THIRD AMENDED AND RESTATED ESCROW AGREEMENT
EXHIBIT 10.3
THIRD AMENDED AND RESTATED ESCROW AGREEMENT
Ladies and Gentlemen:
United Development Funding IV, a Maryland real estate investment trust (the “Trust”),
will issue in a public offering (the “Offering”) common shares of beneficial interest (the
“Shares”) pursuant to a Registration Statement on Form S-11 filed by the Trust with the
Securities and Exchange Commission and a Prospectus included therein, as may be amended or
supplemented from time to time (the “Prospectus”). Realty Capital Securities, LLC, a
Delaware limited liability company (the “Dealer Manager”), will act as the exclusive dealer
manager for the Offering. The Shares will be offered by the Dealer Manager and select members
(each being referred to herein as a “Dealer” and collectively as the “Dealers”) of
the Financial Industry Regulatory Authority (FINRA) on a reasonable best efforts basis. The Trust
and the Dealer Manager are entering into this Third Amended and Restated Escrow Agreement (the
“Agreement”) to set forth the terms on which LegacyTexas Bank (the “Escrow Agent”),
will hold and disburse the proceeds from subscriptions for the purchase of the Shares in the
Offering until such time as (i) in the case of subscriptions received from all nonaffiliates of the
Trust, the Trust has received and accepted subscriptions for Shares resulting in total minimum
capital raised of $1,000,000 (the “Required Capital”) and, thereafter, until otherwise
directed by the Trust; (ii) in the case of subscriptions received from residents of Pennsylvania
(“Pennsylvania Subscribers”), the Trust has received subscriptions for Shares from
nonaffiliates of the Trust resulting in total minimum capital raised of $35,000,000 (the
“Pennsylvania Required Capital”); (iii) in the case of subscriptions received from
residents of Nebraska (“Nebraska Subscribers”), the Trust has received subscriptions for
Shares from nonaffiliates of the Trust resulting in total minimum capital raised of $5,000,000 (the
“Nebraska Required Capital”); and (iv) in the case of subscriptions received from residents
of New York (“New York Subscribers”), the Trust has received subscriptions for Shares from
nonaffiliates of the Trust resulting in total minimum capital raised of $2,500,000 (the “New
York Required Capital”).
This Agreement amends, restates and replaces in full that certain Second Amended and Restated
Escrow Agreement, dated as of August 20, 2009, by and between the Trust and the Escrow Agent, which
itself amended, restated and replaced in full that certain Amended and Restated Escrow Agreement,
dated as of December 8, 2008, by and between the Trust and the Escrow Agent, which itself amended,
restated and replaced in full that certain Escrow Agreement, dated as of September 9, 2008, by and
between the Trust and the Escrow Agent. The Trust hereby appoints LegacyTexas Bank as Escrow Agent
for purposes of holding the proceeds from the subscriptions for the Shares, on the terms and
conditions hereinafter set forth:
1. Until such time as the Trust has received subscriptions for Shares resulting in total
minimum capital raised equal to the Required Capital and such funds are disbursed from the Escrow
Account, as hereinafter defined, in accordance with paragraph 3(a) hereof, persons subscribing to
purchase the Shares (the “Subscribers”) will be instructed by the Dealer Manager or any
Dealer to remit
the purchase price in the form of checks, drafts, wires, Automated Clearing House (ACH) or
money orders (hereinafter referred to as “Instruments of Payment”) payable to the order of
“LegacyTexas Bank,
Escrow Agent for United Development Funding IV.” Any Instruments of Payment
made payable to a party other than the Escrow Agent shall be returned to the Dealer Manager or the
Dealer who submitted such Instrument of Payment. When the Dealer’s internal supervisory procedures
are conducted at the site at which the Instruments of Payment and the Subscription Materials (as
defined below) are initially received by the Dealer, by the end of the next business day after
receipt of any Instruments of Payment and Subscription Materials, the Dealer will send to the
Escrow Agent such Instruments of Payment along with each Subscriber’s name, address, executed IRS
Form W-9, number of Shares purchased and purchase price remitted and any other subscription
documentation (the “Subscription Materials”). When the Dealer’s internal supervisory
procedures are conducted at a different location (the “Final Review Office”), the Dealer
shall transmit the Instruments of Payment and the Subscription Materials to the Final Review Office
by the end of the next business day after receipt of any Instruments of Payment and Subscription
Materials; the Final Review Office will, by the end of the next business day following its receipt
of the Instruments of Payment and the Subscription Materials, forward the Instruments of Payment
and the Subscription Materials to the Escrow Agent. The Dealer Manager or the Dealer also will
provide in writing to Escrow Agent, concurrently with the Subscription Materials and the
Instruments of Payment, instructions regarding the escrow account (i.e., the Escrow Account,
Pennsylvania Escrow Account, Nebraska Escrow Account or New York Escrow Account, as such terms are
defined below) in which to deposit the proceeds of each Instrument of Payment (it being understood
that absent any written directions to the contrary, Escrow Agent shall deposit such proceeds in the
Escrow Account) and notification whether the applicable Subscriber is an affiliate of the Trust (it
being understood that absent any written notification to the contrary, Escrow Agent shall presume
that each Subscriber is not an affiliate of the Trust). The Escrow Agent shall notify the Trust
and the Dealer Manager from time to time during the term of this Agreement of the names of any
Subscribers for whom the Escrow Agent has not received a properly executed IRS Form W-9, to the
extent Escrow Agent is able to make such determination. The Escrow Agent will keep and maintain
the Subscription Materials and will deposit the Instruments of Payment from such Subscribers into
an interest-bearing deposit account entitled “Escrow Account for the Benefit of Subscribers for
Shares of United Development Funding IV” or such similar designation as the parties may agree (the
“Escrow Account”) until such Escrow Account has closed pursuant to paragraph 3(a) hereof.
