This Agreement is made and executed this _____ day of ___________________ 20_____, by and between the City of Blue Island, Illinois, a body politic and corporate in the State of Illinois; (“Public Body”), _____________________________ (“Financial Institution”) and ____________________________(“Custodian”).
WHEREAS, the Public Body desires to continue to maintain deposits of the Public Body’s funds at the Financial Institution.
WHEREAS, the Financial Institution desires to hold the funds of the Public Body and can provide pledged securities as collateral security for those deposits; and
WHEREAS, the Public Body and the Financial Institution desire the Custodian to maintain custody from time to time of certain of the Financial Institution’s securities for the benefit of the Public Body as collateral security for the Public Body’s deposit accounts maintained at the Financial Institution;
NOW, THEREFORE, it is agreed by and between the Public Body, the Financial Institution and the Custodian as follows:
1. Securities Interest.
The Financial Institution hereby pledges and grants in favor of the Public Body a lien and continuing security interest in the securities deposited with the Custodian from time to time, all substitutions and additions thereto, all other rights and privileges incident to such securities, all proceeds and profits of any of the foregoing (“Collateral”) as collateral security for all deposit accounts maintained from time to time by the Public Body with the Financial Institution. The Financial Institution shall take all necessary steps to transfer and perfect this security interest pursuant to Illinois Commercial Code. The lien and security interest pursuant for hereunder shall not be deemed to disaffirm, replace or otherwise adversely affect the existence and effectiveness of any lien or security interest previously or hereafter granted by the Financial Institution in favor of the Public Body, pursuant to this agreement or otherwise.
2. Identification and Value of Securities.
The Financial Institution agrees to deposit and the Custodian agrees to accept any documents necessary to facilitate transfer of title in the event of subsequent release to the Public Body. With respect to each deposit of pledged securities made with the Custodian, the Financial Institution will execute and deliver to the Public Body a written confirmation identifying the pledged securities and the value thereof (and, if delivered in substitution or replacement of existing Collateral with the written authorization of the Public Body, the Collateral being proposed for substitution). The Financial Institution will also deliver to the Public Body a copy of a receipt by the Custodian accepting the pledged securities. As used in this agreement, “value” of Collateral means the lesser of the face principal amount of the securities constituting Collateral or the current market value. Current market value of any pledged securities shall be as determined and agreed between the Public Body and the Financial Institution from time to time, each acting reasonably in good faith.
3. Permitted Securities.
Securities pledged hereunder and deposited with the Custodian shall be of one or more of the following types:
Government Securities;
Obligations of Federal Agencies;
Obligations of Federal Instrumentalities; or
Obligation of the State of Illinois.
The types of securities may be modified from time to time by agreement between the Public Body and the Financial Institution.
4. Public Body Demand for Additional Collateral.
In the event that the amount of all deposits of the Public Body maintained with the Financial Institution at the close of any business day exceeds 102% of the value of the Collateral, the Public Body may, by notice to the Financial Institution, demand that the Financial Institution deliver additional Collateral to the Custodian, of a value which together with the Collateral then held by the Custodian, shall equal or exceed 110% (or such other percentage agreed upon by the Public Body and the Financial Institution) of the amount of deposits at the close of business that day. The failure of the Financial Institution to deliver the requested additional Collateral within 24 hours after the demand by the Public Body shall constitute a default. In addition to the rights enumerated in Section 13 of this agreement, the Public Body shall have the right to immediately collect its deposits with the Financial Institution without penalty.
5. Release or Substitution of Securities.
The Financial Institution shall have the right at any time to seek to substitute Collateral of equal value and of the type as permitted under Section 3 and otherwise acceptable to the Public Body. Substituted Collateral shall be considered Collateral for all purposes. If the substitute collateral is of equal or greater value, similar maturity and included in Section 3 above, substitution can take place without approval of the Public Body. Notice of the substitution should be sent to the Public Body, as provided in this agreement. If the substitute collateral is not of equal or greater value, the Financial Institution shall provide to the Public Body, at least 72 hours before the time of any substitution, a statement of the respective values of the Collateral to be replaced and the Collateral to be substituted. Except as provided herein, the Custodian agrees that no Collateral may be released and substituted without the prior written approval of the Public Body. At all times, the Custodian will maintain on file the signatures of agents of the Public Body authorized to approve releases and substitutions.
