HomeMy WebLinkAboutBank DepositoriesRESOLUTION 2011-4
ADOPTED
DOC ID: 6417
THIS IS TO CERTIFY THAT THE FOLLOWING RESOLUTION NO. 2011-4 WAS
ADOPTED AT THE REGULAR MEETING OF THE SOUTHOLD TOWN BOARD ON
JANUARY 4, 2011:
WHEREAS, Section 64 of the Town Law requires the Town Board to designate, by resolution,
banks in the State in which the Supervisor or other officers of the Town shall deposit moneys
coming into their hands by virtue of their office; and
WHEREAS, the Town Board may require any bank, so designated, to deposit with such Board
bonds or certificates of the United State, of the State of New York or any county, town, city,
village or school district of the State of New York, such security for such funds so deposited, but
such bond or certificate shall be subject to the approval of the Town Board and shall be
deposited in such place and held under such conditions as the Town Board may determine; now,
therefore, be it
RESOLVED that the following banks are designate for fiscal year 2011 as depositories, and the
following securities are hereby required as collateral for such cash balances in said banks:
Bridgehampton National Bank
Bridgehampton National Bank
(Tax Receiver's Account)
Bank of America
Capital One Bank
Capital One Bank
(Tax Receiver's Account)
Suffolk County National Bank
Suffolk County National Bank
(Tax Receiver's Account)
JP Morgan Chase Bank
$ 25,000,000.00
$ 5,000,000.00
$ 5,000,000.00
$ 25,000,000.00
$ 25,000,000.00
$ 25,000,000.00
$ 5,000,000.00
$ 10,000,000.00
AND BE FURTHER RESOLVED that the Town Board hereby authorizes Supervisor Scott A.
Russell to execute Collateral Agreements between the Town of Southold and the above
designated banks and their Third Party Custodial Institutions, all in accordance with the approval
of the Town Attorney; and be it
FURTHER RESOLVED that authorization for increase and decrease of securities shall be
subject to the approval of the Supervisor.
Elizabeth A. Neville
Southold Town Clerk
RESULT: ADOPTED [UNANIMOUS]
MOVER: Vincent Orlando, Councilman
Resolution 2011-4 Board Meeting of January 4, 2011
SECONDER: William Ruland, Councilman
AYES: Ruland, Orlando, Talbot, Krupski Jr., Evans, Russell
Updated: 1/3/2011 3:29 PM by Lynda Rudder Page 2
THIRD PARTY CUSTODIAN AGREEMENT
THIS AGREEMENT made and executed as of .~ .~([I between TOWN OF SOUTHOLD
("Local Government"), Capital One, National Association ( Bahk ) and The Bank of New York Mellon
("Custodian").
W1TNESSETH
WHEREAS, Local Government desires to maintain or continue to maintain public deposits with the Bank;
WHEREAS, the Bank desires to obtain such deposits and to provide security therefor as required by the
General Municipal Law, Banking Law and other applicable statutes;
WHEREAS, the Custodian agrees to provide safekeeping services and to hold any securities pledged by the
Bank in a custodial account established for the benefit of the Local Government as secured party pursuant to this
Agreement
NOW, THEREFORE, in consideration of the mutual promises set forth hereafter, the parties hereto agree as
follows:
1. Security Requirements.
(a) The Bank, to secure the timely payment of Uninsured Deposits heretofore or hereafter made by the
Local Government, including any interest due thereon and any costs or expenses incurred by Local Government and
arising out of the collection of any deposits made with the Bank, shall provide the Local Government with Eligible
Collateral having an Adjusted Market Value equal to the Collateral Requirement. Whenever Eligible Collateral is
provided pursuant to this paragraph, the Bank hereby grants to the Local Government a pledge and security interest in
and to such Eligible Collateral and shall deliver such Eligible Collateral to the Custodian in the manner prescribed in
Section 2 of this Agreement. The security interest of the Local Government in Eligible Collateral shall terminate upon
the transfer of such Eligible Collateral from the Account. Eligible Letters of Credit and Eligible Surety Bonds
provided pursuant to this paragraph shall be subject to the prior approval of the Local Government unless the Local
Government has approved in writing the form of an Eligible Letter of Credit or Eligible Surety Bond to be issued by a
specific entity or the form of such Eligible Letter of Credit or Eligible Surety Bond is attached hereto as an Exhibit.
(b) The Custodian will daily determine the Adjusted Market Value of the Eligible Collateral provided
pursuant to this Agreement (except that the Bank shall provide to the Custodian the Market Value of Eligible Surety
Bonds). If the Adjusted Market Value of such Eligible Collateral is less than the Collateral Requirement, the
Custodian will so notify the Bank and the Bank shall, upon such notice, be required to provide additional Eligible
Collateral having an Adjusted Market Value equal to or greater than such deficiency no later than one Business Day
after receipt of such notice. If the Adjusted Market Value of the Eligible Collateral provided pursuant to this
Agreement exceeds the Collateral Requirement, the Custodian, at the direction of the Bank, shall transfer securities
from the Account, or in the case of other Eligible Collateral, cause or consent to a reduction in the amount thereof, to
the extent of such excess.
(c) The Bank may substitute Eligible Collateral ("Substitute Collateral") for any Eligible Collateral
previously provided pursuant to this Agreement so long as the Substitute Collateral has an Adjusted Market Value
equal to or greater than the Eligible Collateral which it will replace. The Bank shall give Written or Oral Instructions
to the Custodian with respect to any proposed substitution. If the Substitute Collateral described in such notice
consists exclusively of Eligible Collateral having sufficient Adjusted Market Value, the Custodian, at the direction of
the Bank, shall transfer the Eligible Collateral out of the Account against delivery to the Account on the same Business
Day of the Substitute Collateral. In the event the Substitute Collateral described in such notice consists of an Eligible
Letter of Credit or Eligible Surety Bond, the prior consent of the Local Government shall be required before the Bank
or Custodian may complete the substitution described in such notice unless the Local Government has, in writing,
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previously approved and consented to the form and issuer of the Eligible Letter of Credit and/or Eligible Surety Bond
to be provided as Substitute Collateral.
2. Custody of Eligible Collateral
(a) The Bank and Local Government hereby appoint the Custodian as custodian of all Eligible
Collateral at any time delivered to the Custodian pursuant to this agreement. The Custodian hereby accepts
appointment as such Custodian and agrees to establish and maintain the Account and appropriate records identifying
the Eligible Collateral as pledged by the Bank to the Local Government. The Account shall be kept separate and apart
from the general assets of the Custodian and will not, in any circumstances, be commingled with or become part of the
backing for any other deposit or liability of the Custodian or any other person or entity. The Custodian, in performing
its duties and responsibilities pursuant to this Agreement, shall act as custodian for, and agent of, the Local
Government.
(b) The Bank and Local Government agree that Eligible Collateral delivered to the Custodian for
deposit in the Account may be in the form of credits to the accounts of Custodian at the Book Entry System or a
Depository or by delivery to the Custodian of physical certificates in a form suitable for transfer or with an assignment
in blank to the Local Government or Custodian. The Bank and Local Government hereby authorize the Custodian on a
continuous and ongoing basis to deposit in the Book Entry System and/or the Depositories all Eligible Collateral that
may be deposited therein and to utilize the Book Entry System and/or Depositories and the receipt and delivery of
physical Securities or any combination thereof in connection with its performance hereunder. Eligible Collateral
credited to the Account and deposited in the Book Entry System or Depositories or other financial intermediaries will
be represented in accounts of the Custodian that include only assets held by the Custodian for its customers, and
including but not limited to accounts in which the Custodian acts in a fiduciary, agency or representative capacity.
Eligible Collateral that is not held in the Book Entry System, Depositories or through another financial intermediary
will be held in the Custodian's vault and physically segregated from securities and other non-cash property belonging
to the Custodian.
(c) (i) The Custodian shall provide to the Local Government weekly and monthly statements reflecting
the activity in the Account. Upon request, the Custodian shall also provide to the Local Government a daily statement
on any Business Day on which Eligible Collateral is transferred to or from the Account.
(ii) Local Govemment agrees that it shall promptly review all statements and shall promptly advise
Custodian by Oral or Written Instruction of any error, omission or inaccuracy in such statements. In the event that
Custodian receives such a Written or Oral Instruction identifying a specific concern with respect to the Market Value,
Adjusted Market Value, or any other matter connected with the Account, Custodian shall undertake to correct any
errors, failures or omissions, provided that Custodian determines in its sole good faith determination that such error,
failure or omission actually occurred. Any such corrections shall be reflected on subsequent statements.
(iii) Notwithstanding anything to the contrary herein, the parties agree that any reasonable action or
inaction Custodian takes in connection with this Agreement shall not be alleged, deemed, or construed as giving rise to
any liability, absent negligence or willful misconduct, as set forth hereunder in, without limitation, Sections 5(a), 5(c),
5(f) and/or 5(g) hereof.
(d)
Custodian.
The Account shall not be subject to any security interest, lien or any right of set-off by or against the
(e) With respect to all Eligible Collateral held in the Account, the Custodian by itself, or through the use
of the Book Entry System or the appropriate Depository, shall, unless otherwise instructed to the contrary by the Bank:
(i) collect all income and other payments reflecting interest and principal on the Eligible Collateral in the Account and
credit such amounts to the account of the Bank; (ii) forward to the Bank copies of all information or documents that it
may receive from an issuer of Eligible Collateral which, in the opinion of the Custodian, is intended for the beneficial
owner of the Eligible Collateral including, without limitation all proxies and other authorizations properly executed
and all proxy statements, notices and reports; (iii) execute, as Custodian, any certificates of ownership, affidavits,
declarations or other certificates under any tax laws now or hereafter in effect in connection with the collection of bond
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and note coupons; (iv) hold directly, or through the Book Entry System or Depository, all rights issued with respect to
any Eligible Collateral held by the Custodian hereunder; and (v) upon receipt of Written Instructions from the Bank,
the Custodian will exchange Eligible Collateral held hereunder for other securities and/or cash in connection with (a)
any conversion privilege, reorganization, recapitalization, redemption in kind, consolidation, tender offer or exchange
offer, or (b) any exercise, subscription, purchase or other similar rights.
3. Events of Defanlt
In the event the Bank shall fail to pay the Local Government any amount of the Deposits by the Local Government
covered by this Agreement in accordance with the terms of such Deposit, or should the Bank fail or suspend active
operations, the Deposits in such Bank shall become due and payable immediately and the Local Government shall
have the right to unilaterally demand delivery of all Eligible Collateral in the Account by notice to the Custodian and
to sell such securities at public or private sale. In the event of such sale, the Local Government, after deducting all
legal expenses and other costs, including reasonable attorneys fees, from the proceeds of such sale, shall apply the
remainder towards any one or more of the liabilities of the Bank to the Local Government and shall return the surplus,
if any, to the Bank.
4. Representation and Warranties
(a) Representations of the Bank. The Bank represents and warrants that:
(1)
it is the legal and actual owner, free and clear of all liens and claims, of all Eligible
Collateral pledged pursuant to this Agreement;
(2)
this Agreement was executed by an officer of the Bank who was authorized by the Bank's
board of directors to do so and will at all times be maintained as an official record of the
Bank;
(3) all securities pledged pursuant to this Agreement are Eligible Collateral;
(4)
the Bank is a bank or trust company located and authorized to do business in the State of
New York;
(5)
all acts, conditions and things required to exist, happen or to be performed on its part
precedent to and in the execution and delivery of this Agreement exist or have happened or
have been performed.
(b) Representations of the Local Government. The Local Government hereby represents and warrants
that:
(l)
this Agreement has been legally and validly entered into, does not and will not violate any
statute or regulation applicable to it and is enforceable against the Local Government in
accordance with its terms;
(2)
the appointment of the Custodian has been duly authorized and no other action by the Local
Government is required and this Agreement was executed by an officer of the Local
Govemment authorized to do so;
(3)
it will not transfer, assign its interests in or the rights with respect to any Eligible Collateral
pledged pursuant to this Agreement except as authorized pursuant to Section 3 of the
Agreement;
(4)
all acts, conditions and things required to exist, happen or to be performed on its part
precedent to and in the execution and delivery of this Agreement exist or have happened or
have been performed.
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5. Concemin~ the Custodian.
(a) The Custodian shall not be liable for any loss or damage, including counsel fees, resulting from its
action or omission to act or otherwise, except for any loss, damage, claim or expense arising out of its own negligence
or willful misconduct, and shall have no obligation hereunder for any loss or damage, including counsel fees, which
are sustained or incurred by reason of any action or inaction by the Book Entry System or any Depository. The
Custodian may, with respect to questions of law, apply for and obtain the advice and opinion of competent counsel and
shall be fully protected with respect to anything done or omitted by it in good faith and conformity with such advice or
opinion. The Local Govermnent and Bank agree, jointly and severally, to indemnify the Custodian and to hold it
harmless against any and all costs, expenses, damages, liabilities or claims, including reasonable fees and expenses of
counsel, which the Custodian may sustain or incur or which may be asserted against the Custodian by reason of or as a
result of any action taken or omitted by the Custodian in connection with operating under this Agreement except those
costs, expenses, damages, liabilities or claims arising out of the negligence or willful misconduct of the Custodian or
any of its employees or duly appointed agencies. This indemnity shall be a continuing obligation of the Local
Government and Bank notwithstanding the termination of this Agreement.
(b) The Custodian shall not be responsible for, or considered to be the Custodian of, any Eligible
Collateral received by it for deposit in the Account until the Custodian actually receives and collects such Eligible
Collateral directly or by the f'mal crediting of the Custodian's account on the books of the Book Entry System or the
appropriate Depository. The Custodian will be entitled to reverse any credits made on the Local Government's behalf
where such credits have been previously made and the Eligible Collateral is not finally collected.
(c) The Custodian shall have no duties or responsibilities whatsoever except such duties and
responsibilities as are specifically set forth in this Agreement, and no covenant or obligation shall be implied against
the Custodian in connection with this Agreement. In no event shall Custodian be liable to Local Government, Bank or
any third party for special, indirect or consequential damages, or lost profits or loss of business, arising in connection
with this Agreement.
(d) The Local Government's authorized officer, upon reasonable notice, shall have access to the
Custodian's books and records maintained with respect to the Local Government's interest in the Account during the
Custodian's normal business hours. Upon the reasonable request of the Local Government, copies of any such books
and records shall be provided by the Custodian to the Local Government or the Local Government's authorized officer
at the Local Government's expense.
(e) The Custodian may enter into subcontracts, agreements and understandings, whenever and on such
terms and conditions as it deems necessary or appropriate, to perform its services hereunder; such subcontracts,
agreements and understandings may be with third parties and may be with other subsidiaries of The Bank of New York
Mellon Corporation or any successor to The Bank of New York Mellon Corporation or with other persons not a party
hereto. No such subcontract, agreement or understanding shall discharge the Custodian from its obligations hereunder.
(f) To the extent Custodian values Eligible Collateral, establishes and maintains Market Value and
Adjusted Market Value of Eligible Collateral held in the Account, Custodian is authorized to utilize any generally
recognized pricing information service (including brokers and dealers of Securities), such as any Nationally
Recognized Statistical Ratings Organization, in order to perform its valuation responsibilities hereunder, if any, and
the parties agree that Custodian shall be held harmless from and against any losses incurred as a result of errors or
omissions of any such pricing information service, broker or dealer.
(g) Custodian shall not be responsible or liable for any failure or delay in the performance of its
obligations under this Agreement arising out of or caused, directly or indirectly, by circumstances beyond its
reasonable control, including without limitation, acts of God, earthquakes, fires, floods, wars, civil or military
disturbances, sabotage, epidemics, riots, loss or malfunctions of utilities, computer (hardware or software) or
communications service, labor disputes, acts of civil or military authority, or governmental, judicial or regulatory
action; provided however, that Custodian shall use its best efforts under the circumstances to resume normal
performance as soon as practicable.
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6. Termination
Any of the parties hereto may terminate this Agreement by giving to the other parties a notice in writing specifying the
date of such termination, which shall be the earlier of (i) not less than 90 days after the date of giving such notice or
(ii) the date on which the Deposits are repaid in full. Such notice shall not affect or terminate the Local Government's
security interest in the Eligible Collateral in the Account. Upon termination hereof, the Custodian shall follow such
reasonable Written Instructions of the Bank and the Local Government concerning the transfer of custody of Eligible
Collateral, collateral records and other items. In the event ora discrepancy between Written Instructions of the Bank
and the Local Government, the Custodian shall act pursuant to the Local Government's Written Instructions. Upon the
date set forth in the termination notice, this Agreement shall terminate except as otherwise provided herein and all
obligations of the parties to each other hereunder shall cease.
7. Miscellaneous.
(a) The Local Government and Bank each agrees to furnish to the Custodian a new Certificate (Exhibit
C) in the event that any present Authorized Person ceases to be an Authorized Person or in the event that any other
Authorized Persons are appointed and authorized. Until such new Certificate is received, the Custodian shall be fully
protected in acting upon Oral or Written Instructions or signatures of the present Authorized Persons.
(b) Any Written Instructions or other instrument in writing authorized or required by this Agreement
shall be given to the Custodian and shall be sufficiently given if sent to the Custodian by regular mail to its offices at
One Wall Street, 5~ Floor, New York, New York 10586, Attention: BDS Client Services, or at such other place as the
Custodian may from time to time designate in writing.
(c) Any notice or other instrument in writing authorized or required by this Agreement to be given to the
Bank shall be sufficiently given if sent to the Bank by regular mail to its offices at 275 Broad Hollow Road, Melville,
New York, or at such other place as the Bank may from time to time designate in writing.
(d) Any notice or other instrument in writing, authorized or required by this Agreement to be given to
the Local Government shall be sufficiently given if sent to the Local Government by regular mail to its offices at
ADDRESS: 53095 Main Road~ P.O. Box 1179~ Southold~ NY 11971-0959, or at such other offices as the Local
Government may from time to time designate in writing.
(e) In case any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable
in any jurisdiction, the validity, legality and unenforceability of the remaining provisions or obligations shall not in any
way be affected or impaired thereby and if any provision is inapplicable to any person or circumstances, it shall
nevertheless remain applicable to ali other persons and circumstances.
(0 This Agreement may not be amended or modified in any manner except by written agreement
executed by all of the parties hereto.
(g) This Agreement shall extend to and be binding upon the parties hereto, and their respective
successors and assigns; provided, however, that this Agreement shall not be assignable by any party without the
written consent of the other parties.
(h) This Agreement shall be construed in accordance with the substantive laws of the State of New
York, without regard to conflicts of laws principles thereof. Bank, Local Government and Custodian hereby consent
to the jurisdiction of a state or federal court situated in New York City, New York in connection with any dispute
arising hereunder. Bank, Local Government and Custodian hereby irrevocably waive, to the fullest extent permitted
by applicable Iaw, any objection which it may now or hereafter have to the laying of venue of any such proceeding
brought in such a court and any claim that such proceeding brought in such a court has been brought in an
inconvenient forum. Bank, Local Government and Custodian each hereby irrevocably waives any and all rights to trial
by jury in any legal proceeding arising out of or relating to this Agreement.
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(i) Waiver of Immunity. To the extent that in any jurisdiction any party may now or hereafter be
entitled to claim, for itself or its assets, immunity fi.om suit, execution, attachment (before or after judgment) or other
legal process, each party irrevocably agrees not to claim, and it hereby waives, such immunity in connection with this
Agreement.
8. Definitions.
Whenever used in this Agreement the following terms shall have the following meanings:
(a) "Account" shall mean the custodial account established with the Custodian for the benefit of the
Local Government as secured party in accordance with this Agreement.
(b) "Adjusted Market Value" shall be one hundred percent of Market Value, except that: (1) in the case
of Eligible Collateral enumerated in subparagraphs (v), (vi) and (vii) of Exhibit "B," the Adjusted Market Value shall
be an amotmt equal to its Market Value multiplied by 0.9 if such Eligible Collateral is not rated in the highest rating
category by at least one Nationally Recognized Statistical Rating Agency, but is so rated in the second highest rating
category, and an amount equal to its Market Value multiplied by 0.8 if such Eligible Security is not so rated in one of
the two highest categories, but is so rated in the third highest rated category; (2) in the case of Eligible Collateral
enumerated in subparagraphs (viii), (x) and (xi) of Exhibit "B," the Adjusted Market Value shall be an amount equal to
its Market Value multiplied by 0.8; (3) in the case of Eligible Collateral enumerated in subparagraph (ix) of Exhibit
"B," the Adjusted Market Value shall be an amount equal to its Market Value multiplied by 0.7; and (4) in the case of
Eligible Letters of Credit, the Adjusted Market Value shall be an amount equal to its Market Value divided by 1.4.
(c) "Authorized Person" shall be any officer of the Local Government or Bank, as the case may be, duly
authorized to give Oral Instructions or Written Instructions on behalf of Local Government or Bank, such persons to
be designated in a Certificate substantially in the form of Exhibit "C"- attached hereto, as such Exhibit may be
amended from time to time.
(d) "Book Entry System" shall mean the Federal Reserve/Treasury Book Entry System for receiving and
delivering U.S. Government Securities.
(e) "Business Day" shall mean any day on which the Custodian and the Bank are open for Business and
on which the Book Entry System and/or the Depositories are open for business.
(f) "Certificate" shall mean the Certificate attached hereto as Exhibit "C".
(g) "Collateral Requirement" shall mean the amounts required in Exhibit "A" unless the Bank and Local
Govemment agree to a different amount in accordance with this Agreement.
(h) "Depository" shall include the Depository Trust Company, the Participants Trust Company and other
securities depositories and clearing agencies (and their successors and nominees) registered with the Securities and
Exchange Commission or otherwise regulated by appropriate federal or state agencies as a securities depository or
clearing agency.
(i) "Deposits" shall mean all deposits by the Local Government in the Bank that are available for all
uses generally permitted by the Bank to the Local Government for actually and finally collected funds under the Bank's
account agreement or policies.
0) "Eligible Collateral" shall mean any securities of the types enumerated in the Schedule of Eligible
Collateral attached hereto as Exhibit "B" as such Schedule may be amended by the parties in writing fi.om time to time,
Eligible Letters of Credit, and Eligible Surety Bonds.
(k) "Eligible Letter of Credit" shall mean an irrevocable letter of credit issued in favor of the Local
Government for a term not to exceed ninety days by either: (1) a bank (other than the Bank) whose commercial paper
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and other unsecured short-term debt obligations (or, in the case of a bank which is the principal subsidiary of a holding
company, whose holding company's commercial paper and other unsecured short-term debt obligations) are rated in
one of three highest rating categories based on the credit of such bank or holding company by at least one Nationally
Recognized Statistical Rating Organization, or (2) a bank (other than the Bank) which is in compliance with applicable
Federal minimum risk-based capital requirements.
(1) "Eligible Surety Bond" shall mean a bond executed by an insurance company authorized to do
business in the State of New York, the claims paying ability of which is rated in the highest rating category by at least
two nationally recognized statistical rating organizations.
(m) "Margin Percentage" shall mean the percentage indicated on Exhibit B attached hereto with respect
to particular types of Eligible Collateral.
(n) "Market Value" shall mean, with respect to any Eligible Security held in the Account, the market
value of such Eligible Security as made available to the Custodian by a generally recognized source selected by the
Custodian or by the Bank or the most recently available closing bid quotation fi.om such soume plus, if not reflected in
the market value, any accrued interest thereon, or, if such source does not make available a market value or a closing
bid price for a particular security, the market value shall be as determined by the Custodian in its sole discretion based
on information furnished to the Custodian by one or mom brokers or dealers; provided however that, if agreed in
writing by the parties hereto, the Bank may provide the Custodian with such Market Values. The Market Value of
Eligible Letters of Credit and Eligible Surety Bonds shall be the face amount thereof.
(o) "Nationally Recognized Statistical Rating Organization" shall mean Moody's, Standard and Poors,
Fitch, Duff and Phelps, BankWatch and IBCA and in the case of Eligible Surety Bonds, shall also include Bests.
(p) "Oral Instructions" shall mean verbal instructions actually received by the Custodian fi.om an
Authorized Person or from a person reasonably believed by the Custodian to be an Authorized Person.
(q)
Agreement.
