Document:

EX-10.3

 

Exhibit 10.3

 

PLEDGE AND SECURITY AGREEMENT

Dated as of November 27, 2007,

by and between

ALLIED WORLD ASSURANCE COMPANY, LTD,

and

WACHOVIA BANK, NATIONAL ASSOCIATION,

as Administrative Agent

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page
	Section 1. Definitions
	 	 	1	 
	Section 2. Representations and Covenants of the Pledgor
	 	 	4	 
	Section 2.01 Representations by the Pledgor
	 	 	4	 
	Section 3. Collateral; Establishment of Collateral Accounts
	 	 	7	 
	Section 3.01 Pledge, Grant of Security Interest
	 	 	7	 
	Section 3.02 Establishment of Collateral Accounts
	 	 	7	 
	Section 3.03 Procedures for Depositing Cash and Crediting Securities to Collateral Accounts
	 	 	8	 
	Section 3.04 Procedures for Requesting Releases of Collateral from Collateral Accounts
	 	 	9	 
	Section 4. Effecting Credit Events
	 	 	10	 
	Section 4.01 Effecting the Issuance of a Letter of Credit
	 	 	10	 
	Section 5. Additional Covenants of the Pledgor
	 	 	10	 
	Section 5.01 Delivery and Other Perfection
	 	 	10	 
	Section 5.02 Other Financing Statements and Liens
	 	 	11	 
	Section 5.03 Maintenance of Collateral Base Percentage
	 	 	11	 
	Section 5.04 Voting Rights; Dividends; etc
	 	 	11	 
	Section 5.05 No Removals, etc
	 	 	12	 
	Section 5.06 U.S. Securities
	 	 	12	 
	Section 6. Remedies; Distribution of Collateral
	 	 	13	 
	Section 6.01 Remedies
	 	 	13	 
	Section 6.02 Disposition of the Collateral
	 	 	14	 
	Section 6.03 Waiver of Claims
	 	 	15	 
	Section 6.04 Application of Proceeds
	 	 	16	 
	Section 6.05 Remedies Cumulative
	 	 	17	 
	Section 6.06 Discontinuance of Proceedings
	 	 	18	 
	Section 6.07 Rights of Administrative Agent
	 	 	18	 
	Section 6.08 Effect of Bankruptcy; Obligations Absolute
	 	 	18	 
	Section 7. The Administrative Agent
	 	 	18	 
	Section 7.01 Limitation of Duties
	 	 	18	 
	Section 7.02 Reliance by Administrative Agent and the Custodian
	 	 	19	 
	Section 7.03 Appointment of Agents
	 	 	20	 
	Section 8. Miscellaneous
	 	 	20	 
	Section 8.01 No Waiver
	 	 	20	 
	Section 8.02 Notices
	 	 	20	 
	Section 8.03 Fees and Expenses of Custodian
	 	 	21	 
	Section 8.04 Expenses etc. of Administrative Agent, Custodian and Administrative Agent; Indemnity
	 	 	21	 
	Section 8.05 Indemnity Obligations Secured by Collateral; Survival
	 	 	22	 
	Section 8.06 Waiver; Amendment
	 	 	22	 
	Section 8.07 Successors and Assigns
	 	 	23	 
	Section 8.08 Termination
	 	 	23	 

 

 

	 	 	 	 	 
	 	 	Page
	Section 8.09 Powers Coupled with an Interest
	 	 	23	 
	Section 8.10 Captions
	 	 	24	 
	Section 8.11 Counterparts
	 	 	24	 
	Section 8.12 Governing Law; Jurisdiction; Consent to Service of Process
	 	 	24	 
	Section 8.13 WAIVER OF JURY TRIAL
	 	 	25	 
	Section 8.14 Integration
	 	 	25	 
	Section 8.15 Severability
	 	 	25	 
	Section 8.16 Financial Assets
	 	 	25	 

 

 

THIS PLEDGE AND SECURITY AGREEMENT (as amended, restated, modified and/or supplemented and as in
effect from time to time, this “Agreement”), dated as of November 27, 2007, by and between
ALLIED WORLD ASSURANCE COMPANY, LTD, an exempted company incorporated in Bermuda (the
“Pledgor”) and WACHOVIA 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 from time to time party thereto (the “Lenders”), and
the Administrative Agent, have entered into a Credit Agreement, dated as of November 27, 2007 (as
amended, restated, modified and/or supplemented from time to time, the “Credit Agreement”),
providing for the issuance of, and participation in, Letters of Credit for the account of the
Pledgor, all as contemplated therein;

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

     “Account Control Agreement” means the account control agreement, dated as of November
27, 2007 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 Event” means the issuance of any Letter of Credit.

