exv10w2






Exhibit 10.2




PLEDGE AND SECURITY AGREEMENT




     THIS PLEDGE AND SECURITY AGREEMENT (as the same may be amended, restated, supplemented or
otherwise modified from time to time, this “Security Agreement”) is entered into as of
April 15, 2011 by and among PROASSURANCE CORPORATION (the “Borrower”), any additional
Persons which become parties to this Security Agreement by executing a Supplement hereto in
substantially the form of Annex I (together with the Borrower, the “Grantors”), and
U.S. BANK NATIONAL ASSOCIATION in its capacity as administrative agent (the “Administrative
Agent”) for the lenders party to the below-defined Credit Agreement (collectively, the
“Lenders”).



PRELIMINARY STATEMENT




     The Borrower, the Administrative Agent and the Lenders are party to a Credit Agreement dated
as of April 15, 2011 (as the same may be amended, restated, supplemented or otherwise modified from
time to time, the “Credit Agreement”). The Grantors are entering into this Security
Agreement in order to secure their obligations under and in connection with Loans made pursuant to
the Secured Borrowing Option under, and as defined in, Section 2.1.2 of the Credit Agreement and to
induce the Lenders to continue extending credit to the Borrower pursuant to the Secured Borrowing
Option under the Credit Agreement.



     ACCORDINGLY, the Grantors and the Administrative Agent, on behalf of the Holders of Secured
Obligations, hereby agree as follows:



ARTICLE I




DEFINITIONS



     1.1. Terms Defined in the Credit Agreement. All capitalized definitional terms used
herein and not otherwise defined shall have the meanings assigned to such terms in the Credit
Agreement.



     1.2. Terms Defined in Delaware UCC. Terms defined in the Delaware UCC which are not
otherwise defined in this Security Agreement are used herein as defined in the Delaware UCC.



     1.3. Definitions of Certain Terms Used Herein. As used in this Security Agreement, in
addition to the terms defined in the Preliminary Statement, the following terms shall have the
following meanings:



     “Article” means a numbered article of this Security Agreement, unless another document
or the Delaware UCC is specifically referenced.



 









 





     “Collateral” means account number 001050975707 maintained with U.S. Bank National
Association and all amounts and items on deposit in or credited thereto, including, without
limitation, all (i) cash, (ii) certificates of deposit and money market mutual funds of the
Borrower or the applicable Grantor, in each case maintained with or issued by U.S. Bank National
Association, (iii) commercial paper (other than commercial paper issued by U.S. Bank National
Association), (iv) collateralized mortgage obligations or real estate mortgage investment conduit
pass through securities, in any case issued by the Federal National Mortgage Association, the
Government National Mortgage Association or the Federal Home Loan Mortgage Corporation, (v)
Instruments, issued by the Federal National Mortgage Association, the Government National Mortgage
Association or the Federal Home Loan Mortgage Corporation, that entitles the holder of, or
beneficial owner under, the Instrument to the whole or any part of the rights or entitlements of a
mortgagee and any other rights or entitlements in respect of a pool of mortgages or any money
payable by mortgagors under those mortgages in relation to real estate mortgages, and the money
payable to the holder of, or beneficiary owner under, the Instrument is based on actual or
scheduled payments on the underlying mortgages, (vi) short-term obligations of, or fully guaranteed
by, the United States of America, (vii) discount notes of U.S. government sponsored enterprises,
including Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, the
Federal Home Loan Banks and the Federal Farm Credit Banks and (viii) corporate or municipal bonds
or similar long term Indebtedness, in each case whether constituting Deposit Accounts, Securities
Accounts, Instruments, General Intangibles or Investment Property, and in each case together with
all proceeds thereof.



     “Control” shall have the meaning set forth in Article 8 or, if applicable, in Section
9-104, 9-105, 9-106 or 9-107 of Article 9 of the Delaware UCC.



     “Default” means an event described in Section 5.1 hereof.



     “Delaware UCC” means the Delaware Uniform Commercial Code as in effect from time to
time.



     “Deposit Accounts” shall have the meaning set forth in Article 9 of the Delaware UCC.



     “Exhibit” refers to a specific exhibit to this Security Agreement, unless another
document is specifically referenced.



     “General Intangibles” shall have the meaning set forth in Article 9 of the Delaware
UCC.



     “Holders of Secured Obligations” means the holders of the Secured Obligations from
time to time and shall include, without limitation, each Lender, the Administrative Agent, and each
of their Affiliates, together with their respective successors and transferees and assigns.



     “Instruments” shall have the meaning set forth in Article 9 of the Delaware UCC.



     “Section” means a numbered section of this Security Agreement, unless another document
is specifically referenced.



