Appendix A to Subpart A of Part 540 - Example of Escrow Agreement for Use Under 46 CFR 540.5(b)
46:9.0.1.2.17.1.1.10.21 : Appendix A
Appendix A to Subpart A of Part 540 - Example of Escrow Agreement
for Use Under 46 CFR 540.5(b) ESCROW AGREEMENT
THIS ESCROW AGREEMENT, made as of this __ day of (month & year),
by and between (Customer), a corporation/company having a place of
business at (“Customer”) _________________ and (Banking Institution
name & address) a banking corporation, having a place of business
at (“Escrow Agent”).
Witnesseth:
WHEREAS, Customer wishes to establish an escrow account in order
to provide for the indemnification of passengers in the event of
non-performance of water transportation to which such passengers
would be entitled, and to establish Customer's financial
responsibility therefore; and
WHEREAS, Escrow Agent wishes to act as Escrow Agent of the
escrow account established hereunder;
NOW, THEREFORE, in consideration of the premises and covenants
contained herein and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Customer has established on (month, & year) (the
“Commencement Date”) an escrow account with the Escrow Agent which
escrow account shall hereafter be governed by the terms of this
Agreement (the “Escrow Account”). Escrow Agent shall maintain the
Escrow Account in its name, in its capacity as Escrow Agent.
2. Customer will determine, as of the date prior to the
Commencement Date, the amount of unearned passenger revenue,
including any funds to be transferred from any predecessor Escrow
Agent. Escrow Agent shall have no duty to calculate the amount of
unearned passenger revenue. Unearned Passenger Revenues are defined
as that passenger revenue received for water transportation and all
other accommodations, services and facilities relating thereto not
yet performed. 46 CFR 540.2(i).
3. Customer will deposit on the Commencement Date into the
Escrow Account cash in an amount equal to the amount of Unearned
Passenger Revenue determined under Paragraph 2 above plus a cash
amount (“the Fixed Amount”) equal to (10 percent of the Customer's
highest Unearned Passenger Revenue for the prior two fiscal years.
For periods on or after (year of agreement (2009)), the Fixed
Amount shall be determined by the Commission on an annual basis, in
accordance with 46 CFR Part 540.
4. Customer acknowledges and agrees that until such time as a
cruise has been completed and Customer has taken the actions
described herein, Customer shall not be entitled, nor shall it have
any interest in any funds deposited with Escrow Agent to the extent
such funds represent Unearned Passenger Revenue.
5. Customer may, at any time, deposit additional funds
consisting exclusively of Unearned Passenger Revenue and the Fixed
Amount, into the Escrow Account and Escrow Agent shall accept all
such funds for deposit and shall manage all such funds pursuant to
the terms of this Agreement.
6. After the establishment of the Escrow Account, as provided in
Paragraph 1, Customer shall on a weekly basis on each (identify day
of week), or if Customer or Escrow Agent is not open for business
on (identify day of week) then on the next business day that
Customer and Escrow Agent are open for business recompute the
amount of Unearned Passenger Revenue as of the close of business on
the preceding business day (hereinafter referred to as the
“Determination Date”) and deliver a Recomputation Certificate to
Escrow Agent on such date. In each such weekly recomputation
Customer shall calculate the amount by which Unearned Passenger
Revenue has decreased due to (i) the cancellation of reservations
and the corresponding refund of monies from Customer to the persons
or entities canceling such reservations; (ii) the amount which
Customer has earned as revenue as a result of any cancellation fee
charged upon the cancellation of any reservations; (iii) the amount
which Customer has earned due to the completion of cruises; and
(iv) the amount by which Unearned Passenger Revenue has increased
due to receipts from passengers for future water transportation and
all other accommodations, services and facilities relating thereto
and not yet performed.
