ESCROW AGREEMENT
This Escrow Agreement (the "Agreement") dated as of _______________ is
by and between Royal Aloha Development Company, a Nevada corporation (the
"Company"), and the First Trust of California, National Association (the
"Escrow Agent").
RECITALS
The Company proposes to offer for sale to the general public in certain
states of the United States and in certain provinces in Canada its _____% Eight
Year Subordinated Notes (the "Notes") up to an aggregate of $8,500,000, in
accordance with the registration provisions of the Securities Act of 1933, as
amended, and pursuant to a Registration Statement on Form SB-2 (the
"Registration Statement") on file with the Securities and Exchange Commission.
In accordance with the terms of the Prospectus contained in the Registration
Statement, the Company desires to provide for the escrow of the funds invested
in the Notes until the minimum amount, described below, has been received.
First Trust of California has agreed to act as escrow agent on behalf
of the Company on the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises the Parties agree as
follows:
1. Appointment of Escrow Agent. The Escrow Agent is hereby appointed as
escrow agent in accordance with the terms hereof, and the Escrow Agent agrees to
act in such capacity.
2. Establishment of Escrow Account. The Escrow Agent, as agent for the
Company to implement the provisions of this Agreement, has established an escrow
fund ("Escrow Fund") which shall contain all checks, drafts, and money orders
("Subscription Payments") and all Subscription Agreements and other related
documents ("Subscription Documents") received by the Escrow Agent directly from
Purchasers, and Subscription Payments and Subscription Documents received by the
Escrow Agent through the Company. Such Subscription Payments and Documents and
any income resulting from the investment of such Subscription Payments shall be
held, invested, and disbursed pursuant to paragraphs 5, 6, and 7 of this
Agreement.
3. Escrow Fees. The Company hereby agrees to pay the Escrow Agent at
the opening of escrow an advance payment for all ordinary services rendered
hereunder (the "Escrow Fee") which shall be calculated in accordance with the
Escrow Agent's standard rate schedule. The Company further agrees to pay the
Escrow Agent reasonable fees, which shall be agreed upon between the Parties,
for any services in addition to those provided for herein to the extent that the
Company has expressly requested such extraordinary services and has been made
aware of their cost in advance of their performance.
4. Deposits. The Company shall transmit to the Escrow Agent, within
three business days of receipt by the Company, all Subscription Payments and all
Subscription Agreements and Subscription Documents received by the Company for
the purchase of the Notes from the purchasers thereof ("Subscribers"), including
without limitation an IRS form W-8/W-9 for each Subscriber. All Subscription
Payments shall be made payable to First Trust of California, National
Association as Escrow Agent for Royal Aloha Development Company. Each
transmittal of Subscription Payments shall be accompanied by a schedule listing
the Subscribers whose funds are being transmitted and the amounts of their
investment. The Company shall also provide a signed IRS form W-8/W-9 to the
Escrow Agent.
5. Investment of Funds. All Subscription Payments shall be deposited in
a First Bank System Business Money Market account and shall upon clearance earn
per diem interest at a rate provided by the First Bank System for such account.
Such investments are hereinafter referred to as "Investments."
6. Holding and Disbursement of Funds and Documents. The Escrow Agent is
hereby authorized and directed to hold the Subscription Payments and
Subscription Documents in the Escrow Fund during the term of this Agreement and
to disburse the Subscription Payments and Subscription Documents and any income
resulting from the Investments, or any part thereof, only to persons entitled
thereto in accordance with the provisions of this Agreement. The Escrow Agent
shall be permitted to commingle the Subscription Payments held in the Escrow
Fund, provided upon distribution of the Subscription Payments pursuant to
Paragraph 7 hereof, the Escrow Agent shall furnish to the Company a financial
accounting, including the disbursements made from the Escrow Fund, the expenses,
if any, theretofore charged to the Escrow Fund, and the income earned on the
Investments. All Subscription Payments and Subscription Documents deposited with
the Escrow Agent shall remain the property of the Subscriber and shall not be
subject to any lien or change by the Escrow Agent, or judgment or Creditors'
claims against the Company until released to it in the manner hereinafter
provided.