"Substitute Collateral" shall have the meaning set forth in paragraph C of Section I of this
(r) "Uninsured Deposits" shall mean that portion of the Local Government's Deposits with the Bank
which exceeds the insurance coverage available fi.om the Federal Deposit Insurance Corporation.
(s) "Written lnslructions" shall mean written communications actually received by the Bank or the
Custodian fi.om an Authorized Person or from a person reasonably believed by the Bank or the Custodian to be an
Authorized Person by a computer, telex, telecopier or any other system whereby the receiver of such commtmications
is able to verify by codes or otherwise with a reasonable degree of certainty the identity of the sender of such
communication.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective
officers thereunto duly authorized and their respective seals to be hereunto affixed, as of the day and year fin'st above
written.
{TOWN OF SOUTHOLD]
(LOCAL GOygt~MENT)
Title: .~ ~O~ c/[f O ~'
CAPITAL ONE, NATIONAL ASSOCIATION
THE BANK OF NEW YORK MELLON
Title: ~ Hank Cugini
Managing Director
capital_one_colldep.doc
EXHIBIT A
Collateral Requirement. On any Business Day that the Local Government has Uninsured Deposits in the
Bank, the Bank, in accordance with paragraph b of Section I of this Agreement, agrees to deliver or cause to be
delivered to the Custodian for deposit in the Account, Eligible Collateral having an Adjusted Market Value equal to
the Collateral Requirement. For purposes of this Agreement, Collateral Requirement shall mean the amount of such
Uninsured Deposits times the Margin Percentage, if any.
EXHIBIT B
Schedule of Eligible Collateral
Margin%
105
105
lO~S
1o~5
(i)
Obligations issued by the United States of America, an agency thereof or a United States
government sponsored corporation or obligations fully insured or guaranteed as to the
payment of principal and interest by the United States of America, an agency thereof or a
United States government sponsored corporation.
(ii)
Obligations issued or fully guaranteed by the International Bank for Reconstruction and
Development, the Inter-American Development Bank, the Asian Development Bank, and
the African Development Bank.
(iii)
Obligations partially insured or guaranteed by any agency of the United States of
America, at a proportion of the Market Value of the obligation that represents the amount
of the insurance or guaranty.
(iv)
Obligations issued or fully insured or guaranteed by the State of New York, obligations
issued by a municipal corporation, school district or district corporation of such State or
obligations of any public benefit corporation which under a specific State statute may be
accepted as security for deposit of public moneys.
EXHIBIT C
CERTIFICATE OF AUTHORIZED PERSONS
(Local Government - Oral and Written Instructions)
The undersigned hereby certifies that he~s the duly elected and acting '~Ot.~J/[ ~/e.~Q~ of
TOWN OF SOUTHOLD __ (the "Local Government"), and further certifies that the following officers or employees
of the Local Government have been duly authorized in conformity with the Local Govemment's BOARD
POLICY to deliver Oral and Written Instructions to The Bank of New York Mellon
("Custodian") pursuant to the Third. Pa~ny Custodian Agreement between the Local Government, Capital One N.A.
("Bank") and Custodian dated I , and that the signatures appearing opposit¢,~heir names are true an~
correct: I t , t ·
Name ~/.,Ti? ~_,. ~,1 S ignaj~,~r.~
,,,, ,
Nam~ - ~/Title / Signatuy
Name Title Signature
Name Title Signature
Name Title Signature
Name Title Signature
Name Title Signature
Name Title Signature
Name Title Signature
This certificate supersedes any certificate of authorized individuals you may currently have on file.
Title:--~:> c~-~r~
Date:
THIRD PARTY CUSTODIAN AGREEMENT
(Collateralized Municipal Deposits)
THIS AGREEMENT, made and executed as of between Town of Southold
("Local Government"), JP Morgan Chase Bank, N.A. ("Bank") and The Bank of New York Mellon ("Custodian").
WITNESSETH
WHEREAS, Local Government desires to maintain or continue to maintain public deposits with the Bank;
WHEREAS, the Bank desires to obtain such deposits and to provide security therefor as required by the
General Municipal Law, Banking Law and other applicable statutes;
WHEREAS, the Custodian agrees to provide safekeeping services and to hold any securities pledged by the
Bank in a custodial account established for the benefit of the Local Government as secured party pursuant to this
Agreement;
NOW, THEREFORE, in consideration of the mutual promises set forth hereafter, the parties hereto agree as
follows:
1. Security Requirements.
(a) The Bank, to secure the timely payment of Uninsured Deposits heretofore or hereafter made by the
Local Government, including any interest due thereon and any costs or expenses incurred by Local Government and
arising out of the collection of any deposits made with the Bank, shall provide the Local Government with Eligible
Collateral having an Adjusted Market Value equal to the Collateral Requirement. Whenever Eligible Collateral is
provided pursuant to this paragraph, the Bank hereby grants to the Local Government a pledge and security interest in
and to such Eligible Collateral and shall deliver such Eligible Collateral to the Custodian in the manner prescribed in
Section 2 of this Agreement. The security interest of the Local Government in Eligible Collateral shall terminate
upon the transfer of such Eligible Collateral from the Account. Eligible Letters of Credit and Eligible Surety Bonds
provided pursuant to this paragraph shall be subject to the prior approval of the Local Government unless the Local
Government has approved in writing the form of an Eligible Letter of Credit or Eligible Surety Bond to be issued by a
specific entity or the form of such Eligible Letter of Credit or Eligible Surety Bond is attached hereto as an Exhibit.
(b) The Custodian will daily determine the Adjusted Market Value of the Eligible Collateral provided
pursuant to this Agreement (except that the Bank shall provide to the Custodian the Market Value of Eligible Surety
Bonds). If the Adjusted Market Value of such Eligible Collateral is less than the Collateral Requirement, the
Custodian will so notify the Bank and the Bank shall, upon such notice, be required to provide additional Eligible
Collateral having an Adjusted Market Value equal to or greater than such deficiency no later than one Business Day
after receipt of such notice. If the Adjusted Market Value of the Eligible Collateral provided pursuant to this
Agreement exceeds the Collateral Requirement, the Custodian, at the direction of the Bank, shall transfer securities
from the Account, or in the case of other Eligible Collateral, cause or consent to a reduction in the amount thereof, to
the extent of such excess.
(c) The Bank may substitute Eligible Collateral ("Substitute Collateral") for any Eligible Collateral
previously provided pursuant to this Agreement so long as the Substitute Collateral has an Adjusted Market Value
equal to or greater than the Eligible Collateral which it will replace. The Bank shall give Written or Oral Instructions
to the Custodian with respect to any proposed substitution. If the Substitute Collateral described in such Written or
Oral Instructions consists exclusively of Eligible Collateral having sufficient Adjusted Market Value, the Custodian,
at the direction of the Bank, shall transfer the Eligible Collateral out of the Account against delivery to the Account
on the same Business Day of the Substitute Collateral. In the event the Substitute Collateral described in such notice
consists of an Eligible Letter of Credit or Eligible Surety Bond, the prior consent of the Local Government shall be
required before the Bank or Custodian may complete the substitution described in such notice unless the Local
Government has, in writing, previously approved and consented to the form and issuer of the Eligible Letter of Credit
and/or Eligible Surety Bond to be provided as Substitute Collateral.
2. Custody of Eligible Collateral
(a) The Bank and Local Government hereby appoint the Custodian as custodian of all Eligible
Collateral at any time delivered to the Custodian pursuant to this Agreement. The Custodian hereby accepts
appointment as such Custodian and agrees to establish and maintain the Account and appropriate records identifying
the Eligible Collateral as pledged by the Bank to the Local Government. Securities in the Account shall be kept
separate and apart from the general assets of the Custodian and will not, in any circumstances, be commingled with or
become part of the backing for any other deposit or liability of the Custodian or any other person or entity. The
Custodian, in performing its duties and responsibilities pursuant to this Agreement, shall act as custodian for, and
agent of, the Local Government.
(b) The Bank and Local Government agree that Eligible Collateral delivered to the Custodian for
deposit in the Account may be in the form of credits to the accounts of Custodian at the Book Entry System or a
Depository or by delivery to the Custodian of physical certificates in a form suitable for transfer or with an
assignment in blank to the Local Government or Custodian. The Bank and Local Government hereby authorize the
Custodian on a continuous and ongoing basis to deposit in the Book Entry System and/or the Depositories all Eligible
Collateral that may be deposited therein and to utilize the Book Entry System and/or Depositories and the receipt and
delivery of physical Securities or any combination thereof in connection with its performance hereunder. Eligible
Collateral credited to the Account and deposited in the Book Entry System or Depositories or other financial
intermediaries will be represented in accounts of Custodian that include only assets held by Custodian for its
customers, and including but not limited to accounts in which Custodian acts in a fiduciary, agency or representative
capacity. Eligible Collateral that is not held in the Book Entry System, Depositories or through another financial
intermediary will be held in the Custodian's vault and physically segregated from securities and other non-cash
property belonging to the Custodian.
(c) (i) The Custodian shall provide to the Local Government weekly and monthly statements reflecting
the activity in the Account. Upon request, the Custodian shall also provide to the Local Government a daily statement
on any Business Day on which Eligible Collateral is transferred to or from the Account.
(ii) Local Government agrees that it shall promptly review all statements and shall promptly advise
Custodian by Oral or Written Instruction of any error, omission or inaccuracy in such statements. In the event that
Custodian receives such a Written or Oral Instruction identifying a specific concern with respect to the Market Value,
Adjusted Market Value, or any other matter connected with the Account, Custodian shall undertake to correct any
errors, failures or omissions, provided that Custodian determines in its sole discretion that such error, failure or
omission actually occurred. Any such corrections shall be reflected on subsequent statements.
(d) The Account shall not be subject to any security interest, lien or any right of set-off by or against
the Custodian.
(e) With respect to all Eligible Collateral held in the Account, the Custodian by itself, or through the
use of the Book Entry System or the appropriate Depository, shall, unless otherwise insl~'ucted to the contrary by the
Bank: (i) collect all income and other payments reflecting interest and principal on the Eligible Collateral in the
Account and credit such amounts to the account of the Bank; (ii) forward to the Bank copies of all information or
documents that it may receive fi.om an issuer of Eligible Collateral which, in the opinion of the Custodian, is intended
for the beneficial owner of the Eligible Collateral including, without limitation all proxies and other authorizations
properly executed and all proxy statements, notices and reports; (iii) execute, as Custodian, any certificates of
ownership, affidavits, declarations or other certificates under any tax laws now or hereafter in effect in connection
with the collection of bond and note coupons; (iv) hold directly, or through the Book Entry System or Depository, all
rights issued with respect to any Eligible Collateral held by the Custodian hereunder; and (v) upon receipt of Written
Instructions from the Bank, the Custodian will exchange Eligible Collateral held hereunder for other securities and/or
cash in connection with (a) any conversion privilege, reorganization, recapitalization, redemption in kind,
consolidation, tender offer or exchange offer, or (b) any exercise, subscription, pumhase or other similar rights.
3. Events of Default
In the event the Bank shall fail to pay the Local Government any amount of the Deposits by the Local Government
covered by this Agreement in accordance with the terms of such Deposit, or should the Bank fail or suspend active
operations, the Deposits in such Bank shall become due and payable immediately and the Local Government shall
have the right to unilaterally demand delivery of all Eligible Collateral in the Account by notice to the Custodian and
to sell such securities at public or private sale. In the event of such sale, the Local Government, after deducting all
legal expenses and other costs, including reasonable attorneys fees, from the proceeds of such sale, shall apply the
remainder towards any one or more of the liabilities of the Bank to the Local Government and shall return the surplus,
if any, to the Bank.
4. Representation and Warranties
(a) Representations of the Bank. The Bank represents and warrants, which representations and
warranties shall be deemed to be continuing, that:
(l)
it is the legal and actual owner, free and clear of all liens and claims, of all Eligible
Collateral pledged pursuant to this Agreement;
(2)
this Agreement was executed by an officer of the Bank who was authorized by the Bank's
board of directors to do so and will at all times be maintained as an official record of the
Bank;
(3) all securities pledged pursuant to this Agreement are Eligible Collateral;
(4)
the Bank is a banking organization located and authorized to do business in the State of
New York;
(5)
all acts, conditions and things required to exist, happen or to be performed on its part
precedent to and in the execution and delivery of this Agreement exist or have happened or
have been performed.
(b) Representations of the Local Government. The Local Government hereby represents and warrants,
which representations and warranties shall be deemed to be continuing, that:
(1)
(2)
the appointment of the Custodian has been duly authorized and no other action by the
Local Government is required and this Agreement was executed by an officer of the Local
Government duly authorized to do so;
(3)
it will not transfer or assign its rights or interests in or with respect to any Eligible
Collateral pledged pursuant to this Agreement, except as authorized pursuant to Section 3
of the Agreement;
(4)
all acts, conditions and things required to exist, happen or to be performed on its part
precedent to and in the execution and delivery of this Agreement exist or have happened or
have been performed.
4
5. Concerning the Custodian.
(a) The Custodian shall not be liable for any loss or damage, including counsel fees, resulting from its
action or omission to act or otherwise, except for any loss, damage, claim or expense arising out of its own negligence
or willful misconduct, and shall have no obligation hereunder for any loss or damage, including counsel fees, which
are sustained or incurred by reason of any action or inaction by the Book Entry System or any Depository. The
Custodian may, with respect to questions of law, apply for and obtain the advice and opinion of counsel and shall be
fully protected with respect to anything done or omitted by it in good faith and conformity with such advice or
opinion. The Local Government and Bank agree, jointly and severally, to indemnify the Custodian and to hold it
harmless against any and all costs, expenses, damages, liabilities or claims, including reasonable fees and expenses of
counsel, which the Custodian may sustain or incur or which may be asserted against the Custodian by reason of or as
a result of any action taken or omitted by the Custodian in connection with operating under this Agreement except
those costs, expenses, damages, liabilities or claims arising out of the negligence or willful misconduct of the
· . . ;o ~ ;~,, ,.u~. ~ ..... .:R..: ..... - .- uf il.,
Custodtan or any of ~ts employees or duly appointed agents. '1~...... de'"" j - .................... ~, ,,o-t~,mm~
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(b) The Custodian shall not be responsible for, or considered to be the Custodian of, any Eligible
Collateral received by it for deposit in the Account until the Custodian actually receives and collects such Eligible
Collateral directly or by the final crediting of the Custodian's account on the books of the Book Entry System or the
appropriate Depository. The Custodian will be entitled to reverse any credits made on the Local Government's behalf
where such credits have been previously made and the Eligible Collateral is not finally collected.
(c) The Custodian shall have no duties or responsibilities whatsoever except such duties and
responsibilities as are specifically set forth in this Agreement and no covenant or obligation shall be implied against
the Custodian in connection with this Agreement. In no event shall Custodian be liable to Local Government, Bank
or any third party for special, indirect or consequential damages, or lost profits or loss of business, arising in
connection with this Agreement·
(d) The Local Government's authorized officer, upon reasonable notice, shall have access to the
Custodian's books and records maintained with respect to the Local Government's interest in the Account during the
Custodian's normal business hours. Upon the reasonable request of the Local Government,' copies of any such books
and records shall be provided by the Custodian to the Local Government or the Local Govemment's authorized
officer at the Local Government's expense.
(e) In performing hereunder, the Custodian may enter into subcontracts, agreements and understandings
with third parties (including subsidiaries of The Bank of New York Mellon Corporation), whenever and on such
terms and conditions as it deems necessary or appropriate. No such subcontract, agreement or understanding shall
discharge the Custodian from its obligations hereunder.
(f) Reliance on Pricing Services. Custodian is authorized to utilize any generally recognized pricing
information service (including brokers and dealers of securities) in order to perform its valuation responsibilities
hereunder, and the Bank and the Local Government agree that Custodian shall not be liable for any loss, damage,
expense, liability or claim (including attorneys' fees) incurred as a result of errors or omissions of any such pricing
information service, broker or dealer.
(g) Fome Maieure. Custodian shall not be responsible or liable for any failure or delay in the
performance of its obligations under this Agreement arising out of or caused, directly or indirectly, by cimumstances
beyond its reasonable control, including without limitation, acts of God, earthquakes, fires, floods, wars, civil or
military disturbances, sabotage, epidemics, riots, loss or malfunctions of utilities, computer (hardware or software) or
communications service outside of Custodian's reasonable control, labor disputes, acts of civil or military authority,
or govemmantal, judicial or regulatory action; provided however, that Custodian shall use its best efforts to resume
normal performance as soon as practicable under the circumstances.
(h) Bank shall pay to Custodian the fees and charges as may be agreed upon from time to time.
Customer shall also reimburse Custodian for out-of-pocket expenses which are a normal incident of the services
provided hereunder.
6. Termination
Any of the parties hereto may terminate' this Agreement by giving to the other parties a notice in writing
specifying the date of such termination, which shall be the earlier of(i) not less than 90 days a~er the date of giving
such notice or (ii) the date on which the Deposits are repaid in full. Such notice shall not affect or terminate the Local
Government's security interest in the Eligible Collateral in the Account. Upon termination hereof, the Custodian shall
follow such reasonable Written Instructions of the Bank and the Local Government concerning the transfer of custody
of Eligible Collateral, collateral records and other items. In the event of a discrepancy between Written Instructions
of the Bank and the Local Government, the Custodian shall act pursuant to the Local Government's Written
Instructions. Upon the date set forth in the termination notice, this Agreement shall terminate except as otherwise
provided herein and all obligations of the parties to each other hereunder shall cease.
7. Miscellaneous.
(a) The Local Government and Bank each agrees to furnish to the Custodian a new Certificate in the
event that any present Authorized Person ceases to be an Authorized Person or in the event that any other Authorized
Persons are appointed and authorized. Until such new Certificate is received, the Custodian shall be fully protected in
acting upon Oral or Written Iustmctions or signatures of the present Authorized Persons.
(b) Any Written Instructions or other instrument in writing authorized or required by this Agreement
shall be given to the Custodian and shall be sufficiently given if sent to the Custodian by regnlar mail to its offices at
One Wall Sheet, 4th Floor, New York, New York 10286, Atto: BDS - Collateral Manager, or at such other place as
the Custodian may from time to time designate in writing.
(c) Any notice or other instrument in writing authorized or required by this Agreement to be given to
the Bank shall be sufficiently given if sent to the Bank by regular mail to its offices at 395 North Service Rd,
Melville, NY 11747, or at such other place as the Bank may from time to time designate in writing.
(d) Any notice or other instrument in writing, authorized or required by this Agreement to be given to
the Local Govemment shall be sufficiently given if sent to the Local Government by regular mail to its offices at
53095 Route 25, PO Box 1179, Southold. NY 11971, or at such other offices as the Local Government may from time
to time designate in writing.
(e) In case any provision in or obligation under this Agreement shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations
shall not in any way be affected or impaired thereby and if any provision is inapplicable to any person or
cimumstances, it shall nevertheless remain applicable to all other persons and circumstances.
(f) This Agreement may not be amended or modified in any manner except by written agreement
executed by all of the parties hereto.
(g) This Agreement shall extend to and be binding upon the parties hereto, and their respective
successors and assigns; provided however, that this Agreement shall not be assignable by any party without the
written consent of the other parties.
(h) This Agreement shall be construed in accordance with the substantive laws of the State of New
York, without regard to conflicts of laws principles thereof. Bank, Local Government and Custodian hereby consent
to the jurisdiction of a state or federal court situated in New York in connection with any dispute arising hereunder.
Bank, Local Government and Custodian hereby irrevocably waive, to the fullest extent permitted by applicable law,
any objection which it may now or hereafter have to the laying of venue of any such proceeding brought in such a
court and any claim that such proceeding brought in such a court has been brought in an inconvenient forum. Bank,
Local Government and Custodian each hereby irrevocably waives any and all rights to trial by jury in any legal
proceeding arising out of or relating to this Agreement.
(i) Waiver of Immunity. To the extent that in any jurisdiction any party may now or hereafter be
entitled to claim, for itself or its assets, immunity from suit, execution, aRachment (before or after judgment) or other
legal process, each party irrevocably agrees not to claim, and it hereby waives, such immunity in connection with this
Agreement.
8. Definitions.
Whenever used in this Agreement, the following terms shall have the following meanings:
(a) "Account" shall mean the custodial account established with the Custodian for the benefit of the
Local Government as secured party in accordance with this Agreement.
(b) "Adjusted Market Value" shall be one hundred percent of Market Value, except that: (1) in the
case of Eligible Collateral enumerated in subparagraphs (v), (vi) and (vii) of Exhibit "B," the Adjusted Market Value
shall be an amount equal to its Market Value multiplied by 0.9 if such Eligible Collateral is not rated in the highest
rating category by at least one Nationally Recognized Statistical Rating Agency, but is so rated in the second highest
rating category, and an amount equal to its Market Value multiplied by 0.8 if such Eligible Security is not so rated in
one of the two highest categories, but is so rated in the third highest rated category; (2) in the ease of Eligible
Collateral enumerated in subparagraphs (viii), (x) and (xi) of Exhibit "B," the Adjusted Market Value shall be an
amount equal to its Market Value multiplied by 0.8; (3) in the case of Eligible Collateral enumerated in subparagraph
(ix) of Exhibit "B," the Adjusted Market Value shall be an amount equal to its Market Value multiplied by 0.7; and
(4) in the case of Eligible Letters of Credit, the Adjusted Market Value shall be an amount equal to its Market Value
divided by 1.4.
(c) "Authorized Person" shall be any officer of the Local Government or Bank, as the ease may be,
duly authorized to give Oral Instructions or Written Instructions on behalf of Local Government or Bank, such
persons to be designated in a Certificate substantially in the form of Exhibit "C"- attached hereto, as such Exhibit may
be amended from time to time.
(d) "Book Entry System" shall mean the Federal Reserve/Treasury Book Entry System for receiving
and delivering U.S. Government Securities.
(e) "Business Day" shall mean any day on which the Custodian and the Bank are open for Business and
on which the Book Entry System and/or the Depositories are open for business.
(f) "Certificate" shall mean the Certificate attached hereto as Exhibit "C".
(g) "Collateral Requirement" shall mean the amotmts required in Exhibit "A" unless the Bank and Local
Govemment agree to a different amount in accordance with this Agreement.
(h) "Depository" shall include the Depository Trust Company, the Participants Trust Company and
other securities depositories and clearing agencies (and their successors and nominees) registered with the Securities
and Exchange Commission or otherwise regulated by appropriate federal or state agencies as a securities depository
or clearing agency.
(i) "Deposits" shall mean all deposits by the Local Govemment in the Bank that are available for all
uses generally permitted by the Bank to the Local Govemment for actually and finally collected funds under the
Bank's account agreement or policies.
(j) "Eligible Collateral" shall mean any securities of the types enumerated in the Schedule of Eligible
Collateral attached hereto as Exhibit "B" as such Schedule may be amended by the parties in writing from time to
time, Eligible Letters of Credit, and Eligible Surety Bonds.
(k) "Eligible Letter of Credit" shall mean an irrevocable letter of credit issued in favor of the Local
Government for a term not to exceed ninety days by either: (1) a bank (other than the Bank) whose commercial paper
and other unsecured short-term debt obligations (or, in the case of a bank which is the principal subsidiary of a
holding company, whose holding company's commemial paper and other unsecured short-term debt obligations) are
rated in one of three highest rating categories based on the credit of such bank or holding company by at least one
Nationally Recognized Statistical Rating Organization, or (2) a bank (other than the Bank) which is in compliance
with applicable Federal minimum risk-based capital requirements.
(1) "Eligible Surety Bond" shall mean a bond executed by an insurance company authorized to do
business in the State of New York, the claims paying ability of which is rated in the highest rating category by at least
two nationally recognized statistical rating organizations.
(m) "Margin Percentage" shall mean the pementage indicated on Exhibit B attached hereto with respect
to particular types of Eligible Collateral.
(n) "Market Value" shall mcan, with respect to any Eligible Security held in the Account, the market
value of such Eligible Security as made available to the Custodian by a generally recognized source selected by the
Custodian plus, if not reflected in the market value, any accrued interest thereon, or, if such soume does not make
available a market value, the market value shall be as determined by the Custodian in its sole discretion based on
information furnished to the Custodian by one or more brokem or dealers; provided however that, if agreed in writing
by the parties hereto, the Bank may provide the Custodian with such Market Values. The Market Value of Eligible
Letters of Credit and Eligible Surety Bonds shall be the face amount thereof.