Instruments of Payment received from Pennsylvania Subscribers (as identified as such by the Trust
or the Dealer Manager) shall be accounted for separately in a subaccount entitled “Escrow Account
for the Benefit of Pennsylvania Subscribers” (the “Pennsylvania Escrow Account”), until
such Pennsylvania Escrow Account has closed pursuant to paragraph 3(a) hereof. Instruments of
Payment received from Nebraska Subscribers (as identified as such by the Trust or the Dealer
Manager) shall be accounted for separately in a subaccount entitled “Escrow Account for the Benefit
of Nebraska Subscribers” (the “Nebraska Escrow Account”), until such Nebraska Escrow
Account has closed pursuant to paragraph 3(a) hereof. Instruments of Payment received from New
York Subscribers (as identified as such by the Trust or the Dealer Manager) shall be accounted for
separately in a subaccount entitled “Escrow Account for the Benefit of New York Subscribers” (the
“New York Escrow Account”), until such New York Escrow Account has closed pursuant to
paragraph 3(a) hereof. Each of the Escrow Account, the Pennsylvania Escrow Account, the Nebraska
Escrow Account and the New York Escrow Account will be established and maintained in such a way as
to permit the interest income calculations described in paragraph 6. The Escrow Agent will send
copies of all Subscription Materials and copies of all Instruments of Payment to DST Systems, Inc.,
000 Xxxx 0xx Xxxxxx, Xxxxxx Xxxx, Xxxxxxxx 00000 promptly after receipt.
2. The Escrow Agent will promptly process for collection the Instruments of Payment upon
deposit into the Escrow Account, Pennsylvania Escrow Account, Nebraska Escrow Account or New York
Escrow Account, as applicable. Deposits will be held in the Escrow Account, the Pennsylvania
Escrow Account, the Nebraska Escrow Account and the New York Escrow Account, as applicable, until
such funds are disbursed in accordance with paragraph 3 hereof. It is the intention of the Trust
and the Escrow Agent that, except as set forth herein, prior to disbursement of the funds deposited
in the Escrow Account,
the Pennsylvania Escrow Account, the Nebraska Escrow Account or the New York Escrow Account,
such funds will not be subject to claims by creditors of the Trust, the Dealer Manager, any Dealer
or any of
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their affiliates; provided however, that such intention does not constitute any
representation by either the Trust or the Escrow Agent that the funds will not be subject to such
claims. If any of the Instruments of Payment are returned to the Escrow Agent for nonpayment prior
to Escrow Agent’s receipt of collected funds from Instruments of Payment in an aggregate amount
which is less than the Required Capital or, in connection with subscriptions from Pennsylvania
Subscribers, the Pennsylvania Required Capital or, in connection with subscriptions from Nebraska
Subscribers, the Nebraska Required Capital or, in connection with subscriptions from New York
Subscribers, the New York Required Capital, the Escrow Agent shall promptly notify the Trust and
the Dealer Manager of such nonpayment, and is authorized to debit the Escrow Account, the
Pennsylvania Escrow Account, the Nebraska Escrow Account or the New York Escrow Account, as
applicable, in the amount of such returned payment as well as any interest earned on the amount of
such payment.
3. (a) Subject to the provisions of paragraphs 3(b)-3(i) below:
(i) Once collected funds from Instruments of Payment in the Escrow Account are an
amount equal to or greater than the Required Capital, the Escrow Agent shall promptly notify
the Trust and the Dealer Manager and, upon receiving written instruction from both the Trust
and the Dealer Manager, (A) disburse to the Trust, by check, ACH or wire transfer, the funds
in the Escrow Account representing the gross purchase price for the Shares in an amount
directed by the Trust in such written notice, and (B) disburse to the Subscribers or the
Trust, as applicable, any interest thereon pursuant to the provisions of paragraph 3(f).
For purposes of this Agreement, the term “collected funds” shall mean all funds received by
the Escrow Agent that have cleared normal banking channels and are in the form of cash or a
cash equivalent. After such time, the Escrow Account shall remain open and the Trust and
the Dealer Manager shall continue to cause subscriptions for the Shares that are not to be
deposited in the Pennsylvania Escrow Account, the Nebraska Escrow Account or the New York
Escrow Account to be deposited therein until the Trust informs the Escrow Agent in writing
to close the Escrow Account (prior to providing such notice to the Escrow Agent, the Trust
shall provide the Dealer Manager at least 5 days written notice of its intent to close the
Escrow Account), and thereafter any Subscription Materials and Instruments of Payment
received by the Escrow Agent from Subscribers other than Pennsylvania Subscribers, Nebraska
Subscribers and New York Subscribers shall be forwarded directly to the Trust; provided
that, if the Escrow Account remains open, until the Escrow Account is closed as set forth
herein, the funds and interest held therein shall be disbursed as set forth above at any
time upon written instruction from both the Trust and the Dealer Manager.
