[XXXXXXXX CHANCE LOGO]
EXHIBIT 10.36
EXECUTION COPY
BARCLAYS BANK PLC
AS SECURED PARTY
ALLIED WORLD ASSURANCE COMPANY, LTD
AS PLEDGOR
MELLON BANK, N.A.
AS BANK
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ACCOUNT CONTROL AGREEMENT
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CONTENTS
CLAUSE PAGE
1. The Account............................................... 3
2. Control By Secured Party.................................. 3
3. Pledgor's Rights In Account............................... 3
4. Priority Of Secured Party's Security Interest............. 6
5. Statements, Confirmations And Notices Of Adverse Claims... 6
6. Bank's Responsibility..................................... 6
7. Indemnity................................................. 7
8. Termination; Survival..................................... 7
9. Governing Law............................................. 8
10. Entire Agreement.......................................... 8
11. Amendments................................................ 8
12. Severability.............................................. 8
13. Successors And Assigns.................................... 8
14. Notices................................................... 8
15. Counterparts.............................................. 8
16. Waiver Of Jury Trial...................................... 8
17. Representations........................................... 9
EXHIBIT A.....................................................
EXHIBIT B.....................................................
Schedule 1....................................................
THIS AGREEMENT dated as of 31 December 2003
BETWEEN
(1) BARCLAYS BANK PLC, as Secured Party;
(2) ALLIED WORLD ASSURANCE COMPANY, LTD, as Pledgor; and
(3) MELLON BANK, N.A., as Bank
BACKGROUND
(A) Pledgor has granted Secured Party a security interest in the financial
assets in the securities account identified in Schedule 1 (the "ACCOUNT"),
maintained by Bank for Pledgor, (including any security entitlement) and
in the Account.
(B) The parties are entering into this agreement to provide for the control of
the Account as a means to perfect the security interest of Secured Party.
Bank has no responsibility to Secured Party in respect to the validity or
perfection of such security interest otherwise than to act in accordance
with the terms and conditions of this Agreement.
1. THE ACCOUNT
Bank represents and warrants to Secured Party that Bank maintains the
Account. Bank represents and warrants that except for the claim and
interest of Pledgor and Secured Party, or as provided in Clause 4 of this
Agreement, Bank does not know of any claim to or interest in the Account
or any financial assets credited thereto. Bank, Pledgor and Secured Party
agree that the Account is a securities account ("SECURITIES ACCOUNT") as
that term is defined in Section 8-501(a) of the Uniform Commercial Code as
in effect from time to time in the State of New York (the "NYUCC"). Bank,
Pledgor and Secured Party agree that each item of property (whether
investment property, financial asset, security, instrument or cash)
credited to the Account shall be treated as a financial asset ("FINANCIAL
ASSET") within the meaning of Section 8-102(a)(9) of the NYUCC.
2. CONTROL BY SECURED PARTY
Bank will comply with all notifications it receives directing it to
transfer or redeem any financial assets credited to the Account (each an
entitlement order ("ENTITLEMENT ORDER") as defined in Section 8-102(a)(8)
of the NYUCC) originated by Secured Party and shall otherwise treat
Secured Party as entitled to exercise the rights in respect of any
financial asset credited to the Account without further consent by
Pledgor.
3. PLEDGOR'S RIGHTS IN ACCOUNT
Subject to this Clause 3, until Bank receives an entitlement order from
the Secured Party, Bank may accept and comply with any entitlement order
from Pledgor with regard to the Account or any financial asset as follows:
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3.1.1 Until Bank receives an entitlement order from Secured Party, Bank
shall distribute to Pledgor all cash distributions received in
regard to financial assets in the Account. Cash distributions do not
include any principal received upon redemption or maturity of a
financial asset, and any such cash will be held for the benefit of
Secured Party.
3.1.2 Pledgor shall not direct Bank to release any of the financial assets
in the Account or to close the Account and Bank agrees that it will
not release any of the financial assets in the Account or close the
Account without Secured Party's consent. For this purpose the term
"release" shall be broadly construed to include release for any
purpose, including (without limitation) release for settlement of a
sale, release for the purposes of substituting new financial assets,
release "free" without consideration and any other manner of leaving
the Account. Secured Party will consent to the release of the
financial assets provided that with respect to such financial
assets, the following procedure is adhered to:
(a) Pledgor will determine (the "DETERMINATION") that the
financial assets remaining in the Account will be equal to or
exceed the required Adjusted Collateral Value (as more
specifically defined and described in a Credit Agreement dated
as of 31 December 2003 between Pledgor and Secured Party) (the
"REQUIRED ACCOUNT VALUE") and to determine this shall
diligently and in good faith:
(i) determine that the financial asset is eligible as
collateral as specified in Exhibit A hereto; and
(ii) use the xxxx-to-market value provided by pricing
services used by Bank in connection with the valuation
of financial assets under similar account control
arrangements or for Bank's trust accounts, in each
instance after applying the discount specified in
Exhibit A hereto; provided that in determining if the
remaining financial assets are sufficient Pledgor shall
use the xxxx-to-market values of the financial assets
reported by such services not more than the Business Day
(as hereinafter defined) prior to the withdrawal or
distribution of any financial asset. Any financial asset
that cannot be valued as provided herein and any
financial asset subject to Bank's lien specified in
Clause 4 shall have no value in determining if the
financial assets are to remain in the Account are
sufficient for the purposes of meeting the Required
Account Value.