(o) "Nationally Recognized Statistical Rating Organization" shall mean Moody's, Standard and Poor's,
Fitch, Duff and Phelps, BankWatch and IBCA and in the case of Eligible Surety Bonds, shall also include Bests.
(p) "Oral Inslmctions" shall mean verbal instructions actually received by the Custodian from an
Authorized Person or from a person reasonably believed by the Custodian to be an Authorized Person.
(q)
Agreement.
"Substitute Collateral" shall have the meaning set forth in paragraph C of Section 1 of this
(r) "Uninsured Deposits" shall mean that portion of the Local Government's Deposits with the Bank
which exceeds the insurance coverage available from the Federal Deposit Insurance Corporation.
(s) "Written Instructions" shall mean written communications actually received by the Bank or the
Custodian from an Authorized Person or from a person reasonably believed by the Bank or the Custodian to be an
Authorized Person by a computer, telex, telecopier or any other system whereby the receiver of such communications
is able to verify by codes or otherwise with a reasonable degree of certainty the identity of the sender of such
communication.
IN WITNESS WHEREOF, the parties hereto have caused is Agreement to be executed by their respective
officers thereunto duly authorized and their respective seals to be hereunto affixed, as of the day and year first above
written.
[LOCAL GOVERNMENT]
[BANKI
Title:
By:
Title:
THE BANK OF NEW YORK MELLON
By:
Title:
colldep4_ro.doc
(7/08)
EXHIBIT A
Collateral Requirement
Collateral Requirement. On any Business Day that the Local Government has Uninsured Deposits in the
Bank, the Bank, in accordance with paragraph b of Section 1 of this Agreement, agrees to deliver or cause to be
delivered to the Custodian for deposit in the Account, Eligible Collateral having an Adjusted Market Value equal to
the Collateral Requirement. For purposes of this Agreement, Collateral Requirement shall mean the amount of such
Uninsured Deposits times the Margin Percentage, if any.
EXHIBIT B
Schedule of Eligible Collateral
Margin %
102
10~2
I0_2
10~2
10__~2
10.~2
102
102
102
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
(x)
Obligations issued by the United States of America, an agency thereof or a United States
government sponsored corporation or obligations fully insured or guaranteed as to the
payment of principal and interest by the United States of America, an agency thereof or a
United States government sponsored corporation.
Obligations issued or fully guaranteed by the International Bank for Reconstruction and
Development, the Inter-American Development Bank, the Asian Development Bank, and
the African Development Bank.
Obligations partially insured or guaranteed by any agency of the United States of America,
at a proportion of the Market Value of the obligatioo that represents the amount of the
insurance or guaranty.
Obligations issued or fully insured or guaranteed by the State of New York, obligations
issued by a municipal corporation, school district or district corporation of such State or
obligations of any public benefit corporation which under a specific State statute may be
accepted as security for deposit of public moneys.
Obligations issued by states (other than the State of New York) of the United States rated
in one of the three highest rating categories by at least one nationally recognized statistical
rating organization.
Obligations of Puerto Rico rated in the three highest rating categories by at least one
nationally recognized statistical rating organization.
Obligations of counties, cities and other governmental entities of a state other than the
State of New York having the power to levy taxes that are backed by the full faith and
credit of such governmental entity and rated in the three highest rating categories by at
least one nationally recognized statistical rating organization.
Obligations of domestic corporations rated in one of the two highest rating categories by
at least one nationally recognized statistical rating organization.
Any mortgage related securities, as defined in the Securities Exchange Act of 1934, as
amended, which may be purchased by banks under the limitations established by Federal
bank regulatory agencies.
Commemial paper and bankers' acceptances issued by a bank (other than the Bank), rated
in the highest short term category by at least one nationally recognized statistical rating
organization and having maturities of not longer than 60 days from the date they are
pledged.
102 (xi) Zero coupon obligations of the United States government marketed as "Treasury strips".
EXHIBIT C
CERTIFICATE OF AUTHORIZED PERSONS
(Local Government - Oral and Written Instructions)
The undersigned hereby certifies that he/she is the duly elected and acting
of
(the
"Local Government"), and further certifies that the following officers or employees of the Local Govemment have
been duly authorized in conformity with the Local Government's to deliver Oral and
Written Instructions to The Bank of New York Mellon ("Custodian") pursuant to the Third Party Custodian
Agreement between the Local Government, ("Bank") and Custodian dated
and that the signatures appearing opposite their names are true and correct:
Name Title Signature
Name Title Signature
Name Title Signature
Name Title Signature
Name Title Signature
Name Title Signature
Name Title Signature
Name Title Signature
Name Title Signature
This certificate supersedes any certificate of authorized individuals you may currently have on file.
[seal]
Title:
Date:
THIRD PARTY CUSTODIAN AGREEMENT
(Collateralized Municipal Deposits)
THIS AGREEMENT, made and executed as of 3/[~M,2_ , 2_.~ t t between Town of Southold
("Local Government"), JP Morgan Chase Bank, N.A. ("Bank") and The Bahl~ of Ne~ York Mellon ("Custodian").
WITNESSETH
WHEREAS, Local Government desires to maintain or continue to maintain public deposits with the Bank;
WHEREAS, the Bank desires to obtain such deposits and to provide security therefor as required by the
General Municipal Law, Banking Law and other applicable statutes;
WHEREAS, the Custodian agrees to provide safekeeping services and to hold any securities pledged by the
Bank in a custodial account established for the benefit of the Local Government as secured party pursuant to this
Agreement;
NOW, THEREFORE, in consideration of the mutual promises set forth hereafter, the parties hereto agree as
follows:
1. Security Requirements.
(a) The Bank, to secure the timely payment of Uninsured Deposits heretofore or hereafter made by the
Local Government, including any interest due thereon and any costs or expenses incurred by Local Government and
arising out of the collection of any deposits made with the Bank, shall provide the Local Government with Eligible
Collateral having an Adjusted Market Value equal to the Collateral Requirement. Whenever Eligible Collateral is
provided pursuant to this paragraph, the Bank hereby grants to the Local Government a pledge and security interest in
and to such Eligible Collateral and shall deliver such Eligible Collateral to the Custodian in the manner prescribed in
Section 2 of this Agreement. The security interest of the Local Government in Eligible Collateral shall terminate
upon the transfer of such Eligible Collateral from the Account. Eligible Letters of Credit and Eligible Surety Bonds
provided pursuant to this paragraph shall be subject to the prior approval of the Local Government unless the Local
Government has approved in writing the form of an Eligible Letter of Credit or Eligible Surety Bond to be issued by a
specific entity or the form of such Eligible Letter of Credit or Eligible Surety Bond is attached hereto as an Exhibit.
(b) The Custodian will daily determine the Adjusted Market Value of the Eligible Collateral provided
pursuant to this Agreement (except that the Bank shall provide to the Custodian the Market Value of Eligible Surety
Bonds). If the Adjusted Market Value of such Eligible Collateral is less than the Collateral Requirement, the
Custodian will so notify the Bank and the Bank shall, upon such notice, be required to provide additional Eligible
Collateral having an Adjusted Market Value equal to or greater than such deficiency no later than one Business Day
after receipt of such notice. If the Adjusted Market Value of the Eligible Collateral provided pursuant to this
Agreement exceeds the Collateral Requirement, the Custodian, at the direction of the Bank, shall transfer securities
from the Account, or in the case of other Eligible Collateral, cause or consent to a reduction in the amount thereof, to
the extent of such excess.
(c) The Bank may substitute Eligible CollatemI ("Substitute Collateral") for any Eligible Collateral
previously provided pursuant to this Agreement so long as the Substitute Collateral has an Adjusted Market Value
equal to or greater than the Eligible Collateral which it will replace. The Bank shall give Written or Oral Instructions
to the Custodian with respect to any proposed substitution. If the Substitute Collateral described in such Written or
Oral Instructions consists exclusively of Eligible Collateral having sufficient Adjusted Market Value, the Custodian,
at the direction of the Bank, shall transfer the Eligible Collateral out of the Account against delivery to the Account
on the same Business Day of the Substitute Collateral. In the event the Substitute Collateral described in such notice
consists of an Eligible Letter of Credit or Eligible Surety Bond, the prior consent of the Local Govemment shall be
required before the Bank or Custodian may complete the substitution described in such notice unless the Local
Government has, in writing, previously approved and consented to the form and issuer of the Eligible Letter of Credit
and/or Eligible Surety Bond to be provided as Substitute Collateral.
2. Custody of Eligible Collateral
(a) The Bank and Local Government hereby appoint the Custodian as custodian of all Eligible
Collateral at any time delivered to the Custodian pursuant to this Agreement. The Custodian hereby accepts
appointment as such Custodian and agrees to establish and maintain the Account and appropriate records identifying
the Eligible Collateral as pledged by the Bank to the Local Government. Securities in the Account shall be kept
separate and apart from the general assets of the Custodian and will not, in any circumstances, be commingled with or
become part of the backing for any other deposit or liability of the Custodian or any other person or entity. The
Custodian, in performing its duties and responsibilities pursuant to this Agreement, shall act as custodian for, and
agent of, the Local Government.
(b) The Bank and Local Government agree that Eligible Collateral delivered to the Custodian for
deposit in the Account may be in the form of credits to the accounts of Custodian at the Book Entry System or a
Depository or by delivery to the Custodian of physical certificates in a form suitable for transfer or with an
assignment in blank to the Local Government or Custodian. The Bank and Local Government hereby authorize the
Custodian on a continuous and ongoing basis to deposit in the Book Entry System and/or the Depositories all Eligible
Collateral that may be deposited therein and to utilize the Book Entry System and/or Depositories and the receipt and
delivery of physical Securities or any combination thereof in connection with its performance hereunder. Eligible
Collateral credited to the Account and deposited in the Book Entry System or Depositories or other financial
intermediaries will be represented in accounts of Custodian that include only assets held by Custodian for its
customers, and including but not limited to accounts in which Custodian acts in a fiduciary, agency or representative
capacity. Eligible Collateral that is not held in the Book Entry System, Depositories or through another financial
intermediary will be held in the Custodian's vault and physically segregated from securities and other non-cash
property belonging to the Custodian.
(c) (i) The Custodian shall provide to the Local Government weekly and monthly statements reflecting
the activity in the Account. Upon request, the Custodian shall also provide to the Local Government a daily statement
on any Business Day on which Eligible Collateral is transferred to or from the Account.
(ii) Local Government agrees that it shall promptly review all statements and shall promptly advise
Custodian by Oral or Written Instruction of any error, omission or inaccuracy in such statements. In the event that
Custodian receives such a Written or Oral Instruction identifying a specific concern with respect to the Market Value,
Adjusted Market Value, or any other matter connected with the Account, Custodian shall undertake to correct any
errors, failures or omissions, provided that Custodian determines in its sole discretion that such error, failure or
omission actually occurred. Any such corrections shall be reflected on subsequent statements.
(d) The Account shall not be subject to any security interest, lien or any right of set-off by or against
the Custodian.
(e) With respect to all Eligible Collateral held in the Account, the Custodian by itself, or through the
use of the Book Entry System or the appropriate Depository, shall, unless otherwise instructed to the contrary by the
Bank: (i) collect all income and other payments reflecting interest and principal on the Eligible Collateral in the
Account and credit such amounts to the account of the Bank; (ii) forward to the Bank copies of all information or
documents that it may receive from an issuer of Eligible Collateral which, in the opinion of the Custodian, is intended
for the beneficial owner of the Eligible Collateral including, without limitation all proxies and other authorizations
properly executed and all proxy statements, notices and reports; (iii) execute, as Custodian, any certificates of
ownership, affidavits, declarations or other certificates under any tax laws now or hereafter in effect in connection
with the collection of bond and note coupons; (iv) hold directly, or through the Book Entry System or Depository, all
rights issued with respect to any Eligible Collateral held by the Custodian hereunder; and (v) upon receipt of Written
Instructions from the Bank, the Custodian will exchange Eligible Collateral held hereunder for other securities and/or
cash in connection with (a) any conversion privilege, reorganization, recapitalization, redemption in kind,
consolidation, tender offer or exchange offer, or (b) any exercise, subscription, purchase or other similar rights.
3. Events of Default
In the event the Bank shall fail to pay the Local Government any amount of the Deposits by the Local Government
covered by this Agreement in accordance with the terms of such Deposit, or should the Bank fail or suspend active
operations, the Deposits in such Bank shall become due and payable immediately and the Local Government shall
have the right to unilaterally demand delivery of all Eligible Collateral in the Account by notice to the Custodian and
to sell such securities at public or private sale. In the event of such sale, the Local Government, aRer deducting all
legal expenses and other costs, including reasonable attorneys fees, from the proceeds of such sale, shall apply the
remainder towards any one or more of the liabilities of the Bank to the Local Government and shall return the surplus,
if any, to the Bank.
4. Representation and Warranties
(a) Representations of the Bank. The Bank represents and warrants, which representations and
warranties shall be deemed to be continuing, that:
it is the legal and actual owner, free and clear of all liens and claims, of all Eligible
Collateral pledged pursuant to this Agreement;
(2)
this Agreement was executed by an officer of the Bank who was authorized by the Bank's
board of directors to do so and will at all times be maintained as an official record of the
Bank;
(3) all securities pledged pursuant to this Agreement are Eligible Collateral;
(4)
the Bank is a banking organization located and authorized to do business in the State of
New York;
(5)
all acts, conditions and things required to exist, happen or to be performed on its part
precedent to and in the execution and delivery of this Agreement exist or have happened or
have been performed.
(b) Representations of the Local Government. The Local Government hereby represents and warrants,
which representations and warranties shall be deemed to be continuing, that:
(0
this Agreement has been legally and validly entered into, does not and will not violate any
statute or regulation applicable to it and is enforceable against the Local Government in
accordance with its terms;
(2)
the appointment of the Custodian has been duly authorized and no other action by the Local
Government is required and this Agreement was executed by an officer of the Local
Government duly authorized to do so;
(3)
it will not transfer or assign its rights or interests in or with respect to any Eligible
Collateral pledged pursuant to this Agreement, except as authorized pursuant to Section 3
of the Agreement;
(4)
all acts, conditions and things required to exist, happen or to be performed on its part
precedent to and in the execution and delivery of this Agreement exist or have happened or
have been performed.
5. Concernina the Custodian.
(a) The Custodian shall not be liable for any loss or damage, including counsel fees, resulting from its
action or omission to act or otherwise, except for any loss, damage, claim or expense arising out of its own negligence
or willful misconduct, and shall have no obligation hereunder for any loss or damage, including counsel fees, which
are sustained or incurred by reason of any action or inaction by the Book Entry System or any Depository. The
Custodian may, with respect to questions of law, apply for and obtain the advice and opinion of counsel and shall be
fully protected with respect to anything done or omitted by it in good faith and conformity with such advice or opinion.
The Local Government and Bank agree, jointly and severally, to indemnify the Custodian and to hold it harmless
against any and all costs, expenses, damages, liabilities or claims, including reasonable fees and expenses of counsel,
which the Custodian may sustain or incur or which may be asserted against the Custodian by reason of or as a result of
any action taken or omitted by the Custodian in connection with operating under this Agreement except those costs,
expenses, damages, liabilities or claims arising out of the negligence or willful misconduct of the Custodian or any of
its employees or duly appointed agents. This indemnity shall be a continuing obligation of the Local Government and
Bank notwithstanding the termination of this Agreement.
(b) The Custodian shall not be responsible for, or considered to be the Custodian of, any Eligible
Collateral received by it for deposit in the Account until the Custodian actually receives and collects such Eligible
Collateral directly or by the final crediting of the Custodian's account on the books of the Book Entry System or the
appropriate Depository. The Custodian will be entitled to reverse any credits made on the Local Government's behalf
where such credits have been previously made and the Eligible Collateral is not fmally collected.
(c) The Custodian shall have no duties or responsibilities whatsoever except such duties and
responsibilities as are specifically set forth in this Agreement and no covenant or obligation shall be implied against
the Custodian in connection with this Agreement. In no event shall Custodian be liable to Local Government, Bank or
any third party for special, indirect or consequential damages, or lost profits or loss of business, arising in connection
with this Agreement.
(d) The Local Government's authorized officer, upon reasonable notice, shall have access to the
Custodian's books and records maintained with respect to the Local Government's interest in the Account during the
Custodian's normal business hours. Upon the reasonable request of the Local Government, copies of any such books
and records shall be provided by the Custodian to the Local Government or the Local Government's authorized officer
at the Local Government's expense.
(e) In performing hereunder, the Custodian may enter into subcontracts, agreements and understandings
with third parties (including subsidiaries of The Bank of New York Mellon Corporation), whenever and on such terms
and conditions as it deems necessary or appropriate. No such subcontract, agreement or understanding shall discharge
the Custodian from its obligations hereunder.
(f) Reliance on Pricine Services. Custodian is authorized to utilize any generally recognized pricing
information service (including brokers and dealers of securities) in order to perform its valuation responsibilities
hereunder, and the Bank and the Local Government agree that Custodian shall not be liable for any loss, damage,
expense, liability or claim (including attorneys' fees) incurred as a result of errors or omissions of any such pricing
information service, broker or dealer.
(g) Force Majeure. Custodian shall not be responsible or liable for any failure or delay in the
performance of its obligations under this Agreement arising out of or caused, directly or indirectly, by cimumstances
beyond its reasonable control, including without limitation, acts of God, earthquakes, rims, floods, wars, civil or
military disturbances, sabotage, epidemics, riots, loss or malfunctions of utilities, computer (hardware or software) or
communications service outside of Custodian's reasonable control, labor disputes, acts of civil or military authority, or
governmental, judicial or regulatory action; provided however, that Custodian shall use its best efforts to resume
normal performance as soon as practicable under the circumstances.
(h) Bank shall pay to Custodian the fees and charges as may be agreed upon from time to time.
Customer shall also reimburse Custodian for out-of-pocket expenses which are a normal incident of the services
provided hereunder.
6. Termination
Any of the parties hereto may terminate this Agreement by giving to the other parties a notice in writing
specifying the date of such termination, which shall be the earlier of (i) not less than 90 days after the date of giving
such notice or (ii) the date on which the Deposits are repaid in full. Such notice shall not affect or terminate the Local
Government's security interest in the Eligible Collateral in the Account. Upon termination hereof, the Custodian shall
follow such reasonable Written Instructions of the Bank and the Local Government concerning the transfer of custody
of Eligible Collateral, collateral records and other items. In the event of a discrepancy between Written Instructions
of the Bank and the Local Govemment, the Custodian shall act pursuant to the Local Government's Written
Instructions. Upon the date set forth in the termination notice, this Agreement shall terminate except as otherwise
provided herein and all obligations of the parties to each other hemtmder shall cease.
7. Miscellaneous.
(a) The Local Government and Bank each agrees to furnish to the Custodian a new Certificate in the
event that any present Authorized Person ceases to be an Authorized Person or in the event that any other Authorized
Persons are appointed and authorized. Until such new Certificate is received, the Custodian shall be fully protected in
acting upon Oral or Written Instructions or signatures of the present Authorized Persons.
(b) Any Written Instructions or other instrument in writing authorized or required by this Agreement
shall be given to the Custodian and shall be sufficiently given if sent to the Custodian by regular mail to its offices at
One Wall Street, 4th Floor, New York, New York 10286, Attn: BDS - Collateral Manager, or at such other place as
the Custodian may from time to time designate in writing.
(c) Any notice or other instrument in writing authorized or required by this Agreement to be given to
the Bank shall be sufficiently given if sent to the Bank by regular mail to its offices at 395 North Service Rd,
Melville, NY 11747, or at such other place as the Bank may from time to time designate in writing.
(d) Any notice or other instrument in writing, authorized or required by this Agreement to be given to
the Local Government shall be sufficiently given if sent to the Local Government by regular mail to its offices at
53095 Route 25, PO Box 1179, Southold, NY 11971, or at such other offices as the Local Government may from time
to time designate in writing.
(e) In case any provision in or obligation under this Agreement shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations
shall not in any way be affected or impaired thereby and if any provision is inapplicable to any person or
circumstances, it shall nevertheless remain applicable to all other persons and circumstances.
(f) This Agreement may not be amended or modified in any manner except by written agreement
executed by all of the parties hereto.
(g) This Agreement shall extend to and be binding upon the parties hereto, and their respective
successors and assigns; provided however, that this Agreement shall not be assignable by any party without the
written consent of the other parties.
(h) This Agreement shall be construed in accordance with the substantive laws of the State of New
York, without regard to conflicts of laws principles thereof. Bank, Local Government and Custodian hereby consent
to the jurisdiction of a state or federal court situated in New York in connection with any dispute arising hereunder.
Bank, Local Government and Custodian hereby irrevocably waive, to the fullest extent permitted by applicable law,
any objection which it may now or hereafter have to the laying of venue of any such proceeding brought in such a
court and any claim that such proceeding brought in such a court has been brought in an inconvenient forum. Bank,
Local Government and Custodian each hereby irrevocably waives any and all rights to trial by jury in any legal
proceeding arising out of or relating to this Agreement.
(i) Waiver of Immunity. To the extent that in any jurisdiction any party may now or hereafter be
entitled to claim, for itself or its assets, immunity from suit, execution, attachment (before or after judgment) or other
legal process, each party irrevocably agrees not to claim, and it hereby waives, such immunity in connection with this
Agreement.
8. Definitions.
Whenever used in this Agreement, the following terms shall have the following meanings:
(a) "Account" shall mean the custodial account established with the Custodian for the benefit of the
Local Government as secured party in accordance with this Agreement.
(b) "Adjusted Market Value" shall be one hundred percent of Market Value, except that: (1) in the
case of Eligible Collateral enumerated in subparagraphs (v), (vi) and (vii) of Exhibit "B," the Adjusted Market Value
shall be an amount equal to its Market Value multiplied by 0.9 if such Eligible Collateral is not rated in the highest
rating category by at least one Nationally Recognized Statistical Rating Agency, but is so rated in the second highest
rating category, and an amount equal to its Market Value multiplied by 0.8 if such Eligible Security is not so rated in
one of the two highest categories, but is so rated in the third highest rated category; (2) in the case of Eligible
Collateral enumerated in subparagraphs (viii), (x) and (xi) of Exhibit "B," the Adjusted Market Value shall be an
amount equal to its Market Value multiplied by 0.8; (3) in the case of Eligible Collateral enumerated in subparagraph
(ix) of Exhibit "B," the Adjusted Market Value shall be an amount equal to its Market Value multiplied by 0.7; and
(4) in the case of Eligible Letters of Credit, the Adjusted Market Value shall be an amount equal to its Market Value
divided by 1.4.
(c) "Authorized Person" shall be any officer of the Local Government or Bank, as the case may be,
duly authorized to give Oral Instructions or Written Instructions on behalf of Local Government or Bank, such
persons to be designated in a Certificate substantially in the form of Exhibit "C"- attached hereto, as such Exhibit may
be amended from time to time.
(d) "Book Entry System" shall mean the Federal Reserve/Treasury Book Entry System for receiving
and delivering U.S. Govemment Securities.
(e) "Business Day" shall mean any day on which the Custodian and the Bank are open for Business and
on which the Book Entry System and/or the Depositories are open for business.
(f) "Certificate" shall mean the Certificate attached hereto as Exhibit "C".
(g) "Collateral Requirement" shall mean the amounts required in Exhibit "A" unless the Bank and Local
Government agree to a different amount in accordance with this Agreement.
(h) "Depository" shall include the Depository Trust Company, the Participants Trust Company and
other securities depositories and clearing agencies (and their successors and nominees) registered with the Securities
and Exchange Commission or otherwise regulated by appropriate federal or state agencies as a securities depository
or clearing agency.
(i) "Deposits" shall mean all deposits by the Local Government in the Bank that are available for all
uses generally permitted by the Bank to the Local Government for actually and finally collected funds under the
Bank's account agreement or policies.
(i) "Eligible Collateral" shall mean any securities of the types enumerated in the Schedule of Eligible
Collateral attached hereto as Exhibit "B" as such Schedule may be amended by the parties in writing from time to
time, Eligible Letters of Credit, and Eligible Surety Bonds.
