EXHIBIT 10.1
EXECUTION
INSURANCE AND INDEMNITY AGREEMENT
among
XL CAPITAL ASSURANCE INC.,
XL ASSET FUNDING COMPANY I LLC,
and
XL LIFE AND ANNUITY HOLDING COMPANY
Dated as of October 13, 2006
TABLE OF CONTENTS
APPENDIX I - Definitions
APPENDIX II - Qualified Investment Agreement Criteria
APPENDIX III - Investment Guidelines
APPENDIX IV - Approved Investment Managers
APPENDIX V - Form of Monthly Report
APPENDIX VI - Form of Policy Request Form
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INSURANCE AND INDEMNITY AGREEMENT dated as of October 13,
2006, among XL CAPITAL ASSURANCE INC., a New York stock insurance company
(together with its successors and assigns, "XLCA"), XL ASSET FUNDING COMPANY I
LLC, a Delaware limited liability company (the "INVESTMENT AGREEMENT PROVIDER"),
and XL LIFE AND ANNUITY HOLDING COMPANY, a Delaware corporation (together with
its successors and assigns, "HOLDING COMPANY" and, together with Investment
Agreement Provider, the "PROVIDER ENTITIES").
INTRODUCTORY STATEMENTS
The Provider Entities have requested that XLCA issue financial
guaranty insurance policies guaranteeing certain required payments of the
principal of and interest on all Qualified Investment Agreements (as hereinafter
defined) (including any such payments subsequently avoided as a preference under
applicable bankruptcy law) upon the terms and subject to the conditions provided
herein.
The parties hereto desire to specify the conditions precedent
to the issuance of each Policy by XLCA, the payment of premium and other amounts
in respect of each Policy, the indemnity and reimbursement to be provided by the
Provider Entities in respect of amounts paid by XLCA under the Policies or
otherwise and certain other matters.
The Provider Entities and XLCA intend that from time to time
XLCA may provide the Provider Entities with information, identify opportunities
and provide assistance to the Provider Entities in connection with the Provider
Entities' marketing of the Qualified Investment Agreements. In addition, from
time to time the Investment Agreement Provider may request XLCA to provide
certain limited, existing surveillance-related information on XLCA's existing
insured credits.
In consideration of the premises and of the agreements herein
contained, XLCA and the Provider Entities hereby agree as follows:
ARTICLE I
DEFINITIONS
Capitalized terms used herein shall have the meanings provided
in Appendix I hereto unless the context otherwise requires. Capitalized terms
used herein and not defined shall have the meanings provided in the Collateral
Management Agreement.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.1. Representations and Warranties of the Provider Entities.
Each of the Provider Entities severally represents, warrants and
covenants as of the date hereof and as of the issuance of each Policy as
follows:
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(a) DUE ORGANIZATION AND QUALIFICATION. Investment Agreement
Provider is a single member limited liability company, duly organized, validly
existing and in good standing under the laws of the State of Delaware. Holding
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. Each of Investment Agreement Provider
and Holding Company is duly qualified to do business, is in good standing and
has obtained all necessary licenses, permits, charters, registrations and
approvals (together, "approvals") necessary for the conduct of its business as
currently conducted and the performance of its obligations under the Related
Agreements to which it is a party.
(b) POWER AND AUTHORITY. Each of the Provider Entities has all
necessary entity power and authority to conduct its business as currently
conducted and as to be conducted, as contemplated by the Related Agreements to
execute, deliver and perform its obligations under the Related Agreements to
which it is a party and to consummate the Transaction.
(c) DUE AUTHORIZATION. The execution, delivery and performance
of the Related Agreements by the Provider Entities to which it is a party have
been duly authorized by all necessary entities and do not require any additional
approvals or consents or other action by or any notice to or filing with any
Person, including, without limitation, any governmental entity or the members or
stockholders of the Provider Entities, except (in each case) such as have been
obtained and are in full force and effect.
(d) NONCONTRAVENTION. Neither the execution and delivery of
the Related Agreements to which it is a party by any of the Provider Entities,
the consummation of the Transaction nor the satisfaction of the terms and
conditions of the Related Agreements to which it is a party:
(i) conflicts with or results in any breach or
violation of any provision of its Organic Documents or any
law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award currently in effect having
applicability to it or any of its properties, including
regulations issued by an administrative agency or other
governmental authority having supervisory powers over it or
other authority having jurisdiction over it or its properties,
(ii) constitutes a default (or an event which, with
the giving of notice or the passage of time, or both, would
constitute a default) by it under, or a breach of any
provision of, any loan agreement, mortgage, indenture or other
agreement or instrument to which it is a party or by which it
or any of its properties is or may be bound or affected, or
(iii) results in or requires the creation of any Lien
(other than the Lien of XLCA under the Collateral Management
Agreement, the Securities Account Control Agreement or Liens
for Required Third Party Collateral) upon or in respect of any
of the Provider Entities' respective assets except as
otherwise expressly contemplated by the Related Agreements.
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(e) NO LITIGATION. There are no actions, suits or proceedings
pending or, to its knowledge, threatened against it or any of its properties
before any court, arbitrator or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign (including, without
limitation, any regulatory commission of any jurisdiction) which, if adversely
determined, could reasonably be expected to result in a Material Adverse Change
with respect to it or the Transaction.
(f) NO DEFAULT. It is not in default under or with respect to
any of its contractual obligations in any respect which could have a material
adverse effect on the rights, interests or remedies of XLCA hereunder or under
the other Related Agreements to which it is a party or on the ability of it to
perform its obligations hereunder or under the other Related Agreements to which
it is a party. No Default, Wind Down Event or Event of Default has occurred and
is continuing.
(g) VALID AND BINDING OBLIGATIONS. The Related Agreements to
which it is a party constitute its legal, valid and binding obligations,
enforceable against it in accordance with their respective terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally and
general equitable principles.
(h) NO CONSENTS. No consent, license, approval or
authorization from, or registration, filing or declaration with, any regulatory
body, administrative agency, or other governmental instrumentality, nor any
consent, approval, waiver or notification of any creditor, lessor or other
nongovernmental person, is required in connection with the execution, delivery
and performance by it of any of the Related Agreements to which it is a party,
except (in each case) such as have been obtained and are in full force and
effect or the failure of which to be obtained could not reasonably be expected
to result in a Material Adverse Change with respect to it or the Transaction.
(i) COMPLIANCE WITH LAW, ETC. No practice, procedure or policy
employed or proposed to be employed by it in the conduct of its business
violates any law, regulation, judgment, agreement, order or decree applicable to
it which, if enforced, would (i) result in a Material Adverse Change with
respect to it or the Transaction or (ii) constitute grounds for the revocation
of any license, charter, permit or registration which is material to the conduct
of its business.
(j) GOOD TITLE; ABSENCE OF LIENS OR SECURITY INTEREST;
PERFECTION OF SECURITY INTEREST. The Investment Agreement Provider is the owner
of, and has good and marketable title to, all of the Collateral free and clear
of all Liens (other than the Lien of XLCA under the Collateral Management
Agreement, the Securities Account Control Agreement or Liens for Required Third
Party Collateral) and has full right, power and lawful authority to assign,
transfer and pledge the Collateral (and any documents which are a part thereof)
and all such substitutions therefor and additions thereto delivered under the
Collateral Management Agreement or the Securities Account Control Agreement.
XLCA has a valid and perfected first priority security interest in the
Collateral free and clear of all Liens and restrictions on transferability
except for Permitted Liens.
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(k) TAXES. It has filed all federal and state tax returns
which are required to be filed, and has paid all taxes, including any
assessments received by it, to the extent that such taxes have become due.
(l) ACCURACY OF INFORMATION. Neither the Related Agreements to
which it is a party nor any documents, agreements, instruments, schedules,
certificates, statements, cash flow schedules, number runs or other writings or
data (collectively, the "Documents") furnished to XLCA by it contain any
statement of a material fact by it which was untrue or misleading in any
material respect when made. There is no fact known to it which has a material
possibility of causing a Material Adverse Change with respect to it or the
Transaction. Since the furnishing of the Related Agreements, there has been no
change nor any development or event involving a prospective change known to it
which would render any of the Related Documents untrue or misleading in a
material respect.
(m) COMPLIANCE WITH SECURITIES LAWS. The consummation of the
Transaction, the execution of the Related Agreements to which it is a party, the
pledge of the Collateral and the Additional Collateral and the entering into by
the Investment Agreement Provider of the Qualified Investment Agreements, comply
with all requirements of law, including all registration requirements of
applicable securities laws. The consummation of the Transaction, the execution
of the Related Agreements to which it is a party the pledge of the Collateral
and the Additional Collateral and the entering into by the Investment Agreement
Provider of the Qualified Investment Agreements, are not in violation of the
Securities Act, or any other federal or state securities laws and neither it nor
the Related Agreements are required to be registered under applicable securities
laws. The Investment Agreement Provider is not required to be registered as an
"investment company" under the Investment Company Act.
(n) RELATED AGREEMENTS. Each of its representations and
warranties contained in the Related Agreements to which it is a party that is
qualified by reference to materiality is true and correct as of the date hereof
and as of the date made and each of its representations and warranties contained
in the Related Agreements to which it is a party that is not so qualified is
true and correct in all material respects as of the date hereof and as of the
date made.
(o) NO INDEBTEDNESS. Except with respect to amounts owed under
the Related Agreements and liabilities and fees and expenses provided for or
otherwise incurred in connection with the preparation, execution, delivery and
performance of the Related Agreements (all of which have been disclosed to
XLCA), Investment Agreement Provider has not incurred any Indebtedness.
(p) SUBSIDIARIES. The Investment Agreement Provider does not
have any Subsidiaries.
(q) INVESTMENT AGREEMENT PROVIDER. With respect to Investment
Agreement Provider only:
(i) Its capital is adequate for its business and
undertakings.
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(ii) Its funds and assets equal to or below the
Overcollaterlization Percentage are not, and will not be,
commingled with those of any other entity, including but not
limited to any of the other Provider Entities, as applicable.
(iii) Its Organic Documents require it to keep true
and full books and records regarding the status of the
business and financial condition of the Investment Agreement
Provider.
(iv) It is solvent and will not be rendered insolvent
by the transactions contemplated by the Related Agreements
and, after giving effect to such transactions, it will not be
left with an unreasonably small amount of capital with which
to engage in its business nor will it incur, or believe that
it has incurred, debts beyond its ability to pay such debts as
they mature. It does not contemplate the commencement of
insolvency, bankruptcy, liquidation or consolidation
proceedings or the appointment of a receiver, liquidator,
conservator, trustee or similar official.
(r) XLCA Information, Co-Marketing and Surveillance. Each of
the Provider Entities understands and agrees that while XLCA intends to provide
the information and to assist with the identification of opportunities and
co-marketing activities as well as surveillance activities described above, the
performance of these services is non-binding upon XLCA and the Provider Entities
shall have no recourse to XLCA for breach or enforcement thereof.
Section 2.2. Affirmative Covenants of the Provider Entities.