(b) If following the Determination, Pledgor has come to the
reasonable conclusion that by requesting a financial asset to
be released, the financial assets remaining in the account
will be equal to or in excess of the Required Account Value (a
"POSITIVE DETERMINATION"), Pledgor will fax:
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(i) the instruction relating to the financial assets that it
wishes to be released (the "INSTRUCTION"); and
(ii) the value of the financial assets that are currently in
the Account (in the form of a portfolio valuation
statement in a form acceptable to Secured Party) and the
value of the financial asset that it wishes to be
released (both as calculated in accordance with Clause
3.1.2(a)),
to Secured Party for the attention of its Collateral
Monitoring Unit on x00 000 000 0000 (or such other number as
Secured Party may notify Pledgor or from time to time) so that
it is received by Secured Party (unless Secured Party agrees
otherwise) at least one Business Day (excluding the day upon
which it is received and the day upon which such instruction
is intended to take effect) before the day upon which such
instruction is intended to take effect;
(c) Secured Party will then promptly consider the Positive
Determination and if it agrees with it, will approve the
instruction (by affixing of the signatures of two of the
persons who appear in Exhibit B hereto (each being an
"AUTHORIZED SIGNATORY") as amended and advised in writing to
Pledgor by Secured Party from time to time) and will return it
by fax to Pledgor on x(000) 000-0000 (or such other number as
Pledgor may notify Secured Party of from time to time). Once
signed in this manner by Secured Party, the Instruction
becomes an "ENDORSED INSTRUCTION".
(d) Pledgor will then fax the Endorsed Instruction to Bank for
processing on ______________________ (or such other number as
Bank may notify Pledgor of from time to time).
(e) Secured Party and Bank shall have no responsibility for any
loss or liability of any nature (direct or indirect) suffered
by the Pledgor as a result of any failure to transmit funds or
to sell, purchase, or otherwise dispose of commodities or
securities (or any delay in transmitting funds or selling,
purchasing, or otherwise disposing of commodities or
securities) or because the approval given by Secured Party in
this Clause 3 is either delivered late or not forthcoming,
unless the Secured Party or the Bank (as the case may be) was
grossly negligent or acted in bad faith.
(f) In this Section a "BUSINESS DAY" shall be construed as a
reference to a day (other than a Saturday or Sunday) on which
banks are open for business in London.
(g) Should there by any difficulties with fax transmissions
between any of the Parties, the relevant Parties will attempt
to effect delivery using another method as agreed between
them.
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3.1.3 Pledgor and Bank shall be entitled to rely:
(a) (subject to Clause 3.1.2(b)) upon an Endorsed Instruction
which it believes in good faith to have been signed by any two
of the Authorized Signatories; and
(b) until notified by Secured Party to the contrary, upon the
continued authority of any Authorized Signatory to endorse an
Instruction.
4. PRIORITY OF SECURED PARTY'S SECURITY INTEREST
4.1 Bank subordinates in favor of Secured Party any interest lien or right of
setoff it may have, now or in the future, against the Account or financial
assets credited to the Account; provided, however, Bank will retain its
prior lien on a financial asset credited to the Account where Bank has
paid for such financial asset but has not received payment therefore from
Pledgor and for payment of its customary fees and expenses pursuant to the
agreement under which the Account is maintained (the "CUSTODY AGREEMENT"),
including any overdraft fees.
4.2 Bank will not agree with any third party that Bank will accept or
complying with entitlement orders originated by the third party in regard
to the Account or any financial asset credited to the Account.
5. STATEMENTS, CONFIRMATIONS AND NOTICES OF ADVERSE CLAIMS
Bank will send copies of all regular statements for the Account
simultaneously to Pledgor and Secured Party. Upon initial deposit of
financial assets into the Account and not less than monthly, Bank shall
provide Secured Party with a report of the valuation of the financial
assets in the Account determined as required in Clause 3 of this
Agreement. Bank will use reasonable efforts promptly to notify Secured
Party and Pledgor if any other person claims a property interest in the
Account or any financial asset credited to the Account.
6. BANK'S RESPONSIBILITY
6.1 Bank shall have no responsibility or liability with respect to changes in
the standard of any securities in the Account or changes in their value
relative to other currencies or securities, or for any deduction for
taxes, levies, or otherwise from deposits made with any depository, or for
any blockage, confiscation or expropriation, limitation of
transferability, or any other action by any government, de factor or de
jure, which affects or could affect the same, or for any other occurrence
beyond its control.
