Bailment for Perfection of Certain Security Interests. (a) The parties agree that if the First Priority Agent shall at any time hold a First Priority Lien on any Collateral that can be perfected or the priority of which can be enhanced by the possession or control of such Collateral or of any account in which such Collateral is held (such Collateral being referred to herein as the “Pledged or Controlled Collateral”) or if under applicable local law with respect to Collateral as to which perfection is governed by the laws of a jurisdiction outside the United States the concept of first and second liens or junior and senior liens is not recognized (“Single Lien Foreign Collateral”), and (i) if any such Pledged or Controlled Collateral is in fact in the possession or under the control of the First Priority Agent, or of agents or bailees of the First Priority Agent, the First Priority Agent shall, solely for the purpose of perfecting the Second Priority Liens granted under the Second Priority Debt Documents and subject to the terms and conditions of this Article V, also (w) hold and/or maintain control of such Pledged or Controlled Collateral and Single Lien Foreign Collateral as gratuitous bailee for and representative (as defined in Section 1-201(35) of the Uniform Commercial Code as in effect in the State of New York) of the Second Priority Agent, (x) with respect to any securities accounts included in the Collateral, have “control” (within the meaning of Section 8-106(d)(3) of the UCC) of such securities accounts on behalf of the Second Priority Agent,(y) with respect to any deposit accounts included in the Collateral, act as agent for the Second Priority Agent and (z) with respect to Single Lien Foreign Collateral, act as agent for the Second Priority Agent or Second Priority Secured Parties (as the circumstances may require to maximize the benefit of the Lien on the Collateral for the benefit of the Second Priority Secured Parties without detriment to the interests of the First Priority Secured Parties); and (ii) if any such Pledged or Controlled Collateral is in the possession or under the control of the Second Priority Agent, or of agents or bailees of the Second Priority Agent, the Second Priority Agent shall, solely for the purpose of perfecting the First Priority Liens granted under the First Priority Debt Documents and subject to the terms and conditions of this Article V, also (x) hold and/or maintain control of such Pledged or Controlled Collateral as gratuitous bailee for and representative (as defined in Section 1-201(35) of the Uniform Commercial Code as in effect in the State of New York) of the First Priority Agent, (y) with respect to any securities accounts included in the Collateral, have “control” (within the meaning of Section 8-106(d)(3) of the UCC) of such securities accounts on behalf of the First Priority Agent and (z) with respect to any deposit accounts included in the Collateral, act as agent for the First Priority Agent. (b) So long as the Discharge of First Priority Claims has not occurred, the First Priority Agent shall be entitled to deal with the Pledged or Controlled Collateral and Single Lien Foreign Collateral in accordance with the terms of this Agreement and the other First Priority Debt Documents as if the Second Priority Liens did not exist. The obligations and responsibilities of the First Priority Agent to the Second Priority Agent and the other Second Priority Secured Parties under this Article V shall be limited solely to holding or controlling the Pledged or Controlled Collateral as gratuitous bailee and representative (as defined in Section 1-201(35) of the Uniform Commercial Code as in effect in the State of New York) and non-judiciary agent in accordance with this Article V. Without limiting the foregoing, the First Priority Agent shall have no obligation or responsibility to ensure that any Pledged or Controlled Collateral and Single Lien Foreign Collateral is genuine or owned by any of the Grantors. The First Priority Agent acting pursuant to this Article V shall not, by reason of this Agreement, any other Security Document or any other document, have a fiduciary relationship in respect of any other First Priority Secured Party, the Second Priority Agent or any other Second Priority Secured Party. (c) Upon the Discharge of First Priority Claims, the First Priority Agent shall, to the extent it is legally able to do so, transfer the possession and control of the Pledged or Controlled Collateral and Single Lien Foreign Collateral, together with any necessary endorsements but without recourse or warranty, to the Second Priority Agent, so as to allow such Person to obtain possession and control of such Pledged or Controlled Collateral or a perfect Lien on the Single Lien Foreign Collateral. In connection with any transfer under the immediately preceding sentence, the First Priority Agent agrees, at the expense of the Grantors, to take all actions in its power as shall be reasonably requested by the Second Priority Agent to permit the Second Priority Agent to obtain, for the benefit of the Second Priority Secured Parties, a first priority security interest in the Pledged or Controlled Collateral. (d) Following the Discharge of First Priority Obligations the Second Priority Agent shall be entitled to deal with the Pledged or Controlled Collateral and Single Lien Foreign Collateral in accordance with the terms of this Agreement and the other Second Priority Debt Documents as if the First Priority Claims did not exist. The obligations and responsibilities of the Second Priority Agent to the First Priority Agent and the other First Priority Secured Parties under this Article V shall be limited solely to holding or controlling