Exhibit 10.2

 

 

 

AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT

Dated as of June 7, 2012,

by and between

ALLIED WORLD ASSURANCE COMPANY, LTD,

and

WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Administrative Agent

 

 

 

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TABLE OF CONTENTS

 

          Page   Section 1.    Definitions      1    Section 2.   
Representations and Covenants of the Pledgor      5       Section 2.01   
Representations by the Pledgor      5    Section 3.    Collateral; Establishment
of Collateral Accounts      7       Section 3.01    Pledge, Grant of Security
Interest      7       Section 3.02    Establishment of Collateral Accounts     
8       Section 3.03    Procedures for Depositing Cash and Crediting Securities
to Collateral Accounts      9       Section 3.04    Procedures for Requesting
Releases of Collateral from Collateral Accounts      10    Section 4.   
Effecting Credit Extensions      11       Section 4.01    Effecting the Credit
Extension      11    Section 5.    Additional Covenants of the Pledgor      11
      Section 5.01    Delivery and Other Perfection      11       Section 5.02
   Other Financing Statements and Liens      12       Section 5.03   
Maintenance of Collateral Base Percentage      12       Section 5.04    Voting
Rights; Dividends; etc      12       Section 5.05    No Removals, etc      13   
   Section 5.06    U.S. Securities      13    Section 6.    Remedies;
Distribution of Collateral      13       Section 6.01    Remedies      13      
Section 6.02    Disposition of the Collateral      15       Section 6.03   
Waiver of Claims      16       Section 6.04    Application of Proceeds      16
      Section 6.05    Remedies Cumulative      18       Section 6.06   
Discontinuance of Proceedings      18       Section 6.07    Rights of
Administrative Agent      18       Section 6.08    Effect of Bankruptcy;
Obligations Absolute      19    Section 7.    The Administrative Agent      19
      Section 7.01    Limitation of Duties      19       Section 7.02   
Reliance by Administrative Agent and the Custodian      20       Section 7.03   
Appointment of Agents      20    Section 8.    Miscellaneous      21      
Section 8.01    No Waiver      21       Section 8.02    Notices      21      
Section 8.03    Fees and Expenses of Custodian      21   

 

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TABLE OF CONTENTS

(continued)

 

          Page   Section 8.04    Expenses etc. of Administrative Agent,
Custodian and Administrative Agent; Indemnity      21    Section 8.05   
Indemnity Obligations Secured by Collateral; Survival      23    Section 8.06   
Waiver; Amendment      23    Section 8.07    Successors and Assigns      23   
Section 8.08    Termination      24    Section 8.09    Powers Coupled with an
Interest      24    Section 8.10    Captions      24    Section 8.11   
Counterparts      25    Section 8.12    Governing Law; Jurisdiction; Consent to
Service of Process      25    Section 8.13    WAIVER OF JURY TRIAL      26   
Section 8.14    Integration      26    Section 8.15    Severability      26   
Section 8.16    Financial Assets      26   

 

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THIS AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT (as amended, restated,
modified and/or supplemented and as in effect from time to time, this
“Agreement”), dated as of June 7, 2012, by and between ALLIED WORLD ASSURANCE
COMPANY, LTD, an exempted company incorporated in Bermuda (the “Pledgor”), and
WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent (together with
any successor Administrative Agent, the “Administrative Agent”). Certain
capitalized terms as used herein are defined in Section 1 hereof. Except as
otherwise defined herein, all capitalized terms used herein and defined in the
Credit Agreement (as defined below) shall be used herein as therein defined.

W I T N E S S E T H :

WHEREAS, the Pledgor, the lenders party thereto, Allied World Assurance Company
Holdings, Ltd, Allied World Assurance Company Holdings, AG, and the
Administrative Agent (as successor by merger to Wachovia Bank, National
Association) are parties to a Credit Agreement, dated as of November 27, 2007
(as amended, the “Original Credit Agreement”), providing for the issuance of
Letters of Credit for the account of the Pledgor, all as contemplated therein,
and the Pledgor and the Administrative Agent (as successor by merger to Wachovia
Bank, National Association) entered into a Pledge and Security Agreement, dated
as of November 27, 2007 (as amended, the “Original Security Agreement”) as a
condition to the closing of the Original Credit Agreement.

WHEREAS, the Pledgor, the lenders from time to time party thereto (the
“Lenders”), Allied World Assurance Company Holdings, Ltd, Allied World Assurance
Company Holdings, AG, and the Administrative Agent, have entered into an Amended
and Restated Credit Agreement, dated as of the date hereof (as amended,
restated, modified and/or supplemented from time to time, the “Credit
Agreement”), providing for the issuance of Letters of Credit for the account of
the Pledgor and for the making of Loans to the Pledgor, all as contemplated
therein and pursuant to which the Original Credit Agreement has been amended and
restated;

WHEREAS, it is a condition to the extension of credit to the Pledgor under the
Credit Agreement that the Pledgor shall have agreed, by executing and delivering
this Agreement, to secure the payment in full of its Obligations under the
Credit Agreement and the other Credit Documents and to amend and restate (but
not effect a novation of) the Original Security Agreement as provided herein.
The Secured Parties (as defined below) are relying on this Agreement in their
decision to extend credit to the Pledgor under the Credit Agreement, and would
not enter into the Credit Agreement without the execution and delivery of this
Agreement by the Pledgor.

STATEMENT OF AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, to
induce the Secured Parties (as defined below) to enter into the Credit Agreement
and to extend credit to the Pledgor thereunder, the parties hereto agree as
follows:

Section 1. Definitions. Terms defined in the Credit Agreement are used herein as
defined therein. In addition, as used in this Agreement, the following terms
have the following

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meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):

“Account Control Agreement” means the amended and restated account control
agreement, dated as of the date hereof, among the Custodian, the Pledgor and the
Administrative Agent, as amended, restated, modified and supplemented and as in
effect from time to time.

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

“Adverse Claim” has the meaning assigned to such term in Section 8-102(a)(1) of
the UCC.

“Agreement” has the meaning assigned to such term in the first paragraph of this
Agreement.

“Cash” means immediately available funds in Dollars.

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

“Collateral” has the meaning assigned to such term in Section 3.01.

“Collateral Account” has the meaning assigned to such term in
Section 3.02(a)(ii), and shall include any successor accounts.

“Collateral Deposit Account” means each of the so designated accounts of the
Collateral Accounts, as defined in Section 3.02(a)(i).

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

“Collateral Securities Account” means each of the so designated accounts of the
Collateral Accounts, as defined in Section 3.02(a)(ii).

“Collateral Transfer” means a transfer, deposit or delivery of any Property to
be included as Collateral by or on behalf of the Pledgor to the Administrative
Agent or the Custodian in accordance with Section 3.03.

