Pt. 540, Subpt. A, App. A
Appendix A to Subpart A of Part 540—Example of Escrow Agreement for Use Under
46 CFR 540.5
1. Legal name(s), state(s) of incorporation, description of business(es), trade name(s) if any, and domicile(s) of each party.
2. Whereas, [name of the passenger vessel operator] (“Operator”) and/or [name of the issuer of the passenger ticket] (“Ticket Issuer”) wish(es) to establish an escrow account to provide for the indemnification of certain of its passengers utilizing [name vessel(s)] in the event of nonperformance of transportation to which such passengers would be entitled, and to establish the Operator's and/or Ticket Issuer's financial responsibility therefor; and
3. Whereas, [name of escrow agent] (“the Escrow Agent”) wishes to act as the escrow agent of the escrow account established hereunder.
4. The Operator and/or Ticket Issuer will determine, as of the day prior to the opening date, the total amounts of U.S. unearned passenger revenues (“UPR”) which it had in its possession. Unearned passenger revenues are defined as [incorporate the elements of 46 CFR 540.2(i) ].
5. The Operator and/or Ticket Issuer shall on the opening date deposit an amount equal to UPR as determined above, plus a cash amount equal to [amount equal to no less than 10% of the Operator's and/or Ticket Issuer's UPR on the date within the 2 fiscal years immediately prior to the filing of the escrow agreement which reflects the greatest amount of UPR, except that the Commission, for good cause shown, may consider a time period other than the previous 2-fiscal-year requirement or other methods acceptable to the Commission to determine the amount of coverage required] (“initial deposit”).
6. The Operator and/or Ticket Issuer may at any time deposit additional funds into the account.
7. The Operator and/or Ticket Issuer shall, at the end of each business week, recompute UPR by first computing:
A. the amount by which UPR has decreased due to: (1) Refunds due to cancellations; (2) amount of cancellation fees assessed in connection with (1) above; and (3) the amount earned from completed cruises; and
B. the amount by which UPR has increased due to receipts from passengers for future water transportation and all other related accommodations and services not yet performed.
The difference between the above amounts is the amount by which UPR has increased or decreased (“new UPR”). If the new UPR plus the amount of the initial deposit exceeds the amount in the escrow account, the Operator and/or Ticket Issuer shall deposit the funds necessary to make the account balance equal to UPR plus the initial deposit. If the account balance exceeds new UPR plus the initial deposit, the balance shall be available to the Operator and/or Ticket Issuer. The information computed in paragraph 7 shall be furnished to the Commission and the Escrow Agent in the form of a recomputation certificate signed and certified by a competent officer of the Operator and/or Ticket Issuer. Copies sent to the Commission are to be addressed to the Director, Bureau of Tariffs, Certification and Licensing, Federal Maritime Commission, Washington, D.C. 20573.
8. A monthly report shall be prepared by the Escrow Agent and provided to the Operator and/or Ticket Issuer and the Commission within 15 days of the end of each month and shall list the investment assets of the account, their original cost, their current market value, and the beginning and ending balance of the account.
9. The Operator's and/or Ticket Issuer's independent auditors shall prepare quarterly reports, such reports to be furnished to the Escrow Agent and the Commission, and any shortfall is to be covered within one business day.
10. The Escrow Agent shall invest the funds of the account in qualified investments as directed by the Operator and/or Ticket Issuer. Some examples of qualified investments are, to the extent permitted by law:
(a) Government obligations of the United States or its agencies;
(b) Certificates of deposit, time deposits or acceptances of any bank, savings institution or trust company whose debt obligations are in the two highest categories rated by Standard and Poor's or Moody's, or which is itself rated in the two highest categories by Keefe, Bryette and Woods;
(c) Commercial paper similarly rated;
(d) Certificates or time deposits issued by any bank, savings institution or trust company when fully insured by the FDIC or the FSLIC;
(e) Money market funds utilizing securities of the same quality as above; and/or
(f) Corporate bonds of the three highest categories, as rated by Standard and Poor's or Moody's.
11. Income derived from the investments shall be credited to the escrow account.
12. The purpose of the escrow agreement is to establish the financial responsibility of the Operator and/or Ticket Issuer pursuant to section 3 of Public Law 89-777 (46 U.S.C. 44101-441 02, 44104-44106), approved November 5, 1966, and the account is to be utilized to discharge the Operator's and/or Ticket Issuer's legal liability to indemnify passengers for nonperformance of transportation via the [name of vessel(s)]. The Escrow Agent is to make such payments on instructions from the Operator and/or Ticket Issuer, or, in the absence of such instructions, 21 says after final judgment against the Operator and/or Ticket Issuer in a U.S. Federal or State court having jurisdiction. The Operator and/or Ticket Issuer will pledge to each passenger holding a ticket for future passage on the Operator's/Ticket Issuer's vessel(s) an interest in the Escrow Account equal to the Fares amount shown on the face of such ticket. The Escrow Agent agrees to act as nominee for each passenger until transportation is performed or until passenger has been compensated.
13. Escrow Agent shall waive right to offset.
14. The Operator and/or Ticket Issuer will indemnify and hold Escrow Agent harmless.
15. Statement of the parties' agreement concerning warranty of bona fides by the Operator and/or Ticket Issuer and Escrow Agent.
16. Statement of the parties' agreement concerning fees to be paid by the Operator and/or Ticket Issuer to Escrow Agent, reimbursable expenses to be paid by the Operator and/or Ticket Issuer to Escrow Agent. A statement that fees for subsequent terms of agreement are to be negotiated.
17. Statement of the parties' agreement concerning the term of agreement and renewal/termination procedures.
18. Statement of the parties' agreement concerning procedures for appointment of successor Escrow Agent.
19. Statement that disposition of funds on termination shall be to the Operator and/or Ticket Issuer, if evidence of the Commission's acceptance of alternative evidence of financial responsibility is furnished; otherwise, all passage fares held for uncompleted voyages are to be returned to the passengers. The Operator and/or Ticket Issuer shall pay all fees previously earned to the Escrow Agent.
20. The agreement may be enforced by the passengers, the Escrow Agent, the Operator and/or Ticket Issuer or by the Federal Maritime Commission.
21. All assets maintained under the escrow agreement shall be physically located in the United Sates and may not be transferred, sold, assigned, encumbered, etc., except as provided in the agreement.
22. The Commission has the right to examine the books and records of the Operator and/or Ticket Issuer and the Escrow Agent, as related to the escrow account, and the agreement may not be modified unless agreed in writing by the Operator and/or Ticket Issuer and Escrow Agent and approved in writing by the Commission.
[57 FR 41891, Sept. 14, 1992, as amended at 74 FR 50731, Oct. 1, 2009]