Document:

jg03-2312_8kpandsagmt.htm

 

EXHIBIT 10.2

 

Execution Version

 

PLEDGE AND SECURITY AGREEMENT

 

Dated as of March 19, 2012

 

 

 

 

among

 

 

 

 

WMI Holdings Corp.

as the Grantor

 

 

 

 

Wilmington Trust, National Association

as First Lien Trustee (as defined herein)

 

 

 

Law Debenture Trust Company of New York

as Second Lien Trustee (as defined herein)

 

 

 

U.S. Bank National Association

as Third Lien Agent (as defined herein)

 

 

 

and

 

 

 

 

Wilmington Trust, National Association

as Collateral Agent (as defined herein)

 

 

 

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This pledge and Security Agreement is subject to the terms and provisions of the Intercreditor Agreement, dated as of March 19, 2012 (as such agreement may be amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Intercreditor Agreement”), by and among the First Lien Trustee (as hereinafter defined), the Second Lien Trustee (as hereinafter defined), the Third Lien Agent (as hereinafter defined) and the Collateral Agent(as hereinafter defined).

 

Pledge and Security Agreement, dated as of March 19, 2012, by and among WMI Holdings Corp., a Washington corporation (“WMI” or the “Grantor”), the First Lien Trustee, the Second Lien Trustee, the Third Lien Agent and Wilmington Trust, National Association, as agent (in such capacity and together with its permitted successors and assigns, the “Collateral Agent”) for the Secured Parties (as hereinafter defined).

 

W i t n e s s e t h:

 

Whereas, WMI has entered into (i) the Senior First Lien Notes Indenture, dated as of the date hereof (as the same may be amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “First Lien Indenture”) with Wilmington Trust, National Association as Trustee (in such capacity and together with its permitted successors and assigns, the “First Lien Trustee”), (ii) the Senior Second Lien Notes Indenture, dated as of the date hereof (as the same may be amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Second Lien Indenture” and together with the First Lien Indenture, the “Indentures”) with Law Debenture Trust Company of New York as Trustee (in such capacity and together with its permitted successors and assigns, the “Second Lien Trustee” and together with the First Lien Trustee, the “Trustees”) and (iii) the Financing Agreement, dated as of the date hereof (as the same may be amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Third Lien Credit Agreement”) with U.S. Bank National Association as Agent (in such capacity and together with its permitted successors and assigns, the “Third Lien Agent”) pursuant to which the lenders party thereto (the “Third Lien Lenders”) have agreed to make loans to WMI in its capacity as borrower thereunder on terms and conditions contained therein;

 

Whereas, pursuant to the Indentures, the Grantor is entering into this Agreement in order to grant to the Collateral Agent separate and distinct security interests in the Collateral for the ratable benefit of the First Lien Secured Parties (as hereinafter defined), the Second Lien Secured Parties (as hereinafter defined) and the Third Lien Secured Parties (as hereinafter defined) to secure their respective Secured Obligations (as hereinafter defined).

 

Now, therefore, the Grantor hereby agrees with the Collateral Agent, the First Lien Trustee (on behalf of the First Lien Secured Parties), the Second Lien Trustee (on behalf of the Second Lien Secured Parties) and the Third Lien Agent (on behalf of the Third Lien Secured Parties), for the ratable benefit of the Secured Parties(as hereinafter defined), as follows:

 

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ARTICLE I  

	
Defined Terms

 

	
Section 1.1  

	
Definitions

 

(a) Terms used herein without definition that are defined in the UCC have the meanings given to them in the UCC, including the following terms (which are capitalized herein):

 

“Account”

“Certificated Security”

“Control Account”

“Deposit Account”

“Instruments”

“Proceeds”

 

(b) The following terms shall have the following meanings:

 

“Agreement” means this Pledge and Security Agreement.

 

“Bankruptcy Event of Default” means an Event of Default pursuant to Section 7.01(5), (6) or (7) of each Indenture (as in effect on the date hereof).

 

“Cash Equivalent” shall have the meaning ascribed to such term in the Indentures as in effect on the date hereof.

 

“Collateral” has the meaning specified in Section 2.1 (Collateral).

 

“Collateral Account” means a separate securities and/or deposit account established and maintained by the Grantor in which the Collateral Agent has a valid perfected security interest and over which the Collateral Agent has exclusive dominion and control.

 

“Constituent Documents” means, with respect to any Person, (a) the articles of incorporation, certificate of incorporation, constitution or certificate of formation (or the equivalent organizational documents) of such Person, (b) the by-laws or operating agreement (or the equivalent governing documents) of such Person and (c) any document setting forth the manner of election or duties of the directors or managing members of such Person (if any) and the designation, amount or relative rights, limitations and preferences of any class or series of such Person’s Stock.

 

“Control Agreement” means an agreement executed by the Grantor, the Collateral Agent, any other secured parties party thereto and the relevant financial institution or securities intermediary, and providing to the Collateral Agent “control” of the Collateral Account and the Trustee Fees Account within the meaning of Articles 8 and 9 of the UCC.

 

“Default” shall have the meaning ascribed to such term in the Indentures as in effect on the date hereof.

 

“Excluded Collateral” means (i) all equity interests in Owner and (ii) all assets of Owner and the Trusts, in each case, until such time as all required approvals to grant a lien therein have been obtained.

 

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“Event of Default” shall mean an “Event of Default” as defined in either Indenture as in effect on the date hereof.

 

“First Lien Noteholder” means each Holder (as defined in the First Lien Indenture as in effect on the date hereof).

 

“First Lien Secured Parties” means the First Lien Trustee, the First Lien Noteholders and any other person from time to time holding First Lien Notes (as defined in the Second Lien Indenture as in effect on the date hereof).

 

“GAAP” shall have the meaning ascribed to such term in the Indentures.

 

“Governmental Authority” shall have the meaning ascribed to such term in the Indentures.

 

“Insurance Book Closing” means the transfer by WMMRC of (i) all Runoff Proceeds held on the date of such transfer, (ii) the right to receive all future Runoff Proceeds and (iii) the Trusts and their assets along with all insurance liabilities associated therewith as of the date of transfer to a protected cell established and maintained pursuant to § 431:19-303 of Title 24 of the Hawaii Insurance Code in conformance with all applicable Requirements of Law, which complies with the following requirements: (w) the Protected Cell shall be organized as a direct wholly owned subsidiary of WMI; (x) the assets of the Protected Cell shall not be chargeable with liabilities arising out of any other business WMMRC may conduct; (y) the business plan establishing the Protected Cell shall restrict its business to the administration and management of the Trusts and the assets thereof along with the liabilities associated therewith, and the distribution of the Runoff Proceeds; and (z) the governing documents of the Protected Cell shall provide that no dividend or distribution may be made to any Person other than WMI as provided for in the Notes Documentation.

 

“Interest Payment Date” shall have the meaning ascribed to such term in the Indentures.

 

“Issuer Incremental Amount” means an amount accruing on the outstanding Issuer Priority Amount or the Issuer Secondary Amount, as applicable, at 13% per annum payable quarterly in arrears on each Interest Payment Date, to WMI.

 

“Issuer Priority Amount” means (i) a principal amount equal to $4.0 million plus (ii) any amounts added due to unpaid Issuer Incremental Amounts in respect of the Issuer Priority Amount, less (iii) any repayments of the Issuer Priority Amounts, to WMI.

 

“Issuer Secondary Amount” means (i) a principal amount equal to $6.0 million plus (ii) any amounts added due to unpaid Issuer Incremental Amounts in respect of the Issuer Secondary Amount, less (iii) any repayments of the Issuer Secondary Amounts to WMI.

 

“Lien” means, with respect to any asset, any mortgage, lien (statutory or otherwise), pledge, hypothecation, charge, security interest, preference, priority or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent

 

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statutes) of any jurisdiction; provided that in no event shall an operating lease be deemed to constitute a Lien.

 

“Notes” means the First Lien Notes (as defined in the Second Lien Indenture as in effect on the date hereof) and the Second Lien Notes (as defined in the First Lien Indenture as in effect on the date hereof).

 

“Notes Documentation” means the Notes Documentation (as defined in the First Lien Indenture as in effect on the date hereof) and the Notes Documentation (as defined in the Second Lien Indenture as in effect on the date hereof).

 

“Noteholders” means the First Lien Noteholders and the Second Lien Noteholders.

 

“Owner” means (x) WMMRC until the occurrence of an Insurance Book Closing and (y) the Protected Cell created by such Insurance Book Closing to which the Runoff Proceeds, the Trusts and the assets thereof are transferred, thereafter, in accordance with the terms of the Notes Documentation as in effect on the date hereof.

 

“Person” means any individual, corporation, limited liability company, partnership, joint venture, association, joint stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.

 

“Pledged Collateral” means, collectively, the capital stock of WMMRC owned or held by the Grantor (to the extent permitted by the applicable Governmental Authority) and the capital stock in the Protected Cell owned or held by the Grantor (to the extent permitted by the applicable Governmental Authority), all chattel paper, certificates or other Instruments representing any of the foregoing.  For purposes of this Agreement, the term “Pledged Collateral” shall not include any Excluded Collateral.

 

“Protected Cell” means a protected cell established by WMI in connection with the Insurance Book Closing upon the receipt of approval of the applicable Governmental Authority and maintained pursuant to § 431:19-303 of Title 24 of the Hawaii Insurance Code, in conformance with all applicable Requirements of Law.

 

“Requirements of Law” shall have the meaning ascribed to such term in the Indentures as in effect on the date hereof.

 

“Runoff Proceeds” means (a)(i) all net premiums, reinsurance recoverables, net revenue resulting from commutation of insurance contracts, net interest income, reserve releases and other revenues derived from the reinsurance contracts, investments and other assets of the Trusts less, without duplication, (ii)(A) the reasonable and necessary costs and expenses of the Trusts and the Owner (including, but not limited to, general and administrative expenses, audit fees, required regulatory capital contributions (which capital contributions will be added back to the Runoff Proceeds if applicable regulations permit such distributions thereof), expenses of regulatory compliance, including all costs associated with the Insurance Book Closing, expenses of administering the Indentures and taxes attributable to the administration of the Trusts or the assets thereof and the collection of premiums and/or management of investments in connection therewith (which expenses shall include reasonable and customary expenses attributable to the foregoing paid under any administrative services agreement, investment management agreement

 

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or similar agreement), and (B) claims paid for covered losses and (b) the proceeds from the foregoing received by the Owner or WMI in cash, securities and/or other property from any sale, liquidation, merger or other disposition in respect of the Owner or its interests in the Trusts or the assets thereof.  The inclusion of clause (b) of this definition shall not be construed as a consent to any sale, liquidation, merger or other disposition or waiver of compliance with any covenant related thereto. For the avoidance of doubt, to the extent that WMI or WMMRC pays any such cost, capital contribution or expense described in clause (ii)(A), payment by WMI or WMMRC will be deemed a cost or expense of the Trusts.

 

“Runoff Proceeds Distribution” shall have the meaning ascribed to such term in the Indentures as in effect on the date hereof.

 

“Second Lien Noteholder” means each Holder (as defined in the Second Lien Indenture as in effect on the date hereof).

 

“Second Lien Secured Parties” means the Second Lien Trustee, the Second Lien Noteholders and any other person from time to time holding Second Lien Notes (as defined in the First Lien Indenture as in effect on the date hereof).

 

“Secured Obligations” means the First Lien Notes Obligations (as defined in the Second Lien Indenture as in effect on the date hereof), the Second Lien Notes Obligations (as defined in the First Lien Indenture as in effect on the date hereof) and the Third Lien Obligations.

 

“Secured Parties” means the Collateral Agent, the First Lien Secured Parties, the Second Lien Secured Parties and the Third Lien Secured Parties.

 

“Secured Party Representative” means First Lien Trustee (if the First Lien Note Obligations are still outstanding) or by the Second Lien Trustee (if none of the First Lien Note Obligations are outstanding and the Second Lien Note Obligations are still outstanding) or by the Third Lien Agent (if none of the First Lien Notes Obligations and Second Lien Notes Obligations are outstanding and the Third Lien Obligations are still outstanding or any commitments to lend are still in effect under the Third Lien Credit Agreement).

 

“Security Documents” means, collectively, this Agreement, the Intercreditor Agreement, any Control Agreements, other security agreements and directions to pay relating to the Collateral executed and delivered and/or filed and recorded in appropriate jurisdictions to preserve and protect the Liens on the Collateral (including, without limitation, financing statements under the UCC of the relevant states) related to the security interests granted by any of the foregoing documents and any other document or instrument evidencing, creating or providing for a Lien on any real or personal tangible or intangible property as security for any or all of the Secured Obligations.

 

“Stock” means shares of capital stock (whether denominated as common stock or preferred stock), beneficial, partnership or membership interests, participations or other equivalents (regardless of how designated) of or in a corporation, partnership, limited liability company or equivalent entity, whether voting or non-voting.

 

“Third Lien Obligations” means the Obligations (as defined in the Third Lien Credit Agreement as in effect on the date hereof).

 

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“Third Lien Secured Parties” means the Third Lien Agent and the Third Lien Lenders.

 

“Trustee Fees Account” shall have the meaning ascribed to such term in the Indentures.

 

“Trusts” means (a) Home Loan Reinsurance Co. United Guaranty Residential Insurance Company Reinsurance Agreement (Acct. No. x6401); (b) Home Loan Reinsurance Co. Genworth Reinsurance Co. Trust Agreement (Acct. No. x6403); (c) Mortgage Guaranty Insurance Corporation/WM MTG Reinsurance Co. Trust; (Acct. No. x2400); (d) Reinsurance Escrow Agreement among WM Mortgage Reinsurance Co. PMI Mortgage Insurance Company and US Bank (Acct. No. x6404); (e) Radian Guaranty Inc. and WM Mortgage Reinsurance Company Agreement, dated March 27, 2001 (Acct. No. x5700); (f) Home Loan Reinsurance Co. Republic Mortgage Co. Reinsurance Agreement, dated December 14, 1998 (Acct. No. x6402); (g) Washington Mutual Custody Account (Acct. No. x6406); and (h) WM Mortgage Reinsurance Company Inc. (Acct. No. x4202).

 

“UCC” means the Uniform Commercial Code of any applicable jurisdiction and, if the applicable jurisdiction shall not have any Uniform Commercial Code, the Uniform Commercial Code as in effect in the State of New York.

 

“WMMRC” means WM Mortgage Reinsurance Company, Inc., a Hawaii corporation and direct wholly-owned subsidiary of WMI.

 

	
Section 1.2  

	
Certain Other Terms

 

(a) In this Agreement, in the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including” and the words “to” and “until” each mean “to but excluding” and the word “through” means “to and including.”

 

(b) The terms “herein,” “hereof,” “hereto” and “hereunder” and similar terms refer to this Agreement as a whole and not to any particular Article, Section, subsection or clause in this Agreement.

 

(c) References herein to an Annex, Schedule, Article, Section, subsection or clause refer to the appropriate Annex or Schedule to, or Article, Section, subsection or clause in this Agreement.

 

(d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.

 

(e) Where the context requires, provisions relating to any Collateral, when used in relation to the Grantor, shall refer to the Grantor’s Collateral or any relevant part thereof.

 

(f) Any reference in this Agreement to an Indenture shall include all appendices, exhibits and schedules thereto, and, unless specifically stated otherwise all amendments, restatements, amendments and restatements, supplements or other modifications thereto, and as the same may be in effect at any time such reference becomes operative.

 

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(g) The term “including” means “including without limitation” except when used in the computation of time periods.

 

(h) The terms “Grantor,” “Trustee,” “Collateral Agent” and “Secured Party” include their respective successors.

 

(i) References in this Agreement to any statute shall be to such statute as amended or modified and in effect from time to time.

 

	
ARTICLE II  

	
Grant of Security Interest

 

	
Section 2.1  

	
Collateral

 

For the purposes of this Agreement, all of the following property now owned or at any time hereafter acquired by the Grantor or in which the Grantor now has or at any time in the future may acquire any right, title or interests is collectively referred to as the “Collateral,” in each case, only to the extent permitted by the applicable Governmental Authority and subject to the priority and payment provisions of the Indentures and the Intercreditor Agreement, including the Grantor’s right to receive the Issuer Incremental Amount:

 

(a) the Collateral Account and all funds and assets held therein or credited thereto;

 

(b) the Trustee Fees Account and all funds and assets held therein or credited thereto;

 

(c) all Run-Off Proceeds received by the Grantor;

 

(d) all rights of the Grantor to receive dividends or distributions in respect of the Run-Off Proceeds;

 

(e) the Pledged Collateral;

 

(f) to the extent not otherwise included, all Proceeds of the foregoing;

 

provided, however, that “Collateral” shall not include any Excluded Collateral; and provided, further, that if and when any property shall cease to be Excluded Collateral, such property shall be deemed at all times from and after the date hereof to constitute Collateral.

 

	
Section 2.2  

	
Grant of Security Interest in Collateral

 

The Grantor, as collateral security for the full, prompt and complete payment and performance when due (whether at stated maturity, by acceleration or otherwise) of the First Lien Notes Obligations of the Grantor, hereby mortgages, pledges and hypothecates to the Collateral Agent for the benefit of the First Lien Secured Parties, and grants to the Collateral Agent for the benefit of the First Lien Secured Parties a first priority lien on and security interest in, all of its right, title and interest in, to and under the Collateral; provided, however, that, if and when any property that at any time constituted Excluded Collateral becomes Collateral, the Collateral Agent shall have, and at all times from and after the date hereof be deemed to have had, a security interest in such property.

 

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The Grantor, as collateral security for the full, prompt and complete payment and performance when due (whether at stated maturity, by acceleration or otherwise) of the Second Lien Notes Obligations of the Grantor, hereby mortgages, pledges and hypothecates to the Collateral Agent for the benefit of the Second Lien Secured Parties, and grants to the Collateral Agent for the benefit of the Second Lien Secured Parties a second priority lien on and security interest in, all of its right, title and interest in, to and under the Collateral; provided, however, that, if and when any property that at any time constituted Excluded Collateral becomes Collateral, the Collateral Agent shall have, and at all times from and after the date hereof be deemed to have had, a security interest in such property.

 

The Grantor, as collateral security for the full, prompt and complete payment and performance when due (whether at stated maturity, by acceleration or otherwise) of the Third Lien Obligations of the Grantor, hereby mortgages, pledges and hypothecates to the Collateral Agent for the benefit of the Third Lien Secured Parties, and grants to the Collateral Agent for the benefit of the Third Lien Secured Parties a third priority lien on and security interest in, all of its right, title and interest in, to and under the Collateral; provided, however, that, if and when any property that at any time constituted Excluded Collateral becomes Collateral, the Collateral Agent shall have, and at all times from and after the date hereof be deemed to have had, a security interest in such property.

 

	
ARTICLE III  

	
Representations and Warranties

 

To induce (i) each Trustee to enter into each Indenture and the Noteholders to accept the Notes issued thereunder and (ii) the Third Lien Agent to enter into the Third Lien Credit Agreement and the Third Lien Lenders to make loans thereunder, the Grantor hereby represents and warrants each of the following to the Collateral Agent and the other Secured Parties:

 

	
Section 3.1  

	
Title; No Other Liens

 

Except for the Lien granted to the Collateral Agent pursuant to this Agreement and the other Liens permitted to exist on the Collateral under the Note Documentation and the Third Lien Credit Agreement, the Grantor (a) is the record and beneficial owner of the Pledged Collateral pledged by it hereunder and (b) has rights in or the power to transfer each other item of Collateral in which a Lien is granted by it hereunder, in case of clauses (a) and (b) above, free and clear of any other Lien.

 

	
Section 3.2  

	
Perfection and Priority

 

The security interest granted pursuant to this Agreement shall constitute a valid and continuing perfected security interest in favor of the Collateral Agent in the Collateral for which perfection is governed by the UCC upon (i) filing a financing statement under the UCC in the applicable filing office in the state of Washington, (ii) the delivery to the Collateral Agent of all Collateral consisting of Certificated Securities, in each case properly endorsed for transfer to the Collateral Agent or in blank and (iii)  the execution of a Control Agreement with respect to the Collateral Account and the Trustee Fees Account.  Such security interest shall be prior to all other Liens on the Collateral except as otherwise permitted pursuant to the Indentures, the Third Lien Credit Agreement or the Intercreditor Agreement; provided, however, the Collateral Agent on behalf of the Secured Parties acknowledges that the Grantor’s interest in the Runoff Proceeds

 

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held by any Person is only through the Grantor’s ownership of the Pledged Collateral, Runoff Proceeds Distribution or other dividend or distribution in respect of equity interest in Owner.

