ESCROW AGREEMENT
THIS
ESCROW AGREEMENT (this “Agreement”) made and entered into this 19th
day of
September,
2008,
by and among BB and T Corporation, a federally-insured deposit organization
located at Columbia, South Carolina (hereinafter referred to as “Escrow Agent”)
and East Coast Ethanol, LLC, a Delaware limited liability company (hereinafter
referred to as “Escrower”).
WITNESSETH:
WHEREAS,
Escrower proposes to engage in an offering of its Membership Units (hereinafter
the “Units”) in an offering registered with the Securities and Exchange
Commission and in the states of North Carolina, South Carolina, Florida,
Georgia, Virginia, Maryland and New York and possibly offered in other states
and foreign jurisdictions pursuant to securities registration exemptions and
under the provisions of the Securities Act of 1933, as amended (hereinafter
the
“Offering”) in order to raise money for the construction and operation of four
ethanol plants;
WHEREAS,
Escrower desires to comply with the requirements of federal and state securities
laws and regulations, and desires to protect the investors in the Offering
by
having all money raised as part of said capital funds campaign held by an Escrow
Agent until the Minimum Escrow Deposit (hereinafter defined) is deposited with
the Escrow Agent; and
WHEREAS,
Escrow Agent has agreed to hold all funds for Escrower pursuant to the terms
of
this Agreement.
NOW
THEREFORE, in consideration of Ten Dollars ($10.00) and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
the
parties agree as follows:
1. Establishment
of Escrow Account.
An
escrow account (hereinafter the “Escrow Account”) is hereby established with the
Escrow Agent for the benefit of the investors in the Offering. Except as
specifically provided in this Agreement, the Escrow Account shall be created
and
maintained subject to the customary rules and regulations of the Escrow Agent
pertaining to such accounts.
2. Ownership
of Escrow Account.
Until
such time as the funds deposited in the Escrow Account (hereinafter the
“Deposited Funds”) shall equal the Minimum Escrow Deposit (as hereinafter
defined), all funds deposited in the Escrow Account by Escrower shall not become
the property of Escrower or be subject to the debts of Escrower or any other
person but shall be held by the Escrow Agent solely for the benefit of investors
who have purchased Units in the Offering.
3. Deposit
of Proceeds.
Upon
execution of this Agreement, Escrower, or its placement agents, shall deliver
to
the Escrow Agent escrow funds to be held by Escrow Agent pursuant to the terms
of this Agreement. The delivery of escrow funds from the Escrower to the Escrow
Agent shall be accompanied by corresponding information regarding the name,
address, social security number or taxpayer identification number and date
of
birth (for natural persons) of each person or entity purchasing Units, the
number of Units purchased, and the amount paid by each such purchaser. Escrower
shall also provide for each subscriber IRS Form W-9 or IRS Form W-8BEN, as
may
be applicable. Escrower shall transmit such information electronically in a
format acceptable to Escrow Agent. As
the
proceeds of each sale are deposited with the Escrow Agent, Escrower shall
reserve the number of Units confirmed to the purchaser thereof in connection
with such sale. Escrower
may make additional deposits of escrow funds into escrow at any time at
Escrower’s discretion. All such deposited proceeds are referred to herein as the
“Escrow Funds”. The Escrow Agent shall reserve the right to reject any funds for
escrow deposit if, in the opinion of the Escrow Agent, the acceptance of such
funds would cause a violation of the U.S. Patriot Act, Bank Secrecy Act, FSA
Money Laundering Directives or OFAC Regulations. Any funds to be deposited
via
wire transfer shall not be wired for deposit until Escrow Agent confirms its
ability to accept said funds for escrow deposit. In connection with any
rejection of said funds for escrow deposit, the Escrow Agent shall provide
reasonable evidence of such potential violation to the Escrower including,
without limitation, documentation of the procedures and processes used by the
Escrow Agent and the facts upon which Escrow Agent relied in making its
determination to reject such funds for escrow deposit.
4. Investment
of Escrow Account.