The amount of Unearned Passenger Revenue as recomputed shall be
compared with the amount of Unearned Passenger Revenue for the
immediately preceding period to determine whether there has been a
net increase or decrease in Unearned Passenger Revenue. If the
balance of the Escrow Account as of the Determination Date exceeds
the sum of the amount of Unearned Passenger Revenue, as recomputed,
plus the Fixed Amount then applicable, then Escrow Agent shall make
any excess funds in the Escrow Account available to Customer. If
the balance in the Escrow Account as of the Determination Date is
less than the sum of the amount of Unearned Passenger Revenue, as
recomputed, plus an amount equal to the Fixed Amount, Customer
shall deposit an amount equal to such deficiency with the Escrow
Agent. Such deposit shall be made in immediately available funds
via wire transfer or by direct transfer from the Customer's U.S.
Bank checking account before the close of business on the next
business day following the day on which the Recomputation
Certificate is received by Escrow Agent. The Escrow Agent shall
promptly notify the Commission within two business days any time a
deposit required by a Recomputation Certificate delivered to the
Escrow Agent is not timely made.
7. Customer shall furnish a Recomputation Certificate, in
substantially the form attached hereto as Annex 1, to the Federal
Maritime Commission (the “Commission”) and to the Escrow Agent
setting forth the weekly recomputation of Unearned Passenger
Revenue required by the terms of Paragraph 6 above. Customer shall
mail or fax to the Commission and deliver to the Escrow Agent the
required Recomputation Certificate before the close of business on
the business day on which Customer recomputes the amount of
Unearned Passenger Revenue. Notwithstanding any other provision
herein to the contrary, Escrow Agent shall not make any funds
available to Customer out of the Escrow Account because of a
decrease in the amount of Unearned Passenger Revenue or otherwise,
until such time as Escrow Agent receives the above described
Recomputation Certificate from Customer, which Recomputation
Certificate shall include the Customer's verification certification
in the form attached hereto as Annex 1. The copies of each
Recomputation Certificate to be furnished to the Commission shall
be mailed to the Commission at the address provided in Paragraph 25
herein. If copies are not mailed to the Commission, faxed or
emailed copies shall be treated with the same legal effect as if an
original signature was furnished. No repayment of the Fixed Amount
may be made except upon approval of the Commission.
Within fifteen (15) days after the end of each calendar month,
Escrow Agent shall provide to Customer and to the Commission at the
addresses provided in Paragraph 25 below, a comprehensive statement
of the Escrow Account. Such statement shall provide a list of
assets in the Escrow Account, the balance thereof as of the
beginning and end of the month together with the original cost and
current market value thereof, and shall detail all transactions
that took place with respect to the assets and investments in the
Escrow Account during the preceding month.
8. At the end of each quarter of Customer's fiscal year,
Customer shall cause the independent auditors then acting for it to
conduct an examination in accordance with generally accepted
auditing standards with respect to the weekly Recomputation
Certificates furnished by Customer of the Unearned Passenger
Revenues and the amounts to be deposited in the Escrow Account and
to express their opinion within forty-five (45) days after the end
of such quarter as to whether the calculations at the end of each
fiscal quarter are in accordance with the provisions of Paragraph 6
of this Agreement. The determination of Unearned Passenger Revenue
of such independent auditors shall have control over any
computation of Unearned Passenger Revenue by Customer in the event
of any difference between such determinations. To the extent that
the actual amount of the Escrow Account is less than the amount
determined by such independent auditors to be required to be on
deposit in the Escrow Account, Customer shall immediately deposit
an amount of cash into the Escrow Account sufficient to cause the
balance of the Escrow Account to equal the amount determined to be
so required. Such deposit shall be completed no later than the
business day after receipt by the Escrow Agent of the auditor's
opinion containing the amount of such deficiency.
The opinion of such independent auditors shall be furnished by
such auditors directly to Customer, to the Commission and to the
Escrow Agent at their addresses contained in this Agreement. In the
event that a required deposit to the Escrow Agent is not made
within one Business Day after receipt of an auditor's report or a
Recomputation Certificate, Escrow Agent shall send notification to
the Commission within the next two Business Days.