 

	
Section 3.3  

	
Jurisdiction of Organization; Chief Executive Office

 

As of the date hereof, the Grantor’s jurisdiction of organization, legal name, organizational identification number and chief executive office or principal place of business are as listed on Schedule 3.3 hereto.

 

	
Section 3.4  

	
Pledged Collateral

 

All Pledged Collateral consisting of Certificated Securities has been delivered to the Collateral Agent in accordance with Section 4.4(a) (Pledged Collateral).

 

	
ARTICLE IV  

	
Covenants

 

The Grantor agrees with the Collateral Agent to the following, as long as any Secured Obligations remain outstanding:

 

	
Section 4.1  

	
Generally

 

The Grantor shall (a) except for the security interest created by this Agreement, not create or suffer to exist any Lien upon or with respect to any Collateral, except Liens permitted under the Note Documentation or the Third Lien Credit Agreement, (b) subject to the provisions of the Intercreditor Agreement, not sell, transfer or assign (by operation of law or otherwise) any Collateral except as permitted under the Note Documentation or the Third Lien Credit Agreement and (c) not enter into any agreement or undertaking restricting the right or ability of the Grantor or the Collateral Agent to sell, assign or transfer any Collateral.

 

	
Section 4.2  

	
Maintenance of Perfected Security Interest; Further Documentation

 

(a) The Grantor shall maintain the security interest created by this Agreement as a perfected security interest having at least the priority described in Section 3.2 (Perfection and Priority) and shall defend such security interest and such priority against the claims and demands of all Persons.

 

(b) At any time and from time to time, upon the written request of the Collateral Agent, and at the sole expense of the Grantor, the Grantor shall promptly and duly execute and deliver, and have recorded, such further instruments and documents and take such further action as the Collateral Agent may reasonably request for the purpose of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including the filing of any financing or continuation statement under the UCC (or other similar laws) in effect in any jurisdiction with respect to the security interest created hereby and the execution and delivery of Control Agreements.

 

	
Section 4.3  

	
Changes in Locations, Name, Etc.

 

(a) Except upon 15 days’ prior written notice to the Collateral Agent and delivery to the Collateral Agent of all additional financing statements and other documents

 

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reasonably necessary to maintain the validity, perfection and priority of the security interests provided for herein, the Grantor shall not do any of the following:

 

(i) change its jurisdiction of organization or the location of its chief executive office or the books and records relating to the Collateral, in each case from that referred to in Section 3.3 (Jurisdiction of Organization; Chief Executive Office); or

 

(ii) (A) change its legal name or any trade name used to identify it in the conduct of its business or ownership of its properties or organizational identification number, if any, or (B) change its corporation, limited liability company or other organizational structure to such an extent that any financing statement filed in connection with this Agreement would become misleading.

 

(b) The Grantor shall keep and maintain at its own cost and expense satisfactory and complete records of the Collateral, including a record of all payments received and all credits granted with respect to the Collateral and all other dealings with the Collateral.

 

	
Section 4.4  

	
Pledged Collateral

 

(a) The Grantor shall deliver to the Collateral Agent all certificates representing or evidencing any Pledged Collateral, whether now existing or hereafter acquired, in suitable form for transfer by delivery or, as applicable, accompanied by the Grantor’s endorsement, where necessary, or duly executed instruments of transfer or assignment in blank.

 

(b) Except as provided in Article V (Remedial Provisions), the Grantor shall be entitled to receive all cash dividends paid in respect of the Pledged Collateral (other than liquidating or distributing dividends) with respect to the Pledged Collateral, provided that all Runoff Proceeds Distributions shall be deposited to the Collateral Account or the Trustee Fees Account, in each case, as provided in the Indentures and all other dividends shall be paid only in accordance with the Indentures and the Intercreditor Agreement.  Any sums paid upon or in respect of any Pledged Collateral upon the liquidation or dissolution of any issuer of any Pledged Collateral, and any distribution of capital made on or in respect of any Pledged Collateral or any property distributed upon or with respect to any Pledged Collateral pursuant to the recapitalization or reclassification of the capital of any issuer of Pledged Collateral or pursuant to the reorganization thereof shall, unless otherwise subject to a perfected security interest in favor of the Collateral Agent, be delivered to the Collateral Agent to be held by it hereunder as additional collateral security for the Secured Obligations.  If any sum of money or property so paid or distributed in respect of any Pledged Collateral shall be received by the Grantor, the Grantor shall, until such money or property is paid or delivered to the Collateral Agent, hold such money or property in trust for the Collateral Agent, segregated from other funds of the Grantor, as additional security for the Secured Obligations.

 

(c) Except as provided in Article V (Remedial Provisions), the Grantor shall be entitled to exercise all voting, consent and corporate, partnership, limited liability company and similar rights with respect to the Pledged Collateral; provided, however, that no vote shall be cast, consent given or right exercised or other action taken by the Grantor that would impair the Collateral, be inconsistent with or result in any violation of any provision of the Note Documentation or the Third Lien Credit Agreement or, without prior notice to the Collateral Agent, enable or permit any issuer of Pledged Collateral to issue any Stock or other equity Securities of any nature or to issue any other securities convertible into or granting the right to

 

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purchase or exchange for any Stock or other equity Securities of any nature of any issuer of Pledged Collateral.

 

(d) The Grantor shall not, without the consent of the First Lien Trustee, the Second Lien Trustee and the Third Lien Agent, agree to any amendment of any Constituent Document that in any way adversely affects the perfection of the security interest of the Collateral Agent in the Pledged Collateral pledged by the Grantor hereunder, including any amendment electing to treat any membership interest or partnership interest that is part of the Pledged Collateral as a “security” under Section 8-103 of the UCC, or any election to turn any previously uncertificated Stock that is part of the Pledged Collateral into certificated Stock.

 

	
Section 4.5  

	
Payment of Obligations

 

The Grantor shall pay and discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all taxes, assessments and governmental charges or levies imposed upon the Collateral or in respect of income or profits therefrom, as well as all claims of any kind (including claims for labor, materials and supplies) against or with respect to the Collateral, except that no such charge need be paid if the amount or validity thereof is currently being contested in good faith by appropriate proceedings, reserves in conformity with GAAP with respect thereto have been provided on the books of the Grantor and such proceedings could not reasonably be expected to result in a Lien on or the sale, forfeiture or loss of any material portion of the Collateral or any interest therein.

 

	
ARTICLE V  

	
Remedial Provisions

 

	
Section 5.1  

	
Code and Other Remedies

 

During the continuance of an Event of Default, the Collateral Agent may exercise, in addition to all other rights and remedies granted to it in this Agreement and in any other instrument or agreement securing, evidencing or relating to the Secured Obligations, all rights and remedies of a secured party under the UCC or any other applicable law.  Without limiting the generality of the foregoing, the Collateral Agent, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon any Grantor or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize upon any Collateral, and may forthwith sell, lease, assign, give option or options to purchase, or otherwise dispose of and deliver any Collateral (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, at any exchange, broker’s board or office of the Collateral Agent or any Lender or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk.  The Collateral Agent shall have the right upon any such public sale or sales, and, to the extent permitted by the UCC and other applicable law, upon any such private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption of any Grantor, which right or equity is hereby waived and released.  The Collateral Agent shall apply the net proceeds of any action taken by it pursuant to this Section 5.1, after deducting all reasonable costs and expenses of every kind incurred in connection therewith or incidental to the care or safekeeping of any Collateral or in any way relating to the Collateral or the rights of the Collateral Agent and any other Secured Party hereunder, including reasonable attorneys’ fees and disbursements, to the payment in whole or in part of the Secured Obligations, in such order as the

 

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Intercreditor Agreement shall prescribe, and only after such application and after the payment by the Collateral Agent of any other amount required by any provision of law or the Intercreditor Agreement, need the Collateral Agent account for the surplus, if any, to any Grantor.  To the extent permitted by applicable law, the Grantor waives all claims, damages and demands it may acquire against the Collateral Agent or any other Secured Party arising out of the exercise by them of any rights hereunder.  If any notice of a proposed sale or other disposition of Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least 10 days before such sale or other disposition.

 

	
Section 5.2  

	
Pledged Collateral

 

(a) During the continuance of an Event of Default (to the extent such Event of Default (other than a Bankruptcy Event of Default) has been declared in writing), the Collateral Agent (at the direction of the applicable Secured Party Representative) to the Grantor, (i) the Collateral Agent shall have the right to receive any Proceeds of the Pledged Collateral and make application thereof to the Secured Obligations in the order set forth in the Indentures and subject to the Intercreditor Agreement and (ii) the Collateral Agent or its nominee may exercise (A) any voting, consent, corporate and other right pertaining to the Pledged Collateral at any meeting of shareholders, partners or members, as the case may be, of the relevant issuer or issuers of Pledged Collateral or otherwise and (B) any right of conversion, exchange and subscription and any other right, privilege or option pertaining to the Pledged Collateral as if it were the absolute owner thereof (including the right to exchange at its discretion any of the Pledged Collateral upon the merger, amalgamation, consolidation, reorganization, recapitalization or other fundamental change in the corporate or equivalent structure of any issuer of Pledged Collateral, the right to deposit and deliver any Pledged Collateral with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions as the Collateral Agent may determine), all without liability except to account for property actually received by it; provided, however, that the Collateral Agent shall have no duty to any Grantor to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing.

 

(b) In order to permit the Collateral Agent to exercise the voting and other consensual rights that it may be entitled to exercise pursuant hereto and to receive all dividends and other distributions that it may be entitled to receive hereunder, (i) the Grantor shall promptly execute and deliver (or cause to be executed and delivered) to the Collateral Agent all such proxies, dividend payment orders and other instruments as the Collateral Agent may from time to time reasonably request and (ii) without limiting the effect of clause (i) above, the Grantor hereby grants to the Collateral Agent an irrevocable proxy to vote all or any part of the Pledged Collateral and to exercise all other rights, powers, privileges and remedies to which a holder of the Pledged Collateral would be entitled (including giving or withholding written consents of shareholders, partners or members, as the case may be, calling special meetings of shareholders, partners or members, as the case may be, and voting at such meetings), which proxy shall be effective, automatically and without the necessity of any action (including any transfer of any Pledged Collateral on the record books of the issuer thereof) by any other person (including the issuer of such Pledged Collateral or any officer or agent thereof) upon the occurrence and during the continuance of an Event of Default (to the extent such Event of Default (other than a Bankruptcy Event of Default) has been declared in writing) and which proxy shall only terminate upon the payment in full of the Secured Obligations.

 

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(c) The Grantor hereby expressly authorizes and instructs each issuer of any Pledged Collateral pledged hereunder by the Grantor to (i) comply with any instruction received by it from the Collateral Agent in writing that (A) states that an Event of Default has occurred and is continuing and (B) is otherwise in accordance with the terms of this Agreement, without any other or further instructions from the Grantor, and the Grantor agrees that such issuer shall be fully protected in so complying and (ii) unless otherwise expressly permitted hereby, pay any dividend or other payment with respect to the Pledged Collateral directly to the Collateral Agent.

 

	
Section 5.3  

	
Proceeds to be Turned Over To Collateral Agent

 

Unless otherwise expressly provided in the Indentures, all Proceeds received by the Collateral Agent hereunder in cash or Cash Equivalents shall be held by the Collateral Agent in the Collateral Account.  All Proceeds while held by the Collateral Agent in the Collateral Account (or by the Grantor in trust for the Collateral Agent) shall continue to be held as collateral security for the Secured Obligations and shall not constitute payment thereof until applied as provided in the Indentures and the Intercreditor Agreement.

 

	
Section 5.4  

	
Non-Recourse

 

(a)           Notwithstanding any other provision of the Indentures, the Notes, the Intercreditor Agreement and the other Security Documents to the contrary, the Collateral Agent on behalf of itself and the Secured Parties, agrees that it and the Secured Parties shall not have or take any recourse (other than actions for specific performance in clause (b) below) with respect to the Notes Documentation against the Grantor or its assets and property or against WMMRC or the Owner or their respective assets and property (other than assets that were required to be transferred to the Protected Cell pursuant to the Insurance Book Closing), except (i) to the Collateral Account, (ii) if the Grantor fails to comply with its obligations pursuant to Sections 4.02(a), 4.02(b), 5.02 or 5.08 of the Indentures, to the assets of the Grantor in an amount equal to the aggregate amount of any Runoff Proceeds or Runoff Proceeds Distributions that were not deposited into the Collateral Account, (iii) to the equity interests in and the excess assets of the Owner to the extent a Lien has been granted therein pursuant to Section 2.2 in favor of the Collateral Agent and (iv) to the Owner or the Grantor for costs and expenses, including reasonable attorney’s fees, related to the enforcement of Sections 4.01, 4.02, 4.03, 5.02, 5.03, 5.07, 5.08, 5.10 and 5.13 of the Indentures, if the Noteholders or the Trustees, as applicable, are the prevailing party in such enforcement action.

 

(b)           The Grantor agrees that irreparable damage would occur and that the Trustees, the Collateral Agent and the Noteholders would not have any adequate remedy at law in the event that any of the provisions of the Indentures were not performed in accordance with their specific terms or were otherwise breached.  It is accordingly agreed that the Trustees, Collateral Agent and the Noteholders shall be entitled to an injunction or injunctions to prevent breaches of the Indentures and to enforce specifically the terms and provisions of the Indentures, including but not limited to Sections 4.02, 5.01, 5.02, 5.03, 5.07, 5.08, 5.11 and 5.13 of the Indentures, in any court of competent jurisdiction, without proof of actual damages (and each party hereby waives any requirement for the securing or posting of any bond or other security in connection therewith); specific performance being in addition to any other remedy to which the parties are entitled at law or in equity.

 

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ARTICLE VI  

	
The Collateral Agent

 

	
Section 6.1  

	
Appointment

 

The First Lien Trustee (on behalf of itself and the First Lien Secured Parties), the Second Lien Trustee (on behalf of itself and the Second Lien Secured Parties) and the Third Lien Agent (on behalf of itself and the Third Lien Secured Parties) hereby irrevocably designate and appoint Wilmington Trust, National Association as the Collateral Agent for the Secured Parties under this Agreement and the Security Documents, and irrevocably authorizes Wilmington Trust, National Association, as the Collateral Agent, to take such action on behalf of the Secured Parties under the provisions of this Agreement and the Security Documents and to exercise such powers and perform such duties as are expressly delegated to the Collateral Agent by the terms thereof, together with such other powers as are reasonably incidental thereto.  Notwithstanding any provision to the contrary elsewhere in this Agreement, any Security Document or otherwise, the Collateral Agent shall not have any duties or responsibilities, except those expressly set forth herein and in the Security Documents, or any fiduciary relationship with any Secured Party, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist against the Collateral Agent.  The provisions of this Agreement are solely for the benefit of the Secured Parties and no Grantor shall have any rights as a third party beneficiary or otherwise under any of the provisions hereof.  In performing its functions and duties hereunder and under the other Security Documents, the Collateral Agent shall act solely as the agent of the Secured Parties and does not assume nor shall be deemed to have assumed any obligation or relationship of trust or agency with or for the Grantor or any of its respective successors and assigns.

	
Section 6.2  

	
Exculpatory Provisions

 

(a) The Collateral Agent shall not be responsible in any manner whatsoever for the correctness of any recitals, statements, representations or warranties herein or in any Security Document or in any certificate, report, statement or other document referred to or provided for in, or received under or in connection with, this Agreement or any Security Document.  The Collateral Agent makes no representations as to the value or condition of the Collateral or any part thereof, or as to the title of the Grantor or any other Person as to the security afforded by the Security Documents, or as to the validity, execution (except its own execution), enforceability, legality or sufficiency of this Agreement, the Security Documents or the Secured Obligations, and the Collateral Agent shall incur no liability or responsibility in respect of any such matters.  The Collateral Agent shall not be responsible for insuring the Collateral or for the payments of taxes, charges or assessments or discharging of Liens upon the Collateral or otherwise as to the maintenance of the Collateral (except as may be expressly set forth with respect to maintenance of Collateral in its possession in the applicable Security Document).

 

(b) The Collateral Agent shall not be required to ascertain or inquire as to the observance or performance by the Grantor of any of the covenants or agreements contained in or conditions of the Security Documents or any other document or agreement or to inspect the properties, books or records of the Grantor.  Whenever it is necessary, or in the opinion of the Collateral Agent advisable, for the Collateral Agent to ascertain the amount of Secured Obligations or other obligations then held by the Secured Parties, the Collateral Agent may rely on a certificate of the applicable Trustee or Third Lien Agent, in the case of the applicable

 

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Secured Obligations or other obligations, and, if the applicable Trustee or Third Lien Agent shall not give such information to the Collateral Agent, the Collateral Agent shall be entitled to rely on the information with respect thereto most recently delivered by the Grantor, as the case may be, to the Collateral Agent.

 

(c) The Collateral Agent shall be under no obligation or duty to take any action under this Agreement or the Security Documents if taking such action (i) would subject the Collateral Agent to a tax in any jurisdiction where it is not then subject to a tax, unless the Collateral Agent receives security or indemnity satisfactory to it against such tax or (ii) would require the Collateral Agent to qualify to do business in any jurisdiction where it is not then so qualified; provided, however, that the Collateral Agent will use reasonable efforts to promptly notify the Secured Party Representative in the event that any action or duty that the Collateral Agent would otherwise take would result in any such tax or qualification requirement (but failure to so provide such notice shall not result in any liability to the Collateral Agent).

 

(d) The Collateral Agent shall not be under any obligation to exercise any of the rights or powers vested in the Collateral Agent by this Agreement and the Security Documents, at the request or direction of the Secured Parties or otherwise, unless the Collateral Agent shall have been provided adequate security and indemnity against the costs, expenses and liabilities which may be incurred by it in compliance with such request or direction, including such reasonable advances as may be requested by the Collateral Agent.

 

(e) No provision of this Agreement or of the Security Documents shall be deemed to impose any duty or obligation on the Collateral Agent to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it, in any jurisdiction in which it shall be illegal, or in which the Collateral Agent shall be unqualified or incompetent, to perform any such act or acts or to exercise any such right, power, duty or obligation.

 

(f) Notwithstanding any other provision of this Agreement, the Collateral Agent shall not be liable for any action taken or omitted to be taken by it in accordance with this Agreement or the Security Documents except for liabilities resulting solely from its own gross negligence or willful misconduct.

 

(g) The Person serving as Collateral Agent hereunder shall have the same rights with respect to any Secured Obligations held by it as any other Secured Party and may exercise such rights as though it were not the Collateral Agent hereunder.  Without altering its obligations hereunder, the Person serving as Collateral Agent and its affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Grantor as if it were not the Collateral Agent.

