EXHIBIT 10.3
SECURITIES ACCOUNT CONTROL AGREEMENT
This Securities Account Control Agreement, dated as of July 20, 2006, among
XL ASSET FUNDING COMPANY I LLC, a Delaware limited liability company (the
"Debtor"), XL CAPITAL ASSURANCE INC., a New York stock insurance company, (the
"Secured Party") and MELLON BANK, N.A. (the "Securities Intermediary") is
entered into pursuant to the provisions of that certain Insurance and Indemnity
Agreement among the Debtor, XL Life and Annuity Holding Company, a Delaware
Corporation and the Secured Party (the "Insurance Agreement") that may hereafter
be entered into by the Debtor and Secured Party. Capitalized terms used but not
defined herein shall have the meaning assigned to them in the Insurance
Agreement. All references herein to the "UCC" shall mean the Uniform Commercial
Code as in effect in the State of New York.
SECTION 1. ESTABLISHMENT OF SECURITIES ACCOUNTS. The Securities
Intermediary hereby confirms and agrees that:
(a) Pursuant to a Custody Agreement between the Debtor and the Securities
Intermediary, dated August 8, 2002, (the "Custody Agreement"), the Securities
Intermediary has established the accounts set forth on Schedule I, collectively
know as the "Collateral Account" in the name of the Debtor and maintained in the
State of Pennsylvania (such Collateral Account and any additional or successor
account, the "Securities Account"). The Securities Intermediary shall not change
the name or account number of the Securities Account without the prior written
consent of the Secured Party;
(b) All securities or other property underlying any financial assets
credited to the Securities Account shall be registered in the name of the
Securities Intermediary, indorsed to the Securities Intermediary or in blank or
credited to another securities account maintained in the name of the Securities
Intermediary and in no case will any financial asset credited to the Securities
Account be registered in the name of the Debtor, payable to the order of the
Debtor or specially indorsed to the Debtor except to the extent the foregoing
have been specially indorsed to the Securities Intermediary or in blank;
(c) All property delivered to the Securities Intermediary pursuant to this
Agreement, the Insurance Agreement or the Collateral Management Agreement shall
be promptly credited to the Securities Account; and
(d) The Securities Account is an account to which financial assets are or
may be credited, and the Securities Intermediary shall, subject to the terms of
this Agreement, treat the Debtor as entitled to exercise the rights that
comprise any financial asset credited to the account.
SECTION 2. "FINANCIAL ASSETS" ELECTION. The Securities Intermediary hereby
agrees that each item of property (whether investment property, financial asset,
security, instrument or cash) credited to the Securities Account shall be
treated as a "financial asset" within the meaning of Section 8-102 (a)(9) of the
UCC.
SECTION 3. ENTITLEMENT ORDERS AND SOLE CONTROL. (a) If at any time the
Securities Intermediary shall receive an "entitlement order" (within the meaning
of Section 8-102 (a)(8) of the UCC) from the Secured Party directing transfer or
redemption of any financial asset relating to Securities Account, the Securities
Intermediary shall comply with such entitlement order without further consent by
the Debtor or any other person. The Securities Intermediary shall settle trades
of financial assets held in the Securities Account at the direction of the
Debtor and shall comply with entitlement orders from the Debtor relating to the
Securities Account. The Secured Party acknowledges that the Debtor intends to
actively trade the Securities Account may authorize free deliveries and engage
in futures, options, swaps, forward contracts, foreign exchange contracts and
other derivative investments, and the Secured Party expressly agrees that
Securities Intermediary may send out assets or pledge collateral as directed to
settle such transactions.
(b) If at any time the Secured Party delivers to the Securities Intermediary a
Notice of Sole Control in substantially the form set forth in EXHIBIT A hereto,
the Securities Intermediary agrees that after receipt of such notice, it will
take all instruction with respect to the Securities Account solely from the
Secured Party. The Securities Intermediary shall have no responsibility to the
parties to monitor the value of the Account, or to monitor that the investments
authorized are in accord with any investment policy or make any determination as
to whether the Secured Party has the right to Sole Control.