9. Escrow Agent shall invest the funds in the Escrow Account in
Qualified Investments as directed by Customer in its sole and
absolute discretion. “Qualified Investments” means, to the extent
permitted by applicable law:
(a) Government obligations or obligations of any agency or
instrumentality of the United States of America;
(b) Commercial paper issued by a United States company rated in
the two highest numerical “A” categories (without regard to further
gradation or refinement of such rating category) by Standard &
Poor's Corporation, or in the two highest numerical “Prime”
categories (without regard to further gradation or refinement of
such rating) by Moody's Investor Services, Inc.;
(c) Certificates of deposit and money market accounts issued by
any United States bank, savings institution or trust company,
including the Escrow Agent, and time deposits of any bank, savings
institution or trust company, including the Escrow Agent, which are
fully insured by the Federal Deposit Insurance Corporation;
(d) Corporate bonds or obligations which are rated by Standard &
Poor's Corporation or Moody's Investors Service, Inc. in one of
their three highest rating categories (without regard to any
gradation or refinement of such rating category by a numerical or
other modifier); and
(e) Money market funds registered under the Federal Investment
Company Act of 1940, as amended, and whose shares are registered
under the Securities Act of 1933, as amended, and whose shares are
rated “AAA”, “AA + ” or “AA” by Standard & Poor's Corporation.
10. All interest and other profits earned on the amounts placed
in the Escrow Account shall be credited to Escrow Account.
11. This Agreement has been entered into by the parties hereto,
and the Escrow Account has been established hereunder by Customer,
to establish the financial responsibility of Customer as the owner,
operator or charterer of the passenger vessel(s) (see Exhibit A),
in accordance with Section 3 of Public Law 89-777, 89th Congress,
approved November 6, 1966 (the “Act”). The Escrow Account shall be
held by Escrow Agent in accordance with the terms hereof, to be
utilized to discharge Customer's legal liability to indemnify the
passengers of the named vessel(s) for non-performance of
transportation within the meaning of Paragraph 3 of the Act. The
Escrow Agent shall make indemnification payments pursuant to
written instructions from Customer, on which the Escrow Agent may
rely, or in the event that such legal liability has not been
discharged by Customer within twenty-one (21) days after any such
passenger has obtained a final judgment (after appeal, if any)
against Customer from a United States Federal or State Court of
competent jurisdiction the Escrow Agent is authorized to pay funds
out of the Escrow Account, after such twenty-one day period, in
accordance with and pursuant to the terms of an appropriate order
of a court of competent jurisdiction on receipt of a certified copy
of such order.
As further security for Customer's obligation to provide water
transportation to passengers holding tickets for transportation on
the passenger vessel(s) (see Exhibit A) Customer will pledge to
each passenger who has made full or partial payment for future
passage on the named vessel(s) an interest in the Escrow Account
equal to such payment. Escrow Agent is hereby notified of and
acknowledges such pledges. Customers' instructions to Escrow Agent
to release funds from the Escrow Account as described in this
Agreement shall constitute a certification by Customer of the
release of pledge with respect to such funds due to completed,
canceled or terminated cruises. Furthermore, Escrow Agent agrees to
hold funds in the Escrow Account until directed by Customer or a
court order to release such funds as described in this Agreement.
Escrow Agent shall accept instructions only from Customer, acting
on its own behalf or as agent for its passengers, and shall not
have any obligations at any time to act pursuant to instructions of
Customer's passengers or any other third parties except as
expressly described herein. Escrow Agent hereby waives any right of
offset to which it is or may become entitled with regard to the
funds on deposit in the Escrow Account which constitute Unearned
Passenger Revenue.
12. Customer agrees to provide to the Escrow Agent all
information necessary to facilitate the administration of this
Agreement and the Escrow Agent may rely upon any information so
provided.
13. Customer hereby warrants and represents that it is a
corporation in good standing in its State of organization and that
is qualified to do business in the State of . Customer further
warrants and represents that (i) it possesses full power and
authority to enter into this Agreement and fulfill its obligations
hereunder and (ii) that the execution, delivery and performance of
this Agreement have been authorized and approved by all required
corporate actions.
14. Escrow Agent hereby warrants and represents that it is a
national banking association in good standing. Escrow Agent further
warrants and represents that (i) it has full power and authority to
enter into this Agreement and fulfill its obligations hereunder and
(ii) that the execution, delivery and performance of this Agreement
have been authorized and approved by all required corporate
actions.