 

	
Section 6.3  

	
Collateral Agent’s Appointment as Attorney-in-Fact

 

(a) The Grantor hereby irrevocably constitutes and appoints the Collateral Agent and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of the Grantor and in the name of the Grantor or in its own name, for the purpose of carrying out the terms of this Agreement, to take any appropriate action and to execute any document or instrument that may be necessary or desirable to accomplish the purposes of this Agreement, and, without limiting the generality of the foregoing, the Grantor hereby gives the Collateral Agent the power

 

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and right, on behalf of the Grantor, without notice to or assent by the Grantor, to do any of the following:

 

(i) pay or discharge taxes and Liens levied or placed on or threatened against the Collateral, effect any repair or pay any insurance called for by the terms of this Agreement (including all or any part of the premiums therefor and the costs thereof);

 

(ii) execute, in connection with any sale provided for in Section 5.1 (Code and Other Remedies), any endorsement, assignment or other instrument of conveyance or transfer with respect to the Collateral; and

 

(iii) (A) direct any party liable for any payment under any Collateral to make payment of any moneys due or to become due thereunder directly to the Collateral Agent or as the Collateral Agent shall direct, (B) ask or demand for, collect, and receive payment of and receipt for, any moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Collateral, (C) commence and prosecute any suit, action or proceeding at law or in equity in any court of competent jurisdiction to collect any Collateral and to enforce any other right in respect of any Collateral, (D) defend any suit, action or proceeding brought against the Grantor with respect to any Collateral, (E) settle, compromise or adjust any such suit, action or proceeding and, in connection therewith, give such discharges or releases as the Collateral Agent may deem appropriate, and (F) generally, sell, transfer, pledge and make any agreement with respect to or otherwise deal with any Collateral as fully and completely as though the Collateral Agent were the absolute owner thereof for all purposes, and do, at the Collateral Agent’s option and the Grantor’s expense, at any time, or from time to time, all acts and things that the Collateral Agent deems necessary to protect, preserve or realize upon the Collateral and the Collateral Agent’s and the other Secured Parties’ security interests therein and to effect the intent of this Agreement, all as fully and effectively as the Grantor might do.

 

Anything in this clause (a) to the contrary notwithstanding, the Collateral Agent agrees that it shall not exercise any right under the power of attorney provided for in this clause (a) unless an Event of Default shall be continuing.

 

(b) If any Grantor fails to perform or comply with any of its agreements contained herein, the Collateral Agent, at its option, but without any obligation so to do, may perform or comply, or otherwise cause performance or compliance, with such agreement.

 

(c) The expenses of the Collateral Agent incurred in connection with actions undertaken as provided in this Section 6.3 shall be payable by the Grantor to the Collateral Agent pursuant to the Intercreditor Agreement.

 

(d) The Grantor hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof.  All powers, authorizations and agencies contained in this Agreement are coupled with an interest and are irrevocable until this Agreement is terminated and the security interests created hereby are released.

 

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Section 6.4  

	
Duty of Collateral Agent; Delegation of Duties

 

(a) The Collateral Agent’s sole duty with respect to the custody, safekeeping and physical preservation of the Collateral in its possession shall be to deal with it in the same manner as the Collateral Agent deals with similar property for its own account.  None of the Collateral Agent, any other Secured Party nor any of their respective officers, directors, employees or agents shall be liable for failure to demand, collect or realize upon any Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of any Grantor or any other Person or to take any other action whatsoever with regard to any Collateral.  The powers conferred on the Collateral Agent hereunder are solely to protect the Collateral Agent’s interest in the Collateral and shall not impose any duty upon the Collateral Agent or any other Secured Party to exercise any such powers.  The Collateral Agent and the other Secured Parties shall be accountable only for amounts that they actually receive as a result of the exercise of such powers, and neither they nor any of their respective officers, directors, employees or agents shall be responsible to any Grantor for any act or failure to act hereunder, except for their own gross negligence or willful misconduct.

 

(b) The Collateral Agent may execute any of its duties or powers hereunder or under the Security Documents either directly or by or through agents or attorneys-in-fact, who may include any Secured Party; provided, however, that the Collateral Agent will give prompt notice to the Secured Party Representative if it delegates a material portion of its duties.  The Collateral Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it without gross negligence or willful misconduct.

 

	
Section 6.5  

	
Reliance by Collateral Agent

 

(a) Whenever in the administration of this Agreement or the Security Documents, the Collateral Agent shall deem it necessary or desirable that a factual matter be proved or established in connection with the Collateral Agent taking, suffering or omitting any action hereunder or thereunder, such matter (unless other evidence in respect thereof is herein specifically prescribed) may be deemed to be conclusively proved or established by a certificate of the Grantor or the applicable Secured Party delivered to the Collateral Agent, and such certificate shall be full warrant to the Collateral Agent for any action taken, suffered or omitted in reliance thereon.

 

(b) The Collateral Agent may consult with legal counsel, independent accountants or other experts selected by it, and any advice of such experts shall be full and complete authorization and protection in respect of any action taken or suffered by it hereunder or under the Security Documents in accordance therewith.  The Collateral Agent shall have the right at any time to seek instructions concerning the administration of this Agreement and the Security Documents from any court of competent jurisdiction.  Any advice of experts may be based, insofar as it relates to factual matters, upon a certificate or other writing of the Secured Party Representative, the Grantor, the Secured Parties, or any other applicable Person or representations made by any of the foregoing furnished to the Collateral Agent.

 

(c) The Collateral Agent may rely, and shall be fully protected in acting, upon any resolution, statement, certificate, instrument, opinion, report, notice, request, consent, order, bond or other paper or document or conversation which it has no reason to believe to be other than genuine and to have been signed, presented or made by the proper party or parties.

 

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Section 6.6  

	
Actions by the Collateral Agent

 

The Collateral Agent shall not be under any obligation to take any action which is discretionary with the Collateral Agent under the provisions hereof or of the Security Documents except upon the written request of the Secured Party Representative.  All of the Secured Parties shall be bound by any direction or instruction given to the Collateral Agent by the Secured Party Representative.

	
Section 6.7  

	
Authorization of Financing Statements

 

The Grantor authorizes the Collateral Agent and its affiliates, counsel and other representatives, at any time and from time to time, to file or record financing statements, amendments to financing statements, and other filing or recording documents or instruments with respect to the Collateral in such form and in such offices as the Collateral Agent reasonably determines appropriate to perfect the security interests of the Collateral Agent under this Agreement.  The Grantor hereby also authorizes the Collateral Agent and its affiliates, counsel and other representatives, at any time and from time to time, to file continuation statements with respect to previously filed financing statements.  A photographic or other reproduction of this Agreement shall be sufficient as a financing statement or other filing or recording document or instrument for filing or recording in any jurisdiction.

 

	
Section 6.8  

	
Authority of Collateral Agent

 

The Grantor acknowledges that the rights and responsibilities of the Collateral Agent under this Agreement with respect to any action taken by the Collateral Agent or the exercise or non-exercise by the Collateral Agent of any option, voting right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Agreement shall, as between the Collateral Agent and the other Secured Parties, be governed by the Intercreditor Agreement and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Collateral Agent and the Grantor, the Collateral Agent shall be conclusively presumed to be acting as agent for the Collateral Agent and the other Secured Parties with full and valid authority so to act or refrain from acting, and the Grantor shall be under no obligation, or entitlement, to make any inquiry respecting such authority.

 

	
Section 6.9  

	
Non-Reliance on the Collateral Agent

 

Neither the Collateral Agent nor any of its officers, directors, employees, agents, attorneys, attorneys-in-fact or affiliates has made any representations or warranties to it and that no act by it hereinafter taken, including, without limitation, any review of the affairs of the Grantor, shall be deemed to constitute any representation or warranty by the Collateral Agent to any Secured Party.  Each Noteholder and each Third Lien Lender must independently and without reliance upon the Collateral Agent, and based on such documents and information as it has deemed appropriate, make its own appraisal of and investigation into the business, operations, property, prospects, financial and other condition and creditworthiness of the Grantor and has made its own decision to accept notes or extend credit to the Grantor.  Each Noteholder and each Third Lien Lender must independently and without reliance upon the Collateral Agent, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under the First Lien Indenture, the Second Lien Indenture or the Third Lien Credit Agreement, as applicable, or any other instrument or agreement, as applicable, and to make such investigation as it deems 

 

 

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necessary to inform itself as to the business, operations, property, prospects, financial and other condition and creditworthiness of the Grantor.  Except for notices, reports and other documents expressly required to be furnished to the Secured Parties by the Collateral Agent hereunder or under the Indentures or Third Lien Credit Agreement, the Collateral Agent shall not have any duty or responsibility to provide any Secured Party with any credit or other information concerning the business, operations, property, prospects, financial and other condition or creditworthiness of the Grantor which may come into its possession or the possession of any of its officers, directors, employees, agents, attorneys, attorneys-in-fact or affiliates.  The Collateral Agent and its affiliates may exercise all contractual and legal rights and remedies which may exist from time to time with respect to other existing and future relationships with the Grantor without any duty to account therefor to the Secured Parties.

 

	
Section 6.10  

	
Compensation and Indemnification

 

(a) The Grantor shall pay to the Collateral Agent from time to time such compensation for its services hereunder as the parties shall agree in writing from time to time.  The Collateral Agent’s compensation shall not be limited by any law on compensation of a trustee of an express trust.  The Grantor shall reimburse the Collateral Agent promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services.  Such expenses shall include the compensation and reasonable disbursements and expenses of the Collateral Agent’s agents and counsel.

 

(b) The Grantor hereby agrees to indemnify the Collateral Agent (in its capacity as such) and its officers, directors, employees, representatives, agents and attorneys from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever (including, without limitation, the reasonable and documented fees and disbursements of counsel for the Collateral Agent or such Person in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not the Collateral Agent or such Person shall be designated a party thereto) which may at any time (including, without limitation, at any time following the payment of the Secured Obligations) be imposed on, incurred by or asserted against the Collateral Agent or such Person as a result of, in any way relating to or arising out of this Agreement or the Security Documents, or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Collateral Agent hereunder or thereunder or in connection herewith or therewith; provided that the Grantor shall not be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the gross negligence or willful misconduct of the Collateral Agent or such Person seeking indemnification hereunder as finally determined by a court of competent jurisdiction.  The agreements in this section shall survive the termination of this Agreement and the payment of the Secured Obligations and all other amounts payable to any of the Secured Parties.

 

(c) To secure the payment obligations of the Grantor in this Section 6.10, the Collateral Agent shall have a Lien on all money and property held or collected by the Collateral Agent, subject to the provisions of the Intercreditor Agreement.  Such Lien shall survive the satisfaction and discharge of this Agreement.

 

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Section 6.11  

	
Termination and Resignation of Collateral Agent

 

(a) Subject to clause (f) below, the Collateral Agent may resign its appointment under this Agreement at any time by giving notice to the Trustees and the Grantor.

 

(b) A successor Collateral Agent shall be selected (i) by the retiring Collateral Agent nominating one of its affiliates, following consultation with the Secured Party Representative and the Grantor or (ii) if the retiring Collateral Agent makes no such nomination following consultation with Grantor, by the Secured Party Representative.

 

(c) The appointment of the Collateral Agent may be terminated and a successor Collateral Agent appointed at any time with the consent of the Trustees, the Third Lien Agent and the Grantor.

 

(d) The resignation of the retiring Collateral Agent and the appointment of a successor Collateral Agent will become effective only upon the successor Collateral Agent accepting its appointment as Collateral Agent and upon the execution and delivery of all documents necessary to substitute the successor as holder of the security comprised in the Security Documents, if any, at which time, (i) the successor Collateral Agent will become bound by the obligations of the Collateral Agent and become entitled to all the rights, privileges, powers, authorities and discretions of the Collateral Agent under this agreement, (ii) the agency of the retiring Collateral Agent will terminate (but without prejudice to any liabilities which the retiring Collateral Agent may have incurred prior to the termination of agency) and (ii) the retiring Collateral Agent will be discharged from any further liability or obligation under or in connection with this Agreement or the Security Documents.

 

(e) The retiring Collateral Agent will cooperate with the successor Collateral Agent in order to ensure that its functions are transferred to the successor Collateral Agent without disruption to the service provided to the Trustees, the Secured Parties and the Grantor and will promptly make available to the successor Collateral Agent the documents and records which have been maintained in connection with this Agreement and the other Security Documents in order that the successor Collateral Agent is able to discharge its functions.

 

(f) The Collateral Agent may resign its appointment upon appointment of a successor Collateral Agent and such successor Collateral Agent having accepted the role of the Collateral Agent under this Agreement.

 

(g) The provisions of this Agreement will continue in effect for the benefit of the retiring Collateral Agent in respect of actions taken or omitted to be taken by it or any event occurring before the termination of agency.

 

	
ARTICLE VII  

	
Miscellaneous

 

	
Section 7.1  

	
Amendments in Writing

 

None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except in a writing signed by all parties hereto.

 

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Section 7.2  

	
Notices

 

All notices, requests and demands to or upon the Grantor, First Lien Trustee, the Second Lien Trustee, the Third Lien Agent and the Collateral Agent shall be made at the addresses specified in Schedule 7.2 hereto, as the same may be modified by written notice to both the Grantor and the Collateral Agent.

 

	
Section 7.3  

	
No Waiver by Course of Conduct; Cumulative Remedies

 

Neither the Collateral Agent nor any other Secured Party shall by any act (except by a written instrument pursuant to Section 7.1 (Amendments in Writing)), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default.  No failure to exercise, nor any delay in exercising, on the part of the Collateral Agent or any other Secured Party, any right, power or privilege hereunder shall operate as a waiver thereof.  No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege.  A waiver by the Collateral Agent or any other Secured Party of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy that the Collateral Agent or such other Secured Party would otherwise have on any future occasion.  The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law.

 

	
Section 7.4  

	
Successors and Assigns

 

This Agreement shall be binding upon the successors and assigns of the Grantor and shall inure to the benefit of the Collateral Agent and each other Secured Party and their successors and assigns; provided, however, that no Grantor may assign, transfer or delegate any of its rights or obligations under this Agreement without the prior written consent of the First Lien Trustee, the Second Lien Trustee and the Third Lien Agent.

 

	
Section 7.5  

	
Counterparts

 

This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by telecopy), each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.  Signature pages may be detached from multiple counterparts and attached to a single counterpart so that all signature pages are attached to the same document.  Delivery of an executed counterpart by telecopy shall be effective as delivery of a manually executed counterpart.

 

	
Section 7.6  

	
Severability

 

Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

 

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Pledge and Security Agreement

WMI Holdings Corp.

	
Section 7.7  

	
Section Headings

 

The Article and Section titles contained in this Agreement are, and shall be, without substantive meaning or content of any kind whatsoever and are not part of the agreement of the parties hereto.

 

	
Section 7.8  

	
Entire Agreement

 

This Agreement together with the other Note Documentation represents the entire agreement of the parties and supersedes all prior agreements and understandings relating to the subject matter hereof.

 

	
Section 7.9  

	
Governing Law

 

This Agreement and the rights and obligations of the parties hereto shall be governed by, and construed and interpreted in accordance with, the law of the State of New York.

 

	
Section 7.10  

	
Release of Collateral

 

At the time provided in each of the First Lien Indenture, the Second Lien Indenture and the Third Lien Credit Agreement and subject to the provisions of the Intercreditor Agreement, the Collateral shall be released from the Lien created hereby and this Agreement and all obligations (other than those expressly stated to survive such termination) of the Collateral Agent and the Grantor hereunder shall terminate, all without delivery of any instrument or performance of any act by any party, and all rights to the Collateral shall revert to the Grantor.  At the request and sole expense of any Grantor following any such termination, the Collateral Agent shall deliver to the Grantor any Collateral of the Grantor held by the Collateral Agent hereunder and execute and deliver to the Grantor such documents as the Grantor shall reasonably request to evidence such termination.

 

	
Section 7.11  

	
Reinstatement

 

The Grantor further agrees that, if any payment made by WMI or other Person and applied to the Secured Obligations is at any time annulled, avoided, set aside, rescinded, invalidated, declared to be fraudulent or preferential or otherwise required to be refunded or repaid, or the proceeds of Collateral are required to be returned by any Secured Party to such Loan Party, its estate, trustee, receiver or any other party, including any Grantor, under any bankruptcy law, state or federal law, common law or equitable cause, then, to the extent of such payment or repayment, any Lien or other Collateral securing such liability shall be and remain in full force and effect, as fully as if such payment had never been made or, if prior thereto the Lien granted hereby or other Collateral securing such liability hereunder shall have been released or terminated by virtue of such cancellation or surrender), such Lien or other Collateral shall be reinstated in full force and effect, and such prior cancellation or surrender shall not diminish, release, discharge, impair or otherwise affect any Lien or other Collateral securing the obligations of any Grantor in respect of the amount of such payment.

 

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Pledge and Security Agreement

WMI Holdings Corp.

	
Section 7.12  

	
Incorporation by Reference

 

The following provisions of the Indentures (as in effect on the date hereof) are hereby incorporated by reference to the extent that they purport to govern the responsibilities and rights of the Collateral Agent: Sections 4.03, 12.02, 12.03(c), 12.04 and 12.07.

	
Section 7.13  

	
Third Lien Agent Authority Subject to Third Lien Credit Agreement

 

U.S. Bank  National Association has been appointed the Third Lien Agent hereunder pursuant to Article VIII of the Third Lien Credit  Agreement.  Notwithstanding anything to the contrary herein, it is expressly understood and agreed by the parties to this Agreement that any authority conferred upon the Third Lien Agent hereunder is subject to the terms of the delegation of authority made by the Third Lien Lenders to the Third Lien Agent pursuant to the Third Lien Credit Agreement and that the Third Lien Agent has agreed to act (and any successor Third Lien Agent shall act) as such hereunder only on the express conditions and protections contained in the Third Lien Credit Agreement (including, without limitation, Section 8.03 thereof).  Any successor Third Lien Agent appointed in accordance with Section 8.07 of the Third Lien Credit Agreement shall be entitled to all the rights, interests and benefits of the Third Lien Agent hereunder.

[Signature Pages Follow]

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23

  

In witness whereof, each of the undersigned has caused this Pledge and Security Agreement to be duly executed and delivered as of the date first above written.

 

	 	

WMI Holdings Corp.,

as Grantor

 

	 
	 	 	 	 
	
 

	
By: 

	/s/ 	 
	 	 	Name:	 
	 	 	Title:	 
	 	 	 	 

 

 

	 	

Wilmington Trust, National Association,

as First Lien Trustee

 

	 
	 	 	 	 
	
 

	
By: 

	/s/ 	 
	 	 	Name:	 
	 	 	Title:	 
	 	 	 	 

 

 

	 	

Law Debenture Trust Company of New York,

as Second Lien Trustee

 

	 
	 	 	 	 
	
 

	
By: 

	/s/ 	 
	 	 	Name:	 
	 	 	Title:	 
	 	 	 	 

 

 

	 	

U.S. Bank National Association

as Third Lien Agent

 

	 
	 	 	 	 
	
 

	
By: 

	/s/ 	 
	 	 	Name:	 
	 	 	Title:	 
	 	 	 	 

 

[Signature Page to Pledge and Security Agreement]

  

  

  

 

Accepted and Agreed

as of the date first above written:

 

 

	 	

Wilmington Trust, National Association,

as Collateral Agent

 

	 
	 	 	 	 
	
 

	
By: 

	/s/ 	 
	 	 	Name:	 
	 	 	Title:	 

 

 

 

 

 

 

 

	
[Signature Page to Pledge and Security Agreement]jg03-2312_8ksecagmt.htm

 

EXHIBIT 10.3

PLEDGE AND SECURITY AGREEMENT

 

PLEDGE AND SECURITY AGREEMENT (the "Agreement") dated as of March 19, 2012, made by each of the Grantors referred to below, in favor of U.S. Bank National Association, a national banking association, in its capacity as agent for the Secured Parties referred to below (in such capacity, together with its successors and assigns in such capacity, if any, the "Agent").