(c) Secured Party hereby agrees that it will not deliver a Notice of Sole
Control or "entitlement order" until an "Event of Default" has occurred. The
term "Event of Default" shall mean (i) prior to the date on which the Insurance
Agreement has been executed and delivered, XLCA shall make any payment under any
policy and (ii) at all times on and after such date, as such term shall be
defined in the Insurance Agreement.
SECTION 4. SUBORDINATION OF LIEN, WAIVER OF SET-OFF. In the event that the
Securities Intermediary has or subsequently obtains by agreement, by operation
of law or otherwise a security interest in the Securities Account or any
security entitlement credited thereto, the Securities Intermediary hereby agrees
that such security interest shall be subordinate to the security interest
created hereby, by the Insurance Agreement or by the Custody Agreement. The
financial assets and other items deposited to the Securities Account will not be
subject to deduction, set-off, banker's lien, or any other right in favor of any
person other than as created hereby or pursuant to the Insurance Agreement
except that pursuant to the Custody Agreement the Securities Intermediary may
set off all amounts due for customary fees and charges with respect to the
Securities Account including reimbursement for amounts advanced to settle
authorized transactions.
SECTION 5. CHOICE OF LAW. This Agreement and the Securities Account (as
well as the securities entitlements related thereto) shall be governed by the
laws of the State of New York. Regardless of any provision in any other
agreement, for purposes of the UCC, the State of New York shall be deemed to be
the Securities Intermediary's jurisdiction.
SECTION 6. CONFLICT WITH OTHER AGREEMENTS.
In the event of any conflict between this Agreement (or any portion thereof) and
any other agreement now existing or hereafter entered into, the terms of this
Agreement shall prevail.
No amendment or modification of this Agreement or waiver of any right hereunder
shall be binding on any party hereto unless it is in writing, signed by all of
the parties hereto.
SECTION 7. ADVERSE CLAIMS. Except for the claims and interest of the
Secured Party and of the Debtor in the Securities Account, the Securities
Intermediary does not know of any claim to, or interest in, the Securities
Account or in any financial asset credited thereto, except to the extent of
assets pledged in connection with futures transactions. The Secured Party
acknowledges that certain securities in the Securities Account have been pledged
as collateral for futures contracts. These securities are custodied elsewhere
but are reflected in the Securities Account for recordkeeping purposes and
identified on the Securities Intermediary's on-line system with the notation
"XXX" in the reg/loc code. Any security with such notation shall not be treated
as Collateral. If any person asserts any lien, encumbrance or adverse claim
(including any writ, garnishment, judgment, warrant of attachment, execution or
similar process) against the Securities Account or in any financial asset
carried therein, the Securities Intermediary will promptly notify the Debtor and
the Secured Party thereof.
SECTION 8. INDEMNIFICATION OF SECURITIES INTERMEDIARY. Debtor hereby agrees
to indemnify, defend and hold harmless the Securities Intermediary, its
directors, officers, agents and employees against any and all claims, causes of
action, liabilities, lawsuits, demands and damages, including without
limitation, any and all court costs and reasonable attorney's fees, in any way
related to or arising out of or in connection with this Agreement or any action
taken or not taken pursuant hereto, except to the extent as a result of
Securities Intermediary's gross negligence or willful misconduct.
SECTION 9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SECURITIES
INTERMEDIARY. The Securities Intermediary hereby makes the following
representations, warranties and covenants:
(a) The Securities Account has been established as set forth in Section 1
above and the Securities Account will be maintained in the manner set forth
herein until termination of this Agreement;
(b) The Securities Account constitutes a "securities account" within the
meaning of Section 8-501(a) of the UCC;
(c) This Agreement is the valid and legally binding obligation of the
Securities Intermediary;
(d) The Securities Intermediary has not entered into, and until the
termination of this Agreement will not enter into, any agreement with any other
person relating to the Securities Account and/or any financial asset credited
thereto pursuant to which the Securities Intermediary has agreed to comply with
entitlement orders of such person. The Securities Intermediary has not entered
into any other agreement with the Debtor or the Secured Party purporting to
limit or condition the obligation of the Securities Intermediary to comply with
entitlement orders as set forth in Section 3 hereof; and
(e) The Securities Intermediary will provide monthly statements concerning
the Securities Account to the Debtor and the Secured Party.