(k) "Eligible Letter of Credit" shall mean an irrevocable letter of credit issued in favor of the Local
Govemment for a term not to exceed ninety days by either: (1) a bank (other than the Bank) whose commercial paper
and other unsecured short-term debt obligations (or, in the case of a bank which is the principal subsidiary of a
holding company, whose holding company's commercial paper and other unsecured short-term debt obligations) are
rated in one of three highest rating categories based on the credit of such bank or holding company by at least one
Nationally Recognized Statistical Rating Organization, or (2) a bank (other than the Bank) which is in compliance
with applicable Federal minimum risk-based capital requirements.
(1) "Eligible Surety Bond" shall mean a bond executed by an insurance company authorized to do
business in the State of New York, the claims paying ability of which is rated in the highest rating category by at least
two nationally recognized statistical rating organizations.
(m) "Margin Percentage" shall mean the percentage indicated on Exhibit B attached hereto with respect
to particular types of Eligible Collateral.
(n) "Market Value" shall mean, with respect to any Eligible Security held in the Account, the market
value of such Eligible Security as made available to the Custodian by a generally recognized soume selected by the
Custodian plus, if not reflected in the market value, any accrued interest thereon, or, if such source does not make
available a market value, the market value shall be as determined by the Custodian in its sole discretion based on
information furnished to the Custodian by one or more brokers or dealers; provided however that, if agreed in writing
by the parties hereto, the Bank may provide the Custodian with such Market Values. The Market Value of Eligible
Letters of Credit and Eligible Surety Bonds shall be the face amount thereofi
(o) "Nationally Recognized Statistical Rating Organization" shall mean Moody's, Standard and Poor's,
Fitch, Duff and Phelps, BankWatch and IBCA and in the case of Eligible Surety Bonds, shall also include Bests.
(p) "Oral Instructions" shall mean verbal instructions actually received by the Custodian from an
Authorized Person or from a person reasonably believed by the Custodian to be an Authorized Person.
(q)
Agreement.
"Substitute Collateral" shall have the meaning set forth in paragraph C of Section I of this
(r) "Uninsured Deposits" shall mean that portion of the Local Govemment's Deposits with the Bank
which exceeds the insurance coverage available from the Federal Deposit Insurance Corporation.
(s) "Written Instructions" shall mean written communications actually received by the Bank or the
Custodian from an Authorized Person or from a person reasonably believed by the Bank or the Custodian to be an
Authorized Person by a computer, telex, telecopier or any other system whereby the receiver of such communications
is able to verify by codes or otherwise with a reasonable degree of certainty the identity of the sender of such
communication.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective
officers thereunto duly authorized and their respective seals to be hereunto affixed, as of the day and year first above
written.
[LOCAL GOVERNMENT]
[BANK]
By: ~
Title:
By:
Title:
THE BANK OF NEW YORK MELLON
~'//John Diagosm.
Title: {.// Managing Director
colldep4_ro.doc
(7/08)
EXHIBIT A
Collateral Requirement
Collateral Requirement. On any Business Day that the Local Government has Uninsured Deposits in the
Bank, the Bank, in accordance with paragraph b of Section I of this Agreement, agrees to deliver or cause to be
delivered to the Custodian for deposit in the Account, Eligible Collateral having an Adjusted Market Value equal to
the Collateral Requirement. For purposes of this Agreement, Collateral Requirement shall mean the amount of such
Uninsured Deposits times the Margin Percentage, if any.
EXHIBIT B
Schedule of Eligible Collateral
Margin %
10~2
1o~2
lO~2
lO~2
lO~
lO~3
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
(x)
Obligations issued by the United States of America, an agency thereof or a United States
government sponsored corporation or obligations fully insured or guaranteed as to the
payment of principal and interest by the United States of America, an agency thereof or a
United States government sponsored corporation.
Obligations issued or fully guaranteed by the International Bank for Reconstruction and
Development, thc Inter-American Development Bank, the Asian Development Bank, and
the African Development Bank.
Obligations partially insured or guaranteed by any agency of the United States of America,
at a proportion of the Market Value of the obligation that represents the amount of the
insurance or guaranty.
Obligations issued or fully insured or guaranteed by the State of New York, obligations
issued by a municipal corporation, school district or district corporation of such State or
obligations of any public benefit corporation which under a specific State statute may be
accepted as security for deposit of public moneys.
Obligations issued by states (other than the State of New York) of the United States rated
in one of the three highest rating categories by at least one nationally recognized statistical
rating organization.
Obligations of Puerto Rico rated in the three highest rating categories by at least one
nationally recognized statistical rating organization.
Obligations of cotmties, cities and other governmental entities of a state other than the
State of New York having the power to levy taxes that are backed by the full faith and
credit of such governmental entity and rated in the three highest rating categories by at
least one nationally recognized statistical rating organization.
Obligations of domestic corporations rated in one of the two highest rating categories by
at least one nationally recognized statistical rating organization.
Any mortgage related securities, as defined in the Securities Exchange Act of 1934, as
amended, which may be purchased by banks under the limitations established by Federal
bank regulatory agencies.
Commercial paper and bankers' acceptances issued by a bank (other than the Bank), rated
in the highest short term category by at least one nationally recognized statistical rating
organization and having maturities of not longer than 60 days from the date they are
pledged.
102 (xi) Zero coupon obligations of thc United States government marketed as "Treasury strips".
EXHIBIT C
CERTIFICATE OF AUTHORIZED PERSONS
(Local Government - Oral and Written Instructions}
The undersigned hereby certifies that heAhc is lh¢ duly elected and acting _ Towrl Clerk of
~--- (the
"Local Government"), and further certifies that the following officers or employees of the Local Government have
been duly authorized in conformity w/th the Local Oovermner, fs tsolit~i~/pron~ch~r.e~ to deliver Oral nad
Written Instructions to The Bank of New York Mellon ("Cust<xl[an") pumuanl to the Third Party Custodian
Agreement between the Local Government, ~_.Ml~C. llaS0'Bank") and Custedian
and ti:al Ibc signatnres appeari0g opposile ttteir names am true and COtTCCt:
Name Title
philli~ Beltz Deputy Supervisor
Name Title
Name Title
Name Title -- Signature
Name Title Signatura
Name Title Signature
Name Title Signature
Name Title Signature
Name Title Signature
Signature
This certificate supersedes any certificate of authorized individuals you may currently have on fire.
[~;eall
Title: Town Clerk
'7.s--oo ~- ~-
THIRD PARTY CUSTODIAN AGREEMENT
THIS AGREEMENT made and executed as of between TOWN OF SOUTHOLD
("Local Government"), Capital One, National Association ("Bank") and The Bank of New York Mellon
("Custodian").
WITNESSETH
WHEREAS, Local Government desires to maintain or continue to maintain public deposits with the Bank;
WHEREAS, the Bank desires to obtain such deposits and to provide security therefor as required by the
General Municipal Law, Banking Law and other applicable statutes;
WHEREAS, the Custodian agrees to provide safekeeping services and to hold any securities pledged by the
Bank in a custodial account established for the benefit of the Local Government as secured party pursuant to this
Agreement
NOW, THEREFORE, in consideration of the mutual promises set forth hereafter, the parties hereto agree as
follows:
1. Security Requirements.
(a) The Bank, to secure the timely payment of Uninsured Deposits heretofore or hereafter made by the
Local Government, including any interest due thereon and any costs or expenses incurred by Local Government and
arising out of the collection of any deposits made with the Bank, shall provide the Local Government with Eligible
Collateral having an Adjusted Market Value equal to the Collateral Requirement. Whenever Eligible Collateral is
provided pursuant to this paragraph, the Bank hereby grants to the Local Government a pledge and security interest in
and to such Eligible Collateral and shall deliver such Eligible Collateral to the Custodian in the manner prescribed in
Section 2 of this Agreement. The security interest of the Local Government in Eligible Collateral shall terminate upon
the transfer of such Eligible Collateral from the Account. Eligible Letters of Credit and Eligible Surety Bonds
provided pursuant to this paragraph shall be subject to the prior approval of the Local Government unless the Local
Government has approved in writing the form of an Eligible Letter of Credit or Eligible Surety Bond to be issued by a
specific entity or the form of such Eligible Letter of Cradit or Eligible Surety Bond is attached hereto as an Exhibit.
(b) The Custodian will daily determine the Adjusted Market Value of the Eligible Collateral provided
pursuant to this Agreement (except that the Bank shall provide to the Custodian the Market Value of Eligible Surety
Bonds). If the Adjusted Market Value of such Eligible Collateral is less than the Collateral Requirement, the
Custodian will so notify the Bank and the Bank shall, upon such notice, be required to provide additional Eligible
Collateral having an Adjusted Market Value equal to or greater than such deficiency no later than one Business Day
after receipt of such notice. If the Adjusted Market Value of the Eligible Collateral provided pursuant m this
Agreement exceeds the Collateral Requirement, the Custodian, at the direction of the Bank, shall transfer securities
from the Account, or in the case of other Eligible Collateral, cause or consent to a reduction in the amount thereof, to
the extent of such excess.
(c) The Bank may substitute Eligible Collateral ("Substitute Collateral") for any Eligible Collateral
previously provided pursuant to this Agreement so long as the Substitute Collateral has an Adjusted Market Value
equal to or greater than the Eligible Collateral which it will replace. The Bank shall give Written or Oral Instructions
to the Custodian with respect to any proposed substitution. If the Substitute Collateral described in such notice
consists exclusively of Eligible Collateral having sufficient Adjusted Market Value, the Custodian, at the direction of
the Bank, shall transfer the Eligible Collateral out of the Account against delive~ to the Account on the same Business
Day of the Substitute Collateral. In the event the Substitute Collateral described in such notice consists of an Eligible
Letter of Credit or Eligible Surety Bond, the prior consent of the Local Government shall be required before the Bank
or Custodian may complete the substitution described in such notice unless the Local Government has, in writing,
-2-
previously approved and consented to the form and issuer of the Eligible Letter of Credit and/or Eligible Surety Bond
to be provided as Substitute Collateral.
2. Custody of Eligible Collateral
(a) The Bank and Local Government hereby appoint the Custodian as custodian of all Eligible
Collateral at any time delivered to the Custodian pursuant to this agreement. The Custodian hereby accepts
appointment as such Custodian and agrees to establish and maintain the Account and appropriate records identifying
the Eligible Collateral as pledged by the Bank to the Local Government. The Account shall be kept separate and apart
fi.om the general assets of the Custodian and will not, in any circumstances, be commingled with or become part of the
backing for any other deposit or liability of the Custodian or any other person or entity. The Custodian, in performing
its duties and responsibilities pursuant to this Agreement, shall act as custodian for, and agent of, the Local
Government.
(b) The Bank and Local Government agree that Eligible Collateral delivered to the Custodian for
deposit in the Account may be in the form of credits to the accounts of Custodian at the Book Entry System or a
Depository or by delivery to the Custodian of physical certificates in a form suitable for transfer or with an assignment
in blank to the Local Government or Custodian. The Bank and Local Government hereby authorize the Custodian on a
continuous and ongoing basis to deposit in the Book Entry System and/or the Depositories all Eligible Collateral that
may be deposited therein and to utilize the Book Entry System and/or Depositories and the receipt and delivery of
physical Securities or any combination thereof in connection with its performance herennder. Eligible Collateral
credited to the Account and deposited in the Book Entry System or Depositories or other financial intermediaries will
be represented in accounts of the Custodian that include only assets held by the Custodian for its customers, and
including but not limited to accounts in which the Custodian acts in a fiduciary, agency or representative capacity.
Eligible Collateral that is not held in the Book Entry System, Depositories or through another financial intermediary
will be held in the Custodian's vault and physically segregated fi.om securities and other non-cash properly belonging
to the Custodian.
(c) (i) The Custodian shall provide to the Local Government weekly and monthly statements reflecting
the activity in the Account. Upon request, the Custodian shall also provide to the Local Government a daily statement
on any Business Day on which Eligible Collateral is transferred to or from the Account.
(ii) Local Government agrees that it shall promptly review all statements and shall promptly advise
Custodian by Oral or Written Instruction of any error, omission or inaccuracy in such statements. In the event that
Custodian receives such a Written or Oral Instruction identifying a specific concern with respect to the Market Value,
Adjusted Market Value, or any other matter connected with the Account, Custodian shall undertake to correct any
errors, failures or omissions, provided that Custodian determines in its sole good faith determination that such error,
failure or omission actually occurred. Any such corrections shall be reflected on subsequent statements.
(iii) Notwithstanding anything to the contrary herein, the parties agree that any reasonable action or
inaction Custodian takes in connection with this Agreement shall not be alleged, deemed, or construed as giving rise to
any liability, absent negligence or willful misconduct, as set forth hereunder in, without limitation, Sections 5(a), 5(c),
5(f) and/or 5(g) hereof.
(d)
Custodian.
The Account shall not be subject to any security interest, lien or any right of set-offby or against the
(e) With respect to all Eligible Collateral held in the Acconnt, thc Custodian by itself, or through the use
of the Book Entry System or the appropriate Depository, shall, unless otherwise instructed to the contrary by the Bank:
(i) collect all income and other payments reflecting interest and principal on the Eligible Collateral in the Account and
credit such amounts to the account of the Bank; (ii) forward to the Bank copies of all information or documents that it
may receive fi.om an issuer of Eligible Collateral which, in the opinion of the Custodian, is intended for the beneficial
owner of the Eligible Collateral including, without limitation all proxies and other authorizations properly executed
and all proxy statements, notices and reports; (iii) execute, as Custodian, any certificates of ownership, affidavits,
declarations or other certificates under any tax laws now or hereafter in effect in connection with the collection of bond
-3-
and note coupons; (iv) hold directly, or through the Book Entry System or Depository, all rights issued with respect to
any Eligible Collateral held by the Custodian hereunder; and (v) upon receipt of Written Instructions fi.om the Bank,
the Custodian will exchange Eligible Collateral held hereunder for other securities and/or cash in connection with (a)
any conversion privilege, reorganization, recapitalization, redemption in kind, consolidation, tender offer or exchange
offer, or (b) any exercise, subscription, purchase or other similar rights.
3. Events of Default
In the event the Bank shall fail to pay the Local Government any amount of the Deposits by the Local Government
covered by this Agreement in accordance with the terms of such Deposit, or should the Bank fail or suspend active
operations, the Deposits in such Bank shall become due and payable immediately and the Local Government shall
have the right to unilaterally demand delivery of all Eligible Collateral in the Account by notice to the Custodian and
to sell such securities at pub!lc or private sale. In the event of such sale, the Local Government, after deducting all
legal expenses and other costs, including reasonable attorneys fees, fi.om the proceeds of such sate, shall apply the
remainder towards any one or more of the liabilities of the Bank to the Local Government and shall return the surplus,
if any, to the Bank.
4. Representation and Warranties
(a) Representations of the Bank. The Bank represents and warrants that:
(l)
it is the legal and actual owner, free and clear of all liens and claims, of all Eligible
Collateral pledged pursuant to this Agreement;
(2)
this Agreement was executed by an officer of the Bank who was authorized by the Bank's
board of directors to do so and will at all times be maintained as an official record of the
Bank;
(3) ali securities pledged pursuant to this Agreement are Eligible Collateral;
(4)
the Bank is a bank or trust company located and authorized to do business in the State of
New York;
(5)
all acts, conditions and things required to exist, happen or to be performed on its part
precedent to and in the execution and delivery of this Agreement exist or have happened or
have been performed.
(b) Representations of the Local Government. The Local Government hereby represents and warrants
(1)
this Agreement has been legally and validly entered into, does not and will not violate any
statute or regulation applicable to it and is enforceable against the Local Government in
accordance with its terms;
(2)
the appointment of the Custodian has been duly authorized and no other action by the Local
Government is required and this Agreement was executed by an officer of the Local
Government authorized to do so;
(3)
it will not transfer, assign its interests in or the rights with respect to any Eligible Collateral
pledged pursuant to this Agreement except as authorized pursuant to Section 3 of the
Agreement;
(4)
all acts, conditions and things required to exist, happen or to be performed on its part
precedent to and in the execution and delivery of this Agreement exist or have happened or
have been performed.
-4-
5. Concerning the Custodian.
(a) The Custodian shall not be liable for any loss or damage, including counsel fees, resulting fi.om its
action or omission to act or otherwise, except for any loss, damage, claim or expense arising out of its own negligence
or willful misconduct, and shall have no obligation hereunder for any loss or damage, including counsel fees, which
are sustained or incurred by reason of any action or inaction by the Book Entry System or any Depository. The
Custodian may, with respect to questions of law, apply for and obtain the advice and opinion of competent counsel and
shall be fully protected with respect to anything done or omitted by it in good faith and conformity with such advice or
opinion. The Local Government and Bank agree, jointly and severally, to indemnify the Custodian and to hold it
harmless against any and all costs, expenses, damages, liabilities or claims, including reasonable fees and expenses of
counsel, which the Custodian may sustain or incur or which may be asserted against the Custodian by reason of or as a
result of any action taken or omitted by the Custodian in connection with operating under this Agreement except those
costs, expenses, damages, liabilities or claims arising out of the negligence or willful misconduct of the Custodian or
any of its employees or duly appointed agencies. This indenmity shall be a continuing obligation of the Local
Govermnent and Bank notwithstanding the termination of this Agreement.
(b) The Custodian shall not be responsible for, or considered to be the Custodian of, any Eligible
Collateral received by it for deposit in the Account until the Custodian actually receives and collects such Eligible
Collateral directly or by the final crediting of the Custodian's account on the books of the Book Entry System or the
appropriate Depository. The Custodian will be entitled to reverse any credits made on the Local Government's behalf
where such credits have been previously made and the Eligible Collateral is not finally collected.
(c) The Custodian shall have no duties or responsibilities whatsoever except such duties and
responsibilities as are specifically set forth in this Agreement, and no covenant or obligation shall be implied against
the Custodian in connection with this Agreement. In no event shall Custodian be liable to Local Government, Bank or
any third party for special, indirect or consequential damages, or lost profits or loss of business, arising in connection
with this Agreement.
(d) The Local Govermnent's authorized officer, upon reasonable notice, shall have access to the
Custodian's books and records maintained with respect to the Local Government's interest in the Account during the
Custodian's normal business hours. Upon the reasonable request of the Local Government, copies of any such books
and records shall be provided by the Custodian to the Local Government or the Local Government's authorized officer
at the Local Government's expense.
(e) The Custodian may enter into subcontracts, agreements and understandings, whenever and on such
terms and conditions as it deems necessary or appropriate, to perform its services hereunder; such subcontracts,
agreements and understandings may be with third parties and may be with other subsidiaries of The Bank of New York
Mellon Corporation or any successor to The Bank of New York Mellon Corporation or with other persons not a party
hereto. No such subcontract, agreement or understanding shall discharge the Custodian from its obligations hereunder.
(f) To the extent Custodian values Eligible Collateral, establishes and maintains Market Value and
Adjusted Market Value of Eligible Collateral held in the Account, Custodian is authorized to utilize any generally
recognized pricing information service (including brokers and dealers of Securities), such as any Nationally
Recognized Statistical Ratings Organization, in order to perform its valuation responsibilities hereunder, if any, and
the parties agree that Custodian shall be held harmless fi.om and against any losses incurred as a result of errors or
omissions of any such pricing information service, broker or dealer.
(g) Custodian shall not be responsible or liable for any failure or delay in the performance of its
obligations under this Agreement arising out of or caused, directly or indirectly, by circumstances beyond its
reasonable control, including without limitation, acts of God, earthquakes, fires, floods, wars, civil or military
disturbances, sabotage, epidemics, riots, loss or malfunctions of utilities, computer (hardware or software) or
communications service, labor disputes, acts of civil or military authority, or governmental, judicial or regulatory
action; provided however, that Custodian shall use its best efforts under the circumstances to resume normal
performance as soon as practicable.
-5-
6. Termination
Any of the parties hereto may terminate this Agreement by giving to the other parties a notice in writing speci~ing the
date of such termination, which shall be the earlier of (i) not less than 90 days after the date of giving such notice or
(ii) the date on which the Deposits are repaid in full. Such notice shall not affect or terminate the Local Government's
security interest in the Eligible Collateral in the Account. Upon termination hereof, the Custodian shall follow such
reasonable Written Instructions of the Bank and the Local Government concerning the transfer of custody of Eligible
Collateral, collateral records and other items. In the event ora discrepancy between Written Instructions of the Bank
and the Local Government, the Custodian shall act pursuant to the Local Government's Written Instructions. Upon the
date set forth in the termination notice, this Agreement shall terminate except as otherwise provided herein and all
obligations of the parties to each other hereunder shall cease.
7. Miscellaneous.
(a) The Local Government and Bank each agrees to furnish to the Custodian a new Certificate (Exhibit
C) in the event that any present Authorized Person ceases to be an Authorized Person or in the event that any other
Authorized Persons are appointed and authorized. Until such new Certificate is received, the Custodian shall be fully
protected in acting upon Oral or Written Instructions or signatures of the present Authorized Persons.
(b) Any Written Instructions or other instrument in writing authorized or required by this Agreement
shall be given to the Custodian and shall be sufficiently given if sent to the Custodian by regular mail to its offices at
One Wall Street, 5t~ Floor, New York, New York 10586, Attention: BDS Client Services, or at such other place as the
Custodian may fi-om time to time designate in writing.
(c) Any notice or other instrument in writing authorized or required by this Agreement to be given to the
Bank shall be sufficiently given if sent to the Bank by regular mail to its offices at 275 Broad Hollow Road, Melville,
New York, or at such other place as the Bank may fi-om time to time designate in writing.
(d) Any notice or other instrument in writing, authorized or required by this Agreement to be given to
the Local Government shall be sufficiently given if sent to the Local Government by regular mail to its offices at
ADDRESS: 53095 Main Road~ P.O. Box 1179~ Southold~ NY 11971-0959~ or at such other offices as the Local
Government may fi-om time to time designate in writing.
(e) In case any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable
in any jurisdiction, the validity, legality and unenforceability of the remaining provisions or obligations shall not in any
way be affected or impaired thereby and if any provision is inapplicable to any person or circumstances, it shall
nevertheless remain applicable to all other persons and circumstances.
(f) This Agreement may not be amended or modified in any manner except by written agreement
executed by all of the parties hereto.
(g) This Agreement shall extend to and be binding upon the parties hereto, and their respective
successors and assigns; provided, however, that this Agreement shall not be assignable by any party without the
written consent of the other parties.
(h) This Agreement shall be construed in accordance with the substantive laws of the State of New
York, without regard to conflicts of laws principles thereof. Bank, Local Government and Custodian hereby consent
to the jurisdiction of a state or federal court situated in New York City, New York in connection with any dispute
arising hereunder. Bank, Local Government and Custodian hereby irrevocably waive, to the fullest extent permitted
by applicable law, any objection which it may now or hereafter have to the laying of venue of any such proceeding
brought in such a court and any claim that such proceeding brought in such a court has been brought in an
inconvenient forum. Bank, Local Government and Custodian each hereby irrevocably waives any and all rights to trial
by jury in any legal proceeding arising out of or relating to this Agreement.
-6-
(i) Waiver of lunnunity. To the extent that in any jurisdiction any pan'y may now or hereafter be
entitled to claim, for itself or its assets, immunity fi.om suit, execution, attachment (before or after judgment) or other
legal process, each patty irrevocably agrees not to claim, and it hereby waives, such immunity in connection with this
Agreement.
8. Definitions.
Whenever used in this Agreement the following terms shall have the following meanings:
(a) "Account" shall mean the custodial account established with the Custodian for the benefit of the
Local Government as secured party in accordance with this Agreement.
(b) "Adjusted Market Value" shall be one hundred percent of Market Value, except that: (1) in the case
of Eligible Collateral enumerated in subparagraphs (v), (vi) and (vii) of Exhibit "B," the Adjusted Market Value shall
be an amount equal to its Market Value multiplied by 0.9 if such Eligible Collateral is not rated in the highest rating
category by at least one Nationally Recognized Statistical Rating Agency, but is so rated in the second highest rating
category, and an amount equal to its Market Value multiplied by 0.8 if such Eligible Security is not so rated in one of
the two highest categories, but is so rated in the third highest rated category; (2) in the case of Eligible Collateral
enumerated in subparagraphs (viii), (x) and (xi) of Exhibit "B," the Adjusted Market Value shall be an amount equal to
its Market Value multiplied by 0.8; (3) in the case of Eligible Collateral enumerated in subparagraph (ix) of Exhibit
"B," the Adjusted Market Value shall be an amonnt equal to its Market Value multiplied by 0.7; and (4) in the case of
Eligible Letters of Credit, the Adjusted Market Value shall be an amount equal to its Market Value divided by 1.4.