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     “Secured Obligations” means all Obligations corresponding with the Loans made pursuant
to the Secured Borrowing Option, including, without limitation, all unpaid principal of and accrued
and unpaid interest on such Loans, all accrued and unpaid fees and all expenses, reimbursements,
indemnities and other obligations in respect thereof, in each case owing to one or more Lenders or
their respective Affiliates.



     “Securities Accounts” shall have the meaning set forth in Article 8 of the Delaware
UCC.



     “Unliquidated Obligations” means, at any time, any Secured Obligations (or portion
thereof) that are contingent in nature or unliquidated at such time, including any Secured
Obligation that is: (i) an obligation to reimburse a bank for drawings not yet made under a letter
of credit issued by it; (ii) any other obligation (including any guarantee) that is contingent in
nature at such time; or (iii) an obligation to provide collateral to secure any of the foregoing
types of obligations.



     The foregoing definitions shall be equally applicable to both the singular and plural forms of
the defined terms.



ARTICLE II




GRANT OF SECURITY INTEREST



     Each of the Grantors hereby pledges, assigns and grants to the Administrative Agent, on behalf
of and for the ratable benefit of the Holders of Secured Obligations, a security interest in all of
such Grantor’s right, title and interest, whether now owned or hereafter acquired, in and to the
Collateral to secure the prompt and complete payment and performance of the Secured Obligations.



ARTICLE III




REPRESENTATIONS AND WARRANTIES



     The Borrower represents and warrants on the date of this Agreement and on any date on which
representations or warranties are made or re-made under the Credit Agreement to the Administrative
Agent and the Holders of Secured Obligations, and each Grantor that becomes a party to this
Security Agreement pursuant to the execution of a Supplement in substantially the form of Annex
I represents and warrants on the date of such supplement (after giving effect to supplements to
each of the Exhibits hereto with respect to such subsequent Grantor as attached to such
Supplement), that:



     3.1. Title, Authorization, Validity and Enforceability. Such Grantor has good and
valid rights in or the power to transfer the Collateral owned by it and title to such owned
Collateral with respect to which it has purported to grant a security interest hereunder, free of
all Liens except for Liens permitted under Section 4.1.6 hereof, and has full corporate,
limited liability company, partnership or other entity, power and authority to grant to the
Administrative Agent the security interest in such Collateral pursuant hereto. The execution and
delivery by such Grantor of this Security Agreement have been duly authorized by proper corporate,
limited liability company, partnership or, as applicable, other proceedings, and this Security
Agreement



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constitutes a legal, valid and binding obligation of such Grantor and creates a security
interest which is enforceable against such Grantor in all Collateral it now owns or hereafter
acquires, except as enforceability may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors’ rights generally.




     3.2. Conflicting Laws and Contracts. Neither the execution and delivery by such
Grantor of this Security Agreement, the creation and perfection of the security interest in the
Collateral granted hereunder, nor compliance with the terms and provisions hereof will violate (i)
any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on such
Grantor, or (ii) such Grantor’s charter, articles, partnership agreement or by-laws (or similar
constitutive documents), or (iii) the provisions of any indenture, instrument or agreement to which
such Grantor is a party or is subject, or by which it, or its Property is bound, or conflict with
or constitute a default thereunder, or result in or require the creation or imposition of any Lien
in, of or on the property of such Grantor pursuant to the terms of any such indenture, instrument
or agreement (other than any Lien of the Administrative Agent on behalf of the Holders of Secured
Obligations).



     3.3. Principal Location. Such Grantor’s mailing address and the location of its place
of business (if it has only one) or its chief executive office (if it has more than one place of
business), is disclosed in Exhibit “A”; such Grantor has no other places of business except
those set forth in Exhibit “A”.



     3.4. No Other Names; Etc. Within the last five (5) years, such Grantor has not
conducted business under any legal name, changed its jurisdiction of formation, merged with or into
or consolidated with any other corporation, except as disclosed in Exhibit “A”. The name
in which such Grantor has executed this Security Agreement is the exact name as it appears in such
Grantor’s organizational documents as filed with such Grantor’s jurisdiction of organization as of
the date hereof.



     3.5. No Default. No Default or Event of Default exists.



     3.6. Filing Requirements. None of the Collateral owned by such Grantor is of a type
for which security interests or liens may be perfected by filing under any federal statute.



     3.7. No Financing Statements. No valid financing statement describing all or any
portion of the Collateral which has not lapsed or been terminated naming such Grantor as debtor has
been filed in any proper jurisdiction except financing statements (i) naming the Administrative
Agent on behalf of the Holders of Secured Obligations as the secured party and (ii) in respect of
Liens permitted by Section 6.16 of the Credit Agreement; provided, that nothing herein
shall be deemed to constitute an agreement to subordinate any of the Liens of the Administrative
Agent under the Loan Documents to any Liens otherwise permitted under Section 6.16 of the Credit
Agreement.