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

     “Custodian” means Mellon Bank, N.A. 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 Mellon Bank, N.A., 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.

2

 

     “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 (a) the aggregate Letter of Credit Exposure of all Lenders as of such date, (b) all fees
to a Secured Party under the Credit Agreement that are accrued and unpaid as of such date and (c)
any other amounts due and owing to the Secured Parties under the Credit Documents 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.

     “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

3

 

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

     (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
Event occurs) that:

4

 

     (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);

     (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;

5

 

     (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;

     (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

6

 

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
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:

7

 

     (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 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. (i) Contemporaneously with, or prior to, any
Collateral Transfer to the Custodian for inclusion in the Collateral Base, the Pledgor shall
(x) deliver customary forms provided by the Custodian (completed to the reasonable
satisfaction of the Custodian) in respect of such Collateral Transfer and (y) notify the
Administrative Agent of such Collateral Transfer in writing, which notice shall be
substantially in the form of Exhibit B and shall set forth (i) the date of such Collateral
Transfer, (ii) in reasonable detail, a description of the Securities (and the respective
fair market value thereof as of the date of such Collateral Transfer), (iii) the Collateral
Base of the Pledgor both before and after giving effect to such Collateral Transfer and (iv)
an officer’s certificate certified by an Authorized Officer that the Cash and/or Securities
subject to such Collateral Transfer constitutes Collateral of the Pledgor under this
Agreement and is subject to the security interests granted herein. 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 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;

8

 

     (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.

     (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 5.11(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

9

 

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

     Section 4. Effecting Credit Events.

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

     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

10

 

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 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.

     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

11

 

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 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.

     (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.

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     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 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;

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     (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;

     (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

14

 

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.

     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.

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      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 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
Reimbursement Obligations, 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 Letters of
Credit and (z) “Secondary Obligations” shall mean all Secured Obligations other than Primary
Obligations.

16

 

     (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 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

17

 

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
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

18

 

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 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.

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     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, 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 of the Credit Agreement. Except as otherwise provided in this
Agreement, all such communications shall be deemed to have been duly given when transmitted

20

 

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.

     (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

21

 

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 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 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).

22

 

     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.

     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.

23

 

     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.

     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 non-exclusive jurisdiction of the Supreme Court of the State of New
York sitting in New York County and of the United States District Court of the Southern
District of New York, and any appellate court from any thereof, in any action or proceeding
arising out of or relating to this Agreement, 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 10.4 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

24

 

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.

     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.

*****

25

 

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: Senior Vice President and Chief Financial Officer	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Marchelle D. Lewis	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Marchelle D. Lewis	 	 
	 	 	Title: Vice President and Treasurer	 	 
	 
	 	 	 	 	 	 
	 	 	WACHOVIA BANK, NATIONAL ASSOCIATION, as

Administrative Agent	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ William R. Goley	 	 
	 

	 	 	 	 	 	 
	 	 	Name: William R. Goley	 	 
	 	 	Title: Director	 	 

SIGNATURE PAGE TO PLEDGE AND SECURITY AGREEMENTEX-10.4

 

Exhibit 10.4

ACCOUNT CONTROL AGREEMENT

     THIS ACCOUNT CONTROL AGREEMENT (this “Agreement”) is dated as of November 27, 2007, among
ALLIED WORLD ASSURANCE COMPANY, LTD (“Pledgor”) with an address at 27 Richmond Road, Pembroke HM08,
Bermuda, MELLON BANK, NA., as custodian (“Custodian”), with an address of One Mellon Center,
Pittsburgh, PA 15258, and WACHOVIA BANK, NATIONAL ASSOCIATION (“Administrative Agent”), in its
capacity as the administrative agent for the lenders under the Credit Agreement (the “Credit
Agreement”) among the Pledgor, Allied World Assurance Company Holdings, Ltd and the lenders from
time to time party thereto (the “Lenders”).