(c) "Authorized Person" shall be any officer of the Local Government or Bank, as the case may be, duly
authorized to give Omi Instructions or Written Instructions on behalf of Local Government or Bank, such persons to
be designated in a Certificate substantially in the form of Exhibit "C"- attached hereto, as such Exhibit may be
amended fi.om time to time.
(d) "Book Entry System" shall mean the Federal Reserve/Treasury Book Entry System for receiving and
delivering U.S. Government Securities.
(e) "Business Day" shall mean any day on which the Custodian and the Bank are open for Business and
on which the Book Entry System and/or the Depositories are open for business.
(f) "Certificate" shall mean the Certificate attached hereto as Exhibit "C".
(g) "Collateral Requirement" shall mean the amounts required in Exhibit "A" unless the Bank and Local
Government agree to a different amount in accordance with this Agreement.
(h) "Depository" shall include the Depository Trust Company, the Participants Trust Company and other
securities depositories and clearing agencies (and their successors and nominees) registered with the Securities and
Exchange Commission or otherwise regulated by appropriate federal or state agencies as a securities depository or
clearing agency.
(i) "Deposits" shall mean all deposits by the Local Government in the Bank that are available for all
uses generally permitted by the Bank to the Local Government for actually and finally collected funds nnder the Bank's
account agreement or policies.
0) "Eligible Collateral" shall mean any securities of the types enumerated in the Schedule of Eligible
Collateral attached hereto as Exhibit "B" as such Schedule may be amended by the parties in writing from time to time,
Eligible Letters of Credit, and Eligible Surety Bonds.
(k) "Eligible Letter of Credit" shall mean an irrevocable letter of credit issued in favor of the Local
Govermnent for a term not to exceed ninety days by either: (1) a bank (other than the Bank) whose commercial paper
-7-
and other unsecured short-term debt obligations (or, in the case of a bank which is the principal subsidiary of a holding
company, whose holding company's corrmaercial paper and other unsecured short-term debt obligations) are rated in
one of three highest rating categories based on the credit of such bank or holding company by at least one Nationally
Recognized Statistical Rating Organization, or (2) a bank (other than the Bank) which is in compliance with applicable
Federal minimum risk-based capital requirements.
(1) "Eligible Surety Bond" shall mean a bond executed by an insurance company authorized to do
business in the State of New York, the claims paying ability of which is rated in the highest rating category by at least
two nationally recognized statistical rating organizations.
(m) "Margin Percentage" shall mean the percentage indicated on Exhibit B attached hereto with respect
to particular types of Eligible Collateral.
(n) "Market Value" shall mean, with respect to any Eligible Security held in the Account, the market
value of such Eligible Security as made available to the Custodian by a generally recognized soume selected by the
Custodian or by the Bank or the most recently available closing bid quotation from such source plus, if not reflected in
the market value, any accrued interest thereon, or, if such source does not make available a market value or a closing
bid price for a particular security, the market value shall be as determined by the Custodian in its sole discretion based
on information furnished to the Custodian by one or more brokers or dealers; provided however that, if agreed in
writing by the parties hereto, the Bank may provide the Custodian with such Market Values. The Market Value of
Eligible Letters of Credit and Eligible Surety Bonds shall be the face amount thereof.
(o) "Nationally Recognized Statistical Rating Organization" shall mean Moody's, Standard and Poors,
Fitch, Duffand Phelps, BankWatch and IBCA and in the case of Eligible Surety Bonds, shall also include Bests.
(p) "Oral Instructions" shall mean verbal instructions actually received by the Custodian from an
Authorized Person or from a person reasonably believed by the Custodian to be an Authorized Person.
(q)
Agreement.
"Substitute Collateral" shall have the meaning set forth in paragraph C of Section I of this
(r) "Uninsured Deposits" shall mean that portion of the Local Government's Deposits with the Bank
which exceeds the insurance coverage available from the Federal Deposit Insurance Corporation.
(s) "Written Instructions" shall mean written communications actually received by the Bank or the
Custodian from an Authorized Person or from a person reasonably believed by the Bank or the Custodian to be an
Authorized Person by a computer, telex, telecopier or any other system whereby the receiver of such communications
is able to verify by codes or otherwise with a reasonable degree of certainty the identity of the sender of such
conununication.
-8-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective
officers thereunto duly authorized and their respective seals to be hereunto affixed, as of the day and year fh'st above
written.
[TOWN OF SOUTHOLD]
(LOCAL G.~RNMENT)
CAPITAL ONE, NATIONAL ASSOCIATION
By:
Title:
THE BANK OF NEW YORK MELLON
By:
Title:
c apital_one_colldep.doc
EXHIBIT A
Collateral Requirement. On any Business Day that the Local Government has Uninsured Deposits in the
Bank, the Bank, in accordance with paragraph b of Section I of this Agreement, agrees to deliver or cause to be
delivered to the Custodian for deposit in the Account, Eligible Collateral having an Adjusted Market Value equal to
the Collateral Requirement. For purposes of this Agreement, Collateral Requirement shall mean the amount of such
Uninsured Deposits times the Margin Percentage, if any.
EXHIBIT B
Schedule of Eligible Collateral
Margin %
10~5
105
105
(i)
Obligations issued by the United States of America, an agency thereof or a United States
government sponsored corporation or obligations fully insured or guaranteed as to the
payment of principal and interest by the United States of America, an agency thereof or a
United States government sponsored corporation.
(ii)
Obligations issued or fully guaranteed by the International Bank for Reconstruction and
Development, the Inter-American Development Bank, the Asian Development Bank, and
the African Development Bank.
(iii)
Obligations partially insured or guaranteed by any agency of the United States of
America, at a proportion of the Market Value of the obligation that represents the amount
of the insurance or guaranty.
(iv)
Obligations issued or fully insured or guaranteed by the State of New York, obligations
issued by a municipal corporation, school district or district corporation of such State or
obligations of any public benefit corporation which under a specific State statute may be
accepted as security for deposit of public moneys.
EXHIBIT C
CERTIFICATE OF AUTHORIZED PERSONS
(Local Government - Oral and Written Instructions)
undersigned hereby certifies that he. is the duly elected and acting
The
OWN OF SOUTHOLD (the Local Government ), and further certifies that the followmg officers or employees
of the Local Govermnent have been duly authorized in conformity with the Local Government's BOARD
POLICY to deliver Oral and Written Instructions to The Bank of New York Mellon
("Custodian") pursuant to the Third Party Custodian Agreement between the Local Government, _Capital One, N.A.
("Bank") and Custodian dated
Name
, and that the signatures appearing opposite their names are true and
Name Title Signature
Name Title Signature
Name Title Signature
Name Title Signature
Name Title Signature
Name Title Signature
Name Title Signature
This certificate supersedes any certificate of authorized individuals you may currently have on file.
Title: ~
THIRD PARTY CUSTODIAN AGREEMENT
THIS AGREEMENT, made and executed as of between Town of
Southol~("Local Government"), Bank &America, N.A. ("Bank") and The Bank of New York Mellon ("Custodian").
WITNESSETH
WHEREAS, Local Government desires to maintain or continue to maintain public deposits with the Bank;
WHEREAS, the Bank desires to obtain such deposits and to provide security therefor as required by the
General Municipal Law, Banking Law and other applicable statutes;
WHEREAS, the Custodian agrees to provide safekeeping services and to hold any securities pledged by the
Bank in a custodial account established for the benefit of the Local Government as secured party pursuant to this
Agreement
NOW, THEREFORE, in consideration of the mutual promises set forth hereat~er, the parties hereto agree as
follows:
1. Security Requirements
(a) The Bank, to secure the timely payment of Uninsured Deposits h~retofore or hereafter made by the
Local Government, including any interest due thereon and any costs or expenses incurred by Local Government and
arising out of the collection of any deposits made with the Bank, shall provide the Local Government with Eligible
Collateral having an Adjusted Market Value equal to the Collateral Requirement. Whenever Eligible Collateral is
provided pursuant to this paragraph, the Bank hereby grants to the Local Government a pledge and security interest in
and to such Eligible Collateral and shall deliver such Eligible Collateral to the Custodian in the manner prescribed in
Section 2 of this Agreement. The security interest of the Local Government in Eligible Collateral shall terminate upon
the transfer of such Eligible Collateral from the Account. Eligible LeRers of Credit and Eligible Surety Bonds
provided pursuan(to this paragraph shall bl subject to the prior approval of the Local Government unless the Local
Government has approved in writing the form of an Eligible Letter of Credit or Eligible Surety Bond to be issued by a
specific entity or the form of such Eligible Letter of Credit or Eligible Surety Bond is attached hereto as an Exhibit.
(b) The Custodian will daily determine the Adjusted Market Value of the Eligible Collateral provided
pursuant to this Agreement (except that the Bank shall provide to the Custodian the Market Value of Eligible Surety
Bonds). If the Adjusted Market Value of such Eligible Collateral is less than the Collateral Requirement, the
Custodian will so notify the Bank and the Bank shall, upon such notice, be required to provide additional Eligible
Collateral having an Adjusted Market Value equal to or greater than such deficiency no later than one Business Day
after receipt of such notice. If the Adjusted Market Value of the Eligible Collateral provided pursuant to this
Agreement exceeds the Collateral Requirement, the Custodian, at the direction of the Bank, shall transfer securities
from the Account, or in the case of otber Eligible Collateral, cause or consent to a reduction in the amount thereof, to
the extent of such excess.
(c) The Bank may substitute Eligible Collateral ("Substitute Collateral") for any Eligible Collateral
previously provided pursuant to this Agreement so long as the Substitute Collateral has an Adjusted Market Value
equal to or greater than the Eligible Collateral which it will replace. The Bank shall give Written or Oral Instructions
to the Custodian with respect to any proposed substitution. If the Substitute Collateral described in such notice
consists exclusively of Eligible Collateral having sufficient Adjusted Market Value, the Custodian, at the direction of
the Bank, shall transfer the Eligible Collateral out oftbe Account against delivery to the Account on the same Business
Day of the Substitute Collateral. In the event the Substitute Collateral described in such notice consists of an Eligible
Latter of Crodit or Eligible Surety Bond, the prior consent oftbe Local Government shall be required before the Bank
or Custodian may complete the substitution described in such notice unless the Lo~al Government has, in writing,
previously approved and consented to the form and issuer of the Eligible Letter of Credit aad/or Eligible Surety Bond
to be provided as Substitute Collateral.
2. Custody of Eligible Collateral
(a) The Bank and Local Government hereby appoint the Custodian as custodian of all Eligible
Collateral at any time delivered to the Custodian pursuant to this agreement. The Custodian hereby accepts
appointment as such Custodian and agrees to establish and maintain the Account and appropriate records identifying
the Eligible Collateral as pledged by the Bank to the Local Government. The Account shall be kept separate and apart
from the general assets of the Custodian and will not, in any circumstances, be commingled with or become part of the
backing for any other deposit or liability of the Custodian or any other person or entity. The Custodian, in performing
its duties and responsibilities pursuant to this Agreement, shall act as custodian for, and agent of, the Local
Govemment.
(b) The Bank and Local Government agree that Eligible Collateral delivered to the Custodian for
deposit in the Account may be in the form of credits to the accounts of Custodian at the Book Entry System or a
Depository or by delivery to the Custodian of physical certificates in a form suitable for transfer or with an assignment
in blank to the Local Government or Custodian. The Bank and Local Government hereby authorize the Custodian on a
continuous and ongoing basis to deposit in the Book Entry System and/or the Depositories all Eligible Collateral that
may be deposited therein and to utilize the Book Entry System and/or Depositories and the receipt and delivery of
physical Securities or any combination thereof in connection with its performance hereunder. Eligible Collateral
credited to the Account and deposited in the Book Entry System or Depositories or other financial intermediaries will
be represented in accounts of The Bank of New York Mellon that include only assets held by The Bank of New York
Mellon for its customers, and including but not limited to accounts in which The Bank of New York Mellon acts in a
fiduciary, agency or representative capacity. Eligible Collateral that is not held in the Book Entry System,
Depositories or through another financial intermediary will be held in the Custodian's vault and physically segregated
from securities and other non-cash property belonging to the Custodian.
(c) (i) The Custodian shall provide the Local Government each month with a statement identifying all
Eligible Collateral in the Account, the Market Value and Adjusted Market Value thereof as of the date of such
statement. The Custodian shall also provide, upon request, the Local Government and Bank with a written
confirmation on any Business Day on which Eligible Collateral is transferred to and from the Account. Such
confirmation shall identify the specific securities which are the subject to the confirmation and state both the Market
Value and Adjusted Market Value thereof.
(ii) Local Government agrees that it shall promptly review all such confirmation statements and shall
promptly advise Custodian by Oral or Written Instruction of any error, omission or inaccuracy in such statements. In
the event that Custodian receives such a Written or Oral Instruction identifying a specific concern with respect to the
Market Value, Adjusted Market Value, or any other matter connected with the Account, Custodian shall undertake to
correct any errors, failures or omissions, if any, that are reported to Custodian by Local Government provided that
Custodian agrees, in the sole good faith determination of Custodian, that such error, failure or omission actually
occurred. Any such corrections shall be reflected on subsequent confirmation statements.
(iii) Notwithstanding anything to the contrary herein, the parties agree that any reasonable action or
inaction Custodian takes in connection with this Agreement shall not be alleged, deemed, or construed as giving rise to
any liability, absent negligence or willful misconduct, as set forth hereunder in, without limitation, Sections 5(a), 5(c),
5(0 and/or 5(g) hereo£
(d)
Custodian.
The Account shall not be subject to any security interest, lien or any right ofset-offby or against the
(e) With respect to all Eligible Collateral held in the Account, the Custodian by itself, or through the use
of the Book Entry System or the appropriate Depository, shall, unless otherwise instructed to the contrary by the Bank:
(i) collect all income and other payments reflecting interest and principal on the Eligible Collateral in the Account and
credit such amounts to the account of the Bank; (ii) forward to the Bank copies of all information or documents that it
may receive fi.om an issuer of Eligible Collateral which, in the opinion of the Custodian, is intended for the beneficial
owner of the Eligible Collateral including, without limitation all proxies and other authorizations properly executed
and all proxy statements, notices and reports; (iii) execute, as Custodian, any certificates of ownership, affidavits,
declarations or other certificates under uny tax laws now or hereafter in effect in connection with the collection of bond
and note coupons; (iv) hold directly, or through the Book Entry System or Depository, all rights issued with respect to
any Eligible Collateral held by the Custodian hereunder; and (v) upon receipt of Written Instructions from the Bank,
the Custodian will exchange Eligible Collateral held hereunder for other securities und/or cash in connection with (a)
any conversion privilege, reorganization, recapitalization, redemption in kind, consolidation, tender offer or exchange
offer, or (b) any exercise, subscription, purchase or other similar rights.
3. Events of Default
In the event the Bank shall fail to pay the Local Government any mount of the Deposits by the Local Government
covered by this Agreement in accordance with the terms of such Deposit, or should the Bank fail or suspend active
operations, the Deposits in such Bank shall become due and payable immediately and the Local Government shall
have the right to unilaterally demund delivery of all Eligible Collateral in the Account by notice to the Custodian and
to sell such securities at public or private sale. In the event of such sale, the Local Government, after deducting all
legal expenses and other costs, including reasonable attorneys fees, from the proceeds of such sale, shall apply the
remainder towards any one or more of the liabilities of the Bank to the Local Government and shall return the surplus,
if any, to the Bank.
4. Representation and Warranties
(a) Representations of the Bank. The Bank represents and warrants that:
(1)
it is the legal and actual owner, free and clear of all liens and claims, of all Eligible
Collateral pledged pursuant to this Agreement;
(2)
this Agreement was executed by an officer of the Bank who was authorized by the Bank's
board of directom to do so and will at all times be maintained as an official record of the
Bank;
(3) all securities pledged pursuant to this Agreement are Eligible Collateral;
(4)
the Bank is a national banking association or trust company located and authorized to do
business in the State of New York;
(5)
all acts, conditions and things required to exist, happen or to be performed on its part
precedent to and in the execution and delivery of this Agreement exist or have happened or
have been performed.
(b)
Representations of the Local Government. The Local Government hereby represents and warrants
that:
(i)
this Agreement has been legally and validly entered into, does not and will not violate any
statute or regulation applicable to it and is enforceable against the Local Government in
accordunce with its terms;
(2)
the appoin~nent of the Custodian has been duly authorized and no other action by the Local
Government is required and this Agreement was executed by an officer of the Local
Government authorized to do so;
(3)
it will not transfer, assign its interests in or the rights with respect thereto any Eligible
Collateral pledged pursuant to this Agreement except as authorized pursuant to Section 3 of
the Agreement;
4
(4)
all acts, conditions and things required to exist, happen or to be performed on its part
precedent to and in the execution and delivery of this Agreement exist or have happened or
have been performed.
5. Concerning the Custodian
(a) The Custodian shall not be liable for any loss or damage, including counsel fees, resulting from its
action or omission to act or otherwise, except for any loss, damage, claim or expense arising out of its own negligence
or willful misconduct, and shall have no obligation hereunder for any loss or damage, including counsel fees, which
are sustained or incurred by reason of any action or inaction by the Book Entry System or any Depository. The
Custodian may, with respect to questions of law, apply for and obtain the advice and opinion of competent counsel and
shall be fully protected with respect to anything done or omitted by it in good faith and in conformity with such advice
or opinion. The Local Government and Bank agree, jointly and severally, to indemni~ the Custodian and to hold it
harmless against any and all costs, expenses, damages, liabilities or claims, including reasonable fees and expenses of
counsel, which the Custodian may sustain or incur or which may be asserted against the Custodian by reason of or as a
result of any action taken or omitted by the Custodian in connection with operating under this Agreement except those
costs, expenses, damages, liabilities or claims arising out of the negligence or willful misconduct of the Custodian or
any of its employees or duly appointed agencies. This indemnity shall be a continuing obligation of the Local
Government and Bank notwithstanding the termination of this Agreement.
(b) The Custodian shall not be responsible for, or considered to be the Custodian of, any Eligible
Collateral received by it for deposit in the Account until the Custodian actually receives and collects such Eligible
Collateral directly or by the final crediting of the Custodian's account on the books of the Book Entry System or the
appropriate Depository. The Custodian will be entitled to reverse any credits made on the Local Government's behalf
where such credits have been previously made and the Eligible Collateral is not finally collected.
(c) The Custodian shall have no duties or responsibilities whatsoever except such duties and
responsibilities as are specifically set forth in this Agreement and no covenant or obligation shall be implied against
the Custodian in connection with this Agreement. ). In no event shall Custodian be liable to Local Government, Bank
or any third party for special, indirect or consequential damages, or lost profits or loss of business, arising in
connection with this Agreement.
(d) The Local Government's authorized officer, upon reasonable notice, shall have access to the
Custodian's books and records maintained with respect to the Local Government's interest in the Account during the
Custodian's normal business hours. Upon the reasonable request of the Local Government, copies of any such books
and records shall be provided by the Custodian to the Local Government or the Local Government's authorized officer
at the Local Government's expense.
(e) The Custodian may enter into subcontracts, agreements and understandings, whenever and on such
terms and conditions as it deems necessary or appropriate, to perform its services hereunder; such subcontracts,
agreements and understandings may be with third parti~:s and may be with other subsidiaries of The Bank of New York
Mellon Corporation or any successor to The Bank of New York Mellon Corporation or with other perso9s not a party
hereto. No such subcontract, agreement or understanding shall discharge the Custodian from its obligations hereunder.
(0 Reliance on Pricing Services. To the extent Custodian values Eligible Collateral, establishes and
maintains Market Value and Adjusted Market Value of Eligible Collateral held in the Account, Custodian is
authorized to utilize any generally recognized pricing information service (including brokers and dealers of
Securities), such as any Nationally Recognized Statistical Ratings Organization, in order to perform its valuation
responsibilities hereunder, if any, and the parties agree that Custodian shall be held harmless from and against any
losses incurred as a result of errors or omissions of any such pricing information service, broker or dealer.
(g) Force Majeure. Custodian shall not be responsible or liable for any failure or delay in the
performance of its obligations under this Agreement arising out of or caused, directly or indirectly, by circumstances
beyond its reasonable control, including without limitation, acts of God, earthquakes, fires, floods, wars, civil or
military disturbances, sabotage, epidemics, riots, loss or malfunctions of utilities, computer (hardware or sottware) or
communications service, labor disputes, acts of civil or military authority, or governmental, judicial or regulatory
action; provided however, that Custodian shall use its best efforts under the circumstances to resume normal
performance as soon as practicable.
6. Termination
Any of the parties hereto may terminate this Agreement by giving to the other parties a notice in writing
speci~ing the date of such termination, which shall be the earlier of (i) not less than 90 days aRer the date of giving
such notice or (ii) the date on which the Deposits are repaid in full. Such notice shall not affect or terminate the Local
Government's security interest in the Eligible Collateral in the Account. Upon termination hereof, the Custodian shall
follow such reasonable Written Instructions of the Bank and the Local Government concerning the transfer of custody
of Eligible Collateral, collateral records and other items. In the event ora discrepancy between Written Instructions of
the Bank and the Local Government, the Custodian shall act pursuant to the Local Government's Written Instructions.
Upon the date set forth in the termination notice, this Agreement shall terminate except as otherwise provided herein
and all obligations of the parties to each other hereunder shall cease.
7. Miscellaneous
(a) The Local Government and Bank each agrees to furnish to the Custodian a new Certificate of
Authorized Persons in the event of any change in the then present Authorized Persons. Until such new Certificate is
received, Custodian shall be fully protected in acting upon Oral Instructions or Written Instructions or signatures of the
present Authorized Persons.
Co) Any Written Instructions or other instrument in writing authorized or required by this Agreement
shall be given to the Custodian and shall be sufficiently given if sent to the Custodian by regular mail to its offices at
One Wall Street, 4a Floor, New York, New York 10286, Arm: Broker-Dealer Services-Collateral Management, or at
such other place as the Custodian may from time to time designate in writing.
(c) Any notice or other instrument in writing authorized or required by this Agreement to be given to the
Bank shall be sufficiently given if sent to the Bank by regular mail to its offices at 100 N. Tryon Street, NC 1-007-07-
19, Charlotte, NC 28255, Arm: Collateral Management, or at such other place as the Bank may from time to time
designate in writing.
(d) Any notice or other instrument in writing, authorized or required by this Agreement to be given to
the Local Government shall be sufficiently given if sent to the Local Government by regular mail to its offices at P__QO
Box 1179, Southold, NY 11971-0959, or at such other offices as the Local Government may fi.om time to time
designate in writing.
(e) In case any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable
in any jurisdiction, the validity, legality and unenforceability of the remaining provisions or obligations shall not in any
way be affected or impaired thereby and if any provision is inapplicable to any person or circumstances, it shall
nevertheless remain applicable to all other persons and cimumstancas.
(f) This Agreement may notbe amended or modified in any manner except by written agreement
executed by all of the parties hereto.
(g) This Agreement shall extend to and be binding upon the parties hereto, and their respective
successors and assigns; provided however, that this Agreement shall not be assignable by any party without the written
consent of the other parties, which consent shall not be uureasonably withheld; and provided further, that Bank may
assign this Agreement to any Affiliate of Bank. For the purposes of this subparagraph (g), the term "Affiliate" shall
mean any entity that (i) directly or indirectly through one or more intermediaries, controls, is controlled by, or is under
common control with, Bank, and (ii) is either a national banking association or a state chartered banking corporation..
(h) This Agreement shall be construed in accordance with the substantive laws of the State of New
York, without regard to conflicts of laws principles thereof. Bank, Local Government and Custodian hereby consent
6
to the jurisdiction of a state or federal court situated in New York City, New York in connection with any dispute
arising hereunder. Bank, Local Govermnent and Custodian hereby irrevocably waive, to the fullest extent permitted
by applicable law, any objection which it may now or hemalter have to the laying of venue of any such proceeding
brought in such a court and any claim that such proceeding brought in such a court has been brought in an
inconvenient forum. Bank, Local Government and Custodian each hereby irrevocably waives any and all rights to trial
by jury in any legal proceeding arising out of or relating to this Agreement.
