§163D-17 - Hawaii agricultural development revolving fund; established; use of corporation funds.

§163D-17 Hawaii agricultural development
revolving fund; established; use of corporation funds. (a) There is
established the Hawaii agricultural development revolving fund, to which shall
be credited any state appropriations to the fund or other moneys made available
to the fund, to be expended as directed by the corporation.

(b) The corporation shall hold the fund in an
account or accounts separate from other funds. The corporation shall invest
and reinvest the fund and the income thereof to:

(1) Purchase qualified securities issued by
enterprises for the purpose of raising seed capital; provided that the
investment shall comply with the requirements of this chapter;

(2) Make grants, loans, and provide other monetary
forms of assistance necessary to carry out the purposes of this chapter; and

(3) Purchase securities as may be lawful investments
for fiduciaries in the State.

All appropriations, grants, contractual
reimbursements, and other funds not designated for this purpose may be used to
pay for the proper general expenses and to carry out the purposes of the
corporation.

(1) Receiving:

(A) An application from the enterprise
containing a business plan, which is consistent with the business and
agricultural development plan, including a description of the enterprise and
its management, product, and market;

(B) A statement of the amount, timing, and
projected use of the capital required;

(C) A statement of the potential economic
impact of the enterprise, including the number, location, and types of jobs
expected to be created; and

(D) Any other information as the corporation
shall require;

(2) Determining, based upon the application
submitted, that:

(A) The proceeds of the investment will be
used only to cover the seed capital needs of the enterprise, except as
authorized in this section;

(B) The enterprise has a reasonable chance of
success;

(C) The enterprise has the reasonable
potential to create employment within the State and offers employment
opportunities to residents;

(D) The coordinating entrepreneur and other
founders of the enterprise have already made or are prepared to make a
substantial financial and time commitment to the enterprise;

(E) The securities to be purchased are
qualified securities;

(F) There is reasonable possibility that the
corporation will recoup at least its initial investment; and

(G) Binding commitments have been made to the
corporation by the enterprise for adequate reporting of financial data to the
corporation, which shall include a requirement for an annual or other periodic
audit of the books of the enterprise, and for control by the corporation that
it considers prudent over the management of the enterprise, in order to protect
the investment of the corporation, including membership on the board of
directors of the enterprise, ownership of voting stock, input in management
decisions, and the right of access to the financial and other records of the enterprise;
and

(3) Entering into a binding agreement with the
enterprise concerning the manner of payback by the enterprise of the funds
advanced, granted, loaned, or received from the corporation. The manner of
payback may include the payment of dividends, returns from the public sale of
corporate securities or products, royalties, and other methods of payback
acceptable to the corporation. In determining the manner of payback the
corporation shall establish a rate of return or rate of interest to be paid on
any investment, loan, or grant of corporation funds under this section.

(d) If the corporation makes a direct
investment, it shall also find that a reasonable effort has been made to find a
professional investor to make an investment in the enterprise as a coventure,
and that the effort was unsuccessful. The findings, when made by the
corporation, shall be conclusive.

(e) The corporation shall not make investments
in qualified securities issued by an enterprise in excess of the following
limits:

(1) Not more than $500,000 shall be invested in the
securities of any one enterprise, except that more than a total of $500,000 may
be invested in the securities of any one enterprise, if the corporation finds,
after its initial investment, that additional investments in that enterprise
are required to protect the initial investment of the corporation, and the
other findings set forth in subsections (d) and (e) are made as to the
additional investment;

(2) The corporation shall not own securities representing
more than forty-nine per cent of the voting stock of any one enterprise at the
time of purchase by the corporation after giving effect to the conversion of
all outstanding convertible securities of the enterprise, except that in the
event of severe financial difficulty of the enterprise, threatening the
investment of the corporation in the enterprise, a greater percentage of those
securities may be owned by the corporation; and

(3) Not more than fifty per cent of the assets of the
corporation shall be invested in direct investments at any time.

(f) No investment, loan, grant, or use of
corporate funds for the purposes of this chapter shall be subject to chapter
42F. [L 1994, c 264, pt of §1; am L 1997, c 190, §6; am L 1998, c 111, §8; am L
2004, c 216, §20]