EXHIBIT 10.2
PLEDGE AND SECURITY
AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT
(as it may be amended or modified from time to time, this “
Security Agreement ”) is entered into as of
May 29, 2009 by and between THE PMI GROUP, INC., a Delaware
corporation (the “ Company ”), and BANK OF
AMERICA, N.A., as Administrative Agent (in such capacity, together
with any successor in such capacity, the “ Administrative
Agent ”) for the financial institutions (the “
Lenders ”) from time to time party to the Credit
Agreement referred to below (the Lenders, together with the
Administrative Agent, are collectively referred to herein as the
“ Secured Parties ”).
PRELIMINARY
STATEMENT
The Company has entered into a
Revolving Credit Agreement, dated as of October 24, 2006 (as
amended, restated, supplemented, refinanced or replaced from time
to time, including as amended and restated as of the date of this
Agreement, the “ Credit Agreement ”), with the
Administrative Agent and the Lenders, pursuant to which the
Administrative Agent and the Lenders have agreed to make loans and
provide other extensions of credit to the Company from time to
time, subject to the terms and conditions set forth in the Credit
Agreement; and
This Pledge and Security Agreement
is being made by the Company in favor of the Administrative Agent,
for the ratable benefit of the Secured Parties, to secure the
payment and performance of the Secured Obligations (as defined in
Article II of this Agreement).
In consideration of the premises set
forth herein and in the Loan Documents, the receipt and sufficiency
of which are hereby acknowledged, the Company hereby agrees with
the Administrative Agent for the ratable benefit of the Secured
Parties as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Terms Defined in Credit Agreement
. All capitalized terms used herein
and not otherwise defined shall have the meanings assigned to such
terms in the Credit Agreement.
Section 1.2. Terms Defined in UCC . Terms defined in the UCC that are not
otherwise defined in this Security Agreement or the Credit
Agreement are used herein as defined in the UCC.
Section 1.3. Definitions of Certain Terms Used
Herein . As used in this
Security Agreement, in addition to the terms defined in the
preamble and Preliminary Statement above, the following terms shall
have the following meanings:
“ Article ” means
a numbered article of this Security Agreement, unless another
document is specifically referenced.
“ Australian Deed Polls
” means of (x) that certain Deed Poll, dated as of
May 29, 2009, by QBE Lenders’ Mortgage Insurance Limited
in favor of the Noteholder (as defined in the QBE Note) from time
to time and the Financiers (as defined therein) and (y) that
certain Deed Poll, dated as of May 29, 2009, by QBE Holdings
(AAP) Pty Limited in favor of the Noteholder (as defined in
the QBE Note) from time to time and the Financiers (as defined
therein).
“ Collateral ”
shall have the meaning set forth in Article II.
“ Control ” shall
have the meaning set forth in Article 8 of the UCC or, if
applicable, in Section 9-104, 9-105, 9-106 or 9-107 of
Article 9 of the UCC.
“ Property ”
means, with respect to any Person, any right, title or interest in
or to property or assets of any kind whatsoever, whether real,
personal or mixed and whether tangible or intangible, whether now
in existence or owned or hereafter entered into or acquired.
“ QBE Note ”
means the Note Deed entered into in December 2008 (as amended
from time to time) between QBE Insurance Group Limited and PMI
Mortgage Insurance Co. (as transferred from PMI Mortgage Insurance
Co. to the Company).
“ QBE Note Purchase
Agreement ” means the Note Purchase Agreement, entered
into as of May 29, 2009, by and between PMI Mortgage Insurance
Co. and the Company, as may be amended, restated or supplemented
from time to time.
“ Requirement of Law
” means, as to any Person, any law, rule or regulation, or
determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person
or any of its assets or to which such Person or any of its assets
is subject.
“ Section ” means
a numbered section of this Security Agreement, unless another
document is specifically referenced.
“ UCC ” means the
Uniform Commercial Code as in effect from time to time in the State
of New York.
The foregoing definitions shall be
equally applicable to both the singular and plural forms of the
defined terms.
