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

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

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

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

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

All appropriations, grants, contractualreimbursements, and other funds not designated for this purpose may be used topay for the proper general expenses and to carry out the purposes of thecorporation.

(c)  The corporation shall purchase qualifiedsecurities issued by an enterprise only after:

(1)  Receiving:

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

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

(C)  A statement of the potential economicimpact of the enterprise, including the number, location, and types of jobsexpected to be created; and

(D)  Any other information as the corporationshall require;

(2)  Determining, based upon the applicationsubmitted, that:

(A)  The proceeds of the investment will beused only to cover the seed capital needs of the enterprise, except asauthorized in this section;

(B)  The enterprise has a reasonable chance ofsuccess;

(C)  The enterprise has the reasonablepotential to create employment within the State and offers employmentopportunities to residents;

(D)  The coordinating entrepreneur and otherfounders of the enterprise have already made or are prepared to make asubstantial financial and time commitment to the enterprise;

(E)  The securities to be purchased arequalified securities;

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

(G)  Binding commitments have been made to thecorporation by the enterprise for adequate reporting of financial data to thecorporation, which shall include a requirement for an annual or other periodicaudit of the books of the enterprise, and for control by the corporation thatit considers prudent over the management of the enterprise, in order to protectthe investment of the corporation, including membership on the board ofdirectors of the enterprise, ownership of voting stock, input in managementdecisions, and the right of access to the financial and other records of the enterprise;and

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

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

(e)  The corporation shall not make investmentsin qualified securities issued by an enterprise in excess of the followinglimits:

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

(2)  The corporation shall not own securities representingmore than forty-nine per cent of the voting stock of any one enterprise at thetime of purchase by the corporation after giving effect to the conversion ofall outstanding convertible securities of the enterprise, except that in theevent of severe financial difficulty of the enterprise, threatening theinvestment of the corporation in the enterprise, a greater percentage of thosesecurities may be owned by the corporation; and

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

(f)  No investment, loan, grant, or use ofcorporate funds for the purposes of this chapter shall be subject to chapter42F. [L 1994, c 264, pt of §1; am L 1997, c 190, §6; am L 1998, c 111, §8; am L2004, c 216, §20]