ACCOUNT CONTROL AGREEMENT
Date: March 5, 2007
Parties
Citibank Europe plc, as “Secured Party”
Allied World Assurance Company, Ltd, a company organized and existing under the laws of Bermuda, as
“Pledgor”
Mellon Bank, N.A., as “Bank”
Account Number: XXXX00000000
(this “Agreement”)
Background
Pledgor has granted Secured Party a security interest in the financial assets in the securities
account identified above (the “Account”), maintained by Bank for Pledgor, (including any security
entitlement) and in the Account. 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.
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, Secured Party and any interest in
favour of Citibank, N.A., or the claim of Bank as provided in Section 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” 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
Investment Property, Securities, Security Entitlements, Financial Assets, Instruments or other
property and all other funds, cash or cash equivalents credited to the Account shall be treated as
a “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 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. This provision is intended to grant Secured Party control of all
Security Entitlements in the Account for the purposes of section 9-106(c) of the NYUCC.
3. Pledgor’s Rights in Account
Subject to this Section 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:
| 3.01 | 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 sale, redemption or maturity of a Financial Asset, and any such cash will be held for the benefit of Secured Party. |
| 3.02 | Bank shall provide Secured Party with electronic access to view holdings and activity in the Account. |
| 3.03 | 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 Account Value (“Required Account Value” in this context constituting an amount equal to 110% of the aggregate amount of the then outstanding letters of credit issued for the account of the Pledgor) and to determine this shall diligently and in good faith: |
| (i) | determine that the remaining Financial Assets are 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; 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 Bank Business Day (as defined below) 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 Section 4 shall have no value in determining if the Financial Assets 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: |
| (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 compiled by Bank and in a form reasonably acceptable to Secured Party) and the value of the Financial Asset (and if applicable any Financial Asset which will be substituted for such Financial Asset) that it wishes to be released (all as calculated in accordance with the methodology in Subsection 3.03(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 of 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 the affixing of the signatures of two of the persons who appear in Exhibit B hereto (each being an “Authorised 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 000 000 000 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”. If Pledgor does not receive an Endorsed Instruction within two (2) Business Days of receipt by Secured Party of the Instruction, such Instruction shall be deemed to have been rejected. | ||
| (d) | Pledgor will then fax the Endorsed Instruction to Bank for processing on 001 412 234 8725 (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 Section 3 is either delivered late or not forthcoming, unless Secured Party or 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 generally open for business in the Republic of Ireland. | ||
| (g) | Should there be 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. |
| 3.04 | Pledgor and Bank shall be entitled to rely: |
| (a) | (subject to Subsection 3.04(b)) upon an Endorsed Instruction which it believes in good faith to have been signed by any two of the Authorised Signatories; and | ||
| (b) | until notified by Secured Party to the contrary, upon the continued authority of any Authorised Signatory to endorse an Instruction. |
| 3.05 | If Secured Party gives Bank an Entitlement Order notifying Bank that Secured Party will exercise exclusive control over the Account, Bank will cease complying with Entitlement Orders or other directions concerning the Account originated by Pledgor. |
4. Priority of Secured Party’s Security Interest
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 therefor 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.
Bank will not agree with any third party that Bank will accept or comply 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
| 5.01 | (a) Notwithstanding Subsection 5.02, Pledgor shall cause Secured Party to be provided with current information concerning the Account via an on-line service of the Bank (currently via its “WorkBench” product) through its designation of the Secured Party as an Authorised User thereunder). |
| (b) | Bank will also within five Bank Business Days of the date of this Agreement: |
| (i) | inform Secured Party of a further method by which it will deliver the Daily Statement as a contingency in the case of failure relating to the method by which Bank will usually deliver the Daily Statement, such contingent method to be agreed by Secured Party; and | ||
| (ii) | provide Secured Party with a list of persons and their accompanying contact details (which Bank will update from time to time and provide to Secured Party promptly after such update) with whom Secured Party may liaise in respect of the Daily Statement. |
| 5.02 | Notwithstanding the provisions of Subsection 5.01, Bank will send copies of all statements and confirmations 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 Section 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. Pledgor shall cause Secured Party to be provided with current information concerning the Account via an on-line service of the Bank (currently, via its “WorkBench” product) by designating Secured Party as an Authorized User thereunder. |
6. Bank’s Responsibility
Bank shall have no responsibility or liability with respect to changes in 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 facto or de jure, which affects or could affect the same, or for any other
occurrence beyond its control.
Except for permitting a withdrawal or delivery in violation of Section 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.
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:
| (a) | 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 | |
| (b) | Bank acts in bad faith with Secured Party in violating Pledgor’s rights. |
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.
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.
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
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 Section 3, and any previous Entitlement Order delivered by Pledgor shall be deemed to
be of no further force and effect.
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.
Section 6, “Bank’s Responsibility” and 7, “Indemnity,” will survive termination of this Agreement.
9. Governing law
This Agreement and the Account (including all interests, duties and obligations with respect
thereto) will be governed by the laws of the State of New York. Bank may not change the law
governing the Account without Secured Party’s express written agreement.
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. Delivery of an executed counterpart of a signature
page to this Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
16. 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.
SIGNATURES
BY:
|
/s/ Xxxx X’Xxxxx
|
|||
| Citibank Europe plc | ||||
| Insurance Letter of Credit Xxxxxxxxxx | ||||
| 0xx Xxxxx | ||||
| 0 Xxxxx Xxxx Xxxx | ||||
| Xxxxxx 0 | ||||
| Xxxxxxxx of Ireland | ||||
BY:
|
/s/ Xxxxxxxxx X. Xxxxx
|
|||
| Allied World Assurance Company, Ltd | ||||
| 00 Xxxxxxxx Xxxx | ||||
| Xxxxxxxx XX00 | ||||
| Xxxxxxxx | ||||
| Bermuda | ||||
BY:
|
/s/ Xxxx X. Xxxxxxxxx
|
|||
| Mellon Bank, N.A. | ||||
| One Mellon Bank Centre | ||||
| Room 151-1570 | ||||
| Xxxxxxxxxx, XX 00000-0000 | ||||
| X.X.X. | ||||
| [Swift Address] |
