SECURITIES ACCOUNT CONTROL
AGREEMENT
This
Securities Account Control Agreement (the “Agreement”)
dated as of September 25, 2008 among Hanover Capital Mortgage
Holdings, Inc. (the “Debtor”), JWH Holding Company, LLC
(the “Secured Party”) and Regions Bank (the
“Securities Intermediary”). Capitalized terms used but
not defined herein shall have the meanings assigned in the Loan and
Security Agreement, to be entered into as of September 26,
2008, between Debtor and the Secured Party (the “Security
Agreement”). All references herein to the “UCC”
shall mean the Uniform Commercial Code as in effect in the State of
New York.
1. Establishment of Securities Account . The Secured
Party and the Debtor do hereby appoint the Securities Intermediary
as securities intermediary, and the Securities Intermediary does
hereby accept the appointment as securities intermediary and agrees
to act on the terms and conditions described herein. The Securities
Intermediary hereby confirms that (i) the Securities
Intermediary has established account number 1046005132 in the name
“Regions Bank as Securities Intermediary for JWH Holding
Company, LLC” (such account and any successor account the
“Securities Account”), (ii) the Securities Account
is a “securities account” as such term is defined in
§8-501(a) of the UCC, (iii) the Securities Intermediary
shall, subject to the terms of this Agreement, treat the Debtor as
entitled to exercise the rights that comprise any financial asset
credited to the account, (iv) all property delivered to the
Securities Intermediary pursuant to the Security Agreement will be
promptly credited to the Securities Account, and (v) all
securities or other property underlying any financial assets
credited to the Securities Account shall be registered in the name
of the Securities Intermediary, endorsed to the Securities
Intermediary or in blank or credited to another securities account
maintained in the name of the Securities Intermediary and in no
case will any financial asset credited to the Securities Account be
registered in the name of the Debtor, payable to the order of the
Debtor or specially endorsed to the Debtor except to the extent the
foregoing have been specially endorsed to the Securities
Intermediary or in blank.
2. “ Financial Assets” Election .
The Securities Intermediary hereby agrees that each item of
property (whether investment property, financial asset, security,
instrument or cash) credited to the Securities Account shall be
treated as a “financial asset” within the meaning of
§8-102(a)(9) of the UCC.
3. Entitlement Orders . If at any time the Securities
Intermediary shall receive an “entitlement order”
(within the meaning of §8-102(a)(8) of the UCC) issued by the
Secured Party and relating to the Securities Account, the
Securities Intermediary shall comply with such entitlement order
without further consent by the Debtor or any other
person.
4. Subordination of Lien; Waiver of Set-Off . In the
event that the Securities Intermediary has or subsequently obtains
by agreement, operation of law or otherwise a security interest in
the Securities Account or any security entitlement credited
thereto, the Securities Intermediary hereby agrees that such
security interest shall be subordinate to the security interest of
the Secured Party. The financial assets and other items deposited
to the Securities Account will not be subject to deduction,
set-off, banker’s lien, or any other right in favor of any
person other than the Secured Party (except that the Securities
Intermediary may set off (i) all amounts due to it in respect of
its customary fees and expenses for the routine
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maintenance and
operation of the Securities Account, and (ii) the face amount
of any checks which have been credited to the Securities Account
but are subsequently returned unpaid because of uncollected or
insufficient funds).
5. Choice of Law . Both this Agreement and the
Securities Account shall be governed by the laws of the State of
New York. Regardless of any provision in any other agreement, for
purposes of the UCC, New York shall be deemed to be the Securities
Intermediary’s jurisdiction and the Securities Account (as
well as the securities entitlements related thereto) shall be
governed by the laws of the State of New York.
6. Conflict with other Agreements . There are no
other agreements entered into between the Securities Intermediary
and the Debtor with respect to the Securities Account. In the event
of any conflict between this Agreement (or any portion thereof) and
any other agreement now existing or hereafter entered into, the
terms of this Agreement shall prevail.
7. Amendments . No amendment or modification of this
Agreement or waiver of any right hereunder shall be binding on any
party hereto unless it is in writing and is signed by all of the
parties hereto.
8. Notice of Adverse Claims . Except for the claims
and interest of the Secured Party and of Debtor in the Securities
Account, the Securities Intermediary does not know of any claim to,
or interest in, the Securities Account or in any “financial
asset” (as defined in §8-102(a) of the UCC) credited
thereto. If any person asserts any lien, encumbrance or adverse
claim (including any writ, garnishment, judgment, warrant of
attachment, execution or similar process) against the Securities
Account or in any financial asset carried therein, the Securities
Intermediary will promptly notify the Secured Party and Debtor
thereof.