 

W I T N E S S E T H:

 

WHEREAS, WMI Holdings Corp., a Washington corporation (the "Borrower"), each subsidiary of the Borrower listed as a "Guarantor" on the signature pages thereto (together with each other Person (as defined in the Financing Agreement) that guarantees all or any portion of the Obligations (as defined in the Financing Agreement) from time to time, each a "Guarantor" and collectively, the "Guarantors", and together with the Borrower and each other Person that executes a supplement hereto and becomes an "Additional Grantor" hereunder, each a "Grantor" and collectively, the "Grantors"), the lenders from time to time party thereto (each a "Lender" and collectively, the "Lenders"), and the Agent are parties to a Financing Agreement, dated as of March 19, 2012 (such agreement, as amended, restated, supplemented, modified or otherwise changed from time to time, including any replacement agreement therefor, being hereinafter referred to as the "Financing Agreement");

 

WHEREAS, pursuant to the Financing Agreement, the Lenders have agreed to make certain term loans (each a "Loan" and collectively, the "Loans"), to the Borrower;

 

WHEREAS, it is a condition precedent to the Lenders making any Loan to the Borrower pursuant to the Financing Agreement that each Grantor shall have executed and delivered to the Agent a pledge to the Agent, for the benefit of the Secured Parties, and the grant to the Agent, for the benefit of the Secured Parties, of (a) a security interest in and Lien on the outstanding shares of Equity Interests (as defined in the Financing Agreement), subject to the terms and condition herein, and indebtedness from time to time owned by such Grantor of each Person now or hereafter existing and in which such Grantor has any interest at any time, and (b) a security interest in all other assets of such Grantor; and

 

WHEREAS, each Grantor has determined that the execution, delivery and performance of this Agreement directly benefit, and are in the best interest of, such Grantor, and the credit extended under the Financing Agreement will inure to the benefit of each Grantor;

 

NOW, THEREFORE, in consideration of the premises and the agreements herein and in order to induce the Lenders to make the Loans and to provide other financial accommodations to the Borrower  pursuant to the Financing Agreement, and the Agent to maintain such Loans pursuant to the Financing Agreement, the Grantors hereby jointly and severally agree with the Agent, for its benefit and the ratable benefit of the other Secured Parties, as follows:

 

	
 

	  	  

 

 

  

  

  

SECTION 1. Definitions .

 

(a) Reference is hereby made to the Financing Agreement for a statement of the terms thereof.  All capitalized terms used in this Agreement and the recitals hereto which are defined in the Financing Agreement or in Article 8 or 9 of the Uniform Commercial Code as in effect from time to time in the State of New York (the "Code") and which are not otherwise defined herein shall have the same meanings herein as set forth therein; provided that terms used herein which are defined in the Code as in effect in the State of New York on the date hereof shall continue to have the same meaning notwithstanding any replacement or amendment of such statute except as the Agent may otherwise determine in its sole discretion.

 

(b) The following terms shall have the respective meanings provided for in the Code:  "Accounts", "Account Debtor", "Cash Proceeds", "Chattel Paper", "Commercial Tort Claim", "Commodity Account", "Commodity Contracts", "Deposit Account", "Documents", "Electronic Chattel Paper", "Equipment", "Fixtures", "General Intangibles", "Goods", "Instruments", "Inventory", "Investment Property", "Letter-of-Credit Rights", "Noncash Proceeds", "Payment Intangibles", "Proceeds", "Promissory Notes", "Record", "Security Account", "Software", "Supporting Obligations" and "Tangible Chattel Paper".

 

(c) As used in this Agreement, the following terms shall have the respective meanings indicated below, such meanings to be applicable equally to both the singular and plural forms of such terms:

 

"Additional Collateral" has the meaning specified therefor in Section 4(a)(i) hereof.

 

"Cash Management Account" means each bank account of each Grantor maintained at one or more Cash Management Banks listed on Schedule IV.

 

"Cash Management Agreement" means a control agreement, in form and substance reasonably satisfactory to the Required Lenders, by and among a Grantor, the Agent and a Cash Management Bank with respect to each Cash Management Account, pursuant to which such Cash Management Bank shall irrevocably agree, among other things, that (i) it will comply at any time with the instructions originated by the Agent (or its designee) to such bank or financial institution directing the disposition of cash, Cash Equivalents, Commodity Contracts, securities, Investment Property and other items from time to time credited to such Cash Management Account, without further consent of such Grantor, (ii) all cash, Cash Equivalents, Commodity Contracts, securities, Investment Property and other items of such Grantor deposited with such institution shall be subject to a perfected, first priority security interest in favor of the Agent (or its designee), (iii) any right of set off, banker's Lien or other similar Lien, security interest or encumbrance shall be fully waived as against the Agent (or its designee), and (iv) upon receipt of written notice from the Agent upon the occurrence of an Event of Default, such Cash Management Bank shall immediately send to the Agent (or its designee) by wire transfer (to such account as the Agent (or its designee) shall specify, or in such other manner as the Agent (or its designee) shall direct) all such cash, Cash Equivalents, the value of any Commodity Contracts, securities, Investment Property and other items held by it and shall agree to cease to

 

  

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comply with any directive or instruction by such Grantor.

 

"Cash Management Bank" has the meaning specified therefor in Section 6(h) hereof.

 

"Certificated Entities" has the meaning specified therefor in Section 5(l) hereof.

 

"Code" has the meaning specified therefor in Section 1(a) hereof.

 

"Collateral" has the meaning specified therefor in Section 2 hereof.

 

"Collections" means all cash, checks, notes, instruments, and other items of payment (including insurance proceeds, proceeds of cash sales, rental proceeds, and tax refunds).

 

"Copyright Licenses" means all licenses, contracts or other agreements, whether written or oral, naming any Grantor as licensee or licensor and providing for the grant of any right to use or sell any works covered by any Copyright (including, without limitation, all Copyright Licenses set forth in Schedule II hereto (as amended, supplemented or otherwise modified from time to time in accordance with the terms hereof)).

 

"Copyrights" means all domestic and foreign copyrights, whether registered or unregistered, including, without limitation, all copyright rights throughout the universe (whether now or hereafter arising) in any and all media (whether now or hereafter developed), in and to all original works of authorship fixed in any tangible medium of expression (including computer software and internet website content) now or hereafter owned, acquired, developed or used by any Grantor (including, without limitation, all copyrights described in Schedule II hereto (as amended, supplemented or otherwise modified from time to time in accordance with the terms hereof)), all applications, registrations and recordings thereof (including, without limitation, applications, registrations and recordings in the United States Copyright Office or in any similar office or agency of the United States or any other country or any political subdivision thereof), and all reissues, extensions or renewals thereof.

 

"Current Value" has the meaning specified therefor in Section 6(l) hereof.

 

"Existing Issuer" has the meaning specified therefor in the definition of the term "Pledged Shares".

 

"Foreign Subsidiary" has the meaning specified therefor in Section 2 hereof.

 

"Insurance Assets" means Regulated Insurance Assets of an Insurance Subsidiary and Insurance Holdings.

 

"Intellectual Property" means all Copyrights, Patents, Trademarks and Other Intellectual Property.

 

"Licenses" means the Copyright Licenses, the Patent Licenses and the Trademark Licenses.

 

  

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"Mortgage" means a mortgage (including, without limitation, a leasehold mortgage), deed of trust or deed to secure debt or similar agreement or instrument, in form and substance satisfactory to the Required Lenders, made by a Grantor in favor of the Agent for the benefit of the Agent and the ratable benefit of the Lenders, securing the Obligations and delivered to the Agent.

 

"New Facility" has the meaning specified therefor in Section 6(l) hereof.

 

"Other Intellectual Property" means all trade secrets, ideas, concepts, methods, techniques, processes, proprietary information, technology, know-how, formulae, rights of publicity and privacy and other general intangibles of like nature, now or hereafter acquired, owned, developed or used by any Grantor (including, without limitation, all Other Intellectual Property set forth in Schedule II hereto (as amended, supplemented or otherwise modified from time to time in accordance with the terms hereof)).

 

"Patent Licenses" means all licenses, contracts or other agreements, whether written or oral, naming any Grantor as licensee or licensor and providing for the grant of any right to manufacture, use or sell any invention covered by any Patent (including, without limitation, all Patent Licenses set forth in Schedule II hereto (as amended, supplemented or otherwise modified from time to time in accordance with the terms hereof)).

 

"Patents" means all domestic and foreign letters patent, design patents, utility patents, industrial designs and inventions, now existing or hereafter acquired (including, without limitation, all of those described in Schedule II hereto (as amended, supplemented or otherwise modified from time to time in accordance with the terms hereof)), all applications, registrations and recordings thereof (including, without limitation, applications, registrations and recordings in the United States Patent and Trademark Office, or in any similar office or agency of the United States or any other country or any political subdivision thereof), and all reissues, divisions, continuations, continuations in part and extensions or renewals thereof.

 

"Perfection Requirement" has the meaning specified therefor in Section 5(i) hereof.

 

"Pledge Amendment" has the meaning specified therefor in Section 4(a)(ii) hereof.

 

"Pledged Debt" means the indebtedness described in Schedule VII hereto (as amended, supplemented or otherwise modified from time to time in accordance with the terms hereof) of the Grantors and all indebtedness from time to time owned or acquired by any Grantor, the Promissory Notes and other Instruments evidencing any or all of such indebtedness, and all interest, cash, Instruments, Investment Property, financial assets, securities, Equity Interests, stock options and Commodity Contracts, notes, debentures, bonds, Promissory Notes or other evidences of indebtedness and all other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such indebtedness.

 

"Pledged Interests" means, collectively, (a) the Pledged Debt, (b) the Pledged Shares and (c) all security entitlements of any Grantor in any and all of the foregoing.

 

  

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"Pledged Issuer" has the meaning specified therefor in the definition of the term "Pledged Shares".

 

"Pledged Shares" means (a) the shares of Equity Interests described in Schedule VIII hereto (as amended, supplemented or otherwise modified from time to time in accordance with the terms hereof), whether or not evidenced or represented by any stock certificate, certificated security or other Instrument, owned by the Grantors and issued by the Persons described in such Schedule VIII (the "Existing Issuers"), (b) the shares of Equity Interests at any time and from time to time acquired by a Grantor of any and all Persons now or hereafter existing (such Persons, together with the Existing Issuers, being hereinafter referred to collectively as the "Pledged Issuers" and each individually as a "Pledged Issuer"), whether or not evidenced or represented by any stock certificate, certificated security or other Instrument, and (c) the certificates representing such shares of Equity Interests, all options and other rights, contractual or otherwise, in respect thereof and all dividends, distributions, cash, Instruments, Investment Property, financial assets, securities, Equity Interests, stock options and Commodity Contracts, notes, debentures, bonds, Promissory Notes or other evidences of indebtedness and all other property (including, without limitation, any stock dividend and any distribution in connection with a stock split) from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such Equity Interests.

 

"Runoff Assets Collateral" means "Collateral" under and as defined in the Runoff Assets Pledge and Security Agreement.

 

"Runoff Assets Pledge and Security Agreement" means that certain Pledge and Security Agreement, dated as of the date hereof, among the Borrower, as the Grantor, Wilmington Trust, National Association, as First Lien Trustee, Law Debenture Trust Company of New York, as Second Lien Trustee, the Agent, as Third Lien Agent, and Wilmington Trust, National Association, as Collateral Agent thereunder, as the same may be amended, restated, supplemented, modified or otherwise changed from time to time, including any replacement agreement therefor.

 

"Secured Parties" means, collectively, the Agent and the Lenders.

 

"Secured Obligations" has the meaning specified therefor in Section 3 hereof.

 

"Trademark Licenses" means all licenses, contracts or other agreements, whether written or oral, naming any Grantor as licensor or licensee and providing for the grant of any right concerning any Trademark, together with any goodwill connected with and symbolized by any such trademark licenses, contracts or agreements and the right to prepare for sale or lease and sell or lease any and all Inventory now or hereafter owned by any Grantor and now or hereafter covered by such licenses (including, without limitation, all Trademark Licenses described in Schedule II hereto (as amended, supplemented or otherwise modified from time to time in accordance with the terms hereof)).

 

"Trademarks" means all domestic and foreign trademarks, service marks, collective marks, certification marks, trade names, business names, d/b/a's, Internet domain names, trade styles, designs, logos and other source or business identifiers and all general

 

  

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intangibles of like nature, now or hereafter owned, adopted, acquired or used by any Grantor (including, without limitation, all domestic and foreign trademarks, service marks, collective marks, certification marks, trade names, business names, d/b/a's, Internet domain names, trade styles, designs, logos and other source or business identifiers described in Schedule II hereto (as amended, supplemented or otherwise modified from time to time in accordance with the terms hereof)), all applications, registrations and recordings thereof (including, without limitation, applications, registrations and recordings in the United States Patent and Trademark Office or in any similar office or agency of the United States, any state thereof or any other country or any political subdivision thereof), and all reissues, extensions or renewals thereof, together with all goodwill of the business symbolized by such marks.

 

SECTION 2. Grant of Security Interest .  As collateral security for the payment, performance and observance of all of the Secured Obligations, each Grantor hereby pledges and assigns to the Agent (and its agents and designees), and grants to the Agent (and its agents and designees), for the benefit of the Secured Parties, a continuing security interest in, all personal property and Fixtures of such Grantor in which such Grantor has rights, wherever located and whether now or hereafter existing and whether now owned or hereafter acquired, of every kind and description, tangible or intangible, including, without limitation, the following (all being collectively referred to herein as the "Collateral"):

 

(a) all Accounts;

 

(b) all Chattel Paper (whether tangible or electronic);

 

(c) the Commercial Tort Claims specified on Schedule VI (as amended, supplemented or otherwise modified from time to time in accordance with the terms hereof);

 

(d) all Deposit Accounts, all cash, and all other property from time to time deposited therein or otherwise credited thereto and the monies and property in the possession or under the control of the Agent or any Lender or any affiliate, representative, agent or correspondent of the Agent or any Lender;

 

(e) all Documents;

 

(f) all General Intangibles (including, without limitation, all Payment Intangibles, Intellectual Property and Licenses);

 

(g) all Goods, including, without limitation, all Equipment, Fixtures and Inventory;

 

(h) all Instruments (including, without limitation, Promissory Notes);

 

(i) all Investment Property;

 

(j) all Letter-of-Credit Rights;

 

(k) all Pledged Interests;

 

  

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(l) all Supporting Obligations;

 

(m) all cash and cash equivalents;

 

(n) all other tangible and intangible personal property of such Grantor (whether or not subject to the Code), including, without limitation, all bank and other accounts and all cash and all investments therein, all proceeds, products, offspring, accessions, rents, profits, income, benefits, substitutions and replacements of and to any of the property of such Grantor described in the preceding clauses of this Section 2 hereof (including, without limitation, any proceeds of insurance thereon and all causes of action, claims and warranties now or hereafter held by such Grantor in respect of any of the items listed above), and all books, correspondence, files and other Records, including, without limitation, all tapes, disks, cards, Software, data and computer programs in the possession or under the control of such Grantor or any other Person from time to time acting for such Grantor that at any time evidence or contain information relating to any of the property described in the preceding clauses of this Section 2 hereof or are otherwise necessary or helpful in the collection or realization thereof; and

 

(o) all Proceeds, including all Cash Proceeds and Noncash Proceeds, and products of any and all of the foregoing Collateral;

 

 

in each case howsoever such Grantor's interest therein may arise or appear (whether by ownership, security interest, claim or otherwise).

 

Notwithstanding anything herein to the contrary, the term "Collateral" shall not include (i) any Insurance Assets or Pledged Interests to the extent, but only for so long as, any insurance-related Governmental Authority does not permit such Insurance Assets or Pledged Interests to become "Collateral" hereunder, it being understood that "Collateral" shall include any such Insurance Assets or Pledged Interests (other than Runoff Assets Collateral to the extent set forth in clause (ii) of this paragraph) immediately upon any approval of such insurance-related Governmental Authority in accordance with Section 6.01(b) of the Financing Agreement, and (ii) Runoff Assets Collateral except as specifically set forth in the Runoff Assets Pledge and Security Agreement and the Intercreditor Agreement (as defined in the Runoff Assets Pledge and Security Agreement).

Notwithstanding anything herein to the contrary, the term "Collateral" shall not include in the case of a Subsidiary of such Grantor organized under the laws of a jurisdiction other than the United States, any of the states thereof or the District of Columbia (a "Foreign Subsidiary"), more than 65% (or such greater percentage that, due to a change in applicable law after the date hereof, (i) would not reasonably be expected to cause the undistributed earnings of such Foreign Subsidiary as determined for United States federal income tax purposes to be treated as a deemed dividend to such Foreign Subsidiary's United States parent and (ii) would not reasonably be expected to cause any material adverse tax consequences) of the issued and outstanding shares of Equity Interests entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) (it being understood and agreed that the Collateral shall include 100% of the issued and outstanding shares of Equity Interests not entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) or other equity interest of such Foreign Subsidiary).

  

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The Grantors agree that the pledge of the shares of Equity Interests of any Pledged Issuer who is a Foreign Subsidiary may be supplemented by one or more separate pledge agreements, deeds of pledge, share charges, or other similar agreements or instruments, executed and delivered by the relevant Grantors in favor of the Agent, which pledge agreements will provide for the pledge of such shares of Equity Interests in accordance with the laws of the applicable foreign jurisdiction.  With respect to such shares of Equity Interests, the Required Lenders may, at any time and from time to time, in their discretion, take, or request the Agent to take, actions in such foreign jurisdictions that will result in the perfection of the Lien created in such shares of Equity Interests, in each case, at the expense of the Grantors.

SECTION 3. Security for Secured Obligations .  The security interest created hereby in the Collateral constitutes continuing collateral security for all of the following obligations, whether now existing or hereafter incurred (the "Secured Obligations"):

 

(a) the prompt payment by each Grantor, as and when due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), of all amounts from time to time owing by it in respect of the Financing Agreement and/or the other Loan Documents, including, without limitation, (i) all Obligations, (ii) in the case of a Guarantor, all amounts from time to time owing by such Guarantor in respect of its guaranty made pursuant to Article IX of the Financing Agreement or under any other Guaranty to which it is a party, including, without limitation, all obligations guaranteed by such Guarantor and (iii) all interest, fees, commissions, charges, expense reimbursements, indemnifications and all other amounts due or to become due under any Loan Document (including, without limitation, all interest, fees, commissions, charges, expense reimbursements, indemnifications and other amounts that accrue after the commencement of any Insolvency Proceeding of any Grantor, whether or not the payment of such interest, fees, commissions, charges, expense reimbursements, indemnifications and other amounts are unenforceable or are not allowable, in whole or in part, due to the existence of such Insolvency Proceeding); and

 

(b) the due performance and observance by each Grantor of all of its other obligations from time to time existing in respect of the Loan Documents.

 

SECTION 4. Delivery of the Pledged Interests.

 

(a) (i)  All Promissory Notes currently evidencing the Pledged Debt and all certificates currently representing the Pledged Shares shall be delivered to the Agent on or prior to the execution and delivery of this Agreement.  All other Promissory Notes, certificates and Instruments constituting Pledged Interests from time to time required to be pledged to the Agent pursuant to the terms of this Agreement or the Financing Agreement (the "Additional Collateral") shall be delivered to the Agent promptly upon, but in any event within ten (10) days of, receipt thereof by or on behalf of any of the Grantors.  All such Promissory Notes, certificates and Instruments shall be held by or on behalf of the Agent pursuant hereto and shall be delivered in suitable form for transfer by delivery or shall be accompanied by duly executed instruments of transfer or assignment or undated stock powers executed in blank, all in suitable form and substance reasonably satisfactory to the Required Lenders to perfect and preserve the security interests purported to be created hereby.  If any Pledged Interests consist of uncertificated securities, unless the immediately following sentence is applicable thereto, such Grantor shall

 

  

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cause the Agent (or its designated custodian or nominee) to become the registered holder thereof, or cause each issuer of such securities to agree that it will comply with instructions originated by the Agent  with respect to such securities without further consent by such Grantor.  If any Pledged Interests consist of security entitlements, such Grantor shall transfer such security entitlements to the Agent (or its custodian, nominee or other designee), or cause the applicable securities intermediary to agree that it will comply with entitlement orders by the Agent without further consent by such Grantor.

 

(ii) Within five (5) days of the receipt by a Grantor of any Additional Collateral, a Pledge Amendment, duly executed by such Grantor, in substantially the form of Exhibit A hereto (a "Pledge Amendment"), shall be delivered to the Agent, in respect of the Additional Collateral that must be pledged pursuant to this Agreement and the Financing Agreement.  The Pledge Amendment shall from and after delivery thereof constitute part of Schedules VII and VIII hereto.  Each Grantor hereby authorizes the Agent to attach each Pledge Amendment to this Agreement and agrees that all Promissory Notes, certificates or Instruments listed on any Pledge Amendment delivered to the Agent shall for all purposes hereunder constitute Pledged Interests and such Grantor shall be deemed upon delivery thereof to have made the representations and warranties set forth in Section 5 hereof with respect to such Additional Collateral.

