EXHIBIT 10.4
Form of Subscription Escrow Agreement
between Registrant and First Security
Bank, National Association, as Escrow Agent
ESCROW AGREEMENT
This Agreement is entered in to as of ________, 1997,
by, between and among FIRST SECURITY BANK OF NATIONAL ASSOCIATION
(the "Escrow Agent"), CKS SECURITIES, INCORPORATED (the "Sales
Agent"), and AEROCENTURY FUND IV, INC., a California corporation
(the "Company").
RECITALS
A. The Company proposes to make an offering (the
"Offering") and sell $20,000,000 of 10% Secure Promissory Notes,
each with a principal face amount of $1,000 and to investors (the
"Investors") in accordance with the terms and conditions of the
Company's Prospectus included in the Company's Registration
Statement on Form SB-2 filed with the Securities and Exchange
Commission (the "Prospectus"). The Units are to be offered to
investors on a best-efforts basis through the Sales Agent and
through members of the National Association of Securities
Dealers, Inc., selected by the Sales Agent (the "Selected
Dealers").
B. The Offering is subject to the provisions of Rule
15c2-4 promulgated by the Securities Exchange Commission pursuant
to Section 15c2-4 of the Exchange Act ("Rule 15c-2-4").
C. The Offering will commence on ________, 1997 and will
terminate two years after the date of commencement of the
Offering, unless such date is advanced by the Company
(the"Termination Date").
D. The Sales Agent intends to participate in the Offering
on a best efforts basis pursuant to the terms of the Sales Agent
Agreement entered into by and between the Company and the Sales
Agent.
E. The Escrow Agent has agreed to act as the
Escrow Agent for the Escrow Account referred to below, on the
terms and conditions set forth below.
NOW, THEREFORE, the parties agree as follows:
1. Establishment of an Escrow Account. By execution of
this Escrow Agreement parties establish an interest-bearing
Escrow Account entitled First Security Bank/AeroCentury Fund IV
Escrow Account, (the Escrow Account"). All funds deposited in the
Escrow Account shall be held in trust for the benefit of the
parties entitled thereto pursuant to the terms of this Escrow
Agreement.
2. Deposit of Subscription Proceeds.
(a) The Escrow Agent from time to time will
receive from the Company, the Sales Agent or Selected Dealers,
funds representing subscription payments for Units. All checks
representing subscription payments shall be made payable to the
order of the First Security Bank/AeroCentury Fund IV Escrow
Account, and shall be accompanied by a copy of any subscription
documents executed by the subscriber. In the event any checks are
made payable to a party other than the Escrow Agent, such checks
shall be promptly returned to the Sales Agent or the Selected
Dealer who submitted such checks.
(b) The Sales Agent agrees that it shall, and
shall require the Selected Dealers to, deliver to Escrow Agent by
noon of the next business day following receipt by the Selected
Dealer all monies received from subscribers for the payment of
Units to the Escrow Agent for deposit into the Escrow Account
together with a written account of each sale, which account shall
set forth, among other things, the subscriber's name and address,
social security or federal taxpayer identification number
together with the Form W-9 referenced in Section 2(d) below, the
number of Units purchase, the amount paid therefor, and whether
the consideration received was in the form of a check or wire
transfer, draft, or money order. The Company shall also provide
the Escrow Agent with such other information as the Escrow Agent
may reasonably request in connection with its duties under this
Agreement.
(c) Escrow Agent will deposit subscribers' checks
for collection and credit the proceeds to the Escrow Account.
Notwithstanding anything to the contrary contained herein, Escrow
Agent is under no duty or responsibility to enforce collection of
any checks delivered to Escrow Agent hereunder. The Escrow Agent
hereby is authorized to forward each check for collection and
deposit the proceeds in the Escrow Account. As an alternative,
the Escrow Agent may telephone the bank on which the check is
drawn to confirm that the check has been paid. Additionally, to
ensure that such funds have cleared normal banking channels for
collection, Escrow Agent is hereby authorized to hold for three
(3) business days any funds to be released pursuant to Section 4
hereof. The Company shall immediately reimburse the Escrow Agent
any monies paid to it if thereafter the Subscriber's check is
returned unpaid. Any item returned unpaid to the Escrow Agent on
its first presentation for payment shall be returned to the
Company and need not be again presented by the Escrow Agent for
collection. The Company agrees to reimburse the Escrow Agent for
the cost incurred with any returned check. For purposes of this
Agreement, the term "Collected Funds" or the term "collected"
when referring to the proceeds of subscribers' checks shall mean
all funds received by the Escrow Agent that have cleared normal
banking channels and are in the form of cash.