The Provider Entities each hereby severally agrees that during the Term
of the Agreement, unless XLCA shall otherwise expressly consent in writing:
(a) COMPLIANCE WITH RELATED AGREEMENTS. It shall comply in all
material respects with the terms and conditions of, and enforce its rights in
all material respects under, each Related Agreement to which it is a party,
shall provide XLCA with written notice immediately upon becoming aware of any
material breach by it or any of the other Provider Entities of any provision of
any Related Agreement to which it is a party.
(b) COMPLIANCE WITH APPLICABLE LAWS. It shall comply in all
material respects with all applicable laws, rules, regulations, orders, writs,
judgments, injunctions, decrees, determinations and awards (including, without
limitation, any fiscal and accounting rules and regulations and any foreign or
domestic law, rule or regulation), including, without limitation, in connection
with the entering into of all Qualified Investment Agreements contemplated by
the Transaction and the Related Agreements.
(c) EXISTENCE. The Investment Agreement Provider shall
maintain its existence as a limited liability company and each entity shall at
all times continue to be duly organized under the laws of the state of Delaware,
duly qualified and duly authorized (as described in Sections 2.1(a), (b) and (c)
hereof) and it shall conduct its business in accordance with and remain in
compliance with the terms of its Organic Documents.
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(d) ACCOUNTANTS' REPORTS; OTHER INFORMATION. It shall keep
proper books of accounts and records and appoint independent public accountants
in accordance with the Related Agreements. Investment Agreement Provider shall
furnish or caused to be furnished to XLCA:
(i) ANNUAL FINANCIAL STATEMENTS. As soon as
available, and in any event within 90 days after the close of
each fiscal year, beginning with 2007, of Investment Agreement
Provider, the unaudited consolidated balance sheets of
Investment Agreement Provider, as of the end of such fiscal
year and the unaudited consolidated statements of income,
changes in equity and cash flows of Investment Agreement
Provider, for such fiscal year, all in reasonable detail and
stating in comparative form the respective figures for the
corresponding date and period in the preceding fiscal year,
prepared in accordance with generally accepted accounting
principles, consistently applied.
(ii) QUARTERLY FINANCIAL STATEMENTS. As soon as
available, and in any event within 45 days after the close of
each quarter of each fiscal year, beginning in 2006, of the
Investment Agreement Provider the unaudited consolidated
balance sheets of the Investment Agreement Provider, as of the
end of such quarter and the unaudited statements of income,
changes in equity and cash flows of the Investment Agreement
Provider, to the extent produced in the normal course of
business of the Investment Agreement Provider for the portion
of the fiscal year then ended, prepared in accordance with
generally accepted accounting principles, consistently applied
(subject to normal year-end adjustments).
(iii) CERTAIN INFORMATION. Upon request, copies of
all proxy statements, financial statements, reports and
registration statements which it files with, or delivers to
the Commission or any other federal government agency,
authority or body which supervises the issuance of securities
by it, or any national securities exchange; PROVIDED, HOWEVER,
that it shall not be required to deliver any tax returns or
exhibits or schedules to tax returns filed with the IRS.
(iv) OTHER INFORMATION. Such other data as XLCA may
reasonably request.
(e) ACCESS TO RECORDS; DISCUSSIONS WITH OFFICERS AND
ACCOUNTANTS. It shall, upon the request of XLCA, permit XLCA or its authorized
agents at reasonable times and upon reasonable prior written notice:
(i) to inspect its books and records, as they may
relate to the Related Agreements, the Collateral, the
Additional Collateral, its obligations under the Related
Agreements, its business and the Transaction;
(ii) to discuss its affairs, finances and accounts
with the Provider Entities Representative; and
(iii) to discuss its affairs, finances and accounts
with its accountants; provided, that the Provider Entities
Representative shall have the right to be present during such
discussions.
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Such inspections and discussions shall be conducted during normal business hours
and shall not unreasonably disrupt the business of the applicable Provider
Entity. Its books and records will be maintained at its address designated
herein for receipt of notices, unless it shall otherwise advise the parties
hereto in writing.
(f) AUDITS. The Investment Agreement Provider, on reasonable
prior notice, shall permit XLCA or its authorized agents, during normal business
hours to examine its respective books and records, as they may relate to the
Related Agreements and the Collateral and its obligations under the Related
Agreements and to make copies and extracts therefrom. The Provider Entities
shall reimburse XLCA for reasonable out-of-pocket costs and expenses for one
audit in total for the Holding Company and the Investment Agreement Provider in
any twelve (12) month period, subject to a cap of Fifteen Thousand Dollars
($15,000) per year, unless an Event of Default is then continuing.
(g) NOTICE OF MATERIAL EVENTS. Each Provider Entity shall, in
addition to any notices, certificates or information provided pursuant to this
Agreement, promptly inform XLCA in writing of the occurrence of any of the
following:
(i) the submission of any claim or the initiation of
any legal process, litigation or administrative or judicial
investigation against it, involving potential damages or
penalties which, if adversely determined, could reasonably be
expected to result in a Material Adverse Change with respect
to it or the Transaction;
(ii) any change in its name, the location of its
principal office or jurisdiction of organization or any change
in the location of any of its books and records;
(iii) the occurrence of any Default, Wind Down Event
or Event of Default (without waiting for any Person to take
any action);
(iv) the commencement of any rule making or
disciplinary proceedings or any proceedings, of which it shall
have knowledge, instituted by or against any of the Provider
Entities, as applicable, in any federal, state or local court
or before any governmental body or agency, or before any
arbitration board, or the promulgation of any proceeding or
any proposed or final rule which, if adversely determined,
could reasonably be expected to result in a Material Adverse
Change with respect to the related Provider Entity, as
applicable, or the Transaction;
(v) the commencement of any proceedings, of which it
shall have knowledge, by or against any of the Provider
Entities as applicable, under any applicable bankruptcy,
reorganization, liquidation, rehabilitation, insolvency or
other similar law now or hereafter in effect or of any
proceeding in which a receiver, liquidator, conservator,
trustee or similar official shall have been, or may be,
appointed or requested for any of the Provider Entities, as
applicable, or any of its assets; or
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(vi) the receipt of notice that (A) any of the
Provider Entities, as applicable, is being placed under
regulatory supervision, (B) any license, permit, charter,
registration or approval necessary for the conduct of any of
the Provider Entities' business, is to be, or may be,
suspended or revoked, or (C) any of the Provider Entities, as
applicable, is to cease and desist any practice, procedure or
policy known to any of them employed by any of the Provider
Entities, as applicable, in the conduct of its business, and
such cessation could reasonably be expected to result in a
Material Adverse Change with respect to any of the Provider
Entities, as applicable, or the Transaction.
(h) [Reserved]
(i) MAINTENANCE OF LICENSES. Each of the Provider Entities
shall maintain all licenses, permits, charters and registrations which are
material to the conduct of its business unless the failure to maintain the same
would not result in a Material Adverse Change with respect to it or the
Transaction.
(j) USE OF ASSETS. The Investment Agreement Provider shall
apply its Cash Assets equal to or less than the Over Collateralization
Percentage only as expressly permitted under the Related Agreements and for no
other purpose.
(k) SURRENDER OF POLICIES. XLCA may contact each Investor
under each Investment Agreement, upon the expiration of the term of a Policy,
and request such Investor to surrender the Policy to XLCA for cancellation.
(l) INVESTMENT AGREEMENT PROVIDER.
(i) Investment Agreement Provider shall conduct its
business solely in its own name through its duly authorized
members, officers or agents.
(ii) Investment Agreement Provider shall maintain its
records and books of account separate from those of all other
entities.
(iii) Investment Agreement Provider shall obtain
proper authorization from its managing member, manager or
members, as applicable, of all action requiring approval.
(iv) Operating expenses and liabilities of Investment
Agreement Provider shall be paid from its own funds or from
any Deposited Assets in excess of the Over Collateralization
Percentage.
(m) THIRD-PARTY BENEFICIARY. Each of the Provider Entities
agree that XLCA shall have all rights of a third-party beneficiary in respect of
the Related Agreements and each hereby severally incorporates and restates its
representations, warranties and covenants as set forth therein for the benefit
of XLCA.
(n) REPORTS. The Provider Entities will provide to XLCA on or
before the fifteenth (15th) of each month a report comprised of the group of
reports listed on Appendix V
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(collectively, the "Monthly Report") which shall be substantially in the forms
shown on Appendix V hereto.
(o) CLOSING DOCUMENTS. Each of the Provider Entities shall
provide or cause to be provided to XLCA (i) an executed original copy of each
document executed in connection with the Initial Transaction within 60 days
after the Initial Closing Date and (ii) a copy of each document executed in
connection with each Qualified Investment Agreement within 60 days of the
Agreement Date.
(p) INCORPORATION OF COVENANTS. Each of the Provider Entities
agrees to comply with its covenants set forth in the Related Agreements and
hereby incorporates such covenants by reference as if each were set forth
herein.
(q) EXEMPT FROM SECURITIES ACT REGISTRATION. (i) Each of the
Provider Entities shall take all reasonable actions necessary so as to exempt
from registration or qualification the sale of the Qualified Investment
Agreements or the consummation of the Transaction under the Securities Act or
under any applicable United States, state securities or "blue sky" laws (or, to
the extent any such registration or qualification is required under the
Securities Act or under any applicable United States, state securities or "blue
sky" law, each Provider Entity shall take all action necessary in order to
obtain such registration or qualification in accordance with applicable law);
(ii) the Investment Agreement Provider shall take all reasonable actions so as
to maintain its exemption from the Investment Company Act.
(r) MAINTENANCE OF CORPORATE RECORDS. Each of the Provider
Entities shall maintain corporate records and books of account separate from any
other Person.
(s) PAYMENT OF INDEBTEDNESS. Each Provider Entity shall
generally pay its Indebtednesses as they become due.
Section 2.3. Negative Covenants of the Investment Agreement Provider.
The Investment Agreement Provider hereby severally agrees that during
the Term of the Agreement, unless XLCA shall otherwise expressly consent in
writing:
(a) AMENDMENTS TO ORGANIC DOCUMENTS. The Investment Agreement
Provider shall not amend, supplement or otherwise modify its respective Organic
Documents (or permit any of the foregoing); provided, however, that the
Investment Agreement Provider may make such amendment, supplement or other
modification so long as any such amendment, supplement or other modification
would not result in a Material Adverse Change.
(b) LIMITATION ON INDEBTEDNESS. Investment Agreement Provider
shall not create, incur or suffer to exist any Indebtedness other than as
specified in the Related Agreements.
(c) SUBSIDIARIES. Investment Agreement Provider shall not form
or acquire, or cause to be formed or acquired, any Subsidiaries.
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(d) LIMITATION ON DIVIDENDS. Except as provided in the
Collateral Management Agreement, Investment Agreement Provider shall not,
directly or indirectly (i) except as expressly permitted by applicable law, make
any distribution (by reduction of capital or otherwise), whether in cash,
properties, securities or a combination thereof, to any owner of a beneficial
interest in Investment Agreement Provider, or otherwise, with respect to any
ownership or equity interest or similar security in or of Investment Agreement
Provider, (ii) redeem, purchase, retire or otherwise acquire for value any such
ownership or equity interest in similar security or (iii) except as expressly
permitted by applicable law with respect to clause (i) above, set aside or
otherwise segregate any amounts for any such purpose; provided, however, nothing
herein or in the Collateral Management Agreement shall be understood to prohibit
the Investment Agreement Provider from disbursing amounts due and owing under
each and every Qualified Investment Agreement as the same become due and payable
under the terms thereof.