     3.8. Federal Employer Identification Number; State Organization Number; Jurisdiction of
Organization. Such Grantor’s federal employer identification number is, and if such Grantor is
a registered organization, such Grantor’s State of organization, type of



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




	 	 	 	 	 	 	 	 	 
	 	 	Federal Employer	 	 	 	State of	 	State
	 	 	Identification	 	Type of	 	Organization or	 	Organization
	Grantor	 	Number	 	Organization	 	Incorporation	 	Number
	ProAssurance 

Corporation

	 	[                    ]
	 	corporation
	 	Delaware
	 	[                    ]






ARTICLE IV




COVENANTS



     From the date of this Security Agreement and thereafter until this Security Agreement is
terminated, the Borrower agrees, and from and after the effective date of any Supplement hereto
substantially in the form of Annex I applicable to any Grantor (and after giving effect to
supplements to each of the Exhibits hereto with respect to such subsequent Grantor as attached to
such Supplement) and thereafter until this Security Agreement is terminated, each such subsequent
Grantor agrees:



     4.1. General.




     4.1.1 Inspection. Each Grantor will permit the Administrative Agent or any
Holder of Secured Obligations, by its representatives and agents (i) to inspect the
Collateral, (ii) to examine and make copies of the books of accounts and other financial
records of such Grantor relating to the Collateral and (iii) to discuss the Collateral and
the related records of such Grantor with, and to be advised as to the same by, such
Grantor’s officers, at such reasonable times and intervals as the Administrative Agent or
such Holder of Secured Obligations may designate.




     4.1.2
Taxes. Each Grantor will timely file complete and correct United States federal and applicable foreign, state and local tax returns required by
law and pay when due all taxes, assessments and governmental charges and levies upon the
Collateral owned by such Grantor, except those which are being contested in good faith by
appropriate proceedings and with respect to which adequate reserves have been set aside in
accordance with GAAP.




     4.1.3 Records and Reports; Notification of Default. Each Grantor shall keep
proper books of record and account in which full, true and correct entries are made with
respect to the Collateral owned by such Grantor, and furnish to the Administrative Agent,
with sufficient copies for each of the Holders of Secured Obligations, such reports
relating to the Collateral as the Administrative Agent shall from time to time reasonably
request. Each Grantor will give prompt notice in writing to the Administrative Agent and
the Lenders of the occurrence of any Default.



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     4.1.4 Financing Statements and Other Actions; Defense of Title. Each Grantor
hereby authorizes the Administrative Agent to file, and if requested will execute and
deliver to the Administrative Agent, all financing statements describing the Collateral
owned by such Grantor and other documents and take such other actions as may from time to
time reasonably be requested by the Administrative Agent in order to grant or maintain a
first perfected security interest in and, if applicable, Control of, the Collateral owned
by such Grantor, subject to Liens permitted under Section 6.16 of the Credit Agreement,
provided that nothing herein shall be deemed to constitute an agreement to subordinate any
of the Liens of the Administrative Agent under the Loan Documents to any Liens otherwise
permitted under Section 6.16 of the Credit Agreement. Such financing statements may
describe the Collateral in the same manner as described herein or may contain an indication
or description of collateral that describes such property in any other manner as the
Administrative Agent may determine, in its reasonable discretion, is necessary, advisable
or prudent to ensure the perfection of the security interest in the Collateral granted to
the Administrative Agent herein. Each Grantor will take any and all actions necessary to
defend title to the Collateral owned by such Grantor against all persons and to defend the
security interest of the Administrative Agent in such Collateral and the priority thereof
against any Lien not expressly permitted hereunder.




     4.1.5 Disposition of Collateral. No Grantor will sell, lease or otherwise
dispose of the Collateral owned by such Grantor except such Grantor may make sales, leases,
transfers and dispositions that are permitted under the Credit Agreement until such time as
a Default has occurred and is continuing.




     4.1.6 Liens. No Grantor will create, incur, or suffer to exist any Lien on
the Collateral owned by such Grantor except Liens permitted pursuant to Section 6.16 of the
Credit Agreement; provided, that nothing herein shall be deemed to constitute an
agreement to subordinate any of the Liens of the Administrative Agent under the Loan
Documents to any Liens otherwise permitted under Section 6.16 of the Credit Agreement.




     4.1.7 Change in Corporate Existence, Type or Jurisdiction of Organization,
Location, Name. Each Grantor will (except as otherwise permitted hereunder or under
the Credit Agreement):




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




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






     4.1.8 Other Financing Statements. No Grantor will suffer to exist or
authorize the filing of any valid financing statement naming it as debtor covering all or
any portion of the Collateral owned by such Grantor, except any financing statement
authorized under Section 4.1.4 hereof.



