantor’s expense. Any direction given by
the Administrative Agent hereunder shall be in writing.

 

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Section 8.03 Waiver of Claims. Except as otherwise provided in this Agreement,
EACH GRANTOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE
AND JUDICIAL HEARING IN CONNECTION WITH THE COLLATERAL AGENT’S TAKING POSSESSION
OR THE COLLATERAL AGENT’S DISPOSITION OF ANY OF THE COLLATERAL, INCLUDING,
WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT
REMEDY OR REMEDIES, and each Grantor hereby further waives, to the extent
permitted by law:

(a) all damages occasioned by such taking of possession or any such disposition
except any damages which are the direct result of the Collateral Agent’s gross
negligence or willful misconduct (as determined by a court of competent
jurisdiction in a final and non-appealable decision);

(b) all other requirements as to the time, place and terms of sale or other
requirements with respect to the enforcement of the Collateral Agent’s rights
hereunder; and

(c) all rights of redemption, appraisement, valuation, stay, extension or
moratorium now or hereafter in force under any applicable law in order to
prevent or delay the enforcement of this Agreement or the absolute sale of the
Collateral or any portion thereof, and each Grantor, for itself and all who may
claim under it, insofar as it or they now or hereafter lawfully may, hereby
waives the benefit of all such laws.

Any sale of, or the grant of options to purchase, or any other realization upon,
any Collateral shall operate to divest all right, title, interest, claim and
demand, either at law or in equity, of the relevant Grantor therein and thereto,
and shall be a perpetual bar both at law and in equity against such Grantor and
against any and all Persons claiming or attempting to claim the Collateral so
sold, optioned or realized upon, or any part thereof, from, through and under
such Grantor.

Section 8.04 Application of Proceeds. (a) All moneys collected by the Collateral
Agent upon any sale or other disposition of any Grantor’s Collateral, together
with all other moneys received by the Collateral Agent hereunder, shall be
applied by the Collateral Agent, at the direction of the Administrative Agent,
as follows:

(i) first, to the payment of all amounts owing to the Collateral Agent or the
Custodian by such Grantor of the type described in clauses (ii), (iii) and
(iv) of the definition of “Secured Obligations”;

(ii) second, to the extent proceeds remain after the application pursuant to the
preceding clause (i), to the payment of all amounts owing to the Administrative
Agent by such Grantor of the type described in clause (v) of the definition of
“Secured Obligations”;

 

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(iii) third, to the extent proceeds remain after the application pursuant to the
preceding clauses (i) and (ii), an amount equal to the outstanding Primary
Obligations of the respective Grantor shall be paid to the Secured Creditors as
provided in Section 8.04(e), with each Secured Creditor receiving an amount
equal to its outstanding Primary Obligations owed by the respective Grantor or,
if the proceeds are insufficient to pay in full all such Primary Obligations,
its Pro Rata Share of the amount remaining to be distributed;

(iv) fourth, to the extent proceeds remain after the application pursuant to the
preceding clauses (i) through (iii), inclusive, an amount equal to the
outstanding Secondary Obligations of the respective Grantor shall be paid to the
Secured Creditors as provided in Section 8.04(e), with each Secured Creditor
receiving an amount equal to its outstanding Secondary Obligations owed by the
respective Grantor or, if the proceeds are insufficient to pay in full all such
Secondary Obligations, its Pro Rata Share of the amount remaining to be
distributed; and

(v) fifth, to the extent proceeds remain after the application pursuant to the
preceding clauses (i) through (iv), inclusive, and following the termination of
this Agreement pursuant to Section 10.08, to the respective Grantor or to
whomever may be lawfully entitled to receive such surplus.

(b) For purposes of this Agreement, (x) “Pro Rata Share” shall mean, when
calculating a Secured Creditor’s portion of any distribution or amount with
respect to any Grantor, that amount (expressed as a percentage) equal to a
fraction the numerator of which is the then unpaid amount of such Secured
Creditor’s Primary Obligations or Secondary Obligations, as the case may be, of
such Grantor and the denominator of which is the then outstanding amount of all
Primary Obligations or Secondary Obligations, as the case may be, of such
Grantor (y) “Primary Obligations” shall mean all principal of, premium, fees and
interest on, all Tranche 1 Unpaid Drawings, the Stated Amount of all outstanding
Tranche 1 Letters of Credit and all fees and (z) “Secondary Obligations” shall
mean all Secured Obligations other than Primary Obligations.

