Exhibit 10.32

 

THE PMI GROUP, INC.

 

and

 

THE BANK OF NEW YORK, as Collateral Agent, Custodial Agent and

Securities Intermediary

 

and

 

THE BANK OF NEW YORK, as Purchase Contract Agent

 

PLEDGE AGREEMENT

 

Dated as of November 3, 2003

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TABLE OF CONTENTS

 

     PAGE

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ARTICLE 1      DEFINITIONS     

Section 1.01.

 

Definitions

   1 ARTICLE 2      PLEDGE     

Section 2.01.

 

Pledge

   5

Section 2.02.

 

Control

   5

Section 2.03.

 

Termination

   5 ARTICLE 3      DISTRIBUTIONS ON PLEDGED COLLATERAL     

Section 3.01.

 

Income and Distributions

   6

Section 3.02.

 

Principal Payments Following Termination Event

   6

Section 3.03.

 

Principal Payments Prior to or on Purchase Contract Settlement Date.

   6

Section 3.04.

 

Payments to Purchase Contract Agent

   7

Section 3.05.

 

Assets Not Properly Released

   7 ARTICLE 4      CONTROL     

Section 4.01.

 

Establishment of Collateral Account

   7

Section 4.02.

 

Treatment as Financial Assets

   8

Section 4.03.

 

Sole Control by Collateral Agent

   8

Section 4.04.

 

Securities Intermediary’s Location

   8

Section 4.05.

 

No Other Claims

   8

Section 4.06.

 

Investment and Release

   8

Section 4.07.

 

Statements and Confirmations

   9

Section 4.08.

 

Tax Allocations

   9

Section 4.09.

 

No Other Agreements

   9

Section 4.10.

 

Powers Coupled with an Interest

   9

Section 4.11.

 

Waiver of Lien; Waiver of Set-off

   9

 

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ARTICLE 5     

INITIAL DEPOSIT; CREATION OF TREASURY UNITS AND RECREATION OF

CORPORATE UNITS

    

Section 5.01.

 

Initial Deposit of Senior Notes.

   9

Section 5.02.

 

Creation of Treasury Units.

   10

Section 5.03.

 

Recreation of Corporate Units.

   11

Section 5.04.

 

Termination Event.

   12

Section 5.05.

 

Cash Settlement.

   14

Section 5.06.

 

Early Settlement and Cash Merger Early Settlement

   15

Section 5.07.

 

Application of Proceeds in Settlement of Purchase Contracts.

   16 ARTICLE 6      VOTING RIGHTS — PLEDGED SENIOR NOTES     

Section 6.01.

 

Voting Rights

   18 ARTICLE 7      RIGHTS AND REMEDIES     

Section 7.01.

 

Rights and Remedies of the Collateral Agent.

   19

Section 7.02.

 

Special Event Redemption

   20

Section 7.03.

 

Successful Initial Remarketing

   20

Section 7.04.

 

Substitutions

   21 ARTICLE 8      REPRESENTATIONS AND WARRANTIES; COVENANTS     

Section 8.01.

 

Representations and Warranties

   21

Section 8.02.

 

Covenants

   22 ARTICLE 9      THE COLLATERAL AGENT, THE CUSTODIAL AGENT AND THE
SECURITIES INTERMEDIARY     

Section 9.01.

 

Appointment, Powers and Immunities

   22

Section 9.02.

 

Instructions of the Company

   23

Section 9.03.

 

Reliance by Collateral Agent, Custodial Agent and Securities Intermediary

   24

Section 9.04.

 

Certain Rights

   24

Section 9.05.

 

Merger, Conversion, Consolidation or Succession to Business

   24

Section 9.06.

 

Rights in Other Capacities

   25

Section 9.07.

 

Non-reliance on Collateral Agent, the Custodial Agent and Securities
Intermediary

   25

Section 9.08.

 

Compensation and Indemnity

   25

Section 9.09.

 

Failure to Act

   26

 

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Section 9.10.

 

Resignation of Collateral Agent, the Custodial Agent and Securities
Intermediary.

   27

Section 9.11.

 

Right to Appoint Agent or Advisor

   28

Section 9.12.

 

Survival

   29

Section 9.13.

 

Exculpation

   29 ARTICLE 10      AMENDMENT     

Section 10.01.

 

Amendment Without Consent of Holders

   29

Section 10.02.

 

Amendment with Consent of Holders

   29

Section 10.03.

 

Execution of Amendments

   30

Section 10.04.

 

Effect of Amendments

   31

Section 10.05.

 

Reference of Amendments

   31 ARTICLE 11      MISCELLANEOUS     

Section 11.01.

 

No Waiver

   31

Section 11.02.

 

Governing Law; Submission to Jurisdiction

   31

Section 11.03.

 

Notices

   32

Section 11.04.

 

Successors and Assigns

   32

Section 11.05.

 

Counterparts

   32

Section 11.06.

 

Severability

   32

Section 11.07.

 

Expenses, Etc

   33

Section 11.08.

 

Security Interest Absolute

   33

Section 11.09.

 

Notice of Special Event, Special Event Redemption and Termination Event

   34

 

EXHIBITS

 

Exhibit A   –  Instruction from Purchase Contract Agent to Collateral Agent
(Creation of Treasury Units) Exhibit B   –  Instruction from Collateral Agent to
Securities Intermediary (Creation of Treasury Units) Exhibit C   –  Instruction
from Purchase Contract Agent to Collateral Agent (Recreation of Corporate Units)
Exhibit D   –  Instruction from Collateral Agent to Securities Intermediary
(Recreation of Corporate Units) Exhibit E   –  Notice of Cash Settlement from
Collateral Agent to Purchase Contract Agent Exhibit F   –  Instruction to
Custodial Agent Regarding Remarketing Exhibit G   –  Instruction to Custodial
Agent Regarding Withdrawal From Remarketing

 

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PLEDGE AGREEMENT

 

PLEDGE AGREEMENT dated as of November 3, 2003 among THE PMI GROUP, INC., a
Delaware corporation (the “Company”), The Bank of New York, as collateral agent
(in such capacity, together with its successors in such capacity, the
“Collateral Agent”), as custodial agent (in such capacity, together with its
successors in such capacity, the “Custodial Agent”), and as securities
intermediary (as defined in Section 8-102(a)(14) of the UCC) with respect to the
Collateral Account (in such capacity, together with its successors in such
capacity, the “Securities Intermediary”), and The Bank of New York, as purchase
contract agent and as attorney-in-fact of the Holders from time to time of the
Units (in such capacity, together with its successors in such capacity, the
“Purchase Contract Agent”) under the Purchase Contract Agreement.

 

RECITALS

 

WHEREAS, the Company and the Purchase Contract Agent are parties to the Purchase
Contract Agreement dated as of the date hereof (as modified and supplemented and
in effect from time to time, the “Purchase Contract Agreement”), pursuant to
which 12,000,000 Corporate Units will be issued.

 

WHEREAS, each Corporate Unit, at issuance, consists of a unit comprised of (a) a
stock purchase contract (a “Purchase Contract”) pursuant to which the Holder
will purchase from the Company on the Purchase Contract Settlement Date, for an
amount equal to $25 (the “Stated Amount”), a number of shares of the Company’s
common stock, par value $0.01 per share (“Common Stock”), equal to the
Settlement Rate and (b) a Senior Note.

 

WHEREAS, pursuant to the terms of the Purchase Contract Agreement and the
Purchase Contracts, the Holders of the Units have irrevocably authorized the
Purchase Contract Agent, as attorney-in-fact of such Holders, among other
things, to execute and deliver this Agreement on behalf of such Holders and to
grant the pledge provided herein of the Collateral to secure the Obligations.

 

NOW, THEREFORE, the Company, the Collateral Agent, the Custodial Agent, the
Securities Intermediary and the Purchase Contract Agent agree as follows:

 

ARTICLE 1

DEFINITIONS

 

Section 1.01. Definitions. For all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires:

 

(a) the words “herein,” “hereof” and “hereunder” and other words of similar
import refer to this Agreement as a whole and not to any particular Article,
Section, Exhibit or other subdivision;

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(b) the following terms which are defined in the UCC shall have the meanings set
forth therein: “certificated security,” “control,” “financial asset,”
“entitlement order,” “securities account” and “security entitlement”;

 

(c) capitalized terms used herein and not defined herein have the meanings
assigned to them in the Purchase Contract Agreement; and

 

(d) the following terms have the meanings given to them in this Section 1.01(d):

 

“Agreement” means this Pledge Agreement, as the same may be amended, modified or
supplemented from time to time.

 

“Cash” means any coin or currency of the United States as at the time shall be
legal tender for payment of public and private debts.

 

“Collateral” means the collective reference to:

 

(i) the Collateral Account and all investment property and other financial
assets from time to time credited to the Collateral Account and all security
entitlements with respect thereto, including, without limitation, (A) the Senior
Notes and security entitlements relating thereto that are a component of the
Corporate Units from time to time, (B) the Applicable Ownership Interests (as
specified in clause (i) of the definition of such term) in the Treasury
Portfolio that are a component of the Corporate Units from time to time, (C) any
Treasury Securities and security entitlements relating thereto delivered from
time to time upon creation of Treasury Units in accordance with Section 5.02
hereof and (D) payments made by Holders pursuant to Section 5.05 hereof;

 

(ii) all Proceeds of any of the foregoing (whether such Proceeds arise before or
after the commencement of any proceeding under any applicable bankruptcy,
insolvency or other similar law, by or against the pledgor or with respect to
the pledgor); and

 

(iii) all powers and rights now owned or hereafter acquired under or with
respect to the Collateral.

 

“Collateral Account” means the securities account of The Bank of New York, as
Collateral Agent, maintained by the Securities Intermediary and designated The
Bank of New York, as Collateral Agent of The PMI Group, Inc., as pledgee of The
Bank of New York, as the Purchase Contract Agent on behalf of and as
attorney-in-fact for the Holders”.

 

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“Company” means the Person named as the “Company” in the first paragraph of this
instrument until a successor shall have become such pursuant to the applicable
provisions of the Purchase Contract Agreement, and thereafter “Company” shall
mean such successor.

 

“Obligations” means, with respect to each Holder, all obligations and
liabilities of such Holder under such Holder’s Purchase Contract, the Purchase
Contract Agreement and this Agreement or any other document made, delivered or
given in connection herewith or therewith, in each case whether on account of
principal, interest (including, without limitation, interest accruing before and
after the filing of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding, relating to such Holder, whether
or not a claim for post-filing or post-petition interest is allowed in such
proceeding), fees, indemnities, costs, expenses or otherwise (including, without
limitation, all fees and disbursements of counsel to the Company or the
Collateral Agent or the Securities Intermediary that are required to be paid by
the Holder pursuant to the terms of any of the foregoing agreements).

 

“Permitted Investments” means any one of the following, in each case maturing on
the Business Day following the date of acquisition:

 

(1) any evidence of indebtedness with an original maturity of 365 days or less
issued, or directly and fully guaranteed or insured, by the United States of
America or any agency or instrumentality thereof (provided that the full faith
and credit of the United States of America is pledged in support of the timely
payment thereof or such indebtedness constitutes a general obligation of it);

 

(2) deposits, certificates of deposit or acceptances with an original maturity
of 365 days or less of any institution which is a member of the Federal Reserve
System having combined capital and surplus and undivided profits of not less
than $500 million at the time of deposit (and which may include the Collateral
Agent);

 

(3) investments with an original maturity of 365 days or less of any Person that
are fully and unconditionally guaranteed by a bank referred to in clause (2);

 

(4) repurchase agreements and reverse repurchase agreements relating to
marketable direct obligations issued or unconditionally guaranteed by the United
States of America or issued by any agency thereof and backed as to timely
payment by the full faith and credit of the United States of America;

 

(5) investments in commercial paper, other than commercial paper issued by the
Company or its Affiliates, of any corporation incorporated under the laws of the
United States or any State thereof,

 

3

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which commercial paper has a rating at the time of purchase at least equal to
“A-1” by Standard & Poor’s Ratings Services (“S&P”) or at least equal to “P-1”
by Moody’s Investors Service, Inc. (“Moody’s”); and

 

(6) investments in money market funds (including, but not limited to, money
market funds managed by the Collateral Agent or an affiliate of the Collateral
Agent) registered under the Investment Company Act of 1940, as amended, rated in
the highest applicable rating category by S&P or Moody’s.

 

“Pledge” means the lien and security interest created by this Agreement.

 

“Pledged Applicable Ownership Interests” means the Holder’s Applicable Ownership
Interests (as specified in clause (i) of the definition thereof) in the Treasury
Portfolio and security entitlements with respect thereto from time to time
credited to the Collateral Account and not then released from the Pledge.

 

“Pledged Senior Notes” means Senior Notes and security entitlements with respect
thereto from time to time credited to the Collateral Account and not then
released from the Pledge.

 

“Pledged Securities” means the Pledged Senior Notes, the Pledged Applicable
Ownership Interests and the Pledged Treasury Securities, collectively.

 

“Pledged Treasury Securities” means Treasury Securities and security
entitlements with respect thereto from time to time credited to the Collateral
Account and not then released from the Pledge.