(ii) Regardless of any release of funds from the Escrow Account, the Dealer Manager or
the Dealer shall continue to forward to the Escrow Agent Subscription Materials and
Instruments of Payment received from New York Subscribers and such Subscription Materials
will be kept and maintained by the Escrow Agent and such Instruments of Payment will be
deposited into the New York Escrow Account by the Escrow Agent until such time as both the
Trust and the Dealer Manager notify the Escrow Agent in writing that total subscription
proceeds (including the amount then in the New York Escrow Account) equal or exceed the New
York Required Capital. Upon the receipt of such written instruction from both the Trust and
the Dealer Manager, the Escrow Agent shall (A) disburse to the Trust, by check, ACH or wire
transfer, the funds then in the New York Escrow Account representing the gross purchase
price for the Shares in an amount directed by the Trust in such written notice, and (B)
disburse to the New York Subscribers or the Trust, as applicable, any interest thereon
pursuant to the provisions of paragraph 3(f). Following such disbursements, the Escrow
Agent shall close the New York Escrow Account, and thereafter any Subscription Materials and
Instruments of Payment received by the Escrow Agent from New York Subscribers shall be, in
the case of Subscription Materials
received from New York Subscribers, kept and maintained by the Escrow Agent and, in the
case of Instruments of Payment received from New York Subscribers, deposited directly to the
Escrow
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Account (or to the Trust, if it has closed the Escrow Account, as instructed in
writing by the Trust).
(iii) Regardless of any release of funds from the Escrow Account or the New York Escrow
Account, the Dealer Manager or the Dealer shall continue to forward to the Escrow Agent
Subscription Materials and Instruments of Payment received from Nebraska Subscribers and
such Subscription Materials will be kept and maintained by the Escrow Agent and such
Instruments of Payment will be deposited into the Nebraska Escrow Account until such time as
both the Trust and the Dealer Manager notify the Escrow Agent in writing that total
subscription proceeds (including the amount then in the Nebraska Escrow Account) equal or
exceed the Nebraska Required Capital. Upon the receipt of such written instruction from
both the Trust and the Dealer Manager, the Escrow Agent shall (A) provide to the Trust for
delivery to the Director of Banking and Finance of the State of Nebraska an affidavit in
substantially the form attached hereto as Exhibit A which states that all of the conditions
of this Agreement relating to the Escrow Account which are capable of being satisfied as of
the date of such affidavit have been met (it being understood that Escrow Agent shall
provide such affidavit only in the event that in Escrow Agent’s sole discretion all such
conditions of this Agreement have been met), (B) disburse to the Trust, by check, ACH or
wire transfer, the funds then in the Nebraska Escrow Account representing the gross purchase
price for the Shares in an amount directed by the Trust in such written notice, and (C)
disburse to the Nebraska Subscribers or the Trust, as applicable, any interest thereon
pursuant to the provisions of paragraph 3(f). Following such disbursements, the Escrow
Agent shall close the Nebraska Escrow Account, and thereafter any Subscription Materials and
Instruments of Payment received by the Escrow Agent from Nebraska Subscribers shall be, in
the case of Subscription Materials received from Nebraska Subscribers, kept and maintained
by the Escrow Agent and, in the case of Instruments of Payment received from Nebraska
Subscribers, deposited directly to the Escrow Account (or to the Trust, if it has closed the
Escrow Account, as instructed in writing by the Trust).
(iv) Regardless of any release of funds from the Escrow Account, the New York Escrow
Account or the Nebraska Escrow Account, the Dealer Manager or the Dealer shall continue to
forward to the Escrow Agent Subscription Materials and Instruments of Payment received from
Pennsylvania Subscribers and such Subscription Materials will be kept and maintained by the
Escrow Agent and such Instruments of Payment will be deposited into the Pennsylvania Escrow
Account until such time as both the Trust and the Dealer Manager notify the Escrow Agent in
writing that total subscription proceeds (including the amount then in the Pennsylvania
Escrow Account) equal or exceed the Pennsylvania Required Capital. Upon the receipt of such
written instruction from both the Trust and the Dealer Manager, the Escrow Agent shall (A)
disburse to the Trust, by check, ACH or wire transfer, the funds then in the Pennsylvania
Escrow Account representing the gross purchase price for the Shares in an amount directed by
the Trust in such written notice, and (B) disburse to the Pennsylvania Subscribers or the
Trust, as applicable, any interest thereon pursuant to the provisions of paragraph 3(f).
Following such disbursements, the Escrow Agent shall close the Pennsylvania Escrow Account,
and thereafter any Subscription Materials and Instruments of Payment received by the Escrow
Agent from Pennsylvania Subscribers shall be, in the case of Subscription Materials received
from Pennsylvania Subscribers, kept and maintained by the Escrow Agent and, in the case of
Instruments of Payment received from Pennsylvania Subscribers, deposited directly to the
Escrow Account (or to the Trust, if it has closed the Escrow Account, as instructed in
writing by the Trust).