“Credit Agreement” has the meaning assigned to such term in the recitals of this
Agreement.

“Credit Extension” means either of the following: (i) a Borrowing of Loans by
the Pledgor or (ii) the Issuance of any Letter of Credit for the account of the
Pledgor.

“Credit Transaction” means, collectively, all Collateral Transfers, all releases
of Collateral pursuant to Section 3.04 and the occurrence of any Credit
Extension.

 

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“Custodian” means The Bank of New York Mellon and shall include any successor
thereto.

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

“Deposit Account Bank” shall mean The Bank of New York Mellon, a “bank” as
defined in Section 9-102(a)(8) of the UCC.

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

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

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

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

“Indemnitee” has the meaning assigned to such term in Section 8.04(b) of this
Agreement.

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

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

“Lenders” has the meaning assigned to such term in the recitals of this
Agreement.

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

“Minimum Collateral Amount” means, as of any date of determination, an amount
equal to the sum of the aggregate Credit Exposure of all Lenders as of such
date.

“NYSE” means the New York Stock Exchange.

“Pledgor” has the meaning assigned to such term in the first paragraph of this
Agreement and shall include any successor thereto.

 

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“Primary Obligations” has the meaning assigned to such term in Section 6.04(b)
of this Agreement.

“Pro Rata Share” has the meaning assigned to such term in Section 6.04(b) of
this Agreement.

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

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

“Registered Organization” has the meaning assigned to such term in
Section 9-102(a)(70) of the UCC.

“Secondary Obligations” has the meaning assigned to such term in Section 6.04(b)
of this Agreement.

“Secured Parties” means the Lenders, the L/C Agent, the Issuing Banks and the
Administrative Agent, and shall include any successor or assigns thereto.

“Secured Obligations” means all of the following:

(i) the full and prompt payment when due (whether at stated maturity, by
acceleration or otherwise) of all Obligations of the Pledgor under the Credit
Agreement and the other Credit Documents, together with all other obligations
(including obligations which, but for the automatic stay under Section 362(a) of
the Bankruptcy Code, would become due) and liabilities (including, without
limitation, interest, fees, costs and indemnities) of the Pledgor to the Secured
Parties, whether now existing or hereafter incurred under, arising out of, or in
connection with, the Credit Agreement and the other Credit Documents to which
the Pledgor is a party and the due performance and compliance by the Pledgor
with all of the terms, conditions and agreements contained in the Credit
Agreement and in such other Credit Documents.

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

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

(iv) all amounts paid by any Indemnitee as to which such Indemnitee has the
right to reimbursement by the Pledgor under Section 8.04(b) of this Agreement;
and

 

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(v) all amounts owing by the Pledgor to the Administrative Agent pursuant to any
of the Credit Documents in its capacity as such.

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

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

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

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

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

“Termination Date” has the meaning assigned to such term in Section 8.08.

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

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

Section 2. Representations and Covenants of the Pledgor.

Section 2.01 Representations by the Pledgor. The Pledgor (as to itself and its
Subsidiaries) represents, warrants and covenants (and shall be deemed to repeat
each such representation and warranty on each date on which a Credit Extension
occurs) that:

(a) it is the legal, beneficial and record owner of, and has good and marketable
title to, all of its Collateral consisting of one or more Collateral Accounts
and all Financial Assets, Cash, Instruments and Securities credited thereto and
Security Entitlements and credit balances carried therein and that it has
sufficient interest in all of its Collateral in which a security interest is
purported to be created hereunder for such security interest to attach (subject,
in each case, to no pledge, lien, mortgage, hypothecation, security interest,
charge, option, Adverse Claim or other encumbrance whatsoever, except for Liens
and security interests created by this Agreement or Liens in favor of the
Custodian);

 

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

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

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

(e) neither the execution, delivery or performance by the Pledgor of this
Agreement, or any other Credit Document to which it is a party, nor compliance
by it with the terms and provisions hereof and thereof nor the consummation of
the transactions contemplated therein: (i) will contravene any provision of any
Requirement of Law applicable to the Pledgor; (ii) will conflict or be
inconsistent with or result in any breach of any of the terms, covenants,
conditions or provisions of, or constitute a default under, or result in the
creation or imposition of (or the obligation to create or impose) any Lien
(except pursuant to the Security Documents) upon any of the properties or assets
of the Pledgor or any of its Subsidiaries pursuant to, the terms of any
indenture, lease, mortgage, deed of trust, credit agreement, securities loan
agreement, repurchase agreement or any other material agreement, contract or
other instrument to which the Pledgor or any of its Subsidiaries is a party or
is otherwise bound, or by which it or any of its properties or assets is bound
or to which it may be subject; or (iii) will violate any provision of the
certificate of incorporation, by-laws (or other organizational document), as the
case may be, of the Pledgor or any of its Subsidiaries;

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

(g) “control” (as defined in Section 8-106 of the UCC) has been obtained by the
Administrative Agent over all of the then existing Collateral consisting of
Securities, Securities Entitlements and Collateral Securities Accounts;

 

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

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

(j) this Agreement, together with the Account Control Agreement and the
transfer, deposit or delivery of any Collateral by or on behalf of the Pledgor
to the Administrative Agent or its agent, or to any Collateral Account, will
constitute, in favor of the Administrative Agent, a valid first lien on and
first priority perfected security interest in all of the Collateral, subject to
no other Lien and enforceable as such against all other creditors of the
Pledgor; and

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

Section 3. Collateral; Establishment of Collateral Accounts.

Section 3.01 Pledge, Grant of Security Interest. As security for the prompt and
complete payment and performance when due of all of the Secured Obligations, the
Pledgor does

 

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hereby assign and transfer unto the Administrative Agent, and does hereby
pledge, charge and grant to the Administrative Agent, for the benefit of the
Secured Parties, a continuing security interest in all of the right, title and
interest of the Pledgor in, to and under all of the following property (and all
rights therein) of the Pledgor, or in which or to which the Pledgor has any
rights, in each case whether now existing or hereafter from time to time
acquired (all of which is hereinafter collectively referred to as the
“Collateral”):

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

(b) all Cash, Securities, Security Entitlements, Investment Property, Financial
Assets, credit balances and other assets and Property and all Instruments in
respect of any of the foregoing, from time to time deposited or held in or
transferred or credited to or carried in any Collateral Account of the Pledgor
from time to time, or required by the Credit Agreement, this Agreement, the
Account Control Agreement and/or any other Credit Document to be transferred,
deposited, credited, carried or held in any Collateral Account of the Pledgor,
from time to time;

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

(d) all Proceeds of any and all of the foregoing (including, without limitation,
all causes of action, claims and warranties now or hereafter held by the Pledgor
in respect of any of the items listed above), all interest on or other income
from the Cash and other Property from time to time held in any Collateral
Account of the Pledgor, and all collections and distributions with respect to
the Collateral of the Pledgor; and

(e) to the extent related to any Property described in the preceding clauses of
this Section 3.01, all books, correspondence, credit files, records and other
papers.

