(a) Any construction contractor may, from time to time, withdraw any part, or the whole, of the amount which has been retained from partial payments to the contractor pursuant to the terms of the contract upon the deposit of securities in the manner described in this section.

(b) This section shall require delivery of securities to or in the name of the:

(1) State treasurer for construction contracts entered into by the state, and any agency or department thereof, including the department of transportation, under § 54-5-113; or

(2) Any other appropriate public official named in the contract for construction contracts entered into by the University of Tennessee or any county, municipality, or political subdivision of the state, including, but not limited to, metropolitan government.

(c) The following shall be considered as securities and may be substituted for retained funds:

(1) United States treasury bonds, United States treasury notes, United States treasury bills;

(2) General obligation bonds of the state of Tennessee;

(3) Certificates of deposit or evidence of other deposits irrevocably pledged from a state or national bank having its principal office in Tennessee or a state or federal savings and loan association having its principal office in Tennessee; or

(4) A letter of credit from a state or national bank having its principal office in Tennessee. The terms and conditions of any letter of credit shall be subject to the approval of the public official described in subsection (b). All letters of credit shall be accompanied by an authorization of the contractor to deliver retained funds to the bank issuing the letter.

(d) No retained amount shall be withdrawn which would represent an amount in excess of the market value of the securities at the time of deposit or of the par value of such securities, whichever is lower, or in excess of the maximum amount committed and stated in the letter of credit.

(e) At the time of deposit of the securities, they shall be accompanied by a conditional assignment to the public official described in subsection (b), which will empower the public official to take custody of the security and to negotiate it at any time to the extent necessary to cause the contract to be fulfilled.

(f) In the case of securities deposited with the state treasurer, such securities shall be negotiated by the state treasurer in the event that the state building commission or the commissioner of transportation, whichever is applicable, determines that such is desirable in order to effectuate the timely completion of the project.

(g) So long as securities remain on deposit and the contractor is not in default, all interest and income paid shall go to the contractor, less any custodial care and servicing costs.

(h) The securities which remain on deposit at the time of completion of the contract and satisfaction of any statutory obligations with respect thereto shall be returned to the contractor.

(i) The public official described in subsection (b) shall have the power to enter into a trust agreement with any state or national bank or state or federal savings and loan association or savings bank located in Tennessee for the safekeeping, custodial care and servicing of securities to the extent necessary to effectuate the purposes of this section. The financial institution serving as trustee under such trust agreement shall hold the securities in trust for the purposes of this section and for the use and benefit of the persons entitled to them under the provisions hereof; provided, that the securities held in trust will not be commingled with any securities owned by the financial institution or any third party, but will at all times remain segregated and subject to identification as the particular securities deposited and held in trust for the purposes of this section.