(c) When payments to Secured Creditors are based upon their respective Pro Rata
Shares, the amounts received by such Secured Creditors hereunder shall be
applied (for purposes of making determinations under this Section 8.04 only)
(i) first, to their Primary Obligations and (ii) second, to their Secondary
Obligations, in each case of the respective Grantor. If any payment to any
Secured Creditor of its Pro Rata Share of any distribution would result in
overpayment to such Secured Creditor, such excess amount shall instead be
distributed in respect of the unpaid Primary Obligations or Secondary
Obligations, as the case may be, of the other Secured Creditors, with each
Secured Creditor whose Primary Obligations or Secondary Obligations, as the case
may be, have not been paid in full to receive an amount equal to such excess
amount multiplied by a fraction the numerator of which is the unpaid Primary
Obligations or Secondary Obligations, as the case may be, of such Secured
Creditor and the denominator of which is the unpaid Primary Obligations or
Secondary Obligations, as the case may be, of all Secured Creditors entitled to
such distribution.

 

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(d) Each of the Secured Creditors, by their acceptance of the benefits hereof
and of the other Security Documents, agrees and acknowledges that if any Secured
Creditor receives a distribution on account of undrawn amounts with respect to
Letters of Credit issued under the Credit Agreement (which shall only occur
after all outstanding Loans under the Credit Agreement and Unpaid Drawings have
been paid in full), such amounts shall be paid to the Administrative Agent under
the Credit Agreement and held by it, for the equal and ratable benefit of the
Secured Creditors, as cash security for the repayment of Secured Obligations
owing to the Secured Creditors as such. If any amounts are held as cash security
pursuant to the immediately preceding sentence, then upon the termination of all
outstanding Letters of Credit under the Credit Agreement, and after the
application of all such cash security to the repayment of all Secured
Obligations owing to the Secured Creditors after giving effect to the
termination of all such Letters of Credit, if there remains any excess cash,
such excess cash shall be returned by the Administrative Agent to the Collateral
Agent for distribution in accordance with Section 8.04(a).

(e) All payments required to be made hereunder shall be made to the
Administrative Agent for the account of the Secured Creditors.

(f) For purposes of applying payments received in accordance with this
Section 8.04, the Collateral Agent shall rely upon the Administrative Agent for
a determination (which the Administrative Agent agrees to provide upon request
of the Collateral Agent) of the outstanding Primary Obligations and Secondary
Obligations of each Grantor owed to the Secured Creditors. Unless it has
received written notice from a Secured Creditor to the contrary, the
Administrative Agent, in furnishing information pursuant to the preceding
sentence, and the Collateral Agent, in acting hereunder, shall be entitled to
assume that no Secondary Obligations are outstanding.

(g) It is understood that the Grantors shall remain severally (and not jointly)
liable to the extent of any deficiency between the amount of the proceeds of the
Collateral of such Grantor and the aggregate amount of such Grantor’s Secured
Obligations.

(h) If at any time when the Administrative Agent shall determine that the
Collateral Agent will exercise its right to sell all or any part of the
Collateral consisting of Securities pursuant to Section 8.02, either (i) such
Collateral or the part thereof to be sold shall not, for any reason whatsoever,
be effectively registered under any applicable securities laws, or (ii) such
Collateral is effectively registered under applicable securities laws, the
Collateral Agent may, in the sole and absolute discretion of the Administrative
Agent, sell such Collateral or part thereof by private sale in such manner and
under such circumstances as the Collateral Agent may deem necessary or advisable
in order that such sale may legally be effected without registration. Without
limiting the generality of the foregoing, in any such event the Collateral
Agent, in the sole and absolute discretion of the Administrative Agent: (i) may
proceed to make such private sale notwithstanding that a registration statement
for the purpose of registering such Collateral or part thereof shall have been
filed under any applicable securities law; (ii) may approach and negotiate with
a single possible purchaser to effect such sale; and (iii) may restrict such
sale to a purchaser who will represent and agree that such purchaser is
purchasing for its own account, for investment, and not with a view to the
distribution or sale of such Collateral or part thereof. In the event of any
such sale, neither the Administrative Agent nor the Collateral Agent shall incur
any responsibility or liability for selling all or any part of the Collateral at
a price which the Administrative Agent, in its sole and absolute discretion, may
in good faith deem reasonable under the circumstances, notwithstanding the
possibility that a substantially higher price might be realized if the sale were
deferred until the registration as aforesaid.