(e) RESTRICTIONS ON LIENS. The Investment Agreement Provider
shall not (i) create, incur or suffer to exist, or agree to create, incur or
suffer to exist, or consent to cause or permit in the future (upon the happening
of a contingency or otherwise) the creation, incurrence or existence of any Lien
on the Collateral, except for: (I) (A) Liens created by the Related Agreements,
(B) Liens the validity of which are being contested in good faith by appropriate
proceedings, provided that adequate reserves with respect thereto are maintained
on the books of Investment Agreement Provider, (C) Liens for taxes that are not
then due and payable or that can be paid thereafter without penalty, provided
that adequate reserves with respect thereto are maintained on the books of
Investment Agreement Provider, (D) Liens to secure payment for services rendered
by the Collateral Agent, and (E) Liens in favor of XLCA (the foregoing,
"Permitted Liens") and (II) for the sake of clarity, Liens on Cash Assets as
provided in Section 3.12 or (ii) sign or file under the Uniform Commercial Code
(or similar law) of any jurisdiction any financing statement with respect to the
Collateral which names the Investment Agreement Provider as a debtor, or sign
any security agreement authorizing any secured party thereunder to file such
financing statement, except in each case any such instrument solely securing the
rights and preserving the Lien of XLCA in the Collateral.
(f) IMPAIRMENT OF RIGHTS. It shall not (i) take any action, or
fail to take any action, if such action or failure to take action may interfere
with the enforcement of any rights under the Related Agreements that are
material to the rights, benefits or obligations of XLCA or the Collateral Agent,
on behalf of XLCA under the Related Agreements; (ii) waive or alter any rights
with respect to the Collateral (or any agreement or instrument relating
thereto), other than as expressly permitted under the Related Agreements; (iii)
take any action, or fail to take any action, if such action or failure to take
action may interfere with the enforcement of any rights of XLCA with respect to
the Collateral ; or (iv) fail to pay any tax, assessment, charge or fee with
respect to the Collateral or fail to defend any action, if such failure to pay
or defend may adversely affect the priority or enforceability of XLCA's first
priority lien on or perfected security interest in the Collateral or the
Investment Agreement Provider's right, title or interest in the Collateral
except as expressly set forth in the Related Agreements.
(g) LIMITATIONS ON FUNDAMENTAL CHANGES. Except as permitted
under the Related Agreements, the Investment Agreement Provider shall not
liquidate, wind up or dissolve itself (or suffer any liquidation, winding up or
dissolution), or convey, sell, lease, assign, transfer or otherwise dispose of
all or substantially all of its property, business or assets, or make any
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material change in its methods of conducting business as contemplated by, or for
the purposes incidental to, the Collateral and the Transaction and Investment
Agreement Provider shall not enter into any merger, consolidation or
amalgamation.
(h) WAIVER, AMENDMENTS, ETC. It shall not waive, modify or
amend, or consent to any waiver, modification or amendment or fail to take any
action if such failure to take action requested by XLCA would permit any waiver,
modification or amendment of, any of the provisions of any of the Related
Agreements or the Qualified Investment Agreements without the prior written
consent of XLCA; provided, however, that such consent shall not be unreasonably
withheld, provided however, such consent shall not be required if after giving
effect to such waiver, modification or amendment such Qualified Investment
Agreement will still qualify as a Qualified Investment Agreement and no Event of
Default or Wind Down Event results from any such waiver, modification or
amendment or could reasonably be expected to result from any such waiver,
modification or amendment.
(i) PRESERVATION OF COLLATERAL. Without the consent of XLCA,
it shall not take any action, or fail to take any action as required by the
Collateral Management Agreement or the Securities Account Control Agreement with
respect to any item of Collateral.
(j) SECURITY INTERESTS. It shall not permit the Lien hereof,
the Securities Account Control Agreement and of the Collateral Management
Agreement not to constitute a valid first priority perfected security interest
in the Collateral.
(k) OWNERSHIP. Investment Agreement Provider shall not issue
any capital shares or rights, warrants or options or other evidences of
ownership rights in respect of capital shares or securities convertible into or
exchangeable for capital shares or other evidences of ownership rights other
than to Holding Company or one or more of its subsidiaries or affiliates.
(l) INSOLVENCY. It shall not voluntarily initiate or commence
any case or proceeding seeking liquidation, rehabilitation, reorganization,
conservation or other relief with respect to its debts under any Insolvency Law,
seek the appointment of a bankruptcy custodian for any of its property, consent
to any such relief or the taking possession by any such official in an
involuntary case or other proceeding commenced against any of the Provider
Entities, as applicable, file any petition or answer or consent seeking
liquidation, rehabilitation, reorganization, conservation or other relief under
any applicable Insolvency Law, make a general assignment for the benefit of
creditors, or admit in writing its inability to pay its debts generally as they
become due. It shall not institute against, or join any other Person in
instituting against any of the Provider Entities, as applicable, or any
affiliate thereof, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceeding, or other proceeding under any bankruptcy or similar law,
for one year and a day after the termination of all Qualified Investment
Agreements.
(m) EXEMPT FROM INVESTMENT COMPANY REGISTRATION. It shall not
take any action, or permit the taking of any action, that would require
Investment Agreement Provider to register as an "investment company" under the
Investment Company Act.
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(n) COLLATERAL PROVIDED UNDER A QUALIFIED INVESTMENT
AGREEMENT. As set forth in the Qualified Investment Agreement, in the event of a
downgrade of XLCA and the Provider Entities decide to provide collateral as
permitted thereunder, the Provider Entities shall notify XLCA three Business
Days prior to providing such collateral and the Provider Entities may only post
collateral thereunder to the extent and only to the extent that the posting of
such collateral will not cause XLCA to be in violation of the single or
aggregate risk limitations set forth in Section 6904 of the New York State
Insurance Laws.
Section 2.4. Representations and Warranties of XLCA.
XLCA represents, warrants and covenants as of the date hereof and as of
the issuance of each Policy as follows:
(a) ORGANIZATION AND LICENSING. XLCA is a duly incorporated
and existing New York stock insurance company licensed to do business in the
State of New York and is in good standing under the laws of such state.
(b) CORPORATE POWER. XLCA has the corporate power and
authority to issue each Policy, execute and deliver this Insurance Agreement and
perform all of its obligations hereunder and thereunder.
(c) AUTHORIZATION; APPROVALS. The issuance of each Policy and
the execution, delivery and performance of this Agreement have been duly
authorized by all necessary corporate proceedings. No further approvals or
filings of any kind, including, without limitation, any further approvals of or
further filings with any governmental agency or other governmental authority, or
any approval of XLCA's board of directors or stockholders, are necessary for
such Policy and this Insurance Agreement to constitute the legal, valid and
binding obligations of XLCA.
(d) ENFORCEABILITY. Each Policy, when issued, and this
Insurance Agreement will each constitute a legal, valid and binding obligation
of XLCA, enforceable in accordance with its terms, subject to applicable laws
affecting the enforcement of creditors' rights generally.
(e) NO LITIGATION. There are no actions, suits, proceedings or
investigations pending or, to the best of XLCA's knowledge, threatened against
it at law or in equity or before or by any court, governmental agency, board or
commission or any arbitrator which should reasonably be expected to materially
and adversely affect its ability to perform its obligations under the Policy or
this Insurance Agreement.
(f) COMPLIANCE WITH LAW, ETC. No practice, procedure or policy
employed, or proposed to be employed, by XLCA in the conduct of its business
violates any law, regulation, judgment, agreement, order or decree applicable to
XLCA that, if enforced, should reasonably be expected to materially and
adversely affect its ability to perform its obligations under the Policy or this
Insurance Agreement.
(g) EXCLUSIVITY. XLCA shall only provide financial guarantee
policies for investment agreements similar to Qualified Investment Agreements
only for the Investment Agreement Provider and not for any other Person unless
(i) the Investment Agreement Provider
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consents, (ii) the Program Limit has been met as provided in Section 3.9, (iii)
XLCA shall have delivered the notice described in Section 3.14(iii) or (iv) a
Wind Down Event or an Event of Default shall have occurred.
ARTICLE III
THE POLICIES; REIMBURSEMENT; INDEMNIFICATION; RELATED SPECIAL
COVENANTS AND AGREEMENTS
Section 3.1. Issuance of the Policies.
XLCA agrees to enter into this Agreement on the Initial Closing Date
and to issue a Policy (and deliver a copy thereof and of any related
endorsements to the Investment Agreement Provider) for each Qualified Investment
Agreement to the Investor together with all required endorsements subject to
satisfaction of the conditions precedent set forth below on the Agreement Date:
(a) PAYMENT OF PREMIUM AND EXPENSES; PREMIUM LETTER. XLCA
shall have been paid, by or on behalf of the Provider Entities, the initial
nonrefundable payment of the Premium, if applicable, specified in the Premium
Letter and shall have been reimbursed for other fees and expenses identified in
the Premium Letter or in Section 3.2 below as payable upon delivery of such
Policy or upon delivery of this document, as applicable.
(b) RELATED AGREEMENTS. XLCA shall have received a Policy
Request Form from the Investment Agreement Provider and a copy of the Related
Agreements, in form and substance satisfactory to XLCA, duly authorized,
executed and delivered by each party thereto on or as of the Initial Closing
Date or the applicable Agreement Date, as applicable.
(c) CERTIFIED DOCUMENTS AND RESOLUTIONS. XLCA shall have
received a copy of (i) the Organic Documents of each of the Provider Entities
and (ii) the resolutions and consents of the applicable governing body of each
of the Provider Entities, in form and substance satisfactory to XLCA,
authorizing the entering into of the Insurance Agreement, the Collateral
Management Agreement and the Securities Account Control Agreement and the
execution, delivery and performance by the Provider Entities of the Related
Agreements and the transactions contemplated thereby, in each case certified by
the Secretary of each of the Provider Entities (which certificate shall state
that such Organic Documents and resolutions and consents are in full force and
effect without modification on the Agreement Date or Initial Closing Date, as
applicable.
(d) INCUMBENCY CERTIFICATE. Upon request of XLCA, XLCA shall
have received a certificate of the Secretary of each of the Provider Entities
certifying the name and signatures of the officers of each of the Provider
Entities, authorized to execute and deliver the Related Agreements to which it
is a party required to be executed, and that all consents to the execution and
delivery of such documents have been obtained.
(e) REPRESENTATIONS AND WARRANTIES; CERTIFICATE. The
representations and warranties of the Provider Entities in this Insurance
Agreement and each of the Related Agreements shall be true and correct as of the
applicable Agreement Date or the Initial Closing Date, as applicable, as if made
on such date.
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(f) OPINIONS OF COUNSEL. XLCA shall have received opinions of
counsel addressed to XLCA as to the creation and perfection of XLCA's interest
in the Collateral within thirty (30) days of the date of this Agreement.
(g) NO LITIGATION, ETC. No suit, action or other proceeding,
investigation, or injunction or final judgment relating thereto, shall be
pending or threatened before any court or governmental agency in which it is
sought to restrain or prohibit or to obtain damages or other relief in
connection with any of the Related Agreements or the consummation of the
Transaction.