 

(b) If any Grantor shall receive, by virtue of such Grantor's being or having been an owner of any Pledged Interests, any (i) stock certificate (including, without limitation, any certificate representing a stock dividend or distribution in connection with any increase or reduction of capital, reclassification, merger, consolidation, sale of assets, combination of shares, stock split, spin-off or split-off), Promissory Note or other Instrument, (ii) option or right, whether as an addition to, substitution for, or in exchange for, any Pledged Interests, or otherwise, (iii) dividends payable in cash (except such dividends permitted to be retained by any such Grantor pursuant to Section 7 hereof) or in securities or other property or (iv) dividends, distributions, cash, Instruments, Investment Property and other property in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in surplus, such Grantor shall receive such stock certificate, Promissory Note, Instrument, option, right, payment or distribution in trust for the benefit of the Agent, shall segregate it from such Grantor's other property and shall deliver it forthwith to the Agent, in the exact form received, with any necessary indorsement and/or appropriate stock powers duly executed in blank, to be held by the Agent as Pledged Interests and as further collateral security for the Secured Obligations.

 

  

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SECTION 5. Representations and Warranties .  Each Grantor jointly and severally represents and warrants as follows:

 

(a) Schedule I hereto (as amended, supplemented or otherwise modified from time to time in accordance with the terms hereof) sets forth a complete and accurate list as of the date hereof of (i) the exact legal name of each Grantor, (ii) the jurisdiction of organization of each Grantor, (iii) the type of organization of each Grantor, (iv) the organizational identification number of each Grantor or states that no such organizational identification number exists, and (v) the federal employer identification number of each Grantor.

 

(b) All Equipment, Fixtures, Inventory and other Goods now existing are, and all Equipment, Fixtures, Inventory and other Goods hereafter existing will be, located at the addresses specified therefor in Schedule III hereto (as amended, supplemented or otherwise modified from time to time in accordance with the terms hereof).  Each Grantor's places of business and chief executive office, the place where such Grantor keeps its Records concerning Accounts and all originals of all Chattel Paper, and each location where any Grantor has any Collateral are located at the addresses specified therefor in Schedule III hereto (as amended, supplemented or otherwise modified from time to time in accordance with the terms hereof).  None of the Accounts is evidenced by Promissory Notes or other Instruments.  Set forth in Schedule IV hereto (as amended, supplemented or otherwise modified from time to time in accordance with the terms hereof) is a complete and accurate list, of each Deposit Account, Securities Account and Commodities Account of each Grantor, together with the name and address of each institution at which each such Account is maintained, the account number for each such Account and a description of the purpose of each such Account.

 

(c) Each Grantor has delivered to the Agent true, complete and correct copies of each License described in Schedule II hereto (as amended, supplemented or otherwise modified from time to time in accordance with the terms hereof), including all schedules and exhibits thereto, which represents all of the Licenses existing on the date of this Agreement.

 

(d) The Grantors own and control, or otherwise have the right to use, all Intellectual Property necessary for the operation of its business, without infringement, to their knowledge, upon or conflict with the rights of any other Person with respect thereto, except for such infringements and conflicts which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.  Schedule II hereto (as amended, supplemented or otherwise modified from time to time in accordance with the terms hereof) sets forth a complete and accurate list of all Intellectual Property and Licenses owned or used by each Grantor as of the date hereof.  All such Intellectual Property is subsisting and in full force and effect, has not been adjudged invalid or unenforceable, is valid and enforceable and has not been abandoned in whole or in part.  Except as set forth in Schedule II hereto (as amended, supplemented or otherwise modified from time to time in accordance with the terms hereof), no such Intellectual Property is the subject of any licensing or franchising agreement.

 

(e) The Existing Issuers set forth in Schedule VIII (as amended, supplemented or otherwise modified from time to time in accordance with the terms hereof) identified as a Subsidiary of a Grantor are each such Grantor's only Subsidiaries existing on the date hereof.  The Pledged Shares have been duly authorized and validly issued and, in the case of

 

  

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Grantors that are corporations, are fully paid and nonassessable and the holders thereof are not entitled to any preemptive, first refusal or other similar rights.  Except as noted in Schedule VIII hereto (as amended, supplemented or otherwise modified from time to time in accordance with the terms hereof), the Pledged Shares constitute 100% (or in the case of a Foreign Subsidiary, 65% of the voting issued shares) of the issued shares of Equity Interests of the Pledged Issuers as of the date hereof.  All other shares of Equity Interests constituting Pledged Interests will be duly authorized and validly issued and, in the case of entities that are corporations, fully paid and nonassessable.

 

(f) To the knowledge of the Grantors, the Promissory Notes currently evidencing the Pledged Debt have been, and all other Promissory Notes from time to time evidencing Pledged Debt, when executed and delivered, will have been, duly authorized, executed and delivered by the respective makers thereof, and, to the knowledge of the Grantors, all such Promissory Notes are or will be, as the case may be, legal, valid and binding obligations of such makers, enforceable against such makers in accordance with their respective terms, except as enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally.

 

(g) The policies currently evidencing the Insurance Assets or any other Insurance Assets listed on Schedule IX hereto (as amended, supplemented or otherwise modified from time to time) have been, and all other policies from time to time evidencing Insurance Assets, when executed and delivered, will have been, duly authorized, executed and delivered by the parties thereto and all such policies or other Insurance Assets as may be relevant are or will be, as the case may be, legal, valid and binding obligations of each party thereto, enforceable against such makers in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally.

 

(h) The Grantors are and will be at all times the sole and exclusive owners of, or otherwise have and will have adequate rights in, the Collateral free and clear of any Lien except for the Permitted Liens.  No effective financing statement or other instrument similar in effect covering all or any part of the Collateral is on file in any recording or filing office except such as may have been filed to perfect or protect any Permitted Lien.

 

(i) No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority (other than an insurance-related Governmental Authority) or any other Person, is required for (i) the grant by any Grantor of the security interest purported to be created hereby in the Collateral or (ii) the exercise by the Agent of any of its rights and remedies hereunder, except, in the case of this clause (ii), as may be required in connection with any sale of any Pledged Interests by laws affecting the offering and sale of securities generally.  No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority or any other Person, is required for the perfection of the security interest purported to be created hereby in the Collateral, except (A) for the filing under the Uniform Commercial Code as in effect in the applicable jurisdiction of the financing statements described in Schedule V hereto (as amended, supplemented or otherwise modified from time to time), all of which financing statements have been duly filed and are in full force and effect, (B) with respect to the perfection of the security interest created hereby in the United

 

  

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States Intellectual Property and Licenses, for the recording of the appropriate Assignment for Security, substantially in the form of Exhibit B hereto in the United States Patent and Trademark Office or the United States Copyright Office, as applicable, (C) with respect to the perfection of the security interest created hereby in foreign Intellectual Property and Licenses, for registrations and filings in jurisdictions located outside of the United States and covering rights in such jurisdictions relating to such foreign Intellectual Property and Licenses, (D) with respect to any action that may be necessary to obtain control of Collateral constituting Deposit Accounts, Electronic Chattel Paper, Investment Property or Letter-of-Credit Rights, the taking of such actions, and (E) the Agent's having possession of all Documents, Chattel Paper, Instruments and cash constituting Collateral (subclauses (A), (B), (C), (D) and (E), each a "Perfection Requirement" and collectively, the "Perfection Requirements").

 

(j) This Agreement creates a legal, valid and enforceable security interest in favor of the Agent, for the benefit of the Secured Parties, in the Collateral secured thereby, as security for the Secured Obligations.  On the date hereof, the Perfection Requirements result in the perfection of such security interests.  Such security interests are, or in the case of Collateral in which any Grantor obtains rights after the date hereof, will be, perfected, first priority security interests, subject in priority only to the Permitted Liens that, pursuant to the definition of the term "Permitted Liens", are not prohibited from being prior to the Liens in favor of the Agent, for the benefit of the Secured Parties, and the recording of such instruments of assignment described above.  Such Perfection Requirements and all other action necessary or desirable to perfect and protect such security interest have been duly made or taken.

 

(k) As of the date hereof, no Grantor holds any Commercial Tort Claims in respect of which a claim has been filed in a court of law or a written notice by an attorney has been given to a potential defendant, except for such claims described in Schedule VI (as amended, supplemented or otherwise modified from time to time in accordance with the terms hereof).

 

(l) With respect to each Grantor and its Subsidiaries that is a partnership or a limited liability company, each such Person has irrevocably opted into (and has caused each of its Subsidiaries that is a partnership or a limited liability company, and a Pledged Issuer to opt into) Article 8 of the Uniform Commercial Code (collectively, the "Certificated Entities").  Such interests are securities for purposes of Article 8 of any relevant Uniform Commercial Code.

 

(m) Each Grantor has good and marketable title to, valid leasehold interests in, or valid licenses to use, all property and assets material to its business, free and clear of all Liens, except Permitted Liens.  All such properties and assets are in good working order and condition, ordinary wear and tear excepted.

 

SECTION 6. Covenants as to the Collateral .  So long as any of the Secured Obligations (whether or not due) shall remain unpaid or any Lender shall have any Commitment under the Financing Agreement, unless the Agent shall otherwise consent in writing upon direction of the Required Lenders:

 

  

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(a) Further Assurances.   Each Grantor will (x) execute and deliver, and cause each of its Subsidiaries to execute and deliver, to the Agent for the benefit of the Agent and the Lenders, at the time of the delivery of the financial statements of the Borrower and its Subsidiaries required by Section 6.01(a)(i) and (ii) of the Financing Agreement (in addition to any requirements hereunder to deliver a Pledge Amendment in respect of Additional Collateral), schedules identifying and describing any changes to the Collateral since the date of the last such schedules delivered to the Agent for the benefit of the Agent and the Lenders (and modify this Agreement by amending the Schedules hereto to include any Additional Collateral), and (y) take such action and execute, acknowledge and deliver such agreements, instruments or other documents as may be necessary from time to time or as the Required Lenders may reasonably request with respect to any Collateral or any Additional Collateral (including with respect to any Insurance Holdings and any Insurance Assets when otherwise required pursuant to the terms hereof) in order (i) to perfect and protect, or maintain the perfection of, the security interest and Lien purported to be created hereby in the relevant jurisdiction as necessary or advisable under applicable law; (ii) to enable the Agent to exercise and enforce its rights and remedies hereunder in respect of the Collateral; or (iii) otherwise to effect the purposes of this Agreement, including, without limitation:  (A) marking conspicuously all Chattel Paper, Instruments and Licenses beneficially owned by such Grantor and not held for sale or disposition in the ordinary course of such Grantor's business, and, at the request of the Agent, all of its Records pertaining to the Collateral with a conspicuous legend sufficient to indicate that such Chattel Paper, Instrument, License or Collateral is subject to the security interest created hereby, (B) if any Account shall be evidenced by a Promissory Note or other Instrument or Chattel Paper, delivering and pledging to the Agent such Promissory Note, other Instrument or Chattel Paper, duly endorsed and accompanied by executed instruments of transfer or assignment, all in form and substance necessary to perfect and preserve the security interest purported to be created hereby or as the Required Lenders may reasonably request, (C) executing and filing (to the extent, if any, that such Grantor's signature is required thereon) or authenticating the filing of, such financing or continuation statements, or amendments thereto, (D) with respect to Intellectual Property hereafter existing and not covered by an appropriate security interest grant, the executing and recording in the United States Patent and Trademark Office or the United States Copyright Office, as applicable, delivery of all appropriate instruments granting a security interest, as may be necessary or desirable or that the Agent may request at the direction of the Required Lenders in order to perfect and preserve the security interest purported to be created hereby, (E) delivering to the Agent irrevocable proxies in respect of the Pledged Interests, (F) furnishing to the Agent from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Agent  may reasonably request, all in reasonable detail, (G) if any Collateral with a book value in excess of $250,000 shall be in the possession of a third party (including, without limitation, any landlord by virtue of Collateral being located on such landlord's premises leased to a Grantor), notifying such Person of the Agent's security interest created hereby and using commercially reasonable efforts to obtain a written agreement, in form and substance satisfactory to the Required Lenders, waiving or subordinating any Liens of such Person in such Collateral, providing access to such Collateral in order to remove such Collateral from such premises during an Event of Default and acknowledging that such Person holds possession of the Collateral for the benefit of the Agent, (H) if at any time after the date hereof, any Grantor acquires or holds any Commercial Tort Claim, promptly notifying the Agent in a writing signed by such Grantor setting forth a brief

 

  

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description of such Commercial Tort Claim and granting to the Agent a security interest therein and in the proceeds thereof, which writing shall incorporate the provisions hereof and shall be in form and substance reasonably satisfactory to the Required Lenders sufficient to perfect and preserve the security interest purported to be created hereby, and (I) taking all actions required by law in any relevant Uniform Commercial Code jurisdiction, or by other law as applicable in any foreign jurisdiction.  No Grantor shall take or fail to take any action which would in any manner impair the validity or enforceability of the Agent's security interest in and Lien on any Collateral.

 

(b) Location of Equipment and Inventory.  Each Grantor will keep the Equipment and Inventory (other than Equipment and Inventory sold in the ordinary course of business at the locations specified in Schedule III hereto (as amended, supplemented or otherwise modified from time to time in accordance with the terms hereof) or, upon not less than thirty (30) days' prior written notice to the Agent accompanied by a new Schedule III hereto indicating each new location of the Equipment and Inventory, at such other locations in the United States as the Grantors may elect, provided that all action has been taken to (i) grant to the Agent a perfected, first priority security interest in such Equipment and Inventory (subject in priority only to Permitted Liens that, pursuant to the definition of the term "Permitted Liens", are not prohibited from being prior to the Liens in favor of the Agent, for the benefit of the Secured Parties) and (ii) comply with 6(a)(G), if applicable

 

(c) Condition of Equipment.  Each Grantor will maintain or cause the Equipment which is reasonably necessary or useful in the proper conduct of its business to be maintained and preserved in good condition, repair and working order as when acquired, ordinary wear and tear and casualty excepted, and will forthwith, or in the case of any loss or damage to any material Equipment promptly after the occurrence thereof, make or cause to be made all repairs, replacements and other improvements in connection therewith which are necessary or desirable, consistent with sound business practice.

 

(d) Insurance.  Each Grantor will, at its own expense, maintain insurance with respect to the Collateral in accordance with the terms of the Financing Agreement.  Each Grantor will deliver to the Agent (for delivery to the Lenders) original or duplicate insurance policies to the extent not previously delivered to the Agent.  Each Grantor will also, execute and deliver to the extent not previously delivered, loss payee endorsements or evidence of additional insured status naming the Agent on behalf of the Lenders in form and substance reasonably satisfactory to the Required Lenders (to the extent not previously delivered).

 

(e) Provisions Concerning the Accounts and the Licenses.

 

(i) The Grantors shall, at its own expense, take all reasonable steps to enforce, collect and receive all amounts owing or to become due on the Accounts Receivable of the Grantors or any of their Subsidiaries and may settle, adjust or compromise the amount due in the ordinary course of business consistent with past practices.  After the occurrence and during the continuance of an Event of Default, the Agent (at the written direction of the Required Lenders) may send a notice of assignment and/or notice of the Lenders' security interest to any and all Account Debtors or third parties holding or otherwise concerned with any

 

  

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of the Collateral, and thereafter the Agent or its designee shall have the sole right to collect the Accounts Receivable and/or take possession of the Collateral and the books and records relating thereto and/or to enforce collection of any such Accounts Receivable, and/or to settle, adjust or compromise the amount or payment thereof.  After receipt by any Grantor of a notice from the Agent that the Agent has notified, intends to notify, or has enforced or intends to enforce a Grantor's rights against the Account Debtors or obligors under any Accounts Receivable as referred to in the immediately preceding sentence after the occurrence and during the continuance of an Event of Default, (A) all amounts and proceeds (including Instruments) received by such Grantor in respect of the Accounts Receivable shall be received in trust for the benefit of the Agent hereunder, shall be segregated from other funds of such Grantor and shall be forthwith paid over to the Agent or its designated agent in the same form as so received (with any necessary endorsement) to be applied as specified in Section 9(d) hereof, and (B) such Grantor will not adjust, settle or compromise the amount or payment of any Account Receivable or extend the time of payment thereof, or release wholly or partly any Account Debtor or obligor thereof, or allow any allowance, credit or discount thereon.

 

(ii) Each Grantor hereby appoints the Agent or its designee on behalf of the Agent as the Grantors' attorney-in-fact with power exercisable during the continuance of an Event of Default to endorse any Grantor's name upon any notes, acceptances, checks, drafts, money orders or other evidences of payment relating to the Accounts Receivable, to sign any Grantor's name on any invoice or bill of lading relating to any of the Accounts Receivable, drafts against Account Debtors with respect to Accounts Receivable, assignments and verifications of Accounts Receivable and notices to Account Debtors with respect to Accounts Receivable, to send verification of Accounts Receivable, and to notify the Postal Service authorities to change the address for delivery of mail addressed to any Grantor to such address as the Agent or its designee may designate and to do all other acts and things necessary to carry out this Agreement.  All acts of said attorney or designee are hereby ratified and approved, and said attorney or designee shall not be liable for any acts of omission or commission (other than acts of omission or commission constituting gross negligence or willful misconduct as determined by a final judgment of a court of competent jurisdiction), or for any error of judgment or mistake of fact or law; this power being coupled with an interest is irrevocable until all of the Loans and other Obligations under the Loan Documents are paid in full, all Commitments are terminated and all of the Loan Documents are terminated.

 

(iii) Nothing herein contained shall be construed to constitute the Agent as agent of any Grantor for any purpose whatsoever, and the Agent and Secured Parties shall not be responsible or liable for any shortage, discrepancy, damage, loss or destruction of any part of the Collateral wherever the same may be located and regardless of the cause thereof (other than from acts of omission or commission constituting gross negligence or willful misconduct as determined by a final judgment of a court of competent jurisdiction).  The Agent and Secured Parties shall not, under any circumstance or in any event whatsoever, have any liability for any error or omission or delay of any kind occurring in the settlement, collection or payment of any of the Accounts Receivable or any instrument received in payment thereof or for any damage resulting therefrom (other than acts of omission or commission constituting gross negligence or willful misconduct as determined by a final judgment of a court of competent jurisdiction).  The Agent, by anything herein or in any assignment or otherwise, does not assume any of the obligations under any contract or agreement assigned to the Agent and

 

  

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shall not be responsible in any way for the performance by any Grantor of any of the terms and conditions thereof.

 

(iv) Upon the occurrence and during the continuance of any material breach or default under any material License by any party thereto other than a Grantor, (A) the relevant Grantor will, promptly after obtaining knowledge thereof, give the Agent written notice of the nature and duration thereof, specifying what action, if any, it has taken and proposes to take with respect thereto, and (B) after the occurrence and during the continuance of an Event of Default, each Grantor will, upon written instructions from the Agent (at the written direction of the Required Lenders and at such Grantor's expense, take such action as the Agent may deem necessary or advisable in respect thereof.

 

(f) Provisions Concerning the Pledged Interests.  Each Grantor will:

 

(i) not make or consent to any amendment or other modification or waiver with respect to any Pledged Interests or enter into any agreement or permit to exist any restriction with respect to any Pledged Interests other than pursuant to the Loan Documents; and

 

(ii) not permit the issuance of (A) any additional shares of any class of Equity Interests of any Pledged Issuer unless pledged to the Agent hereunder, (B) any securities convertible voluntarily by the holder thereof or automatically upon the occurrence or non-occurrence of any event or condition into, or exchangeable for, any such shares of Equity Interests or (C) any warrants, options, contracts or other commitments entitling any Person to purchase or otherwise acquire any such shares of Equity Interests.

 

(g) Intellectual Property.

 

(i) If applicable, each Grantor has duly executed and delivered the applicable Assignment for Security in the form attached hereto as Exhibit B.  Each Grantor (either itself or through licensees) will, and will cause each licensee thereof to, take all reasonable action necessary to maintain all of the Intellectual Property that is necessary for the conduct of such Grantor's business in full force and effect, including, without limitation, using the proper statutory notices and markings and using the Trademarks on each applicable trademark class of goods in order to so maintain the Trademarks in full force, free from any claim of abandonment for non-use, and no Grantor will (nor permit any licensee thereof to) do any act or knowingly omit to do any act whereby any Intellectual Property may become invalidated.