(b) At the close of business on the date that is one year following commencement of the
Offering (the “Expiration Date”) (such commencement date shall be
promptly provided to the Escrow Agent by the Trust after the commencement of the Offering),
the Escrow Agent shall promptly notify the Trust and the Dealer Manager (the “Expiration
Notice”) if it is not in receipt of Subscription Materials
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received on or before the Expiration
Date and Instruments of Payment dated not later than the Expiration Date in the aggregate amount
that equals or exceeds the Required Capital (from all sources but exclusive of any funds received
from subscriptions for Shares from entities that are affiliated with the Trust). Following the
tenth calendar day after the date of the Expiration Notice, the Escrow Agent shall promptly return
directly to each Subscriber the collected funds deposited in the Escrow Account, the Pennsylvania
Escrow Account, the Nebraska Escrow Account and the New York Escrow Account on behalf of such
Subscriber, or shall return the Instruments of Payment delivered but not yet processed for
collection prior to such time, together with interest in the amounts calculated pursuant to
paragraph 6 for each Subscriber, at the address provided in the Subscription Materials. However,
the Escrow Agent shall not be required to remit any payments until funds represented by such
payments have been collected.
(c) Notwithstanding subparagraphs 3(a) and 3(b) above, if on or before the close of business
on such date that is 120 days after commencement of the Offering (the “Initial Escrow
Period”) (such commencement date shall be promptly provided to the Escrow Agent by the Trust
after the commencement of the Offering), Escrow Agent is not in receipt of Instruments of Payment
dated not later than that date from nonaffiliated sources in an amount that equals or exceeds the
Pennsylvania Required Capital, the Escrow Agent shall promptly notify the Trust and the Dealer
Manager. Thereafter, the Trust shall send to each Pennsylvania Subscriber by certified mail within
ten (10) calendar days after the end of the Initial Escrow period a notification in the form of
Exhibit B. If, pursuant to such notification, a Pennsylvania Subscriber requests the return of his
or her subscription funds within ten (10) calendar days after receipt of the notification (the
“Request Period”), the Escrow Agent shall, within fifteen (15) calendar days after receipt
of such request from the Investor, deliver directly to each such Pennsylvania Subscriber the
collected funds from Instruments of Payment deposited in the Pennsylvania Escrow Account on behalf
of such Pennsylvania Subscriber or shall return the Instruments of Payment delivered but not yet
processed for collection prior to such time to the address provided by the Trust, together with
interest income in the amounts calculated pursuant to paragraph 6. However, the Escrow Agent shall
not be required to remit such payments until the Escrow Agent has collected funds represented by
such payments.
(d) The subscription funds of Pennsylvania Subscribers who do not request the return of their
subscription funds within the Request Period shall remain in the Pennsylvania Escrow Account for
successive 120-day escrow periods (a “Successive Escrow Period”), each commencing
automatically upon the termination of the Initial Escrow Period or prior Successive Escrow Period,
as applicable, and the Trust and Escrow Agent shall follow the notification and payment procedure
set forth in paragraph 3(c) above with respect to the Initial Escrow Period for each Successive
Escrow Period until the occurrence of the earliest of (i) the Expiration Date, (ii) such time as
the Trust notifies the Escrow Agent in writing pursuant to paragraph 3(a)(iv) that total
subscription proceeds (including the amount then in the Pennsylvania Escrow Account) equal or
exceed the Pennsylvania Required Capital and the disbursement of the Pennsylvania Escrow Account on
the terms specified herein, or (iii) all funds held in the Pennsylvania Escrow Account having been
returned to the Pennsylvania Subscribers in accordance with the provisions hereof.
(e) If the Trust notifies the Escrow Agent in writing that it rejects any subscription for
which the Escrow Agent has collected funds, the Escrow Agent shall promptly disburse out of the
Escrow Account, Pennsylvania Escrow Account, Nebraska Escrow Account or New York Escrow Account, as
applicable, the amount set forth in such notification to the Subscriber also set forth in such
notification. If the Trust rejects any subscription for which the Escrow Agent has not yet
collected funds but has submitted the Subscriber’s Instrument of Payment for collection, the Escrow
Agent shall promptly return the funds in the amount of the Subscriber’s Instrument of Payment to
the rejected Subscriber after such funds have been collected. If the Escrow Agent has not yet
submitted a rejected Subscriber’s Instrument of Payment for collection, the Escrow Agent shall
promptly remit the Subscriber’s Instrument of Payment directly to the Subscriber. The Trust
acknowledges and agrees that Escrow Agent has no responsibility for accepting, rejecting or
approving subscriptions. If the Offering is terminated prior to
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the receipt of Subscription
Materials and Instruments of Payment from nonaffiliated sources in an amount that equals or exceeds
the Pennsylvania Required Capital, Nebraska Required Capital or New York Required Capital, any
subscriptions held in the Pennsylvania Escrow Account, the Nebraska Escrow Account or the New York
Escrow Account, respectively, will be deemed rejected by the Trust, and the subscription funds held
in such escrow accounts, if any, will be remitted to the respective Subscribers in accordance with
this paragraph 3(e), together with interest income in the amounts calculated pursuant to paragraph
6.