 

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Section 8.05 Remedies Cumulative. Each and every right, power and remedy hereby
specifically given to the Administrative Agent or the Collateral Agent shall be
in addition to every other right, power and remedy specifically given to the
Administrative Agent or the Collateral Agent under this Agreement, the other
Security Documents or now or hereafter existing at law, in equity or by statute
and each and every right, power and remedy whether specifically herein given or
otherwise existing may be exercised from time to time or simultaneously and as
often and in such order as may be deemed expedient by the Administrative Agent
or the Collateral Agent. All such rights, powers and remedies shall be
cumulative and the exercise or the beginning of the exercise of one shall not be
deemed a waiver of the right to exercise any other or others. No delay or
omission of the Administrative Agent or the Collateral Agent in the exercise of
any such right, power or remedy and no renewal or extension of any of the
Secured Obligations shall impair any such right, power or remedy or shall be
construed to be a waiver of any Default or Event of Default or an acquiescence
thereof. No notice to or demand on any Grantor in any case shall entitle it to
any other or further notice or demand in similar or other circumstances or
constitute a waiver of any of the rights of the Administrative Agent or the
Collateral Agent to any other or further action in any circumstances without
notice or demand. In the event that the Collateral Agent shall bring any suit to
enforce any of its rights hereunder and shall be entitled to judgment, then in
such suit the Collateral Agent may recover reasonable expenses, including
reasonable attorneys’ fees, and the amounts thereof shall be included in such
judgment.

Section 8.06 Discontinuance of Proceedings. In case the Collateral Agent shall
have instituted any proceeding to enforce any right, power or remedy under this
Agreement by foreclosure, sale, entry or otherwise, and such proceeding shall
have been discontinued or abandoned for any reason or shall have been determined
adversely to the Collateral Agent, then and in every such case the relevant
Grantor, the Collateral Agent and each holder of any of the Secured Obligations
shall be restored to their former positions and rights hereunder with respect to
the Collateral subject to the security interest created under this Agreement,
and all rights, remedies and powers of the Collateral Agent shall continue as if
no such proceeding had been instituted.

Section 8.07 Rights of Collateral Agent. In making the determinations and
allocations required by this Section 8, the Collateral Agent may rely upon its
records and information supplied by any Grantor, the Administrative Agent, the
Custodian and any other Person, and the Collateral Agent shall have no liability
to any Grantor for actions taken in reliance on such information, except in the
case of its gross negligence or willful misconduct (as determined by a court of
competent jurisdiction in a final non-appealable decision) in applying or
utilizing such information.

Section 8.08 Effect of Bankruptcy; Obligations Absolute. (a) If, through the
operation of any bankruptcy, reorganization, insolvency or other laws or
otherwise, the Collateral Agent’s Lien hereunder is avoided, disallowed or
otherwise not enforced with respect to some, but not all, of the Secured
Obligations then outstanding, the Collateral Agent shall make the calculations
required by Section 8 without giving effect to such Secured Obligations and
shall apply the proceeds of the Collateral in the proportions and subject to the
priorities specified herein.

 

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(b) The obligations of each Grantor hereunder shall remain in full force and
effect without regard to, and shall not be impaired by, (a) any bankruptcy,
insolvency, reorganization, arrangement, readjustment, composition, liquidation
or the like of such Grantor or any other Grantor; (b) any exercise or
non-exercise, or any waiver of, any right, remedy, power or privilege under or
in respect of this Agreement or any other Security Document; or (c) any
amendment to or modification of any Credit Document or any security for any of
the Secured Obligations; whether or not such Grantor shall have notice or
knowledge of any of the foregoing.

Section 9. The Collateral Agent; The Custodian.

Section 9.01 Limitation of Duties. (a) Neither the Collateral Agent nor the
Custodian (which term as used in this sentence shall include reference to their
Affiliates and their own and their Affiliates’ officers, directors, employees
and agents) shall (i) have any duties or responsibilities except those expressly
set forth in this Agreement (and in the Account Control Agreement, in the case
of the Custodian) and shall not by reason of this Agreement be a trustee for, or
a fiduciary with respect to, any Grantor or any other Person; (ii) be
responsible to any Grantor for any recitals, statements, representations or
warranties contained in any notice or report, or in any other certificate or
other document referred to or provided for in, or received by it under, the
Credit Agreement, this Agreement or any other Credit Document, or for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of the
Credit Agreement, this Agreement or any other Credit Document or for any failure
by any Person to perform any of its obligations hereunder or thereunder, except
for its own gross negligence or willful misconduct (as determined by a court of
competent jurisdiction in a final and non-appealable decision); (iii) be
required to initiate or conduct any litigation or collection proceedings
hereunder; (iv) take any action pursuant to Sections 4.03(f), 7.01(a) or (b), or
8.02 except as instructed by the Administrative Agent; and (v) be responsible
for any action taken or omitted to be taken by it under the Credit Agreement,
this Agreement or any other Credit Document or under any other document or
instrument referred to or provided for herein or therein or in connection
herewith or therewith, except for its own gross negligence or willful misconduct
(as determined by a court of competent jurisdiction in a final and
non-appealable decision).