the Pledged or Controlled Collateral and Single Lien Foreign Collateral as bailee in accordance with this Section 5.01. Without limiting the foregoing, the Second Priority Agent shall have no obligation or responsibility to ensure that any Pledged or Controlled Collateral or Single Lien Foreign Collateral is genuine or owned by any of the Grantors. The Second Priority Agent acting pursuant to this Article V shall not, by reason of this Agreement, any other Security Document or any other document, have a fiduciary relationship in respect of any other Second Priority Secured Party, the First Priority Agent or any other First Priority Secured Party. (e) Any documents that would otherwise be required to be delivered by a Grantor under a Second Priority Security Document to the Second Priority Agent to perfect or assist in the enforcement of any Lien created under such Second Priority Security Document shall be deemed delivered to the Second Priority Agent on evidence provided to the Second Priority Agent that such Grantor has delivered the relevant documentation to the First Priority Agent in accordance with the First Priority Security Documents. (f) The Second Priority Agent and the First Priority Agent agree that any notices of assignment or charge issued pursuant to any Debt Document should be such that the notice of assignment or charge issued pursuant to the First Priority Security Document will prevail until the occurrence of the Discharge of First Priority Claims. (g) To the extent required under a First Priority Security Document as to which Collateral thereunder may have been delivered to the Second Priority Agent under a Second Priority Security Document (a “Relevant Second Priority Security Document”), the Grantors party to any Relevant Second Priority Security Document hereby instruct the Second Priority Agent, and the Second Priority Agent hereby agrees, to deliver to the First Priority Security Agent all share certificates and stock transfer forms or other physical Collateral delivered to the Second Priority Agent pursuant to that Relevant Second Priority Security Documents. (h) Prior to the Discharge of First Priority Claims, notwithstanding any provision of any Second Priority Security Documents, the Grantors party to any Second Priority Security Documents shall not be required to deliver: (i) any notice of assignment or charge of any relevant security in the form prescribed under that Second Priority Security Documents and shall instead deliver any such notice in a form with such amendments as approved by the First Priority Agent and the Second Priority Agent, each acting reasonably, as are necessary to reflect the provisions of this Agreement and
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Bailment for Perfection of Certain Security Interests. (a) The parties agree that if the First Priority Agent shall at any time hold a First Priority Lien on any Collateral that can be perfected or the priority of which can be enhanced by the possession or control of such Collateral or of any account in which such Collateral is held (such Collateral being referred to herein as the “Pledged or Controlled Collateral”) or if under applicable local law with respect to Collateral as to which perfection is governed by the laws of a jurisdiction outside the United States the concept of first and second liens or junior and senior liens is not recognized (“Single Lien Foreign Collateral”), and
(i) if any such Pledged or Controlled Collateral is in fact in the possession or under the control of the First Priority Agent, or of agents or bailees of the First Priority Agent, the First Priority Agent shall, solely for the purpose of perfecting the Second Priority Liens granted under the Second Priority Debt Documents and subject to the terms and conditions of this Article V, also (w) hold and/or maintain control of such Pledged or Controlled Collateral and Single Lien Foreign Collateral as gratuitous bailee for and representative (as defined in Section 1-201(35) of the Uniform Commercial Code as in effect in the State of New York) of the Second Priority Agent, (x) with respect to any securities accounts included in the Collateral, have “control” (within the meaning of Section 8-106(d)(3) of the UCC) of such securities accounts on behalf of the Second Priority Agent,(y) with respect to any deposit accounts included in the Collateral, act as agent for the Second Priority Agent and (z) with respect to Single Lien Foreign Collateral, act as agent for the Second Priority Agent or Second Priority Secured Parties (as the circumstances may require to maximize the benefit of the Lien on the Collateral for the benefit of the Second Priority Secured Parties without detriment to the interests of the First Priority Secured Parties); and
(ii) if any such Pledged or Controlled Collateral is in the possession or under the control of the Second Priority Agent, or of agents or bailees of the Second Priority Agent, the Second Priority Agent shall, solely for the purpose of perfecting the First Priority Liens granted under the First Priority Debt Documents and subject to the terms and conditions of this Article V, also (x) hold and/or maintain control of such Pledged or Controlled Collateral as gratuitous bailee for and representative (as defined in Section 1-201(35) of the Uniform Commercial Code as in effect in the State of New York) of the First Priority Agent, (y) with respect to any securities accounts included in the Collateral, have “control” (within the meaning of Section 8-106(d)(3) of the UCC) of such securities accounts on behalf of the First Priority Agent and (z) with respect to any deposit accounts included in the Collateral, act as agent for the First Priority Agent.