(f) At any time after funds are disbursed upon the Trust’s and the Dealer Manager’s
instructions pursuant to paragraph 3(a) above, on the tenth day following the date of receipt of
such instruction, the Escrow Agent shall promptly disburse directly to each Subscriber out of the
Escrow Account, Pennsylvania Escrow Account, Nebraska Escrow Account or New York Escrow Account, as
applicable, the amount of the interest payable to such Subscriber. However, the Escrow Agent shall
not be required to remit any payments until the Escrow Agent has collected funds represented by
such payments. The forgoing notwithstanding, interest, if any, earned on accepted subscription
proceeds will be payable to a Subscriber only if the Subscriber’s funds have been held in escrow by
the Escrow Agent for at least 35 days. Interest, if any, earned on accepted subscription proceeds
of Subscribers’ funds held less than 35 days will be paid to the Trust. The Escrow Agent may use
such reasonable allocation methods as it determines to be equitable in allocating interest income
among Subscribers and as between the Subscribers and the Trust if the funds bear interest at
multiple rates during the escrow period. The Trust agrees to accept Escrow Agent’s calculation of
any interest hereunder absent manifest mathematical error. As used in this Agreement,
“subscription proceeds” shall mean the proceeds from the applicable Instruments of Payment.
(h) Any disbursement of funds by the Escrow Agent to Subscribers shall be made to the persons
named in the Subscription Materials at the address stated therein by cashiers’ check mailed by
United States mail.
(i) If at the time of any required disbursement of interest to a Subscriber, the Escrow Agent
has not received a properly executed IRS Form W-9, the Escrow Agent shall withhold from any
interest distribution such amount as may be required to be withheld by law and remit such withheld
amounts to the Internal Revenue Service in timely fashion.
4. Prior to the disbursement of funds deposited in the Escrow Account, the Pennsylvania Escrow
Account, the Nebraska Escrow Account, or the New York Escrow Account in accordance with the
provisions of paragraph 3 hereof, the Escrow Agent shall invest all of the funds deposited as well
as
earnings and interest derived therefrom in the Escrow Account, the Pennsylvania Escrow
Account, the Nebraska Escrow Account, or the New York Escrow Account, as applicable, in bank money
market accounts maintained with the Escrow Agent.
It is hereby expressly agreed and stipulated by the parties hereto that the Escrow Agent shall
not be required to exercise any discretion hereunder and shall have no investment or management
responsibility and, accordingly, shall have no duty to, or liability for its failure to, provide
investment recommendations or investment advice to the parties hereto. It is the intention of the
parties hereto that the Escrow Agent will never be required to use, advance or risk its own funds
or otherwise incur financial liability in the performance of any of its duties or the exercise of
any of its rights and powers hereunder.
5. The Escrow Agent is entitled to rely upon written instructions received from the Trust or
the Dealer Manager, unless the Escrow Agent has actual knowledge that such instructions are not
valid or genuine; provided that, if in the Escrow Agent’s opinion, any instructions from the Trust
or the Dealer Manager are unclear, the Escrow Agent may request clarification from the Trust or the
Dealer Manager, as the case may be, prior to taking any action, and if such instructions continue
to be unclear, the Escrow Agent may rely upon written instructions from the Trust’s or the Dealer
Manager’s legal counsel, as the
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case may be, in distributing or continuing to hold any funds or may
take any other action authorized hereunder. However, the Escrow Agent shall not be required to
disburse any funds attributable to Instruments of Payment that have not been processed for
collection, until such funds are collected, and then shall disburse such funds in compliance with
the disbursement instructions from both the Trust and the Dealer Manager.
6. If the Offering terminates prior to receipt of the Required Capital (such termination date
shall be promptly provided to the Escrow Agent by the Trust), or one or more Pennsylvania
Subscribers elects to have his or her subscription proceeds returned in accordance with paragraph
3, interest income earned on subscription proceeds deposited in the Escrow Account (the “Escrow
Income”), the Pennsylvania Escrow Account (the “Pennsylvania Escrow Income”), the
Nebraska Escrow Account (the “Nebraska Escrow Income”) and the New York Escrow Account (the
“New York Escrow Income”), as applicable, shall be remitted to Subscribers, or to the Trust
if the applicable Subscriber’s funds have been held in escrow by the Escrow Agent for less than 35
days in accordance with paragraph 3 and without any deductions for escrow expenses. For each
Subscriber who has deposited funds that have been held in escrow by the Escrow Agent for at least
35 days, such Subscriber’s pro rata portion of Escrow Income shall be determined as follows: the
total amount of Escrow Income minus interest earned on accepted subscription proceeds held by the
Escrow Agent for less than 35 days shall be multiplied by a fraction, (a) the numerator of which is
determined by multiplying the number of Shares that were subscribed for by the Subscriber times the
number of days the Subscriber’s proceeds were held in the Escrow Account prior to the date of
disbursement, and (b) the denominator of which is the total of the numerators for all Subscribers
in such account who have deposited funds that have been held in escrow by the Escrow Agent for at
least 35 days. The Escrow Agent shall remit all such Escrow Income, Pennsylvania Escrow Income,
Nebraska Escrow Income and New York Escrow Income in accordance with paragraph 3. If the Trust
chooses to leave the Escrow Account open after receiving the Required Capital, then it shall make
regular acceptances of subscriptions therein, but no less frequently than monthly, and the Escrow
Income from the last such acceptance shall be calculated and remitted to the Subscribers or the
Trust, as applicable, pursuant to the provisions of paragraph 3(f). The Trust agrees to accept
Escrow Agent’s calculation of the Escrow Income, Pennsylvania Escrow Income, Nebraska Escrow
Income, New York Escrow Income, and any pro rata portion thereof, absent manifest mathematical
error.