ARTICLE II
GRANT OF SECURITY INTEREST
Section 2.1 Grant of Security
Interest . As collateral security for the prompt and
complete payment, performance and observance of all present and
future Obligations, whether at stated maturity, by acceleration or
otherwise (including, without limitation, all interest thereon,
whether accruing prior or subsequent to the commencement of a
bankruptcy or similar proceeding involving the Company as a debtor
and whether or not such interest is an allowed claim in any such
proceeding) (all of the foregoing being herein referred to as the
“ Secured Obligations ”), the Company hereby
assigns, transfers, pledges and grants to the Administrative Agent,
for the ratable benefit of the Secured Parties, all of its right,
title and interest in, to and under the property described below in
this Article II (all of which is collectively referred to as
the “ Collateral ”) for the purposes of creating
a first priority security interest in such Collateral:
(i) the QBE Note;
(ii) the QBE Note Purchase
Agreement;
(iii) all present and future payments,
proceeds, distributions, instruments, compensation, interests and
rights with respect to the Collateral, and all monies due or to
become due and payable to the Company with respect to the
Collateral or otherwise paid, issued or distributed from time to
time in respect of or in exchange therefor, and any instrument or
other document evidencing or representing the same (including,
without limitation, all proceeds of dissolution or liquidation);
and
(iv) all proceeds of every kind and nature,
including proceeds of proceeds, of any and all of the
foregoing.
Section 2.2 Limitations on Rights Upon
Initial Transfer . Both the Company and the Administrative
Agent agree that any transfer of the Collateral to the
Administrative Agent prior to the occurrence and continuation of an
Event of Default has been made solely to facilitate the
Administrative Agent’s exercise of its rights and remedies in
respect of the Collateral in the capacity of a secured party under
Article 9 of the UCC. Such transfer shall not entitle the
Administrative Agent to take any actions in respect of the
Collateral in any other capacity, and in no event shall the
Administrative Agent be permitted to treat the Collateral as its
own property (or as property of the Secured Parties) or exercise
rights in respect thereof except as provided in this Agreement or
as available to it on default as a secured party under the
UCC.
ARTICLE III
DELIVERY OF INSTRUMENTS, SECURITIES, CHATTEL PAPER AND
DOCUMENTS
Section 3.1. Delivery of Instruments, Securities, Chattel
Paper and Documents . The
Company will (a) deliver to the Administrative Agent
immediately upon execution of this Security Agreement an original
of the QBE Note, (b) hold in trust for the Administrative
Agent upon receipt and promptly thereafter deliver to the
Administrative Agent any Chattel Paper, Securities and Instruments
constituting Collateral received after the date of this Security
Agreement, (c) upon the Administrative Agent’s request,
deliver to the Administrative Agent, and thereafter hold in trust
for the Administrative Agent upon receipt and promptly deliver to
the Administrative Agent any Document evidencing or constituting
Collateral and (d) upon the Administrative Agent’s
reasonable request, deliver to the Administrative Agent a duly
executed amendment to this Security Agreement (each, an “
Amendment ”), pursuant to which the Company will
pledge any additional Collateral. The Company hereby authorizes the
Administrative Agent to attach each Amendment to this Security
Agreement and agrees that all additional collateral set forth in
such Amendments shall be considered to be part of the
Collateral.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
The Company hereby represents,
warrants and covenants that:
Section 4.1. Pledged Collateral . Immediately prior to giving effect to this
Agreement, the Company is the sole holder of record and the sole
beneficial owner of the Collateral free and clear of any Lien
thereon or affecting the title thereto, except the Lien created
hereunder.
Section 4.2. Place of Perfection; Records; Etc.
The organizational number issued to
the Company by the State of Delaware is 2366199. The federal
employer identification number of the Company is 94-3199675. The
Company agrees to furnish to the Administrative Agent prompt
written notice of any change in: (i) the Company’s name;
(ii) the location of the Company’s chief executive
office or its principal place of business; (iii) the
Company’s organizational legal entity designation or
jurisdiction of incorporation or formation; (iv) the
Company’s federal taxpayer identification number or
organizational identification number assigned to it by its
jurisdiction of incorporation or formation; or (v) the
acquisition by the Company of any property that constitutes
Collateral and for which additional filings or recordings are
necessary to perfect and maintain the Administrative Agent’s
security interest therein. The Company agrees not to effect or
permit any change referred to in the preceding sentence unless the
Company has made or requested to be made all filings under the UCC
or other applicable law that are required in order for the
Administrative Agent to continue at all times following such change
to have a valid, legal and perfected, first priority security
interest in the Collateral, all of which filings shall be in form
and substance satisfactory to the Administrative Agent.