 

(ii) Notwithstanding the foregoing, so long as no Event of Default has occurred and is continuing, no Grantor shall have an obligation to use or to maintain any Intellectual Property (A) that relates solely to any product or work, that has been, or is in the process of being, discontinued, abandoned or terminated, (B) that is being replaced with Intellectual Property substantially similar to the Intellectual Property that may be abandoned or otherwise become invalid, so long as the failure to use or maintain such Intellectual Property does not materially adversely affect the validity of such replacement Intellectual Property and so long as such replacement Intellectual Property is subject to the Lien created by this Agreement or (C) that is substantially the same as any other Intellectual Property that is in full force, so long as the failure

 

  

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to use or maintain such Intellectual Property does not materially adversely affect the validity of such replacement Intellectual Property and so long as such other Intellectual Property is subject to the Lien and security interest created by this Agreement.

 

(iii) Each Grantor will cause to be taken all reasonably necessary steps in any proceeding before the United States Patent and Trademark Office and the United States Copyright Office or any similar office or agency in any other country or political subdivision thereof to maintain each registration of the Intellectual Property (other than Intellectual Property not necessary for the conduct of such Grantor's business described in clause (ii) above), including, without limitation, filing of renewals, affidavits of use, affidavits of incontestability and opposition, interference and cancellation proceedings and payment of maintenance fees, filing fees, taxes or other governmental fees.  If any Intellectual Property (other than the Intellectual Property not necessary for the conduct of such Grantor's business as described in (ii) above) is infringed, misappropriated, diluted or otherwise violated in any material respect by a third party, the Grantors shall (x) upon obtaining knowledge of such infringement, misappropriation, dilution or other violation, promptly notify the Agent and (y) to the extent the Grantors shall deem appropriate under the circumstances, promptly sue for infringement, misappropriation, dilution or other violation, seek injunctive relief where appropriate and recover any and all damages for such infringement, misappropriation, dilution or other violation, or take such other actions as the Grantors shall deem appropriate under the circumstances to protect such Intellectual Property.

 

(iv) Upon the acquisition of any Intellectual Property or License by any Grantor, such Grantor shall promptly, but in any event not later than 30 days after the acquisition thereof, furnish to the Agent notice of the acquisition of such Intellectual Property or License and shall within 30 days thereafter take such actions as are required or advisable to perfect the Agent's lien in such property.  Notwithstanding anything herein to the contrary, no failure on the part of a prior owner of any Intellectual Property or License acquired by any Grantor to comply with the covenants imposed on the Grantors under Section 6(g) of this Agreement will be attributed to or otherwise deemed a breach of those covenants by any Grantor acquiring such Intellectual Property or License.

 

(v) Notwithstanding anything herein to the contrary, upon the occurrence and during the continuance of an Event of Default, no Grantor may abandon or otherwise permit any material Intellectual Property to become invalid without the prior written consent of the Agent, and if any material Intellectual Property is infringed, misappropriated, diluted or otherwise violated in any material respect by a third party, the Grantors will take such action as the Agent (at the direction of the Required Lenders) shall reasonably deem appropriate under the circumstances to protect such Intellectual Property.  Upon the occurrence and during the continuance of any Event of Default, the Agent shall have the right but shall in no way be obligated to file applications for protection of the Intellectual Property and/or bring suit in the name of any Grantor, the Agent or the Secured Parties to enforce the Intellectual Property and any License thereunder.  In the event of such suit, each Grantor shall, at the reasonable request of the Agent (at the direction of the Required Lenders), do any and all lawful acts and execute any and all documents requested by the Agent (at the direction of the Required Lenders) in aid of such enforcement and the Grantors shall promptly reimburse and indemnify the Agent for all costs and expenses incurred by the Agent in the exercise of its rights under this Section 6(g)(vi) in accordance with Section 10.04 of the Financing Agreement.

 

  

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(vi) In the event that any Grantor shall (A) obtain rights to any new Trademarks necessary for the operation of its business, or any reissue, renewal or extension of any existing Trademark necessary for the operation of its business, (B) obtain rights to or develop any new patentable inventions, or become entitled to the benefit of any Patent, or any reissue, division, continuation, renewal, extension or continuation-in-part of any existing Patent or any improvement thereof (whether pursuant to any license or otherwise), (C) obtain rights to or develop any new works protectable by Copyright, or become entitled to the benefit of any rights with respect to any Copyright or any registration or application therefor, or any renewal or extension of any existing Copyright or any registration or application therefor, or (D) obtain rights to or develop new Other Intellectual Property, the provisions of Section 2 hereof shall automatically apply thereto and such Grantor shall give to the Agent prompt notice thereof in accordance with the terms of this Agreement and the Financing Agreement.  Except as otherwise provided herein or in the Financing Agreement each Grantor, either itself or through any agent, employee, licensee or designee, shall give the Agent written notice of each application submitted by it for the registration of any Trademark or Copyright or the issuance of any Patent with the United States Patent and Trademark Office or the United States Copyright Office, as applicable, or in any similar office or agency of the United States or any country or any political subdivision thereof.

 

(vii) Each Grantor shall execute, authenticate and deliver any and all assignments, agreements, instruments, documents and papers as the Agent (at the direction of the Required Lenders) may reasonably request to evidence the Agent's security interest hereunder in such Intellectual Property and the General Intangibles of such Grantor relating thereto or represented thereby, and each Grantor hereby appoints the Agent its attorney-in-fact to execute and/or authenticate and file all such writings for the foregoing purposes, all acts of such attorney being hereby ratified and confirmed, and such power (being coupled with an interest) shall be irrevocable until the date on which all of the Secured Obligations have been paid in full in cash after the termination of each Lender's Commitment and each of the Loan Documents.

 

(h) Deposit, Commodities and Securities Accounts.  (i)  Each Grantor shall (x) establish and maintain cash management services of a type and on terms reasonably satisfactory to the Required Lenders at one or more of the banks reasonably acceptable to the Required Lenders set forth on Schedule IV (each a "Cash Management Bank") and (y) deposit or cause to be deposited promptly, and in any event no later than the next Business Day after the date of receipt thereof, all proceeds in respect of any Collateral, all Collections (of a nature susceptible to a deposit in a bank account) and all other amounts received by any Grantor (including payments made by Account Debtors directly to any Grantor) into a Cash Management Account; (ii) On or prior to the Effective Date, the Grantors shall, with respect to each Cash Management Account, deliver to the Agent a Cash Management Agreement with respect to such Cash Management Account.  From and after the Effective Date, the Grantors shall not maintain, and shall not permit any of their Subsidiaries to maintain, cash, Cash Equivalents or other amounts in any Deposit Account or Securities Account, unless the Agent shall have received a Cash Management Agreement in respect of each such Deposit Account or Securities Account; (iii) Upon the terms and subject to the conditions set forth in a Cash Management Agreement with respect to a Cash Management Account, upon the direction of the Agent upon an Event of Default having occurred and continuing, all amounts received in such Cash Management Account shall be wired each Business Day into the Agent's Account; (iv) Any such securities,

 

  

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cash, investments and other items so received by the Agent shall be held as additional Collateral for the Secured Obligations or applied in accordance with Section 9 hereof; (v) So long as no Default or Event of Default has occurred and is continuing, the Borrower may amend Schedule IV to add or replace a Cash Management Bank or Cash Management Account; provided, however, that prior to the time of the opening of such Cash Management Account, each Grantor and such prospective Cash Management Bank shall have executed and delivered to the Agent a Cash Management Agreement; (vi) Each Grantor shall close any of its Cash Management Accounts (and establish replacement cash management accounts in accordance with the foregoing sentence) promptly and in any event within 30 days of notice from the Agent that the creditworthiness of any Cash Management Bank is no longer acceptable to the Required Lenders, or that the operating performance, funds transfer, or availability procedures or performance of such Cash Management Bank with respect to Cash Management Accounts or the Agent's liability under any Cash Management Agreement with such Cash Management Bank is no longer acceptable in the respective Lender's and Agent's reasonable judgment; (vii) The Cash Management Accounts shall be cash collateral accounts, with all cash, checks and similar items of payment in such accounts securing payment of the Obligations, and in which the Grantors are hereby deemed to have granted a Lien to the Agent for the benefit of the Agent and the Lenders; and (viii) All checks, drafts, notes, money orders, acceptances, cash and other evidences of Indebtedness received directly by any Grantor from any of its Account Debtors, as proceeds from Accounts of such Grantor or as proceeds of any other Collateral shall be held by such Grantor in trust for the Agent and the Lenders and if of a nature susceptible to a deposit in a bank account, upon receipt be deposited by such Grantor in original form and no later than the next Business Day after receipt thereof into a Cash Management Account or other bank account referenced in the definition of Cash Management Accounts as excluded from the scope thereof.  Each Grantor shall not commingle such collections with the proceeds of any assets, if any, not included in the Collateral.  No checks, drafts or other instrument received by the Agent shall constitute final payment to the  Agent unless and until such instruments have actually been collected.

 

(i) Control.  Each Grantor hereby agrees to take any or all action that may be necessary or desirable or that the Agent may request in order for the Agent to obtain control in accordance with Sections 9-104, 9-105, 9-106, and 9-107 of the Code with respect to the following Collateral:  (i) Deposit Accounts, (ii) Electronic Chattel Paper, (iii) Investment Property and (iv) Letter-of-Credit Rights.  Each Grantor hereby acknowledges and agrees that any agent or designee of the Agent shall be deemed to be a "secured party" with respect to the Collateral under the control of such agent or designee for all purposes.

 

(j) Records; Inspection and Reporting.

 

(i) Each Grantor shall keep adequate records concerning the Accounts, Chattel Paper and Pledged Interests.  Each Grantor shall permit the Agent, or any agents or representatives thereof or such professionals or other Persons as the Agent may designate, upon reasonable advance notice, at the expense of the Grantors (provided that so long as no Event of Default shall have occurred and be continuing, the Grantors shall pay for only (I) one examination described in the following clause (A) per year, (II) one visit and inspection described in the following clause (B) per year, (III) one verification described in the following clause (C) per year, (IV) one audit, physical count, appraisal, valuation or examination described

 

  

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in the following clause (D) per year, and (V) one discussion described in the following clause (E) per year): (A) to examine and make copies of and abstracts from such Grantor's books and records, (B) to visit and inspect its properties, (C) to verify materials, leases, notes, Accounts, Inventory and other assets of such Grantor from time to time, (D) to conduct audits, physical counts, appraisals and/or valuations, or examinations at the locations of such Grantor and (E) to discuss such Grantor's affairs, finances and accounts with any of its directors, officers, managerial employees, independent accountants or any of its other representatives. In furtherance of the foregoing, each Grantor hereby authorizes its independent accountants, and the independent accountants of each of its Subsidiaries, to discuss the affairs, finances and accounts of such Person (independently or together with representatives of such Person) with the agents and representatives of the Agent in accordance with this Section 6(j).

 

(ii) Except as otherwise expressly permitted by Section 6.02(j) of the Financing Agreement, no Grantor shall, without prior written notice to the Agent and the Lenders, amend, modify or otherwise change (A) its name, organizational identification number or FEIN (B) its jurisdiction of organization as set forth in Schedule I hereto or (C) its chief executive office as set forth in Schedule III hereto.  Each Grantor shall promptly notify the Agent upon obtaining an organizational identification number, if on the date hereof such Grantor did not have such identification number.

 

(iii) The Borrowers acknowledge that pursuant to this Section 6(j), representatives of the Lenders and the Agent may visit any or all of the Grantors and/or conduct an inspection, including audits, valuations, assessments, appraisals, and/or examinations of any or all of the Grantors at any time and from time to time provided, however, that so long as no Event of Default shall have occurred and be continuing, the Borrower shall pay for only one such inspection per year.  The Borrower agrees to pay (i) out-of-pocket costs and reasonable expenses incurred in connection with all such visits, inspections, audits, physical counts, valuations, assessments, appraisals,  and/or examinations and (ii) the cost of all visits, inspections, audits, physical counts, valuations, assessments, appraisals, and/or examinations conducted by a third party on behalf of the Agent and/or the Lenders.

 

(k) Partnership and Limited Liability Company Interest.  Except with respect to partnership interests and membership interests evidenced by a certificate, which certificate has been pledged and delivered to the Agent pursuant to Section 4 hereof, no Grantor that is a partnership or a limited liability company shall, nor shall any Grantor with any Subsidiary that is a partnership or a limited liability company, permit such partnership interests or membership interests to (i) be dealt in or traded on securities exchanges or in securities markets, (ii) become a security for purposes of Article 8 of any relevant Uniform Commercial Code, (iii) become an investment company security within the meaning of Section 8-103 of any relevant Uniform Commercial Code or (iv) be evidenced by a certificate.  Each Grantor agrees that such partnership interests or membership interests shall constitute General Intangibles.

 

(l) After-Acquired Real Property.  Upon the acquisition by any Grantor after the date hereof of any fee interest in any real property (wherever located) (each such interest being a "New Facility"), or leasehold interest in any real property, such Grantor shall promptly  notify the Agent and the Lenders thereof, setting forth with specificity a description of the interest acquired, the location of the real property, any structures or

 

  

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improvements thereon and either an appraisal or such Grantor's good-faith estimate of the current value of such real property (for purposes of this Section, the "Current Value"). Upon the acquisition by any Grantor after the date hereof of any interest in any (i) New Facility with a Current Value in excess of $250,000 individually, or $1,000,000 in the aggregate, such Grantor shall deliver a Mortgage (and, with respect to any New Facility with a Current Value of $2,500,000  or more (or, with respect to the delivery of title insurance, $1,000,000 or more)) at the time of such acquisition,  any other real property deliverables (including, without limitation, appraisals, title insurance and a Phase 1 report) in favor of the Agent for the benefit of the Secured Parties, in each case in form  reasonably acceptable to the Required Lenders with respect to such New Facility and (ii) any leasehold interest in a property at which Collateral with a value of $50,000 or more is located, such Grantor shall use its commercially reasonable efforts to provide a landlord’s waiver, in form reasonably acceptable to the Required Lenders, with respect to such leasehold interest.  The Borrower shall pay all fees and expenses, including reasonable attorneys' fees and expenses, and all customary title insurance charges and premiums, in connection with each Grantor's obligations under this Section 6(l).  It is understood by the parties hereto that no leasehold mortgages shall be requested with respect to any interest in real property  consisting of office space so long as a landlord waiver in a form reasonably acceptable to the Required Lenders has been obtained with respect to such real property.

 

(m) Validity of Security Documents.  Each Security Agreement, each Mortgage or each other security document, after delivery thereof pursuant hereto, shall at all times continue to create a valid and perfected and, except to the extent permitted by the terms hereof or thereof, first priority Lien in favor of the Agent for the benefit of the Agent and the Lenders on any Collateral purported to be covered thereby.

 

SECTION 7. Voting Rights, Dividends, Etc. in Respect of the Pledged Interests.

 

(a) So long as no Event of Default shall have occurred and be continuing:

 

(i) each Grantor may exercise any and all voting and other consensual rights pertaining to any Pledged Interests for any purpose not inconsistent with the terms of this Agreement or the Financing Agreement; provided, however, that (A) none of the Grantors will exercise or refrain from exercising any such right, as the case may be, that could reasonably be expected to have a Material Adverse Effect and (B) each Grantor will give the Agent at least five (5) Business Days' notice of the manner in which it intends to exercise, or the reasons for refraining from exercising, any such right which could reasonably be expected to have a Material Adverse Effect;

 

(ii) each of the Grantors may receive and retain any and all dividends, interest or other distributions paid in respect of the Pledged Interests to the extent permitted by the Financing Agreement and subject to Section 4(b) hereof; and

 

(iii) the Agent will (at the direction of the Required Lenders) execute and deliver (or cause to be executed and delivered) to a Grantor all such proxies and other instruments as such Grantor may reasonably request for the purpose of enabling such Grantor to exercise the voting and other rights which it is entitled to exercise pursuant to Section

 

  

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7(a)(i) hereof and to receive the dividends, interest and/or other distributions which it is authorized to receive and retain pursuant to Section 7(a)(ii) hereof.

 

(b) Upon the occurrence and during the continuance of an Event of Default:

 

(i) all rights of each Grantor to exercise the voting and other consensual rights which it would otherwise be entitled to exercise pursuant to Section 7(a)(i) hereof, and to receive the dividends, distributions, interest and other payments that it would otherwise be authorized to receive and retain pursuant to Section 7(a)(ii) hereof, shall cease, and all such rights shall thereupon become vested in the Agent, which shall thereupon have the sole right to exercise such voting and other consensual rights and to receive and hold as Pledged Interests such dividends, distributions and interest payments;

 

(ii) the Agent is authorized to notify each debtor with respect to the Pledged Debt to make payment directly to the Agent (or its designee) and may collect any and all moneys due or to become due to any Grantor in respect of the Pledged Debt, and each of the Grantors hereby authorizes each such debtor to make such payment directly to the Agent (or its designee) without any duty of inquiry;

 

(iii) without limiting the generality of the foregoing, the Agent may at its option exercise any and all rights of conversion, exchange, subscription or any other rights, privileges or options pertaining to any of the Pledged Interests as if it were the absolute owner thereof, including, without limitation, the right to exchange, in its discretion, any and all of the Pledged Interests upon the merger, consolidation, reorganization, recapitalization or other adjustment of any Pledged Issuer, or upon the exercise by any Pledged Issuer of any right, privilege or option pertaining to any Pledged Interests, and, in connection therewith, to deposit and deliver any and all of the Pledged Interests with any committee, depository, transfer agent, registrar or other designated agent upon such terms and conditions as it may determine; and

 

(iv) all dividends, distributions, interest and other payments that are received by any of the Grantors contrary to the provisions of Section 7(b)(i) hereof shall be received in trust for the benefit of the Agent, shall be segregated from other funds of the Grantors, and shall be forthwith paid over to the Agent as Pledged Interests in the exact form received with any necessary indorsement and/or appropriate stock powers duly executed in blank, to be held by the Agent as Pledged Interests and as further collateral security for the Secured Obligations.

 

SECTION 8. Additional Provisions Concerning the Collateral .

 

(a) To the maximum extent permitted by applicable law, and for the purpose of taking any action that the Agent and/or the Required Lenders may deem reasonably necessary or advisable to accomplish the purposes of this Agreement, each Grantor hereby (i) authorizes the Agent to execute any such agreements, instruments or other documents in such Grantor's name and to file such agreements, instruments or other documents in such Grantor's name and in any appropriate filing office, (ii) authorizes the Agent at any time and from time to time to file, one or more financing or continuation statements and amendments thereto, relating

 

  

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to the Collateral (including, without limitation, any such financing statements that (A) describe the Collateral as "all assets" or "all personal property" (or words of similar effect) or that describe or identify the Collateral by type or in any other manner as the Agent may determine, regardless of whether any particular asset of such Grantor falls within the scope of Article 9 of the Uniform Commercial Code, and (B) contain any other information required by Part 5 of Article 9 of the Code for the sufficiency or filing office acceptance of any financing statement, continuation statement or amendment, including, without limitation, whether such Grantor is an organization, the type of organization and any organizational identification number issued to such Grantor) and (iii) ratifies such authorization to the extent that the Agent has filed any such financing statements, continuation statements, or amendments thereto, prior to the date hereof.  A photocopy or other reproduction of this Agreement or any financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by law.