7. Escrow Agent shall be paid by the Trust for its services to be rendered hereunder in
accordance with Exhibit C attached hereto. Escrow Agent acknowledges that the Dealer Manager has
no obligation to pay the Escrow Agent in accordance with Exhibit C attached hereto or otherwise.
8. The Escrow Agent will be liable as a depository only and will not be responsible for the
sufficiency or accuracy of the form, execution or validity of any check or any other document
delivered to the Escrow Agent hereunder or any description of the property or other thing contained
therein or the identity, authority or rights of the persons executing or delivering or purporting
to execute or deliver any such document. The Escrow Agent’s duties hereunder are limited to the
safekeeping of the assets, instruments or other documents received and the delivery of the same in
accordance with this Agreement. The Escrow Agent will not be liable for any act or omission done
in good faith, or for any claim, demand, loss or damage made or suffered by any party to this
Agreement, excepting such as may arise through or be caused by the Escrow Agent’s misconduct or
negligence. The Escrow Agent is authorized to rely on any document believed by the Escrow Agent to
be authentic in making any delivery of funds or property hereunder. Escrow Agent shall not be
required to comply with any direction or instruction other than those specifically described
herein.
9. In accepting any funds or documents delivered hereunder, it is agreed and understood by the
undersigned that the Escrow Agent will not be called on to construe any contract or instrument
deposited herewith, and in the event of a dispute will be required to act in respect to the deposit
herein made only on the consent in writing of the undersigned. In the failure of such consent, the
Escrow Agent reserves the right to hold any money in its possession, and all papers in connection
with or concerning
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this escrow, until a mutual agreement in writing has been reached between all of
said parties and delivered to the Escrow Agent or until delivery is legally authorized and ordered
by final judgment or decree of a court of competent jurisdiction. If the Escrow Agent obeys or
complies with any judgment, order or decree of a court of competent jurisdiction, the Escrow Agent
will not be liable to any of the parties hereto nor to any other person, firm or corporation by
reason of such compliance, notwithstanding any such judgment, order or decree being subsequently
reversed, modified, annulled, set aside or vacated.
10. In addition to Escrow Agent’s other rights herein, in the event any contest, dispute,
conflicting claim or litigation arises or exists in connection with this Agreement or Escrow Agent
is otherwise in doubt as to what action to take hereunder, then in such event, Escrow Agent may, in
its sole discretion, (i) continue to retain the funds as Escrow Agent during the pendency of any
such contest, dispute, conflicting claim or litigation or resolution of such matter creating doubt
as to what action Escrow Agent is to take hereunder, provided that both the Trust and the Dealer
Manager consent to Escrow Agent retaining such funds or (ii) interplead the funds held in the
Escrow Account, Pennsylvania Escrow Account, Nebraska Escrow Account and New York Escrow Account
into the office of the court clerk of Dallas County, State of Texas, in which event, Escrow Agent
shall be entitled to be repaid its expenses, including court costs and attorneys’ fees that it
incurs as a result thereof, and in which event this Agreement shall be deemed terminated. Each of
the Trust and the Dealer Manager consents and agrees to the jurisdiction of the District Court of
Dallas County, Texas for such purpose.
11. If at any time Escrow Agent is served with any judicial or administrative order, judgment,
decree, writ or other form of final judicial or administrative process which in any way affects the
property held in escrow hereunder (the “Escrow Property”) (including but not limited to
orders of attachment or garnishment or other forms of levies or injunctions or stays relating to
the transfer of Escrow Property), Escrow Agent is authorized to comply therewith in any manner as
it or its legal counsel of its own choosing deems appropriate; and if Escrow Agent complies with
any such judicial or administrative order, judgment, decree, writ or other form of judicial or
administrative process, Escrow Agent shall not be liable to any of the parties hereto or to any
other person or entity even though such order, judgment, decree, writ or process may be
subsequently modified or vacated or otherwise determined to have been without legal force or
effect.
12. (a) Escrow Agent shall not be liable for any action taken or omitted or for any loss or
injury resulting from its actions or its performance or lack of performance of its duties hereunder
in the absence of negligence or misconduct on its part. In no event shall Escrow Agent be liable
(i) for acting in accordance with or relying upon any instruction, notice, demand, certificate or
document from the Trust
pursuant to paragraph 5 hereof (ii) for any consequential, punitive or special damages, (iii)
for the acts or omissions of its nominees, correspondents, designees, subagents or custodians,
provided that the same have been selected by the Escrow Agent with reasonable care, or (iv) for an
amount in excess of the value of the collected funds in the Escrow Account, the New York Escrow
Account, the Nebraska Escrow Account and the Pennsylvania Escrow Account, valued as of the date of
deposit.
(b) Escrow Agent shall not incur any liability for not performing any act or fulfilling any
duty, obligation or responsibility hereunder by reason of any occurrence beyond the reasonable
control of Escrow Agent (including but not limited to any act or provision of any present or future
law or regulation or governmental authority, any act of God or war, or the unavailability of the
Federal Reserve Bank wire or telex or other wire or communication facility).