(h) LEGALITY; REGULATIONS; RATING AGENCY COMPLIANCE. No
statute, rule, regulation or order shall have been enacted, entered or deemed
applicable by any government or governmental or administrative agency or court
which would make the Transaction or the execution and delivery of the applicable
Qualified Investment Agreement any Policy, illegal or otherwise prevent the
consummation thereof. For the sake of clarity, this shall include XLCA's
compliance with its aggregate and single risk limits and the requirements of the
Rating Agencies.
(i) FILINGS AND RECORDINGS. XLCA shall have received evidence
satisfactory to it of the filing and/or recording in all applicable
jurisdictions (or such filing and/or recording having been provided for in a
manner satisfactory to XLCA) of all documents, including, without limitation,
duly executed and delivered copies of the Collateral Management Agreement,
Securities Account Control Agreement, financing statements, termination
statements and other appropriate instruments, in form and substance satisfactory
to XLCA, as may be necessary in the opinion of XLCA to perfect the first
priority Liens created by the Collateral Management Agreement, and all taxes,
fees and other charges payable in connection with such execution, delivery,
recording and filing shall have been paid.
(j) NO DEFAULT. No Wind Down Event shall then be continuing or
Default or Event of Default shall have occurred.
(k) ADDITIONAL ITEMS. XLCA shall have received such other
documents, instruments, approvals or opinions requested by XLCA as may be
reasonably necessary to effect the Transaction, including but not limited to
evidence satisfactory to XLCA that the conditions precedent, if any, in the
Related Agreements have been satisfied.
(l) COMPLIANCE. Each Provider Entity shall be, as of the
applicable agreement date, in compliance with the terms of the Related
Agreements to which it is a party.
(m) SATISFACTION OF CONDITIONS IN THE PREMIUM LETTER. All
conditions contained in the Premium Letter shall have been satisfied or waived.
(n) QUALIFIED INVESTMENT AGREEMENT. The investment agreement,
if any, to be entered into shall be a Qualified Investment Agreement meeting the
criteria set forth in Appendix II hereto.
(o) PROGRAM LIMIT. The Program Limit is Five Billion Dollars
($5,000,000,000) which may be increased subject to the approval of XLCA's credit
committee.
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(p) ARTICLE 69 LIMIT NOT EXCEEDED. After giving effect to the
proposed Policy, XLCA's aggregate exposure to the Investment Agreement Provider
would not exceed XLCA's single risk limit as provided by Section 6904 of the NYS
Insurance Law, calculated using the methodology set forth on Appendix V.
Upon the execution and delivery hereof and XLCA's issuance of a Policy
on the applicable Agreement Date, the foregoing conditions precedent shall be
deemed to have been satisfied or waived by XLCA in connection with the Initial
Closing Date or particular Agreement Date, as applicable; PROVIDED, HOWEVER,
that XLCA reserves all of its rights and remedies against each of the Provider
Entities with respect to the accuracy or completion of each of the foregoing
conditions precedent.
Section 3.2. Payment of Fees and Premium.
(a) RATING AGENCY FEES. The Rating Agencies directly related
to the transactions contemplated hereby shall be paid by the Provider Entities.
All periodic and subsequent fees of the Rating Agencies with respect to, and
directly allocable to, the entering into of the Qualified Investment Agreements
shall be for the account of, and shall be billed to, Investment Agreement
Provider.
(b) PREMIUM. In consideration of the issuance by XLCA of each
Policy, the Provider Entities shall pay to XLCA the Premium in accordance with
the terms of the Premium Letter. The Premium paid hereunder and pursuant to the
Related Agreements and the Premium Letter shall be nonrefundable without regard
to whether XLCA makes any payment under the Policy or any other circumstances
relating to the Qualified Investment Agreements or provision being made for
payment of the Qualified Investment Agreements prior to maturity. The Provider
Entities shall make all payments of Premium by wire transfer to an account
designated from time to time by XLCA by written notice to the Provider Entities.
The Premium for each Policy shall be calculated as specified in the Premium
Letter. Anything herein or in any of the Related Agreements notwithstanding,
upon the occurrence of a Wind Down Event or an Event of Default, the entire
outstanding balance of further installments of the Premium for the Policies
issued shall be immediately due and payable.
Section 3.3. Reimbursement and Additional Payment Obligation.
The Investment Agreement Provider agrees to pay to XLCA as follows:
(a) a sum equal to the total of all amounts paid by XLCA under
the Policies;
(b) any and all advances, loans, charges, fees, costs and
expenses which XLCA may reasonably pay or incur, including, but not limited to,
reasonable attorneys' and accountants' fees and expenses, in connection with (i)
in the event of payments under the Policy, any accounts established to
facilitate payments under the Policy to the extent XLCA has not been immediately
reimbursed on the date that any amount is paid by XLCA under the Policy, (ii)
the enforcement, defense or preservation of any rights in respect of any of the
Related Agreements, including defending, monitoring or participating in any
litigation or proceeding (including any insolvency or bankruptcy proceeding in
respect of any Transaction participant or any affiliate thereof) relating to any
of the Related Agreements, any party to any of the Related Agreements
15
or the Transaction, and (iii) the foreclosure against, sale or other disposition
of any Collateral, or pursuit of any other remedies under any of the Related
Agreements, to the extent such costs and expenses are not recovered from such
foreclosure, sale or other disposition;
(c) interest on any and all amounts described in Section 3.3
hereunder from the date paid by XLCA until payment thereof in full and interest
on any and all amounts described in Section 3.2 hereunder from the date due
until payment thereof in full, in each case, payable to XLCA at the Late Payment
Rate per annum (to the extent permitted by law, if in respect of any
unreimbursed amounts representing interest); and
(d) any payments (other than as set forth in Sections 3.3(a)
or (b)) made by XLCA on behalf of, or advanced to, any of the Provider Entities
including, without limitation, any amounts payable by any of the Provider
Entities, as the case may be, pursuant to the Collateral Management Agreement or
any other Related Agreements; and any payments made by XLCA as, or in lieu of,
any servicing, management, agent, custodial lockbox payment processing or
administrative fees payable, in the sole discretion of XLCA, to third parties in
connection with the Transaction.
All such amounts are to be immediately due and payable without demand,
in full, without any requirement on the part of XLCA to seek reimbursement from
any other sources of indemnity therefor or to allocate expenses to other
transactions benefiting therefrom. Notwithstanding the forgoing, XLCA shall
promptly deliver copies of any third party invoices it receives to the Provider
Entities.
Section 3.4. Indemnification.
(a) INDEMNIFICATION BY INVESTMENT AGREEMENT PROVIDER. In
addition to any and all rights of reimbursement, indemnification, subrogation
and any other rights pursuant hereto, the other Related Agreements or under law
or in equity, the Investment Agreement Provider and the Holding Company (each an
"Indemnifying Party" and collectively, the "Indemnifying Parties") jointly and
severally, each agree to pay, and to protect, indemnify and save harmless, XLCA,
any officer, director, shareholder, employee or agent of XLCA or any Person
controlling XLCA within the meaning of either Section 15 of the Securities Act
or Section 20 of the Securities Exchange Act (individually, an "Indemnified
Party" and, collectively, the "Indemnified Parties") from and against any and
all claims, losses, liabilities (including penalties), actions, suits,
judgments, demands, damages, costs or expenses (including, without limitation,
fees and expenses of attorneys, consultants and auditors and reasonable costs of
investigations) of any nature arising out of or relating to the Transaction or
the execution, delivery, enforcement, performance or administration of the
Related Agreements (except those arising due to the willful misconduct, gross
negligence or bad faith of either of the Indemnified Parties), including,
without limitation, those arising out of or relating to:
(i) any statement, omission or action (other than of
or by XLCA) in connection with the execution and delivery of
or performance under the Qualified Investment Agreements, the
consummation of the Transaction or the negotiation, execution
or delivery of any Related Agreements;
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(ii) the gross negligence, bad faith, willful
misconduct, misfeasance, malfeasance or theft committed by any
director, officer, employee or agent of either of any Provider
Entity in connection with the Transaction or relating to the
Related Agreements;
(iii) the violation by any of the Provider Entities
of any domestic or foreign law, rule or regulation; or
(iv) the breach by any Provider Entity of any
representation, warranty or covenant under any of the Related
Agreements or the occurrence, in respect of any of the
Provider Entities, under any of the Related Agreements of any
"event of default" or any event which, with the giving of
notice or lapse of time or both, would constitute any "event
of default."
(b) INDEMNIFICATION BY XLCA. XLCA (an "Indemnifying Party")
agrees to pay and to protect, indemnify and save harmless the Holding Company
and the Investment Agreement Provider, any officer, director, shareholder,
employee or agent of the Holding Company or the Investment Agreement Provider or
any Person controlling the Holding Company or the Investment Agreement Provider
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Securities Exchange Act (individually, an "Indemnified Party" and,
collectively, the "Indemnified Parties") from and against any and all claims,
losses, liabilities (including penalties), actions, suits, judgments, demands,
damages, costs or expenses (including, without limitation, fees and expenses of
attorneys, consultants and auditors and reasonable costs of investigations) of
any nature arising out of or relating to the Transaction or the execution,
delivery, enforcement, performance or administration of the Related Agreements
(except those arising due to the willful misconduct, gross negligence or bad
faith of either of the Indemnified Parties), including, without limitation,
those arising out of or relating to:
(i) the gross negligence, bad faith, willful
misconduct, misfeasance, malfeasance or theft committed by any
director, officer, employee or agent of XLCA in connection
with the Transaction or relating to the Related Agreements; or
(ii) a breach by XLCA of any representation, warranty
or covenant under any of the Related Agreements.
(c) CONDUCT OF ACTIONS OR PROCEEDINGS. If any action or
proceeding (including any governmental investigation) shall be brought or
asserted against any Indemnified Party in respect of which indemnity may be
sought from the Indemnifying Parties hereunder, such Indemnified Party shall
promptly notify the Indemnifying Parties in writing, and the Indemnifying
Parties shall assume the defense thereof, including the employment of counsel
reasonably satisfactory to the Indemnified Party and the payment of all
expenses. An Indemnified Party shall have the right to employ separate counsel
in any such action and to participate in the defense thereof at the expense of
the Indemnified Party; provided, however, that the fees and expenses of such
separate counsel shall be at the expense of the Indemnifying Parties if (i) the
Indemnifying Parties have agreed to pay such fees and expenses, (ii) the
Indemnifying Parties shall have failed promptly to assume the defense of such
action or
17
proceeding and employ counsel reasonably satisfactory to the Indemnified Party
in any such action or proceeding or (iii) the named parties to any such action
or proceeding (including any impleaded parties) include both the Indemnified
Party and either or both of the Indemnifying Parties, and the Indemnified Party
shall have been advised by counsel that (A) there may be one or more legal
defenses available to it which are different from or additional to those
available to either or both of the Indemnifying Parties and (B) the
representation of either or both of the Indemnifying Parties and the Indemnified
Party by the same counsel would be inappropriate or contrary to prudent practice
(in which case, if the Indemnified Party notifies the Indemnifying Parties in
writing that it elects to employ separate counsel at the expense of the
Indemnifying Parties, the Indemnifying Parties shall not have the right to
assume the defense of such action or proceeding on behalf of such Indemnified
Party, it being understood, however, that the Indemnifying Parties shall not, in
connection with any one such action or proceeding or separate but substantially
similar or related actions or proceedings in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys at any time (in
addition to local counsel, if necessary) for the Indemnified Parties, which firm
(or firms) shall be designated in writing by XLCA). The Indemnifying Parties
shall not be liable for any settlement of any such action or proceeding effected
without its written consent to the extent that any such settlement shall be
prejudicial to the Indemnifying Parties, but, if settled with its written
consent, or if there be a final judgment for the plaintiff in any such action or
proceeding with respect to which the Indemnifying Parties shall have received
notice in accordance with this Section 3.4(b), the Indemnifying Parties agree to
indemnify and hold the Indemnified Parties harmless from and against any loss or
liability by reason of such settlement or judgment.