6.2 Except for permitting a withdrawal or delivery in violation of Clause 3,
Bank will not be liable to Secured Party for complying with entitlement
orders from Pledgor that are received by Bank before Bank receives and has
a reasonable opportunity to act on an entitlement order from Secured
Party.
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6.3 Bank will not be liable to Pledgor for complying with an entitlement order
originated by Secured Party even if Pledgor notifies Bank that Secured
Party is not legally entitled to issue the entitlement order or notice of
exclusive control, unless:
6.3.1 Bank takes the action after it is served with an injunction,
restraining order or other legal process enjoining it from doing so,
issued by a court of competent jurisdiction, and had a reasonable
opportunity to act on the injunction, restraining order or other
legal process; or
6.3.2 Bank acts in collusion with Secured Party in violating Pledgor's
rights.
6.4 This Agreement does not create any obligation of Bank except for those
expressly set forth in this Agreement. In particular, Bank need not
investigate whether Secured Party is entitled under Secured Party's
agreement with Pledgor to give an entitlement order. Bank may rely on
notices and communications it believes given by the appropriate party.
6.5 Bank will maintain the Account and financial assets in the same manner as
it maintains accounts and assets for its custodial customers generally.
During the term of this Agreement, Bank will remain a securities
intermediary within the meaning of such term in Section 8-102(a)(14) of
the NYUCC and 31 C.F.R. 357.2.
6.6 From and after the time Secured Party sends an entitlement order to Bank,
Secured Party shall be entitled to the benefits of the Custody Agreement
as if it were the client thereunder.
7. INDEMNITY
Pledgor will indemnify, defend and hold harmless Bank, its partners,
officers, directors, employees and agents against claims, liabilities and
expenses arising out of this Agreement (including reasonable attorney's
fees and disbursements), except to the extent such claims, liabilities,
and expenses arise from the Bank's negligence, bad faith or wilful
misconduct.
8. TERMINATION; SURVIVAL
8.1 Secured Party may terminate this Agreement by notice to Bank and Pledgor.
Bank or Pledgor may terminate this Agreement on 30 days' notice to all of
the other parties. Upon receipt of a notice of termination from Pledgor,
Bank shall cease accepting any entitlement order from Pledgor, as
specified in Clause 3, and any previous entitlement order delivered by
Pledgor shall be deemed to be of no further force and effect.
8.2 If Secured Party notifies Bank that its security interest in the Account
or all of the financial assets therein has terminated, this Agreement will
immediately terminate.
8.3 Clause 6 (Bank's Responsibility) and Clause 7 (Indemnity), will survive
termination of this Agreement.
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9. GOVERNING LAW
THIS AGREEMENT, INSOFAR AS IT RELATES TO THE SECURED PARTY'S SECURITY
INTEREST IN THE ACCOUNT, WILL BE GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO ITS CHOICE OF LAWS PROVISIONS.
10. ENTIRE AGREEMENT
This Agreement is the entire agreement and supersedes any prior agreements
and contemporaneous oral agreements, of the parties concerning its subject
matter.
11. AMENDMENTS
No amendment of, or waiver of a right under, this Agreement will be
binding unless it is in writing and signed by the party to be charged.
12. SEVERABILITY
To the extent a provision of this Agreement is unenforceable, this
Agreement will be construed as if the unenforceable provision were
omitted.
13. SUCCESSORS AND ASSIGNS
A successor to or assignee of Secured Party's rights and obligations under
the agreement between Secured Party and Pledgor will succeed to Secured
Party's rights and obligations under this Agreement.
14. NOTICES
A notice or other communication to a party under this Agreement will be in
writing, (including facsimile) (except that entitlement orders shall be
given in accordance with procedures as Bank may reasonably specify), will
be sent to the party's address set forth below or to such other address as
the party may notify the other parties and will be effective on receipt.
15. COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of which
shall constitute one and the same instrument, and any party hereto may
execute this Agreement by signing and delivering one or more counterparts.
16. WAIVER OF JURY TRIAL
PLEDGOR, BANK AND SECURED PARTY HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL
PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY
ARISING OUT OF, OR RELATED TO, OR CONNECTED WITH THIS AGREEMENT.
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17. REPRESENTATIONS
Each party hereto hereby represents and warrants that the individual
executing this Agreement on its behalf has the requisite power and
authority to do so and to bind it to the terms of this Agreement.
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SIGNATURES
SECURED PARTY PLEDGOR
By: /s/ [ILLEGIBLE] By: /s/ [ILLEGIBLE]
Barclays Bank PLC Allied World Assurance Company, Ltd
00 Xxxxxxxx Xxxxxx
Facsmile: x00 000 000 0000 Xxxxxxxx XX 12
Bermuda
CUSTODIAN BANK
By: /s/ Xxxxxx X. Xxxxxxx
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Vice President
For and on behalf of Mellon Bank, N.A.
Xxx Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attn: Insurance Custody Department