13. Escrow Agent shall not be responsible in any respect for the form, execution, validity,
value or genuineness of documents or securities deposited hereunder, or for any description
therein, or for the identity, authority or rights of persons executing or delivering or purporting
to execute or deliver any such document, security or endorsement.
-8-
14. THE TRUST SHALL BE LIABLE FOR AND SHALL REIMBURSE AND INDEMNIFY ESCROW AGENT, ITS
OFFICERS, DIRECTORS, PARTNERS, EMPLOYEES AND AGENTS (EACH HEREIN CALLED AN “INDEMNIFIED
PARTY”) AND HOLD THE INDEMNIFIED PARTIES HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS, LOSSES,
LIABILITIES, COSTS, DAMAGES OR EXPENSES (INCLUDING REASONABLE ATTORNEYS’ FEES AND EXPENSES)
(COLLECTIVELY, “LOSSES”) ARISING FROM OR IN CONNECTION WITH OR RELATED TO THIS AGREEMENT OR
BEING ESCROW AGENT HEREUNDER (INCLUDING BUT NOT LIMITED TO LOSSES INCURRED BY THE INDEMNIFIED
PARTIES IN CONNECTION WITH THE SUBMISSION OF THE AFFIDAVIT ATTACHED HERETO AS EXHIBIT A TO THE
DIRECTOR OF BANKING AND FINANCE OF THE STATE OF NEBRASKA); PROVIDED, HOWEVER, THAT NOTHING
CONTAINED HEREIN SHALL REQUIRE THE INDEMNIFIED PARTIES TO BE INDEMNIFIED FOR LOSSES CAUSED BY THE
INDEMNIFIED PARTIES’ NEGLIGENCE OR MISCONDUCT.
15. All communications and notices (each a “Notice”) required or permitted by this
Agreement shall be in writing and shall be delivered personally or by messenger or sent by
overnight delivery service or via telecopy or other electronic transmission, in all cases addressed
to the person for whom it is intended at such person’s address set forth below or to such other
address as a party shall have designated by notice in writing to the other party in the manner
provided by this paragraph:
(a) if to the Trust:
United Development Funding IV
The United Development Funding Building
Suite 100
0000 Xxxxxxxxx Xxx
Xxxxxxxxx, Xxxxx 00000
Attention: Xxxx Xxxxx
The United Development Funding Building
Suite 100
0000 Xxxxxxxxx Xxx
Xxxxxxxxx, Xxxxx 00000
Attention: Xxxx Xxxxx
(b) if to the Dealer Manager:
Realty Capital Securities, LLC
Three Xxxxxx Place, Suite 3300B
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxx
Managing Director
Three Xxxxxx Place, Suite 3300B
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxx
Managing Director
(c) if to the Escrow Agent:
LegacyTexas Bank
0000 Xxxxxx Xxxxx
Xxxxx 000 (Second Floor)
Xxxxx, Xxxxx 00000
Attention: Xxxx Xxxxxxx
0000 Xxxxxx Xxxxx
Xxxxx 000 (Second Floor)
Xxxxx, Xxxxx 00000
Attention: Xxxx Xxxxxxx
Each party hereto may, from time to time, change the address to which Notices to it are to be
delivered or mailed hereunder by Notice in accordance herewith to the other parties. Each Notice
shall be deemed given and effective upon actual receipt (or refusal of receipt).
16. This Agreement shall be governed by the laws of the State of Texas as to both
interpretation and performance without regard to the conflict of laws rules thereof.
-9-
17. The provisions of this Agreement shall be binding upon the legal representatives,
successors, and assigns of the parties hereto.
18. Each of the Trust and the Dealer Manager hereby acknowledges that LegacyTexas Bank is
serving as Escrow Agent only for the limited purposes herein set forth, and hereby agrees that it
will not represent or imply that, by serving as Escrow Agent hereunder or otherwise, it has
investigated the desirability or advisability of investment in the Trust or has approved, endorsed
or passed upon the merits of the Shares or the Trust or has in any way reviewed or endorsed any
disclosures made by the Trust relating thereto, nor shall the Trust use the name of the Escrow
Agent in any manner whatsoever in connection with the offer or sale of the Shares other than by
acknowledgment that it has agreed to serve as Escrow Agent for the limited purposes herein set
forth.
19. This Agreement and any amendment hereto may be executed (including by facsimile
transmission) by the parties hereto with counterpart signature pages or in one or more
counterparts, each of which shall be deemed to be an original.
20. The Escrow Agent shall be bound only by the terms of this Agreement with respect to the
subject matter of this Agreement and shall not be bound by or incur any liability in connection
with the subject matter of this Agreement with respect to any other agreements or understanding
between any other parties, whether or not the Escrow Agent has knowledge of any such agreements or
understandings.
21. The Escrow Agent represents and warrants that it is a “bank,” as such term is defined in
Section 3(a)(6) of the Securities Exchange Act of 1934, as amended.
22. The provisions set forth in paragraphs 7-20 and 23 herein shall survive the termination of
this Agreement and/or the resignation or removal of the Escrow Agent.
23. In the event that any part of this Agreement is declared by any court or other judicial or
administrative body to be null, void, or unenforceable, said provision shall survive to the extent
it is not so declared, and all of the other provisions of this Agreement shall remain in full force
and effect.