 

“Proceeds” has the meaning ascribed thereto in the UCC and includes, without
limitation, all interest, dividends, cash, instruments, securities, financial
assets and other property received, receivable or otherwise distributed upon the
sale (including, without limitation, the Remarketing), exchange, collection or
disposition of any financial assets from time to time held in the Collateral
Account.

 

“Purchase Contract Agent” has the meaning specified in the paragraph preceding
the recitals of this Agreement.

 

“TRADES” means the Treasury/Reserve Automated Debt Entry System maintained by
the Federal Reserve Bank of New York pursuant to the TRADES Regulations.

 

“TRADES Regulations” means the regulations of the United States Department of
the Treasury, published at 31 C.F.R. Part 357, as amended from time to time.
Unless otherwise defined herein, all terms defined in the TRADES Regulations are
used herein as therein defined.

 

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“Transfer” means (i) in the case of certificated securities in registered form,
delivery as provided in ‘8-301(a) of the UCC, endorsed to the transferee or in
blank by an effective endorsement, (ii) in the case of Treasury Securities,
registration of the transferee as the owner of such Treasury Securities on
TRADES and (iii) in the case of security entitlements, including, without
limitation, security entitlements with respect to Treasury Securities, a
securities intermediary indicating by book entry that such security entitlement
has been credited to the transferee’s securities account.

 

“Treasury Securities” means zero-coupon U.S. treasury securities that mature on
November 15, 2006 (CUSIP No. 912820GQ4).

 

“UCC” means the Uniform Commercial Code as in effect in the State of New York
from time to time.

 

“Value” means, with respect to any item of Collateral on any date, as to (1)
Cash, the face amount thereof, (2) Treasury Securities or Senior Notes, the
aggregate principal amount thereof at maturity and (3) Applicable Ownership
Interests (as specified in clause (i) of the definition of such term), the
appropriate percentage of the aggregate principal amount at maturity of the
Treasury Portfolio.

 

ARTICLE 2

PLEDGE

 

Section 2.01. Pledge. Each Holder, acting through the Purchase Contract Agent as
such Holder’s attorney-in-fact, and the Purchase Contract Agent, acting solely
as such attorney-in-fact, hereby pledges and grants to the Collateral Agent, as
agent of and for the benefit of the Company, a continuing first priority
security interest in and to, and a lien upon and right of set-off against, all
of such Person’s right, title and interest in and to the Collateral to secure
the prompt and complete payment and performance when due (whether at stated
maturity, by acceleration or otherwise) of the Obligations. The Collateral Agent
shall have all of the rights, remedies and recourses with respect to the
Collateral afforded a secured party by the UCC, in addition to, and not in
limitation of, the other rights, remedies and recourses afforded to the
Collateral Agent by this Agreement.

 

Section 2.02. Control. The Collateral Agent shall have control of the Collateral
Account pursuant to the provisions of Article 4 of this Agreement.

 

Section 2.03. Termination. As to each Holder, this Agreement and the Pledge
created hereby shall terminate upon the satisfaction of such Holder’s
Obligations. Upon such termination, the Collateral Agent shall, except as
otherwise provided herein, instruct the Securities Intermediary to Transfer such
Holder’s portion of the Collateral to the Purchase Contract Agent for
distribution to such Holder, free and clear of the Pledge created hereby.

 

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ARTICLE 3

DISTRIBUTIONS ON PLEDGED COLLATERAL

 

Section 3.01. Income and Distributions. The Collateral Agent shall transfer all
income and distributions received by the Collateral Agent on account of the
Pledged Senior Notes, the Pledged Applicable Ownership Interests or Permitted
Investments from time to time held in the Collateral Account (ABA No. 021000018,
A/C No. 290453, Re: The PMI Group, Inc.) to the Purchase Contract Agent for
distribution to the applicable Holders as provided in the Purchase Contracts or
Purchase Contract Agreement.

 

Section 3.02. Principal Payments Following Termination Event. Following a
Termination Event, the Collateral Agent shall transfer all principal payments it
receives, if any, in respect of (1) the Pledged Senior Notes, (2) the Pledged
Applicable Ownership Interests and (3) the Pledged Treasury Securities, to the
Purchase Contract Agent for the benefit of the applicable Holders for
distribution to such Holders in accordance with their respective interests, free
and clear of the Pledge created hereby.

 

Section 3.03. Principal Payments Prior to or on Purchase Contract Settlement
Date.

 

(a) Subject to the provisions of Section 5.06, and except as provided in Section
3.03(b) below, if no Termination Event shall have occurred, all principal
payments received by the Securities Intermediary in respect of (1) the Pledged
Senior Notes, (2) the Pledged Applicable Ownership Interests and (3) the Pledged
Treasury Securities shall be held and invested in Permitted Investments until
the Purchase Contract Settlement Date, and transferred to the Company on the
Purchase Contract Settlement Date as provided in Section 5.07 hereof. Any
balance remaining in the Collateral Account shall be released from the Pledge
and transferred to the Purchase Contract Agent for the benefit of the applicable
Holders for distribution to such Holders in accordance with their respective
interests, free and clear of the Pledge created thereby. The Company shall
instruct the Collateral Agent in writing as to the type of Permitted Investments
in which any payments made under this Section 3.03(a) shall be invested. In no
event shall the Collateral Agent be liable for the selection of Permitted
Investments or for investment losses incurred thereon. The Collateral Agent
shall have no liability in respect of losses incurred as a result of the failure
of the Company to provide timely written investment direction.

 

(b) All principal payments received by the Securities Intermediary in respect of
(1) the Pledged Senior Notes, (2) the Applicable Ownership Interests (as
specified in clause (i) of the definition thereof) in the Treasury Portfolio and
(3) the Treasury Securities or security entitlements thereto, that, in each
case, have been released from the Pledge pursuant hereto shall be transferred to
the Purchase Contract Agent for the benefit of the applicable Holders for
distribution to such Holders in accordance with their respective interests.

 

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Section 3.04. Payments to Purchase Contract Agent. The Securities Intermediary
shall use commercially reasonable efforts to deliver payments to the Purchase
Contract Agent hereunder to the account designated by the Purchase Contract
Agent for such purpose not later than 12:00 p.m. (New York City time) on the
Business Day such payment is received by the Securities Intermediary; provided,
however, that if such payment is received on a day that is not a Business Day or
after 11:00 a.m. (New York City time) on a Business Day, then the Securities
Intermediary shall use commercially reasonable efforts to deliver such payment
to the Purchase Contract Agent no later than 10:30 a.m. (New York City time) on
the next succeeding Business Day.

 

Section 3.05. Assets Not Properly Released. If the Purchase Contract Agent or
any Holder shall receive any principal payments on account of financial assets
credited to the Collateral Account and not released therefrom in accordance with
this Agreement, the Purchase Contract Agent or such Holder shall hold the same
as trustee of an express trust for the benefit of the Company and, upon receipt
of an Officers’ Certificate of the Company so directing, promptly deliver the
same to the Securities Intermediary for credit to the Collateral Account or to
the Company for application to the Obligations of the Holders, and the Purchase
Contract Agent and Holders shall acquire no right, title or interest in any such
payments of principal amounts so received. The Purchase Contract Agent shall
have no liability under this Section 3.05 unless and until it has been notified
in writing that such payment was delivered to it erroneously and shall have no
liability for any action taken, suffered or omitted to be taken prior to its
receipt of such notice.

 

ARTICLE 4

CONTROL

 

Section 4.01. Establishment of Collateral Account. The Securities Intermediary
hereby confirms that:

 

(a) the Securities Intermediary has established the Collateral Account;

 

(b) the Collateral Account is a securities account;

 

(c) subject to the terms of this Agreement, the Securities Intermediary shall
identify in its records the Collateral Agent as the entitlement holder entitled
to exercise the rights that comprise any financial asset credited to the
Collateral Account;

 

(d) all property delivered to the Securities Intermediary pursuant to this
Agreement or the Purchase Contract Agreement, including any Applicable Ownership
Interests (as specified in clause (i) of such definition) in the Treasury
Portfolio and any Permitted Investments, will be credited promptly to the
Collateral Account; and

 

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(e) all securities or other property underlying any financial assets credited to
the Collateral Account shall be (i) registered in the name of the Purchase
Contract Agent and endorsed to the Securities Intermediary or in blank, (ii)
registered in the name of the Securities Intermediary or (iii) credited to
another securities account maintained in the name of the Securities
Intermediary. In no case will any financial asset credited to the Collateral
Account be registered in the name of the Purchase Contract Agent or any Holder
or specially endorsed to the Purchase Contract Agent or any Holder unless such
financial asset has been further endorsed to the Securities Intermediary or in
blank.

 

Section 4.02. Treatment as Financial Assets. Each item of property (whether
investment property, financial asset, security, instrument or cash) credited to
the Collateral Account shall be treated as a financial asset.

 

Section 4.03. Sole Control by Collateral Agent. Except as provided in Section
6.01, at all times prior to the termination of the Pledge, the Collateral Agent
shall have sole control of the Collateral Account, and the Securities
Intermediary shall take instructions and directions with respect to the
Collateral Account solely from the Collateral Agent. If at any time the
Securities Intermediary shall receive an entitlement order issued by the
Collateral Agent and relating to the Collateral Account, the Securities
Intermediary shall comply with such entitlement order without further consent by
the Purchase Contract Agent or any Holder or any other Person. Except as
otherwise permitted under this Agreement, until termination of the Pledge, the
Securities Intermediary will not comply with any entitlement orders issued by
the Purchase Contract Agent or any Holder.

 

Section 4.04. Securities Intermediary’s Location. The Collateral Account, and
the rights and obligations of the Securities Intermediary, the Collateral Agent,
the Purchase Contract Agent and the Holders with respect thereto, shall be
governed by the laws of the State of New York. Regardless of any provision in
any other agreement, for purposes of the UCC, New York shall be deemed to be the
Securities Intermediary’s jurisdiction.

 

Section 4.05. No Other Claims. Except for the claims and interest of the
Collateral Agent and of the Purchase Contract Agent and the Holders in the
Collateral Account, the Securities Intermediary (without having conducted any
investigation) does not know of any claim to, or interest in, the Collateral
Account or in any financial asset credited thereto. If any Person asserts any
lien, encumbrance or adverse claim (including any writ, garnishment, judgment,
warrant of attachment, execution or similar process) against the Collateral
Account or in any financial asset carried therein, the Securities Intermediary
will promptly notify the Collateral Agent and the Purchase Contract Agent.

 

Section 4.06. Investment and Release. All proceeds of financial assets from time
to time deposited in the Collateral Account shall be invested and reinvested as
provided in this Agreement. At no time prior to termination of the

 

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Pledge with respect to any particular property shall such property be released
from the Collateral Account except in accordance with this Agreement or upon
written instructions of the Collateral Agent.

 

Section 4.07. Statements and Confirmations. The Securities Intermediary will
promptly send copies of all statements, confirmations and other correspondence
concerning the Collateral Account and any financial assets credited thereto
simultaneously to each of the Purchase Contract Agent and the Collateral Agent
at their addresses for notices under this Agreement.

 

Section 4.08. Tax Allocations. The Purchase Contract Agent shall report all
items of income, gain, expense and loss recognized in the Collateral Account, to
the extent such reporting is required by law, to the Internal Revenue Service
authorities in the manner required by law. Neither the Securities Intermediary
nor the Collateral Agent shall have any tax reporting duties hereunder.

 

Section 4.09. No Other Agreements. The Securities Intermediary has not entered
into, and prior to the termination of the Pledge will not enter into, any
agreement with any other Person relating to the Collateral Account or any
financial assets credited thereto, including, without limitation, any agreement
to comply with entitlement orders of any Person other than the Collateral Agent.

 

Section 4.10. Powers Coupled with an Interest. The rights and powers granted in
this Article 4 to the Collateral Agent have been granted in order to perfect its
security interests in the Collateral Account, are powers coupled with an
interest and will be affected neither by the bankruptcy of the Purchase Contract
Agent or any Holder nor by the lapse of time. The obligations of the Securities
Intermediary under this Article 4 shall continue in effect until the termination
of the Pledge with respect to any and all Collateral.

 

Section 4.11. Waiver of Lien; Waiver of Set-off. The Securities Intermediary
waives any security interest, lien or right to make deductions or set-offs that
it may now have or hereafter acquire in or with respect to the Collateral
Account, any financial asset credited thereto or any security entitlement in
respect thereof. Neither the financial assets credited to the Collateral Account
nor the security entitlements in respect thereof will be subject to deduction,
set-off, banker’s lien or any other right in favor of any person other than the
Company.

 

ARTICLE 5

INITIAL DEPOSIT; CREATION OF TREASURY UNITS AND RECREATION OF

CORPORATE UNITS

 

Section 5.01. Initial Deposit of Senior Notes.

 

(a) Prior to or concurrently with the execution and delivery of this Agreement,
the Purchase Contract Agent, on behalf of the initial Holders of the

 

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Corporate Units, shall Transfer to the Securities Intermediary, for credit to
the Collateral Account, the Senior Notes or security entitlements relating
thereto, and, in the case of security entitlements, the Securities Intermediary
shall indicate by book-entry that a securities entitlement to such Senior Notes
has been credited to the Collateral Account.