7. Termination of Escrow; Disbursement of Funds.
A. If at any time prior to termination of the escrow, the sum
of $8,500,000 in Subscription Payments has been deposited pursuant to
this Agreement, the Escrow Agent shall confirm the receipt of such
payments to the Company. The Company shall have sixty (60) days from
such confirmation from the Escrow Agent to enter into a binding
construction loan agreement (the "Construction Loan") and to certify to
the Escrow Agent that the Company has entered the Construction Loan.
Following such certification by the Company, and upon written request
of the Company, the Escrow Agent shall disburse promptly all
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Subscription Payments and all Subscription Documents to the Company in
immediately available funds. The Escrow Agent shall then disburse to
each Subscriber by check the amount of interest accrued on the
Subscription Payments of such Subscriber. All disbursements by the
Escrow Agent to Subscribers pursuant to this Section shall be made by
the Escrow Agent's usual escrow checks and shall be mailed by first
class United States Postal Services mail, postage prepaid, as soon as
practicable but not later than the third business day after the
disbursement of funds to the Company, at which time this Agreement
shall terminate. In the event that the Company is unable to obtain the
Construction Loan within (60) days of the confirmation by the Escrow
Agent of receipt of $8,500,000 in Subscription Payments, this Escrow
Agreement shall terminate and the Escrow Agent shall release all
Subscription Payments and Subscription Documents to the Subscribers
according to the terms of paragraph 7.B below.
B. If within ninety (90) days (or pursuant to any extension by
the Company) after the effective date of the Registration Statement the
Company and any Broker/Dealer have not deposited at least $4,500,000 in
Subscription Payments with the Escrow Agent, the Escrow Agent shall so
notify the Company. The Company at its option may extend the offering
period and this Agreement for up to two (2) additional ninety (90) day
terms. At the end of any such ninety (90) day period, if Subscription
Payments of at least $4,500,000 have not been deposited with the Escrow
Agent, the Company at its option may terminate this Agreement, and upon
written notice of such termination, the Escrow Agent shall release all
Subscription Payments and the corresponding Subscription Documents
together with all interest accrued on such funds to each Subscriber
respectively at the address given by such Subscriber in the
Subscription Agreement. All disbursements by the Escrow Agent pursuant
to this Section shall be made by the Escrow Agent's usual escrow checks
and shall be mailed by first class United States Postal Services mail,
postage prepaid, as soon as practicable but not later than the third
business day after the termination of the escrow. The Escrow Agent
shall furnish to the Company an accounting for the refund in full to
all Subscribers.
C. If after the first ninety (90) days after the effective
date of the Registration Statement the Company and any Broker/Dealer
has deposited at least $4,500,000 in Subscription Payments with the
Escrow Agent, the Escrow Agent shall inform the Company of the amount
of Subscription Payments deposited into escrow, and the Company
promptly shall inform the Escrow Agent of its decision either (i) to
proceed with a distribution of the Subscription Payments deposited in
the escrow account in accordance with the terms of Paragraph 7.A above,
including distribution of interest to each Subscriber, or (ii) to
extend the offering for an additional ninety (90) days. In the event
that the Company decides to extend the offering, and at the end of each
such extension, the Company shall give notice to the Escrow Agent of
its decision to distribute the funds or to further extend the offering
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time, provided that the Company may not extend the offering time by
more than two (2) extensions of ninety (90) days each. If the Company
elects to distribute the funds, then the Company shall have 60 days
from the end of the applicable ninety (90) day period in which to
certify that it has obtained the Construction Loan.
D. If the Escrow Agent receives a notice in writing from
the Company stating that the Company wishes to withdraw the offering or
to terminate the escrow before a minimum of $4,500,000 in Subscription
Payments has been deposited with the Escrow Agent, the Escrow Agent
shall disburse all funds and documents held in escrow in accordance
with the provisions of paragraph 7.B above.