(b) So long as the Discharge of First Priority Claims has not occurred, the First Priority Agent shall be entitled to deal with the Pledged or Controlled Collateral and Single Lien Foreign Collateral in accordance with the terms of this Agreement and the other First Priority Debt Documents as if the Second Priority Liens did not exist. The obligations and responsibilities of the First Priority Agent to the Second Priority Agent and the other Second Priority Secured Parties under this Article V shall be limited solely to holding or controlling the Pledged or Controlled Collateral as gratuitous bailee and representative (as defined in Section 1-201(35) of the Uniform Commercial Code as in effect in the State of New York) and non-judiciary agent in accordance with this Article V. Without limiting the foregoing, the First Priority Agent shall have no obligation or responsibility to ensure that any Pledged or Controlled Collateral and Single Lien Foreign Collateral is genuine or owned by any of the Grantors. The First Priority Agent acting pursuant to this Article V shall not, by reason of this Agreement, any other Security Document or any other document, have a fiduciary relationship in respect of any other First Priority Secured Party, the Second Priority Agent or any other Second Priority Secured Party.
(c) Upon the Discharge of First Priority Claims, the First Priority Agent shall, to the extent it is legally able to do so, transfer the possession and control of the Pledged or Controlled Collateral and Single Lien Foreign Collateral, together with any necessary endorsements but without recourse or warranty, to the Second Priority Agent, so as to allow such Person to obtain possession and control of such Pledged or Controlled Collateral or a perfect Lien on the Single Lien Foreign Collateral. In connection with any transfer under the immediately preceding sentence, the First Priority Agent agrees, at the expense of the Grantors, to take all actions in its power as shall be reasonably requested by the Second Priority Agent to permit the Second Priority Agent to obtain, for the benefit of the Second Priority Secured Parties, a first priority security interest in the Pledged or Controlled Collateral.
(d) Following the Discharge of First Priority Obligations the Second Priority Agent shall be entitled to deal with the Pledged or Controlled Collateral and Single Lien Foreign Collateral in accordance with the terms of this Agreement and the other Second Priority Debt Documents as if the First Priority Claims did not exist. The obligations and responsibilities of the Second Priority Agent to the First Priority Agent and the other First Priority Secured Parties under this Article V shall be limited solely to holding or controlling the Pledged or Controlled Collateral and Single Lien Foreign Collateral as bailee in accordance with this Section 5.01. Without limiting the foregoing, the Second Priority Agent shall have no obligation or responsibility to ensure that any Pledged or Controlled Collateral or Single Lien Foreign Collateral is genuine or owned by any of the Grantors. The Second Priority Agent acting pursuant to this Article V shall not, by reason of this Agreement, any other Security Document or any other document, have a fiduciary relationship in respect of any other Second Priority Secured Party, the First Priority Agent or any other First Priority Secured Party.
(e) Any documents that would otherwise be required to be delivered by a Grantor under a Second Priority Security Document to the Second Priority Agent to perfect or assist in the enforcement of any Lien created under such Second Priority Security Document shall be deemed delivered to the Second Priority Agent on evidence provided to the Second Priority Agent that such Grantor has delivered the relevant documentation to the First Priority Agent in accordance with the First Priority Security Documents.
(f) The Second Priority Agent and the First Priority Agent agree that any notices of assignment or charge issued pursuant to any Debt Document should be such that the notice of assignment or charge issued pursuant to the First Priority Security Document will prevail until the occurrence of the Discharge of First Priority Claims.
(g) To the extent required under a First Priority Security Document as to which Collateral thereunder may have been delivered to the Second Priority Agent under a Second Priority Security Document (a “Relevant Second Priority Security Document”), the Grantors party to any Relevant Second Priority Security Document hereby instruct the Second Priority Agent, and the Second Priority Agent hereby agrees, to deliver to the First Priority Security Agent all share certificates and stock transfer forms or other physical Collateral delivered to the Second Priority Agent pursuant to that Relevant Second Priority Security Documents.
(h) Prior to the Discharge of First Priority Claims, notwithstanding any provision of any Second Priority Security Documents, the Grantors party to any Second Priority Security Documents shall not be required to deliver:
(i) any notice of assignment or charge of any relevant security in the form prescribed under that Second Priority Security Documents and shall instead deliver any such notice in a form with such amendments as approved by the First Priority Agent and the Second Priority Agent, each acting reasonably, as are necessary to reflect the provisions of this Agreement and
(ii) to the Second Priority Agent any share certificate, stock transfer form, document of title or other document required to be delivered to the First Priority Agent pursuant to any First Priority Security Documents.
(i) In the case of any conflict or inconsistency between the instructions of the Second Priority Agent and the First Priority Agent in respect of the First Priority Security Documents and the Second Priority Security Documents, the instructions of the First Priority Agent shall prevail.
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Sources: Letter of Credit Agreement (McDermott International Inc)