 

(b) The Collateral Agent may, at any time or from time to time, in its sole
discretion, cause any or all securities or other property underlying any
financial assets credited to the Collateral Account to be registered in the name
of the Securities Intermediary, the Collateral Agent or their respective
nominees; provided, however, that unless any Event of Default (as defined in the
Indenture) shall have occurred and be continuing, the Collateral Agent agrees
not to cause any Senior Notes to be so re-registered.

 

Section 5.02. Creation of Treasury Units.

 

(a) Unless the Treasury Portfolio has replaced the Senior Notes as a component
of the Corporate Units, a Holder of Corporate Units shall have the right, at any
time on or prior to 5:00 p.m. (New York City time) on the fifth Business Day
immediately preceding the Purchase Contract Settlement Date, to create Treasury
Units by substitution of Treasury Securities or security entitlements with
respect thereto for the Pledged Senior Notes comprising a part of all or a
portion of such Holder’s Corporate Units, in integral multiples of 40 Corporate
Units by:

 

(i) Transferring to the Securities Intermediary, for credit to the Collateral
Account, Treasury Securities or security entitlements with respect thereto
having a Value equal to the aggregate principal amount of the Pledged Senior
Notes to be released, accompanied by a notice, substantially in the form of
Exhibit C to the Purchase Contract Agreement, whereupon the Purchase Contract
Agent shall deliver to the Collateral Agent a notice, substantially in the form
of Exhibit A hereto, (A) stating that such Holder has notified the Purchase
Contract Agent that such Holder has Transferred Treasury Securities or security
entitlements with respect thereto to the Collateral Agent for credit to the
Collateral Account, (B) stating the Value of the Treasury Securities or security
entitlements with respect thereto Transferred by such Holder and (C) requesting
that the Collateral Agent release from the Pledge the Pledged Senior Notes that
are a component of such Corporate Units; and

 

(ii) delivering the related Corporate Units to the Purchase Contract Agent.

 

Upon receipt of such notice and confirmation that Treasury Securities or
security entitlements with respect thereto have been credited to the Collateral
Account as described in such notice, the Collateral Agent shall instruct the
Securities Intermediary by a notice, substantially in the form of Exhibit B
hereto,

 

10

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to release such Pledged Senior Notes from the Pledge by Transfer to the Purchase
Contract Agent for distribution to such Holder, free and clear of the Pledge
created hereby.

 

If the Treasury Portfolio has replaced the Senior Notes as a component of the
Corporate Units and subject to the conditions of the Purchase Contract
Agreement, a Holder of Corporate Units may, at any time on or prior to the
second Business Day immediately preceding the Purchase Contract Settlement Date,
substitute Treasury Securities for the Applicable Ownership Interests in the
Treasury Portfolio with respect to such Corporate Units, but only in multiples
of 16,000 Corporate Units. In such an event, the Holder shall transfer the
required amount of Treasury Securities to the Securities Intermediary, for
credit to the Collateral Account, and the Purchase Contract Agent shall request
the Collateral Agent to instruct the Securities Intermediary to release the
Pledge of and transfer to the Holder the appropriate Applicable Ownership
Interests in the Treasury Portfolio in the manner set forth above.

 

(b) Upon credit to the Collateral Account of Treasury Securities or security
entitlements with respect thereto delivered by a Holder of Corporate Units and
receipt of the related instruction from the Collateral Agent, the Securities
Intermediary shall release such Pledged Senior Notes or Applicable Ownership
Interest in the Treasury Portfolio, as the case may be, and shall promptly
Transfer the same to the Purchase Contract Agent for distribution to such
Holder, free and clear of the Pledge created hereby.

 

Section 5.03. Recreation of Corporate Units.

 

(a) Unless the Treasury Portfolio has replaced the Senior Notes as a component
of the Corporate Units, at any time on or prior to 5:00 p.m. (New York City
time) on the fifth Business Day immediately preceding the Purchase Contract
Settlement Date, a Holder of Treasury Units shall have the right to recreate
Corporate Units by substitution of Senior Notes or security entitlements with
respect thereto for Pledged Treasury Securities in integral multiples of 40
Treasury Units by:

 

(i) Transferring to the Securities Intermediary, for credit to the Collateral
Account, Senior Notes or security entitlements with respect thereto having a
principal amount equal to the Value of the Pledged Treasury Securities to be
released, accompanied by a notice, substantially in the form of Exhibit C to the
Purchase Contract Agreement, whereupon the Purchase Contract Agent shall deliver
to the Collateral Agent a notice, substantially in the form of Exhibit C hereto,
stating that such Holder has Transferred the Senior Notes or security
entitlements with respect thereto to the Collateral Account for credit to the
Collateral Account and requesting that the Collateral Agent release from the
Pledge the Pledged Treasury Securities related to such Treasury Units; and

 

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(ii) delivering the related Treasury Units to the Purchase Contract Agent.

 

Upon receipt of such notice and confirmation that Senior Notes or security
entitlements with respect thereto have been credited to the Collateral Account
as described in such notice, the Collateral Agent shall instruct the Securities
Intermediary by a notice, substantially in the form of Exhibit D hereto, to
release such Pledged Treasury Securities from the Pledge by Transfer to the
Purchase Contract Agent for distribution to such Holder, free and clear of the
Pledge created hereby.

 

If the Treasury Portfolio has replaced the Senior Notes as a component of the
Corporate Units, a Holder of Treasury Units may, at any time on or prior to the
second Business Day immediately preceding the Purchase Contract Settlement Date,
substitute the Applicable Ownership Interests in the Treasury Portfolio for the
Pledged Treasury Securities with respect to such Treasury Units, but only in
multiples of 16,000 Treasury Units. In such an event, the Holder shall Transfer
the required Applicable Ownership Interests in the Treasury Portfolio to the
Securities Intermediary, for credit to the Collateral Account, and the Purchase
Contract Agent shall request the Collateral Agent to instruct the Securities
Intermediary to release and Transfer to the Holder the Pledged Treasury
Securities in the manner set forth above.

 

(b) Upon credit to the Collateral Account of Senior Notes or security
entitlements with respect thereto or Applicable Ownership Interests in the
Treasury Portfolio delivered by a Holder of Treasury Units and receipt of the
related instruction from the Collateral Agent, the Securities Intermediary shall
release such Pledged Treasury Securities and shall promptly Transfer the same to
the Purchase Contract Agent for distribution to such Holder, free and clear of
the Pledge created hereby.

 

Section 5.04. Termination Event.

 

(a) Upon receipt by the Collateral Agent of written notice from the Company or
the Purchase Contract Agent that a Termination Event has occurred, the
Collateral Agent shall release all Collateral from the Pledge and shall promptly
instruct the Securities Intermediary to Transfer:

 

(i) any Pledged Senior Notes or security entitlements with respect thereto or
Pledged Applicable Ownership Interests;

 

(ii) any Pledged Treasury Securities; and

 

(iii) any payments by Holders (or the Permitted Investments of such payments)
pursuant to Section 5.05 hereof,

 

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to the Purchase Contract Agent for the benefit of the Holders for distribution
to such Holders, in accordance with their respective interests, free and clear
of the Pledge created hereby; provided, however, if any Holder shall be entitled
to receive less than $1,000 with respect to its interest in the Applicable
Ownership Interests (as specified in clause (i) of the definition of such term)
in the Treasury Portfolio, the Purchase Contract Agent shall dispose of such
interest for cash and deliver to such Holder cash in lieu of delivering the
Applicable Ownership Interests (as specified in clause (i) of the definition of
such term) in the Treasury Portfolio.

 

(b) If such Termination Event shall result from the Company’s becoming a debtor
under the Bankruptcy Code, and if the Collateral Agent shall for any reason fail
promptly to effectuate the release and Transfer of all Pledged Senior Notes,
Pledged Applicable Ownership Interests, Pledged Treasury Securities and payments
by Holders (or the Permitted Investments of such payments) pursuant to Section
5.05 and Proceeds of any of the foregoing, as the case may be, as provided by
this Section 5.04, the Purchase Contract Agent shall:

 

(i) use its best efforts to obtain an opinion of a nationally recognized law
firm to the effect that, notwithstanding the Company’s being the debtor in such
a bankruptcy case, the Collateral Agent will not be prohibited from releasing or
Transferring the Collateral as provided in this Section 5.04 and shall deliver
or cause to be delivered such opinion to the Collateral Agent within ten days
after the occurrence of such Termination Event, and if (A) the Purchase Contract
Agent shall be unable to obtain such opinion within ten days after the
occurrence of such Termination Event or (B) the Collateral Agent shall continue,
after delivery of such opinion, to refuse to effectuate the release and Transfer
of all Pledged Senior Notes, Pledged Applicable Ownership Interests, Pledged
Treasury Securities and the payments by Holders (or the Permitted Investments of
such payments) pursuant to Section 5.05 hereof and Proceeds of any of the
foregoing, as the case may be, as provided in this Section 5.04, then the
Purchase Contract Agent shall within fifteen days after the occurrence of such
Termination Event commence an action or proceeding in the court having
jurisdiction of the Company’s case under the Bankruptcy Code seeking an order
requiring the Collateral Agent to effectuate the release and transfer of all
Pledged Senior Notes, Pledged Applicable Ownership Interests, Pledged Treasury
Securities and the payments by Holders (or the Permitted Investments of such
payments) pursuant to Section 5.05 hereof and Proceeds of any of the foregoing,
or as the case may be, as provided by this Section 5.04; or

 

(ii) commence an action or proceeding like that described in Section 5.04(b)(i)
hereof within ten days after the occurrence of such Termination Event.

 

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Section 5.05. Cash Settlement.

 

(a) Upon receipt by the Collateral Agent of (1) a notice from the Purchase
Contract Agent promptly after the receipt by the Purchase Contract Agent of a
notice from a Holder of Corporate Units that such Holder has elected, in
accordance with the procedures specified in Section 5.02(b)(i) or 5.02(e)(i) of
the Purchase Contract Agreement to effect a Cash Settlement and (2) payment by
such Holder by deposit in the Collateral Account on or prior to 5:00 p.m. (New
York City time) on the fourth Business Day or the first Business Day, as
applicable, immediately preceding the Purchase Contract Settlement Date of the
Purchase Price in lawful money of the United States by certified or cashier’s
check or wire transfer of immediately available funds payable to or upon the
order of the Securities Intermediary, then the Collateral Agent shall:

 

(i) instruct the Securities Intermediary promptly to invest any such Cash in
Permitted Investments;

 

(ii) instruct the Securities Intermediary to release from the Pledge such
Holder’s related Pledged Senior Notes or Pledged Applicable Ownership Interests,
as applicable, as to which such Holder has effected a Cash Settlement pursuant
to this Section 5.05(a); and

 

(iii) instruct the Securities Intermediary to Transfer all such Pledged Senior
Notes or Pledged Applicable Ownership Interests, as the case may be, to the
Purchase Contract Agent for distribution to such Holder, in each case free and
clear of the Pledge created hereby.

 

The Company shall instruct the Collateral Agent in writing as to the type of
Permitted Investments in which any such Cash shall be invested. In no event
shall the Collateral Agent or Securities Intermediary be liable for the
selection of Permitted Investments or for investment losses incurred thereon.
The Collateral Agent and Securities Intermediary shall have no liability in
respect of losses incurred as a result of the failure of the Company to provide
timely written investment direction.

 

Upon receipt of Proceeds upon the maturity of the Permitted Investments on the
Purchase Contract Settlement Date, the Collateral Agent shall (A) instruct the
Securities Intermediary to pay the portion of such Proceeds and deliver any
certified or cashier’s checks received, in an aggregate amount equal to the
Purchase Price, to the Company on the Purchase Contract Settlement Date, and (B)
release any amounts in excess of the Purchase Price earned from such Permitted
Investments to the Purchase Contract Agent for distribution to such Holder in
accordance with the Purchase Contract Agreement.

 

(b) If a Holder of Corporate Units (unless the Treasury Portfolio has replaced
the Senior Notes as a component of such Corporate Units) (i) fails to notify the
Purchase Contract Agent of its intention to make a Cash Settlement as provided
in Section 5.02(b)(i) of the Purchase Contract Agreement or (ii) does notify the
Purchase Contract Agent of its intention to pay the Purchase Price in

 

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cash, but fails to make such payment as required by Section 5.02(b)(ii) of the
Purchase Contract Agreement, such Holder shall be deemed to have consented to
the disposition of such Holder’s Pledged Senior Notes in accordance with Section
5.02(b)(iii) of the Purchase Contract Agreement.

 

(c) As soon as practicable after 5:00 p.m. (New York City time) on the fourth
Business Day immediately preceding the Purchase Contract Settlement Date, the
Collateral Agent shall deliver to the Purchase Contract Agent a notice,
substantially in the form of Exhibit E hereto, stating (i) the amount of Cash
that it has received with respect to the Cash Settlement of Corporate Units and
(ii) the amount of Pledged Senior Notes to be remarketed in the Final
Remarketing pursuant to Section 5.02(c)(i) of the Purchase Contract Agreement.