(i) Waiver of ImmuniB,. To the extent that in any jurisdiction any party may now or hereafter be
entitled to claim, for itself or its assets, immunity from suit, execution, attachment (before or aflrer jodgment) or other
legal process, each party irrevocably agrees not to claim, and it hereby waives, such immunity in connection with this
Agreement.
(j) Bank and Local Government hereby acknowledge that Custodian is subject to federal laws,
including the Customer Identification Program (CIP) requirements under the USA PATRIOT Act and its
implementing regulations, pursuant to which Custodian must obtain, verify and record information that allows
Custodian to identify each of Bank and Local Government. Accordingly, prior to opening an Account hereunder
Custodian will ask Bank and/or Local Government to provide certain information including, but not limited to, Bank's
and/or Local Government's name, physical address, tax identification number and other information that will help
Custodian to identify and verify each of Bank's and Local Government's identity such as organizational documents,
certificate of good standing, license to do business, or other pertinent identifying information. Bank and Local
Government agree that Custodian cannot open an Account hereunder unless and until Custodian verifies Bank's and/or
Local Government's identity in accordance with its CIP.
8. Definitions.
Whenever used in this Agreement the following terms shall have the following meanings:
(a) "Account" shall mean the custodial account established with the Custodian for the benefit of the
Local Government as secured party in accordance with this Agreement.
(b) "Adjusted Market Value" shall be one hundred percent of Market Value, except that: (1) in the case
of Eligible Collateral enumerated in subparagraphs (v), (vi) and (vii) of Exhibit B, the Adjusted Market Value shall be
an amount equal to its Market Value multiplied by 0.9 if such Eligible Collateral is not rated in the highest rating
category by at least one Nationally Recognized Statistical Rating Agency, but is so rated in the second highest rating
category, and an amount equal to its Market Value multiplied by 0.8 if such Eligible Security is not so rated in one of
the two highest categories, but is so rated in the third highest rated category; (2) in the case of Eligible Collateral
enumerated in subparagraphs (viii), (x) and (xi) of Exhibit B, the Adjusted Market Value shall be an amount equal to
its Market Value multiplied by 0.8; (3) in the case of Eligible Collateral enumerated in subparagraph (ix) of Exhibit B,
the Adjusted Market Value shall be an amount equal to its Market Value multiplied by 0.7; and (4) in the case of
Eligible Letters of Crodit, the Adjusted Market Value shall be an amount equal to its Market Value divided by 1.4.
(c) "Authorized Person" shall be any officer of the Local Government or Bank, as the case may be, duly
authorized to give Oral Instructions or Written Instructions on behalf of Local Government or Bank, such persons to
be designated in a Certificate of Authorized Persons which contains a specimen signature of such person.
(d) "Book Entry System" shall mean the Federal Reserve/Treasury Book Entry System for receiving and
delivering U.S. Government Securities.
(e) "Business Day" shall mean any day on which the Custodian and the Bank are open for Business and
on which the Book Entry System and/or the Depositories are open for business.
(f) "Certificate" shall mean a certificate substantially in the form of Exhibit C, attached hereto.
(g) "Collateral Requirement" shall mean the amounts required in Exhibit A unless the Bank and Local
Government agree to a different amount in accordance with this Agreement and advise the Custodian accordingly.
(h) "Depository" shall include the Depository Trust Company and other securities depositories and
clearing agencies (and their successors and nominees) registered with the Securities and Exchange Commission or
otherwise regulated by appropriate federal or state agencies as a securities depository or clearing agency.
(i) "Deposits" shall mean all deposits by the Local Government in the Bank that are available for all
uses generally permitted by the Bank to the Local Government for actually and finally collected funds under the
Bank's account agreement or policies.
O) "Eligible Collateral" shall mean any securities of the types enumerated in the Schedule of Eligible
Collateral attached hereto as Exhibit B as such Schedule may be amended by the parties in writing from time to time,
Eligible Letters of Credit, and Eligible Surety Bonds.
(k) "Eligible Letter of Credit" shall mean an irrevocable letter of credit issued in favor of the Local
Government for a term not to exceed ninety days by either: (1) a bank (other than the Bank) whose commercial paper
and other unsecured short-term debt obligations (or, in the case of a bank which is the principal subsidiary of a holding
company, whose holding company's commercial paper and other unsecured short-term debt obligations) are rated in
one of three highest rating categories based on the credit of such bank or holding company by at least one Nationally
Recognized Statistical Rating Organization, or (2) a bank (other than the Bank) which is in compliance with applicable
Federal minimum risk-based capital requirements.
(I) "Eligible Surety Bond" shall mean a bond executed by an insurance company authorized to do
business in the State of New York~ the claims paying ability of which is rated in the highest rating category by at least
two nationally recognized statistical rating organizations.
(m) "Margin Percentage" shall mean the percentage indicated on Exhibit B attached hereto with respect
to particular types of Eligible Collateral.
(n) "Market Value" shall mean, with respect to uny Eligible Security held in the Account, the market
value of such Eligible Security as made available to the Custodian by a generally recognized source selected by the
Custodian plus, if not reflected in the market value, any accrued interest thereon, or, if such source does not make
available a market value, the market value shall be as determined by the Custodian in its sole discretion based on
information furnished to the Custodian by one or more brokers or dealers; provided however that, if agreed in writing
by the parties hereto, the Bank may provide the Custodian with such Market Values. The Market Value of Eligible
Letters of Credit and Eligible Surety Bonds shall be the face amount thereof.
(o) "Nationally Recognized Statistical Rating Organization" shall mean Moody's, Standard und Peers,
Fitch, Duff and Phelps, BankWatch and IBCA and in the case of Eligible Surety Bonds, shall also include Bests.
(p) "Oral Instructions" shall imean verbal instructions actually received by the Custodian from an
Authorized Person or from a person reasonably believed by the Custodian to be an Authorized Person.
(q)
Agreement.
"Substitute Collateral" shall have the meaning set forth in paragraph C of Section 1 of this
(r) "Uninsured Deposits" shall mean that portion of the Local Government's Deposits with the Bank
which exceeds the insurance coverage available from the Federal Deposit Insurance Corporation.
(s) "Written Instructions" shall mean written communications actually received by the Bank or the
Custodian from an Authorized Person or from a person reasonably believed by the Bank or the Custodian to be an
Authorized Person by a computer, telex, facsimile or any system whereby the receiver of such communications is able
to verify by codes or otherwise with a reasonable degree of certainty the identity oftbe sender of such communication.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers
thereunto duly authorized and their respective seals to be hereunto affixed, as of the day and year first above written.
[PUBLIC ENTITY
Signature:__
By: Scott Russell
Title: Supervisor
BANK OF AMERICA, N.A.
By:_
Title:
THE BANK OF NEW YORK MELLON
By:
Title:
bankofamerc~lldcp4(NY).doe
(12/08)
EXHIBIT A
Collateral Requirement. On any Business Day that the Local Government has Uninsured Deposits in the
Bank, the Bank, in accordance with paragraph b of Section 1 of this Agreement, agrees to deliver or cause to be
delivered to the Custodian for deposit in the Account, Eligible Collateral having an Adjusted Market Value equal to
the Collateral Requirement. For purposes of this Agreement, Collateral Requirement shall mean the amount of such
Uninsured Deposits times the Margin Percentage, if any.
EXHIBIT C
CERTIFICATE OF AUTHORIZED PERSONS
(Oral and Written Instructions)
The undersigned hereby certifies that he/she is the duly elected and acting Town Clerk of the Town of
Southole!, and further certifies that the following officers or employees of the Town of Southold have been duly
authorized to deliver Oral and Written Instructions to The Bank of New York Mellon ("Custodian") pursuant to the
Third Party Custodian Agreement between the Local Government, Bank of America, N/t}. ("Bank") and Custodian
dated/~- , and that the signatures appearing opposite their names ~e~~~i~
Scott Russell __Supervisor
Name Title "~ ~,,,,,,...~ Signature
B. PhilliPNameBeltz __DeputvTitleSupervisor__ / ~.~.
Name Title Signature
Name Title Signature
Name Title Signature
Name Title Signature
Name Title Signature
Name Title Signature
This certificate supersedes any certificate of authorized individuals you may currently have on file.
[corporate ~
seal]
Title: Town Clerk
Date: July 13,2011
M&T Investment Group
Third Party Custody Agreement
This Third Party Custody Agreement ("Agreement"), made and executed this twentieth day of July 2011,
between Town of So~thold-Fishers Island Ferry District, located at 53095 Route 25, Southold, in the
County of Suffolk, State of New York (the "Local Government"), Suffolk County National Bank, a ful_~l
service commercial bank having offices at 4 West Second Street, Riverhead, New York (the "Bank"), and
Manufacturers and Traders Trust Company, having offices at One M&T Plaza, Buffalo, New York 14203
(the "Custodian").
WITNESSETH
WHEREAS, the Local Government desires to maintain or continue to maintain public deposits with
the Bank;
WHEREAS, the Bank desires to obtain such deposits and to provide security therefor as required
by the New York General Municipal Law, the New York Banking Law and other applicable statutes;
WHEREAS, the Custodian agrees to provide safekeeping services and to hold any securities
pledged by the Bank in a custodial account established for the benefit of the Local Government as secured
party pursuant to this Agreement;
NOW, THEREFORE, in consideration of the mutual promises set forth hereafter, the parties hereto
agree as follows:
1) Schedule of Deposits and Required Security
a)
Attached, as Exhibit A hereto is a schedule of the maximum amount of the Deposits anticipated by
the Local Government and the Bank during the periods indicated and the Collateral Requirement
to be provided by the Bank during each such period. The obligation of the Bank to provide Eligible
Collateral pursuant to this Agreement shall not be less than the Collateral Requirement shown in
Exhibit "A" unless the Bank requests and obtains the Local Government's written consent at least
three (3) Business Days before the Collateral Requirement is reduced. The Local Government
and Bank may, at any time during the term of this agreement, agree to amend Exhibit "A". Any
such amendments to either increase or decrease the Collateral Requirements shown in Exhibit "A"
shall be confirmed in writing by both the Bank and the Local government at least three (3)
Business Days before the new Collateral Requirement becomes effective. A copy of any
amendments made pursuant to this section shall be furnished to the Custodian.
2) Security Requirements
a)
The Bank, to secure the timely payment of Uninsured Deposits heretofore or hereafter made by
the Local Government, including any interest due thereon, shall provide the Local Government
with Eligible Collateral having an Adjusted Market Value equal to the Collateral Requirement.
Whenever Eligible Securities are provided pursuant to this paragraph, the Bank hereby grants to
the Local Government a pledge and security interest in and to such Eligible Securities and shall
deliver such Eligible Securities to the Custodian in the manner prescribed in section 3 of this
Agreement. The security interest of the Local Government in Eligible Securities shall terminate
upon the transfer of such Eligible Securities from the Account. Eligible Letters of Credit and
Eligible Surety Bonds provided pursuant to this paragraph shall be subject to the prior approval of
the Local Government unless the Local Government has approved in writing the form of an Eligible
Letter of Credit or Eligible Surety Bond to be issued by a specific entity or the form of such Eligible
Letter of Credit or Eligible Surety Bond is attached hereto as an Exhibit.
1 of 10 (03/09)
M&T Investment Group
b)
At least monthly if Option A under Exhibit A is elected or daily if Option B under Exhibit A is elected
and the Bank advises the Custodian of the amount of Uninsured Deposits, the Custodian will
determine the Adjusted Market Value of the Eligible Collateral provided pursuant to this
Agreement. If the Adjusted Market Value of such Eligible Collateral is less than the Collateral
Requirement, the Custodian shall notify the Bank and the Bank shall, upon such notice, be
required to provide additional Eligible Collateral having a Adjusted Market Value equal to or
greater than such deficiency no later than one Business Day after receipt of such notice. If the
Adjusted Market Value of the Eligible Collateral provided pursuant to this Agreement exceeds the
Collateral Requirement, the Custodian, at the direction of the Bank, shall transfer securities from
the Account, or in the case of other Eligible Collateral, cause or consent to a reduction in the
amount thereof, to the extent of such excess.
c)
The Bank may substitute Eligible Collateral ("Substitute Collateral") for any Eligible Collateral
previously provided pursuant to this Agreement so long as the Substitute Collateral has an
Adjusted Market Value equal to or greater than the Eligible Collateral which it will replace. The
Bank shall give Written or Oral Instructions thereof to the Custodian of any proposed substitution.
In the event that the Custodian determines that the Substitute Collateral described in such notice
consists exclusively of Eligible Securities having sufficient Adjusted Market Value, the Custodian,
at the direction of the Bank, shall transfer the Eligible Securities out of the Account against delivery
to the Account on the same Business Day of the Substitute Collateral. In the event the Substitute
Collateral described in such notice consists of an Eligible Letter of Credit or Eligible Surety Bond,
the prior consent of the Local Government shall be required before the Bank or Custodian may
complete the substitution described in such notice unless the Local Government has, in writing,
previously approved and consented to the form and issuer of the Eligible Letter of Credit and/or
Eligible Surety Bond to be provided as Substitute Collateral.
3) Custody of Eliqible Securities
a)
The Bank and Local Government hereby appoint the Custodian as custodian of all Eligible
Securities at any time delivered to the Custodian pursuant to this Agreement. The Custodian
hereby accepts appointment as such Custodian and agrees to establish and maintain the Account
and appropriate records identifying the Eligible Securities as pledged by the Bank to the Local
Government. The Account shall be kept separate and apart from the general assets of the
Custodian and will not, in any circumstances, be commingled with or become part of the backing
for any other deposit or liability of the Custodian. The Custodian, in performing its duties and
responsibilities pursuant to this Agreement, shall act as Custodian for, and agent of, the Local
Government.
b)
The Bank and Local Government agree that Eligible Securities delivered to the Custodian for
deposit in the Account may be in the form of credits to the accounts of the Custodian at the Book
Entry System or a Depository or by delivery to the Custodian of physical certificates in a form
suitable for transfer or with an assignment in blank to the Local Government or Custodian. The
Bank and Local Government hereby authorize the Custodian on a continuous and ongoing basis
to deposit in the Book Entry System and/or the Depositories all Eligible Securities that may be
deposited therein and to utilize the Book Entry System and/or Depositories and the receipt and
delivery of physical securities or any combination thereof in connection with its performance
hereunder. Eligible Securities credited to the Account and deposited in the Book Entry System or
Depositories or other financial intermediaries will be represented in accounts of the Custodian that
include only assets held by the Custodian for customers, including but not limited to accounts in
which the Custodian acts in a fiduciary, agency or representative capacity. Eligible Securities that
are not held in the Book Entry System, Depositories or through another financial intermediary will
be held in the Custodian's vault and physically segregated from securities and other non-cash
property belonging to the Custodian.
c) The Custodian shall provide the Local Government and the Bank each month with a statement
identifying all Eligible Securities in the Account, the Market Value thereof as of the date of such
statement. Upon request, the Custodian shall provide the Local Government and Bank with a
written confirmation within three (3) Business Days of any day on which Eligible Securities are
transferred to and from the Account. Such confirmation shall identify the specific securities that
2 of 10 (03/09)
[] M&T Investment Group
are the subject to the confirmation and state the Market Value thereof as of the date of such
transaction.
d) The Account shall not be subject to any security interest, lien or any right of set-off by or against
the Custodian.
e)
With respect to all Eligible Securities held in the Account, the Custodian by itself, or through the
use of the Book Entry System or the appropriate Depository, shall, unless otherwise instructed to
the contrary by the Bank: (i) collect all income and other payments reflecting interest and principal
on the Eligible Securities in the Account and credit such amounts to the account of the Bank; (ii)
forward to the Bank copies of all information or documents that it may receive from an issuer of
Eligible Securities which, in the opinion of the Custodian, are intended for the beneficial owner of
the Eligible Securities including, without limitation all proxies and other authorizations properly
executed and all proxy statements, notices and reports; (iii) execute, as Custodian, any certificates
of ownership, affidavits, declarations or other certificates under any tax laws now or hereafter in
effect in connection with the collection of bond and note coupons; (iv) hold directly, or through the
Book Entry System or Depositary, all dghts issued with respect to any Eligible Securities held by
the Custodian hereunder; and (v) upon receipt of written instruction from the Bank, the Custodian
will exchange Eligible Securities held hereunder for other securities and/or cash in connection with
(a) any conversion privilege, reorganization, recapitalization, redemption in kind, consolidation,
tender offer or exchange offer, or (b) any exercise, subscription, purchase or other similar rights.
4) Events of Default
a)
In the event the Bank shall fail to pay the Local Government any amount of the Deposits by the
Local Government covered by this Agreement in accordance with the terms of such Deposit, or
should the Bank fail or suspend active operations, the Deposits in such Bank shall become due
and payable immediately and the Local Government shall have the right to unilaterally demand
delivery of all Eligible Securities in the Account by notice to the Custodian and to sell such
securities at public or private sale. In the event of such sale, the Local Government, after
deducting all legal expenses and other costs, including reasonable attorneys fees, from the
proceeds of such sale, shall apply the remainder towards any one or more of the liabilities of the
Bank to the Local Government and shall return the surplus, if any, to the Bank.
5) Representation and Warranties
a)
Representations of the Bank. The Bank represents and warrants that:
i) it is the legal and actual owner, free and clear of all liens and claims, of all Eligible Securities
pledged pursuant to this Agreement;
ii) the form of this Agreement was approved by its board of directors;
iii) this Agreement was executed by an officer of the Bank who was authorized by the Bank's
board of directors to do so and will at all times be maintained as an official record of the Bank;
iv)
all securities pledged pursuant to this Agreement are Eligible Securities and that all letters of
credit and surety bonds obtained by the Bank in satisfaction of its obligations hereunder and of
which the Local Government is the beneficiary are Eligible Collateral;
v) the Bank is a bank or trust company located and authorized to do business in the State of New
York;
vi)
all acts, conditions and things required to exist, happen or to be performed on its part
precedent to and in the execution and delivery of this Agreement exist or have happened or
have been performed.
vii) Representations of the Local Government. The Local Government hereby represents and
warrants that:
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(1) (this Agreement has been legally and validly entered into, does not and will not violate any
statute or regulation applicable to it and is enforceable against the Local Government in
accordance with its terms;
(2) the appointment of the Custodian has been duly authorized and no other action by the
Local Government is required and this Agreement was executed by an officer of the Local
Government authorized to do so;
(3) it will not transfer, assign its interests in or the rights with respect thereto any Eligible
Securities pledged pursuant to this Agreement except as authorized pursuant section 4 of
the Agreement.
(4) all acts, conditions and things required to exist, happen or to be performed on its part
precedent to and in the execution and delivery of this Agreement exist or have happened
or have been performed.
6) Concerninq the Custodian
a)
The Custodian shall not be liable for any loss or damage, including counsel fees, resulting from its
action or omission to act or otherwise, except for any loss, damage, claim or expense arising out
of its own negligence or willful misconduct, and shall have no obligation hereunder for any loss or
damage, including counsel fees, which are sustained or incurred by reason of any action or
inaction by the Book Entry System or Depository. The Custodian may, with respect to questions of
law, apply for and obtain the advice and opinion of competent counsel and shall be fully protected
with respect to anything done or omitted by it in good faith and conformity with such advice or
opinion. The Local Government and Bank agree, jointly and severally, to indemnify the Custodian
and to hold it harmless against any and all costs, expenses, damages, liabilities or claims,
including reasonable fees and expenses of counsel, which the Custodian may sustain or incur or
which may be asserted against the Custodian by reason of or as a result of any action taken or
omitted by the Custodian in connection with operating under this Agreement, except those costs,
expenses, damages, liabilities or claims adsing out of the negligence or willful misconduct of the
Custodian or any of its employees or duly appointed agencies. This indemnity shall be a
continuing obligation of the Local Government and Bank notwithstanding the termination of this
Agreement.
b)
The Custodian shall not be responsible for, or considered to be the Custodian of, any security
received by it for deposit in the Account until the Custodian actually receives and collects such
security directly or by the final crediting of the Custodian's account on the books of the Book Entry
System or the appropriate Depository. The Custodian will be entitled to reverse any credits made
on the Local Government's behalf where such credits have been previously made and the Eligible
Securities are not finally collected.
c) The Bank shall pay to the Custodian such fees as may be agreed upon from time to time.
d)
The Custodian shall have no duties or responsibilities whatsoever except such duties and
responsibilities as are specifically set forth in this Agreement and no covenant or obligation shall
be implied against the Custodian in connection with this Agreement.
e)
The Local Government's authorized officer, upon reasonable notice, shall have access to the
Custodian's books and records maintained with respect to the Local Government's interest in the
Account during the Custodian's normal business hours. Upon the reasonable request of the Local
Government, the Custodian shall provide copies of any such books and records to the Local
Government or the Local Government's authorized officer at the Local Government's expense.
7) Termination
a) Any of the parties hereto may terminate this Agreement by giving to the other party a notice in
writing specifying the date of such termination, which shall be the eadier of (i) not less than 90
days after the date of giving such notice or (ii) the date on which the Deposits are repaid in full,
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9)
Such notice shall not affect or terminate the Local Government's security interest in the Eligible
Securities in the Account. Upon termination hereof, the Bank shall pay to the Custodian such
compensation as may be due to the Custodian as of the date of such termination and the
Custodian shall follow such reasonable Written Instructions of the Bank concerning the transfer of
custody of Eligible Securities, collateral records and other items. In the event the Custodian also
receives separate Written Instructions from the Local Government concerning the transfer of
Eligible Securities, the Custodian shall act pursuant to the Local Government's Written
Instructions. Upon the date set forth in the termination notice, this Agreement shall terminate
except as otherwise provided herein and all obligations of the parties to each other hereunder shall
cease.
8) Miscellaneous
a)
The Local Government and Bank each agrees to notify the Custodian in the event that any present
Authorized Person ceases to be an Authorized Person or in the event that any other Authorized
Persons are appointed and authorized. Until such new notification is received, the Custodian shall
be fully protected in acting upon Oral or Written Instructions or signatures of the present
Authorized Persons.
b)
Any Written Instructions or other instrument in writing authorized or required by this Agreement
shall be given to the Custodian and shall be sufficiently given if sent to the Custodian by regular
mail to its offices at One M&T Plaza, 9th Floor, Buffalo, New York 14203, Attn: Institutional Custody
Services or at such other place as the Custodian may from time to time designate in writing.
c)
Any notice or other instrument in writing authorized or required by this Agreement to be given to
the Bank shall be sufficiently given if sent to the Bank by regular mail to its address listed at the
end of this Agreement or at such other place as the Bank may from time to time designate in
writing.
d)
Any notice or other instrument in writing, authorized or required by this Agreement to be given to
the Local Government shall be sufficiently given if sent to the Local Government by regular mail to
its address listed at the end of this Agreement or at such other offices as the Local Government
may from time to time designate in writing.
e)
In case any provision in or obligation under this Agreement shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and unenforceabilify of the remaining
provisions or obligations shall not in any way be affected or impaired thereby and if any provision
is inapplicable to any person or circumstances, it shall nevertheless remain applicable to all other
persons and circumstances.
f)
This Agreement may not be amended or modified in any manner by the Local Government or the
Bank except with the written consent of the Custodian. The Custodian may amend or modify this
Agreement upon thirty (30) days' prior written notice to the Local Government and the Bank, and
continued the use of the services provided by the Custodian under this Agreement to the Local
Government and the Bank after the effective date of such amendment or modification shall be
deemed to constitute their consent to such amendment or modification.
g)
This Agreement shall extend to and be binding upon the parties hereto, and their respective
successors and assigns; provided, however, that this Agreement shall not be assignable by any
party without the written consent of the other parties.
h) This Agreement shall be construed in accordance with the laws of the State of New York without
regard to conflict of law principles thereof.