Section 4.3. Sale or Other Disposition of Pledged
Collateral . The Company
will not assign (by operation of law or otherwise), sell, lease,
transfer, encumber, pledge or grant a Lien on the Collateral in
favor of any Person other than the Administrative Agent or
otherwise dispose of or abandon, nor will it suffer or permit any
of the same to occur with respect to, any Collateral, and the
inclusion of “proceeds” of the Collateral under the
security interest granted herein shall not be deemed a consent by
the Administrative Agent or any other Secured Party to any sale or
other disposition of any Collateral.
Section 4.4. Authority; Binding Obligation
. The Company has the right and
requisite corporate authority to pledge, assign, deliver and set
over the Collateral to the Administrative Agent as provided herein.
This Security Agreement has been duly authorized, executed and
delivered by the Company and constitutes a legal, valid and binding
obligation of the Company enforceable against the Company in
accordance with its terms subject to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors’ rights and
to general equity principles.
Section 4.5. Required Consents . Except as may be required in connection with
any disposition of any portion of the Collateral by laws affecting
the offering and sale of securities generally and the filing of a
UCC financing statement in the form annexed hereto as
Exhibit A in the office of the Secretary of State of
the State of Delaware, (i) no consent of any Person
(including, without limitation, any shareholders, partners or
creditors of the Company) and no license, permit, approval or
authorization of, exemption by, notice or report to, or
registration, filing or declaration with any Governmental Authority
that has not been made or obtained on or prior to the date hereof
is required to be made or obtained by the Company in connection
with (a) the execution or delivery by the Company, validity or
enforceability against the Company, or the performance by the
Company of, this Security Agreement, (b) the creation or
maintenance by the Company of the security interest created hereby
or the perfection thereof (including the first priority nature of
such security interest) except as provided under applicable law
with respect to the filing of continuation statements or amendments
to financing statements and (ii) no consent of any Person
(including, without limitation, any shareholders, partners or
creditors of the Company) and no license, permit, approval or
authorization of, exemption by, notice or report to, or
registration, filing or declaration with any Governmental Authority
is required to be made or obtained by the Company in connection
with the exercise by the Administrative Agent of the rights
provided for in this Security Agreement or the remedies in respect
of the Collateral pursuant to this Security Agreement.
Section 4.6. Nature of Security Interest, etc
. No financing statement or security
agreement describing all or any portion of the Collateral naming
the Company as debtor has been filed or is of record in any
jurisdiction except for financing statements or security agreements
naming the Administrative Agent as the secured party. The Company
will not authorize the filing of any financing statement naming it
as debtor covering all or any portion of the Collateral. The
Company acknowledges that it is not authorized to file any
financing statement or amendment or termination statement with
respect to any financing statement naming it as debtor covering all
or any portion of the Collateral without the prior written consent
of the Administrative Agent, subject to the Company’s rights
under Section 9-509(d)(2) of the UCC. Upon the filing of a UCC
financing statement in the form annexed hereto as
Exhibit A in the office of the Secretary of State of
the State of Delaware, the pledge of the Collateral pursuant to
this Security Agreement creates a valid and perfected first
priority security interest in favor of the Administrative Agent for
the ratable benefit of the Secured Parties in the Collateral,
securing the prompt and complete payment, performance and
observance of the Secured Obligations, subject to no other
Lien.
Section 4.7. Modification of Agreements
. It will not, without the prior
written consent of the Administrative Agent, execute any document
or instrument or take any other action of any kind which may, in
the reasonable judgment of the Administrative Agent, reasonably be
expected to have an adverse effect on the value of the Collateral
or any rights or remedies in respect of the Collateral of the
Secured Parties set forth in or arising under this Security
Agreement, including but not limited to agreeing to any
modification, amendment, waiver, or consent under or with respect
to the QBE Note, the QBE Note Purchase Agreement, the Australian
Deed Polls, or the provisions of the QBE Share Sale Agreements
relating to or affecting the QBE Note, in each case having such
effect.