 

(d) If there has been a Failed Final Remarketing, as soon as practicable after
5:00 p.m. (New York City time) on the Business Day immediately preceding the
Purchase Contract Settlement Date, the Collateral Agent shall deliver to the
Purchase Contract Agent a notice, stating (i) the amount of Cash that it has
received with respect to the Cash Settlement of Corporate Units and (ii) the
amount of Pledged Senior Notes with respect to which an automatic deemed
exercise of the Put Right has occurred pursuant to Section 5.02(c)(iii) of the
Purchase Contract Agreement.

 

Section 5.06. Early Settlement and Cash Merger Early Settlement. Upon receipt by
the Collateral Agent of a notice from the Purchase Contract Agent that a Holder
of Units has elected to effect either (i) Early Settlement of its obligations
under the Purchase Contracts forming a part of such Units in accordance with the
terms of the Purchase Contracts and Section 5.07 of the Purchase Contract
Agreement or (ii) Cash Merger Early Settlement of its obligations under the
Purchase Contracts forming a part of such Units in accordance with the terms of
the Purchase Contracts and Section 5.04(b)(ii) of the Purchase Contract
Agreement (which notice shall set forth the number of such Purchase Contracts as
to which such Holder has elected to effect Early Settlement or Cash Merger Early
Settlement), and that the Purchase Contract Agent has received from such Holder,
and paid to the Company as confirmed in writing by the Company, the related
Purchase Price pursuant to the terms of the Purchase Contracts and the Purchase
Contract Agreement and that all conditions to such Early Settlement or Cash
Merger Early Settlement, as the case may be, have been satisfied, then the
Collateral Agent shall release from the Pledge, (1) Pledged Senior Notes or the
Pledged Applicable Ownership Interests in the case of a Holder of Corporate
Units or (2) Pledged Treasury Securities, in the case of a Holder of Treasury
Units, in each case with a Value equal to the product of (x) the Stated Amount
times (y) the number of Purchase Contracts as to which such Holder has elected
to effect Early Settlement or Cash Merger Early Settlement, and shall instruct
the Securities Intermediary to Transfer all such Pledged Applicable Ownership
Interests or Pledged Senior Notes or Pledged Treasury Securities, as the case
may be, to the Purchase Contract Agent for distribution to such Holder, in each
case free and clear of the Pledge created hereby. A holder of Treasury Units may
settle

 

15

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early only in integral multiples of 40 Treasury Units, and a Holder of Corporate
Units, if the Treasury Portfolio has replaced the Senior Notes as a component of
such Corporate Units, may settle early only in integral multiples of 16,000
Corporate Units.

 

Section 5.07. Application of Proceeds in Settlement of Purchase Contracts.

 

(a) If a Holder of Corporate Units (unless the Treasury Portfolio has replaced
the Senior Notes as a component of such Corporate Units) has not elected to make
an effective Cash Settlement by notifying the Purchase Contract Agent in the
manner provided for in Section 5.02(b)(i) of the Purchase Contract Agreement or
does notify the Purchase Contract Agent as provided in paragraph 5.02(b)(i) of
the Purchase Contract Agreement of its intention to pay the Purchase Price in
cash, but fails to make such payment as required by paragraph 5.02(b)(ii) of the
Purchase Contract Agreement, such Holder shall be deemed to have elected to pay
for the shares of Common Stock to be issued under such Purchase Contracts from
the Proceeds of the Final Remarketing of the related Pledged Senior Notes. In
the event of a Successful Final Remarketing, the Collateral Agent shall instruct
the Securities Intermediary to Transfer the related Pledged Senior Notes to the
Remarketing Agent, upon confirmation of deposit by the Remarketing Agent of the
Proceeds of such Final Remarketing (less, to the extent permitted by the
Remarketing Agreement, the Remarketing Fee) in the Collateral Account. On the
Purchase Contract Settlement Date, the Collateral Agent shall, in consultation
with the Purchase Contract Agent, instruct the Securities Intermediary to remit
a portion of the Proceeds from such Final Remarketing equal to the aggregate
principal amount of such Pledged Senior Notes to satisfy in full such Holder’s
obligations to pay the Purchase Price to purchase the shares of Common Stock
under the related Purchase Contracts and to remit the balance of the Proceeds
from the Final Remarketing, if any, to the Purchase Contract Agent for
distribution to such Holder.

 

Upon a Failed Final Remarketing, each Holder of Corporate Units (unless the
Treasury Portfolio has replaced the Senior Notes represented by such Corporate
Units) that has not elected to make an effective Cash Settlement by notifying
the Purchase Contract Agent in the manner provided for in Section 5.02(e)(i) of
the Purchase Contract Agreement or does notify the Purchase Contract Agent as
provided in paragraph 5.02(e)(i) of the Purchase Contract Agreement of its
intention to pay the Purchase Price in cash, but fails to make such payment as
required by paragraph 5.02(e)(ii) of the Purchase Contract Agreement, shall be
deemed to have exercised such Holder’s Put Right with respect to the Senior
Notes that are a component of Corporate Units and to have elected to have a
portion of the Proceeds of the Put Right set-off against such Holder’s
obligation to pay the aggregate Purchase Price for the shares of Common Stock to
be issued under the Purchase Contracts underlying such Corporate Units in full
satisfaction of such Holders’ obligations under the Purchase Contracts.
Following such set-off, the Holder’s obligations to pay the Purchase Price for
the

 

16

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shares of Common Stock will be deemed to be satisfied in full, and the
Collateral Agent shall cause the Securities Intermediary to release the Pledged
Senior Notes from the Collateral Account and shall promptly transfer the Pledged
Senior Notes to the Company. Thereafter, the Collateral Agent shall promptly
remit the remaining Proceeds of the Holder’s exercise of the Put Right in excess
of the aggregate Purchase Price for the shares of Common Stock to be issued
under such Purchase Contracts to the Purchase Contract Agent for payment to the
Holder of the Corporate Units to which such Senior Notes relate.

 

(b) A Holder of a Treasury Unit or a Holder of a Corporate Unit (if the Treasury
Portfolio has replaced the Senior Notes as a component of such Corporate Unit)
shall be deemed to have elected to pay for the shares of Common Stock to be
issued under such Purchase Contracts from the Proceeds of the related Pledged
Treasury Securities or Pledged Applicable Ownership Interests, as the case may
be. Promptly, after 11:00 a.m. (New York City time) on the Business Day
immediately prior to the Purchase Contract Settlement Date, the Company shall
instruct the Collateral Agent in writing as to the type of Permitted Investments
in which any Proceeds shall be invested. In no event shall the Collateral Agent
be liable for the selection of Permitted Investments or for investment losses
incurred thereon. The Collateral Agent shall have no liability in respect of
losses incurred as a result of the failure of the Company to provide timely
written investment direction. Without receiving any instruction from any Holder,
the Collateral Agent shall instruct the Securities Intermediary to remit the
Proceeds of the related Pledged Treasury Securities or Pledged Applicable
Ownership Interests, as the case may be, to the Company in settlement of such
Purchase Contracts on the Purchase Contract Settlement Date. In the event the
sum of the Proceeds from the related Pledged Treasury Securities or Pledged
Applicable Ownership Interests, as the case may be, and the investment earnings
from the investment in Permitted Investments exceeds the aggregate Purchase
Price of the Purchase Contracts being settled thereby, the Collateral Agent
shall instruct the Securities Intermediary to transfer such excess, when
received, to the Purchase Contract Agent for distribution to Holders.

 

(c) On or prior to 5:00 p.m. (New York City time) on the fifth Business Day
immediately preceding the applicable Remarketing Date, but no earlier than the
Payment Date immediately preceding such date, Holders of Separate Senior Notes
may elect to have their Separate Senior Notes remarketed under the Remarketing
Agreement, by delivering their Separate Senior Notes along with a notice of such
election, substantially in the form of Exhibit F hereto, to the Collateral
Agent. The Collateral Agent, acting as Custodial Agent, shall hold Separate
Senior Notes in an account separate from the Collateral Account in which the
Pledged Securities shall be held. Holders of Separate Senior Notes electing to
have their Separate Senior Notes remarketed will also have the right to withdraw
that election by written notice to the Collateral Agent, substantially in the
form of Exhibit G hereto, on or prior to 5:00 p.m. (New York City time) on the
fifth Business Day immediately preceding the applicable Remarketing Date,

 

17

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upon which notice the Custodial Agent shall return such Separate Senior Notes to
such Holder. After such time, such election shall become an irrevocable election
to have such Separate Senior Notes remarketed in such Remarketing.

 

By 11:00 a.m. (New York City time) on the Business Day immediately preceding the
applicable Remarketing Date, the Custodial Agent shall notify the Remarketing
Agent of the aggregate principal amount of the Separate Senior Notes to be
remarketed and deliver to the Remarketing Agent for remarketing all Separate
Senior Notes delivered to the Custodial Agent pursuant to this Section 5.07(c)
and not validly withdrawn prior to such date. In the event of a Successful
Remarketing, after deducting the Remarketing Fee, the Remarketing Agent will
remit to the Custodial Agent the remaining portion of the proceeds of such
Remarketing for payment to the Holders of the remarketed Separate Senior Notes,
in accordance with their respective interests. In the event of a Failed
Remarketing, the Remarketing Agent will promptly return such Separate Senior
Notes to the Custodial Agent for distribution to the appropriate Holders.

 

ARTICLE 6

VOTING RIGHTS — PLEDGED SENIOR NOTES

 

Section 6.01. Voting Rights. Subject to the terms of Section 4.02 of the
Purchase Contract Agreement, the Purchase Contract Agent may exercise, or
refrain from exercising, any and all voting and other consensual rights
pertaining to the Pledged Senior Notes or any part thereof for any purpose not
inconsistent with the terms of this Agreement and in accordance with the terms
of the Purchase Contract Agreement; provided, that the Purchase Contract Agent
shall not exercise or shall not refrain from exercising such right, as the case
may be, if, in the reasonable judgment of the Purchase Contract Agent, such
action would impair or otherwise have a material adverse effect on the value of
all or any of the Pledged Senior Notes; and provided, further, that the Purchase
Contract Agent shall give the Company and the Collateral Agent at least five
Business Days’ prior written notice of the manner in which it intends to
exercise, or its reasons for refraining from exercising, any such right. Upon
receipt of any notices and other communications in respect of any Pledged Senior
Notes, including notice of any meeting at which holders of the Senior Notes are
entitled to vote or solicitation of consents, waivers or proxies of holders of
the Senior Notes, the Collateral Agent shall use reasonable efforts to send
promptly to the Purchase Contract Agent such notice or communication, and as
soon as reasonably practicable after receipt of a written request therefor from
the Purchase Contract Agent, execute and deliver to the Purchase Contract Agent
such proxies and other instruments in respect of such Pledged Senior Notes as
are prepared by the Company and delivered to the Purchase Contract Agent with
respect to the Pledged Senior Notes.

 

18

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ARTICLE 7

RIGHTS AND REMEDIES

 

Section 7.01. Rights and Remedies of the Collateral Agent.

 

(a) In addition to the rights and remedies specified in Section 5.07 hereof or
otherwise available at law or in equity, after an event of default (as specified
in Section 7.01(b) below) hereunder, the Collateral Agent shall have all of the
rights and remedies with respect to the Collateral of a secured party under the
UCC (whether or not the UCC is in effect in the jurisdiction where the rights
and remedies are asserted) and the TRADES Regulations and such additional rights
and remedies to which a secured party is entitled under the laws in effect in
any jurisdiction where any rights and remedies hereunder may be asserted.
Without limiting the generality of the foregoing, such remedies may include, to
the extent permitted by applicable law, (1) retention of the Pledged Senior
Notes, Pledged Treasury Securities or the applicable Pledged Applicable
Ownership Interests in full satisfaction of the Holders’ obligations under the
Purchase Contracts and the Purchase Contract Agreement or (2) sale of the
Pledged Senior Notes, Pledged Treasury Securities or the applicable Pledged
Applicable Ownership Interests in one or more public or private sales.

 

(b) Without limiting any rights or powers otherwise granted by this Agreement to
the Collateral Agent, in the event the Collateral Agent is unable to make
payments to the Company on account of the applicable Pledged Applicable
Ownership Interests, or on account of principal payments of any Pledged Treasury
Securities as provided in Article 3 hereof, in satisfaction of the Obligations
of the Holder of the Units of which such applicable Pledged Applicable Ownership
Interests or such Pledged Treasury Securities, as applicable, are a part, under
the related Purchase Contracts, the inability to make such payments shall
constitute an event of default hereunder and the Collateral Agent shall have and
may exercise, with reference to such Pledged Treasury Securities or Pledged
Applicable Ownership Interests, as applicable, any and all of the rights and
remedies available to a secured party under the UCC and the TRADES Regulations
after default by a debtor, and as otherwise granted herein or under any other
law.

 

(c) Without limiting any rights or powers otherwise granted by this Agreement to
the Collateral Agent, the Collateral Agent is hereby irrevocably authorized to
receive and collect all payments of (i) the principal amount of the Pledged
Senior Notes, (ii) the principal amount of the Pledged Treasury Securities and
(iii) the principal amount of the Pledged Applicable Ownership Interests,
subject, in each case, to the provisions of Article 3 hereof, and as otherwise
granted herein.