(d) CONTRIBUTION. To provide for just and equitable
contribution if the indemnification provided by an Indemnifying Party is
determined to be unavailable for any Indemnified Party (other than due to
application of this Section 3.4), such Indemnifying Party shall contribute to
the losses incurred by the Indemnified Party on the basis of the relative fault
of the Indemnifying Party, on the one hand, and the Indemnified Party, on the
other hand. Upon the incurrence of any costs by the Indemnified Party to which
the Indemnified Party is entitled to contribution hereunder, the Indemnifying
Parties shall reimburse the Indemnified Party promptly upon demand.
Section 3.5. Subrogation.
Subject only to the priority of payment provisions of the Investment
Agreements and not in limitation of XLCA's equitable right of subrogation, the
parties hereto acknowledge that, to the extent of any payment made by XLCA
pursuant to the Policy or Insured Payment for which XLCA has not been
reimbursed, XLCA is to be fully subrogated to the extent of such payment and any
additional interest due on any late payment, to the rights of the Investors to
any moneys paid or payable under the Investment Agreements or otherwise. The
parties hereto agree to such subrogation and, further, agree to execute such
instruments and to take such actions as, in the sole judgment of XLCA, are
necessary to evidence such subrogation and to perfect the rights of XLCA to
receive any moneys paid or payable in respect of the Investment Agreements under
the Related Agreements or otherwise.
Section 3.6. Payments by Investment Agreement Provider.
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XLCA hereby acknowledges that all payments by the Investment Agreement
Provider hereunder or under any Related Agreement shall not be made from
Required Third Party Collateral.
Section 3.7. Required Over-Collateralization Deposits.
The Holding Company shall contribute to the Investment Agreement
Provider the initial Required Over Collateralization Deposit and all subsequent
Required Over Collateralization Deposits, which shall become Cash Assets and be
deposited, held, invested and released as provided in the Collateral Management
Agreement as part of the Collateral.
Section 3.8. Administration of Investment Agreement Provider.
The Investment Agreement Provider shall be managed and operated by the
Holding Company and its designees, and the Holding Company and its designees
will provide all administrative support required to operate the Investment
Agreement Provider in a commercially responsible manner and in accordance with
all applicable legal requirements and in accordance with the terms hereof and of
the Related Agreements.
Section 3.9. Maximum Size of Program.
The Investment Agreement Provider shall not enter into Qualified
Investment Agreements which would cause the Investment Agreement Provider to be
providing investments to Investors in excess of the Program Limit, as designated
or changed from time to time by written notice from XLCA to the Investment
Agreement Provider.
Section 3.10. Investment of Amounts Deposited.
All amounts deposited with the Investment Agreement Provider pursuant
to the Qualified Investment Agreements and all earnings thereon other than
Required Third Party Collateral and all other Cash Assets shall be deposited,
held, invested and released only in accordance with the Collateral Management
Agreement.
Section 3.11. Other Cash Assets.
All Cash Assets received pursuant to the Qualified Investment
Agreements and not constituting Required Third Party Collateral shall also be
deposited, held, invested and released only in accordance with the Collateral
Management Agreement.
Section 3.12. Required Third Party Collateral; Other Collateral.
Notwithstanding anything herein to the contrary, to the extent required
pursuant to the Qualified Investment Agreements, the Investment Agreement
Provider shall deliver Required Third Party Collateral to the party authorized
or required to hold the same pursuant to the applicable Qualified Investment
Agreement.
Notwithstanding anything contained in any Related Agreement to the contrary
(including, in particular, Section 3.2(e)), the Investment Agreement Provider
may
19
transfer Cash Assets held in the Collateral Account to third parties to hold as
collateral as part of the management of its investment portfolio or as part of
and related to the business of the Investment Agreement Provider pursuant to the
terms of any International Swaps and Derivatives Association, Inc ("ISDA")
documentation and documentation for any rate swap, asset swap, liability swap,
forward rate transaction, interest rate option, foreign exchange transaction,
cap transaction, floor transaction, collar transaction, currency swap, currency
option, credit protection transaction, credit swap, credit default swap, total
return swap, credit spread transaction, repurchase transaction, reverse
repurchase transaction, buy/sell-back transaction, securities lending or
borrowing transaction or forward purchase or sale of a security or other
financial instrument or interest in connection with the hedging of its business,
the Investment Agreement Provider may deliver Required Third Party Collateral to
the party authorized or required to hold the same pursuant to the applicable
agreement to the extent that after giving effect to any new insurance policies
issued by XLCA, XLCA's aggregate Policy exposure has not been increased.
Section 3.13. Qualified Investment Agreements.
The Investment Agreement Provider shall not enter into any agreement
pursuant to which it offers a return on an investment which does not meet the
requirements to be a Qualified Investment Agreement.
Section 3.14. Program Investment Period.
The Investment Agreement Provider shall not enter into any Qualified
Investment Agreement and XLCA shall not provide any new Policy:
(i) during any period where amounts invested under
Qualified Investment Agreements exceed the then applicable
Program Limit;
(ii) during any period when a Wind Down Event is then
contining;
(iii) after the occurrence of an Event of Default;
(iv) from and after the date set forth in a written
notice from XLCA to the Investment Agreement Provider (which
notice may be sent for any reason), which date shall be at
least twelve (12) months after the date on which such notice
is sent, unless such notice is withdrawn; or
(v) from and after the date set forth in a written
notice from XLCA to the Investment Agreement Provider (which
may be sent if XLCA has a good faith belief that a material
event has or could reasonably be expected to occur with
respect to the Transaction or the Provider Entities, or XLCA's
rating agencies or regulators, with respect to the Transaction
or the Provider Entities) which date shall be at least ninety
(90) days (or such earlier date as XLCA's rating agencies or
regulators shall require) after the date on which such notice
is sent, unless such notice is withdrawn;
20
provided, however, that if (i) the amounts invested in Qualified Investment
Agreements exceed the applicable Program Limit or (ii) a Wind Down Event has
occurred, in either case for more than one (1) time, then XLCA shall not be
required to provide any Policies.
Section 3.15. Management of Investments.
All Cash Assets of the Investment Agreement Provider, including without
limitation, all Collateral and Required Third Party Collateral shall at all
times be managed pursuant to investment guidelines attached hereto as Appendix
III by one or more Portfolio Managers approved by XLCA. Appendix IV sets forth
the list of approved Portfolio Investment Managers.
Each Portfolio Manager shall be removed by the Investment Agreement
Provider only with the prior written consent of XLCA (which consent shall not be
unreasonably withheld, conditioned or delayed). Any replacement selected by the
Investment Agreement Provider shall be appointed only with the prior written
consent of XLCA (which shall not be unreasonably withheld, conditioned or
delayed).
Section 3.16. Notice of Potential Insufficiency.
The Investment Agreement Provider shall deliver a written
notice (a "Notice of Potential Insufficiency") to XLCA at least 2 Business Days
prior to the due date of any required payment under any Qualified Investment
Agreement of the amount, if any, that the Investment Agreement Provider has
reason to expect will be required to be paid under the related Policy on such
due date.
ARTICLE IV
FURTHER AGREEMENTS
Section 4.1. Effective Date; Term of Agreement.
This Insurance Agreement shall take effect on the Initial Closing Date
and shall remain in effect until the later of (a) such time as XLCA is no longer
subject to a claim under any Policy and (b) such time as all amounts payable by
the Provider Entities to XLCA hereunder and under each of the Related Agreements
have been irrevocably paid in full and any period during which any such payment
to XLCA could have been avoided in whole or in part as a preference payment
under applicable bankruptcy, insolvency, receivership or similar law shall have
expired.; provided, however, that the provisions of SECTIONS 3.2, 3.3, 3.4, 3.5,
3.6 and 3.7 hereof shall survive any termination of this Insurance Agreement.
Section 4.2. Further Assurances and Corrective Instruments.
(a) So long as this Agreement is in effect, none of the
Provider Entities shall grant any waiver of rights under any of the Related
Agreements to which it is a party without the prior written consent of XLCA.
(b) To the extent permitted by law, the Provider Entities
agree that they will, from time to time, execute, acknowledge and deliver, or
cause to be executed, acknowledged and
21
delivered within a reasonable period of time, such supplements hereto and such
further instruments as XLCA may request and may be required in XLCA's reasonable
judgment to effectuate the intention of or facilitate the performance of the
Related Agreements.
Section 4.3. Obligations Absolute.
(a) The obligations of the Provider Entities hereunder shall
be absolute and unconditional, and shall be paid or performed strictly in
accordance with this Insurance Agreement.
(b) Notwithstanding anything to the contrary in this Insurance
Agreement, none of the Provider Entities waives any notice of or right to cure
any Wind Down Event or Event of Default or other event of default to the extent
any such notice or right to cure is specifically set forth in any Related
Agreement.
(c) Nothing herein shall be construed as prohibiting any of
the Provider Entities, as the case may be, from pursuing any rights or remedies
it may have against any other Person in a separate legal proceeding.
Section 4.4. Assignments; Reinsurance; Third-Party Rights.
(a) This Insurance Agreement shall be a continuing obligation
of the parties hereto and shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. None of
the Provider Entities may assign its rights or obligations under this Insurance
Agreement, or delegate any of its duties hereunder, without the prior written
consent of XLCA. Any assignment made in violation of this Insurance Agreement
shall be null and void.
(b) XLCA shall have the right to enter into contracts of
reinsurance with respect to the Policy upon such terms and conditions as XLCA
may in its discretion determine; PROVIDED, HOWEVER, that no such reinsurance
agreement or arrangement shall relieve XLCA of any of its obligations hereunder
or under the Policy or shall give such reinsurer direct rights as against the
Provider Entities.
(c) Nothing in this Insurance Agreement shall confer any
right, remedy or claim, express or implied, upon any Person, other than the
parties hereto, and all the terms, covenants, conditions, promises and
agreements contained herein shall be for the sole and exclusive benefit of the
parties hereto and their successors and permitted assigns.
(d) Any party assigning rights or obligations hereunder shall
provide prompt written notice to the Rating Agencies of such action specifying
the rights and obligations assigned and the assignee.
Section 4.5. Confidentiality.