 

(b) Each Grantor hereby irrevocably appoints the Agent as its attorney-in-fact and proxy, with full authority in the place and stead of such Grantor and in the name of such Grantor or otherwise, effective upon the occurrence and during the continuance of an Event of Default (other than as to clause (vi) below which appointment is effective whether or not an Event of Default has occurred or is continuing), to take any action and to execute any instrument that the Required Lenders may deem necessary or advisable to accomplish the purposes of this Agreement (subject to the rights of a Grantor under Section 6 hereof and Section 7(a) hereof), (i) to ask, demand, collect, sue for, recover, compound, receive and give acquittance and receipts for moneys due and to become due under or in respect of any Collateral, (ii) to receive, endorse, and collect any drafts or other Instruments, Documents and Chattel Paper in connection with clause (i) or (ii) above, (iii) to receive, indorse and collect all Instruments made payable to such Grantor representing any dividend, interest payment or other distribution in respect of any Pledged Interests and to give full discharge for the same, (iv) to file any claims or take any action or institute any proceedings which the Required Lenders may  deem necessary or desirable for the collection of any Collateral or otherwise to enforce the rights of the Agent and the Lenders with respect to any Collateral, (v) to execute assignments, licenses and other documents to enforce the rights of the Agent and the Lenders with respect to any Collateral, (vi) to pay or discharge taxes or Liens levied or placed upon or threatened against the Collateral, the legality or validity thereof and the amounts necessary to discharge the same to be determined by the Required Lenders in their discretion, and such payments made by the Agent to become Obligations of such Grantor to the Agent, due and payable immediately without demand, and (vii) to sign and endorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, assignments, verifications and notices in connection with Accounts, Chattel Paper and other documents relating to the Collateral.  This power is coupled with an interest and is irrevocable until the date on which all of the Secured Obligations have been paid in full in cash after the termination of each Lender's Commitment and each of the Loan Documents.

 

(c) For the purpose of enabling the Agent to exercise rights and remedies hereunder upon the occurrence and during the continuance of an Event of Default, at such time as the Agent shall be lawfully entitled to exercise such rights and remedies, and for no other purpose, each Grantor hereby (i) grants to the Agent an irrevocable, non-exclusive license (exercisable without payment of royalty or other compensation to any Grantor) to use, assign, license or sublicense any Intellectual Property now or hereafter owned by any Grantor, wherever the same may be located, including in such license reasonable access to all media in which any

 

  

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of the licensed items may be recorded or stored and to all computer programs used for the compilation or printout thereof; and (ii) assigns to the Agent, to the extent assignable, all of its rights to any Intellectual Property now or hereafter licensed or used by any Grantor.  Notwithstanding anything contained herein to the contrary, but subject to any provisions of the Financing Agreement that limit or condition the right of a Grantor to dispose of its property and Section 6(g) hereof, so long as no Event of Default shall have occurred and be continuing, each Grantor may exploit, use, enjoy, protect, license, sublicense, assign, sell, dispose of or take other actions with respect to the Intellectual Property in the ordinary course of its business.  In furtherance of the foregoing, unless an Event of Default shall have occurred and be continuing, the Agent shall from time to time, upon the request of a Grantor, execute and deliver any instruments, certificates or other documents, in the form so requested, which such Grantor shall have certified are appropriate (in such Grantor's judgment) to allow it to take any action permitted above (including relinquishment of the license provided pursuant to this clause (c) as to any Intellectual Property).  Further, upon the date on which all of the Secured Obligations have been paid in full in cash after the termination of each Lender's Commitment and each of the Loan Documents, the Agent (subject to Section 13(e) hereof) shall release and reassign to the Grantors all of the Agent's right, title and interest in and to the Intellectual Property, and the Licenses, all without recourse, representation or warranty whatsoever and at the Grantors' sole expense.  The exercise of rights and remedies hereunder by the Agent shall not terminate the rights of the holders of any licenses or sublicenses theretofore granted by any Grantor in accordance with the second sentence of this clause (c).  Each Grantor hereby releases the Agent from any claims, causes of action and demands at any time arising out of or with respect to any actions taken or omitted to be taken by the Agent under the powers of attorney granted herein other than actions taken or omitted to be taken through the Agent's gross negligence or willful misconduct, as determined by a final determination of a court of competent jurisdiction.

 

(d) Upon the occurrence and during the continuance of a Default if any Grantor fails to perform any agreement or obligation contained herein the Agent may itself perform, or cause performance of, such agreement or obligation, in the name of such Grantor or the Agent, and the expenses of the Agent incurred in connection with such performance shall be jointly and severally payable by the Grantors pursuant to Section 10.04 of the Financing Agreement and shall be secured by the Collateral.

 

(e) The powers conferred on the Agent hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers.  Other than the exercise of reasonable care to assure the safe custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Agent shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral and shall be relieved of all responsibility for any Collateral in its possession upon surrendering it or tendering surrender of it to any of the Grantors (or whomsoever shall be lawfully entitled to receive the same or as a court of competent jurisdiction shall direct).  The Agent shall be deemed to have exercised reasonable care in the custody and preservation of any Collateral in its possession if such Collateral is accorded treatment substantially equal to that which the Agent accords its own property, it being understood that the Agent shall not have responsibility for ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relating to any Collateral, whether or not the Agent has or is deemed to have knowledge of such matters.  The

 

  

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Agent shall not be liable or responsible for any loss or damage to any of the Collateral, or for any diminution in the value thereof, by reason of the act or omission of any warehouseman, carrier, forwarding agency, consignee or other agent or bailee selected by the Agent in good faith.

 

(f) Anything herein to the contrary notwithstanding (i) each Grantor shall remain liable under the Licenses and otherwise in respect of the Collateral to the extent set forth therein to perform all of its obligations thereunder to the same extent as if this Agreement had not been executed, (ii) the exercise by the Agent of any of its rights hereunder shall not release any Grantor from any of its obligations under the Licenses or otherwise in respect of the Collateral, and (iii) the Agent shall not have any obligation or liability by reason of this Agreement under the Licenses or otherwise in respect of the Collateral, nor shall the Agent be obligated to perform any of the obligations or duties of any Grantor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder.

 

(g) Upon the occurrence and during the continuance of a Default or an Event of Default, the Agent may at any time in its discretion (i) without notice to any Grantor, transfer or register in the name of the Agent or any of its nominees any or all of the Pledged Interests, subject only to the revocable rights of such Grantor under Section 7(a) hereof, and (ii) exchange certificates or Instruments constituting Pledged Interests for certificates or Instruments of smaller or larger denominations.

 

SECTION 9. Remedies Upon Default .  If any Event of Default shall have occurred and be continuing:

 

(a) The Agent may exercise in respect of the Collateral, in addition to any other rights and remedies provided for herein or otherwise available to it, all of the rights and remedies of a secured party upon default under the Code (whether or not the Code applies to the affected Collateral), and also may (i) take absolute control of the Collateral, including, without limitation, transfer into the Agent's name or into the name of its nominee or nominees (to the extent the Agent has not theretofore done so) and thereafter receive, for the benefit of the Agent and the Lenders, all payments made thereon, give all consents, waivers and ratifications in respect thereof and otherwise act with respect thereto as though it were the outright owner thereof, (ii) require each Grantor to, and each Grantor hereby agrees that it will at its expense and upon request of the Agent forthwith, assemble all or part of the Collateral as directed by the Agent and make it available to the Agent at a place or places to be designated by the Agent that is reasonably convenient to both parties, and the Agent may enter into and occupy any premises owned or leased by any Grantor where the Collateral or any part thereof is located or assembled for a reasonable period in order to effectuate the Agent's rights and remedies hereunder or under law, without obligation to any Grantor in respect of such occupation, and (iii) without notice except as specified below and without any obligation to prepare or process the Collateral for sale, (A) sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of the Agent's offices, at any exchange or broker's board or elsewhere, for cash, on credit or for future delivery, and at such price or prices and upon such other terms as the Agent may  deem commercially reasonable and/or (B) lease, license or otherwise dispose of the Collateral or any part thereof upon such terms as the Agent may  deem commercially reasonable.  The Agent or any other Secured Party or any of their respective Affiliates may be the purchaser, licensee, assignee or recipient of the Collateral or any part thereof at any such sale and shall be entitled,

 

  

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for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold, assigned or licensed at such sale, to use and apply any of the Secured Obligations owed to such person as a credit on account of the purchase price of the Collateral or any part thereof payable by such person at such sale.  Each Grantor agrees that, to the extent notice of sale or any other disposition of the Collateral shall be required by law, at least five (5) days' prior notice to the applicable Grantor of the time and place of any public sale or the time after which any private sale or other disposition of the Collateral is to be made shall constitute reasonable notification.  The Agent shall not be obligated to make any sale or other disposition of Collateral regardless of notice of sale having been given.  The Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned.  Each Grantor hereby waives any claims against the Agent and the Lenders arising by reason of the fact that the price at which the Collateral may have been sold at a private sale was less than the price which might have been obtained at a public sale or was less than the aggregate amount of the Secured Obligations, even if the Agent accepts the first offer received and does not offer the Collateral to more than one offeree, and waives all rights that such Grantor may have to require that all or any part of the Collateral be marshaled upon any sale (public or private) thereof.  Each Grantor hereby acknowledges that (i) any such sale of the Collateral by the Agent shall be made without warranty, (ii) the Agent may specifically disclaim any warranties of title, possession, quiet enjoyment or the like, (iii) the Agent may bid (which bid may be, in whole or in part, in the form of cancellation of indebtedness), if permitted by law, for the purchase, lease, license or other disposition of the Collateral or any portion thereof for the account of the Agent (on behalf of itself and the Lenders) and (iv) such actions set forth in clauses (i), (ii) and (iii) above shall not adversely affect the commercial reasonableness of any such sale of the Collateral.  In addition to the foregoing, (i) upon written notice to any Grantor from the Agent, each Grantor shall cease any use of the Intellectual Property or any trademark, patent or copyright similar thereto for any purpose described in such notice; (ii) the Agent may, at any time and from time to time, upon ten (10) days' prior notice to any Grantor, license, whether general, special or otherwise, and whether on an exclusive or non-exclusive basis, any of the Intellectual Property, throughout the universe for such term or terms, on such conditions, and in such manner, as the Agent shall in its sole discretion determine; and (iii) the Agent may, at any time, pursuant to the authority granted in Section 8 hereof (such authority being effective upon the occurrence and during the continuance of an Event of Default), execute and deliver on behalf of a Grantor, one or more instruments of assignment of the Intellectual Property (or any application or registration thereof), in form suitable for filing, recording or registration in any country.

 

(b) In the event that the Agent determines to exercise its right to sell all or any part of the Pledged Interests pursuant to Section 9(a) hereof, each Grantor will, at such Grantor's expense and upon request by the Agent:  (i) to the extent an exemption from applicable registration requirements is unavailable, execute and deliver, and cause each issuer of such Pledged Interests and the directors and officers thereof to execute and deliver, all such instruments and documents, and do or cause to be done all such other acts and things, as may be necessary or, in the opinion of the Agent, advisable to register such Pledged Interests under the provisions of the Securities Act, and to cause the registration statement relating thereto to become effective and to remain effective for such period as prospectuses are required by law to be furnished, and to make all amendments and supplements thereto and to the related prospectus

 

  

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which, in the opinion of the Agent , are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the SEC applicable thereto, (ii) to the extent an exemption from applicable registration requirements is unavailable, cause each issuer of such Pledged Interests to qualify such Pledged Interests under the state securities or "Blue Sky" laws of each jurisdiction, and to obtain all necessary governmental approvals for the sale of the Pledged Interests, as requested by the Agent, (iii) cause each Pledged Issuer to make available to its securityholders, as soon as practicable, an earnings statement which will satisfy the provisions of Section 11(a) of the Securities Act, and (iv) do or cause to be done all such other acts and things as may be necessary to make such sale of such Pledged Interests valid and binding and in compliance with applicable law.  Each Grantor acknowledges the impossibility of ascertaining the amount of damages which would be suffered by the Agent by reason of the failure by any Grantor to perform any of the covenants contained in this Section 9(b) and, consequently, agrees that, if any Grantor fails to perform any of such covenants, it shall pay, as liquidated damages and not as a penalty, an amount equal to the value of the Pledged Interests on the date the Agent demands compliance with this Section 9(b); provided, however, that the payment of such amount shall not release any Grantor from any of its obligations under any of the other Loan Documents.

 

(c) Notwithstanding the provisions of Section 9(b) hereof, each Grantor recognizes that the Agent may  deem it impracticable to effect a public sale of all or any part of the Pledged Shares or any other securities constituting Pledged Interests and that the Agent may , therefore, determine to make one or more private sales of any such securities to a restricted group of purchasers who will be obligated to agree, among other things, to acquire such securities for their own account, for investment and not with a view to the distribution or resale thereof.  Each Grantor acknowledges that any such private sale may be at prices and on terms less favorable to the seller than the prices and other terms which might have been obtained at a public sale and, notwithstanding the foregoing, agrees that such private sales shall be deemed to have been made in a commercially reasonable manner and that the Agent shall have no obligation to delay the sale of any such securities for the period of time necessary to permit the issuer of such securities to register such securities for public sale under the Securities Act.  Each Grantor further acknowledges and agrees that any offer to sell such securities which has been (i) publicly advertised on a bona fide basis in a newspaper or other publication of general circulation in the financial community of New York, New York (to the extent that such an offer may be so advertised without prior registration under the Securities Act) or (ii) made privately in the manner described above to not less than fifteen bona fide offerees shall be deemed to involve a "public disposition" for the purposes of Section 9-610(c) of the Code (or any successor or similar, applicable statutory provision) as then in effect in the State of New York, notwithstanding that such sale may not constitute a "public offering" under the Securities Act, and that the Agent may, in such event, bid for the purchase of such securities.

 

(d) Any cash held by or for the benefit of the Agent (or its agent or designee) as Collateral and all Cash Proceeds received by the Agent (or its agent or designee) in respect of any sale of or collection from, or other realization upon, all or any part of the Collateral may, in the discretion of the Agent, be held by the Agent (or its agent or designee) as collateral for, and/or then or at any time thereafter applied (after payment of any amounts payable to the Agent pursuant to Section 10.04 of the Financing Agreement) in whole or in part by the Agent against, all or any part of the Secured Obligations in such order as the Agent  shall

 

  

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elect, consistent with the provisions of the Financing Agreement.  Any surplus of such cash or Cash Proceeds held by the Agent (or its agent or designee) and remaining after the date on which all of the Secured Obligations have been indefeasibly paid in full in cash after the termination of each Lender's Commitment, and each of the Loan Documents, shall be paid over to whomsoever shall be lawfully entitled to receive the same or as a court of competent jurisdiction shall direct.

 

(e) In the event that the proceeds of any such sale, collection or realization are insufficient to pay all amounts to which the Agent and the Lenders are legally entitled, the Grantors shall be jointly and severally liable for the deficiency, together with interest thereon at the highest rate specified in any applicable Loan Document for interest on overdue principal thereof or such other rate as shall be fixed by applicable law, together with the costs of collection and the reasonable fees, costs, expenses and other client charges of any attorneys employed by the Agent to collect such deficiency.

 

(f) Each Grantor hereby acknowledges that if the Agent complies with any applicable requirements of law in connection with a disposition of the Collateral, such compliance will not adversely affect the commercial reasonableness of any sale or other disposition of the Collateral.

 

(g) The Agent shall not be required to marshal any present or future collateral security (including, but not limited to, this Agreement and the Collateral) for, or other assurances of payment of, the Secured Obligations or any of them or to resort to such collateral security or other assurances of payment in any particular order, and all of the Agent's rights hereunder and in respect of such collateral security and other assurances of payment shall be cumulative and in addition to all other rights, however existing or arising.  To the extent that any Grantor lawfully may, such Grantor hereby agrees that it will not invoke any law relating to the marshalling of collateral which might cause delay in or impede the enforcement of the Agent's rights under this Agreement or under any other instrument creating or evidencing any of the Secured Obligations or under which any of the Secured Obligations is outstanding or by which any of the Secured Obligations is secured or payment thereof is otherwise assured, and, to the extent that it lawfully may, each Grantor hereby irrevocably waives the benefits of all such laws.

 

(h) Upon the occurrence and during the continuance of any Default or Event of Default, the Agent or its designee may at any time and from time to time employ and maintain on the premises of any Grantor a custodian selected by the Agent or its designee who shall have full authority to do all acts necessary to protect the Agent's and the Lenders' interests.  Each Grantor hereby agrees to, and to cause its Subsidiaries to, cooperate with any such custodian and to do whatever the Agent or its designee may reasonably request to preserve the Collateral.  All costs and expenses incurred by the Agent or its designee by reason of the employment of the custodian shall be the responsibility of the Borrower and shall be payable on demand and shall be subject to and encompassed by Section 10.04 of the Financing Agreement.

 

(i) Grant of Intellectual Property License.  For the purpose of enabling the Agent, during the continuance of an Event of Default, to exercise rights and remedies under Section 9 hereof at such time as the Agent shall be lawfully entitled to exercise such rights and remedies, and for no other purpose, each Grantor hereby grants to the Agent, to the extent assignable, an irrevocable, non-exclusive license to use, assign, license or sublicense any of the

 

  

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Intellectual Property owned or hereafter acquired by such Grantor, wherever the same may be located, and all customer lists, formulae and other Records of any Grantor relating to the distribution of products and services in connection with which any of such Intellectual Property is used.  Such license shall include access to all media in which any of the licensed items may be recorded or stored and to all computer programs used for the compilation or printout hereof.

 

SECTION 10. Notices, Etc.   All notices and other communications provided for hereunder shall be given in accordance with the notice provision of the Financing Agreement.

 

SECTION 11. Security Interest Absolute; Joint and Several Obligations .

 

(a) All rights of the Secured Parties, all Liens and all obligations of each of the Grantors hereunder shall be absolute and unconditional irrespective of (i) any lack of validity or enforceability of the Financing Agreement or any other Loan Document, (ii) any change in the time, manner or place of payment of, or in any other term in respect of, all or any of the Secured Obligations, or any other amendment or waiver of or consent to any departure from the Financing Agreement or any other Loan Document, (iii) any exchange or release of, or non-perfection of any Lien on any Collateral, or any release or amendment or waiver of or consent to departure from any guaranty, for all or any of the Secured Obligations, or (iv) any other circumstance that might otherwise constitute a defense available to, or a discharge of, any of the Grantors in respect of the Secured Obligations.  All authorizations and agencies contained herein with respect to any of the Collateral are irrevocable and powers coupled with an interest.

 

(b) Each Grantor hereby waives (i) promptness and diligence, (ii) notice of acceptance and notice of the incurrence of any Obligation by any Borrower, (iii) notice of any actions taken by the Agent, any Lender, any Guarantor or any other Person under any Loan Document or any other agreement, document or instrument relating thereto, (iv) all other notices, demands and protests, and all other formalities of every kind in connection with the enforcement of the Obligations, the omission of or delay in which, but for the provisions of this subsection (b), might constitute grounds for relieving such Grantor of any such Grantor's obligations hereunder and (v) any requirement that the Agent or any Lender protect, secure, perfect or insure any security interest or other lien on any property subject thereto or exhaust any right or take any action against any Grantor or any other Person or any collateral.

 

(c) All of the obligations of the Grantors hereunder are joint and several.  The Agent may, in its sole and absolute discretion, enforce the provisions hereof against any of the Grantors and shall not be required to proceed against all Grantors jointly or seek payment from the Grantors ratably.  In addition, the Agent may , in its sole and absolute discretion, select the Collateral of any one or more of the Grantors for sale or application to the Secured Obligations, without regard to the ownership of such Collateral, and shall not be required to make such selection ratably from the Collateral owned by all of the Grantors.  The release or discharge of any Grantor by the Agent shall not release or discharge any other Grantor from the obligations of such Person hereunder.

 

SECTION 12. Agent .  In case of the pendency of any proceeding under the Bankruptcy Code or any other judicial proceeding relative to any Grantor, the Agent (irrespective of whether the principal of any Loan shall then be due and payable as herein

 

  

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expressed or by declaration or otherwise and irrespective of whether any Agent shall have made any demand on the Borrower) shall be entitled and empowered (but not obligated) by intervention in such proceeding or otherwise:

 

(a) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Agent and the Lenders (including any claim for the compensation, expenses, disbursements and advances of the Agent and the Lenders and their respective agents and counsel and all other amounts due the Agent and the Lenders hereunder and under the other Loan Documents) allowed in such judicial proceeding; and

 

(b) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;

 

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Agent and each Lender to make such payments to the Agent and, in the event that the Agent shall consent to the making of such payments directly to the Agents and the Lenders, to pay to the Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Agent and its agents and counsel, and any other amounts due the Agent hereunder and under the other Loan Documents.

 

SECTION 13. Miscellaneous .