 

(d) The Purchase Contract Agent and each Holder of Units agrees that, from time
to time, upon the written request of the Collateral Agent or the Purchase
Contract Agent, such Holder shall execute and deliver such further

 

19

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documents and do such other acts and things as the Collateral Agent may
reasonably request in order to maintain the Pledge, and the perfection and
priority thereof, and to confirm the rights of the Collateral Agent hereunder.
The Purchase Contract Agent shall have no liability to any Holder for executing
any documents or taking any such acts requested by the Collateral Agent
hereunder, except for liability for its own grossly negligent acts, its own
grossly negligent failure to act or its own willful misconduct.

 

Section 7.02. Special Event Redemption. Upon the occurrence of a Special Event
Redemption while Senior Notes are still credited to the Collateral Account, the
Collateral Agent is hereby authorized to present the Pledged Senior Notes for
payment as may be required by their respective terms and to direct the Indenture
Trustee to remit the Redemption Price to the Securities Intermediary for credit
to the Collateral Account on or prior to 12:30 p.m., New York City time on such
Special Event Redemption Date, by federal funds check or wire transfer of
immediately available funds. Upon receipt of such funds, the Pledged Senior
Notes shall be released from the Collateral Account and promptly transferred to
the Company. Upon the crediting of such funds to the Collateral Account, the
Collateral Agent, at the written direction of the Company, shall instruct the
Securities Intermediary to (a) apply an amount of such funds equal to the
Redemption Amount to purchase the Treasury Portfolio from the Quotation Agent,
(b) credit to the Collateral Account the Applicable Ownership Interests
(specified in clause (i) of the definition of such term) in the Treasury
Portfolio and (c) promptly remit the remaining portion of such funds, if any, to
the Purchase Contract Agent for payment to the Holders of Corporate Units, in
accordance with their respective interests and the Purchase Contract Agreement.

 

Section 7.03. Successful Initial Remarketing. In the event of a Successful
Initial Remarketing prior to the Final Remarketing Date, the Collateral Agent
shall, at the direction of the Company, instruct the Securities Intermediary to
(i) Transfer the Pledged Senior Notes to the Remarketing Agent upon confirmation
of deposit by the Remarketing Agent of the Proceeds of such Successful Initial
Remarketing (after deducting any Remarketing Fee in accordance with the
Remarketing Agreement) in the Collateral Account, (ii) apply an amount equal to
the Treasury Portfolio Purchase Price to purchase from the Quotation Agent the
Treasury Portfolio, (iii) credit the Applicable Ownership Interests (specified
in clause (i) of the definition of such term) in the Treasury Portfolio to the
Collateral Account, and (iv) promptly remit the remaining portion of such
Proceeds to the Purchase Contract Agent for payment to the Holders of Corporate
Units, in accordance with their respective interests and the Purchase Contract
Agreement. With respect to Separate Senior Notes, any Proceeds of such Initial
Remarketing (after deducting any Remarketing Fee in accordance with the
Remarketing Agreement) attributable to the Separate Senior Notes will be
remitted to the Custodial Agent for payment to the holders of Separate Senior
Notes. The Pledged Applicable Ownership Interests thus credited to the
Collateral Account will secure the obligation of all Holders of Corporate Units
to purchase Common

 

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Stock of the Company under the Purchase Contracts constituting a part of such
Corporate Units, in substitution for the Pledged Senior Notes, which shall be
released from the Collateral Account. In the event of a Failed Final
Remarketing, the Pledged Senior Notes shall remain credited to the Collateral
Account and Section 5.07 shall apply.

 

Section 7.04. Substitutions. Whenever a Holder has the right to substitute
Treasury Securities, Senior Notes or security entitlements for any of them or
the appropriate Applicable Ownership Interest (as defined in clause (i) of the
definition of such term) in the Treasury Portfolio, as the case may be, for
financial assets held in the Collateral Account, such substitution shall not
constitute a novation of the security interest created hereby.

 

ARTICLE 8

REPRESENTATIONS AND WARRANTIES; COVENANTS

 

Section 8.01. Representations and Warranties. Each Holder from time to time,
acting through the Purchase Contract Agent as attorney-in-fact (it being
understood that the Purchase Contract Agent shall not be liable for any
representation or warranty made by or on behalf of a Holder), hereby represents
and warrants to the Collateral Agent (with respect to such Holder’s interest in
the Collateral), which representations and warranties shall be deemed repeated
on each day a Holder Transfers Collateral, that:

 

(a) such Holder has the power to grant a security interest in and lien on the
Collateral;

 

(b) such Holder is the sole beneficial owner of the Collateral and, in the case
of Collateral delivered in physical form, is the sole holder of such Collateral
and is the sole beneficial owner of, or has the right to Transfer, the
Collateral it Transfers to the Collateral Agent for credit to the Collateral
Account, free and clear of any security interest, lien, encumbrance, call,
liability to pay money or other restriction other than the security interest and
lien granted under Article 2 hereof;

 

(c) upon the Transfer of the Collateral to the Collateral Agent for credit to
the Collateral Account, the Collateral Agent, for the benefit of the Company,
will have a valid and perfected first priority security interest therein
(assuming that any central clearing operation or any securities intermediary or
other entity not within the control of the Holder involved in the Transfer of
the Collateral, including the Collateral Agent and the Securities Intermediary,
gives the notices and takes the action required of it hereunder and under
applicable law for perfection of that interest and assuming the establishment
and exercise of control pursuant to Article 4 hereof); and

 

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(d) the execution and performance by the Holder of its obligations under this
Agreement will not result in the creation of any security interest, lien or
other encumbrance on the Collateral other than the security interest and lien
granted under Article 2 hereof or violate any provision of any existing law or
regulation applicable to it or of any mortgage, charge, pledge, indenture,
contract or undertaking to which it is a party or which is binding on it or any
of its assets.

 

Section 8.02. Covenants. The Holders from time to time, acting through the
Purchase Contract Agent as their attorney-in-fact (it being understood that the
Purchase Contract Agent shall not be liable for any covenant made by or on
behalf of a Holder), hereby covenant to the Collateral Agent that for so long as
the Collateral remains subject to the Pledge:

 

(a) neither the Purchase Contract Agent nor such Holders will create or purport
to create or allow to subsist any mortgage, charge, lien, pledge or any other
security interest whatsoever over the Collateral or any part of it other than
pursuant to this Agreement; and

 

(b) neither the Purchase Contract Agent nor such Holders will sell or otherwise
dispose (or attempt to dispose) of the Collateral or any part of it except for
the beneficial interest therein, subject to the Pledge hereunder, transferred in
connection with the Transfer of the Units.

 

ARTICLE 9

THE COLLATERAL AGENT, THE CUSTODIAL AGENT AND THE SECURITIES

INTERMEDIARY

 

It is hereby agreed as follows:

 

Section 9.01. Appointment, Powers and Immunities. The Collateral Agent, the
Custodial Agent or Securities Intermediary shall act as agent for the Company
hereunder with such powers as are specifically vested in the Collateral Agent,
the Custodial Agent or Securities Intermediary, as the case may be, by the terms
of this Agreement. The Collateral Agent, the Custodial Agent and Securities
Intermediary shall:

 

(a) have no duties or responsibilities except those expressly set forth in this
Agreement and no implied covenants or obligations shall be inferred from this
Agreement against the Collateral Agent, the Custodial Agent and Securities
Intermediary, nor shall the Collateral Agent, the Custodial Agent and Securities
Intermediary be bound by the provisions of any agreement by any party hereto
beyond the specific terms hereof;

 

(b) not be responsible for any recitals contained in this Agreement, or in any
certificate or other document referred to or provided for in, or received by it
under, this Agreement, the Units or the Purchase Contract Agreement, or for the

 

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value, validity, effectiveness, genuineness, enforceability or sufficiency of
this Agreement (other than as against the Collateral Agent, the Custodial Agent
or Securities Intermediary, as the case may be), the Units, any Collateral or
the Purchase Contract Agreement or any other document referred to or provided
for herein or therein or for any failure by the Company or any other Person
(except the Collateral Agent, the Custodial Agent or Securities Intermediary, as
the case may be) to perform any of its obligations hereunder or thereunder or
for the perfection, priority or, except as expressly required hereby,
maintenance of any security interest created hereunder;

 

(c) not be required to initiate or conduct any litigation or collection
proceedings hereunder (except pursuant to directions furnished under Section
9.02 hereof, subject to Section 9.08 hereof);

 

(d) not be responsible for any action taken or omitted to be taken by it
hereunder or under any other document or instrument referred to or provided for
herein or in connection herewith or therewith, except for its own gross
negligence or willful misconduct; and

 

(e) not be required to advise any party as to selling or retaining, or taking or
refraining from taking any action with respect to, any securities or other
property deposited hereunder.

 

Subject to the foregoing, during the term of this Agreement, the Collateral
Agent, the Custodial Agent and the Securities Intermediary shall take all
reasonable action in connection with the safekeeping and preservation of the
Collateral hereunder as determined by industry standards.

 

No provision of this Agreement shall require the Collateral Agent, Custodial
Agent or Securities Intermediary to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its duties hereunder.
In no event shall the Collateral Agent, Custodial Agent or Securities
Intermediary be liable for any amount in excess of the Value of the Collateral.

 

Section 9.02. Instructions of the Company. The Company shall have the right, by
one or more written instruments executed and delivered to the Collateral Agent,
to direct the time, method and place of conducting any proceeding for the
realization of any right or remedy available to the Collateral Agent, or of
exercising any power conferred on the Collateral Agent, or to direct the taking
or refraining from taking of any action authorized by this Agreement; provided,
however, that (i) such direction shall not conflict with the provisions of any
law or of this Agreement or involve the Collateral Agent in personal liability
and (ii) the Collateral Agent shall be indemnified to its satisfaction as
provided herein. Nothing contained in this Section 9.02 shall impair the right
of the Collateral Agent in its discretion to take any action or omit to take any
action which it deems proper and which is not inconsistent with such direction.
None of the Collateral Agent, the Custodial Agent or the Securities Intermediary
has any obligation or responsibility to file UCC financing statements.

 

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Section 9.03. Reliance by Collateral Agent, Custodial Agent and Securities
Intermediary. Each of the Collateral Agent, the Custodial Agent and the
Securities Intermediary shall be entitled, in the absence of bad faith, to rely
conclusively upon any certification, order, judgment, opinion, notice or other
written communication (including, without limitation, any thereof by e-mail or
similar electronic means, telecopy, telex or facsimile) 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 (without being required to determine the correctness of
any fact stated therein) and consult with and conclusively rely upon advice,
opinions and statements of legal counsel and other experts selected by the
Collateral Agent, the Custodial Agent or the Securities Intermediary, as the
case may be. As to any matters not expressly provided for by this Agreement, the
Collateral Agent, the Custodial Agent and the Securities Intermediary shall in
all cases be fully protected in acting, or in refraining from acting, hereunder
in accordance with instructions given by the Company in accordance with this
Agreement.

 

Section 9.04. Certain Rights. (a) Whenever in the administration of the
provisions of this Agreement, the Collateral Agent, the Custodial Agent or the
Securities Intermediary shall deem it necessary or desirable that a matter be
proved or established prior to taking or suffering any action to be taken
hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may, in the absence of gross negligence or bad faith on
the part of the Collateral Agent, the Custodial Agent or the Securities
Intermediary, be deemed to be conclusively proved and established by a
certificate signed by one of the Company’s officers, and delivered to the
Collateral Agent, the Custodial Agent or the Securities Intermediary and such
certificate, in the absence of gross negligence or bad faith on the part of the
Collateral Agent, the Custodial Agent or the Securities Intermediary, shall be
full warrant to the Collateral Agent, the Custodial Agent or the Securities
Intermediary for any action taken, suffered or omitted by it under the
provisions of this Agreement upon the faith thereof.

 

(b) The Collateral Agent, the Custodial Agent or the Securities Intermediary
shall not be bound to make any investigation into the facts or matters stated in
any resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, entitlement order, approval or other paper or document.

 

Section 9.05. Merger, Conversion, Consolidation or Succession to Business. Any
corporation into which the Collateral Agent, the Custodial Agent or the
Securities Intermediary may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Collateral Agent, the Custodial Agent or the
Securities Intermediary shall be a party, or any corporation succeeding to all
or substantially all of the corporate trust business of the Collateral Agent,
the Custodial Agent or the Securities Intermediary shall be the successor of the
Collateral Agent, the

 

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Custodial Agent or the Securities Intermediary hereunder without the execution
or filing of any paper with any party hereto or any further act on the part of
any of the parties hereto except where an instrument of transfer or assignment
is required by law to effect such succession, anything herein to the contrary
notwithstanding.