Definitions
Whenever used in this Agreement the following terms shall have the following meanings:
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a) "Account" shall mean the custodial account established with the Custodian for the benefit of the
Local Government as secured party in accordance with this Agreement.
b)
"Adjusted Market Value" shall be one hundred percent of Market Value except that: (1) in the case
of Eligible Securities enumerated in subparagraphs (v), (vi) and (vii) of Exhibit B, the Adjusted
Market Value shall be an amount equal to its Market Value multiplied by 0.9 if such Eligible
Security is not rated in the highest rating category by at least one nationally recognized statistical
rating agency, but is so rated in the second highest rating category, and an amount equal to its
Market Value multiplied by 0.8 if such Eligible Security is not so rated in one of the two highest
categories, but is so rated in the third highest rated category; (2) in the case of Eligible Securities
enumerated in subparagraphs (viii), (x) and (xi) of Exhibit B, the Adjusted Market Value shall be an
amount equal to its Market Value multiplied by 0.8; (3) in the case of eligible securities enumerated
in subparagraph (ix) of Exhibit B, the Adjusted Market Value shall be an amount equal to its
market value multiplied by 0.7; and, (4) in the case of Eligible Letters of Credit, the Adjusted
Market Value shall be the amount of the letter divided by 1.4.
c)
"Authorized Person" shall be any officer of the Local Government or the Bank designated in writing
from time to time as authorized to give Oral Instructions or Written Instructions on behalf of the
Local Government or the Bank, as the case may be.
d) "Bank" shall have the meaning set forth in the heading of this Agreement.
e) "Book Entry System" shall mean the Federal Reserve/Treasury Book Entry System for receiving
and delivering government securities,
f) "Business Day" shall mean any day on which the Custodian and the Bank are open for business
and on which the Book Entry System and/or the Depositories are open for business.
g) "Collateral Requirement" shall mean the amounts required in Exhibit "A" unless the Bank and
Local Government agree to a different amount in accordance with this Agreement.
h)
"Depository" shall include the Depository Trust Company and other securities depositories and
clearing agencies (and their successors and nominees) registered with the Securities and
Exchange Commission or otherwise regulated by appropriate federal or state agencies as a
securities depository or clearing agency.
i)
"Deposits" shall mean all deposits by the Local Government in the Bank that are available for all
uses generally permitted by the Bank to the Local Govemment for actually and finally collected
funds under the Bank's account agreement or policies,
j) "Eligible Collateral" shall mean Eligible Securities, Eligible Letters of Credit and Eligible Surety
Bonds.
k)
"Eligible Letter of Credit" shall mean an irrevocable letter of credit issued in favor of the Local
Government for a term not to exceed ninety days by either: (1) a bank (other than the Bank)
whose commercial paper and other unsecured short-term debt obligations (or, in the case of a
bank which is the principal subsidiary of a holding company, whose holding company's commercial
paper and other unsecured short-term debt obligations) are rated in one of three highest rating
categories based on the credit of such bank or holding company by at least one nationally
recognized statistical rating organization; or, (2) by a bank (other than the Bank) which is in
compliance with applicable federal minimum risk-based capital requirements.
i)
"Eligible Securities" shall mean any securities of the types enumerated in the Schedule of Eligible
Securities attached hereto as Exhibit "B", as such Schedule may be amended by the parties in
writing from time to time. Such a Schedule may establish limitations pertaining to the types or
amounts of Eligible Securities that may be provided pursuant to this Agreement.
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m)
"Eligible Surety Bond" shall mean a bond executed by an insurance company authorized to do
business in the State of New York, the claims paying ability of which is rated in the highest rating
category by at least two nationally recognized statistical rating organizations.
n)
"Market Value" shall mean, with respect to any Eligible Security held in the Account, the market
value of such Eligible Security as made available to the Custodian by a generally recognized
source selected by the Custodian or by the Bank or the most recently available closing bid
quotation from such source plus, if not reflected in the market value, any accrued interest thereon,
or, if such source does not make available a market value or a closing bid price for a particular
security, the market value shall be as determined by the Custodian in its sole discretion based on
information furnished to the Custodian by one or more brokers or dealers or based on information
otherwise reasonably acceptable to the Local Government; provided however that, if agreed in
writing by the parties hereto, the Bank may provide the Custodian with such Market Values. The
Market Value of Eligible Letters of Credit and Eligible Surety Bonds shall be the face amount
thereof.
o) "Margin Percentage" shall equal 102 percent.
p)
"Nationally Recognized Statistical Rating Organization" shall mean Moody's, Standard and Poors,
Fitch, Duff and Phelps, BankWatch and IBCA and in the case of Eligible Surety Bonds, shall also
include Bests.
q)
"Oral Instructions" shall mean verbal instructions actually received by the Custodian from an
Authorized Person or from a person reasonably believed by the Custodian to be an Authorized
Person.
r) "Substitute Collateral" shall have meaning set forth in paragraph c of Section 2 of this Agreement.
s) "Uninsured Deposits" shall mean that portion of the Local Government's Deposits with the Bank
that exceeds the insurance coverage available from the Federal Deposit Insurance Corporation.
t)
"Written Instructions" shall mean written communications actually received by the Bank or the
Custodian from an Authorized Person or from a person reasonably believed by the Bank or the
Custodian to be an Authorized Person by a computer, telex, telecepier or any other system
whereby the receiver of such communications is able to verify by codes or otherwise with a
reasonable degree of certainty the identity of the sender of such communication.
The remainder of this page intentionally/eft blank
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their
respective officers thereunto duly authorized, as of the day and year first above written.
ACKNOWLEDGED AND AGREED:
Town of Southold-Fishers Island Ferry
District
Local Gov~em/~.as Pledgee
By: .~i~1~' ~
ScotCRussell
Town Supervisor
Suffolk County National Bank
Bank, as Depositary and Pledgor
~reG°rdon H uszag(~~
sident & Chief Executive Officer
Post Office Box 1179, Southold,NY 11971-0~5'~
Address
(631) 765-1889
Telephone Number
Post Office Box 9000, Riverhead NY 11901
Address
(631) 208-2280
Telephone Number
MANUFACTURERS AND TRADERS
TRUST
Title:
RUSSELL E. JAC00S, AVP
MANUFACTURERS ANDTRADERSTRUST COMFANY
ONE M&T PLAZA
BUFFALO, NY 14203
{716) 842-5079
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EXHIBIT A*
OPTION A
Schedule of Anticipated Deposit and Collateral Requirements:
Maximum Amount of
Anticipated Uninsured Deposits
January
February
March
April
May
June
July
August
September
October
November
December
Amount of
Collateral Required
OPTION B
Collateral Requirement:
On any Business Day that the Local Government has Uninsured Deposits in the Bank, the Bank, in
accordance with paragraph b of section 2 of this Agreement, agrees to deliver or cause to be delivered to
the Custodian for deposit in the Account Eligible Collateral having an Adjusted Market Value equal to the
Collateral Requirement. For purposes of this Agreement, Collateral Requirement shall mean the amount
of such Uninsured Deposits times the Margin Percentage, if any.
* This exhibit should include all official accounts on deposit in the bank including offices and
departments whether Option A or B is utilized.
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X
X
X
X
EXHIBIT B
Schedule of Eligible Securities
(i) Obligations issued, or fully insured or guaranteed as to the payment of principal and
interest, by the United States of America, an agency thereof or a United States
government sponsored corporation.
(ii) Obligations issued or fully guaranteed by the International Bank for Reconstruction
and Development, the Inter-American Development Bank, the Asian Development
Bank, and the African Development Bank.
(iii) Obligations partially insured or guaranteed by any agency of the United States of
America, at a proportion of the Market Value of the obligation that represents the
amount of the insurance or guaranty.
(iv) Obligations issued or fully insured or guaranteed by the State of New York,
obligations issued by a municipal corporation, school district or district corporation of
such State or obligations of any public benefit corporation, which under a specific
State statute may be accepted as security for deposit of public moneys.
(v) Obligations issued by states (other than the State of New York) of the United
States rated in one of the three highest rating categories by at least one nationally
recognized statistical rating organization.
(vi) Obligations of Puerto Rico rated in one of the three highest rating categories by at
least one nationally recognized statistical rating organization.
(vii) Obligations of counties, cities and other governmental entities of a state other
than the State of New York having the power to levy taxes that are backed by the full
faith and credit of such governmental entity and rated in one of the three highest rating
categories by at least one nationally recognized statistical rating organization.
(viii) Obligations of domestic corporations rated in one of the two highest rating
categories by at least one nationally recognized statistical rating organization.
(ix) Any mortgage related securities, as defined in the Securities Exchange Act of
1934, as amended, which may be purchased by banks under the limitations
established by bank regulatory agencies.
(x) Commemial paper and bankers' acceptances issued by a bank, other than the
Bank, rated in the highest short term category by at least one nationally recognized
statistical rating organization and having maturities of not longer than 60 days from the
date they are pledged.
(xi) Zero coupon obligations of the United States government marketed as "Treasury
strips".
10~10 (03/09)
THIRD PARTY CUSTODIAN AGREEMENT
THIS AGREEMENT, made and executed this 12th day of August, 2011 between the
Fishers Island Ferry District, located in the County of Suffolk, State of New York ("Local
Government"), The Bridgehampton National Bank having offices at Bridgehampton, New
York ("Bank") and Manufacturers and Traders Trust Company (M&T Bank), having offices
at Buffalo, New York ("Custodian").
WITNESSETH
WHEREAS, Local Government desires to maintain or continue to maintain public
deposits with the Bank;
WHEREAS, the Bank desires to obtain such deposits and to provide security therefore as
required by the General Municipal Law, Banking Law and other applicable statutes;
WHEREAS, the Custodian agrees to provide safekeeping services and to hold any
securities pledged by the Bank in a custodial account established for the benefit of the Local
Government as secured party pursuant to this Agreement;
NOW, THEREFORE, in consideration of the mutual promises set forth hereafter, the
parties hereto agree as follows:
Schedule of Deposits and Required Security
Attached as Exhibit A hereto is the collateral requirements. The Local Government and
the Bank have agreed to select option B of Exhibit A. The Bank will only provide
eligible collateral which qualifies as 100% of market value collateral, therefore, the
market value and the adjusted market value will be the same.
2. Security Requirements.
The Bank, to secure the timely payment of Uninsured Deposits heretofore or
hereafter made by the Local Government, including any interest due thereon, shall
provide the Local Government with Eligible Collateral having an Adjusted
Market Value equal to the Collateral Requirement. Whenever Eligible Securities
are provided pursuant to this paragraph, the Bank hereby grants to the Local
Government a pledge and security interest in and to such Eligible Securities and
shall deliver such Eligible Securities to the Custodian in the manner prescribed in
section 3 of this Agreement. The security interest of the Local Government in
Eligible Securities shall terminate upon the transfer of such Eligible Securities
from the Account.
The Custodian will Monthly determine the Adjusted Market Value of the Eligible
Collateral provided pursuant to this Agreement. If the Adjusted Market Value of
such Eligible Collateral is less than the Collateral Requirement, the Custodian will
so notify the Bank and the Bank shall, upon such notice, be required to provide
additional Eligible Collateral having an Adjusted Market Value equal to or greater
than such deficiency no later than one Business Day after receipt of such notice.
If the Adjusted Market Value of the Eligible Collateral provided pursuant to this
Agreement exceeds the Collateral Requirement, the Custodian, at the direction of
the Bank, shall transfer securities from the Account, or in the case of other
Eligible Collateral, cause or consent to a reduction in the mount thereof, to the
extent of such excess.
The Bank may substitute Eligible Collateral ("Substitute Collateral") for any
Eligible Collateral previously provided pursuant to this Agreement so long as the
Substitute Collateral has an Adjusted Market Value equal to or greater than the
Eligible Collateral which it will replace. The Bank shall give Written or Oral
Notice Ihereof to theCustodian of any proposed substitution. In the event-that the
Custodian determines that the Substitute Collateral described in such notice
consists exclusively of Eligible Securities having sufficient Adjusted Market
Value, the Custodian, at the direction of the Bank, shall transfer the Eligible
Securities out of the Account against delivery to the Account on the same
Business Day of the Substitute Collateral.
The Custodian, to the extent not contained in the confirmation required by
paragraph c of section 3 of this Agreement, shall provide the Local Government
with a written confirmation setting forth: (1) a complete description of Eligible
Collateral provided, reduced or transferred to or from the Account pursuant to this
2
section; and, (2) the Market Value and Adjusted Market Value of such Eligible
Collateral as of the date of such transaction.
3. Custody of Eligible Securities
The Bank and Local Government hereby appoint the Custodian as custodian of
all Eligible Securities at any time delivered to the Custodian pursuant to this
Agreement. The Custodian hereby accepts appointment as such Custodian and
agrees to establish and maintain the Account and appropriate records identifying
the Eligible Securities as pledged by the Bank to the Local Government. The
Account shall be kept separate and apart from the general assets of the Custodian
and will not, in any circumstances, be commingled with or become part of the
backing for any other deposit or liability of the Custodian. The Custodian, in
performing its duties and responsibilities pursuant to this Agreement, shall act as
Custodian for, and agent of, the Local Government.
bo
The Bank and Local Oovemment agree that Eligible Securities delivered to the
Custodian for deposit in the Account may be in the form of credits to the
· accounts of the Custodian at the Book Entry System or a Depository or by
delivery to the Custodian of physical certificates in a form suitable for transfer or
with an assignment in blank to the Local Government or Custodian. The Bank
and Local Government hereby authorize the Custodian on a continuous and
ongoing basis to deposit in the Book Entry System and/or the Depositories all
Eligible Securities that may be deposited therein and to utilize the Book Entry
System and/or~)epes.;tories and the receipt and-delivery of-physicM-semhqties or
any combination thereof in connection with its performance hereunder. Eligible
Securities credited to the Account and deposited in the Book Entry System or
Depositories or other financial intermediaries will be represented in accounts of
the Custodian that include only assets held by the Custodian for customers,
including but not limited to accounts in which the Custodian acts in a fiduciary,
agency or representative capacity. Eligible Securities that are not held in the
Book Entry System, Depositories or through another financial intermediary will
be held in the Custodian's vault and physically segregated from securities and
other non-cash property belonging to the Custodian.
3
The Custodian shall provide the Local Government and Bank with a written
confirmation on each Business Day on which Eligible Securities are transferred
to and from the Account. Such confirmation shall identify the specific securities
which are the subject to the confirmation and state both the Market Value and
Adjusted Market Value thereof. The Custodian shall also provide the Local
Government and the Bank each month with a statement identifying all Eligible
Securities in the Account, the Market Value and Adjusted Market Value thereof
as of the date of such statement.
do
The Account shall not be subject to any security interest, lien or any right of set-
offby or against the Custodian.
e. With respect to all Eligible Securities held in the Account, the Custodian by
itself, or through the use of the Book Entry System or the appropriate Depository,
shall, unless otherwise instructed to the contrary by the Bank: (i) collect all
income and other payments reflecting interest and principal on the Eligible
Securities in the Account and credit such amounts to the account of the Bank; (ii)
forward to the Bank copies of all information or documents that it may receive
from an issuer of Eligible Securities which, in the opinion of the Custodian, are
intended for the beneficial owner of the Eligible Securities including, without
limitation all proxies and other authorizations properly executed and all proxy
statements, notices and reports; (iii) execute, as Custodian, any certificates of
ownership, affidavits, declarations or other certificates under any tax laws now or
hereafter in effect in connection with the collection of bond and note coupons;
--- (iv) hold dire~.xl3q4~4hrough the Book Entry System or Depositary, all rights
issued with respect to any Eligible Securities held by the Custodian hereunder;
and (v) upon receipt of written instruction from the Bank, the Custodian will
exchange Eligible Securities held hereunder for other securities and/or cash in
connection with (a) any conversion privilege, reorganization, recapitalization,
redemption in kind, consolidation, tender offer or exchange offer, or (b) any
exercise, subscription, purchase or other similar rights.
4. Events of Default
4
In the event the Bank shall fail to pay the Local Government any mount of the Deposits
by the Local Government covered by this Agreement in accordance with the terms of
such Deposit, or should the Bank fail or suspend active operations, the Deposits in such
Bank shall become due and payable immediately and the Local Government shall have
the fight to unilaterally demand delivery of all Eligible Securities in the Account by
notice to the Custodian and to sell such securities at public or private sale. In the event
of such sale, the Local Government, after deducting all legal expenses and other costs,
including reasonable attomeys fees, from the proceeds of such sale, shall apply the
remainder towards any one or more of the liabilities of the Bank to the Local
Government and shall return the surplus, if any, to the Bank.
5. Representation and Warranties.
(a) Representations of the Bank. The Bank represents and warrants that:
(0
it is the legal and actual owner, free and clear of all liens and claims, of all Eligible
Securities pledged pursuant to this Agreement;
(2) the form of this Agreement was approved by its board of directors;
(3)
this Agreement was executed by an officer of the Bank who was authorized by the
Bank's board of directors to do so and will at all times be maintained as an official
record of the Bank;
_(4) ali securities pledged pur. sum-.t to this Agreement are Eligible Securities;
(5)
the Bank is a bank or trust company located and authorized to do business in the
State of New York;
(6)
all acts, conditions and things required to exist, happen or to be performed on its part
precedent to and in the execution and delivery of this Agreement exist or have
happened or have been performed.
(b)
Representations of the Local Government. The Local Government hereby represents and
warrants that:
(1)
this Agreement has been legally and validly entered into, does not and will
not violate any statute or regulation applicable to it and is enforceable
against the Local Government in accordance with its terms;
(2)
the appointment of the Custodian has been duly authorized and no other action
by the Local Government is required and this Agreement was executed by
an officer of the Local Government authorized to do so;
(3)
it will not transfer, assign its interests in or the fights with respect thereto
any Eligible Securities pledged pursuant to this Agreement except as
authorized pursuant section 4 of the Agreement.
(4)
all acts, conditions and things required to exist, happen or to be performed on its
part precedent to and in the execution and delivery of this Agreement exist or
have happened or have been performed.
6. Concerning the Custodian.
a. The Custodian shall not be liable for any loss or damage, including counsel fees,
resulting from its action or omission to act or otherwise, except for any loss,
damage, claim or expense arising out of its own negligence or willful misconduct,
and shall have no obligation hereunder for any loss or damage, including counsel
fees, which are sustained or incurred by reason of any action or inaction by the
~Book Entry System or Depository. The Custodian may, with respect to questions
of law, apply for and obtain the advice and opinion of competent counsel and shall
be fully protected with respect to anything done or omitted by it in good faith and
conformity with such advice or opinion. The Local Government and Bank agree,
jointly and severally, to indemnify the Custodian and to hold it harmless against
any and alt costs, expenses, damages, liabilities or claims, including reasonable
fees and expenses of counsel, which the Custodian may sustain or incur or which
may be asserted against the Custodian by reason of or as a result of any action
taken or omitted by the Custodian in connection with operating under this
Agreement, except those costs, expenses, damages, liabilities or claims arising out
of the negligence or willful misconduct of the Custodian or any of its employees
or duly appointed agencies. This indemnity shall be a continuing obligation of the
Local Government and Bank notwithstanding the termination of this Agreement.
The Custodian shall not be responsible for, or considered to be the
Custodian of, any security received by it for deposit in the Account until
the Custodian actually receives and collects such security directly or by the
final crediting of the Custodian's account on the books of the Book Entry
System or the appropriate Depository. The Custodian will be entitled to
reverse any credits made on the Local Government's behalf where such
credits have been previously made and the Eligible Securities are not
finally collected.
The Bank shall pay to the Custodian such fees as may be agreed upon from time
to time.
The Custodian shall have no duties or responsibilities whatsoever except such duties and
responsibilities as are specifically set forth in this Agreement and no covenant or
obligation shall be implied against the Custodian in connection with this
Agreement.
e. The Local Government's authorized officer, upon reasonable notice, shall have
access to the Custodian's books and records maintained with respect to the Local
Government's interest in the Account during the Custodian's normal business
hours. Upon the reasonable request of the Local Government, copies of any such
__ books and record~ ~hal! be provided by the Custodian tothe Local Government or
the Local Government's authorized officer at the Local Government's expense.
7. Termination.
Any of the parties hereto may terminate this Agreement by giving to the other party a
notice in writing specifying the date of such termination, which shall be the earlier
of (i) not less than 90 days after the date of giving such notice or (ii) the date on
which the Deposits are repaid in full. Such notice shall not affect or terminate the
Local Government's security interest in the Eligible Securities in the Account.
Upon termination hereof, the Bank shall pay to the Custodian such compensation
7
as may be due to the Custodian as of the date of such termination and the
Custodian shall follow such reasonable Written Instructions of the Bank and the
Local Government concerning the transfer of custody of Eligible Securities,
collateral records and other items. In the event of a discrepancy between Written
Instructions of the Bank and the Local Government, the Custodian shall act
pursuant to the Local Government's Written Instructions. Upon the date set forth
in the termination notice, this Agreement shall terminate except as otherwise
provided herein and all obligations of the parties to each other hereunder shall
cease.
Miscellaneous.
The Local Government and Bank each agrees to furnish to the Custodian a
new Certificate (Exhibit C) in the event that any present Authorized
Person ceases to be an Authorized Person or in the event that any other
Authorized Persons are appointed and authorized. Until such new
Certificate is received, the Custodian shall be fully protected in acting
upon Oral or Written Inslrucfions or signatures of the present Authorized
Persons.
do
Any Written Instructions or other instrument in writing authorized or required by
this Agreement shall be given to the Custodian and shall be sufficiently
given if sent to the Custodian by regular mail to its Offices at Buffalo,
New York or at such other place as the Custodian may from time to time
Any notice or other instrument in writing authorized or required by this
Agreement to be given to the Bank shall be sufficiently given if sent to the
Bank by regular mail to its Offices at P. O. Box 3005, Bridgehampton, NY
11932 or at such other place as the Bank may from time to time designate
in writing.
Any notice or other instrument in writing, authorized or required by this
Agreement to be given to the Local Government shall be sufficiently given
if sent to the Local Government by regular mail to its Offices at 54 East
ho
Main Street, Patchogue,/NY 11772 or at such other Offices as the Local
government may from time to time designate in writing.
9. Definitions.
In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and unenforceability of the remaining provisions or obligations shall not in
any way be affected or impaired thereby and if any provision is
inapplicable to any person or circumstances, it shall nevertheless remain
applicable to all other persons and circumstances.
This Agreement may not be amended or modified in any manner except by
written agreement executed by all of the parties hereto.
This Agreement shall extend to and be binding upon the parties hereto,
and their respective successors and assigns; provided, however, that this
Agreement shall not be assignable by any party without the written consent
of the other parties.
This Agreement shall be construed in accordance with the laws of the
State of New York without regard to conflict of law principles thereof.
Whenever used in this Agreement the following terms shall have the following meanings:
"Account" shall mean the custodial account established with the Custodian
for the benefit of the Local Government as secured party in accordance
with this Agreement.
b. "Adjusted Market Value" shall be one hundred percent of Market Value.
"Authorized Person" shall be any officer of the Local Government or
Bank, as the case may be, duly authorized to give Oral Instructions or
Written Instructions on behalf of Local Government or Bank, such persons
to be designated in a Certificate substantially in the form of Exhibit "C"
9
attached hereto, as such Exhibit may be amended from time to time.
"Bank" shall mean any bank as defined by the banking law of the State of New
York or a national banking association located and authorized to do
business in New York.
ko
go
"Book Entry System" shall mean the Federal Reserve/Treasury Book Entry
System for receiving and delivering government securities.
"Business Day" shall mean any day on which the Custodian and the Bank are open
for business and on which the Book Entry System and/or the Depositories
are open for business.
"Certificate" shall mean the Certificate attached hereto as Exhibit "C".
"Collateral Requirement" shall mean the amounts required in Exhibit "A" unless
the Bank and Local Government agree to a different amount in accordance
with this Agreement.
"Depository" shall include the Depository Trust Company, the Participants Trust
Company and other securities depositories and clearing agencies (and their
successors and nominees) registered with the Securities and Exchange
Commission or otherwise regulated by appropriate federal or state
agencies as a securities depository or clearing agency.
"Deposits" shall mean all deposits by the Local Government in the Bank that are
available for all uses generally permitted by the Bank to the Local
Government for actually and finally collected funds under the Bank's
account agreement or policies.
"Eligible Collateral" shall mean Eligible Securities.
"Eligible Securities" shall mean any securities of the types enumerated in the
Schedule of Eligible Securities attached hereto as Exhibit "B", as such
Schedule may be mended by the parties in writing from time to time.