6. Financial Institution Representations and Warranties.
a. The Financial Institution represents and warrants to the Public Body that it is the owner of the Collateral and that such Collateral is and will remain free and clear of any and all security interests, liens and claims of any other person, except for the security interest granted hereunder to the Public Body. The Financial Institution shall be deemed to repeat such representation with respect to Collateral delivered in addition to or in substitution of then-existing Collateral. The Public Body’s sole obligation to the Financial Institution with respect to Collateral is to return or cause the return of the Collateral to the Financial Institution at the termination, and full performance by the Financial Institution of, its obligations with respect to all deposits of the Public Body secured hereunder.
b. The Financial Institution agrees that all of the statements contained in this Agreement and in documents executed pursuant to this Agreement are made to induce the Public Body to deposit its funds in the Financial Institution and with the knowledge that the Public Body will rely on these statements. This Agreement shall prevail over the term of any other agreement between the Financial Institution and the Public Body with which it may conflict.
7. Approval by Board or Loan Committee of the Financial Institution.
The Financial Institution represents that it is duly authorized, by resolution of the Board of Directors or the Loan Committee of the Financial Institution, and has full right, power and authority, to execute this Agreement and the Custody Agreement, and to pledge and grant a security interest with respect to the Collateral. The Financial Institution has furnished a certified copy of the authorizing resolution, attached hereto as Exhibit A. The Financial Institution shall also furnish additional resolutions, if any, approved by the Board of Directors or the Loan Committee of the Financial Institution authorizing the substitution of Collateral or reauthorizing the granting of a security interest with respect to the existing Collateral.
8. Continuously Maintain Agreement as Official Record.
The Financial Institution further agrees that it will immediately upon execution keep and continuously maintain, as part of its official record, an executed copy of this Agreement, and confirmations executed hereunder and such other customary writings and records sufficient to identify those securities which have been pledged to the Public Body.
9. Maintaining Custody.
The Financial Institution may participate in and use the Federal Book-Entry Account System, a service provided by the Federal Reserve Bank for its member banks for deposit of United States Treasury bills, bonds, notes, certificates of indebtedness and Federal agency securities or the DTC system. The Custodian may hold securities in its vault and may deposit securities with a depository. The certificates representing securities, including those in bearer form, may be held in bulk form with, and may be merged into certificates of the same class of the issuer which constitutes assets of other accounts or owners without certification as to the ownership attached. Utilization of a book-entry system may be made for the transfer or pledge of securities held by the Custodian or by the securities depository. However, it is understood that the Custodian shall, at all times, maintain a separate and distinct record of the securities in the account(s).
10. Liability of the Custodian.
In the event of its failure to exercise ordinary care, the Custodian will be liable only for direct damages. The Custodian shall be deemed to have exercised ordinary care if its actions or failure to act is in conformity with reasonable practice of the banking industry. Notwithstanding any other provision of this Agreement, if it becomes necessary for the Public Body to obtain court enforcement of its rights against the Custodian and the Public Body should prevail, the Custodian shall be liable for the legal fees and cost of the Public Body.
11. Instructions.
Except as otherwise provided herein, the Custodian may accept and act upon instructions from the Financial Institution or the Public Body which instructions must be in writing on the letterhead of the Financial Institution or Public Body containing the signature of the person or persons authorized to provide instructions. Instructions may also be sent by facsimile on the letterhead of the Financial Institution or Public Body, provided the instructions are also sent in writing on letterhead within one business day and both the facsimile and the writing contain the signature of the person or persons authorized to provide instructions. All instructions and confirmations given to you hereunder shall be given pursuant to authority contained in currently effective resolutions of the Public Body and by persons authorized by such resolutions to give the same. The Public Body will from time to time furnish you with certified copies of such resolutions and you may rely on authorizations contained therein until we notify you in writing of a change thereto.
