Under any contract made or awarded by a state agency which exceeds a total of $500,000 and on which a state agency withholds a percentage of the money due the contractor until the state agency has accepted the contract, the contractor may withdraw the whole or a portion of the amount retained under the following conditions:
I. A negotiable certificate of deposit, United States treasury notes, United States treasury certificates of indebtedness, United States treasury bills, or bonds or notes of the state of New Hampshire or of any political subdivision of the state of New Hampshire in an amount equivalent to the amount to be withdrawn shall be first deposited with the treasurer of the state of New Hampshire. The initial amount deposited shall be at least $10,000. No amount shall be withdrawn in excess of the market value of the securities at the time of deposit or the par value of such securities, whichever is lower. The minimum value of any individual security shall be $5,000.
II. With prior notification to the contracting agency of the state and the state treasurer, the contractor shall be allowed to substitute securities for those deposited under paragraph I; provided that the market value of the new securities at the time of substitution or the par value of such securities, whichever is lower, shall be equal to or exceed the amount withheld by the state agency.
III. The state treasurer shall collect all interest or income when due on the obligations so deposited and shall pay the same, when and as collected, to the contractor who deposited the obligations. If the deposit is in the form of coupon bonds, the state treasurer shall deliver each coupon as it matures to the contractor. The state treasurer shall have the power to enter into a contract or agreement with any national bank, trust company or safe deposit company located in New England for custodial care and servicing of any securities deposited with him under this section. Such services shall consist of the safekeeping of the securities and of all services required to effect the purposes of this section.
IV. Any amount deducted by a state agency, pursuant to the terms of the contract, from the retained payments due the contractor shall be deducted, first from that portion of the retained payments for which no security has been substituted, then from the proceeds of any deposited security. In the latter case, the contractor shall be entitled to receive interest, coupons, or income only from those securities which remain after such amount has been deducted.
V. Any assignment of retained payments made by the contractor shall be honored by the state treasurer as part of the procedure to accomplish the substitution of securities under this section, provided that the assignment shall not be made without prior approval by the contracting state agency and the state treasurer. The assignment shall not impair the equitable rights of the contractor’s surety in the retained payments, in the securities substituted for retained payments in the event of the contractor’s default in the performance of the contract, or in the payment of labor and material bills or other obligations covered by the surety’s bond.