(b) In no event shall the Collateral Agent, the Custodian or the Administrative
Agent be liable for indirect, special or consequential damages of any kind
whatsoever (including lost profits and lost business opportunity) even if it is
advised of the possibility of such damages and regardless of the form of action
in which any such damages may be claimed.

(c) In no event shall the Collateral Agent, the Custodian or the Administrative
Agent be responsible for, or have any liability with respect to, any losses due
to forces beyond its reasonable control, including without limitation, strikes,
work stoppages, acts of war or terrorism, insurrection, revolution, nuclear or
natural catastrophes or act of God, and interruptions, loss or malfunction of
utilities, communications or computer (software or hardware) services.

 

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(d) Neither the Custodian nor the Collateral Agent shall have any liability for
the acts or omissions of any Securities Intermediary (including DTC or any
Federal Reserve Bank) or Deposit Account Bank in which any Collateral is held,
except for its negligence in retaining or maintaining any such Securities
Intermediary (other than DTC or any Federal Reserve Bank) or Deposit Account
Bank.

(e) Neither the Custodian nor the Collateral Agent shall have any liability with
respect to information received from third parties, including pricing
information services.

Section 9.02 Reliance by Collateral Agent and the Custodian. The Collateral
Agent and the Custodian shall be entitled to rely upon any certification, notice
or other communication (including, without limitation, any thereof by telephone,
facsimile, telegram or cable) believed by it to be genuine and correct and to
have been signed or sent by or on behalf of the proper Person or Persons, and
upon advice and statements of legal counsel, independent accountants and other
experts selected by the Collateral Agent. If in one or more instances the
Collateral Agent or the Custodian takes any action or assumes any responsibility
not specifically delegated to it pursuant to this Agreement, neither the taking
of such action nor the assumption of such responsibility shall be deemed to be
an express or implied undertaking on the part of the Collateral Agent or the
Custodian that it will take the same or similar action or assume the same or
similar responsibility in any other instance.

Section 9.03 Appointment of Agents. (a) The Collateral Agent may perform its
duties and exercise its rights and powers under this Agreement by or through
such agents and custodians (including, without limitation, the Custodian) as it
shall appoint. Each Grantor hereby agrees that the Custodian shall be the
Securities Intermediary and Deposit Account Bank of such Grantor with respect to
the Collateral Accounts. As a condition to appointing any agent or custodian,
the Collateral Agent, at the expense of the Parent Borrower, may obtain an
opinion of counsel, in form and substance reasonably satisfactory to the
Collateral Agent, as to the continued perfection of the security interests in
the Collateral in favor of the Collateral Agent.

(b) In the event that the Collateral Agent appoints an agent pursuant to this
Section 9.03, each and every remedy, power, right, claim, demand, cause of
action, estate, title, interest and Lien expressed or intended by this Agreement
to be exercised by or vested in or conveyed to the Collateral Agent with respect
thereto shall be exercisable by and vest in such agent but only in order to
exercise such powers, rights and remedies, and every covenant and obligation
necessary to the exercise thereof by such agent shall run to and be enforceable
by either of them. In particular, and without limiting the generality of the
foregoing, upon the determination by the Collateral Agent that any such agent or
custodian may be required or appropriate, the Collateral Agent may appoint such
agents or custodians to hold, maintain, invest, reinvest, collect upon or
liquidate any Collateral and to make such payments or disbursements, including
payments and disbursements to any Grantor as the Collateral Agent shall direct
consistent with this Agreement. The Collateral Agent shall have the right to
terminate the appointment of any agent or custodian hereunder without the
consent of any Grantor or any other Person.

 

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(c) The Collateral Agent may perform its duties and exercise its rights and
powers under this Agreement by or through the Custodian pursuant to and in
accordance with the terms hereof.

Section 10. Miscellaneous.