     4.2. Instruments. Upon the Administrative Agent’s request, after the occurrence and
during the continuance of an Event of Default, each Grantor will deliver to the Administrative
Agent (and thereafter hold in trust for the Administrative Agent upon receipt and immediately
deliver to the Administrative Agent) the originals of all Instruments constituting Collateral,
marked with such legends and assigned as the Administrative Agent shall specify. The rights of the
Administrative Agent under any allonge delivered in connection with any Instrument constituting
Collateral shall be exercised only upon the occurrence and during the continuance of an Event of
Default.



     4.3. Updating of Exhibits to Security Agreement. Each Grantor will provide to the
Administrative Agent, concurrently with the delivery of the certificate of a financial officer of
the Borrower as required by Section 6.1(ii) of the Credit Agreement, updated versions, as
necessary, of the Exhibits to this Security Agreement. Each Grantor, in its discretion, may also
from time to time provide additional updates to the Exhibits to this Security Agreement. Updated
versions of Exhibits shall replace the prior versions thereof being updated. For the avoidance of
doubt, the receipt of such updated Exhibits by the Administrative Agent shall not be understood to
permit any action prohibited hereunder or constitute a waiver of any provision contained herein.



ARTICLE V




DEFAULT



     5.1. The occurrence of any one or more of the following events shall constitute a Default:




     5.1.1 Any representation or warranty made or deemed made by a Grantor herein or which
is contained in any certificate, document or financial or other statement furnished by such
Grantor at any time under or in connection with this Security Agreement shall prove to have
been incorrect, false or misleading in any material respect on or as of the date made or
deemed made.



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     5.1.2 The breach by any Grantor of any of the terms or provisions of Sections
4.1.5 or 4.1.6 or Article VII.




     5.1.3 The breach by any Grantor (other than a breach which constitutes a Default
under Section 5.1.1 or 5.1.2 hereof) of any of the terms or provisions of
this Security Agreement which is not remedied within 30 days after the giving of written
notice to such Grantor by the Administrative Agent.




     5.1.4 Any material portion of the Collateral shall be transferred or otherwise
disposed of, in any manner not permitted by Section 4.1.5 or 8.6 hereof.




     5.1.5 The occurrence of any “Event of Default” under, and as defined in, the Credit
Agreement.



     5.2. Acceleration and Remedies. Upon the acceleration of payment of any principal,
interest or other obligations owing under or in connection with the Loan Documents, pursuant to
Article VIII of the Credit Agreement, all principal, interest, fees and other amounts owing or
outstanding under the Credit Agreement, and, to the extent provided for under any other Loan
Documents, such obligations owing or outstanding under such Loan Documents, shall immediately
become due and payable without presentment, demand, protest or notice of any kind, all of which are
hereby expressly waived, and the Administrative Agent may, with the concurrence or at the direction
of the Required Lenders, exercise any or all of the following rights and remedies:




     5.2.1 Those rights and remedies provided in this Security Agreement, the Credit
Agreement, or any other Loan Document, provided that this Section 5.2.1
shall not be understood to limit any rights or remedies available to the Administrative
Agent and the Holders of Secured Obligations prior to a Default.




     5.2.2 Those rights and remedies available to a secured party under the Delaware UCC
(whether or not the Delaware UCC applies to the affected Collateral) or under any other
applicable law (including, without limitation, any law governing the exercise of a bank’s
right of setoff or bankers’ lien) when a debtor is in default under a security agreement.




     5.2.3 Without notice except as specifically provided in Section 8.1 hereof or
elsewhere herein, sell, lease, assign, grant an option or options to purchase or otherwise
dispose of the Collateral or any part thereof in one or more parcels at public or private
sale, for cash, on credit or for future delivery, and upon such other terms as the
Administrative Agent may deem commercially reasonable.


The Administrative Agent, on behalf of the Holders of Secured Obligations, may comply with any
applicable state or federal law requirements in connection with a disposition of the Collateral,
and such compliance will not be considered to adversely affect the commercial reasonableness of any
sale of the Collateral.



Notwithstanding the foregoing, the Administrative Agent and Lenders will be subject to those
limitations on rights and remedies set forth in Article VIII of the Credit Agreement.




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     5.3. Grantors’ Obligations Upon Default. Upon the request of the Administrative Agent
after the occurrence and during the continuance of a Default, each Grantor will:




     5.3.1 Assembly of Collateral. Assemble and make available to the
Administrative Agent the Collateral and all records relating thereto at any place or places
specified by the Administrative Agent.




     5.3.2 Secured Party Access. Permit the Administrative Agent, by the
Administrative Agent’s representatives and agents, to enter any premises where all or any
part of the Collateral, or the books and records relating thereto, or both, are located, to
take possession of all or any part of the Collateral and to remove all or any part of the
Collateral.