Section 4.8. Further Assurances . It will, at its sole cost and expense, perform
all acts and promptly execute, acknowledge and deliver all such
documents and instruments and take all such actions, in each case,
reasonably requested by the Administrative Agent from time to time
to evidence, perfect, maintain or enforce the Administrative
Agent’s first priority security interest granted herein or
otherwise in furtherance of the provisions of this Security
Agreement. In addition and without limiting the foregoing, the
Company will (w) promptly from time to time following the
request of the Administrative Agent, request that the issuer of the
QBE Note furnish any and all notices, reports and other information
relating to the QBE Note that the Company is then entitled to
receive (whether pursuant to the terms of the QBE Note or
otherwise) and upon receipt thereof will deliver copies of same to
the Administrative Agent (x) promptly forward to the
Administrative Agent true and complete copies of any notices
received or given by the Company or PMI Insurance relating to the
QBE Note or the amount actually or potentially owed thereon,
including but not limited to any notice or other communication
regarding a breach of “Warranties” or relating to the
“Actual Insurance Loss Percentage”, as applicable,
under either of the QBE Share Sale Agreements, together with copies
of any responses thereto, (y) keep the Administrative Agent
fully informed of any reduction to the QBE Note Interest (other
than by virtue of the capitalization of any such portion thereof in
accordance with the terms of the QBE Note as in effect on the
Restatement Effective Date) or to the QBE Note Principal, in each
case that has occurred pursuant to Section 7 of the QBE Note
or otherwise and (z) take any and all actions necessary, or in
the reasonable opinion of the Administrative Agent desirable, to
(i) defend title to the Collateral against all Persons and
(ii) defend the security interest of the Administrative Agent
in the Collateral and the priority thereof.
Section 4.9. Authority; Binding Obligation of QBE Note and
Australian Deed Polls .
(a) To the best of its knowledge, the QBE Note has
been duly authorized, authenticated or issued and delivered by the
Issuer thereof, and is the legal, valid and binding obligation of
such issuer enforceable in accordance with its terms, and as of the
date of this Agreement, the Issuer is not in default
thereunder.
(b) To the best of its knowledge, each of the
Australian Deed Polls is the legal, valid and binding obligation of
each party thereto.
Section 4.10. Adjustments to the QBE Note Amount
. Except with the prior written
consent of the Administrative Agent, the Company will not and will
not suffer or permit any of its Subsidiaries to agree to any
reduction of the QBE Note Principal or QBE Note Interest
(including, but not limited to, consenting to any
“Claim” respecting a breach of “Warranties”
or agreeing to resolution of the amount of the “Actual
Insurance Loss Percentage” (as each such term is defined in
the applicable QBE Share Sale Agreement) that would result in such
an adjustment) (i) if at the time of such proposed adjustment or
immediately after giving effect thereto (irrespective of whether a
Default or Event of Default has occurred or is then continuing) the
QBE Note Amount is or would be less than an amount equal to 125% of
the Aggregate Commitments then outstanding or (ii) at any time
during the continuance of an Event of Default.
Section 4.11. Notices under Australian Deed Polls
. The Company acknowledges and
agrees that the Administrative Agent shall at all times have the
right to obtain information and notices, and exercise such other
rights, as are provided to the Administrative Agent under, and
pursuant and subject to the terms and conditions set forth in, the
Australian Deed Polls.
ARTICLE V
APPLICATION OF CASH COLLATERAL; EXPENSES
Section 5.1. Application of Cash Collateral
. Any monies received and retained
by the Administrative Agent as additional collateral hereunder
pursuant to the foregoing provisions may, at any time and from time
to time, be applied by the Administrative Agent in the manner set
forth in Section 8.03 of the Credit Agreement.
Section 5.2. Expenses . Company will upon demand pay the
Administrative Agent or any other Secured Party for any and all
reasonable o
