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HomeMy WebLinkAboutJP Morgan Chase BankRESOLUTION 2012-199 ADOPTED DOC ID: 7625 THIS IS TO CERTIFY THAT THE FOLLOWING RESOLUTION NO. 2012-199 WAS ADOPTED AT THE REGULAR MEETING OF THE SOUTHOLD TOWN BOARD ON FEBRUARY 28, 2012: RESOLVED that the Town Board of the Town of Southold hereby authorizes and directs Supervisor Scott A. Russell to execute the Pledge and Assignment and Custodial Undertaking Agreements between the Town of Southoid and JP Morgan Chase Bank~ N.A. in connection with securing deposits of public funds of the Town of Southold, subject to the approval of the Town Attorney. Elizabeth A. Neville Southoid Town Clerk RESULT: ADOPTED [UNANIMOUS] MOVER: Jill Doherty, Councilwoman SECONDER: Louisa P. Evans, Justice AYES: Ruland, Talbot, Doherty, Kmpski Jr., Evans, Russell Pledge and Assignment Agreement In Connection With Public Funds PLEDGE AND ASSIGNMENT AGREEMENT, dated made by JPMorgan Chase Bank, N.A., (the "Pledgor"), Town of Southold, the "Local Government"). WHEREAS, the Pledgor has been duly designated as a depository for moneys of the Local Government ("Public Funds") and has now or may receive additional Public Funds of the Local Government for deposit with it, and WHEREAS, pursuant to Section 10 of the New York General Municipal Law, Pledgor is required to provide security for Public Funds of the Local Government in the form of Eligible Securities as such term is defined by Section 10.1 (f) of the New York General Municipal Law, NOW, THEREFORE, subject to the terms and conditions hereinafter set forth, the parties agree as follows: SECTION 1. Pledge and Assignment. The Pledgor hereby pledges and assigns to the Local Government, and grants to the Local Government a security interest in certain Eligible Securities (the "Collateral") together with other instruments from time to time hereafter delivered to or otherwise possessed by the Pledgor for or on behalf of the Local Government in substitution for or in addition to any or all of the then existing Collateral, from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the then existing Collateral, and all proceeds of any or all of the foregoing Collateral. SECTION 2. Security for Obligations. This Agreement secures the Public Funds of the Local Government held by the Pledgor in time and demand deposit accounts in excess of the amount insured under the provisions of the Federal Deposit Insurance Corporation (the "Accounts") now or hereafter held by Pledgor in the name of the Local Government, together with all interest, if any, accrued thereon (such time and demand deposits and interests hereafter referred to in the aggregate as the "Secured Amount"). SECTION 3. Delivery of Collateral. All certificates or instruments, if any, representing or evidencing the Collateral shall be delivered to the Custodian (as hereinafter defined) and held on behalf of the Local Government pursuant hereto and shall be in suitable form for transfer by delivery, or shall be Word/Shared/TeamS/Custodial Pledge.doc 2/8/2012 accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to the Custodian. SECTION 4. Minimum Collateral Value; Substitutions. The Local Government shall notify the Pledgor, in writing, of the dollar amount of the Public Funds to be secured pursuant to this Agreement. The Pledgor shall have no obligation to secure additional Public Funds unless it receives additional written notice from the Local Government to do so. The Pledgor shall notify the Custodian, in writing, by facsimile, of any increase or decrease in the value of the Collateral to be pledged. The market value of the Collateral shall equal the amount of the aggregate collected balances of the Public Funds in the Accounts in excess of the amount insured under the provisions of the Federal Deposit Insurance Act as now or hereafter amended. If at any time during the period of this Agreement, the aggregate market value of the Collateral shall fall below said amount, the Pledgor shall pledge to the Local Government and deliver to the Custodian additional Collateral to cover the amount of deficiency. In addition, the Pledgor may freely substitute for any Collateral subject to this Agreement other Collateral, equivalent in value and quality to the Collateral for which substitution is being made. All additional and/or substituted Collateral pledged and delivered to the Custodian pursuant to this Section 4, where applicable, shall be accompanied by proper instruments of transfer or assignment executed by the Pledgor in accordance with the instructions of the Custodian. Collateral released by the Local Government shall be redelivered to the Pledgor and be accompanied by proper instruments of reassignment executed by the Local Government in favor of the Pledgor. Wherever securities pledged as Collateral hereunder are transferred by entries on the books of a federal reserve bank or other book-entry system operated by a federally regulated entity without physical delivery of the evidence of such obligations, the records of the Custodian with which the Local Government may place such securities shall show, at all times, the interest of the Local Government in such securities. In lieu of accepting securities pledged as Collateral hereunder, the Local Government may, in its sole discretion, accept from Pledgor as Collateral for the Accounts or any portion thereof an "Eligible Surety Bond" (as such term is defined in Section 10.1(g) of the New York General Municipal Law) payable to the Local Government or an "Eligible Letter of Credit" (as such term is defined in Section 1 0.1 (h) of the New York General Municipal Law) payable to the Local Government. -2- SECTION 5. Events of Default. Each of the following events shall constitute an event of default hereunder ("Event of Default"): (a) The Pledgor shall, without cause, refuse to pay to the Local Government, within a reasonable time after demand, any collected balance in the Accounts plus interest upon maturity or upon demand (as applicable), or (b) The Pledgor shall be deemed insolvent and closed by Order of the New York State Banking Department, appointing the Federal Deposit Insurance Corporation as conservator or receiver therefor. SECTION 6. Remedies upon Default. If an Event of Default shall have occurred and be continuing, then the Local Government may without being required to give any notice to the Pledgor, sell the Collateral, or any part thereof, at any public or private sale or at any broker's board or on any securities exchange, for