The
Escrow Funds shall be credited by the Escrow Agent and recorded in the Escrow
Account. The Escrow Agent is hereby authorized to deposit, transfer, hold and
invest all funds received under this Agreement, including principal and
interest, in those investments directed in writing by Escrower. Escrow Agent
is
hereby authorized to invest Escrow Funds in the Xxxxxxx Xxxxx Financial Square
Treasury Obligations Fund # 469 (the “TOF”) for temporary investment without
written direction until such time as the money is to be paid out according
to
the terms of this Agreement. Any interest received by the Escrow Agent with
respect to the Escrow Funds shall be paid to Escrower, or the investors, as
indicated elsewhere in this Agreement.
5. Limitation
of Liability and Indemnification of Escrow Agent.
The
Escrow Agent shall not be obligated to disburse the Escrow Funds except as
provided herein. Without limiting the generality of the foregoing, should any
party claim that it is entitled to receive all of any part of the Escrow Funds,
then Escrow Agent shall not be obligated to disburse the Escrow Funds to the
party claiming the same without the prior written consent of the Escrower.
In
performing any of its duties with respect to the Escrow Account, the Escrow
Agent shall not be liable for any loss, costs, or damages which it may incur
as
a result of serving as escrow agent hereunder, except for any loss, costs,
or
damages arising out of its willful default or gross negligence. Escrower agrees
to indemnify and hold harmless the Escrow Agent from and against any and all
losses, claims, damages, liabilities and expenses, including without limitation,
reasonable costs of investigation and attorney’s fees and disbursements, which
may be imposed upon or incurred by the Escrow Agent in connection with the
performance of its obligations under this Agreement. In the event of any dispute
between the parties to this Agreement, in the sole discretion of Escrow Agent
to
justify its doing so, the Escrow Agent shall be entitled to tender into the
registry or custody of any court of competent jurisdiction all money or property
in its hands held under the terms of this Agreement, together with such legal
pleadings as it deems appropriate, and thereupon the Escrow Agent shall be
discharged from any further obligation under this Agreement.
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6. Termination
of Escrow.
This
Agreement and the Escrow created hereunder shall be terminated as provided
in
paragraph 7 hereof or as of the date in calendar year 2009 (the “Termination
Date”), which is one year and one day following the date in calendar year 2008
upon which the Securities and Exchange Commission declares the Offering
effective (the “Offering Effective Date”). Escrower shall notify Escrow Agent of
the Offering’s Effective Date within thirty (30) days of the receipt of notice
of the Offering’s Effective Date from the Securities and Exchange
Commission.
7. Disposition
of Escrow Funds.
The
Escrow Agent shall have the following duties and obligations under this
Agreement:
a. The
Escrow Agent shall give the Escrower prompt written notice when the Deposited
Funds equal $25,365,000 (exclusive of interest). Any time following receipt
of
such notice and prior to the first day of the 11th
month
following the effective date of the Escrower’s registration statement, the
Escrower will advise the purchasers of Units to remit to the Escrow Agent the
balance of the purchase price within twenty (20) days. Thereafter, Escrow Agent
shall give the Escrower written notice acknowledging the receipt of the
Deposited Funds every seven days. The Escrow Agent shall give the Escrower
prompt written notice when the Deposited Funds total $253,650,000 (exclusive
of
interest).
b. At
the
time (and in the event) that: (i) the Deposited Funds shall, during the term
of
this Agreement, equal $253,650,000 in subscription proceeds (exclusive of
interest) (the “Minimum Escrow Deposit”); (ii) the Escrow Agent
shall
have received written confirmation from the Escrower that the Escrower has
obtained a written debt financing commitment for debt financing ranging from
a
minimum of approximately $269,875,000 to a maximum of approximately
$608,050,000; (iii) the Escrower has affirmatively elected in writing to
terminate this Agreement; and (iv)
the
Escrow Agent shall have provided to each state securities department in which
the Escrower has registered its securities for sale, as communicated to the
Escrow Agent by the Escrower, an affidavit stating that the foregoing
requirements (i), (ii) and (iii) of this subsection 7b have been satisfied,
then
this Agreement shall terminate, and the Escrow Agent shall promptly disburse
the
funds on deposit, including interest, to the Escrower to be used in accordance
with the provisions set out in the Registration Statement. The Escrower will
deliver a copy of the Registration Statement to the Escrow Agent upon execution
of this Agreement. The Escrow Agent will have no responsibility to examine
the
Registration Statement with regard to the Escrow Account or otherwise and the
Registration Statement shall contain a provision to such effect. Upon the making
of such disbursement, the Escrow Agent shall be completely discharged and
released of any and all further responsibilities hereunder.