Each party hereto agrees to keep the information and any other
materials and documents which are furnished to the other parties hereto in
connection with the Transaction and in which are identified as being
confidential (collectively, the "Information") in
22
accordance with the receiving party's customary procedures for handling
confidential information, except that the receiving party shall be permitted to
disclose the Information:
(i) to such of its and its affiliates, officers,
directors, employees, counsel, advisors and representatives,
each of whom shall be informed of the confidential nature of
the Information,
(ii) to the extent required by applicable laws and
regulations or by a subpoena or similar legal process
(provided that we shall give you prior notice of the
disclosure unless such notice is prohibited by the law,
subpoena or similar legal process),
(iii) to the extent requested by any rating agency,
reinsurer, prospective reinsurer or regulatory authority,
(iv) to the extent such Information (A) becomes
publicly available other than as a result of a breach of this
agreement, (B) becomes available to us on a non-confidential
basis from a source other than the receiving party or (C) was
available to the receiving party on a non-confidential basis
from a source other than the delivering party provided in each
case under (B) or (C) such source is not, to the receiving
party's knowledge, bound by a confidentiality agreement with
the delivering party or is not otherwise believed by the
receiving party to be prohibited from transmitting the
information to the receiving party,
(v) to the extent the delivering party shall have
consented to such disclosure in writing, and
(vi) to the extent that such Information is
independently developed by the receiving party.
Section 4.6. Liability of XLCA.
Neither XLCA nor any of its officers, directors or employees shall be
liable or responsible for: (a) the use which may be made of the Policy by or for
any beneficiary or agent for beneficiaries thereunder, any depository, any bank,
or any other Person or for any acts or omissions of any beneficiary or agent for
any beneficiary of any Policy; (b) the validity, sufficiency, accuracy or
genuineness of documents or of any endorsements thereon delivered to XLCA in
connection with any claim under the Policy, or of any signatures thereon, even
if such documents or signatures should in fact prove to be in any or all
respects invalid, insufficient, fraudulent or forged or (c) any acts or
omissions to act of any of the Provider Entities or any other person in
connection with the Collateral or the Additional Collateral, unless such act or
omission was at the direction of XLCA. In furtherance and not in limitation of
the foregoing, XLCA may accept documents that appear on their face to be in
order, without responsibility for further investigation.
23
ARTICLE V
WIND DOWN EVENTS; EVENTS OF DEFAULT; REMEDIES
Section 5.1. Wind Down Events.
The occurrence of any of the following events shall constitute a
"Wind-Down Event:"
(i) an Event of Default is then contining;
(ii) amounts invested under Qualified Investment
Agreements exceed the then applicable Program Limit;
(iii) from and after the date set forth in a written
notice from XLCA to the Investment Agreement Provider, which
date shall be as set forth in Section 3.14 (iv) or (v) hereof,
unless such notice is withdrawn; or
(iv) any Provider Entity is required to register
under the Investment Company Act.
The Wind Down Event set forth in clause (ii) above may be cured by the Provider
Entities one time. Any subsequent occurrence of such event or condition shall
only be subject to waiver by XLCA.
Section 5.2. Events of Default.
The occurrence of any of the following events shall constitute an
"Event of Default:"
(a) any of the Provider Entities shall fail to make when due
and payable any payment of Premium required hereunder and a continuation of such
failure for a period of twenty (20) Business Days thereafter;
(b) XLCA shall make any payment under any Policy;
(c) any of the Provider Entities shall fail to pay its debts
generally as they come due, or shall admit in writing its inability to pay its
debts generally, or shall make a general assignment for the benefit of
creditors, or shall institute any proceeding seeking to adjudicate any of the
Provider Entities insolvent or seeking a liquidation, or shall take advantage of
any Insolvency Act, or shall commence a case or other proceeding naming any of
the Provider Entities as debtor under any Insolvency Act, or a case or other
proceeding against any of the Provider Entities under any Insolvency Act shall
be instituted against any of the Provider Entities seeking liquidation of any of
the Provider Entities, as applicable, shall fail to take appropriate action
resulting in the withdrawal or dismissal of such proceeding within 60 days or
there shall be appointed or any of the Provider Entities shall consent to, or
acquiesce in, the appointment of a receiver, liquidator, conservator, trustee or
similar official in respect of itself or the whole or any substantial part of
its properties or assets or any of the Provider Entities shall take any
corporate action in furtherance of any of the foregoing;
24
(d) a Portfolio Manager is removed or resigns and the Provider
Entities fail to appoint a successor from the list of approved Portfolio
Managers on APPENDIX IV or approved by XLCA in accordance with the provisions
hereof and such failure continues for a period of twenty (20) Business Days (or
such longer period as is approved in writing by XLCA) from the effective date of
such removable or resignation;
(e) the Required Collateral Amount is not on deposit as
reported in any Monthly Report and the Investment Agreement Provider fails to
deliver additional Eligible Investments necessary to meet the Required
Collateral Amount to the Collateral Agent within fifteen (15) Business Days of
the date on which the Monthly Report was due;
(f) the absolute difference between the Duration of Portfolio
and the Duration of Investment Agreements as reported in any Monthly Report
exceeds 365 days as of any Monthly Valuation Date and such difference is not
reduced to 365 days or fewer within twenty (20) Business Days of such Monthly
Valuation Date;
(g) any representation or warranty made by any Provider Entity
under any of the Related Agreements, or in any certificate or report furnished
under any of the Related Agreements, shall prove to be untrue, incorrect or
incomplete in any material respect as of the date such representation or
warranty was made; provided, however, that if any Provider Entity effectively
cures any such defect in any representation or warranty under any Related
Agreement, or certificate or report furnished under any Related Agreement,
within twenty (20) Business Days (or such longer period as XLCA shall permit in
writing) after the earlier to occur of (1) the discovery thereof by such party
or (2) the receipt by such party of written notice thereof from XLCA; or within
the time period specified in the relevant Related Agreement as the cure period
therefor, such defect shall not in and of itself constitute an Event of Default
hereunder;
(h) any of the Provider Entities shall have asserted that any
of the Related Agreements to which it is a party is not valid and binding on the
parties thereto; or (ii) any court, governmental authority or agency having
jurisdiction over any of the parties to any of the Related Agreements or any
property thereof shall find or rule that any material provision of any of the
Related Agreements is not valid and binding on the parties thereto and all
appeals therefrom have been decided or the time to appeal has run; in either
case for a period of twenty (20) Business Days after the earlier to occur of (1)
the discovery thereof by such party or (2) the receipt by such party of written
notice thereof from XLCA;
(i) any of the Provider Entities shall fail to perform or
observe any other material covenant or agreement contained herein or in any of
the Related Agreements (except for the obligations otherwise described Section
5.1 or Section 5.2 and such failure shall continue for a period of twenty (20)
Business Days (or such longer period as XLCA shall permit in writing) after the
earlier to occur of (1) the discovery thereof by such party or (2) the receipt
by such party of written notice thereof from XLCA; PROVIDED, HOWEVER, that, if
such failure shall be of a nature that it cannot be cured within the period
otherwise permitted, such failure shall not constitute an Event of Default
hereunder if within such period, as applicable, the applicable Provider Entity
shall have given notice to XLCA of corrective action it proposes to take, which
25
corrective action is agreed in writing by XLCA to be satisfactory and the
applicable Provider Entity shall thereafter pursue such corrective action
diligently until such default is cured;
(j) the occurrence of an event of default (with all notice and
cure periods herewith ended) under the Related Agreements except for the Policy
and such event of default shall continue for twenty (20) Business Days (or such
longer period as XLCA shall permit in writing) after the earlier to occur of (1)
the discovery thereof by such party or (2) the receipt by such party of written
notice thereof from XLCA;
(k) any of the Provider Entities shall have consolidated with
or merged with or into any Person or any of the Provider Entities shall have
transferred all or any material amount of its assets to any Person or liquidated
or dissolved (an "Acquisition Event"), in each case without the written consent
of XLCA; or
(l) the amount invested under Qualified Investment Agreements
exceeds the then applicable Program Limit by ten percent (10%) or more over the
then applicable Program Limit.
Section 5.3. Remedies on a Wind Down Event.
(a) Upon the occurrence and continuation of a Wind Down Event,
XLCA may exercise any one or more of the rights and remedies set forth below:
(i) the Investment Agreement Provider shall not enter into
any Qualified Investment Agreement;
(ii) XLCA shall not be required to provide any new
Policies.
Section 5.4. Remedies on an Event of Default.
(a) Upon the occurrence and continuation of an Event of
Default, XLCA may exercise any one or more of the rights and remedies set forth
below:
(i) declare all obligations or indebtedness of every
type or description owed by any of the Provider Entities to
XLCA to be immediately due and payable, and the same shall
thereupon be immediately due and payable;
(ii) declare all or a portion of the Premium that has
accrued or will accrue to be payable, and the same shall
thereupon be immediately due and payable to the extent then
accrued and shall thereupon become immediately due and payable
upon accrual to the extent accruing thereafter, whether or not
XLCA shall have declared an "Event of Default" or shall have
exercised, or be entitled to exercise, any other rights or
remedies hereunder;
(iii) exercise any rights and remedies available
under the Related Agreements as provided therein, including
foreclosing on the Collateral and
26
delivering the Notice of Sole Control and any entitlement
orders to the Securities Intermediary as provided under the
Securities Account Control Agreement;
(iv) removal of any Portfolio Manager and replacement
of the same in its sole discretion;
(v) take whatever action at law or in equity as may
appear necessary or desirable in its judgment to collect the
amounts then due and thereafter to become due under the
Related Agreements or to enforce performance of any obligation
of the Provider Entities under the Related Agreements, in each
case in accordance with the terms thereof; or
(vi) XLCA may in its sole and absolute discretion,
and without notice, remove the Holding Company and any or all
of its designees and take control of all or a portion of the
management and operations of the Investment Agreement
Provider, either directly or through designees.
Section 5.5. Waivers.
(a) No remedy herein conferred upon or reserved is intended to
be exclusive of any other available remedy, but each remedy shall be cumulative
and shall be in addition to other remedies given under the Related Agreements or
existing at law or in equity. No delay or failure to exercise any right or power
accruing under any Related Agreement upon the occurrence of any, Event of
Default or Wind Down Event or otherwise, nor any single or partial exercise of
any right or power, shall impair any such right or power or shall be construed
to be a waiver thereof, but any such right and power may be exercised from time
to time and as often as may be deemed expedient. In order to entitle XLCA to
exercise any remedy reserved to XLCA in this Article, it shall not be necessary
to give any notice, other than such notice as may be expressly required in this
Article or any Related Agreement under which XLCA is exercising a particular
remedy in connection with its rights hereunder, provided that any such notice
shall be in writing.
(b) If any proceeding has been commenced to enforce any right
or remedy under this Insurance Agreement, and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
XLCA, then and in every such case the parties hereto shall, subject to any
determination in such proceeding, be restored to their respective former
positions hereunder, and, thereafter, all rights and remedies of XLCA shall
continue as though no such proceeding had been instituted.
(c) XLCA shall have the right, to be exercised in its complete
discretion, to waive any breach of any covenant, default or Wind-Down Event or
Event of Default by a writing setting forth the terms, conditions and extent of
such waiver signed by XLCA and delivered to the other parties hereto. Any such
waiver may only be effected in writing duly executed by XLCA, and no other
course of conduct shall constitute a waiver of any provision hereof. Unless such
writing expressly provides to the contrary, any waiver so granted shall extend
only to the specific event or occurrence so waived and not to any other similar
event or occurrence.