15. This Agreement shall have a term of one (1) year and shall
be automatically renewed for successive one (1) year terms unless
notice of intent not to renew is delivered to the other party to
this Agreement and to the Commission at least 90 days prior to the
expiration of the current term of this Agreement. Notice shall be
given by certified mail to the parties at the addresses provided in
Paragraph 25 below. Notice shall be given by certified mail to the
Commission at the address specified in this Agreement.
16. (a) Customer hereby agrees to indemnify and hold harmless
Escrow Agent against any and all claims, losses, damages,
liabilities, cost and expenses, including litigation, arising
hereunder, which might be imposed or incurred on Escrow Agent for
any acts or omissions of the Escrow Agent or Customer, not caused
by the negligence or willful misconduct of the Escrow Agent. The
indemnification set forth herein shall survive the resignation or
removal of the Escrow Agent and the termination of this
agreement.
(b) In the event of any disagreement between parties which
result in adverse claims with respect to funds on deposit with
Escrow Agent or the threat thereof, Escrow Agent may refuse to
comply with any demands on it with respect thereto as long as such
disagreement shall continue and in so refusing, Escrow Agent need
not make any payment and Escrow Agent shall not be or become liable
in any way to Customer or any third party (whether for direct,
incidental, consequential damages or otherwise) for its failure or
refusal to comply with such demands and it shall be entitled to
continue so to refrain from acting and so refuse to act until such
conflicting or adverse demands shall finally terminate by mutual
written agreement acceptable to Escrow Agent or by a final,
non-appealable order of a court of competent jurisdiction.
17. Escrow Agent shall be entitled to such compensation for its
services hereunder as may be agreed upon from time to time by
Escrow Agent and Customer and which shall initially be set forth in
a separate letter agreement between Escrow Agent and Customer. This
Agreement shall not become effective until such letter agreement
has been executed by both parties hereto and confirmed in writing
to the Commission.
18. Customer may terminate this Agreement and engage a successor
escrow agent, after giving at least 90 days written termination
notice to Escrow Agent prior to terminating Escrow Agent if such
successor agent is a commercial bank whose passbook accounts are
insured by the Federal Deposit Insurance Corporation and such
successor agrees to the terms of this agreement, or if there is a
new agreement then such termination shall not be effective until
the new agreement is approved in writing by the Commission. Upon
giving the written notice to Customer and the Commission, Escrow
Agent may terminate any and all duties and obligations imposed on
Escrow Agent by this Agreement effective as of the date specified
in such notice, which date shall be at least 90 days after the date
such notice is given. All escrowed funds as of the termination date
specified in the notice shall be turned over to the successor
escrow agent, or if no successor escrow agent has been named within
90 days after the giving of such notice, then all such escrowed
funds for sailing scheduled to commence after the specified
termination date shall be returned to the person who paid such
passage fares upon written approval of the Commission. In the event
of any such termination where the Escrow Agent shall be returning
payments to the passengers, then Escrow Agent shall request from
Customer a list of passenger names, addresses, deposit/fare amounts
and other information needed to make refunds. On receipt of such
list, Escrow Agent shall return all passage fares held in the
Escrow Account as of the date of termination specified in the
notice to the passengers, excepting only amounts Customer is
entitled to receive pursuant to the terms of this Agreement for
cruises completed through the termination date specified in the
notice, and all interest which shall be paid to Customer.
In the event of termination of this Agreement and if alternative
evidence of financial responsibility has been accepted by the
Commission and written evidence satisfactory to Escrow Agent of the
Commission's acceptance is presented to Escrow Agent, then Escrow
Agent shall release to Customer all passage fares held in the
Escrow Account as of the date of termination specified in the
notice. In the event of any such termination where written evidence
satisfactory to Escrow Agent of the Commission's acceptance has not
been presented to Escrow Agent, then Escrow Agent shall request
from Customer a list of passenger names, addresses, deposit/fare
amounts and other information needed to make refunds. On receipt of
such list, Escrow Agent shall return all passage fares held in the
Escrow Account as of the date of termination specified in the
notice to the passengers, excepting only amounts Customer is
entitled to receive pursuant to the terms of this Agreement for
cruises completed through the termination date specified in the
notice, and all interest which shall be paid to Customer. Upon
termination, Customer shall pay all costs and fees previously
earned or incurred by Escrow Agent through the termination
date.