 

Section 9.06. Rights in Other Capacities. The Collateral Agent, the Custodial
Agent and the Securities Intermediary and their Affiliates may (without having
to account therefor to the Company) accept deposits from, lend money to, make
their investments in and generally engage in any kind of banking, trust or other
business with the Purchase Contract Agent, any other Person interested herein
and any Holder of Units (and any of their respective subsidiaries or affiliates)
as if it were not acting as the Collateral Agent, the Custodial Agent or the
Securities Intermediary, as the case may be, and the Collateral Agent, the
Custodial Agent, the Securities Intermediary and their affiliates may accept
fees and other consideration from the Purchase Contract Agent and any Holder of
Units without having to account for the same to the Company; provided that each
of the Securities Intermediary, the Custodial Agent and the Collateral Agent
covenants and agrees with the Company that it shall not accept, receive or
permit there to be created in favor of itself and shall take no affirmative
action to permit there to be created in favor of any other Person, any security
interest, lien or other encumbrance of any kind in or upon the Collateral other
than the lien created by the Pledge.

 

Section 9.07. Non-reliance on Collateral Agent, the Custodial Agent and
Securities Intermediary. None of the Securities Intermediary, the Custodial
Agent or the Collateral Agent shall be required to keep itself informed as to
the performance or observance by the Purchase Contract Agent or any Holder of
Units of this Agreement, the Purchase Contract Agreement, the Units or any other
document referred to or provided for herein or therein or to inspect the
properties or books of the Purchase Contract Agent or any Holder of Units. None
of the Collateral Agent, the Custodial Agent or the Securities Intermediary
shall have any duty or responsibility to provide the Company with any credit or
other information concerning the affairs, financial condition or business of the
Purchase Contract Agent or any Holder of Units (or any of their respective
affiliates) that may come into the possession of the Collateral Agent, the
Custodial Agent or the Securities Intermediary or any of their respective
affiliates.

 

Section 9.08. Compensation and Indemnity. The Company agrees to:

 

(a) pay the Collateral Agent, the Custodial Agent and the Securities
Intermediary from time to time such compensation as shall be agreed in writing
between the Company and the Collateral Agent, the Custodial Agent or the
Securities Intermediary, as the case may be, for all services rendered by them
hereunder;

 

(b) indemnify and hold harmless the Collateral Agent, the Custodial Agent, the
Securities Intermediary and each of their respective directors, officers,

 

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agents and employees (collectively, the “Indemnitees”), from and against any and
all claims, liabilities, losses, damages, fines, penalties and expenses
(including reasonable fees and expenses of counsel) and taxes (other than those
based upon, determined by or measured by the income of the Collateral Agent, the
Custodial Agent and Securities Intermediary (collectively, “Losses” and
individually, a “Loss”) that may be imposed on, incurred by, or asserted
against, the Indemnitees or any of them for following any instructions or other
directions upon which either the Collateral Agent, the Custodial Agent or the
Securities Intermediary is entitled to rely pursuant to the terms of this
Agreement, provided that the Collateral Agent, the Custodial Agent or the
Securities Intermediary has not acted with gross negligence or engaged in
willful misconduct or bad faith with respect to the specific Loss against which
indemnification is sought; and

 

(c) in addition to and not in limitation of paragraph (b) immediately above,
indemnify and hold the Indemnitees and each of them harmless from and against
any and all Losses that may be imposed on, incurred by or asserted against, the
Indemnitees or any of them in connection with or arising out of the Collateral
Agent’s, the Custodial Agent’s or the Securities Intermediary’s acceptance or
performance of its powers and duties under this Agreement, provided that the
Collateral Agent, the Custodial Agent or the Securities Intermediary has not
acted with gross negligence or engaged in willful misconduct or bad faith with
respect to the specific Loss against which indemnification is sought.

 

The provisions of this Section and Section 11.07 shall survive the resignation
or removal of the Collateral Agent, Custodial Agent or Securities Intermediary
and the termination of this Agreement.

 

Section 9.09. Failure to Act. In the event of any ambiguity in the provisions of
this Agreement or any dispute between or conflicting claims by or among the
parties hereto or any other Person with respect to any funds or property
deposited hereunder, then at its sole option, each of the Collateral Agent, the
Custodial Agent and the Securities Intermediary shall be entitled, after prompt
notice to the Company and the Purchase Contract Agent, to refuse to comply with
any and all claims, demands or instructions with respect to such property or
funds so long as such dispute or conflict shall continue, and the Collateral
Agent, the Custodial Agent and the Securities Intermediary shall not be or
become liable in any way to any of the parties hereto for its failure or refusal
to comply with such conflicting claims, demands or instructions. The Collateral
Agent, the Custodial Agent and the Securities Intermediary shall be entitled to
refuse to act until either:

 

(a) such conflicting or adverse claims or demands shall have been finally
determined by a court of competent jurisdiction or settled by agreement between
the conflicting parties as evidenced in a writing satisfactory to the Collateral
Agent, the Custodial Agent or the Securities Intermediary; or

 

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(b) the Collateral Agent, the Custodial Agent or the Securities Intermediary
shall have received security or an indemnity satisfactory to it sufficient to
save it harmless from and against any and all loss, liability or reasonable
out-of-pocket expense which it may incur by reason of its acting.

 

The Collateral Agent, the Custodial Agent and the Securities Intermediary may in
addition elect to commence an interpleader action or seek other judicial relief
or orders as the Collateral Agent, the Custodial Agent or the Securities
Intermediary may deem necessary. Notwithstanding anything contained herein to
the contrary, none of the Collateral Agent, the Custodial Agent or the
Securities Intermediary shall be required to take any action that is in its
opinion contrary to law or to the terms of this Agreement, or which would in its
opinion subject it or any of its officers, employees or directors to liability.

 

Section 9.10. Resignation of Collateral Agent, the Custodial Agent and
Securities Intermediary.

 

(a) Subject to the appointment and acceptance of a successor Collateral Agent,
Custodial Agent or Securities Intermediary as provided below:

 

(i) the Collateral Agent, the Custodial Agent and the Securities Intermediary
may resign at any time by giving notice thereof to the Company and the Purchase
Contract Agent as attorney-in-fact for the Holders of Units;

 

(ii) the Collateral Agent, the Custodial Agent and the Securities Intermediary
may be removed at any time by the Company; and

 

(iii) if the Collateral Agent, the Custodial Agent or the Securities
Intermediary fails to perform any of its material obligations hereunder in any
material respect for a period of not less than 20 days after receiving written
notice of such failure by the Purchase Contract Agent and such failure shall be
continuing, the Collateral Agent, the Custodial Agent and the Securities
Intermediary may be removed by the Purchase Contract Agent, acting at the
direction of the Holders of Units.

 

The Purchase Contract Agent shall promptly notify the Company of any removal of
the Collateral Agent, the Custodial Agent or the Securities Intermediary
pursuant to clause (iii) of this Section 9.10. Upon any such resignation or
removal, the Company shall have the right to appoint a successor Collateral
Agent, Custodial Agent or Securities Intermediary, as the case may be, which
shall not be an Affiliate of the Purchase Contract Agent. If no successor
Collateral Agent, Custodial Agent or Securities Intermediary shall have been so
appointed and shall have accepted such appointment within 30 days after the
retiring Collateral Agent’s, Custodial Agent’s or Securities Intermediary’s
giving of notice of resignation or the Company’s or the Purchase Contract
Agent’s giving notice of such removal, then the retiring or removed Collateral
Agent,

 

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Custodial Agent or Securities Intermediary may petition any court of competent
jurisdiction, at the expense of the Company, for the appointment of a successor
Collateral Agent, Custodial Agent or Securities Intermediary. The Collateral
Agent, the Custodial Agent and the Securities Intermediary shall each be a bank
or a national banking association which has an office (or an agency office) in
New York City with a combined capital and surplus of at least $50,000,000. Upon
the acceptance of any appointment as Collateral Agent, Custodial Agent or
Securities Intermediary hereunder by a successor Collateral Agent, Custodial
Agent or Securities Intermediary, as the case may be, such successor Collateral
Agent, Custodial Agent or Securities Intermediary, as the case may be, shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Collateral Agent, Custodial Agent or Securities
Intermediary, as the case may be, and the retiring Collateral Agent, Custodial
Agent or Securities Intermediary, as the case may be, shall take all appropriate
action, subject to payment of any amounts then due and payable to it hereunder,
to transfer any money and property held by it hereunder (including the
Collateral) to such successor. The retiring Collateral Agent, Custodial Agent or
Securities Intermediary shall, upon such succession, be discharged from its
duties and obligations as Collateral Agent, Custodial Agent or Securities
Intermediary hereunder. After any retiring Collateral Agent’s, Custodial Agent’s
or Securities Intermediary’s resignation hereunder as Collateral Agent,
Custodial Agent or Securities Intermediary, the provisions of this Article 9
shall continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as the Collateral Agent, Custodial
Agent or Securities Intermediary. Any resignation or removal of the Collateral
Agent, Custodial Agent or Securities Intermediary hereunder, at a time when such
Person is acting as the Collateral Agent, Custodial Agent or Securities
Intermediary, shall be deemed for all purposes of this Agreement as the
simultaneous resignation or removal of the Collateral Agent, Securities
Intermediary or Custodial Agent, as the case may be.

 

(b) Because The Bank of New York is serving as the Collateral Agent hereunder
and the Purchase Contract Agent under the Purchase Contract Agreement, if an
event of default occurs hereunder or under the Purchase Contract Agreement, The
Bank of New York will resign as the Collateral Agent, but continue to act as the
Purchase Contract Agent. A successor Collateral Agent will be appointed in
accordance with the terms hereof. If any such event of default is cured or
waived prior to the appointment of a successors Collateral Agent, the duty of
The Bank of New York to resign in respect of such event of default shall cease.

 

Section 9.11. Right to Appoint Agent or Advisor. The Collateral Agent shall have
the right to appoint agents or advisors in connection with any of its duties
hereunder, and the Collateral Agent shall not be liable for any action taken or
omitted by, or in reliance upon the advice of, such agents or advisors selected
in good faith.

 

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Section 9.12. Survival. The provisions of this Article 9 shall survive
termination of this Agreement and the resignation or removal of the Collateral
Agent, the Custodial Agent or the Securities Intermediary.

 

Section 9.13. Exculpation. Anything contained in this Agreement to the contrary
notwithstanding, in no event shall the Collateral Agent, the Custodial Agent or
the Securities Intermediary or their officers, directors, employees or agents be
liable under this Agreement to any third party for indirect, special, punitive,
or consequential loss or damage of any kind whatsoever, including, but not
limited to, lost profits, whether or not the likelihood of such loss or damage
was known to the Collateral Agent, the Custodial Agent or the Securities
Intermediary, or any of them and regardless of the form of action.

 

ARTICLE 10

AMENDMENT

 

Section 10.01. Amendment Without Consent of Holders. Without the consent of any
Holders, the Company, when duly authorized, the Collateral Agent, the Custodial
Agent, the Securities Intermediary and the Purchase Contract Agent, at any time
and from time to time, may amend this Agreement, in form satisfactory to the
Company, the Collateral Agent, the Custodial Agent, the Securities Intermediary
and the Purchase Contract Agent, to:

 

(a) evidence the succession of another Person to the Company and the assumption
by any such successor of the covenants of the Company;

 

(b) evidence and provide for the acceptance of appointment hereunder by a
successor Collateral Agent, Custodial Agent, Securities Intermediary or Purchase
Contract Agent;

 

(c) add to the covenants of the Company for the benefit of the Holders, or
surrender any right or power herein conferred upon the Company, provided that
such covenants or such surrender do not adversely affect the validity,
perfection or priority of the Pledge created hereunder;

 

(d) cure any ambiguity (or formal defect), correct or supplement any provisions
herein which may be inconsistent with any other such provisions herein; or

 

(e) make any other provisions with respect to such matters or questions arising
under this Agreement, provided that such action shall not adversely affect the
interests of the Holders in any material respect.

 

Section 10.02. Amendment with Consent of Holders. With the consent of the
Holders of not less than a majority of the Purchase Contracts at the time
outstanding, including without limitation the consent of the Holders obtained in

 

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connection with a tender or an exchange offer, by Act of such Holders delivered
to the Company, the Purchase Contract Agent, the Custodial Agent, the Securities
Intermediary and the Collateral Agent, as the case may be, the Company, when
duly authorized by a Board Resolution, the Purchase Contract Agent, the
Collateral Agent, the Securities Intermediary and the Collateral Agent may amend
this Agreement for the purpose of modifying in any manner the provisions of this
Agreement or the rights of the Holders in respect of the Units; provided,
however, that no such supplemental agreement shall, without the unanimous
consent of the Holders of each Outstanding Unit adversely affected thereby in
any material respect:

 

(a) change the amount or type of Collateral underlying a Unit (except for the
rights of holders of Corporate Units to substitute the Treasury Securities for
the Pledged Senior Notes or the Pledged Applicable Ownership Interests, as the
case may be, or the rights of Holders of Treasury Units to substitute Senior
Notes or the Applicable Ownership Interests (as specified in clause (i) of the
definition of such term) in the Treasury Portfolio, as applicable, for the
Pledged Treasury Securities), unless such change is not adverse to the Holders,
impair the right of the Holder of any Unit to receive distributions on the
underlying Collateral or otherwise adversely affect the Holder’s rights in or to
such Collateral; or

 

(b) otherwise effect any action that would require the consent of the Holder of
each Outstanding Unit affected thereby pursuant to the Purchase Contract
Agreement if such action were effected by a modification or amendment of the
provisions of the Purchase Contract Agreement; or

 

(c) reduce the percentage of Purchase Contracts the consent of whose Holders is
required for the modification or amendment of the provisions of this Agreement;

 

provided that if any amendment or proposal referred to above would adversely
affect only the Corporate Units or only the Treasury Units, then only the
affected class of Holders as of the record date for the Holders entitled to vote
thereon will be entitled to vote on such amendment or proposal, and such
amendment or proposal shall not be effective except with the consent of Holders
of not less than a majority of such class; provided, further, that the unanimous
consent of the Holders of each outstanding Purchase Contract of such class
affected thereby shall be required to approve any amendment or proposal
specified in clauses (a) through (c) above.