Section 3.02 Establishment of Collateral Accounts.

(a) On or prior to the date hereof, the Pledgor shall have established with the
Custodian, and at all times thereafter until the Termination Date, the Pledgor
shall maintain with the Custodian:

(i) each deposit account listed in Part A of Schedule I hereto (each a
“Collateral Deposit Account”); and

(ii) each securities account listed in Part B of Schedule I hereto (each, a
“Collateral Securities Account” and together with each Collateral Deposit
Account, the “Collateral Accounts”).

(b) Any Cash or Securities deposited, delivered or transferred by or on behalf
of the Pledgor to the Custodian in connection with any Credit Transaction in
accordance

 

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with Section 3.03 shall be credited to (x) in the case of Cash, a Collateral
Deposit Account of the Pledgor and (y) in the case of Securities, a Collateral
Securities Account of the Pledgor.

Section 3.03 Procedures for Depositing Cash and Crediting Securities to
Collateral Accounts.

(a) In General. The Pledgor may, prior to 12:00 p.m. Charlotte, North Carolina
time, on any Business Day, transfer, deliver or deposit or cause to be
transferred, delivered or deposited, as the case may be, (i) Cash to a
Collateral Deposit Account of the Pledgor or (ii) Securities to a Collateral
Securities Accounts of the Pledgor (each a “Collateral Transfer”).

(b) Collateral Transfer. Contemporaneously with, or prior to, any Collateral
Transfer to the Custodian for inclusion in the Collateral Base, the Pledgor
shall deliver customary forms provided by the Custodian (completed to the
reasonable satisfaction of the Custodian) in respect of such Collateral
Transfer. Each Collateral Transfer shall be made in accordance with customary
procedures of the Custodian.

(c) Upon the occurrence of each Credit Transaction, the Pledgor shall be deemed
to represent and warrant to the Administrative Agent with respect to each item
of Property subject to a Collateral Transfer or otherwise constituting
Collateral of the Pledgor that:

(i) the Collateral Base is equal to or exceeds the Minimum Collateral Amount
pertaining to the Pledgor on and as of the date of such Collateral Transfer; and

(ii) such Property is Eligible Collateral;

(iii) the Pledgor has noted on its books and records that such Property is
pledged to the Administrative Agent under this Agreement;

(iv) with respect to each such item of Property (and all other Property
theretofore transferred to the Administrative Agent as of the date of such
Credit Transaction is included in the Collateral hereunder), this Agreement, the
Account Control Agreement and the delivery of such Property to the respective
Collateral Account creates a valid first Lien on and first priority perfected
security interest in such Property in favor of the Administrative Agent, subject
to no other Liens, other than Liens in favor of the Custodian, and enforceable
as such against all other creditors of the Pledgor.

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

 

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

(f) Further Assurances. In connection with any Collateral Transfer under this
Section 3.03 or otherwise in respect hereof, the Pledgor shall take such action,
at its own expense, as the Administrative Agent may reasonably request
(including, without limitation, to the extent that the Administrative Agent may
reasonably request, delivering undated bond powers or other instruments of
transfer or entering into one or more control agreements on terms reasonably
satisfactory to the Administrative Agent) for the purpose of ensuring that the
Administrative Agent will have a perfected first priority security interest with
respect to each item of Collateral so transferred. In addition, the Pledgor will
furnish to the Administrative Agent from time to time statements and schedules
identifying and describing the Collateral (including, without limitation, each
Collateral Base Report delivered pursuant to Section 6.11(c) of the Credit
Agreement) with respect to the Pledgor and such other reports in connection with
such Collateral as the Administrative Agent may reasonably request, all in
reasonable detail.

Section 3.04 Procedures for Requesting Releases of Collateral from Collateral
Accounts.

(a) In General. The Pledgor may, prior to 12:00 p.m. Charlotte, North Carolina
time, on any Business Day, deliver to the Administrative Agent a request for a
release of Collateral from one or more of its Collateral Accounts by delivering
in writing to the Administrative Agent a Collateral Release Request
substantially in the form of Exhibit A (appropriately completed) with respect
thereto. Subject to Section 3.04(b), the Administrative Agent shall promptly
grant its consent to any request to release the Collateral in accordance with
this Section 3.04, and, if and when such consent is granted, the Pledgor may
deliver the customary documents as may be required by the Custodian to effect
such release of Collateral. The Pledgor shall not request the Custodian to
release Collateral from the Collateral Accounts without the prior written
consent of the Administrative Agent.

(b) Notwithstanding anything to the contrary contained in this Agreement or any
other Credit Document, the Administrative Agent may withhold its consent to any
Collateral Release Request (i) if, immediately before or after giving effect
thereto, the Collateral Base would be less than the Minimum Collateral Amount
pertaining to the Pledgor on and as of the date of such Collateral Release
Request or (ii) if a Default or an Event of Default has occurred and is
continuing.

(c) The Administrative Agent shall not have any liability whatsoever to any
other Secured Party as the result of any release of Collateral by it in
accordance with (or

 

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which the Administrative Agent reasonably believes to be in accordance with)
this Section 3.04.

Section 4. Effecting Credit Extensions.

Section 4.01 Effecting the Credit Extension. Pursuant to the Credit Agreement,
and notwithstanding anything in any Credit Document to the contrary, the Lenders
and the Issuing Bank or Issuing Banks, as the case may be, shall not be required
to make any Credit Extension if, immediately upon giving effect to such Credit
Extension, the Collateral Base would be less than the Minimum Collateral Amount
pertaining to the Pledgor on and as of the date of such Credit Extension, as
confirmed by the Custodian to the Administrative Agent in a manner reasonably
acceptable to the Administrative Agent immediately prior to such Credit
Extension.