(d) The Sales Agent will provide for each
subscription an Internal Revenue Service Form W-9, pursuant to
which each subscriber will furnish the Escrow Agent such
subscriber's taxpayer identification number and will state under
penalties of perjury that such taxpayer identification number is
true and correct and whether the subscriber is subject to the
requirements of the Interest and Dividend Tax Compliance Act of
1983 providing for the withholding of 31% of the reportable
interest, dividends or other payments.
3. Rejection of Subscription. The Company warrants and
represents that pursuant to the terms of the Prospectus it may
accept or reject a subscription in whole or in part for any
reason. In the event the Company elects to reject the
subscription of any subscriber whose subscription payment has
been deposited into the Escrow Account, the Company shall deliver
written notice of the rejection to the Escrow agent setting forth
the name, address, taxpayer information identification number of
social security number and subscription amount of the subscriber
whose subscription has been rejected. The Escrow Agent shall
return to the subscriber within five (5) banking days or receipt
of such notice the subscription proceeds, together with the
subscriber's pro rata share of earnings on subscription proceeds
held in the escrow account when the funds have been collected
pursuant to Section 2(c) of this Agreement. Pro rata share of
earnings for each subscriber shall be calculated on a 360-day
year. Subscriptions will be deemed to be accepted if not rejected
or canceled with thirty (30) calendar days of receipt by the
Escrow Agent, said time limitation to include that date or
receipt. The Escrow Agent shall not be responsible for the
decision by the Company to accept or reject a subscription.
4. Release of Funds. The Escrow Agent is authorized
to release the subscription funds, and all interest earned
thereon, from the Escrow Account as follows:
(a) If: (i) the Escrow Agent has received
Collected Funds of at least $500,000 representing 500 Units (the
"Minimum Subscription"), on or before seven (7) business days
after the Termination Date, and (ii) either (A) with respect to
the initial release of Collected Funds (the "Initial Closing")
from escrow , the Company and Sales Agent deliver to Escrow Agent
a Certificate confirming that subscriptions totaling the Minimum
Subscription or more have been
received and accepted by the Company and that all other
conditions for release of the Collected Funds from escrow as set
forth in the Prospectus have been satisfied or (B) with respect
to release of Collected Funds from escrow subsequent to the
Initial Closing, the Company and the Sales Agent certify in
writing that the Collected Funds then held in escrow are
sufficient to purchase Income Producing Assets (as defined in the
Prospectus) or an interest therein; then, the Escrow Agent is
authorized to release the funds, together with interest earned,
to the Company.
(b) If the Escrow Agent does not receive Collected
Funds equal the Minimum Subscription or more by May 1, 1998
1997, the Company and the Sales Agent promptly shall deliver to
the Escrow Agent written instructions stating the subscription
amount and pro rata interest to be returned to each subscriber.
Upon receipt of the written instructions, the Escrow Agent shall
mail to each subscriber check made payable to the subscriber in
the amount mutually specified by the Company and Sales Agent. The
Escrow Agent shall not be responsible for the determination of
the amounts to be returned to each subscriber.
(c) In the event the Company decides to cancel or
terminate the Offering prior to the Termination Date, the Company
promptly shall deliver to the Escrow Agent written instruction
stating the subscription amount and pro rata interest to be
returned to each subscriber (to be based on the amount of
subscriber's funds, the length of time in escrow and calculated
on a 360-day year). Upon receipt to the subscriber in the amount
specified by the Company. The Escrow Agent shall not be
responsible for the determination of the amounts to be returned
to each subscriber.
(d) Any subscription funds returned to subscribers
pursuant to written instructions furnished to the Escrow Agent by
the Company pursuant to paragraphs 4(b) or 4(c) of this Escrow
Agreement shall be without deduction or offset for any fee or
compensation due Escrow Agent. Any unpaid escrow fee or other
compensation due Escrow Agent pursuant to the terms of this
Escrow Agreement shall not be deducted pro rata from any interest
earned on the subscription funds prior to their return to the
subscribers. The amount of any fee or other compensation due
Escrow Agent will be payable jointly and severally by the Company
and the Sales Agent as set forth in Section 8 hereof.