19. Neither Customer nor Escrow Agent shall have the right to
sell, pledge, hypothecate, assign, transfer or encumber funds or
assets in the Escrow Account except in accordance with the terms of
this Agreement.
20. This Agreement is for the benefit of the parties hereto and,
accordingly, each and every provision hereof shall be enforceable
by any or each or both of them. Additionally, this Agreement shall
be enforceable by the Commission. However, this Agreement shall not
be enforceable by any other party, person or entity whatsoever.
21. (a) No amendments, modifications or other change in the
terms of this Agreement shall be effective for any purpose
whatsoever unless agreed upon in writing by Escrow Agent and
Customer and approved in writing by the Commission.
(b) No party hereto may assign its rights or obligations
hereunder without the prior written consent of the other, and
unless approved in writing by the Commission. The merger of
Customer with another entity or the transfer of a controlling
interest in the stock of Customer shall constitute an assignment
hereunder for which prior written approval of the Commission is
required, which approval shall not be unreasonably withheld.
22. The foregoing provisions shall be binding upon undersigned,
their assigns, successors and personal representative.
23. The Commission shall have the right to inspect the books and
records of the Escrow Agent and those of Customer as related to the
Escrow Account. In addition, the Commission shall have the right to
seek copies of annual audited financial statements and other
financial related information.
24. All investments, securities and assets maintained under the
Escrow Agreement will be physically located in the United
States.
25. Notices relating to this Agreement shall be sent to Customer
at (address) and to Escrow Agent at (address) or to such other
address as any party hereto may hereafter designate in writing. Any
communication sent to the Commission or its successor organization
shall be sent to the following address: Bureau of Certification and
Licensing, Federal Maritime Commission, 800 North Capitol NW.,
Washington, DC 20573-0001.
26. This agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and
all of which when taken together shall constitute one and the same
instrument.
27. This Agreement is made and delivered in, and shall be
construed in accordance with the laws of the State ____ of without
regard to the choice of law rules.
IN WITNESS WHEREOF, the undersigned have each caused this
Agreement to be executed on their behalf as of the date first above
written.
By: Title: By: Title: EXHIBIT A
ESCROW AGREEMENT, dated _______ by and between (Customer) and
(Escrow Agent).
Passenger Vessels Owned or Chartered ANNEX 1 RECOMPUTATION
CERTIFICATE To: Federal Maritime Commission And To: (“Bank”)
The undersigned, the Controller of __________ hereby furnishes
this Recomputation Certificate pursuant to the terms of the Escrow
Agreement dated ________, between the Customer and (“Bank”). Terms
herein shall have the same definitions as those in such Escrow
Agreement and Federal Maritime Commission regulations.
I. Unearned Passenger Revenue as of (“Date”) was: $______ a.
Additions to unearned Passenger Revenue since such date were: 1.
Passenger Receipts: $______ 2. Other (Specify) $______ 3. Total
Additions: $______ b. Reductions in Unearned Passenger Revenue
since such date were: 1. Completed Cruises: $______ 2. Refunds and
Cancellations: $______ 3. Other (Specify) $______ 4. Total
Reductions: $______ II. Unearned Passenger Revenue as of the date
of this Recomputation Certificate is: $______ a. Excess Escrow
Amount $______ III. Plus the Required Fixed Amount: $______ IV.
Total Required in Escrow: $______ V. Current Balance in Escrow
Account: $______ VI. Amount to be Deposited in Escrow Account:
$______ VII. Amount of Escrow Account available to Operator:
$______ VIII. I declare under penalty of perjury that the above
information is true and correct. Dated: (Signature) Name: Title:
(Signature) Name: Title: [78 FR 13281, Feb. 27, 2013]