Recitals:

     Pledgor and the Custodian are parties to a certain Custody Agreement dated as of November 19,
2001 (the “Custody Agreement”), governing the Account (as hereinafter defined);

     Pursuant to the Pledge and Security Agreement, dated as of the date hereof, from Pledgor to
the Lenders (the “Security Agreement”), Pledgor has pledged to the Lenders securities account
number AWAF0003002 and related deposit account, if any (collectively, the “Account”) together with
all financial assets, investment property, securities, securities entitlements, cash and other
property therein; and

     The Lenders have appointed the Administrative Agent as the Lenders’ agent in relation to the
Security Agreement.

     Pledgor, Custodian and Administrative Agent are entering into this Agreement to provide for
the control of the Account and to perfect the security interest of Administrative Agent therein.

     The terms “deposit account”, “entitlement holder”, “entitlement order”, “financial asset”,
“investment property”, “proceeds”, “security”, “security entitlement” and “securities intermediary”
shall have the meanings set forth in Articles 8 and 9 of the Uniform Commercial Code as in effect
from time to time in the State of New York (hereinafter, “UCC”).

     The Pledgor and the Administrative Agent hereby appoint the Custodian as custodian, bailee and
securities intermediary of all financial assets at any time delivered to, or deposited with, the
Custodian to be credited to the Account. The Custodian hereby accepts the foregoing appointment as
custodian, bailee, securities intermediary and agent.

     Therefore, in consideration of the premises and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the
parties hereby agree as follows:

     1. The Account. Custodian hereby represents and warrants to Administrative Agent and
Pledgor that (a) the Account has been established in the name of Pledgor and (b) to the best of
Custodian’s knowledge, except for the claims and interest of Administrative Agent and Pledgor in
the Account (subject to any claim in favor of Custodian permitted under Section 2), Custodian does
not know of any claim to or interest in the Account. All parties agree that the

 

 

Account and all property held by Custodian in the Account or credited to the Account and all
other rights of the Pledgor against the Custodian arising out of the Account will be treated as
investment property under Article 9 of the UCC and financial assets under Article 8 of the UCC.
The Custodian makes no representation or warranty, and shall have no responsibility or liability,
with respect to the effectiveness of this Agreement in perfecting such security interest.

     2. Priority of Lien. Custodian hereby acknowledges the security interest granted to
Administrative Agent by Pledgor. Custodian hereby subordinates all liens, encumbrances, claims and
rights of setoff it may have against the Account or any financial asset carried in the Account or
any credit balance in the Account to the security interests of the Administrative Agent and agrees
that, except for its lien on financial assets in the Account to secure payment for financial assets
purchased for the Account and customary fees and charges pursuant to the Custody Agreement, it will
not assert any such lien, encumbrance, claim or right against the Account or any financial asset
and other property carried in the Account or any credit balance in the Account. Custodian will not
agree with any third party that Custodian will comply with entitlement orders concerning the
Account originated by such third party.

     3. Control. Custodian will comply at all times with entitlement orders originated by
Administrative Agent concerning the Account without further consent by Pledgor or any other person.
Custodian shall make trades of financial assets and other property held in the account at the
direction of Pledgor, or Pledgor’s authorized representative, and comply with entitlement orders
and such other direction concerning the Account from Pledgor, or Pledgor’s authorized
representatives, until such time as Administrative Agent delivers a written notice to Custodian and
Pledgor that Administrative Agent is thereby exercising exclusive control over the Account (the
“Notice of Exclusive Control”). After Custodian receives the Notice of Exclusive Control,
Custodian will cease complying with entitlement orders or other directions concerning the Account
originated by Pledgor or Pledgor’s representatives.