24. Unless otherwise provided in this Agreement, final termination of this Agreement shall
occur on the date that all funds held in the Escrow Account, the Pennsylvania Escrow Account, the
Nebraska Escrow Account and the New York Escrow Account are distributed either (a) to the Trust or
to Subscribers and the Trust has informed the Escrow Agent in writing to close the Escrow Account,
the Pennsylvania Escrow Account, the Nebraska Escrow Account and the New York Escrow Account
pursuant to paragraph 3 hereof or (b) to a successor escrow agent upon written instructions
from both the Trust and the Dealer Manager.
25. This Agreement shall not be modified, waived, revoked, released or terminated unless
reduced to writing and signed by all parties hereto, unless otherwise provided herein.
26. The Escrow Agent may resign at any time from its obligations under this Agreement by
providing written notice to the Trust and the Dealer Manager. Such resignation shall be effective
on the date specified in such notice, which shall be not less than thirty days after such written
notice has been given. The Escrow Agent shall have no responsibility for the appointment of a
successor escrow agent.
27. The Escrow Agent may be removed for cause by the Trust by written notice to the Escrow
Agent and the Dealer Manager effective on the date specified in such written notice.
28. The appointment of any successor escrow agent may occur only upon the acceptance of both
the Trust and the Dealer Manager, which acceptance shall not be unreasonably withheld, and upon the
written acceptance by the successor escrow agent of substantially all of the terms and conditions
of this Agreement.
-10-
29. The Trust will provide the Escrow Agent a copy of the final Prospectus and any amendments
or supplements thereto, in each case within 5 days of first use by the Trust.
[Signature page follows]
-11-
Agreed to as of the 10th day of November, 2009.
| UNITED DEVELOPMENT FUNDING IV | ||||||
| By: |
/s/ Xxxxxx X. Xxxxxxxx
|
|||||
| Name: Title: |
Xxxxxx X. Xxxxxxxx Chairman and Chief Executive Officer |
|||||
| REALTY CAPITAL SECURITIES, LLC | ||||||
| By: | /s/ Xxxxx Xxxxxxxx | |||||
| Name: Title: |
Xxxxx Xxxxxxxx Executive Vice President |
|||||
The terms and conditions contained above are hereby accepted and agreed to by:
| LEGACYTEXAS BANK, as Escrow Agent | ||||
By: |
/s/ Lea Xxx Xxxxx
|
|||
Name:
|
Lea Xxx Xxxxx | |||
Title:
|
Executive Vice President — Chief Operations Officer | |||
[Signature Page to Escrow Agreement]
EXHIBIT A
FORM OF ESCROW AGENT AFFIDAVIT FOR NEBRASKA
STATE OF
COUNTY OF
COUNTY OF
ESCROW AGENT AFFIDAVIT
(the “Affiant”), being duly sworn, deposes and says:
That the Affiant is a duly appointed and authorized representative of LegacyTexas Bank (the
“Escrow Agent”);
That the Escrow Agent is the duly appointed and authorized escrow agent for the public
offering of the securities (the “Offering”) of United Development Funding IV (the “Trust”);
That all of the conditions of that certain Third Amended and Restated Escrow Agreement entered
into by and between the Escrow Agent, the Trust, and Realty Capital Securities, LLC in connection
with the Offering and effective as of the 10th day of November, 2009 (the “Agreement”)
which are capable of being satisfied as of the date hereof have been met.
Affiant makes this Affidavit to the State of Nebraska Department of Banking and Finance
pursuant to Nebraska regulations Chapter 25, Section 003.01C1 promulgated under §8-1120(3) of the
Securities Act of Nebraska.
IN WITNESS WHEREOF, the undersigned has duly executed this document this day of
, 20 .
| By: | ||||||
| Name: | ||||||
| Title: | ||||||
Sworn to and subscribed before me
this day of , 20 .
this day of , 20 .
Notary Public
My commission expires:____________
(NOTARIAL SEAL)
A-1
EXHIBIT B
FORM OF NOTICE TO PENNSYLVANIA SUBSCRIBERS
You have tendered a subscription to purchase common shares of beneficial interest of United
Development Funding IV (the “Trust”). Your subscription is currently being held in escrow. The
guidelines of the Pennsylvania Securities Commission do not permit the Trust to accept
subscriptions from Pennsylvania residents until an aggregate of $35,000,000 of gross offering
proceeds have been received by the Trust. The Pennsylvania guidelines provide that until this
minimum amount of offering proceeds is received by the Trust, every 120 days during the offering
period Pennsylvania Subscribers may request that their subscription be returned.
If you wish to continue your subscription in escrow until the Pennsylvania minimum
subscription amount is received, nothing further is required.
If you wish to terminate your subscription for the Trust’s shares and have your subscription
returned, please so indicate below, sign, date, and return to the Escrow Agent at LegacyTexas Bank,
, Attn:
.
I hereby terminate my prior subscription to purchase common shares of beneficial interest of
United Development Funding IV and request the return of my subscription funds. I certify to United
Development Funding IV that I am a resident of Pennsylvania.
| Signature: | ||||||
| Name: | ||||||
| (please print) | ||||||
| Date: | ||||||
Please send the subscription refund to:
B-1
EXHIBIT C
ESCROW AGENT COMPENSATION
None.
C-1