Section 5. Additional Covenants of the Pledgor. In furtherance of the grant of
the pledge and security interest pursuant to Section 3.01 hereof, the Pledgor
hereby agrees with the Administrative Agent as follows:

Section 5.01 Delivery and Other Perfection. The Pledgor shall:

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

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

(c) if (i) the Pledgor is not entitled to receive from the Administrative Agent
distributions with respect to any Collateral pursuant to Section 5.04(a),
(ii) any distribution in respect of any of such Collateral shall be evidenced
by, or any of such Collateral shall otherwise be converted to, any Instrument
and (iii) such Instrument is transferred to the Pledgor or otherwise at its
direction (other than to the Administrative Agent) in a physical form, the
Pledgor shall immediately transfer, or cause to be transferred, such Instrument
to the Custodian for credit to the Collateral Account, and the Custodian shall
credit such Instrument to the Collateral Account, duly endorsed in a manner
reasonably satisfactory to the Administrative Agent and the Custodian, to be
held

 

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as Collateral with respect to the Pledgor pursuant to this Agreement, and the
Pledgor shall transfer any cash distributions or interest received by the
Pledgor immediately to the Custodian for credit to the Collateral Account, and
the Custodian shall promptly credit such Instrument to the Collateral Account;
and

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

Section 5.02 Other Financing Statements and Liens. The Pledgor shall not file or
permit to be on file, or authorize or permit to be filed or to be on file, in
any jurisdiction, any financing statement or like instrument with respect to the
Collateral in which the Administrative Agent is not named as the sole secured
party or be a party to any control agreement related to the Collateral except in
favor of the Administrative Agent, and shall not otherwise create or permit to
exist any Lien or any other interest of any kind upon or with respect to any of
such Collateral, except for the Liens created by this Agreement or any other
Credit Document or Liens in favor of the Custodian.

Section 5.03 Maintenance of Collateral Base Percentage. The Pledgor will take
all such actions as shall be necessary to cause the Collateral Base at all times
to be at least the Minimum Collateral Amount pertaining to the Pledgor.

Section 5.04 Voting Rights; Dividends; etc

(a) So long as no Default or Event of Default shall have occurred and be
continuing, the Pledgor shall be entitled (i) to exercise or refrain from
exercising, in its sole discretion, any or all voting and other consensual
rights, and to take or refrain from taking, in its sole discretion, any or all
actions, in respect of the Collateral or any part thereof for all purposes not
inconsistent with the provisions of this Agreement and (ii) to receive from the
Custodian and retain for its own account any cash dividend, interest or other
cash distribution with respect to the Collateral actually received by the
Custodian (except for any distribution specified by the issuer in a writing
delivered or otherwise notified to the Administrative Agent as a special,
extraordinary or liquidating dividend), net of withholding for any tax,
assessment, charge or levy. In order to release such dividend, interest or
distribution, the Pledgor may execute an appropriate Collateral Release Request
in respect thereof, subject to its Collateral Base being equal to at least the
Minimum Collateral Amount pertaining to the Pledgor upon the release thereof.

(b) Except as provided in Section 5.04(c), all voting and other consensual
rights and rights to take any action with respect to Securities, however
registered, shall be exercised by the Pledgor or its designee. Upon request from
the Pledgor, the Administrative Agent shall forthwith make and deliver to the
Pledgor such proxies, powers of attorney, consents, waivers or other documents
or instruments as the Pledgor shall reasonably request in order to permit the
Pledgor to exercise its rights under this Section 5.04.

 

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(c) Upon the occurrence and during the continuance of a Default or Event of
Default, (i) the Pledgor shall hold any dividends, interest or other
distributions which it receives with respect to its respective Collateral in
trust for the Administrative Agent, separate from all other moneys of the
Pledgor, and forthwith transfer such dividends, interest or other distributions
to the Custodian for crediting to the relevant Collateral Accounts, (ii) the
Administrative Agent shall be entitled to register all or any item of such
Collateral in its own name or in the name of its nominee or designee and
(iii) the Administrative Agent shall be entitled to exercise all voting rights,
and to give any and all consents, in connection with any and all Securities, and
the Pledgor hereby grants the Administrative Agent an irrevocable proxy and
irrevocably appoints the Administrative Agent its attorney-in-fact coupled with
an interest to vote or otherwise act in furtherance of the purposes hereof in
accordance with this Agreement. Upon request, the Pledgor shall forthwith make
and deliver to the Administrative Agent such powers of attorney, consents and
waivers (in addition to the power of attorney and consent set forth in this
Section 5.04(c)) as the Administrative Agent shall reasonably request in order
to permit the Administrative Agent to exercise its rights under this
Section 5.04 and this Agreement. Notwithstanding the foregoing, the Pledgor may
not take any action under this Section 5.04 with respect to any Collateral that,
in the Administrative Agent’s reasonable judgment, (i) would in any way
adversely affect the Lien created under this Agreement with respect to an item
of Collateral or impair the interest or rights of the Administrative Agent
therein, except as permitted by Section 3.04 or (ii) would otherwise be
inconsistent with the provisions of this Agreement or result in a violation
hereof. Upon the occurrence and during the continuance of a Default or Event of
Default, the Pledgor shall not give any consent or waiver, authorize any
assumption, make any modification and supplement, or take other action with
respect to any Collateral without the consent of the Administrative Agent.

Section 5.05 No Removals, etc. Without at least 15 days’ prior written notice to
the Administrative Agent, the Pledgor shall not maintain any of its books and
records with respect to any Collateral at any office or maintain its principal
place of business at any place other than at the notice address indicated to the
Administrative Agent pursuant to the Credit Agreement.

Section 5.06 U.S. Securities. The Securities delivered, contained and maintained
in the Collateral Securities Accounts shall be Securities that are primarily
cleared and settled within the United States.

Section 6. Remedies; Distribution of Collateral.

Section 6.01 Remedies. The Pledgor agrees that, if any Event of Default shall
have occurred and be continuing, then and in every such case, the Administrative
Agent, in addition to any rights now or hereafter existing under applicable law
and under the other provisions of this Agreement, shall have all rights as a
secured creditor under the UCC, and such additional rights and remedies to which
a secured creditor is entitled under the laws in effect in all relevant
jurisdictions and upon written instruction by the Administrative Agent may:

(a) personally, or by agents or attorneys, immediately take possession of the
Collateral or any part thereof, from the Pledgor or any other Person who then
has

 

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possession of any part thereof (including, without limitation, the Custodian)
with or without notice or process of law, and for that purpose may enter upon
the Pledgor’s premises where any of the Collateral is located and remove the
same and use in connection with such removal any and all services, supplies,
aids and other facilities of the Pledgor;

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

(c) instruct the Custodian to transfer all Collateral held by the Custodian to
the Administrative Agent for the benefit of the Secured Parties;

(d) sell, assign or otherwise liquidate any or all of the Collateral or any part
thereof in accordance with Section 6.02, or direct the Pledgor or the Custodian
to sell, assign or otherwise liquidate any or all of Collateral or any part
thereof, and, in each case, take possession of the proceeds of any such sale or
liquidation;

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

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

(y) store and keep any Collateral so delivered to the Administrative Agent at
such place or places pending further action by the Administrative Agent as
provided in Section 6.02;

(f) apply any monies constituting Collateral or proceeds thereof in accordance
with the provisions of Section 6.04;

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

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

 

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(i) receive all amounts payable in respect of the Collateral otherwise payable
to the Pledgor under Section 5.04;

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

(k) take the actions referred to in Section 6.04(e) and Section 6.05;

it is understood and agreed that the Pledgor’s obligation so to deliver the
Collateral is of the essence of this Agreement and that, accordingly, upon
application to a court of equity having jurisdiction, the Administrative Agent
shall be entitled to a decree requiring specific performance by the Pledgor of
said obligation. If and so long as an Event of Default shall have occurred and
be continuing, the Administrative Agent shall not be liable with respect to any
action taken by it, or omitted to be taken by it, as a direct result of
instructions provided by the Required Lenders, except to the extent a court of
competent jurisdiction by final and non-appealable judgment has determined that
the Administrative Agent in bad faith breached its obligations hereunder or
under any other Credit Document or acted with gross negligence or willful
misconduct.