ARTICLE VI




WAIVERS, AMENDMENTS AND REMEDIES



     No delay or omission of the Administrative Agent or any Holder of Secured Obligations to
exercise any right or remedy granted under this Security Agreement shall impair such right or
remedy or be construed to be a waiver of any Default or an acquiescence therein, and any single or
partial exercise of any such right or remedy shall not preclude any other or further exercise
thereof or the exercise of any other right or remedy. No waiver, amendment or other variation of
the terms, conditions or provisions of this Security Agreement whatsoever shall be valid unless in
writing signed by the Administrative Agent with the concurrence or at the direction of the (a)
Required Lenders (or, if required under Section 8.3 of the Credit Agreement, all Lenders) and (b)
each Grantor, and then only to the extent in such writing specifically set forth, provided that the
addition of any Subsidiary as a Grantor hereunder by execution of a Supplement hereto in the form
of Annex I (with such modifications as shall be acceptable to the Administrative Agent)
shall not require receipt of any consent from or execution of any documentation by the Required
Lenders or any other Grantor party hereto. All rights and remedies contained in this Security
Agreement or by law afforded shall be cumulative and all shall be available to the Administrative
Agent and the Holders of Secured Obligations until the Secured Obligations (excluding Unliquidated
Obligations not then due) have been paid in full.



ARTICLE VII




PROCEEDS; COLLECTION OF RECEIVABLES



     7.1. Special Collateral Account. At any time after the occurrence and during the
continuance of a Default, the Administrative Agent may require all cash proceeds of the Collateral
to be deposited in a special non-interest bearing cash collateral account with the Administrative
Agent and held there as security for the Secured Obligations. No Grantor shall have any control
whatsoever over said cash collateral account. The Administrative Agent shall apply the collected
balances in said cash collateral account promptly to the payment of the Secured Obligations whether
or not the Secured Obligations shall then be due.



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     7.2. Application of Proceeds. Any proceeds of Collateral received by the
Administrative Agent shall be applied pursuant to Section 2.1.2 of the Credit Agreement.



ARTICLE VIII




GENERAL PROVISIONS



     8.1. Notice of Disposition of Collateral; Condition of Collateral. Each Grantor
hereby waives notice of the time and place of any public sale occurring during the continuance of a
Default or the time after which any private sale or other disposition of all or any part of the
Collateral may be made during the continuance of a Default. To the extent such notice may not be
waived under applicable law, any notice made shall be deemed reasonable if sent to the Borrower,
addressed as set forth in Article IX hereof, at least ten days prior to (i) the date of any
such public sale or (ii) the time after which any such private sale or other disposition may be
made. The Administrative Agent shall have no obligation to clean-up or otherwise prepare the
Collateral for sale.



     8.2. Secured Party Performance of Grantor’s Obligations. Without having any
obligation to do so, the Administrative Agent may perform or pay any obligation which any Grantor
has agreed to (and failed to) perform or pay in this Security Agreement and such Grantor shall
reimburse the Administrative Agent for any reasonable amounts paid by the Administrative Agent
pursuant to this Section 8.2. Each Grantor’s obligation to reimburse the Administrative
Agent pursuant to the preceding sentence shall be a Secured Obligation payable on demand.



     8.3. Authorization for Secured Party to Take Certain Action. Each Grantor irrevocably
authorizes the Administrative Agent at any time and from time to time in the sole discretion of the
Administrative Agent and appoints the Administrative Agent as its attorney-in-fact (i) to execute
on behalf of such Grantor as debtor and to file financing statements necessary or desirable in the
Administrative Agent’s sole discretion to perfect and to maintain the perfection and priority of
the Administrative Agent’s security interest in the Collateral, (ii) to indorse and collect any
cash proceeds of the Collateral, (iii) to file a carbon, photographic or other reproduction of this
Security Agreement or any financing statement with respect to the Collateral as a financing
statement and to file any other financing statement or amendment of a financing statement (which
does not add new collateral or add a debtor) in such offices as the Administrative Agent in its
sole discretion deems necessary or desirable to perfect and to maintain the perfection and priority
of the Administrative Agent’s security interest in the Collateral, (iv) subject to the terms of
Section 4.1.5 hereof, to enforce payment of the Instruments in the name of the
Administrative Agent or such Grantor, (v) to apply the proceeds of any Collateral received by the
Administrative Agent to the Secured Obligations as provided in Article VII and (vi) to
discharge past due taxes, assessments, charges, fees or Liens on the Collateral (except for such
Liens as are specifically permitted hereunder or under any other Loan Document or which are being
contested in good faith pursuant to any other Loan Document), and each Grantor agrees to reimburse
the Administrative Agent on demand for any reasonable payment made or any reasonable expense
incurred by the Administrative Agent in connection therewith, provided that this authorization
shall not relieve any Grantor of any of its obligations under this Security Agreement or under the
Credit Agreement.