 

(a) No amendment of any provision of this Agreement (including any Schedule attached hereto) shall be effective unless it is in writing and signed by each Grantor effected thereby and the Agent, and no waiver of any provision of this Agreement, and no consent to any departure by any Grantor therefrom, shall be effective unless it is in writing and signed by the Agent, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

 

(b) No failure on the part of the Secured Parties to exercise, and no delay in exercising, any right hereunder or under any other Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right.  The rights and remedies of the Secured Parties provided herein and in the other Loan Documents are cumulative and are in addition to, and not exclusive of, any rights or remedies provided by law.  The rights of the Secured Parties under any Loan Document against any party thereto are not conditional or contingent on any attempt by such Person to exercise any of its rights under any other Loan Document against such party or against any other Person, including but not limited to, any Grantor.

 

(c) This Agreement shall create a continuing security interest in the Collateral and shall (i) remain in full force and effect, subject to paragraph (e) below, until the date on which all of the Secured Obligations have been indefeasibly paid in full in cash after the termination of each Lender's Commitment, and each of the Loan Documents and (ii) be binding on each Grantor all other Persons who become bound as debtor to this Agreement in accordance

 

  

-30-

  

with Section 9-203(d) of the Code, and shall inure, together with all rights and remedies of the Secured Parties hereunder, to the benefit of the Secured Parties and their respective successors, transferees and assigns.  Without limiting the generality of clause (ii) of the immediately preceding sentence, the Secured Parties may assign or otherwise transfer their respective rights and obligations under this Agreement and any other Loan Document to any other Person pursuant to the terms of the Financing Agreement, and such other Person shall thereupon become vested with all of the benefits in respect thereof granted to the Secured herein or otherwise.  Upon any such assignment or transfer, all references in this Agreement to any Secured Party shall mean the assignee of any such Secured Party.  None of the rights or obligations of any Grantor hereunder may be assigned or otherwise transferred without the prior written consent of the Agent , and any such assignment or transfer shall be null and void.

 

(d) Upon the date on which all of the Secured Obligations have been indefeasibly paid in full in cash after the termination of each Lender's Commitment and each of the Loan Documents, (i) subject to paragraph (e) below, this Agreement and the security interests and licenses created hereby shall terminate and all rights to the Collateral shall revert to the Grantors and (ii) the Agent will, upon the Grantors' request and at the Grantors' expense, without any representation, warranty or recourse whatsoever, (A) return to the Grantors (or whomsoever shall be lawfully entitled to receive the same or as a court of competent jurisdiction shall direct) such of the Collateral as shall not have been sold or otherwise disposed of or applied pursuant to the terms hereof and (B) execute and deliver to the Grantors such documents as the Grantors shall reasonably request to evidence such termination.

 

(e) This Agreement shall remain in full force and effect and continue to be effective should any petition be filed by or against any Grantor for liquidation or reorganization, should any Grantor become insolvent or make an assignment for the benefit of any creditor or creditors or should a receiver or trustee be appointed for all or any significant part of any Grantor's assets, and shall continue to be effective or be reinstated, as the case may be, if at any time payment or performance of the Secured Obligations, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee of the Secured Obligations, whether as a "voidable preference," "fraudulent conveyance," or otherwise, all as though such payment or performance had not been made.  In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Secured Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.

 

(f) Upon the execution and delivery, or authentication, by any Person of a security agreement supplement in substantially the form of Exhibit C hereto (each a "Security Agreement Supplement"), (i) such Person shall be referred to as an "Additional Grantor" and shall be and become a Grantor, and each reference in this Agreement to "Grantor" shall also mean and be a reference to such Additional Grantor, and each reference in this Agreement and the other Loan Documents to "Collateral" shall also mean and be a reference to the Collateral of such Additional Grantor, and (ii) the supplemental Schedules I-IX attached to each Security Agreement Supplement shall be incorporated into and become a part of and supplement Schedules I-IX, respectively, hereto, and the Agent may attach such Schedules as supplements to such Schedules, and each reference to such Schedules shall mean and be a reference to such Schedules, as supplemented pursuant hereto.

 

  

-31-

  

(g) THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY AND PERFECTION OR THE PERFECTION AND THE EFFECT OF PERFECTION OR NON-PERFECTION OF THE SECURITY INTEREST CREATED HEREBY, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAW OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.

 

(h) In addition to and without limitation of any of the foregoing, this Agreement shall be deemed to be a Loan Document and shall otherwise be subject to all of terms and conditions contained in Sections 10.10 and 10.11 of the Financing Agreement, mutatis mutandis.

 

(i) Each Grantor irrevocably and unconditionally waives any right it may have to claim or recover in any legal action, suit or proceeding with respect to this Agreement any special, exemplary, punitive or consequential damages.

 

(j) Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining portions hereof or thereof or affecting the validity or enforceability of such provision in any other jurisdiction.

 

(k) Section headings herein are included for convenience of reference only and shall not constitute a part of this Agreement for any other purpose.

 

(l) This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which shall be deemed an original, but all of such counterparts taken together shall constitute one and the same agreement.  Delivery of an executed counterpart of this Agreement by facsimile or electronic mail shall be equally effective as delivery of an original executed counterpart.

 

  

-32-

  

(m) For purposes of this Agreement, all references to Schedule I-IX attached hereto shall be deemed to refer to each such Schedule as updated from time to time in accordance with the terms of this Agreement.

 

SECTION 14.  Authority of the Agent .  Each Grantor acknowledges that the rights and powers of the Agent under this Agreement with respect to any action taken by the Agent or the exercise or non-exercise by the Agent of any option, voting right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Agreement or any amendment, supplement or other modification of this Agreement shall, as between the Agent and the Secured Parties, be governed by the Financing Agreement and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Agent and each of the Grantors, the Agent shall be conclusively presumed to be acting as agent for the Secured Parties with full and valid authority so to act or refrain from acting, and no Grantor shall be under any obligation, or entitlement, to make any inquiry respecting such authority.

 

Section 15.  Authority Subject to Financing Agreement .  U.S. Bank  National Association has been appointed the Agent hereunder pursuant to Article VIII of the Financing  Agreement.  Notwithstanding anything to the contrary herein, it is expressly understood and agreed by the parties to this Agreement that any authority conferred upon the Agent hereunder is subject to the terms of the delegation of authority made by the Lenders to the Agent pursuant to the Financing Agreement and that the Agent has agreed to act (and any successor Agent shall act) as such hereunder only on the express conditions and protections contained in the Financing Agreement (including, without limitation, Section 8.03 thereof).  Any successor Agent appointed in accordance with Section 8.07 of the Financing Agreement shall be entitled to all the rights, interests and benefits of the Agent hereunder.

 

 [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

  

-33-

  

IN WITNESS WHEREOF, each Grantor has caused this Agreement to be executed and delivered by its officer thereunto duly authorized, as of the date first above written.

 

	 	GRANTORS:	 
	 	
 

WMI HOLDINGS CORP.

	 
	 	 	 	 
	
 

	
By: 

	/s/ 	 
	 	 	Name:	 
	 	 	Title:	 
	 	 	 	 

 

	 	
WMI INVESTMENT CORP.

	 
	 	 	 	 
	
 

	
By: 

	/s/ 	 
	 	 	Name:	 
	 	 	Title:	 
	 	 	 	 

	 	  	  

 

 

  

  

  

SCHEDULE I

 

 

LEGAL NAMES; ORGANIZATIONAL IDENTIFICATION NUMBERS; JURISDICTIONS OF ORGANIZATION; FEDERAL EMPLOYER IDENTIFICATION NUMBER

 

	
 

	
Sched. I-1

	  

 

 

  

  

  

SCHEDULE II

 

 

INTELLECTUAL PROPERTY AND LICENSES; TRADE NAMES

 

 

	
A.

	
COPYRIGHTS

 

1.           Registered Copyrights

 

2.           Copyright Applications

 

3.           Copyright Licenses

 

 

 

	
B.

	
PATENTS

1.           Registered Patents

 

2.           Patents Applications

 

3.           Patents Licenses

 

 

 

	
C.

	
TRADEMARKS

1.           Registered Trademarks

 

2.           Trademark Applications

 

3.           Trademark Licenses

 

	
D.

	
OTHER INTELLECTUAL PROPERTY AND LICENSES

	  	  
	
E.

	
TRADENAMES

	  	  
	
F.

	
NAME OF, AND EACH TRADENAME USED BY, EACH PERSON FROM WHICH A GRANTOR HAS ACQUIRED ANY SUBSTANTIAL PART OF THE COLLATERAL WITHIN THE PRECEDING FIVE YEARS

	
 

	
Sched. II-1

	  

  

  

  

SCHEDULE III

 

LOCATIONS OF GRANTORS

	
LOCATION

	
Description of Location (state if Location

	
  

	
(i) contains Equipment, Fixtures, Inventory or other Goods

	
  

	
(ii) is chief place of business and

	
  

	
chief executive office, or

	
  

	
(iii) contains Records concerning Accounts

	
  

	
and originals of Chattel Paper)

	
 

	
Sched. III-1

	  

 

 

  

  

  

SCHEDULE IV

 

 

DEPOSIT ACCOUNTS, SECURITIES ACCOUNTS AND COMMODITIES ACCOUNTS

 

Name and Address

of Institution

Maintaining Account                                                      Account Number                                           Type of Account

 

	
 

	
Sched. IV-1

	  

 

 

  

  

  

SCHEDULE V

 

 

UCC FINANCING STATEMENTS

 

 

UCC Financing Statements have been filed in the jurisdictions below against the Grantors:

	
Name of Grantor

	
Secretary of State

	  	  
	  	  
	  	  
	  	  
	  	  

	
 

	
Sched. V-1

	  

 

 

  

  

  

SCHEDULE VI

 

 

COMMERCIAL TORT CLAIMS

 

	
 

	
Sched. VI-1

	  

 

 

  

  

  

 

SCHEDULE VII

 

 

PLEDGED DEBT

 

 

	
Grantor

	
Name of Maker

	
Description

	
Principal Amount 

Outstanding as of

	  	  	  	  

 

 

	
 

	
Sched. VII-1

	  

 

 

  

  

  

 

SCHEDULE VIII

 

 

PLEDGED SHARES

 

	
 

 

Grantor

	
 

Name of Pledged Issuer

	
 

Number of Shares

	
Percentage of Outstanding Shares

	
 

 

Class

	
 

Certificate Number

	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  

	
 

	
Sched. VIII-1

	  

 

 

  

  

  

 

SCHEDULE IX

 

INSURANCE ASSETS

	
 

	
Sched. IX-1

	  

 

 

  

  

  

EXHIBIT A

 

PLEDGE AMENDMENT

 

This Pledge Amendment, dated _________ __, ___, is delivered pursuant to Section 4 of the Pledge and Security Agreement referred to below.  The undersigned hereby agrees that this Pledge Amendment may be attached to the Pledge and Security Agreement, dated March 19, 2012, as it may heretofore have been or hereafter may be amended, restated, supplemented, modified or otherwise changed from time to time (the "Security Agreement") and that the Promissory Notes or shares listed on this Pledge Amendment shall be hereby pledged and assigned to the Agent and become part of the Pledged Interests referred to in such Pledge Agreement and shall secure all of the Secured Obligations referred to in such Security Agreement.

 

	
Pledged Debt

	
Grantor

	
Name of Maker

	
Description

	
Principal Amount

Outstanding as of

	  	  	  	  
	  	  	  	  

	
Pledged Shares

 

	
Grantor

	
Name of

Pledged Issuer

	
Number of Shares

	
Percentage of Outstanding Shares

	
Class

	
Certificate Number

	  	  	  	  	  	  
	  	  	  	  	  	  

 

 

	 	[GRANTOR]	 
	 	 	 	 
	 	
By: 

	/s/ 	 
	 	 	Name 	 
	 	 	Title 	 
	 	 	 	 

 

	
U.S. BANK NATIONAL

ASSOCIATION,

as the Agent:

	 
	 	 	 
	
By: 

	/s/ 	 
	 	Name 	 
	 	Title 	 
	 	 	 

	
 

	
Exh. A-1

	  

  

  

  

EXHIBIT B

 

ASSIGNMENT FOR SECURITY - - [TRADEMARKS] [PATENTS] [COPYRIGHTS]

 

WHEREAS, ________________ (the "Assignor") [has adopted, used and is using, and holds all right, title and interest in and to, the trademarks and service marks listed on the attached Schedule A, which trademarks and service marks are registered or applied for in the United States Patent and Trademark Office (the "Trademarks")] [holds all right, title and interest in the letter patents, design patents and utility patents listed on the attached Schedule A, which patents are issued or applied for in the United States Patent and Trademark Office (the "Patents")] [holds all right, title and interest in the copyrights listed on the attached Schedule A, which copyrights are registered in the United States Copyright Office (the "Copyrights")];

 

WHEREAS, the Assignor has entered into a Pledge and Security Agreement, dated March 19, 2012 (as amended, restated, supplemented, modified or otherwise changed from time to time, the "Security Agreement"), in favor of U.S. Bank National Association, as the Agent for itself and certain lenders (in such capacity, together with its successors and assigns, if any, the "Assignee"); and

 

WHEREAS, pursuant to the Security Agreement, the Assignor has assigned to the Assignee and granted to the Assignee for the benefit of the Secured Parties (as defined in the Security Agreement) a continuing security interest in all right, title and interest of the Assignor in, to and under the [Trademarks, together with, among other things, the good-will of the business symbolized by the Trademarks] [Patents] [Copyrights] and the applications and registrations thereof, and all proceeds thereof, including, without limitation, any and all causes of action which may exist by reason of infringement thereof and any and all damages arising from past, present and future violations thereof (the "Collateral"), to secure the payment, performance and observance of the Secured Obligations (as defined in the Security Agreement);

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Assignor does hereby pledge, convey, sell, assign, transfer and set over unto the Assignee and grants to the Assignee for the benefit of the Assignee and the Lenders a continuing security interest in the Collateral to secure the prompt payment, performance and observance of the Secured Obligations.

 

The Assignor does hereby further acknowledge and affirm that the rights and remedies of the Assignee with respect to the Collateral are more fully set forth in the Security Agreement, the terms and provisions of which are hereby incorporated herein by reference as if fully set forth herein.

 

	
 

	
Exh. B-1

	  

 

 

  

  

  

IN WITNESS WHEREOF, the Assignor has caused this Assignment to be duly executed by its officer thereunto duly authorized as of _____________ __, 201_.

 

	 	[GRANTOR]	 
	 	 	 	 
	
 

	
By: 

	/s/ 	 
	 	 	Name 	 
	 	 	Title 	 
	 	 	 	 

 

STATE OF ____________

ss.:

COUNTY OF __________

 

On this ____ day of _______________, 201_, before me personally came ________________, to me known to be the person who executed the foregoing instrument, and who, being duly sworn by me, did depose and say that s/he is the ________________ of _______________________________________, a ____________________, and that s/he executed the foregoing instrument in the firm name of _______________________________________, and that s/he had authority to sign the same, and s/he acknowledged to me that he executed the same as the act and deed of said firm for the uses and purposes therein mentioned.

 

 

	
 

	
Exh. B-2

	  

 

 

  

  

  

SCHEDULE A TO ASSIGNMENT FOR SECURITY

 

 

[Trademarks and Trademark Applications]

[Patent and Patent Applications]

[Copyright and Copyright Applications]

Owned by ______________________________

	
 

	
Exh. B-3

	  

  

  

  

EXHIBIT C

 

 

FORM OF SECURITY AGREEMENT SUPPLEMENT

 

[Date of Security Agreement Supplement]

 

U.S. Bank National Association, as Agent

214 North Tryon Street, 26th Floor

Charlotte, NC 28202

 

Ladies and Gentlemen:

 

Reference hereby is made to (i) the Financing Agreement, dated as of March 19, 2012 (such agreement, as amended, restated, supplemented, modified or otherwise changed from time to time, including any replacement agreement therefor, being hereinafter referred to as the "Financing Agreement") by and among WMI Holdings Corp., a Washington corporation (the "Borrower", sometimes referred to herein as the "Borrower"), each subsidiary of the Borrower listed as a "Guarantor" on the signature pages thereto (together with each other Person (as defined in the Financing Agreement) that guarantees all or any portion of the Obligations (as defined in the Financing Agreement) from time to time, each a "Guarantor" and collectively, the "Guarantors", and together with the Borrowers, each a "Grantor" and collectively, the "Grantors"), the lenders from time to time party thereto (each a "Lender" and collectively, the "Lenders"), and U.S. Bank National Association, a national banking association, in its capacity as Agent for the Lenders (in such capacity, together with its successors and assigns in such capacity, if any, the "Agent") and (ii) the Pledge and Security Agreement, dated as of March 19, 2012 (as amended, restated, supplemented or otherwise modified from time to time, the "Security Agreement"), made by the Grantors from time to time party thereto in favor of the Agent.  Capitalized terms defined in the Financing Agreement or the Security Agreement and not otherwise defined herein are used herein as defined in the Financing Agreement or the Security Agreement.

 

SECTION 1.                      Grant of Security.  The undersigned hereby grants to the Agent, for the ratable benefit of the Secured Parties, a security interest in, all of its right, title and interest in and to all of the Collateral (as defined in the Security Agreement) of the undersigned, whether now owned or hereafter acquired by the undersigned, wherever located and whether now or hereafter existing or arising, including, without limitation, the property and assets of the undersigned set forth on the attached supplemental schedules to the Schedules to the Security Agreement.

 

SECTION 2.                      Security for Obligations.  The grant of a security interest in the Collateral by the undersigned under this Security Agreement Supplement and the Security Agreement secures the payment of all Secured Obligations of the undersigned now or hereafter existing under or in respect of the Loan Documents, whether direct or indirect, absolute or contingent, and whether for principal, reimbursement obligations, interest, premiums, penalties, fees, indemnifications, contract causes of action, costs, expenses or otherwise.  Without limiting the generality of the foregoing, each of this Security Agreement Supplement and the Security

 

	
 

	
Exh. C-1

	  

 

 

  

  

  

Agreement secures the payment of all amounts that constitute part of the Secured Obligations and that would be owed by the undersigned to the Agent or any Secured Party under the Loan Documents but for the fact that such Secured Obligations are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving a Grantor.

 

SECTION 3.                      Supplements to Security Agreement Schedules.  The undersigned has attached hereto supplemental Schedules I through VIII to Schedules I through VIII, respectively, to the Security Agreement, and the undersigned hereby certifies, as of the date first above written, that such supplemental Schedules have been prepared by the undersigned in substantially the form of the equivalent Schedules to the Security Agreement, and such supplemental Schedules include all of the information required to be scheduled to the Security Agreement and do not omit to state any information material thereto.

 

SECTION 4.                      Representations and Warranties.  The undersigned hereby makes each representation and warranty set forth in Section 5 of the Security Agreement (as supplemented by the attached supplemental Schedules) to the same extent as each other Grantor.

 

SECTION 5.                      Obligations Under the Security Agreement.  The undersigned hereby agrees, as of the date first above written, to be bound as a Grantor by all of the terms and provisions of the Security Agreement to the same extent as each of the other Grantors.  The undersigned further agrees, as of the date first above written, that each reference in the Security Agreement to an "Additional Grantor" or a "Grantor" shall also mean and be a reference to the undersigned.

 

SECTION 6.                      Governing Law.  This Security Agreement Supplement shall be governed by, and construed in accordance with, the laws of the State of New York.

 

	
 

	  	  

  

  

  

 

SECTION 7.                      Loan Document.  In addition to and without limitation of any of the foregoing, this Security Agreement Supplement shall be deemed to be a Loan Document and shall otherwise be subject to all of terms and conditions contained in Sections 10.10 and 10.11 of the Financing Agreement, mutatis mutandis.

 

	 	
Very truly yours,

 

	 
	 	[NAME OF ADDITIONAL GRANTOR]	 
	 	 	 	 
	
 

	
By: 

	/s/ 	 
	 	 	Name 	 
	 	 	Title 	 
	 	 	 	 

 

	Acknowledged and Agreed:	 
	
 

U.S. BANK NATIONAL

ASSOCIATION

As Agent

	 
	 	 	 
	
By: 

	/s/ 	 
	 	Name 	 
	 	Title

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