Section 10.01 No Waiver. No failure on the part of the Collateral Agent to
exercise and no delay in exercising, and no course of dealing with respect to,
any right, power or privilege under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege under this Agreement preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. The remedies provided
herein are cumulative and not exclusive of any remedies provided by law.

Section 10.02 Notices. All notices, requests and other communications provided
for herein (including, without limitation, any modifications of, or waivers,
requests or consents under, this Agreement) shall be given or made in writing
(including, without limitation, by facsimile) delivered to the intended
recipient as set forth below:

(a) in the case of any Grantor, at the address for notices specified for such
Person in of the Credit Agreement;

(b) as to the Custodian, at the following address:

Deutsche Bank Trust Company Americas

ASFS

60 Wall Street, 27th Floor

New York, New York 10005

Attention: Ailsa Morillo

Telephone: (212) 250-4893

Facsimile: (212) 553-2464;

(c) as to the Collateral Agent, at the following address for any Administrative
Agent’s Notice, Collateral Transfer Request, Collateral Release Request and all
other notices:

Deutsche Bank Trust Company Americas

ASFS

60 Wall Street, 27th Floor

New York, New York 10005

Attention: Ailsa Morillo

Telephone: (212) 250-4893

Facsimile: (212) 553-2464;

(d) as to the Administrative Agent, at the following address:

JPMorgan Chase Bank, N.A.

1111 Fannin, 10th Floor

Houston, Texas 77002

Attention: Michael Maldonado

Telephone: (713) 750-2932

Facsimile: (713) 750-2223

 

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Except as otherwise provided in this Agreement, all such communications shall be
deemed to have been duly given when transmitted by telecopier or personally
delivered or, in the case of a mailed notice, upon receipt, in each case given
or addressed as aforesaid. Notwithstanding the foregoing, any Administrative
Agent’s Notice or Borrowing Base Report may be sent be electronic mail, shall be
effective when received. Such electronic mail shall be directed to the following
address: (a) if to the Administrative Agent, michael.j.maldonado@jpmorgan.com or
(b) if to the Collateral Agent, ailsa.morillo@db.com. Any party may change its
mailing address, telephone number, facsimile number or electronic mail address
by notifying the other parties hereto in accordance with the provisions set
forth above.

Section 10.03 Fees and Expenses of Custodian. The Parent Borrower agrees to pay
any and all fees, expenses, charges and costs of the Custodian upon demand, and
in no event or circumstance will the Collateral Agent, the Administrative Agent
or any Lender have any liability therefor.

Section 10.04 Expenses etc. of Collateral Agent, Custodian and Administrative
Agent; Indemnity. (a) The Parent Borrower agrees to pay or reimburse each of the
Collateral Agent, the Custodian and the Administrative Agent for (i) all
reasonable out-of-pocket costs and expenses of the Collateral Agent, the
Custodian or the Administrative Agent (including, without limitation, the
reasonable fees and expenses of legal counsel) in connection with (x) any
enforcement or collection proceedings, including, without limitation, all manner
of participation in or other involvement with (a) bankruptcy, insolvency,
receivership, foreclosure, winding up or liquidation proceedings, (b) judicial
or regulatory proceedings and (c) workout, restructuring or other negotiations
or proceedings (whether or not the workout, restructuring or transaction
contemplated thereby is consummated) and (y) the enforcement of this
Section 10.04; and (ii) all transfer, stamp, documentary or other similar taxes,
assessments or charges levied by any governmental or revenue authority in
respect of this Agreement or any other document referred to herein and all
costs, expenses, taxes, assessments and other charges incurred in connection
with any filing, registration, recording or perfection of any security interest
contemplated hereby.

(b) The Parent Borrower agrees to indemnify, reimburse and hold the Collateral
Agent, the Custodian, the Administrative Agent, each other Secured Creditor and
their respective successors, assigns, employees, affiliates and agents
(hereinafter referred to individually as “Indemnitee,” and collectively as
“Indemnitees”) harmless from any and all liabilities, obligations, damages,
injuries, penalties, claims, demands, actions, suits, judgments and any and all
costs, expenses or disbursements (including reasonable attorneys’ fees and
expenses) (for the purposes of this Section 10.04(b), the foregoing are
collectively called “expenses”) of whatsoever kind and nature imposed on,
asserted against or incurred by any of the Indemnitees in any way relating to or
arising out of this Agreement, any other Security Document or any other document
executed in connection herewith or therewith or in any other way connected with
the administration of the transactions contemplated hereby or thereby or the
enforcement of any of the terms of, or the preservation of any rights under any
thereof, or in any