 

It shall not be necessary for any Act of Holders under this Section to approve
the particular form of any proposed amendment, but it shall be sufficient if
such Act shall approve the substance thereof.

 

Section 10.03. Execution of Amendments. In executing any amendment permitted by
this Article, the Collateral Agent, the Custodial Agent, the Securities

 

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Intermediary and the Purchase Contract Agent shall be entitled to receive and
(subject to Section 7.01 of the Purchase Contract Agreement with respect to the
Purchase Contract Agent) shall be fully authorized and protected in relying
upon, an Opinion of Counsel and an officers’ certificate stating that the
execution of such amendment is authorized or permitted by this Agreement and
that all conditions precedent, if any, to the execution and delivery of such
amendment have been satisfied. The Collateral Agent, Custodial Agent, Securities
Intermediary and Purchase Contract Agent may, but shall not be obligated to,
enter into any such amendment which affects their own respective rights, duties
or immunities under this Agreement or otherwise.

 

Section 10.04. Effect of Amendments. Upon the execution of any amendment under
this Article, this Agreement shall be modified in accordance therewith, and such
amendment shall form a part of this Agreement for all purposes; and every Holder
of Certificates theretofore or thereafter authenticated, executed on behalf of
the Holders and delivered under the Purchase Contract Agreement shall be bound
thereby.

 

Section 10.05. Reference of Amendments. Certificates authenticated, executed on
behalf of the Holders and delivered after the execution of any amendment
pursuant to this Section may, and shall if required by the Collateral Agent or
the Purchase Contract Agent, bear a notation in form approved by the Purchase
Contract Agent and the Collateral Agent as to any matter provided for in such
amendment. If the Company shall so determine, new Certificates so modified as to
conform, in the opinion of the Collateral Agent, the Purchase Contract Agent and
the Company, to any such amendment may be prepared and executed by the Company
and authenticated, executed on behalf of the Holders and delivered by the
Purchase Contract Agent in accordance with the Purchase Contract Agreement in
exchange for Certificates representing Outstanding Units.

 

ARTICLE 11

MISCELLANEOUS

 

Section 11.01. No Waiver. No failure on the part of the Company, the Collateral
Agent, the Custodial Agent, the Securities Intermediary or any of their
respective agents to exercise, and no course of dealing with respect to, and no
delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise by the Company, the
Collateral Agent, the Custodial Agent, the Securities Intermediary or any of
their respective agents of any right, power or remedy hereunder preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy. The remedies herein are cumulative and are not exclusive of any remedies
provided by law.

 

Section 11.02. Governing Law; Submission to Jurisdiction. THIS AGREEMENT SHALL
BE GOVERNED BY, AND CONSTRUED IN

 

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ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. The Company, the Collateral
Agent, the Custodial Agent, the Securities Intermediary and the Holders from
time to time of the Units, acting through the Purchase Contract Agent as their
attorney-in-fact, hereby submit to the nonexclusive jurisdiction of the United
States District Court for the Southern District of New York and of any New York
state court sitting in New York City for the purposes of all legal proceedings
arising out of or relating to this Agreement or the transactions contemplated
hereby. The Company, the Collateral Agent, the Custodial Agent, the Securities
Intermediary and the Holders from time to time of the Units, acting through the
Purchase Contract Agent as their attorney-in-fact, irrevocably waive, to the
fullest extent permitted by applicable law, any objection that they may now or
hereafter have to the laying of the venue of any such proceeding brought in such
a court and any claim that any such proceeding brought in such a court has been
brought in an inconvenient forum.

 

Section 11.03. Notices. All notices, requests, consents and other communications
provided for herein (including, without limitation, any modifications of, or
waivers or consents under, this Agreement) shall be given or made in writing
(including, without limitation, by telecopy) delivered to the intended recipient
at the “Address for Notices” specified below its name on the signature pages
hereof or, as to any party, at such other address as shall be designated by such
party in a notice to the other parties. 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.

 

Section 11.04. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the respective successors and assigns of the Company,
the Collateral Agent, the Custodial Agent, the Securities Intermediary and the
Purchase Contract Agent, and the Holders from time to time of the Units, by
their acceptance of the same, shall be deemed to have agreed to be bound by the
provisions hereof and to have ratified the agreements of, and the grant of the
Pledge hereunder by, the Purchase Contract Agent.

 

Section 11.05. 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.

 

Section 11.06. Severability. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(i) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in order to carry out the
intentions of the parties hereto as nearly as may be possible and (ii) the
invalidity or unenforceability of any provision hereof in any jurisdiction shall
not affect the validity or enforceability of such provision in any other
jurisdiction.

 

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Section 11.07. Expenses, Etc. The Company agrees to reimburse the Collateral
Agent, the Custodial Agent and the Securities Intermediary for:

 

(a) all reasonable costs and expenses of the Collateral Agent, the Custodial
Agent and the Securities Intermediary (including, without limitation, the
reasonable fees and expenses of counsel to the Collateral Agent, the Custodial
Agent and the Securities Intermediary), in connection with (i) the negotiation,
preparation, execution and delivery or performance of this Agreement and (ii)
any modification, supplement or waiver of any of the terms of this Agreement;

 

(b) all reasonable costs and expenses of the Collateral Agent, the Custodial
Agent and the Securities Intermediary (including, without limitation, reasonable
fees and expenses of counsel) in connection with (i) any enforcement or
proceedings resulting or incurred in connection with causing any Holder of Units
to satisfy its obligations under the Purchase Contracts forming a part of the
Units and (ii) the enforcement of this Section 11.07;

 

(c) 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;

 

(d) all reasonable fees and expenses of any agent or advisor appointed by the
Collateral Agent and consented to by the Company under Section 9.11 of this
Agreement; and

 

(e) any other out-of-pocket costs and expenses reasonably incurred by the
Collateral Agent, the Custodial Agent and the Securities Intermediary in
connection with the performance of their duties hereunder.

 

Section 11.08. Security Interest Absolute. All rights of the Collateral Agent
and security interests hereunder, and all obligations of the Holders from time
to time hereunder, shall be absolute and unconditional irrespective of:

 

(a) any lack of validity or enforceability of any provision of the Purchase
Contracts or the Units or any other agreement or instrument relating thereto;

 

(b) any change in the time, manner or place of payment of, or any other term of,
or any increase in the amount of, all or any of the obligations of Holders of
the Units under the related Purchase Contracts, or any other amendment or waiver
of any term of, or any consent to any departure from any requirement of, the
Purchase Contract Agreement or any Purchase Contract or any other agreement or
instrument relating thereto; or

 

33

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(c) any other circumstance which might otherwise constitute a defense available
to, or discharge of, a borrower, a guarantor or a pledgor.

 

Section 11.09. Notice of Special Event, Special Event Redemption and Termination
Event. Upon the occurrence of a Special Event, a Special Event Redemption or a
Termination Event, the Company shall deliver written notice to the Purchase
Contract Agent, the Collateral Agent and the Securities Intermediary. Upon the
written request of the Collateral Agent or the Securities Intermediary, the
Company shall inform such party whether or not a Special Event, a Special Event
Redemption or a Termination Event has occurred.

 

SIGNATURES ON THE FOLLOWING PAGE

 

34

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

 

THE PMI GROUP, INC.

 

THE BANK OF NEW YORK, as

Purchase Contract Agent and as

attorney-in-fact of the Holders from time

to time of the Units

By:

 

/s/ Donald P. Lofe, Jr.

--------------------------------------------------------------------------------

 

By:

 

/s/ Michael Pitfick

--------------------------------------------------------------------------------

   

Name:

 

Donald P. Lofe, Jr.

     

Name:

 

Michael Pitfick

   

Title:

 

Executive Vice President and

Chief Financial Officer

     

Title:

 

Assistant Vice President

Address for Notices:

 

Address for Notices:

The PMI Group, Inc.

303 Oak Road

Walnut Creek, California 94597

Telecopier No.: (925) 658-6175

Attention: General Counsel

 

The Bank of New York

101 Barclay Street, Floor 8W

New York, NY 10286

Telecopier No.: 212-815-5707

Attention: Corporate Trust Administration

 

THE BANK OF NEW YORK,

as Collateral Agent, Custodial Agent

and Securities Intermediary

By:

 

/s/ Michael Pitfick

--------------------------------------------------------------------------------

   

Name:

 

Michael Pitfick

   

Title:

 

Assistant Vice President

 

Address for Notices:

The Bank of New York

101 Barclay Street, Floor 8W

New York, NY 10286

Telecopier No.: 212-815-5707

Attention: Corporate Trust

Administration

 

--------------------------------------------------------------------------------

EXHIBIT A

 

INSTRUCTION

FROM PURCHASE CONTRACT AGENT

TO COLLATERAL AGENT

(Creation of Treasury Units)

 

The Bank of New York

The Collateral Agent

101 Barclay Street, Floor 8W

New York, NY 10286

Telecopier No.: 212-815-5707

Attention: Corporate Trust Administration

 

Re:                 Corporate Units of The PMI Group, Inc. (the “Company”)

 

The securities account of The Bank of New York, as Collateral Agent, maintained
by the Securities Intermediary and designated The Bank of New York, as
Collateral Agent of The PMI Group, Inc., as pledgee of The Bank of New York, as
the Purchase Contract Agent on behalf of and as attorney-in-fact for the
Holders” (the “Collateral Account”)

 

Please refer to the Pledge Agreement, dated as of November 3, 2003 (the “Pledge
Agreement”), among the Company, you, as Collateral Agent, as Securities
Intermediary and as Custodial Agent and the undersigned, as Purchase Contract
Agent and as attorney-in-fact for the holders of Corporate Units from time to
time. Capitalized terms used herein but not defined shall have the meaning set
forth in the Pledge Agreement.

 

We hereby notify you in accordance with Section 5.02 of the Pledge Agreement
that the holder of securities named below (the “Holder”) has elected to
substitute $             Value of Treasury Securities or security entitlements
with respect thereto in exchange for an equal Value of Pledged Senior Notes
relating to              Corporate Units and has delivered to the undersigned a
notice stating that the Holder has Transferred such Treasury Securities or
security entitlements with respect thereto to the Securities Intermediary, for
credit to the Collateral Account.

 

We hereby request that you instruct the Securities Intermediary, upon
confirmation that such Treasury Securities or security entitlements thereto have
been credited to the Collateral Account, to release to the undersigned an equal
Value of Pledged Senior Notes in accordance with Section 5.02 of the Pledge
Agreement.

 

Date:

 

A-1

--------------------------------------------------------------------------------

The Bank of New York, as Purchase Contract Agent and as attorney-in-fact of the
Holders from time to time of the Units

By:

 

 

--------------------------------------------------------------------------------

   

Name:

   

Title:

 

A-2

--------------------------------------------------------------------------------

Please print name and address of Holder electing to substitute Treasury
Securities or security entitlements with respect thereto for the Pledged Senior
Notes:

 

 

--------------------------------------------------------------------------------

 

--------------------------------------------------------------------------------

Name  

Social Security or other Taxpayer Identification Number, if any

 

--------------------------------------------------------------------------------

    Address    

 

--------------------------------------------------------------------------------

   

 

--------------------------------------------------------------------------------

   

 

A-3

--------------------------------------------------------------------------------

EXHIBIT B

 

INSTRUCTION

FROM COLLATERAL AGENT

TO SECURITIES INTERMEDIARY

(Creation of Treasury Units)

 

The Bank of New York

as Securities Intermediary

101 Barclay Street, Floor 8W

New York, NY 10286

Telecopier No.: 212-815-5707

Attention: Corporate Trust Administration

 

Re:                 Corporate Units of The PMI Group, Inc. (the “Company”)

 

The securities account of The Bank of New York, as Collateral Agent, maintained
by the Securities Intermediary and designated The Bank of New York, as
Collateral Agent of The PMI Group, Inc. as pledgee of The Bank of New York, as
the Purchase Contract Agent on behalf of and as attorney-in-fact for the
Holders” (the “Collateral Account”)

 

Please refer to the Pledge Agreement, dated as of November 3, 2003 (the “Pledge
Agreement”), among the Company, you, as Collateral Agent, as Securities
Intermediary and as Custodial Agent and The Bank of New York, as Purchase
Contract Agent and as attorney-in-fact for the holders of Corporate Units from
time to time. Capitalized terms used herein but not defined shall have the
meanings set forth in the Pledge Agreement.