27
ARTICLE VI
MISCELLANEOUS
Section 6.1. Amendments, etc.
This Insurance Agreement may be amended, modified or terminated only by
written instrument or written instruments signed by the parties hereto. No act
or course of dealing shall be deemed to constitute an amendment, modification or
termination hereof unless it is communicated in writing and agreed to by the
parties.
Section 6.2. Notices.
All demands, notices and other communications to be given hereunder
shall be in writing (except as otherwise specifically provided herein) and shall
be mailed by registered mail or personally delivered or telecopied (confirmation
received) to the recipient as follows:
(a) To XLCA:
XL Capital Assurance Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Surveillance
Confirmation: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(in each case in which notice or other communication to XLCA
refers to a Wind-Down Event, an Event of Default or a claim on
the Policy or with respect to which failure on the part of
XLCA to respond shall be deemed to constitute consent or
acceptance, then a copy of such notice or other communication
should also be sent to the attention Surveillance and shall be
marked to indicate "URGENT MATERIAL ENCLOSED.")
(b) To Investment Agreement Provider:
XL Asset Funding Company I LLC
▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Financial Administration Department
Confirmation: ▇-▇▇▇-▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(c) To Holding Company:
The President and General Counsel
XL Life and Annuity Holding Company
▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Phone: ▇▇▇-▇▇▇-▇▇▇▇
Fax:: ▇▇▇-▇▇▇-▇▇▇▇
28
A party may specify an additional or different address or addresses by writing
mailed or delivered to the other parties and each Rating Agency as aforesaid.
All such notices and other communications shall be effective upon receipt.
Section 6.3. Payment Procedure.
In the event of any payment by XLCA for which it is entitled to be
reimbursed or indemnified as provided in or pursuant to this Insurance
Agreement, the Provider Entities agree to accept the voucher or other evidence
of payment as prima facie evidence of the propriety thereof and the liability
therefor to XLCA in the absence of manifest error. All payments to be made to
XLCA under this Insurance Agreement shall be made to XLCA in lawful currency of
the United States of America in immediately available funds to the account
number provided in the Premium Letter before 1:00 p.m. (New York, New York time)
on the date when due or as XLCA shall otherwise direct by written notice to the
other parties hereto. In the event that the date of any payment to XLCA or the
expiration of any time period hereunder occurs on a day which is not a Business
Day, then such payment or expiration of time period shall be made or occur on
the next succeeding Business Day with the same force and effect as if such
payment was made or time period expired on the scheduled date of payment or
Termination Date. Payments to be made to XLCA under Section 3.2 or 3.3 of this
Insurance Agreement or the Premium Letter shall bear interest at the Late
Payment Rate from the date when due to the date paid.
Section 6.4. Severability.
In the event that any provision of this Insurance Agreement shall be
held invalid or unenforceable by any court of competent jurisdiction, the
parties hereto agree that such holding shall not invalidate or render
unenforceable any other provision hereof. The parties hereto further agree that
the holding by any court of competent jurisdiction that any remedy pursued by
any party hereto is unavailable or unenforceable shall not affect in any way the
ability of such party to pursue any other remedy available to it.
Section 6.5. Limitation on Interest.
No provision in this Agreement shall require the payment or permit the
collection of interest in excess of the maximum rate by applicable law.
Section 6.6. Governing Law.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED, AND THE OBLIGATIONS,
RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED, IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAW
PRINCIPLES.
29
Section 6.7. Consent to Jurisdiction.
(a) THE PARTIES HERETO HEREBY IRREVOCABLY SUBMIT TO THE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK AND ANY COURT IN THE STATE OF NEW YORK LOCATED IN THE CITY AND COUNTY
OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION, SUIT OR
PROCEEDING BROUGHT AGAINST IT AND TO OR IN CONNECTION WITH THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREUNDER OR FOR RECOGNITION OR ENFORCEMENT OF ANY
JUDGMENT, AND THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREE
THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD OR
DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN
SUCH FEDERAL COURT. THE PARTIES HERETO AGREE THAT A FINAL JUDGMENT IN ANY SUCH
ACTION, SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. TO
THE EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES HERETO HEREBY WAIVE AND
AGREE NOT TO ASSERT BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE IN ANY SUCH
SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF SUCH COURTS, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN
AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS
IMPROPER OR THAT THE RELATED DOCUMENTS OR THE SUBJECT MATTER THEREOF MAY NOT BE
LITIGATED IN OR BY SUCH COURTS.
(b) To the extent permitted by applicable law, the parties
hereto shall not seek and hereby waive the right to any review of the judgment
of any such court by any court of any other nation or jurisdiction which may be
called upon to grant an enforcement of such judgment.
(c) Each of the Provider Entities hereby irrevocably appoints
and designates the Persons specified in Section 6.2 hereof, as its true and
lawful attorney and duly authorized agent for acceptance of service of legal
process, and agrees to maintain such person as such. Each of the Provider
Entities agrees that service of such process upon such Person by mail shall
constitute personal service of such process upon it.
(d) Nothing contained in this Insurance Agreement shall limit
or affect XLCA's right to serve process in any other manner permitted by law or
to start legal proceedings relating to any of the Related Agreements against any
of the Provider Entities or their property in the courts of any jurisdiction.
Section 6.8. Consent of XLCA.
In the event that XLCA's consent is required under any of the Related
Agreements, the determination whether to grant or withhold such consent shall be
made by XLCA in its sole discretion without any implied duty towards any other
Person, except as otherwise provided therein.
30
Section 6.9. Counterparts.
This Insurance Agreement may be executed in counterparts by the parties
hereto, and all such counterparts shall constitute one and the same instrument.
Section 6.10. Trial by Jury Waived.
EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
LAW, ANY RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION ARISING DIRECTLY
OR INDIRECTLY OUT OF, UNDER OR IN CONNECTION WITH ANY OF THE RELATED DOCUMENTS
OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREUNDER. EACH PARTY HERETO (A)
CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY PARTY HERETO HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT IT WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
HAS BEEN INDUCED TO ENTER INTO THE RELATED DOCUMENTS TO WHICH IT IS A PARTY BY,
AMONG OTHER THINGS, THIS WAIVER.
Section 6.11. Limited Liability.
No recourse under any Related Agreement shall be had against, and no
personal liability shall attach to, any officer, employee, director, affiliate
member, beneficial owner or shareholder of any party hereto, as such, by the
enforcement of any assessment or by any legal or equitable proceeding, by virtue
of any statute or otherwise in respect of any of the Related Agreements, or the
Policy, it being expressly agreed and understood that each Related Agreement is
solely a corporate obligation of each party hereto, and that any and all
personal liability, either at common law or in equity, or by statute or
constitution, of every such officer, employee, director, affiliate or
shareholder for breaches by any party hereto of any obligations under any
Related Agreement is hereby expressly waived as a condition of and in
consideration for the execution and delivery of this Insurance Agreement.
Section 6.12. Entire Agreement.
This Insurance Agreement, the Premium Letter, the Related Agreements
and the Policy set forth the entire agreement between the parties with respect
to the subject matter thereof, and this Insurance Agreement supersedes and
replaces any agreement or understanding that may have existed between the
parties prior to the date hereof in respect of such subject matter.
Section 6.13. Headings.
The headings of articles and sections and the table of contents
contained in this Insurance Agreement are provided for convenience only. They
form no part of this Insurance Agreement and shall not affect its construction
or interpretation. Unless otherwise indicated, all references to articles and
sections in this Insurance Agreement refer to the corresponding articles and
sections of this Insurance Agreement.
Section 6.14. No Partnership.
31
Nothing in this Insurance Agreement or any other agreement entered into
in connection with the Transaction shall be deemed to constitute XLCA a partner,
co-venturer or joint owner of property with any other entity.
Section 6.15. No Proceedings.
XLCA hereby agrees that it will not institute against Investment
Agreement Provider, or join any other Person in instituting against Investment
Agreement Provider, any Insolvency Proceeding prior to the date which is one
year and one day after the payment in full of all obligations under the
Investment Agreements. Nothing in the foregoing sentence shall limit the right
of XLCA to file any claim in or otherwise take any action with respect to any
Insolvency Proceeding that was instituted against Investment Agreement Provider
by any Person other than XLCA.
32
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Insurance Agreement, all on the day and year first above written.
XL CAPITAL ASSURANCE INC., a New York
` stock insurance corporation
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
__________________________________
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Senior Managing Director
XL ASSET FUNDING COMPANY I LLC, a
Delaware limited liability company
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
__________________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: President
XL LIFE AND ANNUITY HOLDING COMPANY,
a Delaware Corporation
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
__________________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: President
[SIGNATURE PAGE TO INSURANCE AND INDEMNITY AGREEMENT]
33
APPENDIX I
DEFINITIONS
"AGREEMENT DATE" means the date a particular Qualified
Investment Agreement is executed and delivered by the Investment Agreement
Provider.
"APPROVALS" shall have the meaning assigned in SECTION 2.1(A)
of this Insurance Agreement.
"BANKRUPTCY CODE" means the federal Bankruptcy Code, Title 11
of the United States Code (11 U.S.C. 101 et seq), as amended from time to time,
and any successor statute.
"BUSINESS DAY" means any day which is not a Saturday or a
Sunday or a day on which banks located in the City of New York are authorized or
required by law or executive order to close or any day on which any party hereto
is not closed to normal business due to force majeure (including but not limited
to war, civil or political unrest, fire, flood).
"CASH ASSETS" means cash and investments belonging to the
Investment Agreement Provider resulting from the Qualified Investment
Agreements.
"CODE" means the Internal Revenue Code of 1986, including,
unless the context otherwise requires, the rules and regulations thereunder, as
amended from time to time.
"COLLATERAL" shall have the meaning ascribed to such term in
the Collateral Management Agreement.
"COLLATERAL ACCOUNT" shall have the meaning ascribed to such
term in the Collateral Management Agreement.
"COLLATERAL AGENT" means Mellon Bank, N.A.
"COLLATERAL MANAGEMENT AGREEMENT" means that certain
Collateral Pledge, Security and Management Agreement by and among XLCA, the
Provider Entities and the Collateral Agent dated as of October 13, 2006, as the
same may be amended, modified and supplemented from time to time.
"COMMISSION" means the Securities and Exchange Commission.
"COMMONLY CONTROLLED ENTITY" means the Provider Entities, as
the case may be, and each entity, whether or not incorporated, which is
affiliated with any of the foregoing pursuant to Section 414(b), (c), (m) or (o)
of the Code.
"DEFAULT" means any event or condition which results, or which
with the giving of notice or the lapse of time or both could reasonably be
expected to result, in an Event of Default.
I-1
"DURATION OF INVESTMENT AGREEMENT" shall have the meaning
given thereto in the applicable Monthly Report.
"DURATION OF PORTFOLIO" shall have the meaning given thereto
in the applicable Monthly Report.
"EVENT OF DEFAULT" shall have the meaning specified in Section
5.2 of this Insurance Agreement.
"HOLDING COMPANY" means XL Life and Annuity Holding Company, a
Delaware corporation and any successor thereto or assign thereof.