12. Events Constituting Default.
The following events shall constitute a default by the Financial Institution under this Agreement:
a. The Financial Institution shall fail to pay when due principal or interest with respect to any deposit of the Public Body maintained with the Financial Institution;
b. Any representation of the Financial Institution herein shall prove to have been untrue as of the date made or any date hereafter;
c. The Financial Institution shall fail to comply with any covenant or agreement contained herein and such non-compliance has not been cured within 30 days of the Public Body’s notice thereof to the Financial Institution;
d. The failure or suspension of active operations of the Financial Institution;
e. The Financial Institution shall make a general assignment for the benefit of creditors; admit in writing its inability to pay its debts as they become due; file a petition in bankruptcy or a petition seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future bankruptcy, insolvency or similar statute, law or regulation or seek the appointment of any trustee, receiver or liquidator for the Financial Institution or any material part of its properties; or
f. Any Federal or State agency or any creditor of the Financial Institution shall file any petition or seek any appointment specified in subsection e. above, or a conservator, receiver, liquidator or similar person shall be appointed with respect to the Financial Institution.
13. Rights Upon Default.
In the event of a default hereunder, the Public Body shall have all the rights and remedies of a secured party under the Illinois Commercial Code with respect to the Collateral, including without limitation the right upon default to collect, liquidate, sell or dispose of the same and to apply the proceeds thereof (after deduction therefrom all costs and expenses relating to such collection, liquidation, sale or disposition, including reasonable attorney fees and court costs) to the payment of any deposit or other liabilities of the Financial Institution to the Public Body arising out of or as a result of the default of the Financial Institution in such manner and at such time as the Public Body may deem appropriate, with the Financial Institution to remain liable for and to immediately pay to the Public Body any deficiency and with any overplus to be returned to the Financial Institution as soon as practicable. Any requirement of the Illinois Uniform Commercial Code for reasonable notice shall be met by the mailing of written notice to the undersigned by regular mail at its address set forth below at least five days prior to the sale or other event giving rise to the requirement of such notice. The rights and remedies specified herein shall be in addition to and supplementary of all rights and remedies which the Public Body would otherwise have at law or in equity. Any delay or failure on the Public Body’s part in exercising any right or remedy hereunder shall not constitute a waiver thereof or preclude the later or further exercise thereof. Notwithstanding any other provision of this Agreement, if it becomes necessary for the Public Body to obtain court enforcement of its rights against the Custodian and the Public Body should prevail, the Custodian shall be liable for the legal fees and costs of the Public Body.
14. Successors and Assigns.
This Agreement is continuing and binding upon the Financial Institution, its successors and assigns and shall inure to the benefit of the Public Body and the Custodian, and their respective successors and assigns.
15. Notice.
All notices, demands, consents and other communications hereunder shall be in writing, and shall be deemed effective when delivered personally, or sent by telegraph or telecopy, or five days after being sent by registered or certified mail, postage prepaid, return receipt requested, at the addresses specified below, or at such other addresses or to such other parties as may be specified in writing by the parties hereto:
Public Body: ______________________________________
______________________________________
______________________________________
Financial Institution: ______________________________________
______________________________________
______________________________________
Custodian: ______________________________________
______________________________________
______________________________________
16. Fees and Expenses of Custodian.
The fees and expenses of the Custodian will be paid by the Financial Institution.
17. Custodian’s Right to Terminate.
The Custodian shall have the right to terminate any of this Agreement and its custody of any securities held pursuant hereto, upon providing thirty days written notice of termination to the Financial Institution and the Public Body. Upon termination of its custody, the Custodian will take necessary steps to transfer the securities to the destination directed by the Financial Institution and the Public Body, jointly, and at the risk and expense of the Financial Institution. In the event that no joint direction is received, the Custodian shall transfer the securities to a trust account established by the Public Body in a financial institution having deposits of at least one hundred million dollars. Thereafter, the Custodian’s liability with respect to such securities shall be fully discharged. The Custodian shall remain responsible however for any prior breaches of this Agreement.
18. Amendments.
This agreement may be modified at any time by a mutual written agreement of the parties.
19. Governing Law.
This agreement shall be construed in accordance with the laws of the State of Illinois.
IN WITNESS WHEREOF, the parties have executed the foregoing Agreement the day and year first mentioned above.
PUBLIC BODY: ______________________________________
By: ______________________________________
Its: ______________________________________
FINANCIAL INSTITUTION: ______________________________________
By: ______________________________________
Its: ______________________________________
CUSTODIAN: ______________________________________
By: ______________________________________
Its: ______________________________________
(Prior Code, Ch. 38, App. D) (Ord. 99-286, passed 12-14-1999)