 

When you have confirmed that $             Value of Treasury Securities or
security entitlements thereto has been credited to the Collateral Account by or
for the benefit of             , as Holder of Corporate Units (the “Holder”),
you are hereby instructed to release from the Collateral Account an equal Value
of Pledged Senior Notes or security entitlements with respect thereto relating
to              Corporate Units of the Holder by Transfer to the Purchase
Contract Agent.

 

B-1

--------------------------------------------------------------------------------

Dated:                     

 

The Bank of New York, as Collateral Agent

By:

 

 

--------------------------------------------------------------------------------

   

Name:

   

Title:

 

B-2

--------------------------------------------------------------------------------

Please print name and address of Holder:

 

 

--------------------------------------------------------------------------------

 

--------------------------------------------------------------------------------

Name  

Social Security or other Taxpayer

Identification Number, if any

 

--------------------------------------------------------------------------------

    Address    

 

--------------------------------------------------------------------------------

   

 

--------------------------------------------------------------------------------

   

 

B-3

--------------------------------------------------------------------------------

EXHIBIT C

 

INSTRUCTION

FROM PURCHASE CONTRACT AGENT

TO COLLATERAL AGENT

(Recreation of Corporate Units)

 

The Bank of New York

The Collateral Agent

101 Barclay Street, Floor 8W

New York, NY 10286

Telecopier No.: 212-815-5707

Attention: Corporate Trust Administration

 

Re:                 Treasury Units of The PMI Group, Inc. (the “Company”)

 

Please refer to the Pledge Agreement dated as of November 3, 2003 (the “Pledge
Agreement”), among the Company, you, as Collateral Agent, as Securities
Intermediary, as Custodial Agent and the undersigned, as Purchase Contract Agent
and as attorney-in-fact for the holders of Treasury Units from time to time.
Capitalized terms used herein but not defined shall have the meaning set forth
in the Pledge Agreement.

 

We hereby notify you in accordance with Section 5.03 of the Pledge Agreement
that the holder of securities named below (the “Holder”) has elected to
substitute $             Value of Senior Notes or security entitlements with
respect thereto in exchange for an equal value of Value of Pledged Treasury
Securities with respect to              Treasury Units and has delivered to the
undersigned a notice stating that the holder has Transferred such Senior Notes
or security entitlements with respect thereto to the Securities Intermediary,
for credit to the Collateral Account.

 

C-1

--------------------------------------------------------------------------------

We hereby request that you instruct the Securities Intermediary, upon
confirmation that such Senior Notes or security entitlements with respect
thereto have been credited to the Collateral Account, to release to the
undersigned an equal Value of Treasury Securities in accordance with Section
5.03 of the Pledge Agreement.

 

        The Bank of New York, as Purchase Contract Agent and as attorney-in-fact
of the Holders from time to time of the Units

Dated:

 

 

--------------------------------------------------------------------------------

 

By:

 

 

--------------------------------------------------------------------------------

           

Name:

           

Title:

 

C-2

--------------------------------------------------------------------------------

Please print name and address of Holder electing to substitute Senior Notes or
security entitlements with respect thereto for Pledged Treasury Securities:

 

 

--------------------------------------------------------------------------------

 

--------------------------------------------------------------------------------

Name  

Social Security or other Taxpayer

Identification Number, if any

 

--------------------------------------------------------------------------------

    Address    

 

--------------------------------------------------------------------------------

   

 

--------------------------------------------------------------------------------

   

 

C-3

--------------------------------------------------------------------------------

EXHIBIT D

 

INSTRUCTION

FROM COLLATERAL AGENT

TO SECURITIES INTERMEDIARY

(Recreation of Corporate Units)

 

The Bank of New York

as Securities Intermediary

101 Barclay Street, Floor 8W

New York, NY 10286

Telecopier No.: 212-815-5707

Attention: Corporate Trust Administration

 

Re:                 Treasury Units of The PMI Group, Inc. (the “Company”)

 

The securities account of The Bank of New York, as Collateral Agent, maintained
by the Securities Intermediary and designated The Bank of New York, as
Collateral Agent of The PMI Group, Inc., as pledgee of The Bank of New York, as
the Purchase Contract Agent on behalf of and as attorney-in-fact for the
Holders” (the “Collateral Account”)

 

Please refer to the Pledge Agreement dated as of November 3, 2003 (the “Pledge
Agreement”), among the Company, you, as Securities Intermediary, Custodial Agent
and Collateral Agent and The Bank of New York, as Purchase Contract Agent and as
attorney-in-fact for the holders of Corporate Units from time to time.
Capitalized terms used herein but not defined shall have the meanings set forth
in the Pledge Agreement.

 

When you have confirmed that $              Value of Senior Notes or security
entitlements with respect thereto has been credited to the Collateral Account by
or for the benefit of             , as Holder of Treasury Units (the “Holder”),
you are hereby instructed to release from the Collateral Account an equal Value
of Treasury Securities or security entitlements with respect thereto relating to
             Treasury Units of the Holder by Transfer to the Purchase Contract
Agent.

 

D-1

--------------------------------------------------------------------------------

       

The Bank of New York, as Collateral Agent

Dated:

 

 

--------------------------------------------------------------------------------

 

By:

 

--------------------------------------------------------------------------------

           

Name:

           

Title:

 

Please print name and address of Holder:

 

 

--------------------------------------------------------------------------------

 

--------------------------------------------------------------------------------

Name  

     Social Security or other Taxpayer

     Identification Number, if any

 

--------------------------------------------------------------------------------

    Address    

 

--------------------------------------------------------------------------------

   

 

--------------------------------------------------------------------------------

   

 

 

D-2

--------------------------------------------------------------------------------

EXHIBIT E

 

NOTICE OF CASH SETTLEMENT FROM COLLATERAL

AGENT TO PURCHASE CONTRACT AGENT

(Cash Settlement Amounts)

 

The Bank of New York

The Purchase Contract Agent

101 Barclay Street, Floor 8W

New York, NY 10286

Telecopier No.: 212-815-5707

Attention: Corporate Trust Administration

 

Re:                 Corporate Units of The PMI Group, Inc. (the “Company”)
             Treasury Units of the Company

 

Please refer to the Pledge Agreement dated as of November 3, 2003 (the “Pledge
Agreement”), by and among you, the Company, and The Bank of New York, as
Collateral Agent, Custodial Agent and Securities Intermediary. Unless otherwise
defined herein, terms defined in the Pledge Agreement are used herein as defined
therein.

 

In accordance with Section 5.05(c) of the Pledge Agreement, we hereby notify you
that as of 5:00 p.m. (New York City time) on the fourth Business Day immediately
preceding November 15, 2006 (the “Purchase Contract Settlement Date”), we have
received (i) $              in immediately available funds paid in an aggregate
amount equal to the Purchase Price due to the Company on the Purchase Contract
Settlement Date with respect to              Corporate Units and (ii) based on
the funds received set forth in clause (i) above, an aggregate principal amount
of $             of Pledged Senior Notes are to be tendered for purchase in the
Final Remarketing.

 

       

The Bank of New York, as Collateral Agent

Dated:

 

 

--------------------------------------------------------------------------------

 

By:

 

--------------------------------------------------------------------------------

           

Name:

           

Title:

 

E-1

--------------------------------------------------------------------------------

EXHIBIT F

 

INSTRUCTION TO CUSTODIAL AGENT REGARDING

REMARKETING

 

The Bank of New York

The Custodial Agent

101 Barclay Street, Floor 8W

New York, NY 10286

Telecopier No.: 212-815-5707

Attention: Corporate Trust Administration

 

Re: Senior Notes Due November 15, 2008 of The PMI Group, Inc. (the “Company”)

 

The undersigned hereby notifies you in accordance with Section 5.07(c) of the
Pledge Agreement, dated as of November 3, 2003 (the “Pledge Agreement”), among
the Company, you, as Collateral Agent, Custodial Agent and Securities
Intermediary and The Bank of New York, as the Purchase Contract Agent and as
attorney-in-fact for the holders of Corporate Units from time to time, that the
undersigned elects to deliver $                     aggregate principal amount
of Separate Senior Notes for delivery to the Remarketing Agent on or prior to
5:00 p.m. (New York City time) on the fifth Business Day immediately preceding
the Initial Remarketing Date for remarketing pursuant to Section 5.07(c) of the
Pledge Agreement. The undersigned will, upon request of the Remarketing Agent,
execute and deliver any additional documents deemed by the Remarketing Agent or
by the Company to be necessary or desirable to complete the sale, assignment and
transfer of the Separate Senior Notes tendered hereby. Capitalized terms used
herein but not defined shall have the meaning set forth in the Pledge Agreement.

 

The undersigned hereby instructs you, upon receipt of the Proceeds of such
remarketing from the Remarketing Agent, to deliver such Proceeds to the
undersigned in accordance with the instructions indicated herein under “A.
Payment Instructions.” The undersigned hereby instructs you, in the event of a
Failed Remarketing, upon receipt of the Separate Senior Notes tendered herewith
from the Remarketing Agent, to deliver such Separate Senior Notes to the
person(s) and the address(es) indicated herein under “B. Delivery Instructions.”

 

With this notice, the undersigned hereby (i) represents and warrants that the
undersigned has full power and authority to tender, sell, assign and transfer
the Separate Senior Notes tendered hereby and that the undersigned is the record
owner of any Senior Notes tendered herewith in physical form or a participant in
The Depository Trust Company (“DTC”) and the beneficial owner of any Senior
Notes tendered herewith by book-entry transfer to your account at DTC, (ii)

 

F-1

--------------------------------------------------------------------------------

agrees to be bound by the terms and conditions of Section 5.07(c) of the Pledge
Agreement and (iii) acknowledges and agrees that after 5:00 p.m. (New York City
time) on the fifth Business Day immediately preceding the Remarketing Date, such
election shall become an irrevocable election to have such Separate Senior Notes
remarketed in the Remarketing. In the case of a Failed Remarketing, such
Separate Senior Notes shall be returned to the undersigned.

 

Date:

 

 

--------------------------------------------------------------------------------

 

By:

 

 

--------------------------------------------------------------------------------

           

Name:

           

Title:

           

Signature Guarantee:

--------------------------------------------------------------------------------

 

--------------------------------------------------------------------------------

     

--------------------------------------------------------------------------------

Name      

Social Security or other Taxpayer

Identification Number, if any

 

--------------------------------------------------------------------------------

        Address        

 

--------------------------------------------------------------------------------

       

 

F-2

--------------------------------------------------------------------------------

A. PAYMENT INSTRUCTIONS

 

Proceeds of the remarketing should be paid by check in the name of the person(s)
set forth below and mailed to the address set forth below.

 

Name(s)

 

(Please Print)

Address

 

(Please Print)

 

(Zip Code)

 

(Taxpayer Identification or Social Security Number)

 

B. DELIVERY INSTRUCTIONS

 

In the event of a Failed Final Remarketing, Senior Notes that are in physical
form should be delivered to the person(s) set forth below and mailed to the
address set forth below.

 

Name(s)

 

(Please Print)

Address

 

(Please Print)

 

(Zip Code)

 

(Tax Identification or Social Security Number)

 

F-3

--------------------------------------------------------------------------------

In the event of a failed final remarketing, Senior Notes that are in book-entry
form should be credited to the account at The Depository Trust Company set forth
below.

 

 

--------------------------------------------------------------------------------

DTC Account Number

Name of Account Party:

--------------------------------------------------------------------------------

 

F-4

--------------------------------------------------------------------------------

EXHIBIT G

 

INSTRUCTION TO CUSTODIAL AGENT REGARDING

WITHDRAWAL FROM REMARKETING

 

The Bank of New York

The Custodial Agent

101 Barclay Street, Floor 8W

New York, NY 10286

Telecopier No.: 212-815-5707

Attention: Corporate Trust Administration

 

Re: Senior Notes due November 15, 2008 of The PMI Group, Inc. (the “Company”)

 

The undersigned hereby notifies you in accordance with Section 5.07(c) of the
Pledge Agreement, dated as of November 3, 2003 (the “Pledge Agreement”), among
the Company and you, as Collateral Agent, Custodial Agent and Securities
Intermediary, and The Bank of New York, as Purchase Contract Agent and as
attorney-in-fact for the holders of Corporate Units from time to time, that the
undersigned elects to withdraw the $             aggregate principal amount of
Separate Senior Notes delivered to the Collateral Agent on             , 200    
for remarketing pursuant to Section 5.07(c) of the Pledge Agreement. The
undersigned hereby instructs you to return such Senior Notes to the undersigned
in accordance with the undersigned’s instructions. With this notice, the
Undersigned hereby agrees to be bound by the terms and conditions of Section
5.07(c) of the Pledge Agreement. Capitalized terms used herein but not defined
shall have the meaning set forth in the Pledge Agreement.

 

Date:

 

 

--------------------------------------------------------------------------------

 

By:

 

 

--------------------------------------------------------------------------------

           

Name:

           

Title:

       

Signature Guarantee:

--------------------------------------------------------------------------------

 

--------------------------------------------------------------------------------

     

 

--------------------------------------------------------------------------------

Name      

Social Security or other Taxpayer

Identification Number, if any

 

--------------------------------------------------------------------------------

        Address        

 

--------------------------------------------------------------------------------

       

 

G-1