Section 6.02 Disposition of the Collateral. If any Event of Default shall have
occurred and be continuing, then any Collateral may, but only by the
Administrative Agent, be sold, assigned, leased or otherwise disposed of under
one or more contracts or as an entirety, and without the necessity of gathering
at the place of sale the property to be sold, and in general in such manner, at
such time or times, at such place or places and on such terms as the
Administrative Agent, may, in compliance with any mandatory requirements of
applicable law, determine to be commercially reasonable (including, without
limitation, on the NYSE or any other established market). Any such sale, lease
or other disposition may be effected by means of a public disposition or private
disposition, effected in accordance with the applicable requirements (in each
case if and to the extent applicable) of Sections 9-610 through 9-613 of the UCC
and/or such other mandatory requirements of applicable law as may apply to the
respective disposition. The Administrative Agent may, without notice or
publication, adjourn any public or private disposition or cause the same to be
adjourned from time to time by announcement at the time and place fixed for the
disposition, and such disposition may be made at any time or place to which the
disposition may be so adjourned. To the extent permitted by any such requirement
of law, the Administrative Agent may bid for and become the purchaser (and may
pay all or any portion of the purchase price by crediting Secured Obligations of
the Pledgor against the purchase price) of the Collateral or any item thereof,
offered for disposition in accordance with this Section 6.02 without
accountability to the Pledgor. If, under applicable law, the Administrative
Agent shall be permitted to make disposition of the Collateral within a period
of time which does not permit the giving of notice to the Pledgor as hereinabove
specified, the Administrative Agent need give the Pledgor only such notice of
disposition as shall be required by such applicable law. The Pledgor agrees to
do or cause to be done all such other acts and things as may be reasonably
necessary to make such disposition or dispositions of all or any portion of the
Collateral valid and binding and in compliance with any and all applicable laws
(including, without limitation, any state or federal securities laws),
regulations, orders, writs, injunctions, decrees or awards of any and all
courts, arbitrators or governmental instrumentalities, domestic or foreign,
having jurisdiction over any such sale or sales, all at the Pledgor’s expense.

 

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Section 6.03 Waiver of Claims. Except as otherwise provided in this Agreement,
THE PLEDGOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE AND
JUDICIAL HEARING IN CONNECTION WITH THE ADMINISTRATIVE AGENT’S TAKING POSSESSION
OR THE ADMINISTRATIVE AGENT’S DISPOSITION OF ANY OF THE COLLATERAL, INCLUDING,
WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT
REMEDY OR REMEDIES, and the Pledgor hereby further waives, to the extent
permitted by applicable law:

(a) all damages occasioned by such taking of possession or any such disposition
except any damages which are the direct result of the Administrative Agent’s bad
faith breach of its obligations hereunder or under any other Credit Document,
gross negligence or willful misconduct (as determined by a court of competent
jurisdiction in a final and non-appealable decision);

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

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

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

Section 6.04 Application of Proceeds.

(a) All moneys collected by the Administrative Agent upon any sale or other
disposition of the Collateral, together with all other moneys received by the
Administrative Agent hereunder, shall be applied as follows:

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

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

(iii) third, to the extent proceeds remain after the application pursuant to the
preceding clauses (i) and (ii), an amount equal to the outstanding Primary
Obligations of the Pledgor shall be paid to the Secured Parties as provided in

 

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Section 6.04(c), with each Secured Party receiving an amount equal to its
outstanding Primary Obligations owed by the Pledgor or, if the proceeds are
insufficient to pay in full all such Primary Obligations, its Pro Rata Share of
the amount remaining to be distributed;

(iv) fourth, to the extent proceeds remain after the application pursuant to the
preceding clauses (i) through (iii), inclusive, an amount equal to the
outstanding Secondary Obligations of the Pledgor shall be paid to the Secured
Parties as provided in Section 6.04(c) hereof, with each Secured Party receiving
an amount equal to its outstanding Secondary Obligations owed by the Pledgor or,
if the proceeds are insufficient to pay in full all such Secondary Obligations,
its Pro Rata Share of the amount remaining to be distributed; and

(v) fifth, to the extent proceeds remain after the application pursuant to the
preceding clauses (i) through (iv), inclusive, and following the termination of
this Agreement pursuant to Section 8.08 hereof, to the Pledgor or to whomever
may be lawfully entitled to receive such surplus.

(b) For purposes of this Agreement, (x) “Pro Rata Share” shall mean, when
calculating a Secured Party’s portion of any distribution or amount, that amount
(expressed as a percentage) equal to a fraction the numerator of which is the
then unpaid amount of such Secured Party’s Primary Obligations or Secondary
Obligations, as the case may be, and the denominator of which is the then
outstanding amount of all Primary Obligations or Secondary Obligations, as the
case may be, (y) “Primary Obligations” shall mean all principal of all Loans to
and Reimbursement Obligations of the Pledgor, together with all fees and
interest (including, without limitation, all interest that accrue after the
commencement of any case, proceeding or other action relating to the bankruptcy,
insolvency, reorganization or similar proceeding of the Pledgor at the rate
provided for in the respective documentation, whether or not a claim for
post-petition fees or interest is allowed in any such proceeding), in respect of
such Loans and Letters of Credit and (z) “Secondary Obligations” shall mean all
Secured Obligations other than Primary Obligations.

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

(d) It is understood that the Pledgor shall remain liable to the extent of any
deficiency between the amount of the proceeds of the Collateral and the
aggregate amount of the Secured Obligations.