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c. In
the
event the Deposited Funds do not equal or exceed the Minimum Escrow Deposit
on
or before the Termination Date or if the Escrower has not received a written
debt financing commitment as described herein on or before the Termination
Date,
the Escrow Agent shall return to each of the purchasers of the Units in the
Offering, as promptly as possible after such Termination Date and on the basis
of its records pertaining to the Escrow Account: (i) the sum which each
purchaser initially paid in on account of purchases of the Units in the Offering
and (ii) each purchaser’s portion of the total interest earned on the Escrow
Account as of the Termination Date. Computation of any purchaser’s share of the
interest earned will be a weighted average based on the proportion of such
purchaser’s deposit in the Escrow Account from the Offering to all such
purchasers’ deposits held by the Escrow Agent and upon the length of time in
days such deposit was held in the Escrow Account as compared to all such
deposits. All computations with respect to each purchaser’s allocable share of
net interest shall be made by the Escrow Agent, which determinations shall
be
final and conclusive. Any amount paid or payable to a purchaser pursuant to
this
paragraph shall be deemed to be the property of such purchaser, free and clear
of any and all claims of the Escrower or its agents or creditors; and the
respective purchases of the Units made and entered into in the Offering shall
thereupon be deemed, ipso facto, to be cancelled without any further liability
of the purchasers or any of them to pay for the Units purchased. At such time
as
the Escrow Agent shall have made all the payments called for in this paragraph,
the Escrow Agent shall be completely discharged and released of any and all
further responsibilities hereunder, and the Units reserved (as provided in
paragraph 3) shall be released from such reservation, except that Escrow Agent
shall be required to prepare and issue a single IRS Form 1099 to each investor
in the event that funds are returned to investors.
8. Fees.
Escrower
agrees to pay the Escrow Agent the fees specified in the Escrow Agent’s fee
schedule attached hereto as Exhibit A, in the manner set forth therein, unless
otherwise agreed to by the parties in writing. Escrower shall be solely
responsible for the payment of such fees and the Escrow Agent shall not seek
payment of the fees from investors or apply any principal deposited by investors
in the Escrow Account or any interest accrued thereon against such fees.
9. Miscellaneous
Provisions:
a. Notice.
All
notices, requests, demands, tenders and other communications required or
permitted hereunder shall be made in writing and shall be deemed to be duly
given if delivered in person or mailed certified mail, return receipt requested,
to the addresses set forth herein. Either party hereto may change the address
to
which notices, requests, demands, tenders and other communications to such
party
shall be delivered or mailed by giving notice to the other party hereto in
the
manner herein provided.
If
to
Escrow Agent:
BB
and T
Corporation
Attn:
Xxxxxx Xxxxxxxx
0000
Xxxxxxxx Xxxxxx
Xxxxxxxx,
XX 00000
Fax:
(000) 000-0000
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If
to
Escrower:
0000
Xxxxxxxx Xxxx,
Xxxx
Xxxxxx Xxx 0000,
Xxxxxxxx,
XX 00000
Attention:
Xxxx X. Xxxx
Fax:
(000)
000-0000
Phone:
(000)
000-0000
with
a
required copy to:
Brown,
Winick, Graves, Gross, Xxxxxxxxxxx and Schoenebaum, P.L.C.
000
Xxxxx
Xxxxxx, Xxxxx 0000
Xxx
Xxxxxx, XX 00000
Attention:
Xxxxxxx X. Xxxxxxxx
Fax:
(000) 000-0000
Phone:
(000) 000-0000
b. Waiver.
Any
term or condition of this Agreement may be waived at any time by the party
which
is entitled to the benefit thereof, but such waiver shall only be effective
if
evidenced by a writing signed by such party. A waiver on one occasion shall
not
be deemed to be a waiver of the same or any other breach on another
occasion.
c. Survival
of Representations.
All
statements and agreements contained herein shall be deemed representation,
warranties, covenants and agreements made by the respective parties to this
Agreement and shall survive the consummation of the transactions contemplated
herein and the passing of title to any property.
d. Amendments.
This
Agreement may be amended or modified only by a writing signed by both of the
parties hereto.
e. Successors
and Assigns.