cash, upon credit or for future delivery, as the Local Government shall deem appropriate. The Local Government shall be authorized at any such sale to restrict the prospective bidders or purchasers to persons who will represent and agree that they are purchasing the Collateral for their own account for investment and not with a view to the distribution or sale thereof, and upon consummation of any such sale, the Local Government shall have the right to assign, transfer and deliver to the purchaser or purchasers thereof the Collateral so sold. The Local Government shall not be obligated to make any sale of Collateral if it shall determine not to do so, regardless of the fact that notice of sale of Collateral may have been given. The Local Government shall pay to the Pledgor, its successors or assigns, the amount of cash, if any, received from the sale of the Collateral that exceeds the Secured Amount after deducting reasonable costs and expenses of the Local Government incurred in connection with the sale of the Collateral. SECTION 7. Return of Collateral. In the event that the Local Government withdraws Public Funds from the Accounts or the Pledgor fulfills its obligations hereunder by paying to the Local Government the collected balances of Public Funds held in the Accounts upon maturity or upon demand (as applicable), then in such instance, (a) this Agreement shall terminate and be of no further force and effect, and (b) all Collateral shall be released immediately by the Custodian and shall be redelivered to the Pledgor accompanied by proper -3- instruments of reassignment executed by the Local Government in favor of the Pledgor. SECTION 8. Custodial Agreement. The Local Government has appointed The JPMorgan Chase Bank, N.A., (acting through its Clearance Department), as custodian (the "Custodian") to hold the Collateral subject to this Agreement and the Custodian has indicated that it will, upon receipt of a copy of this Agreement, where applicable, retain physical possession of the certificates and instruments representing or evidencing the Collateral, segregate the Collateral and act in accordance with the terms and provisions of this Agreement and the provisions of the New York General Municipal Law applicable hereto. Except for the substitution of Collateral as provided for in this Agreement, the Custodian shall not deliver the Collateral to the Local Government or the Pledgor unless otherwise instructed to do so in writing by either party which writing shall certify that an Event of Default has occurred and is continuing or that this Agreement has been terminated, as applicable. SECTION 9. Binding Agreement; Assignment. This Agreement, and the terms, covenants and conditions hereof, shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Local Government shall not be permitted to assign this Agreement or any interest herein or in the Collateral, or any part thereof, or otherwise pledge, encumber or grant any option with respect to the Collateral, or any part thereof without the prior written consent of the Pledgor. SECTION 10. Miscellaneous. Neither this Agreement nor any provisions hereof may be amended, modified, waived, discharged or terminated orally nor may any of the Collateral be released or the pledge or the security interest created hereby extended, except by an instrument in writing signed by a duly authorized officer of the Pledgor. The Section headings used herein are for convenience of reference only and shall not define or limit the provisions of this Agreement. SECTION 11. Severability. In case any lien, security interest or other right of any part hereto shall be held to be invalid, illegal or unenforceable, such invalidity, illegality and/or unenforceability shall not affect any other lien, security interest or other right granted hereby. SECTION 12. Notices. All communications and notices hereunder shall be in writing mailed, sent by facsimile or delivered to the other party as follows: To Pledgor: National Collateral Management Group JPMorgan Chase Bank, N.A. 1111 Polaris Parkway, Floor 1E Columbus, OH 43240 Phone: (888) 333-8340 #2 Fax: (614) 248-9542 To Local Government: Town of Southold 53095 Route 25 P.O. Box 1179 Southold, NY 11971 Attention: Phone: Fax: or to such other address as shall be designated by one party in a written notice to the other party complying as to delivery with the terms of this Section. All notices, request, demands and other communications provided for hereunder shall be effective when deposited in the mails (postage prepaid), sent by facsimile and receipt confirmed or delivered by hand addressed as aforesaid. SECTION 13. Costs, Expenses, Taxes and Compensation. Each party agrees to pay its own costs, expenses and taxes due (including penalties) in connection with the preparation, execution, delivery, administration and enforcement of this Agreement, and the instruments and documents to be delivered hereunder. The Local Government hereby agrees to pay to the Pledgor compensation for the services described herein which shall be agreed upon from time to time by the parties hereto, reduced to written form, annexed to this Agreement and which shall become a part hereof. SECTION 14. Governing Law. This Agreement is made under and shall be governed by the laws of the State of New York in all respects, including matters of construction, validation and performance. -5- IN WITNESS WHEREOF, the Pledgor and the Local Government have each caused this Agreement to be duly executed and delivered by an officer thereunto duly authorized as of the date first above written. By: Title: Date: JPMorgan Chase Bank Title: Date: -6- Custodial Undertaking in Connection With Pledge and Assignment Agreement dav THIS AGREEMENT, made and executed this of ~e~/::::~'~'~Y, 20/~, between Town of Southold, located in the County of Suffolk, State of New York ("Local Government"), JPMorgan Chase Bank, N.A., "Bank") and JPMorgan Chase Bank, N.A., Clearance Department, ("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 New York General Municipal Law, 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 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. Any such amendments to either increase or decrease the Collateral Requirement shall be confirmed in writing by either party at least one Business Day 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 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 2/9/2012 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. The Custodian will determine on a daily basis 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 Collateral Requirement at the time of Substitution. 