 

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way relating to or arising out of the ownership, purchase, delivery, control,
acceptance, lease, financing, possession, sale, return or other disposition, or
use of the Collateral, the violation of the laws of any country, state or other
governmental body or unit, any tort, or contract claim; provided that no
Indemnitee shall be indemnified pursuant to this Section 10.04(b) for losses,
damages or liabilities to the extent caused by the gross negligence or willful
misconduct of such Indemnitee (as determined by a court of competent
jurisdiction in a final and non-appealable decision). The Parent Borrower agrees
that upon written notice by any Indemnitee of the assertion of such a liability,
obligation, damage, injury, penalty, claim, demand, action, suit or judgment,
the Parent Borrower shall assume full responsibility for the defense thereof.
Each Indemnitee agrees to use its best efforts to promptly notify the Parent
Borrower of any such assertion of which such Indemnitee has knowledge.

(c) Without limiting the application of Section 10.04(a) hereof, the Parent
Borrower agrees to pay or reimburse the Collateral Agent and the Administrative
Agent for any and all reasonable fees, costs and expenses of whatever kind or
nature incurred in connection with the creation, preservation or protection of
the Collateral Agent’s Liens on, and security interest in, the Collateral,
including, without limitation, all fees and taxes in connection with the
recording or filing of instruments and documents in public offices, payment or
discharge of any taxes or Liens upon or in respect of the Collateral, premiums
for insurance with respect to the Collateral and all other fees, costs and
expenses in connection with protecting, maintaining or preserving the Collateral
and the Collateral Agent’s interest therein, whether through judicial
proceedings or otherwise, or in defending or prosecuting any actions, suits or
proceedings arising out of or relating to the Collateral.

(d) Without limiting the application of Section 10.04(a) or (b) hereof, upon
demand by any Indemnitee, the Parent Borrower agrees to pay, indemnify and hold
each Indemnitee harmless from and against any loss, costs, damages and expenses
which such Indemnitee may suffer, expend or incur in consequence of or growing
out of any misrepresentation by any Grantor in this Agreement, any other Credit
Document or in any writing contemplated by or made or delivered pursuant to or
in connection with this Agreement or any other Credit Document.

(e) If and to the extent that the obligations of the Parent Borrower under this
Section 10.04 are unenforceable for any reason, the Parent Borrower hereby
agrees to make the maximum contribution to the payment and satisfaction of such
obligations which is permissible under applicable law.

Section 10.05 Indemnity Obligations Secured by Collateral; Survival. Any amounts
paid by any Indemnitee as to which such Indemnitee has the right to
reimbursement shall constitute Secured Obligations secured by the Collateral.
The indemnity obligations of the Parent Borrower contained in Section 10.04(b)
shall continue in full force and effect notwithstanding the full payment of all
of the other Secured Obligations and notwithstanding the full payment of all the
notes issued, and Loans made, under the Credit Agreement, the termination of all
Letters of Credit issued under the Credit Agreement and the payment of all other
Secured Obligations and notwithstanding the discharge thereof and the occurrence
of the Termination Date.

 

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Section 10.06 Waiver; Amendment. Except as otherwise expressly provided in this
Agreement, none of the terms and conditions of this Agreement may be changed,
waived, modified or varied in any manner whatsoever unless in writing duly
signed by each Grantor directly affected thereby (it being understood that the
addition or release of any Grantor hereunder shall not constitute a change,
waiver, discharge or termination affecting any Grantor other than the Grantor so
added or released) and by the Collateral Agent (with the written consent of the
Majority Tranche 1 Lenders or, to the extent provided in the Credit Agreement,
each of the Lenders).

Section 10.07 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns; provided that no Grantor nor the Custodian may assign any of
its respective rights or obligations hereunder without the prior consent of the
Collateral Agent.