(e) The Company expressly acknowledges that prior
to the release of the subscription funds pursuant to paragraph
4(a) above, the Company shall not have any interest in or claim
to the subscription funds nor are the subscription funds subject
to claims of creditors of the Company.
5. Segregation of Funds. The subscription funds deposited
into the Escrow Account and any interest earned thereon shall be
kept separate from all other funds in the custody of the Escrow
Agent, including any other funds that may be deposited with the
Escrow Agent by the Company, the Sales Agent, the Selected
Dealers or any of their affiliates.
6. Investment of Funds. All Collected Funds received by
the Escrow Agent shall be promptly invested in the name of Escrow
Agent as agent for the Company, in no event later than the third
business day immediately following the date of each deposit made
by the Escrow Agent into the Escrow Account. The Collected Funds
only may be invested in short-term securities issued or
guaranteed by the U.S. Government, interest-bearing bank
accounts, short-term bank certificates of deposit, or bank money
market accounts, including those accounts issued or offered by
the Escrow Agent, as directed in writing by the Company. The
maturity date of investment may not extend past the Termination
Date, unless the investment may be disposed of by the Termination
Date without any dissipation of the funds. Funds shall not be
invested in money-market mutual funds, corporate equity or debt
securities, repurchase agreements, banker's acceptances,
commercial paper, or municipal securities. The Escrow Agent shall
have not obligation to invest such amounts until all applicable
tax withholding requirements have been satisfied. The Escrow
Agent shall in no event be liable for any investment loss if such
loss results from an investment
made in accordance with this Agreement. The Escrow Agent shall
retain the prospective Subscriber's Form W-9, but shall deliver
to the Company the remainder of any subscription documents of the
prospective subscriber to the Company within five business days
of receipt by the Escrow Agent.
7. Duties of the Escrow Agent.
(a) The Escrow Agent acts as depositary only and
is not responsible or liable in manner whatsoever for the
sufficiency, correctness, genuineness, or validity of any
instrument deposited under this Escrow Agreement. The Escrow
Agent makes no representation whatsoever as to the compliance of
the Offering of Notes with any applicable state or federal laws,
regulations, or rulings. The Escrow Agent has not make, not will
make, any representations or warranties made by the Company or
the Sales Agent or any Selected Dealer concerning the Company.
Furthermore, the Escrow Agent shall not be responsible for the
application or use of any funds released from the Escrow Account
pursuant to this Escrow Agreement.
(b) Except as expressly provided in this Escrow
Agreement, the Escrow Agent shall be entitled, to act entirely on
the basis of written instructions received from the Company and
shall have no independent duty of inquiry regarding the basis for
such instructions or the calculation of the amount of interest
earned with respect to any subscription payments.
(c) The Escrow Agent shall not be liable for any
error of judgment or for any act taken or omitted by it in good
faith or for any mistake of fact or law, or for anything which it
may do or refrain from doing in connection with this Escrow
Agreement except for its own willful misconduct, and the Escrow
Agent shall have not duties to anyone except the Company.
(d) The Escrow Agent may consult with legal
counsel in the event of any dispute or question as to the
construction of this Escrow Agreement or the Escrow Agent's
duties under this Escrow Agreement, and the Escrow Agent shall
incur no liability and shall be fully protected in acting in
accordance with the opinion and instructions of counsel.
Notwithstanding the Escrow Agent's consultation with counsel, the
Escrow Agent is not obligated to institute, defend or participate
in any litigation regarding a dispute arising from the Escrow
Account or this Escrow Agreement.
(e) Should any controversy arise involving the
parties hereto or any of them or any other person, firm or entity
with respect to this Escrow Agreement or the Collected Funds, or
should a substitute escrow agent fail to be designated as
provided in Section 15 hereof, or if Escrow Agent should be in
doubt as to what action to take, Escrow Agent shall have the
right, but not the obligation, either to (i) withhold delivery of
the Collected Funds until the controversy is resolved, the
conflicting demands are withdrawn or its doubt is resolved, or
(ii) institute a petition for interpleader in any court of
competent jurisdiction to determine the rights of the parties
hereto. In the event Escrow Agent is a party to any dispute,
Escrow Agent shall have the additional right to refer to such
controversy to binding arbitration. Should a petition for
interpleader be instituted, or should Escrow Agent be threatened
with litigation or become involved in litigation or binding
arbitration in any manner whatsoever in connection with this
Escrow Agreement or the Collected Funds, then, the Company and
the Sales Agent hereby jointly and severally agree to reimburse
Escrow Agent for its attorneys' fees and any and all other
expenses, losses, costs and damages incurred by Escrow Agent in
connection with or resulting from such threatened or actual
litigation or arbitration prior to any disbursement hereunder.