"INVESTMENT AGREEMENT PROVIDER" means XL Asset Funding Company
I, LLC, a Delaware limited liability company, and any successor thereto or
assign thereof.
"INDEBTEDNESS" means, with respect to any Person, without
duplication (it being understood, for the avoidance of doubt that Qualified
Investment Agreement liabilities shall not be deemed to constitute Indebtedness)
at any time, (a) indebtedness or liability of such Person for borrowed money
whether or not evidenced by bonds, debentures, notes or other instruments, or
for the deferred purchase price of property or services (including trade
obligations); (b) obligations of such Person as lessee under leases which should
have been or should be, in accordance with United States generally accepted
accounting principles, recorded as capital leases; (c) obligations issued for or
liabilities incurred on the account of such Person; (d) obligations or
liabilities of such Person arising under acceptance facilities; (e) obligations
of such Person under any guarantees, endorsements (other than for collection or
deposit in the ordinary course of business) and other contingent obligations to
purchase, to provide funds for payment, to supply funds to invest in any Person
or otherwise to assure a creditor against loss; (f) obligations of such Person
secured by any Lien on property or assets of such Person, whether or not the
obligations have been assumed by such Person, except for Liens for Required
Third Party Collateral; or (g) obligations of such Person under any interest
rate or currency exchange agreement; provided Indebtedness shall not include (i)
Qualified Investment Agreement liabilities, (ii) liabilities arising from the
management of its investment portfolio, including, but not limited to, pursuant
to any International Swaps and Derivatives Association, Inc ("ISDA")
documentation, (iii) Liens related to the business of the Investment Agreement
Provider under any agreement related to transactions such as a rate swap, asset
swap, liability swap, forward rate transaction, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
currency swap, currency option, credit protection transaction, credit swap,
credit default swap, total return swap, credit spread transaction, repurchase
transaction, reverse repurchase transaction, buy/sell-back transaction,
securities lending or borrowing transaction or forward purchase or sale of a
security or other financial instrument or interest or (iv) expenses payable in
the ordinary course of business.
"INDEMNIFIED PARTY" or "INDEMNIFIED PARTIES" shall have the
meaning assigned in SECTION 3.4(A) of this Insurance Agreement.
"INDEMNIFYING PARTY" shall have the meaning assigned in
SECTION 3.4(A) of this Insurance Agreement.
I-2
"INITIAL CLOSING DATE" means the date this Agreement is
executed and delivered by the parties hereto.
"INITIAL TRANSACTION" means the execution and delivery of this
Agreement and the Collateral Management Agreement and all related actions to
effect such events.
"INSOLVENCY LAW" means any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors.
"INSOLVENCY PROCEEDING" shall have the meaning assigned to
such term in the Notice of Claim.
"INSURANCE AGREEMENT" means this Insurance and Indemnity
Agreement dated as of October 13, 2006, among Investment Agreement Provider,
Holding Company and XLCA, as the same may be amended from time to time.
"INSURER DEFAULT" means the existence and continuance of any
of the following: (a) a failure by XLCA to make a payment when or as required
under this Insurance Agreement in accordance with its terms or under the Policy
in accordance with its terms and the continuation thereof for two (2) Business
Days; or (b)(i) XLCA (A) files any petition or commences any case or proceeding
under any provision or chapter of the Bankruptcy Code or any other similar
federal or state law relating to insolvency, bankruptcy, rehabilitation,
liquidation or reorganization, (B) makes a general assignment for the benefit of
its creditors, or (C) has an order for relief entered against it under the
Bankruptcy Code or any other similar federal or state law relating to
insolvency, bankruptcy, rehabilitation, liquidation or reorganization which is
final and nonappealable; or (ii) a court of competent jurisdiction, the New York
Department of Insurance or other competent regulatory authority enters a final
and nonappealable order, judgment or decree (A) appointing a custodian, trustee,
agent or receiver for XLCA or for all or any material portion of its property or
(B) authorizing the taking of possession by a custodian, trustee, agent or
receiver of XLCA (or the taking if possession of all or any material portion of
the property of XLCA).
"INVESTMENT" means the principal invested by an Investor under
a Qualified Investment Agreement.
"INVESTMENT COMPANY ACT" means the Investment Company Act of
1940, including, unless the context otherwise requires, the rules and
regulations thereunder, as amended from time to time.
"INVESTOR" means the party entering into a Qualified
Investment Agreement with the Investment Agreement Provider.
"IRS" means the Internal Revenue Service.
"LATE PAYMENT RATE" means the lesser of (a) the Prime Rate
plus 2% and the maximum rate permissible under applicable usury or similar laws
limiting interest rates. The Late Payment Rate shall be computed on the basis of
the actual number of days elapsed over a
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year of 360 days. The Late Payment Rate shall be calculated by XLCA and
evidenced by a certificate of XLCA delivered to the Trustee.
"LIEN" means, as applied to the property or assets (or the
income or profits therefrom) of any Person, in each case whether the same is
consensual or nonconsensual or arises by contract, operation of law, legal
process or otherwise: (a) any mortgage, lien, pledge, hypothecation, assignment,
deposit arrangement, preference priority or other security agreement of
preferential arrangement, attachment, charge, lease, conditional sale or other
title retention agreement, or other security interest or encumbrance of any
kind; or (b) any arrangement, express or implied, under which such property or
assets are transferred, sequestered or otherwise identified for the purpose of
subjecting or making available the same for the payment of debt or performance
of any other obligation in priority to the payment of the general, unsecured
creditors of such Person.
"MATERIAL ADVERSE CHANGE" means, (A) in respect of any Person,
a material adverse change in (i) the business, financial condition, results of
operations, properties of such Person or any of the Provider Entities, or (ii)
the ability of such Person to perform its obligations under any of the Related
Agreements to which it is a party; and (B) with respect to the Transaction, a
material adverse change in (i) the Collateral or the Additional Collateral, (ii)
the first priority perfected security interest of the Collateral Agent, on
behalf of the XLCA in the Collateral, (iii) the ability of the Collateral Agent
to liquidate, or foreclose against, the Collateral, or (iv) the practical
realization by XLCA of any of the benefits or security afforded under any of the
Related Agreements.
"MONTHLY VALUATION DATE" shall have the meaning set forth in
the Collateral Management Agreement.
"NOTICE OF CLAIM" means a Payment Notice in the form attached
as Exhibit A to Endorsement No. 1 to the Policy.
"NOTICE OF POTENTIAL INSUFFICIENCY" shall have the meaning set
forth in Section 3.16 hereof.
"OPERATING ACCOUNT" shall have the meaning ascribed to such
term in the Collateral Management Agreement.
"ORGANIC DOCUMENTS" means the documents governing the
formation, governance and dissolution of an entity.
"OVER COLLATERALIZATION RATIO" means the ratio of the
aggregate market value of Collateral plus Required Third Party Collateral,
including accrued interest, to the aggregate amount of the Investments under the
Qualified Investment Agreements (as defined therein) and aggregate accrued
earnings owed thereunder (as defined therein).
"PERMITTED LIENS" has the meaning set forth in Section 2.3(e).
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"PERSON" means an individual, joint stock company, trust,
unincorporated association, joint venture, corporation, business or owner trust,
limited liability company, partnership or other organization or entity (whether
governmental or private).
"POLICY" means, any one of the financial guaranty insurance
policies, issued by XLCA, pursuant to the Insurance Agreement.
"POLICY REQUEST FORM" means the form to be delivered by the
Investment Agreement Provider to XLCA prior to the issuance of a Policy
substantially in the form of Appendix VI hereto.
"PORTFOLIO MANAGER" means any party that enters into a written
agreement with the Investment Agreement Provider to manage any Cash Assets or
investments thereof for the Investment Agreement Provider, appointed in
accordance with Section 3.9 hereof.
"PREMIUM" means the premium payable in accordance with SECTION
3.2 of this Insurance Agreement.
"PREMIUM LETTER" means the letter agreement among XLCA and the
Investment Agreement Provider dated the date hereof in respect of the premium
payable by the Provider Entities in consideration of the issuance of the Policy.
"PRIME RATE" means the rate of interest per annum publicly
announced from time to time by Citibank, N.A. or any successor thereto as its
prime rate in effect at its principal office in New York City. Each change in
the Prime Rate shall be effective from and including the date such change is
publicly announced as being effective.
"PROGRAM LIMIT" shall mean the amount designated by XLCA in
accordance with Section 3.9 hereof as the maximum principal amount outstanding
at any one time under all Qualified Investment Agreements collectively.
"PROVIDER ENTITIES" means Investment Agreement Provider, and
Holding Company.
"PROVIDER ENTITIES REPRESENTATIVE" means any representative,
manager or officer of any of the Provider Entities or any Person acting on
behalf of the Provider Entities designated as such by the management committee
of any of the Provider Entities and communicated in writing to XLCA and
reasonably acceptable to XLCA.
"QUALIFIED INVESTMENT AGREEMENT" means an Investment Agreement
entered into by the Investment Agreement Provider meeting the requirements set
forth in Appendix II hereto.
"RATING AGENCIES" shall mean ▇▇▇▇▇'▇ Investors Service, Inc.,
Standard & Poor's Ratings Services and Fitch, Inc., and any successor to same
thereof.
"RELATED AGREEMENTS" shall mean the Collateral Management
Agreement, the Qualified Investment Agreements, the Securities Account Control
Agreement, the Insurance Agreement, each Policy and Premium Letter.
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"REQUIRED COLLATERAL AMOUNT" shall have the meaning ascribed
thereto in the Collateral Management Agreement.
"REQUIRED OVER COLLATERALIZATION DEPOSITS" shall have the
meaning ascribed thereto in the Collateral Management Agreement.
"REQUIRED THIRD PARTY COLLATERAL" means money and investments
held as collateral for an Investor under a Qualified Investment Agreement and
any other similar agreement including but not limited to collateralized
investment agreements, repos and reverse repos.
"SECURITIES ACCOUNT CONTROL AGREEMENT" means the agreement
among the Investment Agreement Provider, XLCA and Mellon Bank, N.A. as amended,
modified or supplemented.
"SECURITIES ACT" means the Securities Act of 1933, including,
unless the context otherwise requires, the rules and regulations thereunder, as
amended from time to time.
"SECURITY DOCUMENTS" means the Guaranty and any ancillary
documents executed or filed to evidence or perfect the security interest of the
XLCA Class A.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of
1934, including, unless the context otherwise requires, the rules and
regulations thereunder, as amended from time to time.
"SUBSIDIARY" means, with respect to any Person, any
corporation, partnership, association or other business entity of which a
majority of the outstanding shares of capital stock or other equity interests
having ordinary voting power for the election of directors or their equivalent
is at the time owned by such Person directly or through one or more
Subsidiaries.
"TERM OF THE AGREEMENT" shall be determined as provided in
Section 4.1 of this Insurance Agreement.
"TERMINATION DATE" means the final date of the term of the
Policy with the longest remaining term, as specified in such Policy.
"TRANSACTION" means the transactions contemplated by the
Related Agreements.
"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"WIND DOWN EVENT" shall have the meaning specified in Section
5.1 of this Insurance Agreement.
"XLCA" means XL Capital Assurance Inc., a New York stock
insurance company and its successors and assigns.
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