Section 10.08 Termination. After the Termination Date, this Agreement shall
terminate (provided that all indemnities set forth herein including, without
limitation, those in Section 10.04(b) hereof, shall survive such termination)
and the Collateral Agent, at the request and expense of the Grantor, will
promptly execute and deliver to such Grantor and/or authorize the filing of a
proper instrument or instruments (including a release of all Liens granted
hereunder and Uniform Commercial Code termination statements on form UCC-3)
acknowledging the satisfaction and termination of this Agreement as to such
Grantor, and will duly assign, transfer and deliver to such Grantor (without
recourse and without any representation or warranty) such of the Collateral of
such Grantor as may be in the possession of the Collateral Agent or Custodian
and as has not theretofore been sold or otherwise applied or released pursuant
to this Agreement. As used in this Agreement, “Termination Date” shall mean the
date upon which the Total Tranche 1 Commitment under the Credit Agreement has
been terminated, all Tranche 1 Unpaid Drawings have been repaid in full, all
Tranche 1 Letters of Credit issued under the Credit Agreement have expired or
been terminated and all Secured Obligations incurred hereunder or under the
Credit Agreement have been paid in full. Upon termination of this Agreement
pursuant to this Section 10.08, the Collateral Agent will, at each Grantor’s
expense and upon its request, return to the respective Grantor such of the
Collateral as shall not have been sold, previously released or otherwise applied
pursuant to the terms of this Agreement or any other Credit Document and execute
and deliver to the respective Grantor such documents as such Grantor shall
reasonably request to evidence such termination.

Section 10.09 Powers Coupled with an Interest. Except to the extent otherwise
expressly provided herein, all authorizations and agencies herein contained with
respect to the Collateral are irrevocable and powers coupled with an interest.

Section 10.10 Captions. The table of contents and captions and section headings
appearing herein are included solely for convenience of reference and are not
intended to affect the interpretation of any provision of this Agreement.

Section 10.11 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.

 

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Section 10.12 Additional Grantors. It is understood and agreed that any Person
that desires to become a Grantor hereunder, or is required to execute a
counterpart of this Agreement after the date hereof pursuant to the requirements
of the Credit Agreement or any other Credit Document, shall become a Grantor
hereunder by (x) executing a counterpart hereof and delivering same to the
Collateral Agent, or by executing an assumption agreement in form and substance
reasonably satisfactory to the Collateral Agent, (y) delivering supplements to
Annex A as are necessary to cause such Annex to be complete and accurate with
respect to such additional Grantor on such date and (z) taking all actions as
specified in (i) this Agreement (including, without limitation, the
establishment of the appropriate Collateral Accounts with the Custodian in
accordance with Section 4.02) and (ii) Section 1.14 of the Credit Agreement, as
would have been taken by such Grantor had it been an original party to the
Credit Agreement and this Agreement, in each case with all documents required
above to be delivered to the Collateral Agent and with all documents and actions
required above to be taken to the reasonable satisfaction of the Collateral
Agent.

Section 10.13 Governing Law; Jurisdiction; Consent to Service of Process.
(a) This Agreement shall be construed in accordance with and governed by the law
of the State of New York.

(b) Each party hereto hereby irrevocably and unconditionally submits, for itself
and its property, to the exclusive jurisdiction of the Supreme Court of the
State of New York sitting in the Borough of Manhattan in New York County and of
the United States District Court of the Southern District of New York, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement and each of the parties hereto hereby irrevocably and
unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State court or, to the
extent permitted by law, in such Federal court. Each of the parties hereto
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law.

(c) Each party hereto hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement in any court referred to in
paragraph (b) of this Section. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.

(d) Each Grantor hereby irrevocably consents to service of process in the manner
provided for notices in Section 12.08 of the Credit Agreement. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.

(e) Each Grantor hereby irrevocably designates, appoints and empowers C T
Corporation, with offices on the date hereof at 111 Eighth Avenue, 13th Floor,
New York, New York 10011, as its designee, appointee and agent to receive,
accept and acknowledge for and on its behalf, and in respect of its property,
service of any and all legal process, summons, notices and documents which may
be served in any such action or proceeding. If for any reason such designee,
appointee and agent shall cease to be available to act as such, each Grantor
agrees to designate a new designee, appointee and agent in New York City on the
terms and for the purposes of this provision reasonably satisfactory to the
Collateral Agent under this Agreement.

 

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Section 10.14 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

Section 10.15 Integration. This Agreement embodies the entire agreement and
understanding among the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements and understandings between any Grantor and
the Collateral Agent with respect to the subject matter thereof.

Section 10.16 Financial Assets. Each Grantor, the Custodian and the Collateral
Agent hereby agree that the Custodian will treat any and all Securities and any
and all other Property and assets (other than Cash) credited from time to time
to each Grantor’s Securities Account as Financial Assets.

*****

 

32

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered as of the day and year first above written.