No
party hereto shall assign this Agreement or any rights or obligation hereunder
without the prior written consent of the other parties hereto. This Agreement
shall be binding upon and shall inure to the benefit of the parties hereto
and
their respective successors and assigns.
f. Governing
Law.
The
validity and effect of this Agreement shall be governed, construed and enforced
under the laws of the State of South Carolina.
g. Entire
Agreement.
This
Agreement contains all of the terms agreed upon by the parties with respect
to
the subject matter hereof and there are not representations or understandings
between the parties except as provided herein.
h. Section
Headings.
Section
headings contained in this Agreement are solely for convenience of reference
and
shall not affect the meaning or interpretation of this Agreement or of any
term
or provision hereof.
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i. Time.
Time
shall be of the essence in this Agreement.
j. Invalid
Provision to Affect No Other.
If
fulfillment of any provision hereof or in any other agreement of even date
or
entered into in connection herewith or any transaction related thereto, at
the
time performance of such provisions shall be due, shall involve transcending
that limit of validity presently prescribed by any applicable usury statute
or
any other applicable law, with regard to obligations of like character and
amount, then ipso facto, the obligation to be fulfilled shall be reduced to
the
limit of such validity; and if any clause or provision herein of therein
contained operates or would prospectively operate to invalidate this agreement,
or any other agreement of even date herewith entered into in connection
herewith, in whole or in part, then such clause or provision only shall be
held
for naught, as though not herein or therein contained, and the remainder of
this
Agreement or such other agreements shall remain operative and in full force
and
effect.
k. Counterpart.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original and all of which together shall be considered one and the
same agreement.
l. Construction
of Agreement.
No
provision of this Agreement shall be construed against or interpreted to the
disadvantage of any party hereto or thereto by any court or other governmental
or judicial authority by reason of such party having or being deemed to have
structured or dictated such provision.
IN
WITNESS WHEREOF, the undersigned have executed this Agreement the day and year
first above written.
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ESCROW
AGENT:
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BB
& T
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By:
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/s/
Xxxxx X. Xxxxxx
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By:
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/s/
Xxxxx Xxxxxx
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Xxxxx
Xxxxxx
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Title:
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Chief
Executive Officer
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Title:
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Vice
President
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Notary
Public:
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Notary
Public: _______________________________
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Sworn
to and subscribed before me
this
19th day of September, 2008.
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Sworn
to and subscribed before me
this
19th day of September, 2008
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/s/
Xxxxxxx X. Register
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/s/
Xxxxxx XxXxxxx
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My
Commission Expires March 27, 2011
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EXHIBIT
A
FEE
SCHEDULE
1.
One-Time
Fee: Each
calendar quarter during which this Escrow Agreement is in effect, Escrow Agent
shall notify Escrower of the number of subscribers for such calendar quarter
and
Escrower shall pay to the Escrow Agent a one-time fee of $50 per subscriber
(“One-Time Fee”). The One-Time Fee shall be payable upon Escrower’s receipt of
notice of the number of subscribers from Escrow Agent. The One-Time Fee shall
be
paid to Escrow Agent regardless of whether the Escrow Funds are eventually
released to Escrower or are returned to investors. The One-Time Fee shall be
payable solely by the Escrower and shall not be deducted from interest accrued
while the Escrow Funds were invested by the Escrow Agent in the TOF.
2.
Operating
Expense Fee: Escrow
Agent shall receive an annual fee in the amount of 25 basis points multiplied
by
the amount of Escrow Funds invested in the TOF (“Operating Expense Fee”). The
Operating Expense Fee represents a portion of the fee typically charged by
the
TOF for management of the Escrow Funds invested in the TOF. If disbursement
of
the Escrow Funds as contemplated by Section 7(b) hereof occurs before Escrow
Agent receives $100,000 in Operating Expense Fees, Escrower shall pay the Escrow
Agent an amount equal to the difference between $100,000 and the Operating
Expense Fee earned until such time. In the event the Escrow Funds are returned
to investors as contemplated by Section 7(c) hereof (“Termination Event”),
Escrow Agent shall retain the Operating Expense Fee it has earned until such
time and shall only receive the One-Time Fee from the Escrower. Upon occurrence
of the Termination Event, all fees payable to the Escrow Agent according to
this
Exhibit A shall be payable solely by the Escrower and shall not be deducted
from
interest accrued while the Escrow Funds were invested by the Escrow Agent in
the
TOF.
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