8. Stop Order; Termination of Escrow. If at any time prior to the
termination of this Agreement, the Escrow Agent is advised by the Securities and
Exchange Commission that a stop order has been issued by the Securities and
Exchange Commission with respect to the Registration Statement, which order has
not been rescinded or stayed within 30 days, the Escrow Agent shall thereupon
return all Subscription Payments and Documents to the respective Subscribers in
accordance with paragraph 7.B above.
9. Collected Funds. No interest shall accrue on any Subscription
Payment and no Subscription Payment shall be disbursed pursuant to Section 7
until such Subscription Payment has been received by the Escrow Agent in
immediately available funds.
10. Liability of Escrow Agent. In performing any duties under the
Escrow Agreement, the Escrow Agent shall not be liable to the Company, any
Subscriber, or any Party for damages, losses, or expenses, except for gross
negligence of willful misconduct on part of the Escrow Agent. The Escrow Agent
shall not incur any such liability for (i) any act or failure to act made or
omitted in good faith, or (ii) any action taken or omitted in reliance upon any
instrument, including any written statement or affidavit provided for in this
Agreement that the Escrow Agent shall in good faith believe to be genuine, nor
will the Escrow Agent be liable or responsible for forgeries, fraud,
impersonations, or determining the scope of any representative authority. In
addition, the Escrow Agent may consult with legal counsel in connection with the
Escrow Agent's duties under this Agreement and shall be fully protected in any
action taken, suffered, or permitted by it in good faith in accordance with the
advice of counsel. The Escrow Agent is not responsible for determining and
verifying the authority of any person acting or purporting to act on behalf of
any party to this Agreement.
11. Fees and Expenses. It is understood that the fees and usual charges
agreed upon for services of the Escrow Agent shall be considered compensation
for ordinary services as contemplated by this Agreement. In the event that the
conditions of this Agreement are not promptly fulfilled, or if the Escrow Agent
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renders any service not provided for in this Agreement, or if the Company
requests a substantial modification of its terms, or if any controversy arises,
or if the Escrow Agent is made a party to, or intervenes in, any litigation
pertaining to this escrow or its subject matter, the Escrow Agent shall be
reasonably compensated for such extraordinary services and reimbursed for all
costs, attorney's fees, including allocated costs of in-house counsel, and
expenses occasioned by such default, delay, controversy, or litigation, and the
Escrow Agent shall have the right to retain all documents and/or other things of
value at any time held by the Escrow Agent in this escrow until such
compensation, fees, costs, and expenses are paid. The Company promises to pay
these sums upon demand. Unless otherwise provided, the Company will pay all of
the Escrow Agent's usual charges and the Escrow Agent may deduct such sums from
the funds deposited.
12. Controversies. If any controversy arises between the Parties to
this Agreement, or with any other Party, concerning the subject matter of this
Agreement, its terms or conditions, the Escrow Agent will not be required to
determine the controversy or to take any action regarding it. The Escrow Agent
may hold all documents and funds and may wait for settlement of any such
controversy by final appropriate legal proceedings or other means as, in the
Escrow Agent's discretion, the Escrow Agent may require, despite what may be set
forth elsewhere in this Agreement. In such event, the Escrow Agent will not be
liable for interest or damage. Furthermore, the Escrow Agent may at its option
file an action of interpleader requiring the Parties to answer and litigate any
claims and rights among themselves. The Escrow Agent is authorized the deposit
with the clerk of the court all documents and funds held in escrow, except all
costs, expenses, charges and reasonable attorney fees incurred by the Escrow
Agent due to the interpleader action and which Company agrees to pay. Upon
initiating such action, the Escrow Agent shall be fully released and discharged
of and from all obligations and liability imposed by the terms of this
Agreement.