 

Wellesley House

90 Pitts Bay Road

Pembroke HM 08

Bermuda

   

ENDURANCE SPECIALTY HOLDINGS LTD.,

as a Grantor

    By:   /s/ Michael J. McGuire Attention: Michael J. McGuire       Name:
Michael J. McGuire Telephone: +1 (441) 278-0943       Title: Chief Financial
Officer Facsimile: +1 (441) 278-0493       Wellesley House    

ENDURANCE SPECIALTY INSURANCE LTD.,

90 Pitts Bay Road     as a Grantor Pembroke HM 08       Bermuda           By:  
/s/ Michael J. McGuire Attention: Michael J. McGuire       Name: Michael J.
McGuire Telephone: +1 (441) 278-0943       Title: Chief Financial Officer
Facsimile: +1 (441) 278-0493            

333 Westchester Ave

   

ENDURANCE U.S. HOLDINGS CORP.,

White Plains, NY 10604     as a Grantor       Attention: Daniel S. Lurie      
Telephone: +1 (914) 468-8009     By:   /s/ Daniel S. Lurie Facsimile: +1
(914) 997-0331       Name: Daniel S. Lurie       Title: Executive Vice President
     

7th Floor, 2 Minster Court

   

ENDURANCE WORLDWIDE HOLDINGS LIMITED,

London, EC3R 7BB     as a Grantor United Kingdom         Attention: Simon
Minshall     By:   /s/ Daniel S. Lurie Telephone: +44 (0)20 7337 2830      
Name: Daniel S. Lurie Facsimile: +44 (0)20 7337 2900       Title: Secretary

 

[ENDURANCE – PLEDGE AND SECURITY AGREEMENT]

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7th Floor, 2 Minster Court     ENDURANCE WORLDWIDE INSURANCE LIMITED, London,
EC3R 7BB     as a Grantor United Kingdom     Attention: Simon Minshall     By:  
/s/ Daniel S. Lurie Telephone: +44 (0)20 7337 2830       Name: Daniel S. Lurie
Facsimile: +44 (0)20 7337 2900       Title: Secretary      

333 Westchester Ave

   

ENDURANCE REINSURANCE

White Plains, NY 10604     CORPORATION OF AMERICA, as a Grantor       Attention:
Daniel S. Lurie       Telephone: +1 (914) 468-8009     By:   /s/ Daniel S. Lurie
Facsimile: +1 (914) 997-0331       Name: Daniel S. Lurie       Title: Secretary
     

333 Westchester Ave

   

ENDURANCE AMERICAN INSURANCE

White Plains, NY 10604     COMPANY, as a Grantor       Attention: Daniel S.
Lurie       Telephone: +1 (914) 468-8009     By:   /s/ Daniel S. Lurie
Facsimile: +1 (914) 997-0331       Name: Daniel S. Lurie       Title: Secretary
     

333 Westchester Ave

   

ENDURANCE AMERICAN SPECIALTY

White Plains, NY 10604     INSURANCE COMPANY, as a Grantor       Attention:
Daniel S. Lurie       Telephone: +1 (914) 468-8009     By:   /s/ Daniel S. Lurie
Facsimile: +1 (914) 997-0331       Name: Daniel S. Lurie       Title: Secretary
     

7101 82nd Street

   

ARMTECH HOLDINGS, INC., as a Grantor

Lubbock, TX 79424             Attention: Michael W. Jones     By:   /s/ Daniel
S. Lurie Telephone: +1 (806) 473-0333       Name: Daniel S. Lurie Facsimile: +1
(806) 473-0334       Title: Secretary

 

 

[ENDURANCE – PLEDGE AND SECURITY AGREEMENT]

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DEUTSCHE BANK TRUST COMPANY AMERICAS, as Collateral Agent By:  

/s/ Eileen M. Hughes

  Name: Eileen M. Hughes   Title: Director By:  

/s/ Rajesh Rampersaud

  Name: Rajesh Rampersaud   Title: Assistant Vice President

[ENDURANCE – PLEDGE AND SECURITY AGREEMENT]

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DEUTSCHE BANK TRUST COMPANY AMERICAS, as Custodian By:  

/s/ Eileen M. Hughes

  Name: Eileen M. Hughes   Title: Director By:  

/s/ Rajesh Rampersaud

  Name: Rajesh Rampersaud   Title: Assistant Vice President

[ENDURANCE – PLEDGE AND SECURITY AGREEMENT]

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JPMORGAN CHASE BANK, N.A., as Administrative Agent By:  

/s/ Brijendra Grewal

  Name: Brijendra Grewal   Title: Vice President

[ENDURANCE – PLEDGE AND SECURITY AGREEMENT]