     It is understood and agreed that the Custodian’s duty to comply with instructions and
entitlement orders from the Administrative Agent regarding the Account is absolute, and the
Custodian shall be under no duty or obligation, nor shall it have the authority, to inquire or
determine whether or not such instructions are in accordance with the Security Agreement or any
other agreement, nor seek confirmation thereof from the Pledgor or any other person. In case of
any conflict between the entitlement orders or instructions received by the Custodian from the
Administrative Agent and any entitlement orders or instructions received by the Custodian from the
Pledgor or any other person other than the Administrative Agent in accordance with this Agreement,
the entitlement orders and instructions originated by the Administrative Agent shall prevail.

     4. Statements and Notices of Adverse Claims; Access to Reports. Custodian will send
copies of all monthly statements concerning the Account to each of Pledgor and Administrative
Agent, within ten (10) business days of the end of each calendar month and at and as of such other
times as Administrative Agent may reasonably request, in all cases at the address set forth in
Section 12 of this Agreement. Upon receipt of written notice of any lien, encumbrance or adverse
claim against the Account or in any financial asset or other property carried therein, Custodian
will make all reasonable efforts to notify Administrative Agent and Pledgor thereof. Further, upon
any pledge, release or substitution of financial assets or other

 

 

property in the Account, Custodian shall notify Administrative Agent within one business day
of such change.

     5. Limited Responsibility of Custodian. Custodian shall have no responsibility or
liability to Administrative Agent for making trades of financial assets held in the Account at the
direction of Pledgor, or Pledgor’s authorized representatives, or complying with entitlement orders
concerning the Account from Pledgor, or Pledgor’s authorized representatives, that are received by
Custodian before Custodian receives a Notice of Exclusive Control. Custodian shall have no
responsibility or liability to Pledgor for complying with a Notice of Exclusive Control or
complying with entitlement orders concerning the Account originated by Administrative Agent, even
if Pledgor notifies Custodian that the Administrative Agent is not legally entitled to issue the
entitlement order or Notice of Exclusive Control. Custodian shall have no responsibility or
liability to Administrative Agent with respect to the value of the Account or any asset held
therein. Custodian shall have no duty to investigate or make any determination as to whether a
default exists under any agreement between Pledgor and Administrative Agent and shall comply with a
Notice of Exclusive Control even if it believes that no such default exists. This Agreement does
not create any obligation or duty of Custodian other than those expressly set forth herein.

     6. Indemnification of Custodian. Pledgor hereby agrees to indemnify, defend and hold
harmless Custodian, its directors, officers, agents and employees against any and all claims,
causes of action, liabilities, lawsuits, demands and damages, including without limitation, any and
all court costs and reasonable attorney’s fees, in any way related to or arising out of or in
connection with this Agreement or any action taken or not taken pursuant hereto, except to the
extent as a result of Custodian’s gross negligence or willful misconduct.

     7. Termination. The rights and powers granted herein to Administrative Agent have
been granted in order to perfect its security interest in the Account, are powers coupled with an
interest and will not be affected by the lapse of time. The obligations of Custodian under
Sections 2, 3 and 5 above shall continue in effect until the earlier of (i) the date on which
Pledgor makes suitable arrangements with the prior written consent of Administrative Agent
following the resignation of Custodian on 30 days’ prior written notice to Administrative Agent and
Pledgor and (ii) Administrative Agent has notified Custodian and Pledgor on 30 days’ prior written
notice in writing that this Agreement is to be terminated.

     8. Entire Agreement. This Agreement, any schedules or exhibits hereto and the
instructions and notices required or permitted to be executed and delivered hereunder set forth the
entire agreement of the parties with respect to the subject matter hereof.

     9. Amendments. No amendment, modification or (except as otherwise specified in
Section 7 above) termination of this Agreement, nor any assignment of any rights hereunder, shall
be binding on any party hereto unless it is in writing and is signed by each of the parties hereto,
and any attempt to so amend, modify, terminate or assign except pursuant to such a writing shall be
null and void. No waiver of any rights hereunder, shall be binding on any party hereto unless such
waiver is in writing and signed by the party against whom enforcement is sought.