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. 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. 2/9/2012 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 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 and the Pledge and Assignment Agreement dated as of t~-~/or'c~,.-~' ,~ ~1o(2, between the Bank and the Local Government (the "l~ledg~ 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 2/9/2012 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 of 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 Depository, 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 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 the Pledge Agreement, the Local Government shall have the 2/9/2012 right to unilaterally demand delivery of all Eligible Securities in the Account by notice to the Custodian in the form of an affidavit certifying that an Event of Default (as defined in the Pledge Agreement) has occurred and is continuing and to sell such securities at public or private sale in accordance with the Pledge Agreement. The Custodian shall deliver said Eligible Securities to the Local Government after confirming with the Bank that an Event of Default has occurred. 5. Representation and Warranties a. Representations of the Bank. The Bank represents and warrants that: it is the legal owner of all Eligible Securities pledged pursuant to this Agreement; 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; the Bank is a bank or trust company located and authorized to do business in the State of New York. Representations of the Local Government. The Local Government hereby represents and warrants that: 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; 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; 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 to section 4 of the Agreement and the Pledge Agreement; all acts, conditions and things required to exist, happen or to be performed on its part precedent to and in the execution and 2/9/2012 delivery of this Agreement exist or have happened or have been performed. Concernincj 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 and the Pledge 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 or the Local Government shall pay 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 the Pledge Agreement and no covenant or obligation 2/9/2012 shall be implied against the Custodian in connection with this Agreement and the Pledge 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. 7. 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 in excess of the amount insured under the provisions of the Federal Deposit Insurance Act as now or hereafter amended are repaid in full or (iii) the mutual agreement of the Bank and the Local Government specifying a termination date. Such notice shall not affect or terminate the Local Government's security interest in the Eligible Securities in the Account up to the date of such termination. Upon termination hereof, the Local Government 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 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 provided they are appropriately executed. 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 "B") 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. 2/9/2012 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 1111 Polaris Parkway, Floor 1E, Columbus, Ohio 43240, ATTN: National Collateral Management Group, (888) 333-8340 option 2, 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 1111 Polaris Parkway, Floor 1E, Columbus, Ohio 43240, ATTN: National Collateral Manaqement Group 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 53095 Route 25, P.O. Box 1179 Southold, NY, 11971 or at such other place 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 principals thereof. 2/9/2012 9. Definitions Whenever used in this Agreement, the following terms shall have the following meanings: ao "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. "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 "A", 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 Marked 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 "A", the Adjusted Market Value shall be an amount equal to its Market Value multiplied by 0.8; and (3) in the case of Eligible Securities enumerated in subparagraph (ix) of Exhibit "A," 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 of credit divided by 1.4. "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 "B" 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. 2/9/2012 "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 "B". "Collateral Requirement" shall have the meaning assigned to such term in Section 1 of this Agreement unless the Bank and Local Government agree to a different amount in accordance with this Agreement and the Pledge 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 Letters of Credit and Eligible Surety Bonds. "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. 2/9/2012 "Eligible Securities" shall mean any securities of the types enumerated in the Schedule of Eligible Securities attached hereto as Exhibit "A", as such Schedule may be amended by the parties in writing from time to time. Such Schedule may establish limitations pertaining to the types or amounts of Eligible Securities which may be provided pursuant to this Agreement. "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. "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. p. "Margin Percentage" shall equal 102 percent. "Nationally Recognized Statistical Rating Organization" shall mean Moody's, Standard and Poors, Fitch, Duff and Phelps, BankWatch and lB, CA and in the case of Eligible Surety Bonds, shall also include Bests. "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. 2/9/2012 "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. 2/9/2012 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. Agreed to by: Town of Southold Signature Name: Title: Date: , 2012 Agreed to by: JPMorgan Chase Bank, N.A. (BANK) Signature Name: Title: -.~ V'-/~ ,2o 2 Date: Agreed to by: JPMorgan Chase Bank, N.A., Sig ~,/' Clearance Dept. (CUSTODIAN) Name: Title: Date: ,2012 2/9/2012 EXHIBIT A 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. 2/9/2012 (x) 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. (xi) Zero coupon obligations of the United States government marketed as "Treasury STRIPS". 2/9/2012 EXHIBIT B Certificate of Authorized Persons Name Title Signature 2/9/2012