(e) If at any time when the Administrative Agent shall determine that it will
exercise its right to sell all or any part of the Collateral consisting of
Securities pursuant to Section 6.02, either (i) such Collateral or the part
thereof to be sold shall not, for any reason whatsoever, be effectively
registered under any applicable securities laws, or (ii) such Collateral is
effectively registered under applicable securities laws, the Administrative
Agent may, in its sole and absolute discretion, sell such Collateral or part
thereof by private sale in such manner and under such circumstances as the

 

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Administrative Agent may deem necessary or advisable in order that such sale may
legally be effected without registration. Without limiting the generality of the
foregoing, in any such event the Administrative Agent, in its sole and absolute
discretion: (i) may proceed to make such private sale notwithstanding that a
registration statement for the purpose of registering such Collateral or part
thereof shall have been filed under any applicable securities law; (ii) may
approach and negotiate with a single possible purchaser to effect such sale; and
(iii) may restrict such sale to a purchaser who will represent and agree that
such purchaser is purchasing for its own account, for investment, and not with a
view to the distribution or sale of such Collateral or part thereof. In the
event of any such sale, the Administrative Agent shall not incur any
responsibility or liability for selling all or any part of the Collateral at a
price which the Administrative Agent, in its sole and absolute discretion, may
in good faith deem reasonable under the circumstances, notwithstanding the
possibility that a substantially higher price might be realized if the sale were
deferred until the registration as aforesaid.

Section 6.05 Remedies Cumulative. Each and every right, power and remedy hereby
specifically given to the Administrative Agent shall be in addition to every
other right, power and remedy specifically given to the Administrative Agent
under this Agreement, the other Security Documents or now or hereafter existing
at law, in equity or by statute and each and every right, power and remedy
whether specifically herein given or otherwise existing may be exercised from
time to time or simultaneously and as often and in such order as may be deemed
expedient by the Administrative Agent. All such rights, powers and remedies
shall be cumulative and the exercise or the beginning of the exercise of one
shall not be deemed a waiver of the right to exercise any other or others. No
delay or omission of the Administrative Agent in the exercise of any such right,
power or remedy and no renewal or extension of any of the Secured Obligations
shall impair any such right, power or remedy or shall be construed to be a
waiver of any Default or Event of Default or an acquiescence thereof. No notice
to or demand on the Pledgor in any case shall entitle it to any other or further
notice or demand in similar or other circumstances or constitute a waiver of any
of the rights of the Administrative Agent to any other or further action in any
circumstances without notice or demand. In the event that the Administrative
Agent shall bring any suit to enforce any of its rights hereunder and shall be
entitled to judgment, then in such suit the Administrative Agent may recover
reasonable expenses, including reasonable attorneys’ fees, and the amounts
thereof shall be included in such judgment.

Section 6.06 Discontinuance of Proceedings. In case the Administrative Agent
shall have instituted any proceeding to enforce any right, power or remedy under
this Agreement by foreclosure, sale, entry or otherwise, and such proceeding
shall have been discontinued or abandoned for any reason or shall have been
determined adversely to the Administrative Agent, then and in every such case
the Pledgor, the Administrative Agent and each holder of any of the Secured
Obligations shall be restored to their former positions and rights hereunder
with respect to the Collateral subject to the security interest created under
this Agreement, and all rights, remedies and powers of the Administrative Agent
shall continue as if no such proceeding had been instituted.

Section 6.07 Rights of Administrative Agent. In making the determinations and
allocations required by this Section 6, the Administrative Agent may rely upon
its records and

 

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information supplied by the Pledgor, the Administrative Agent, the Custodian and
any other Person, and the Administrative Agent shall have no liability to the
Pledgor for actions taken in reliance on such information, except in the case of
its bad faith breach of any of its obligations hereunder or under any other
Credit Document, gross negligence or willful misconduct (as determined by a
court of competent jurisdiction in a final non-appealable decision) in applying
or utilizing such information.

Section 6.08 Effect of Bankruptcy; Obligations Absolute.

(a) If, through the operation of any bankruptcy, reorganization, insolvency or
other laws or otherwise, the Administrative Agent’s Lien hereunder is avoided,
disallowed or otherwise not enforced with respect to some, but not all, of the
Secured Obligations then outstanding, the Administrative Agent shall make the
calculations required by Section 6 without giving effect to such Secured
Obligations and shall apply the proceeds of the Collateral in the proportions
and subject to the priorities specified herein.

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

Section 7. The Administrative Agent.

Section 7.01 Limitation of Duties.

(a) The Administrative Agent (which term as used in this sentence shall include
reference to its Affiliates and its own and its Affiliates’ officers, directors,
employees and agents) shall not (i) have any duties or responsibilities except
those expressly set forth in this Agreement and shall not by reason of this
Agreement be a trustee for, or a fiduciary with respect to, the Pledgor or any
other Person; (ii) be responsible to the Pledgor for any recitals, statements,
representations or warranties contained in any notice or report, or in any other
certificate or other document referred to or provided for in, or received by it
under, the Credit Agreement, this Agreement or any other Credit Document, or for
the value, validity, effectiveness, genuineness, enforceability or sufficiency
of the Credit Agreement, this Agreement or any other Credit Document or for any
failure by any Person to perform any of its obligations hereunder or thereunder,
except for its own bad faith breach of any of its obligations under this
Agreement or any other Credit Document, gross negligence or willful misconduct
(as determined by a court of competent jurisdiction in a final and
non-appealable decision); (iii) be required to initiate or conduct any
litigation or collection proceedings hereunder; and (iv) be responsible for any
action taken or omitted to be taken by it under the Credit Agreement, this
Agreement or any other Credit Document or under any other document

 

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or instrument referred to or provided for herein or therein or in connection
herewith or therewith, except for its own bad faith breach of any of its
obligations under this Agreement or any other Credit Document, gross negligence
or willful misconduct (as determined by a court of competent jurisdiction in a
final and non-appealable decision).

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

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

(d) The Administrative Agent shall not have any liability for the acts or
omissions of any Securities Intermediary (including DTC or any Federal Reserve
Bank).

(e) The Administrative Agent shall not have any liability with respect to
information received from third parties, including pricing information services.

Section 7.02 Reliance by Administrative Agent and the Custodian. The
Administrative Agent shall be entitled to rely upon any certification, notice or
other communication (including, without limitation, any thereof by telephone,
facsimile, telegram or cable) believed by it to be genuine and correct and to
have been signed or sent by or on behalf of the proper Person or Persons, and
upon advice and statements of legal counsel, independent accountants and other
experts selected by the Administrative Agent. If in one or more instances the
Administrative Agent takes any action or assumes any responsibility not
specifically delegated to it pursuant to this Agreement, neither the taking of
such action nor the assumption of such responsibility shall be deemed to be an
express or implied undertaking on the part of the Administrative Agent that it
will take the same or similar action or assume the same or similar
responsibility in any other instance.