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     8.4. Specific Performance of Certain Covenants. Each Grantor acknowledges and agrees
that a breach of any of the covenants contained in Sections 4.1.5, 4.1.6,
4.2, 5.3, or 8.6 or in Article VII hereof will cause irreparable
injury to the Administrative Agent and the Holders of Secured Obligations, that the Administrative
Agent and Holders of Secured Obligations have no adequate remedy at law in respect of such breaches
and therefore agrees, without limiting the right of the Administrative Agent or the Holders of
Secured Obligations to seek and obtain specific performance of other obligations of the Grantors
contained in this Security Agreement, that the covenants of the Grantors contained in the Sections
referred to in this Section 8.4 shall be specifically enforceable against the Grantors.



     8.5. Entry onto Certain Premises. Upon the occurrence and during the continuance of a
Default, the Administrative Agent shall be entitled, in its reasonable discretion, to enter any
premises owned or leased by the Grantors where any of the Collateral or any records relating to the
Collateral are located until the Secured Obligations are paid or the Collateral or records relating
thereto are removed therefrom, whichever first occurs, without any obligation to pay any Grantor
for such entry.



     8.6. Dispositions Not Authorized. No Grantor is authorized to sell or otherwise
dispose of the Collateral except as set forth in Section 4.1.5 hereof and notwithstanding
any course of dealing between any Grantor and the Administrative Agent or other conduct of the
Administrative Agent, no authorization to sell or otherwise dispose of the Collateral (except as
set forth in Section 4.1.5 hereof) shall be binding upon the Administrative Agent or the
Holders of Secured Obligations unless such authorization is in writing signed by the Administrative
Agent with the consent or at the direction of the Required Lenders.



     8.7. Benefit of Agreement. The terms and provisions of this Security Agreement shall
be binding upon and inure to the benefit of the Grantors, the Administrative Agent and the Holders
of Secured Obligations and their respective successors and permitted assigns (including all persons
who become bound as a debtor to this Security Agreement), except that the Grantors shall not have
the right to assign their rights or delegate their obligations under this Security Agreement or any
interest herein, without the prior written consent of the Administrative Agent.



     8.8. Survival of Representations. All representations and warranties of the Grantors
contained in this Security Agreement shall survive the execution and delivery of this Security
Agreement.



     8.9. Taxes and Expenses. Taxes, costs, fees and expenses in respect of this Security
Agreement shall be paid by the Grantors as required by Section 9.6 of the Credit Agreement (with
the understanding and agreement of each Grantor that, for purposes hereof, each Grantor shall have
the same payment and reimbursement obligations as the Borrower under Section 9.6 even though such
Grantor is not specifically referenced in Section 9.6). Any and all costs and expenses incurred by
the Grantors in the performance of actions required pursuant to the terms hereof shall be borne
solely by the Grantors.



     8.10. Headings. The title of and section headings in this Security Agreement are for
convenience of reference only, and shall not govern the interpretation of any of the terms and
provisions of this Security Agreement.



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     8.11. Termination. This Security Agreement shall continue in effect (notwithstanding
the fact that from time to time there may be no Secured Obligations outstanding) until (i) the
Credit Agreement has terminated (subject to the survival of those terms that survive termination)
pursuant to its express terms and (ii) all of the Secured Obligations have been paid in full in
cash and performed in full and no commitments of the Administrative Agent or the Holders of Secured
Obligations which would give rise to any Secured Obligations are outstanding.



     8.12. Entire Agreement. This Security Agreement embodies the entire agreement and
understanding between the Grantors and the Administrative Agent relating to the Collateral and
supersedes all prior agreements and understandings between the Grantors and the Administrative
Agent relating to the Collateral.



     8.13. Choice of Law; Consent to Jurisdiction; Waiver of Jury Trial.



          8.13.1 CHOICE OF LAW. THIS SECURITY AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS) OF
THE STATE OF DELAWARE, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.




          8.13.2 CONSENT TO JURISDICTION. EACH GRANTOR HEREBY IRREVOCABLY SUBMITS TO
THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR STATE COURT SITTING IN
DELAWARE IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT
AND EACH GRANTOR HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY
OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING
HEREIN SHALL LIMIT THE RIGHT OF THE ADMINISTRATIVE AGENT OR ANY HOLDER OF SECURED
OBLIGATIONS TO BRING PROCEEDINGS AGAINST ANY GRANTOR IN THE COURTS OF ANY OTHER
JURISDICTION. ANY JUDICIAL PROCEEDING BY ANY GRANTOR AGAINST THE ADMINISTRATIVE AGENT OR
ANY HOLDER OF SECURED OBLIGATIONS OR ANY AFFILIATE OF THE ADMINISTRATIVE AGENT OR ANY
HOLDER OF SECURED OBLIGATIONS INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY
ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS SECURITY AGREEMENT SHALL BE BROUGHT ONLY
IN A COURT IN DELAWARE.