13. Indemnification of Escrow Agent. The Company and its successors and
assigns agree jointly and severally to indemnify and hold the Escrow Agent
harmless against any and all losses, claims, damages, liabilities, and expenses,
including reasonable costs of investigation, counsel fees, including allocated
costs of in-house counsel and disbursements that may be imposed on the Escrow
Agent or incurred by the Escrow Agent in connection with the performance of its
duties under this Agreement, including but not limited to any litigation arising
from this Agreement or involving its subject matter.
14. Withholding of Interest. The Company acknowledges that payment of
any interest earned on the funds invested in this escrow will be subject to
backup withholding penalties unless a properly completed Internal Revenue
Service Form W-8 or W-9 certification is submitted to Escrow Agent.
15. Resignation of Escrow Agent. The Escrow Agent may resign at any
time upon giving at least (30) days written notice to the Company provided,
however, that no such resignation shall become effective until the appointment
of a successor escrow agent which shall be accomplished as follows: The Company
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shall use its best efforts to obtain a successor escrow agent within thirty (30)
days after receiving such notice. If the Company fails to agree upon a successor
escrow agent within such time, the Escrow Agent shall have the right to appoint
a successor escrow agent authorized to do business in the state of California.
The successor escrow agent shall execute and deliver an instrument accepting
such appointment and it shall without further acts, be vested with all the
estates, properties, rights, powers, and duties of the predecessor escrow agent
as if originally named as escrow agent. The Escrow Agent shall thereupon be
discharged from any further duties and liability under this Agreement.
16. Automatic Succession. Any company into which the Agent may be
merged or with which it may consolidated, or any company to whom Agent may
transfer a substantial amount of its Global Escrow business, shall be the
Successor to the Agent without the execution or filing of any paper or any
further act on the part of any of the Parties, anything herein to the contrary
notwithstanding; provided that the combined capital and surplus of such
Successor shall not be, immediately following such transaction, substantially
less than the combined capital and surplus of the Agent immediately prior to
such transaction.
17. Termination. This Agreement shall terminate upon the completion of
the conditions of Section 7.A, 7.B or 7.C hereof, without any notices to any
person except as provided in this Agreement, unless earlier terminated pursuant
to the terms hereof.
18. Miscellaneous.
a. Governing Laws. This Agreement is to be construed and
interpreted according to California law.
b. Counterpart. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
c. Notices. All instructions, notices and demands
herein provided for shall be in writing and shall be mailed postage
prepaid, first class mail, delivered by courier, or telecopies as
follows:
If to the Company: Royal Aloha Development Company
0000 Xxxxxxxxxx Xxxx., Xxxxx 000
Xxxxxxxx, Xxxxxx 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
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If to the Escrow Agent: First Trust of California, National
Association Global Escrow Depository Services
Xxx Xxxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
d. Amendments. This Agreement may be amended by written
notice signed by the Partnership, except that Section 10 through
Section 16 may be amended only with the consent of the Escrow Agent.
Any notice to be executed by or on behalf of the Company shall be
valid if signed by Xxxx X. Xxxxxxxx.
The Company represents and agrees that it has not made nor will it in
the future make any representation that states or implies that the Escrow Agent
has endorsed, recommended or guaranteed the purchase, value, or repayment of the
Securities offered for sale by the Company. The Company further agrees that it
will insert in any prospectus, offering circular, advertisement, subscription
agreement or other document made available to prospective purchasers of the
Securities the following statement in bold face type: "First Trust of
California, National Association is acting only as an escrow agent in connection
with the offering of the Notes described herein, and has not endorsed,
recommended or guaranteed the purchase, value or repayment of such Notes," and
will furnish to the Escrow Agent a copy of each such prospectus, offering
circular, advertisement, subscription agreement, or other document at least 5
business days prior to its distribution to prospective purchasers of the
Securities.
ROYAL ALOHA DEVELOPMENT
COMPANY
By:----------------------
FIRST TRUST OF CALIFORNIA,
NATIONAL ASSOCIATION GLOBAL
ESCROW DEPOSITORY SERVICES
By:----------------------
Escrow Agent