10
Such Schedule may establish limitations pertaining to the types or amounts
of Eligible Securities which may be provided pursuant to this Agreement.
"Market Value" shall mean, with respect to any Eligible Security held in
the Account, the market value of such Eligible Security as made available
to the Custodian by a generally recognized source selected by the
Custodian or by the Bank or the most recently available closing bid
quotation from such source plus, if not reflected in the market value, any
accrued interest thereon, or, if such source does not make available a
market value or a closing bid price for a particular security, the market
value shall be as determined by the Custodian in its sole discretion based
on information furnished to the Custodian by one or more brokers or
dealers or based on information otherwise reasonably acceptable to the
Local Government; provided however that, if agreed in writing by the
parties hereto, the Bank may provide the Custodian with such Market
Values.
n. "Margin Percentage" shall equal 105 percent.
o. "Nationally Recognized Statistical Rating Organization" shall mean
Moody's, Standard and Poors, Fitch, Duff and Phelps, BankWatch and IBCA.
p. "Oral Instructions" shall mean verbal instructions actually received by the
Custodian from an Authorized Person or from a person reasonably
_ believecLb_y the Custodian to be an Authorized Person. -
qo
"Substitute Collateral" shall have meaning set forth in paragraph c of
Section 2 of this Agreement.
"Uninsured Deposits" shall mean that portion of the Local Government's
Deposits with the Bank which exceeds the insurance coverage available
from the Federal Deposit Insurance Corporation.
"Written Instructions" shall mean written communications actually
received by the Bank or the Custodian from an Authorized Person or from
11
a person reasonably believed by the Bank or the Custodian to be an
Authorized Person by a computer, telex, telecopier or any other system
whereby the receiver of such communications is able to verify by codes or
otherwise with a reasonable degree of certainty the identity of the sender
of such communication.
12
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their
respective officers thereunto duly authorized and their respective seals to be hereunto atTlxed, as
of the day and year first above written.
ACKNOWLEDGED AND AGREED:
Fisher Island Ferry
Scott Russell
The Bridgehampton National Bank
Howard H. Nolan
Sr. Executive Vice President
Town Supervisor Chief Financial Officer
Typed Name and Title " /' Typed Name and Title
PO Box 1179
Southold, NY 11971-
Address
2200 Montauk Highway/PO Box 3005
Bridgehampton, NY 11932
Address
(631) 765-1889 (631) 537-1000
Telephone Telephone
Seal Seal
MANUFACTURERS AND TRADERS
TRUST COMPANY
As Custodhm
By:
Typed Name and Title
Address
Telephone
Seal
13
EXHIBIT A*
OPTION A
Schedule of Anticipated Deposit and Collateral Requirements
Maximum Amount oi Amount of
Anticipated Collateral
Uninsured Deposits Required
February-
March
Vlay
June
July
August
geptember
~ctober
qovember
December
OPTION B
Colla~ On any Business Day that the Local Government has Uninsured
Deposits in the Bank, the Bank, in accordance with paragraph b of ~tion 2 of this Agreement,
agrees to deliver or cause to be delivered to the Custodian for deposit in the Account Eligible
Collateral having an Adjusted Market Value equal to the Collateral Requirement. For purposes
of this Agreement, Collateral Requirement shall mean the mount of such Uninsured Deposits
* This exhibit should include all official accounts on deposit in the bank including offices and
departments whether Option A or B is utilized.
14
EXHIBIT B
Schedule of Eligible Securities
(i) Obligations issued by the United States of America, an agency thereof or a United
States government sponsored corporation or obligations fully insured or guaranteed as to
the payment of principal and interest by the United States of America, an agency thereof
or a United States government sponsored corporation.
(ii) Obligations issued or fully insured or guaranteed by the State of New York, obligations
issued by a municipal corporation, school district or district corporation of such State or
obligations of any public benefit corporation which under a specific State statute may be
accepted as security for deposit of public monies.
(iii) Obligations issued or fully guaranteed by the International Bank for Reconstruction and
Development, the Inter-American Development Bank, the Asian Development Bank, and
the African Development Bank.
(iv) Obligations4mrtiallyinsured~r~uaranteed by any agency of the United States of America,
at a proportion of the Market Value of the obligation that represents the amount of the
insurance or guaranty.
15
EXHIBIT C
For Local Government:
Certificate of Authorized Persons
By:.
By:
For Bank:
Sr. Executive Vice President, Chief Financial Officer
By:
Laura Gorman
Assistant Cashier, Treasury Manager
16
THIRD PARTY CUSTODIAN AGREEMENT
THIS AGREEMENT, made and executed this 12th day of August, 2011 between the
Fishers Island Ferry District, located in the County of Suffolk, State of New York ("Local
Government"), The Bridgehampton National Bank having offices at Bridgehampton, New
York ("Bank") and Manufacturers and Traders Trust Company (M&T Bank), having offices
at Buffalo, New York ("Custodian").
WITNESSETH
WHEREAS, Local Government desires to maintain or continue to maintain public
deposits with the Bank;
WHEREAS, the Bank desires to obtain such deposits and to provide security therefore as
required by the General Municipal Law, Banking Law and other applicable statutes;
WHEREAS, the Custodian agrees to provide safekeeping services and to hold any
securities pledged by the Bank in a custodial account established for the benefit of the Local
Government as secured party pursuant to this Agreement;
NOW, THEREFORE, in consideration of the mutual promises set forth hereafter, the
parties hereto agree as follows:
1. Schedule of Deposits and Required Security
Attached as Exhibit A hereto is the collateral requirements. The Local Government and
the Bank have agreed to select option B of Exhibit A. The Bank will only provide
eligible collateral which qualifies as 100% of market value collateral, therefore, the
market value and the adjusted market value will be the same.
2. Security Requirements.
The Bank, to secure the timely payment of Uninsured Deposits heretofore or
hereafter made by the Local Government, including any interest due thereon, shall
provide the Local Government with Eligible Collateral having an Adjusted
Market Value equal to the Collateral Requirement. Whenever Eligible Securities
are provided pursuant to this paragraph, the Bank hereby grants to the Local
Government a pledge and security interest in and to such Eligible Securities and
shall deliver such Eligible Securities to the Custodian in the manner prescribed in
section 3 of this Agreement. The security interest of the Local Government in
Eligible Securities shall terminate upon the transfer of such Eligible Securities
from the Account.
The Custodian will Monthly determine the Adjusted Market Value of the Eligible
Collateral provided pursuant to this Agreement. If the Adjusted Market Value of
such Eligible Collateral is less than the Collateral Requirement, the Custodian will
so notify the Bank and the Bank shall, upon such notice, be required to provide
additional Eligible Collateral having an Adjusted Market Value equal to or greater
than such deficiency no later than one Business Day after receipt of such notice.
If the Adjusted Market Value of the Eligible Collateral provided pursuant to this
Agreement exceeds the Collateral Requirement, the Custodian, at the direction of
the Bank, shall transfer securities from the Account, or in the case of other
Eligible Collateral, cause or consent to a reduction in the amount thereof, to the
extent of such excess.
The Bank may substitute Eligible Collateral ("Substitute Collateral") for any
Eligible Collateral previously provided pursuant to this Agreement so long as the
Substitute Collateral has an Adjusted Market Value equal to or greater than the
Eligible Collateral which it will replace. The Bank shall give Written or Oral
Notice thereof to the Custodian of any proposed substitution. In the event that the
Custodian determines that the Substitute Collateral described in such notice
consists exclusively of Eligible Securities having sufficient Adjusted Market
Value, the Custodian, at the direction of the Bank, shall transfer the Eligible
Securities out of the Account against delivery to the Account on the same
Business Day of the Substitute Collateral.
The Custodian, to the extent not contained in the confirmation required by
paragraph c of section 3 of this Agreement, shall provide the Local Government
with a written confirmation setting forth: (1) a complete description of Eligible
Collateral provided, reduced or transferred to or from the Account pursuant to this
2
section; and, (2) the Market Value and Adjusted Market Value of such Eligible
Collateral as of the date of such transaction.
3. Custody of Eligible Securities
The Bank and Local Government hereby appoint the Custodian as custodian of
all Eligible Securities at any time delivered to the Custodian pursuant to this
Agreement. The Custodian hereby accepts appointment as such Custodian and
agrees to establish and maintain the Account and appropriate records identifying
the Eligible Securities as pledged by the Bank to the Local Government. The
Account shall be kept separate and apart from the general assets of the Custodian
and will not, in any circumstances, be commingled with or become part of the
backing for any other deposit or liability of the Custodian. The Custodian, in
performing its duties and responsibilities pursuant to this Agreement, shall act as
Custodian for, and agent of, the Local Government.
The Bank and Local Government agree that Eligible Securities delivered to the
Custodian for deposit in the Account may be in the form of credits to the
accounts of the Custodian at the Book Entry System or a Depository or by
delivery to the Custodian of physical certificates in a form suitable for transfer or
with an assignment in blank to the Local Government or Custodian. The Bank
and Local Government hereby authorize the Custodian on a continuous and
ongoing basis to deposit in the Book Entry System and/or the Depositories all
Eligible Securities that may be deposited therein and to utilize the Book Entry
System and/or Depositories and the receipt and delivery of physical securities or
any combination thereof in connection with its performance hereunder. Eligible
Securities credited to the Account and deposited in the Book Entry System or
Depositories or other financial intermediaries will be represented in accounts of
the Custodian that include only assets held by the Custodian for customers,
including but not limited to accounts in which the Custodian acts in a fiduciary,
agency or representative capacity. Eligible Securities that are not held in the
Book Entry System, Depositories or through another financial intermediary will
be held in the Custodian's vault and physically segregated from securities and
other non-cash property belonging to the Custodian.
The Custodian shall provide the Local Government and Bank with a written
confirmation on each Business Day on which Eligible Securities are transferred
to and from the Account. Such confirmation shall identify the specific securities
which are the subject to the confirmation and state both the Market Value and
Adjusted Market Value thereof. The Custodian shall also provide the Local
Government and the Bank each month with a statement identifying all Eligible
Securities in the Account, the Market Value and Adjusted Market Value thereof
as of the date of such statement.
The Account shall not be subject to any security interest, lien or any right of set-
off by or against the Custodian.
With respect to all Eligible Securities held in the Account, the Custodian by
itself, or through the use of the Book Entry System or the appropriate Depository,
shall, unless otherwise instructed to the contrary by the Bank: (i) collect all
income and other payments reflecting interest and principal on the Eligible
Securities in the Account and credit such amounts to the account of the Bank; (ii)
forward to the Bank copies of all information or documents that it may receive
from an issuer of Eligible Securities which, in the opinion of the Custodian, are
intended for the beneficial owner of the Eligible Securities including, without
limitation all proxies and other authorizations properly executed and all proxy
statements, notices and reports; (iii) execute, as Custodian, any certificates of
ownership, affidavits, declarations or other certificates under any tax laws now or
hereafter in effect in connection with the collection of bond and note coupons;
(iv) hold directly, or through the Book Entry System or Depositary, all rights
issued with respect to any Eligible Securities held by the Custodian hereunder;
and (v) upon receipt of written instruction from the Bank, the Custodian will
exchange Eligible Securities held hereunder for other securities and/or cash in
connection with (a) any conversion privilege, reorganization, recapitalization,
redemption in kind, consolidation, tender offer or exchange offer, or (b) any
exercise, subscription, purchase or other similar rights.
4. Events of Default
4
In the event the Bank shall fail to pay the Local Government any amount of the Deposits
by the Local Government covered by this Agreement in accordance with the terms of
such Deposit, or should the Bank fail or suspend active operations, the Deposits in such
Bank shall become due and payable immediately and the Local Government shall have
the right to unilaterally demand delivery of all Eligible Securities in the Account by
notice to the Custodian amd to sell such securities at public or private sale. In the event
of such sale, the Local Government, after deducting all legal expenses and other costs,
including reasonable attorneys fees, from the proceeds of such sale, shall apply the
remainder towards any one or more of the liabilities of the Bank to the Local
Government and shall return the surplus, if any, to the Bank.
5. Representation and Warranties.
(a) Representations of the Bank. The Bank represents and warrants that:
(l)
it is the legal and actual owner, free and clear of all liens and claims, of all Eligible
Securities pledged pursuant to this Agreement;
(2) the form of this Agreement was approved by its board of directors;
(3)
this Agreement was executed by an officer of the Bank who was authorized by the
Bank's board of directors to do so and will at all times be maintained as an official
record of the Bank;
(4) all securities pledged pursuant to this Agreement are Eligible Securities;
(5)
the Bank is a bank or trust company located and authorized to do business in the
State of New York;
(6)
all acts, conditions and things required to exist, happen or to be performed on its part
precedent to and in the execution and delivery of this Agreement exist or have
happened or have been performed.
(b)
Representations of the Local Government. The Local Government hereby represents and
warrants that:
5
(1)
this Agreement has been legally and validly entered into, does not and will
not violate any statute or regulation applicable to it and is enfomeable
against the Local Government in accordance with its terms;
(2)
the appointment of the Custodian has been duly authorized and no other action
by the Local Government is required and this Agreement was executed by
an officer of the Local Government authorized to do so;
(3)
it will not transfer, assign its interests in or the rights with respect thereto
any Eligible Securities pledged pursuant to this Agreement except as
authorized pursuant section 4 of the Agreement.
(4)
all acts, conditions and things required to exist, happen or to be performed on its
part precedent to and in the execution and delivery of this Agreement exist or
have happened or have been performed.
6. Concerning the Custodian.
The Custodian shall not be liable for any loss or damage, including counsel fees,
resulting from its action or omission to act or otherwise, except for any loss,
damage, claim or expense arising out of its own negligence or willful misconduct,
and shall have no obligation hereunder for any loss or damage, including counsel
fees, which are sustained or incurred by reason of any action or inaction by the
Book Entry System or Depository. The Custodian may, with respect to questions
of law, apply for and obtain the advice and opinion of competent counsel and shall
be fully protected with respect to anything done or omitted by it in good faith and
conformity with such advice or opinion. The Local Government and Bank agree,
jointly and severally, to indemnify the Custodian and to hold it harmless against
any and all costs, expenses, damages, liabilities or claims, including reasonable
fees and expenses of counsel, which the Custodian may sustain or incur or which
may be asserted against the Custodian by reason of or as a result of any action
taken or omitted by the Custodian in connection with operating under this
Agreement, except those costs, expenses, damages, liabilities or claims arising out
of the negligence or willful misconduct of the Custodian or any of its employees
6
or duly appointed agencies. This indemnity shall be a continuing obligation of the
Local Government and Bank notwithstanding the termination of this Agreement.
The Custodian shall not be responsible for, or considered to be the
Custodian of, any security received by it for deposit in the Account until
the Custodian actually receives and collects such security directly or by the
final crediting of the Custodian's account on the books of the Book Entry
System or the appropriate Depository. The Custodian will be entitled to
reverse any credits made on the Local Government's behalf where such
credits have been previously made and the Eligible Securities are not
finally collected.
The Bank shall pay to the Custodian such fees as may be agreed upon from time
to time.
The Custodian shall have no duties or responsibilities whatsoever except such duties and
responsibilities as are specifically set forth in this Agreement and no covenant or
obligation shall be implied against the Custodian in connection with this
Agreement.
The Local Government's authorized officer, upon reasonable notice, shall have
access to the Custodian's books and records maintained with respect to the Local
Government's interest in the Account during the Custodian's normal business
hours. Upon the reasonable request of the Local Government, copies of any such
books and records shall be provided by the Custodian to the Local Government or
the Local Government's authorized officer at the Local Government's expense.
Termination.
Any of the parties hereto may terminate this Agreement by giving to the other party a
notice in writing specifying the date of such termination, which shall be the earlier
of (i) not less than 90 days after the date of giving such notice or (ii) the date on
which the Deposits are repaid in full. Such notice shall not affect or terminate the
Local Government's security interest in the Eligible Securities in the Account.
Upon termination hereof, the Bank shall pay to the Custodian such compensation
7
as may be due to the Custodian as of the date of such termination and the
Custodian shall follow such reasonable Written Instructions of the Bank and the
Local Government concerning the transfer of custody of Eligible Securities,
collateral records and other items. In the event of a discrepancy between Written
Instructions of the Bank and the Local Government, the Custodian shall act
pursuant to the Local Government's Written Instructions. Upon the date set forth
in the termination notice, this Agreement shall terminate except as otherwise
provided herein and all obligations of the parties to each other hereunder shall
cease.
8. Miscellaneous.
The Local Government and Bank each agrees to furnish to the Custodian a
new Certificate (Exhibit C) in the event that any present Authorized
Person ceases to be an Authorized Person or in the event that any other
Authorized Persons are appointed and authorized. Until such new
Certificate is received, the Custodian shall be fully protected in acting
upon Oral or Written Instructions or signatures of the present Authorized
Persons.
Any Written Instructions or other instrument in writing authorized or required by
this Agreement shall be given to the Custodian and shall be sufficiently
given if sent to the Custodian by regular mail to its Offices at Buffalo,
New York or at such other place as the Custodian may from time to time
designate in writing.
Any notice or other instrument in writing authorized or required by this
Agreement to be given to the Bank shall be sufficiently given if sent to the
Bank by regular mail to its Offices at P. O. Box 3005, Bridgehampton, NY
11932 or at such other place as the Bank may from time to time designate
in writing.
Any notice or other instrument in writing, authorized or required by this
Agreement to be given to the Local Government shall be sufficiently given
if sent to the Local Government by regular mail to its Offices at''
or at such other Offices as the Local
government may from time to time designate in writing.
In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and unenforceability of the remaining provisions or obligations shall not in
any way be affected or impaired thereby and if any provision is
inapplicable to any person or circumstances, it shall nevertheless remain
applicable to all other persons and circumstances.
This Agreement may not be amended or modified in any manner except by
written agreement executed by all of the parties hereto.
This Agreement shall extend to and be binding upon the parties hereto,
and their respective successors and assigns; provided, however, that this
Agreement shall not be assignable by any party without the written consent
of the other parties.
This Agreement shall be construed in accordance with the laws of the
State of New York without regard to conflict of law principles thereof.
9. Definitions.
Whenever used in this Agreement the following terms shall have the following meanings:
"Account" shall mean the custodial account established with the Custodian
for the benefit of the Local Government as secured party in accordance
with this Agreement.
b. "Adjusted Market Value" shall be one hundred percent of Market Value.
"Authorized Person" shall be any officer of the Local Government or
Bank, as the case may be, duly authorized to give Oral Instructions or
Written Instructions on behalf of Local Government or Bank, such persons
to be designated in a Certificate substantially in the form of Exhibit "C"
9
attached hereto, as such Exhibit may be amended from time to time.
"Bank" shall mean any bank as defined by the banking law of the State of New
York or a national banking association located and authorized to do
business in New York.
"Book Entry System" shall mean the Federal Reserve/Treasury Book Entry
System for receiving and delivering government securities.
"Business Day" shall mean any day on which the Custodian and the Bank are open
for business and on which the Book Entry System and/or the Depositories
are open for business.
g. "Certificate" shall mean the Certificate attached hereto as Exhibit "C".
"Collateral Requirement" shall mean the mounts required in Exhibit "A" unless
the Bank and Local Government agree to a different amount in accordance
with this Agreement.
"Depository" shall include the Depository Trust Company, the Participants Trust
Company and other securities depositories and clearing agencies (and their
successors and nominees) registered with the Securities and Exchange
Commission or otherwise regulated by appropriate federal or state
agencies as a securities depository or clearing agency.
"Deposits" shall mean all deposits by the Local Government in the Bank that are
available for all uses generally permitted by the Bank to the Local
Government for actually and finally collected fimds under the Bank's
account agreement or policies.
k. "Eligible Collateral" shall mean Eligible Securities.
"Eligible Securities" shall mean any securities of the types enumerated in the
Schedule of Eligible Securities attached hereto as Exhibit "B", as such
Schedule may be amended by the parties in writing from time to time.
10
Such Schedule may establish limitations pertaining to the types or amounts
of Eligible Securities which may be provided pursuant to this Agreement.
"Market Value" shall mean, with respect to any Eligible Security held in
the Account, the market value of such Eligible Security as made available
to the Custodian by a generally recognized source selected by the
Custodian or by the Bank or the most recently available closing bid
quotation from such source plus, if not reflected in the market value, any
accrued interest thereon, or, if such source does not make available a
market value or a closing bid price for a particular security, the market
value shall be as determined by the Custodian in its sole discretion based
on information furnished to the Custodian by one or more brokers or
dealers or based on information otherwise reasonably acceptable to the
Local Government; provided however that, if agreed in writing by the
parties hereto, the Bank may provide the Custodian with such Market
Values.
n. "Margin Percentage" shall equal 105 percent.
o. at~onally Recognized Statistical Rating Organization" shall mean
Moody's, Standard and Poors, Fitch, Duff and Phelps, BankWatch and IBCA.
"Oral Instructions" shall mean verbal instructions actually received by the
Custodian from an Authorized Person or from a person reasonably
believed by the Custodian to be an Authorized Person.
"Substitute Collateral" shall have meaning set forth in paragraph c of
Section 2 of this Agreement.
"Uninsured Deposits" shall mean that portion of the Local Government's
Deposits with the Bank which exceeds the insurance coverage available
from the Federal Deposit Insurance Corporation.
"Written Instructions" shall mean written communications actually
received by the Bank or the Custodian from an Authorized Person or from
11
a person reasonably believed by the Bank or the Custodian to be an
Authorized Person by a computer, telex, telecopier or any other system
whereby the receiver of such communications is able to verify by codes or
otherwise with a reasonable degree of certainty the identity of the sender
of such communication.
12
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their
respective officers thereunto duly authorized and their respective seals to be hereunto affixed, as
of the day and year first above written.
ACKNOWLEDGED AND AGREED:
Fisher Island Ferry
Scott/~ussell
Town S~u, pervisor
Typed Name and Title
PO Box 1179
Southold,
NY 11971
Address
(631) 765-1889
Telephone
The Bridgehampton National Bank
As Depositary and Pledgor
Howard H. Nolan
Sr. Executive Vice President
Chief Financial Officer
Typed Name and Title
2200 Montauk Highway/PO Box 3005
Bridgehampton, NY 11932
Address
(631) 537-1000
Telephone
Seal
MANUFACTURERS AND TRADERS
TRUST COMPANY
As Custodian
Typed Nme ~d Title
Seal
Telephone
Seal
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EXHIBIT A*
OPTION A
Schedule of Anticipated Deposit and Collateral Requirements
Maximum Amount of Amount of
Anticipated Collateral
Uninsured Deposits Required
January
February
March
April
May
June
luly
August
September
Dctober
~qovember
December
OPTION B
Collateral Requirement. On any Business Day that the Local Government has Uninsured
Deposits in the Bank, the Bank, in accordance with paragraph b of section 2 of this Agreement,
agrees to deliver or cause to be delivered to the Custodian for deposit in the Account Eligible
Collateral having an Adjusted Market Value equal to the Collateral Requirement. For purposes
of this Agreement, Collateral Requirement shall mean the amount of such Uninsured Deposits
times the Margin Percentage, if any.
This exhibit should include all official accounts on deposit in the bank including offices and
departments whether Option A or B is utilized.
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EXHIBIT B
Schedule of Eligible Securities
(i) Obligations issued by the United States of America, an agency thereof or a United
States govemment sponsored corporation or obligations fully insured or guaranteed as to
the payment of principal and interest by the United States of America, an agency thereof
or a United States government sponsored corporation.
(ii) Obligations issued or fully insured or guaranteed by the State of New York, obligations
issued by a municipal corporation, school district or district corporation of such State or
obligations of any public benefit corporation which under a specific State statute may be
accepted as security for deposit of public monies.
(iii) Obligations issued or fully guaranteed by the International Bank for Reconstruction and
Development, the Inter-American Development Bank, the Asian Development Bank, and
the African Development Bank.
(iv) Obligations partially insured or guaranteed by any agency of the United States of America,
at a proportion of the Market Value of the obligation that represents the amount of the
insurance or guaranty.
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For Local Government:
EXHIBIT C
Certificate of Authorized Persons
Scot~.Russell, Town Supervisor
By:_
By:
For Bank:
Sr. Executive Vice President, Chief Financial Officer
E~~esident, Chief Retail Banking Officer
Laura Gorman
Assistant Cashier, Treasury Manager
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