8. Fee.
(a) For its ordinary services rendered pursuant to
this Escrow Agreement, the Escrow Agent shall be paid by the
Company and the Sales Agent, the fees and expenses set forth
in Exhibit A whether or not the offering contemplated by the
Prospectus is consummated.
(b) In the event:
(i) That the Escrow Agent performs
any service no specifically provided in this Escrow Agreement;
(ii) That there is any assignment,
modification, or attachment of any interest in the subject matter
of this Escrow Agreement;
(iii) That any controversy arises under
this Escrow Agreement; or
(iv) That the Escrow Agent is made a
party to, or intervenes in, any litigation pertaining to this
Escrow Agreement, the Escrow Agent shall be reasonably
compensated any reimbursed by the Company and the Sales Agent,
jointly and severally, for all costs and expenses (including,
without limitation, attorney's fees whether or not suit is
instituted) occasioned thereby. The Escrow Agent shall have a
first lien on the money, property, and papers held by it under
this Escrow Agreement for its compensation and expenses, and the
Company and the Sales Agent, jointly and severally, agree to pay
such compensation and expenses; provided, however, that the lien
shall attach only if the conditions set forth in paragraph 4(a)
of this Escrow Agreement have been met.
9. Resignation of Escrow Agent. The Escrow Agent reserves
the right to resign as escrow holder at any time by given thirty
(30) days prior written notice of such resignation to the
Company. In the event of such resignation by the Escrow Agent,
the Escrow Agent shall deliver the funds then held in the Escrow
Account and all related records to any replacement escrow holder
appointed by the Company. If the Company fails to notify the
Escrow Agent in writing as of the identity of such replacement
escrow holder within thirty (30) days after receiving the notice
of the Escrow Agent's resignation, the Escrow Agent will be
entitled to return to each subscriber whose subscription payment
is then being held in the Escrow Account the amount of such
subscriber's subscription payment plus the net amount of interest
earned with respect to such subscriber's subscription payment. If
the Escrow Agent decides to return such amounts to subscribers
and the Company fails to notify the Escrow Agent of their
determination of the net interest amounts payable to the
respective subscribers, the Escrow Agent shall determine such net
interest amounts in such a manner as it deems appropriate, and in
no event shall the Escrow Agent be liable for its determination
of such net interest amounts. Notwithstanding the resignation of
the Escrow Agent, the Company shall remain liable for all fees
payable to the Escrow Agent pursuant to the terms of this Escrow
Agreement.
10. Representations and Warranties of the Company.
The Company represents and warrants as follows:
(a) The Offering complies with, or is exempt from,
all applicable registration or qualification requirements,
including, without limitation, those of the Securities and
Exchange Commission, the California Department of Corporations,
and all other applicable state regulatory authorities.
(b) The Offering complies with all other
applicable federal and state laws, rules and regulations.
(c) All selling agreements entered into with the
Sales Agent and selling agreements which in the future may be
entered into, contain or will contain a provisions which binds
the Sales Agent to comply with the terms of this Escrow
Agreement.
(d) This Escrow Agreement does not conflict with
any representation, written or oral, made by the Company to any
person, organization, or governmental agency in connection with
the Offering.
(e) The Prospectus indicates that subscribers will
not receive any interest on subscription payments, unless
subscription payments are refunded to subscribers pursuant to
paragraphs 3, 4(b) or 4(c).
(f) The proceeds of the Offering are not subject
to any impound condition imposed by the Department of Corporation
of the State of California or by another regulatory authority.
11. Representation of the Sales Agent. The Sales Agent
represents and warrants that the terms of this Escrow Agreement
do not conflict with any representation or warranty, oral or
written, made by the Sales Agent in connection with the Offering.
12. Offering Materials. The Company shall cause
substantially all of the following language to be included in the
Prospectus and any other offering materials.
"The sole role of the Escrow Agent in this offering is
that of escrow holder. The Escrow Agent has not reviewed
this Prospectus or any other offering materials and has
not made any representations whatsoever as to the nature
of this offering or its compliance, or lack thereof, with
any applicable federal or state laws, rules or
regulations. The Escrow Agent does not represent the
interest of the Note holders or potential investors. The
Escrow Agent's duties are limited as expressly set forth
in the Escrow Agreement. Note holders and potential
investors may request a copy of the Escrow Agreement from
the Company. Also, a copy of the Escrow Agreement is on
file as an exhibit to the Company's Registration
Statement with the Securities and Exchange Commission,
and a copy may be obtained from the Commission. The
payment of interest and the refunds of funds deposited in
escrow and provided for in the Escrow Agreement and are
not matters of discretion for Escrow Agent."