Section 7.03 Appointment of Agents

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

(b) In the event that the Administrative Agent appoints an agent pursuant to
this Section 7.03, each and every remedy, power, right, claim, demand, cause of
action,

 

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

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

Section 8. Miscellaneous.

Section 8.01 No Waiver. No failure on the part of the Administrative Agent to
exercise and no delay in exercising, and no course of dealing with respect to,
any right, power or privilege under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege under this Agreement preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. The remedies provided
herein are cumulative and not exclusive of any remedies provided by law.

Section 8.02 Notices. All notices, requests and other communications provided
for herein (including, without limitation, any modifications of, or waivers,
requests or consents under, this Agreement) shall be given or made in writing
(including, without limitation, by facsimile) delivered to the intended
recipient as set forth below at the address for notices specified for such
Person in the Credit Agreement. Except as otherwise provided in this Agreement,
all such communications shall be deemed to have been duly given when transmitted
by telex or telecopier or personally delivered or, in the case of a mailed
notice, upon receipt, in each case given or addressed as aforesaid. Any party
may change its mailing address, telephone number, facsimile number or electronic
mail address by notifying the other parties hereto in accordance with the
provisions set forth above.

Section 8.03 Fees and Expenses of Custodian. The Pledgor agrees to pay any and
all fees, expenses, charges and costs of the Custodian relating to the Pledgor
and/or the Collateral or Collateral Accounts as and when due, and in no event or
circumstance will the Administrative Agent or any Lender have any liability
therefor.

Section 8.04 Expenses etc. of Administrative Agent, Custodian and Administrative
Agent; Indemnity.

 

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(a) The Pledgor agrees to pay or reimburse the Administrative Agent for (i) all
its reasonable out of pocket costs and expenses (including, without limitation,
the reasonable fees and expenses of legal counsel) in connection with (x) any
enforcement or collection proceedings, including, without limitation, all manner
of participation in or other involvement with (A) bankruptcy, insolvency,
receivership, foreclosure, winding up or liquidation proceedings, (B) judicial
or regulatory proceedings and (C) workout, restructuring or other negotiations
or proceedings (whether or not the workout, restructuring or transaction
contemplated thereby is consummated), in the case of (A), (B) and (C) relating
solely to the Pledgor and/or the Collateral or Collateral Accounts, and (y) the
enforcement of this Section 8.04; and (ii) all transfer, stamp, documentary or
other similar taxes, assessments or charges levied by any Governmental Authority
in respect of this Agreement or any other document referred to herein and all
costs, expenses, taxes, assessments and other charges incurred by the
Administrative Agent in connection with any filing, registration, recording or
perfection of any security interest contemplated hereby.

(b) The Pledgor agrees to indemnify the Administrative Agent, each other Secured
Party and each Related Party (each such person being called an “Indemnitee”, and
collectively, the “Indemnitees”) against, and hold each Indemnitee harmless
from, any and all losses, claims, damages, liabilities and related expenses
(including the reasonable fees, charges and disbursements of one U.S. counsel
and one Bermuda counsel for any Indemnitee) (collectively, the “Losses”)
incurred by any Indemnitee or asserted against any Indemnitee by any third party
or by the Pledgor arising out of, in connection with, or as a result of the
execution or delivery of this Agreement, any other Security Document or any
agreement or instrument contemplated hereby or thereby, the performance by the
parties hereto of their respective obligations hereunder or thereunder or the
consummation of the transactions contemplated hereby or thereby or the
enforcement of any of the terms of, or the preservation of any rights under any
thereof, or in any way relating to or arising out of the ownership, purchase,
delivery, control, acceptance, lease, financing, possession, sale, return or
other disposition, or use of the Collateral, the violation of the laws of any
country, state or other governmental body or unit, any tort, or contract claim;
provided that such indemnity shall not, as to any Indemnitee, be available to
the extent that such Losses (x) are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or willful misconduct of such Indemnitee or (y) result from a claim
brought by the Pledgor against an Indemnitee for breach in bad faith of such
Indemnitee’s obligations hereunder or under any other Credit Document, if the
Pledgor has obtained a final and nonappealable judgment in its favor on such
claim as determined by a court of competent jurisdiction.

(c) Without limiting the application of Section 8.04(a) hereof, the Pledgor
agrees to pay or reimburse the Administrative Agent for any and all reasonable
fees, costs and expenses of whatever kind or nature relating solely to the
Pledgor and/or the Collateral and Collateral Accounts and incurred in connection
with the creation, preservation or protection of the Administrative Agent’s
Liens on, and security interest in, the Collateral, including, without
limitation, all fees and taxes in connection with the recording or filing of
instruments and documents in public offices, payment or discharge

 

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of any taxes or Liens upon or in respect of the Collateral, premiums for
insurance with respect to the Collateral and all other fees, costs and expenses
in connection with protecting, maintaining or preserving the Collateral and the
Administrative Agent’s interest therein, whether through judicial proceedings or
otherwise, or in defending or prosecuting any actions, suits or proceedings
arising out of or relating to the Collateral.

(d) Without limiting the application of Section 8.04(a) or Section 8.04(b)
hereof, the Pledgor agrees to pay, indemnify and hold each Indemnitee harmless
from and against any loss, costs, damages and expenses which such Indemnitee may
suffer, expend or incur in consequence of or growing out of any
misrepresentation by the Pledgor in this Agreement, any other Credit Document or
in any writing contemplated by or made or delivered pursuant to or in connection
with this Agreement or any other Credit Document.

(e) If and to the extent that the obligations of the Pledgor under this
Section 8.04 are unenforceable for any reason, the Pledgor hereby agrees to make
the maximum contribution to the payment and satisfaction of such obligations
which is permissible under applicable law.

Section 8.05 Indemnity Obligations Secured by Collateral; Survival. Any amounts
paid by any Indemnitee as to which such Indemnitee has the right to
reimbursement by the Pledgor shall constitute Secured Obligations secured by the
Collateral. The indemnity obligations of the Pledgor contained in
Section 8.04(b) shall continue in full force and effect notwithstanding the full
payment of all of the other Secured Obligations and notwithstanding the full
payment of all the Obligations under the Credit Agreement, the termination of
all Letters of Credit issued under the Credit Agreement and the payment of all
other Secured Obligations and notwithstanding the discharge thereof and the
occurrence of the Termination Date.