9. Maintenance of Securities Account . In addition
to, and not in lieu of, the obligation of the Securities
Intermediary to honor entitlement orders as agreed in §3
hereof, the Securities Intermediary agrees to maintain the
Securities Account as follows:
a. Sole
Control with Secured Party . Except as expressly provided in
this Section 9, the Securities Intermediary agrees that it
will take all instruction with respect to the account solely from
the Secured Party.
b. Voting
Rights . Until such time as the Securities Intermediary
receives instructions from the Secured Party to the contrary, the
Debtor shall direct the Securities Intermediary with respect to the
voting of any financial assets credited to the Securities
Account.
c.
Permitted Investments . Until such time as the Securities
Intermediary receives instructions from the Secured Party to the
contrary, the Debtor shall direct the Securities Intermediary with
respect to the selection of investments to be made; provided,
however, that the Securities Intermediary shall not honor any
instruction to purchase any investments other than investments of a
type described on Exhibit A hereto.
d. Income
on Investments . Until such time as the Securities Intermediary
receives instructions from the Secured Party to the contrary, the
Debtor shall have the right to instruct the Securities Intermediary
to transfer any interest or dividends earned with respect
to
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any of the
financial assets credited to the Securities Account to it, and the
Securities Intermediary will comply with any such
instructions.
e. Income
on Investments . Until such time as the Securities Intermediary
receives instructions from the Secured Party to the contrary, the
Debtor shall have the right to instruct the Securities Intermediary
to transfer any cash received on account of the principal of any of
the financial assets credited to the Securities Account to the
Secured Party to be applied to amounts owing under the Security
Agreement.
f.
Statements and Confirmations . The Securities Intermediary
will promptly send copies of all statements, confirmations and
other correspondence concerning the Securities Account and/or any
financial assets credited thereto simultaneously to each of the
Debtor and the Secured Party at the address set forth in
Section 12 of this Agreement.
g. Tax
Reporting . All items of income, gain, expense and loss
recognized in the Securities Account shall be reported to the
Internal Revenue Service and all state and local taxing authorities
under the name and taxpayer identification number of the
Debtor.
10. Instructions . The Secured Party agrees with the
Debtor that it will not provide instructions to the contrary to the
Securities Intermediary pursuant to clauses b. through e. of
Section 9 above until the earlier of
(i) February 15, 2009, (ii) the date on which the
Secured Party demands repayment of the loans made pursuant to the
Security Agreement or (iii) the occurrence of either of the
following: (a) an involuntary proceeding shall be commenced or
an involuntary petition shall be filed seeking
(1) liquidation, reorganization or other relief in respect of
the Debtor or its debts, or of a substantial part of its assets,
under any Federal, state or foreign bankruptcy, insolvency,
receivership or similar law now or hereafter in effect or
(2) the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for the Debtor or for
a substantial part of its assets, and, in any such case, such
proceeding or petition shall continue undismissed for 60 days
or an order or decree approving or ordering any of the foregoing
shall be entered; or (b) the Debtor shall (1) voluntarily
commence any proceeding or file any petition seeking liquidation,
reorganization or other relief under any Federal, state or foreign
bankruptcy, insolvency, receivership or similar law now or
hereafter in effect, (2) consent to the institution of, or
fail to contest in a timely and appropriate manner, any proceeding
or petition described in clause (a) of this clause (iii),
(3) apply for or consent to the appointment of a receiver,
trustee, custodian, sequestrator, conservator or similar official
for the Debtor or for a substantial part of its assets,
(4) file an answer admitting the material allegations of a
petition filed against it in any such proceeding, (5) make a
general assignment for the benefit of creditors or (6) take
any action for the purpose of effecting any of the
foregoing.
11. Representations, Warranties and Covenants of the
Securities Intermediary . The Securities Intermediary
hereby makes the following representations, warranties and
covenants:
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a.
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The
Securities Account has been established as set forth in
Section 1 above and the Securities Account will be maintained
in the manner set forth herein until termination of this Agreement.
The Securities
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Intermediary
shall not change the name or account number of the Securities
Account without the prior written consent of the Secured
Party.
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b.
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No
financial asset is or will be registered in the name of Debtor,
payable to its order, or specially endorsed to it, except to the
extent such financial asset has been endorsed to the Securities
Intermediary or in blank.
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c.
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This Securities Account Control
Agreement is the valid and legally binding obligations of the
Securities Intermediary.
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d.
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The
Securities Intermediary has not entered into, and until the
termination of this Agreement will not enter into, any agreement
with any other person relating to any of the Securities Account
and/or any financial assets credited thereto pursuant to which it
has agreed to comply with entitlement orders (as defined in
§8-102(a) (8) of the UCC) of such person. The Securities
Intermediary has not entered into any other agreement with the
Debtor or Secured Party purporting to limit or condition the
obligation of the Securities Intermediary to comply with
entitlement orders as set forth in Section 3
hereof.
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12. Successors . The terms of this Agreement shall be
binding upon, and shall inure to the benefit of, the parties hereto
and their respective corporate successors and permitted
assigns.
13. Notices . Any notice, request or other
communication required or permitted to be given under this
Agreement shall be
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