 

 

     10. Severability. If any term or provision set forth in this Agreement shall be
invalid or unenforceable, the remainder of this Agreement, or the application of such term or
provision to persons or circumstances other than those to which it is held invalid or
unenforceable, shall be construed in all respects as if such invalid or unenforceable term or
provision were omitted.

     11. Successors. The terms of this Agreement shall be binding upon, and shall inure to
the benefit of, the parties hereto and their respective successors and permitted assigns.

     12. Notices. Any notice, request or other communication required or permitted to be
given under this Agreement shall be in writing and deemed to have been properly given (i) when
delivered in person, or (ii) when sent by telecopy or other electronic means and electronic
confirmation of error free receipt is received or (iii) upon receipt of notice sent by certified or
registered mail, return receipt requested, postage prepaid, in each case when addressed to the
party at the address (or telecopier number) specified for such party below. Any party may change
its address for notices in the manner set forth above.

	 	 	 
	Pledgor:
	 	Allied World Assurance Company, Ltd
	 
	 	27 Richmond Road
	 
	 	Pembroke HM 08, Bermuda
	 
	 	Attn: Marchelle Lewis
	 
	 	Telephone: (441) 278-5680
	 
	 	Telecopy: (441) 295-2618
	 
	 	 
	 
	 	with copies to:
	 
	 	 
	 
	 	Allied World Assurance Company, Ltd
	 
	 	27 Richmond Road
	 
	 	Pembroke HM 08, Bermuda
	 
	 	Attn: Joan Dillard
	 
	 	Telephone: (441) 278-5678
	 
	 	Telecopy: (441) 295-2618
	 
	 	 
	 
	 	and
	 
	 	 
	 
	 	John T. Capetta, Esq.
	 
	 	Kelley Drye & Warren LLP
	 
	 	400 Atlantic Street, 13th Floor
	 
	 	Stamford, CT 06901
	 
	 	Telecopy: (203) 327-2669
	 
	 	 
	Custodian:
	 	Mellon Bank, N.A.
	 
	 	One Mellon Center
	 
	 	Pittsburgh, PA 15258
	 
	 	Attn: Tom Spagnol
	 
	 	Telephone: (412) 236-1315
	 
	 	Telephone: (412) 234-8725

 

 

	 	 	 
	Administrative Agent:
	 	Wachovia Bank, National Association,
	 
	 	as Administrative Agent
	 
	 	301 South College Street, 15th Floor, NC5562
	 
	 	Charlotte, North Carolina 28288-5562
	 
	 	Attn: Will Goley
	 
	 	Telephone: (704) 383-8180
	 
	 	Telecopy: (704) 383-7611

     13. Counterparts. This Agreement may be executed in any number of counterparts, all
of which shall constitute one and the same instrument, and any party hereto may execute this
Agreement by signing and delivering one or more counterparts.

     14. Choice of Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York.

     15. Waiver of Jury Trial. Pledgor, Custodian and Administrative Agent hereby waive
trial by jury in any judicial proceeding involving, directly or indirectly, any matter in any way
arising out of, or related to, or in connection with this Agreement

     16. Representations. Each party hereby represents and warrants that the individual
executing this Agreement on its behalf has the requisite power and authority to do so and to bind
such party to the terms of this Agreement.

 

 

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 Pledgor
	 
	 	 	 	 
	By:

	 	/s/ Joan H. Dillard	 	 
	 

	 	 	 	 
	 

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

	 	/s/ Marchelle D. Lewis
 

	 	 
	 

	 	     Signature	 	 
	Name: Marchelle D. Lewis
	Title: Vice President and Treasurer
	 
	 	 	 	 
	MELLON BANK, N.A., as Custodian
	 
	 	 	 	 
	By:

	 	/s/ Donna Moses
 

	 	 
	 

	 	     Signature	 	 
	Name: Donna Moses
	Title: First Vice President
	 
	 	 	 	 
	WACHOVIA BANK, NATIONAL ASSOCIATION, as Administrative Agent
	 
	 	 	 	 
	By:

	 	/s/ William R. Goley
 

	 	 
	 

	 	     Signature	 	 
	Name: William R. Goley
	Title: Director

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