SECTION 10. GRANTING CLAUSE. As security for all amounts owed under the
Insurance Agreement, this Agreement, the Collateral Management Agreement and any
other agreement between Debtor and Secured Party, the Debtor hereby pledges,
assigns and conveys to the Secured Party , all of its right, title and interest
in and to the Securities Account and all securities, cash, investments or other
financial assets now or hereafter credited thereto.
SECTION 11. SUCCESSORS; ASSIGNMENT. The terms of this Agreement shall be
binding upon, and shall inure to the benefit of, the parties hereto and their
respective corporate successors or heirs and personal representatives who obtain
such rights solely by operation of law. The Secured Party may assign its rights
hereunder only with the express written consent of the Securities Intermediary
and by sending written notice of such assignment to the Debtor.
SECTION 12. NOTICES. All notices, demands and communications hereunder
shall be in writing and shall be deemed to be duly given if sent by registered
or certified mail, return receipt requested, reputable overnight mail service,
by receipted hand delivery or by facsimile provided that confirmation of
effective transmission is received and provided further that a hard copy is sent
the same day by either United States First Class Mail, reputable overnight
delivery service or hand delivery, as follows:
SECURED PARTY:
XL Capital Assurance Inc.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx. XX 00000-0000
Attention: General Counsel and Surveillance
Phone: 000-000-0000
Fax: 000-000-0000
DEBTOR:
XL Asset Funding Company I LLC
00 X. Xxxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Attention: XL Asset Funding I, Financial Administration Department
Phone: 0-000-000-0000
Fax: 000-000-0000
SECURITIES INTERMEDIARY:
Mellon Bank, N.A.
Xxx Xxxxxx Xxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxx Xxx Xxxx
Phone: 000-000-0000
Fax: 000-000-0000
or at such other address as any of the above may have furnished to the other
parties in writing in a manner specified in this Section and any such notice or
communications shall be deemed to have been given as of the third business day
after the date so mailed or on the date hand delivered or delivered by overnight
mail service, as the case may be, except with respect to the XLCA as to which
date shall be deemed to have been given on the date received by the XLCA.
SECTION 13. TERMINATION. The rights and powers granted herein to the
Secured Party, granted in order to perfect its security interest in the
Securities Account, are powers coupled with interest and will neither be
affected by the bankruptcy of the Debtor nor by the lapse of time. The
obligations of the Securities Intermediary hereunder shall continue in effect
until the security interests of the Secured Party in the Securities Account have
been terminated pursuant to the terms of this Agreement and the Secured Party
has notified the Securities Intermediary of such termination in writing. The
Secured Party agrees to provide Notice of Termination in substantially the form
of EXHIBIT B hereto to the Securities Intermediary upon the request of the
Debtor on or after the termination of the Secured Party's security interest in
the Securities Account pursuant to the terms of this Agreement.
SECTION 14. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which shall constitute one and the same instrument, and any
party hereto may execute this Agreement by signing and delivering one or more
counterparts.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
Debtor:
XL ASSET FUNDING COMPANY I LLC
By: /s/ Xxxxx XxXxxxxx
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Name: Xxxxx XxXxxxxx
Title: Vice President
Secured Party:
XL CAPITAL ASSURANCE INC.
By: /s/ Xxxxxx Xxxxxxxx
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Name: Xxxxxx Xxxxxxxx
Title: Senior Managing Director
Securities Intermediary:
MELLON BANK, N.A.
By: /s/ Xxxxx X. Xxxxx
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Name: Xxxxx X. Xxxxx
Title: First Vice President