          8.13.3 WAIVER OF JURY TRIAL. EACH GRANTOR, THE ADMINISTRATIVE AGENT AND EACH
HOLDER OF SECURED OBLIGATIONS HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR
OTHERWISE) IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS SECURITY AGREEMENT OR THE
RELATIONSHIP ESTABLISHED HEREUNDER.




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     8.14. Indemnity. Each Grantor hereby agrees, jointly with the other Grantors and
severally, to indemnify the Administrative Agent and the Holders of Secured Obligations, and their
respective successors, assigns, agents and employees (the “Indemnified Parties”), from and
against any and all liabilities, damages, penalties, suits, costs, and reasonable expenses of any
kind and nature (including, without limitation, all reasonable expenses of litigation or
preparation therefor whether or not an Indemnified Party is a party thereto) imposed on, incurred
by or asserted against an Indemnified Party arising out of this Security Agreement, or arising out
of or relating to the manufacture, purchase, acceptance, rejection, ownership, delivery, lease,
possession, use, operation, condition, sale, return or other disposition of any Collateral
(including, without limitation, latent and other defects, whether or not discoverable by an
Indemnified Party or any Grantor), provided that such indemnity shall not, as to any indemnitee, be
available to the extent that such losses, claims, damages, penalties, liabilities or related
expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to
have resulted from the gross negligence, bad faith or willful misconduct of such indemnitee;
provided, that with respect to fees and expenses in respect of counsel for the Indemnified
Parties in connection with any of the foregoing, the Grantors shall only be required to pay (on a
joint and several basis) for the reasonable fees and expenses of one outside counsel (and up to one
local counsel in each applicable local jurisdiction and any applicable regulatory counsel) for the
Indemnified Parties, unless the Administrative Agent or a Holder of Secured Obligations (or its
counsel) determines that it would create actual or potential conflicts of interest to not have
individual counsel, in which case the Administrative Agent and such Holder of Secured Obligations
may have its own counsel which may be reimbursed in connection with the foregoing.



     8.15. Subordination of Intercompany Indebtedness. Each Grantor agrees that any and
all claims of such Grantor against any other Grantor (each an “Obligor”) with respect to
any “Intercompany Indebtedness” (as hereinafter defined), any endorser, obligor or any other
guarantor of all or any part of the Secured Obligations, or against any of its properties shall be
subordinate and subject in right of payment to the prior payment, in full and in cash, of all
Secured Obligations; provided that, and not in contravention of the foregoing, so long as
no Default has occurred and is continuing, such Grantor may make loans to and receive payments with
respect to Intercompany Indebtedness from each such Obligor to the extent not prohibited by the
terms of this Security Agreement and the other Loan Documents. Notwithstanding any right of any
Grantor to ask, demand, sue for, take or receive any payment from any Obligor, all rights, liens
and security interests of such Grantor, whether now or hereafter arising and howsoever existing, in
any assets of any other Obligor shall be and are subordinated to the rights of the Holders of
Secured Obligations and the Administrative Agent in those assets. No Grantor shall have any right
to foreclose upon any such asset, whether by judicial action or otherwise, unless and until all of
the Secured Obligations (other than Unliquidated Obligations) shall have been fully paid and
satisfied (in cash) and all Commitments of the Lenders under the Credit Agreement have terminated
or expired. If all or any part of the assets of any Obligor, or the proceeds thereof, are subject
to any distribution, division or application to the creditors of such Obligor, whether partial or
complete, voluntary or involuntary, and whether by reason of
liquidation, bankruptcy, arrangement, receivership, assignment for the benefit of creditors or
any other similar action or proceeding, or if the business of any such Obligor is dissolved or if
substantially all of the assets of any such Obligor are sold (except to the extent not prohibited
by the Loan Documents), then, and in any such event (such event being herein referred to as an



13









 




“Insolvency Event”), any payment or distribution of any kind or character, either in cash,
securities or other property, which shall be payable or deliverable upon or with respect to any
Indebtedness of such Obligor to any Grantor (“Intercompany Indebtedness”) shall be paid or
delivered directly to the Administrative Agent for application on any of the Secured Obligations,
due or to become due, until such Secured Obligations (other than Unliquidated Obligations) shall
have first been fully paid and satisfied (in cash). Should any payment, distribution, security or
instrument or proceeds thereof be received by the applicable Grantor upon or with respect to the
Intercompany Indebtedness after any Insolvency Event and prior to the satisfaction of all of the
Secured Obligations (other than Unliquidated Obligations) and the termination or expiration of all
Commitments of the Lenders have been terminated or expired, such Grantor shall receive and hold the
same in trust, as trustee, for the benefit of the Holders of Secured Obligations and shall
forthwith deliver the same to the Administrative Agent, for the benefit of the Holders of Secured
Obligations, in precisely the form received (except for the endorsement or assignment of the
Grantor where necessary), for application to any of the Secured Obligations, due or not due, and,
until so delivered, the same shall be held in trust by the Grantor as the property of the Holders
of Secured Obligations. If any such Grantor fails to make any such endorsement or assignment to
the Administrative Agent, the Administrative Agent or any of its officers or employees is
irrevocably authorized to make the same. Each Grantor agrees that until the Secured Obligations
(other than Unliquidated Obligations) have been paid in full (in cash) and satisfied and all
Commitments of the Lenders have terminated or expired, no Grantor will assign or transfer to any
Person (other than the Administrative Agent or the Borrower or another Grantor) any claim any such
Grantor has or may have against any Obligor.