Section 8.06 Waiver; Amendment. Except as otherwise expressly provided in this
Agreement, none of the terms and conditions of this Agreement may be changed,
waived, modified or varied in any manner whatsoever unless in writing duly
signed by the Pledgor and by the Administrative Agent (with the written consent
of the Required Lenders or, to the extent provided in the Credit Agreement, each
of the Lenders). This Agreement constitutes an amendment, modification and
restatement of the Original Security Agreement and shall not constitute a
novation, extinguishment or substitution of the obligations of the Pledgor under
the Original Security Agreement or in any way release or impair the rights,
duties, or obligations created pursuant to the Original Security Agreement or
any other Credit Document or affect the relative priorities thereof, except as
modified hereby or by documents, instruments and agreements executed and
delivered in connection herewith, and all of such rights, duties, and
obligations are assumed, ratified and affirmed by the Pledgor.

Section 8.07 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns; provided that the Pledgor may not assign any of its
respective rights or obligations hereunder without the prior consent of the
Administrative Agent.

 

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Section 8.08 Termination. After the Termination Date, this Agreement and the
Liens created hereunder shall automatically terminate (provided that all
indemnities set forth herein including, without limitation, those in
Section 8.04(b) hereof, shall survive such termination) and the Administrative
Agent, at the reasonable request and expense of the Pledgor, will promptly
execute and deliver to the Pledgor and/or authorize the filing of a proper
instrument or instruments prepared by the Pledgor and presented to the
Administrative Agent (including a release of all Liens granted hereunder and
Uniform Commercial Code termination statements on form UCC-3) acknowledging the
satisfaction and termination of this Agreement and any Liens created hereunder
as to the Pledgor, and will duly assign, transfer and deliver to the Pledgor
(without recourse and without any representation or warranty) such of the
Collateral of the Pledgor as may be in the possession of the Administrative
Agent or Custodian and as has not theretofore been sold or otherwise applied or
released pursuant to this Agreement. As used in this Agreement, “Termination
Date” shall mean the first date upon which the Aggregate Commitments under the
Credit Agreement have been terminated, all Letters of Credit issued under the
Credit Agreement have been terminated or either (i) collateralized by cash
and/or Cash Equivalents in a manner reasonably satisfactory to the
Administrative Agent or (ii) supported by back-to-back letters of credit the
terms, conditions and issuer of which are reasonably satisfactory to the
Administrative Agent, and all Secured Obligations then due and payable have been
irrevocably and indefeasibly paid in full. Upon termination of this Agreement
pursuant to clause (ii) above, the Administrative Agent will, at the Pledgor’s
expense, return to the Pledgor such of the Collateral as shall not have been
sold, previously released or otherwise applied pursuant to the terms of this
Agreement or any other Credit Document and execute and deliver to the Pledgor
such documents as the Pledgor shall reasonably request to evidence such
termination. Upon termination of this Agreement pursuant to clause (i) above,
the Administrative Agent will, at the Pledgor’s expense (A) return to the
Pledgor such of the Collateral as shall not have been sold, previously released
or otherwise applied pursuant to the terms of this Agreement or any other Credit
Document except for the cash and/or Cash Equivalents expressly referred to in
such clause (i), and execute and deliver to the Pledgor such documents as the
Pledgor shall reasonably request to evidence such termination and (B) promptly
after each Letter of Credit that is collateralized pursuant to such clause
(i) has been terminated, return to the Pledgor such of such cash and/or Cash
Equivalents as shall not have been sold, previously released or otherwise
applied pursuant to the terms of this Agreement or any other Credit Document in
an amount equal to the excess of such cash and/or Cash Equivalents over the sum
of the aggregate Letter of Credit Exposure and other Secured Obligations then
due and payable and execute and deliver to the Pledgor such documents as the
Pledgor shall reasonably request to evidence such termination.

Section 8.09 Powers Coupled with an Interest. Except to the extent otherwise
expressly provided herein, all authorizations and agencies herein contained with
respect to the Collateral are irrevocable and powers coupled with an interest.

Section 8.10 Captions. The table of contents and captions and section headings
appearing herein are included solely for convenience of reference and are not
intended to affect the interpretation of any provision of this Agreement.

 

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Section 8.11 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.

Section 8.12 Governing Law; Jurisdiction; Consent to Service of Process.

(a) This Agreement shall be construed in accordance with and governed by the law
of the State of New York (without giving regard to any conflicts of laws
provisions thereof).

(b) Each party hereto hereby irrevocably and unconditionally submits, for itself
and its property, to the exclusive jurisdiction of the courts of the State of
New York sitting in New York County and of the U.S. District Court for the
Southern District of New York, and any appellate court from any thereof, in any
action or proceeding arising out of or relating to this Agreement, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such New York State
court or, to the extent permitted by law, in such Federal court. Each of the
parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in this Agreement shall
affect any right that any party may otherwise have to bring any action or
proceeding relating to this Agreement against any other party or its properties
in the courts of any jurisdiction.

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

(d) Each party to this Agreement irrevocably consents to service of process in
the manner provided for notices in Section 11.4 of the Credit Agreement. Nothing
in this Agreement will affect the right of any party to this Agreement to serve
process in any other manner permitted by law.

(e) The Pledgor hereby irrevocably designates, appoints and empowers Allied
World Assurance Company (U.S.) Inc., with an office on the date hereof at 199
Water Street, 16th Floor, New York City, NY 10038, United States of America, as
its designee, appointee and agent to receive, accept and acknowledge for and on
its behalf, and in respect of its property, service of any and all legal
process, summons, notices and documents which may be served in any such action
or proceeding. If for any reason such designee, appointee and agent shall cease
to be available to act as such, the Pledgor agrees to designate a new designee,
appointee and agent in New York City on the terms and for the purposes of this
provision reasonably satisfactory to the Administrative Agent under this
Agreement.

 

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Section 8.13 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

Section 8.14 Integration. This Agreement and the other Credit Documents embody
the entire agreement and understanding among the parties hereto with respect to
the subject matter hereof and supersede all prior agreements and understandings
between the Pledgor and the Administrative Agent with respect to the subject
matter thereof.

Section 8.15 Severability. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or unenforceability of any other
provisions of this Agreement, which shall remain in full force and effect.

Section 8.16 Financial Assets. The Pledgor and the Administrative Agent hereby
agree that any and all Securities and any and all other Property and assets
(other than Cash) credited from time to time to a Collateral Securities Accounts
of the Pledgor shall be treated by the Custodian as Financial Assets.

*****

 

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

 

ALLIED WORLD ASSURANCE COMPANY, LTD, as the Pledgor By:  

/s/ Joan H. Dillard

Name:   Joan H. Dillard Title:   Executive Vice President and Chief Financial
Officer By:  

/s/ Marchelle D. Lewis

Name:   Marchelle D. Lewis Title:   Senior Vice President and Treasurer WELLS
FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent By:  

/s/ Casey Connelly

Name:   Casey Connelly Title:   Director

SIGNATURE PAGE TO PLEDGE AND SECURITY AGREEMENT