The Company shall not make any other references,
written oral, to or regarding the Escrow Agent without the prior
written consent of the Escrow Agent.
13. Indemnification of Escrow Agent. The Company
and the Sales Agent shall indemnify and hold the Escrow Agent,
its directors, officers, employees and agents harmless from and
against any and all liability, demands, claims, actions, losses,
interest, cost of defense, and expenses (including reasonable
attorney's fees) which arise out of or in connection with the
acceptance or appointment as Escrow Agent except such acts or
omissions as may result from the willful misconduct or gross
negligence of the Escrow Agent in connection with this Escrow
Agreement. Promptly after receipt by the Escrow Agent of notice
of any demand or claim or the commencement of any action, suit or
proceeding relating to this Escrow Agreement, the Escrow Agent
shall notify the Company and Sales Agent in writing. IT IS
EXPRESSLY THE INTENT OF THE COMPANY AND THE SALES AGENT TO
INDEMNIFY THE ESCROW AGENT, AND ITS DIRECTORS, OFFICERS,
EMPLOYEES AND AGENTS FROM THEIR ORDINARY NEGLIGENCE. The
provision of this Section 13 shall survive termination of this
Agreement.
14. Notices. Notice required to be given pursuant
to the terms of this Escrow Agreement shall be deemed received
upon personal delivery or deposit into the mail by overnight
courier or by telecopy, subject to confirmation as follows:
If to the Company:
AEROCENTURY FUND IV, INC.
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
(000) 000-0000
Telecopy: (000) 000-0000
If to the Escrow Agent:
FIRST SECURITY BANK, NATIONAL ASSOCIATION
00 Xxxxx Xxxx Xxxxxx
Xxxx Xxxx Xxxx, XX 00000
Attn: Xxxx Xxxxxx, Esq.
(000) 000-0000
Telecopy: (000)000-0000
If to the Sales Agent:
CKS SECURITIES, INCORPORATED
000 Xxxx Xxxx Xxxxxx
Xxxxxxxxx, XX 00000
15. Miscellaneous.
(a) The provisions of this Escrow Agreement shall
be binding upon and inure to the benefit of the parties hereto
and their respective legal representatives, heirs, successors or
assigns.
(b) This Escrow Agreement may be executed in two
or more counterparts, each of which shall e deemed an original,
but all of which together shall constitute one and the same
instrument.
(c) This Escrow Agreement shall be governed, by
and construed in accordance with the laws of the State of Utah,
and the federal and state courts located in Salt Lake City, utah
shall be the proper forum and venue for any action arising from
this Escrow Agreement.
(d) All captions contained in this Escrow
Agreement are for convenience only and are not to be deemed part
of the agreement or to be referred to in connection with the
interpretation of this Escrow Agreement.
(e) Whenever required by the context of this
Escrow Agreement, the singular number shall include the plural,
and vice versa; the masculine gender shall include the feminine
and neuter genders; and the neuter gender shall include the
masculine and feminine genders.
(f) This Escrow Agreement shall not be subject to
rescission or modification except on receipt by the Escrow Agent
of the written instructions of the Company and the Sales Agent or
their respective successors in interest, and no such
modifications shall be effective unless and until consented in
writing by the Escrow Agent.
(g) The failure of the Escrow Agent to insist upon
strict adherence to any term of this Escrow Agreement on one or
more occasions shall not be considered a waiver or deprive the
Escrow Agent of the right thereafter to insist upon strict
adherence to such term or any other term of this Escrow
Agreement. Any waiver must be in writing.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the data first above written.
AEROCENTURY FUND IV, INC.
By:_____________________________
Xxxx X. Xxxxxxx
Tax. I.D. No. __________________
FIRST SECURITY BANK,
NATIONAL ASSOCIATION
By:_____________________________
Its:____________________________
CKS SECURITIES, INCORPORATED
By:_____________________________
Its:____________________________
EXHIBIT A
FEE SCHEDULE
UNIT FEES
Initial Charge
Annual Administrative Fee
Receipts Into Escrow