     8.16. Severability. Any provision in this Security Agreement that is held to be
inoperative, unenforceable, or invalid in any jurisdiction shall, as to that jurisdiction, be
inoperative, unenforceable, or invalid without affecting the remaining provisions in that
jurisdiction or the operation, enforceability, or validity of that provision in any other
jurisdiction, and to this end the provisions of this Security Agreement are declared to be
severable.



     8.17. Counterparts. This Security Agreement may be executed in counterparts (and by
different parties hereto in different counterparts), each of which shall constitute an original,
but all of which when taken together shall constitute a single contract. Delivery of an executed
counterpart of a signature page of this Security Agreement by telecopy or electronic mail (PDF)
shall be effective as delivery of a manually executed counterpart of this Security Agreement.



     8.18. Release of Collateral. Notwithstanding Article VI hereof or anything to the
contrary set forth herein, if Collateral is permitted to be sold, transferred or assigned by a
Grantor pursuant to or in connection with a transaction permitted hereunder or under the Credit
Agreement (such as, but not limited to, a permitted asset sale or a permitted sale of a
Subsidiary), then the Administrative Agent shall release such Collateral from its Lien thereon;
provided, that the Borrower shall deliver a written certificate to the Administrative Agent
(upon which the Administrative Agent shall be entitled to conclusively rely) certifying that such
transaction is permitted under the Credit Agreement, and providing evidence that reasonably
supports such
certification, prior to any such release. The Administrative Agent, at the Grantors’ sole cost
and expense, shall deliver such documents and make such filings reasonably requested of it to
further evidence such release. The security interest in the Collateral granted hereunder shall be
released as provided under and in accordance with the terms of the Credit Agreement.



14









 





ARTICLE IX




NOTICES



     9.1. Sending Notices. Any notice required or permitted to be given under this
Security Agreement shall be sent (and deemed received) in the manner and to the addresses set forth
in Section 13.1 of the Credit Agreement. Any notice delivered to the Borrower shall be deemed to
have been delivered to all of the Grantors.



     9.2. Change in Address for Notices. Each of the Grantors, the Administrative Agent
and the Lenders may change the address for service of notice upon it by a notice in writing to the
other parties in accordance with Section 9.1.



ARTICLE X




THE ADMINISTRATIVE AGENT



     U.S. Bank National Association has been appointed Administrative Agent for the Holders of
Secured Obligations hereunder pursuant to Article X of the Credit Agreement. It is expressly
understood and agreed by the parties to this Security Agreement that any authority conferred upon
the Administrative Agent hereunder is subject to the terms of the delegation of authority made by
the Holders of Secured Obligations to the Administrative Agent pursuant to the Credit Agreement,
and that the Administrative Agent has agreed to act (and any successor Administrative Agent shall
act) as such hereunder only on the express conditions contained in such Article X. Any successor
Administrative Agent appointed pursuant to Article X of the Credit Agreement shall be entitled to
all the rights, interests and benefits of the Administrative Agent hereunder.



[SIGNATURE PAGES TO FOLLOW]




15









 




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



	 	 	 	 	 	 	 

	 	 	PROASSURANCE
CORPORATION, as a Grantor
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	 
 

	 	 
	 

	 	Title:	 	 	 	 






Signature Page to Pledge and Security Agreement




 









 





U.S. BANK NATIONAL

ASSOCIATION, as Administrative Agent




	 	 	 	 	 

	By: 

Name:

	 	 
 

	 	 
	Title:
	 	 	 	 






Signature Page to Pledge and Security Agreement




 









 





EXHIBIT “A”

(See Sections 3.3 and 3.4 of Security Agreement)



Prior names, jurisdiction of formation, place of business (if Grantor has only
one place of business), chief executive office (if Grantor has more than one
place of business), mergers and mailing address:




[________]

[_________]

[_________]

[_________]

[_________]




 









 





ANNEX I

to




SUBSIDIARY



SECURITY AGREEMENT



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




     IN WITNESS WHEREOF, [NAME OF NEW GRANTOR], a [__________________] [corporation/limited
liability company/other] has executed and delivered this Annex I counterpart to the
Agreement as of this ___________ day of ____________, ___.



	 	 	 	 	 	 	 

	 	 	[NAME OF NEW GRANTOR]	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	 
 

	 	 
	 

	 	Title: