EXHIBIT 10
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (THE "ESCROW AGREEMENT") IS ENTERED INTO BY AND BETWEEN
FEDERAL MORTGAGE MANAGEMENT II, INC. (THE "COMPANY"), SOUTHTRUST ASSET
MANAGEMENT COMPANY OF FLORIDA (THE "ESCROW AGENT") AND EXECUTIVE WEALTH
MANAGEMENT SERVICES, INC. (THE "PLACEMENT AGENT").
BACKGROUND
THE COMPANY INTENDS TO OFFER FOR PUBLIC SALE PROMISSORY NOTES (IN SERIES
1996A-I, II AND III HAVING VARYING MATURITIES RANGING FROM 48 TO 72 MONTHS IN
AGGREGATE PRINCIPAL AMOUNT OF $5 MILLION (THE "NOTES"). SUCH NOTES WILL BE
PUBLICLY OFFERED IN FLORIDA AND SUCH OTHER STATES IN WHICH THE NOTES HAVE BEEN
QUALIFIED FOR SALE THROUGH THE BEST EFFORTS OF THE PLACEMENT AGENT (THE
"OFFERING"). THE TERMS OF THE NOTE OFFERING BY THE COMPANY PROVIDE THAT THE
COMPANY MUST SELL A MINIMUM PRINCIPAL AMOUNT OF NOTES OF $1,500,000 ON OR BEFORE
THE TERMINATION OF THE INITIAL OFFERING PERIOD, WHICH INITIAL OFFERING PERIOD
SHALL CONCLUDE ON A DATE WHICH IS 90 DAYS FROM THE DATE THAT THE NOTE OFFERING
COMMENCES, WHICH DATE OF OFFERING CONCLUSION IS ANTICIPATED TO BE ______, 1997
(THE "OFFERING PERIOD"), UNLESS EXTENDED. THE TERMS OF THE NOTE OFFERING FURTHER
PROVIDE THAT UPON THE SALE OF THE MINIMUM PRINCIPAL AMOUNT OF NOTES
($1,500,000), THE COMPANY MAY CONTINUE TO SELL ADDITIONAL NOTESS OF THE SERIES
UNTIL AN AGGREGATE OF $5 MILLION IN PRINCIPAL AMOUNT OF NOTES HAS BEEN SOLD. THE
COMPANY AND THE PLACEMENT AGENT DESIRE TO ESTABLISH ESCROW ARRANGEMENTS WHEREBY
THE PROCEEDS REALIZED FROM THE SALE OF THE INITIAL $1,500,000 PRINCIPAL AMOUNT
OF NOTES (OF ANY CATEGORY OF THE SERIES) WILL BE DEPOSITED IN AN ESCROW ACCOUNT
PENDING THE SUCCESSFUL ATTAINMENT AND TIMELY SALE OF SUCH MINIMUM PRINCIPAL
AMOUNT OF NOTES ($1,500,000). THE COMPANY AND THE PLACEMENT AGENT, BY MEANS OF
THIS AGREEMENT, DESIRE TO APPOINT THE ESCROW AGENT AS THE ESCROW AGENT WITH
RESPECT TO THE ACCUMULATION, INVESTMENT AND REINVESTMENT OF THE PROCEEDS
REALIZED FROM THE SALE OF THE INITIAL $1,500,000 PRINCIPAL AMOUNT OF NOTES,
WHICH PROCEEDS ARE TO BE DEPOSITED IN ESCROW HEREUNDER (THE "ESCROWED
PROCEEDS").
AGREEMENT
1. ESTABLISHMENT OF ESCROW ACCOUNT. ON OR PRIOR TO THE DATE OF THE COMMENCEMENT
OF THE OFFERING, THE PARTIES SHALL ESTABLISH AN ESCROW ACCOUNT WITH THE ESCROW
AGENT, WHICH ESCROW ACCOUNT SHALL BE ENTITLED FEDERAL MORTGAGE MANAGEMENT II,
INC. - ESCROW ACCOUNT (THE "ESCROW ACCOUNT"). THE PLACEMENT AGENT WILL INSTRUCT
SUBSCRIBERS TO MAKE CHECKS FOR SUBSCRIPTIONS PAYABLE TO THE ORDER OF THE ESCROW
AGENT DURING THE PERIOD OF THE ESCROW. ANY CHECKS RECEIVED THAT ARE MADE PAYABLE
TO A PARTY OTHER THAN THE ESCROW AGENT SHALL BE RETURNED TO THE PLACEMENT AGENT.
2. ESCROW PERIOD. THE ESCROW PERIOD SHALL BEGIN WITH THE COMMENCEMENT OF THE
OFFERING PERIOD AND SHALL TERMINATE UPON THE EARLIER TO OCCUR OF THE FOLLOWING
DATES:
(A) THE DATE UPON WHICH THE ESCROW AGENT CONFIRMS THAT IT HAS RECEIVED IN
THE ESCROW ACCOUNT ESCROWED PROCEEDS OF $1,500,000 IN DEPOSITED FUNDS (THE
"MINIMUM REQUIREMENT"); OR
(B) MIDNIGHT,_______________________- (UNLESS EXTENDED AS PERMITTED IN THE
OFFERING DOCUMENT FOR AN ADDITIONAL 90 DAYS AT THE SOLE OPTION OF THE COMPANY
WITH A COPY OF SUCH EXTENSION TO THE ESCROW AGENT); OR
(C) THE DATE UPON WHICH A DETERMINATION IS MADE BY THE COMPANY TO TERMINATE
THE NOTE OFFERING PRIOR TO ATTAINMENT OF THE MINIMUM REQUIREMENT.
DURING THE ESCROW PERIOD, THE COMPANY AND THE PLACEMENT AGENT ARE AWARE AND
UNDERSTAND THAT THEY ARE NOT ENTITLED TO ANY FUNDS RECEIVED INTO ESCROW AND NO
AMOUNTS DEPOSITED IN THE ESCROW ACCOUNT SHALL BECOME THE PROPERTY OF THE COMPANY
OR ANY OTHER ENTITY, OR BE SUBJECT TO THE DEBTS OF THE COMPANY OR ANY OTHER
ENTITY.
3. DEPOSITS INTO THE ESCROW ACCOUNT. THE PLACEMENT AGENT AGREES THAT IT SHALL
PROMPTLY DELIVER ALL MONIES RECEIVED FROM SUBSCRIBERS FOR THE PAYMENT OF THE
INITIAL $1,500,000 PRINCIPAL AMOUNT OF NOTES FOR DEPOSIT IN THE ESCROW ACCOUNT
TOGETHER WITH A SUBSCRIPTION AGREEMENT FOR EACH SALE, WHICH SUBSCRIPTION
AGREEMENT SHALL SET FORTH, AMONG OTHER THINGS, THE SUBSCRIBER'S NAME AND
ADDRESS, THE PRINCIPAL AMOUNT OF NOTES PURCHASED, THE AMOUNT PAID THEREFOR, A
COMPLETED FORM W-9 (WHEN AND IF REQUIRED) AND WHETHER THE CONSIDERATION RECEIVED
WAS IN THE FORM OF A CHECK, DRAFT, OR MONEY ORDER. ALL MONIES SO DEPOSITED IN
THE ESCROW ACCOUNT ARE HEREIN REFERRED TO AS THE ESCROWED PROCEEDS.
4. DISBURSEMENTS FROM THE ESCROW ACCOUNT. IN THE EVENT THE ESCROW AGENT DOES
NOT RECEIVE THE MINIMUM REQUIREMENT OF $1,500,000 PRIOR TO THE TERMINATION OF
THE OFFERING, THE ESCROW AGENT SHALL REFUND TO EACH SUBSCRIBER THE AMOUNT
RECEIVED FROM THE SUBSCRIBER, WITHOUT DEDUCTION, PENALTY, OR EXPENSE TO THE
SUBSCRI BER, AND THE ESCROW AGENT SHAL1 NOTI FY THE COMPANY AND THE PLACEMENT
AGENT OF ITS DISTRIBUTION OF THE FUNDS. THE ESCROWED PROCEEDS RETURNED TO EACH
SUBSCRIBER SHALL BE FREE AND CLEAR OF ANY AND ALL CLAIMS OF THE COMPANY OR ANY
OF ITS CREDITORS, AND SHALL INCLUDE INTEREST AS HEREIN PROVIDED.
IN THE EVENT THE ESCROW AGENT DOES RECEIVE THE PROCEEDS REPRESENTING THE
MINIMUM REQUIREMENT OR MORE PRIOR TO TERMINATION OF THE ESCROW PERIOD, THE
ESCROWED PROCEEDS, TOGETHER WITH ANY INTEREST EARNED THEREON, SHALL BE RELEASED
TO THE "TRUSTEE", XXXXXXX XXXX, P.A. UNDER THAT CERTAIN INDENTURE AND CUSTODY
AGREEMENT DATED _____ BETWEEN THE COMPANY AND THE TRUSTEE; PROVIDED, HOWEVER,
THAT IN NO EVENT WILL THE ESCROWED PROCEEDS BE RELEASED TO THE TRUSTEE UNTIL
SUCH AMOUNT IS RECEIVED BY THE ESCROW AGENT IN COLLECTED FUNDS. FOR PURPOSES OF
THIS AGREEMENT, THE TERM "COLLECTED FUNDS" SHALL MEAN ALL FUNDS RECEIVED BY THE
ESCROW AGENT WHICH HAVE CLEARED NORMAL BANKING CHANNELS AND ARE IN THE FORM OF
CASH.
5. COLLECTION PROCEDURE. THE ESCROW AGENT IS HEREBY AUTHORIZED TO FORWARD EACH
CHECK FOR COLLECTION AND, UPON COLLECTION OF THE PROCEEDS OF EACH CHECK, DEPOSIT
THE COLLECTED PROCEEDS IN THE ESCROW ACCOUNT. AS AN ALTERNATIVE, THE ESCROW
AGENT MAY TELEPHONE THE BANK ON WHICH THE CHECK IS DRAWN TO CONFIRM THAT THE
CHECK HAS BEEN PAID.
ANY CHECK RETURNED UNPAID TO THE ESCROW AGENT SHALL BE RETURNED TO THE
PLACEMENT AGENT. IN SUCH CASES, THE ESCROW AGENT WILL PROMPTLY NOTIFY THE
COMPANY OF SUCH RETURN.
IF THE COMPANY REJECTS ANY SUBSCRIPTION FOR WHICH THE ESCROW AGENT HAS
ALREADY COLLECTED FUNDS, THE ESCROW AGENT SHALL PROMPTLY ISSUE A REFUND CHECK TO
THE REJECTED SUBSCRIBER. IF THE COMPANY REJECTS ANY SUBSCRIPTION FOR WHICH THE
ESCROW AGENT HAS NOT YET COLLECTED FUNDS BUT HAS SUBMITTED THE SUBSCRIBER'S
CHECK FOR COLLECTION, THE ESCROW AGENT SHALL PROMPTLY ISSUE A CHECK IN THE
AMOUNT OF THE SUBSCRIBER'S CHECK TO THE REJECTED SUBSCRIBER AFTER THE ESCROW
AGENT HAS CLEARED SUCH FUNDS. IF THE ESCROW AGENT HAS NOT YET SUBMITTED A
REJECTED SUBSCRIBER'S CHECK FOR COLLECTION, THE ESCROW AGENT SHALL PROMPTLY
REMIT THE SUBSCRIBER'S CHECK DIRECTLY TO THE SUBSCRIBER.
6. INVESTMENT OF ESCROW AMOUNT. THE ESCROW AGENT SHALL INVEST THE ESCROWED
PROCEEDS ONLY IN SUCH ACCOUNTS OR INVESTMENTS OFFERED BY THE ESCROW AGENT AS THE
COMPANY MAY SPECIFY BY WRITTEN NOTICE. THE COMPANY MAY ONLY SPECIFY INVESTMENT
IN (1) BANK ACCOUNTS, (2) BANK MONEY-MARKET ACCOUNTS, (3) SHORT-TERM
CERTIFICATES OF DEPOSIT ISSUED BY A BANK, OR (4) SHORT-TERM SECURITIES ISSUED OR
GUARANTEED BY THE U.S. GOVERNMENT.
7. INTEREST EARNED ON ESCROW ACCOUNT. IN THE EVENT THAT THE ESCROW AGENT
EFFECTS A RETURN OF THE NOTE SUBSCRIPTION PROCEEDS TO NOTE SUBSCRIBERS AS
DESCRIBED IN SECTION 4 HEREOF, THE ESCROW AGENT SHALL, WITH RESPECT TO INTEREST
EARNED AS A RESULT OF THE INVESTMENT OF THE ESCROWED PROCEEDS, IF ANY IS EARNED,
PAY SUCH INTEREST TO THE NOTE SUBSCRIBERS, TAKING INTO ACCOUNT THE AMOUNT OF THE
NOTE SUBSCRIPTION PROCEEDS DELIVERED WITH RESPECT TO EACH SUBSCRIBER AND THE
PERIOD OF TIME THAT SUCH NOTE SUBSCRIPTION PROCEEDS WERE INVESTED BY THE ESCROW
AGENT. IN EFFECTING SUCH INTEREST CALCULATION, THE ESCROW AGENT MAY EXCLUSIVELY
RELY ON THE COMPUTATIONS EFFECTED BY THE COMPANY AND PROVIDED TO THE ESCROW
AGENT. IN THE EVENT THAT THE NOTE SUBSCRIPTION PROCEEDS ARE DELIVERED TO THE
TRUSTEE AS A RESULT OF THE SUCCESSFUL ATTAINMENT OF THE MINIMUM REQUIREMENT, THE
ESCROW AGENT SHALL DIRECT SUCH INTEREST EARNED ON THE ESCROWED PROCEEDS TO THE
TRUSTEE. IN ALL EVENTS, THE COMPANY SHALL BE RESPONSIBLE FOR THE FEES OF THE
ESCROW AGENT.
8. COMPUTATIONS. ALL DETERMINATIONS OF SUMS PAYABLE TO NOTE SUBSCRIBERS, WITH
RESPECT TO THE BALANCE OF SUBSCRIPTION PROCEEDS TO BE RETURNED TO SUBSCRIBERS,
SHALL BE MADE BY THE COMPANY AND DELIVERED TO THE ESCROW AGENT IN THE FORM OF A
CERTIFICATE FROM THE COMPANY AND THE ESCROW AGENT MAY EXCLUSIVELY RELY ON SUCH
CERTIFICATE. ALL DISTRIBUTIONS OF INTEREST TO NOTE SUBSCRIBERS, IF ANY ARE MADE,
SHALL BE EFFECTED BY THE COMPANY.
9. NO IMPLIED DUTIES OF ESCROW AGENT. THE ESCROW AGENT UNDERTAKES TO PERFORM
ONLY SUCH DUTIES AS ARE EXPRESSLY SET FORTH IN THIS ESCROW AGREEMENT AND NO
DUTIES OR OBLIGATIONS OF THE ESCROW AGENT SHALL BE IMPLIED IN THIS ESCROW
AGREEMENT, OR OTHERWISE.
10. RELIANCE OF ESCROW AGENT ON DOCUMENTS. THE ESCROW AGENT MAY ACT IN RELIANCE
UPON ANY WRITING OR INSTRUMENT OR SIGNATURE WHICH IT, IN GOOD FAITH, BELIEVES TO
BE GENUINE; MAY ASSUME THE VALIDITY AND ACCURACY OF ANY STATEMENT OR ASSERTION
CONTAINED IN SUCH A WRITING OR INSTRUMENT; AND MAY ASSUME THAT ANY PERSON
PURPORTING TO GIVE ANY WRITING, NOTICE, ADVICE, OR INSTRUCTIONS IN CONNECTION
WITH THE PROVISIONS OF THIS ESCROW AGREEMENT HAS BEEN DULY AUTHORIZED TO DO SO.
THE ESCROW AGENT SHALL NOT BE LIABLE IN ANY MANNER FOR THE SUFFICIENCY OR
CORRECTNESS AS TO FORM, EXECUTION, OR VALIDITY OF ANY INSTRUMENT OR COPY OF ANY
INSTRUMENT DEPOSITED IN ESCROW, NOR AS TO THE IDENTITY, AUTHORITY, OR RIGHT OF
ANY PERSON WHO EXECUTED THE SAME; AND ITS DUTIES SHALL BE LIMITED TO THOSE
PROVIDED IN THIS ESCROW AGREEMENT.
11. INDEMNIFICATION OF ESCROW AGENT. UNLESS THE ESCROW AGENT DISCHARGES ANY OF
ITS DUTIES UNDER THIS ESCROW AGREEMENT IN A GROSSLY NEGLIGENT MANNER OR IS
GUILTY OF WILLFUL MISCONDUCT WITH REGARD TO ITS DUTIES UNDER THIS ESCROW
AGREEMENT, THE COMPANY SHALL INDEMNIFY THE ESCROW AGENT AND HOLD THE ESCROW
AGENT HARMLESS FROM ANY AND ALL CLAIMS, LIABILITIES, LOSSES, ACTIONS, SUITS, OR
PROCEEDINGS, OR OTHER EXPENSES, FEES, OR CHARGES OF ANY CHARACTER OR NATURE,
WHICH IT MAY INCUR OR WITH WHICH IT MAY BE THREATENED BY REASON OF ITS ACTING AS
ESCROW AGENT UNDER THIS ESCROW AGREEMENT; AND SHALL INDEMNIFY THE ESCROW AGENT
AGAINST ANY AND ALL EXPENSES INCLUDING REASONABLE ATTORNEYS' FEES AND THE COST
OF DEFENDING ANY ACTION, SUIT, OR PROCEEDING OR RESISTING ANY CLAIM IN SUCH
CAPACITY.
12. DISCRETION OF ESCROW AGENT TO FILE AN INTERGLEADER ACTION-OR OTHER SUIT. IF
THE PARTIES, INCLUDING ANY SUBSCRIBER, SHALL BE IN DISAGREEMENT ABOUT THE
INTERPRETATION OF THIS ESCROW AGREEMENT, OR ABOUT THEIR RESPECTIVE RIGHTS AND
OBLIGATIONS, OR THE PROPRIETY OF ANY ACTION CONTEMPLATED BY THE ESCROW AGENT
UNDER THIS ESCROW AGREEMENT, THE ESCROW AGENT MAY, BUT SHALL NOT BE REQUIRED TO,
FILE AN ACTION IN INTERPLEADER OR OTHER SUIT TO RESOLVE SUCH DISAGREEMENT. THE
ESCROW AGENT SHALL BE INDEMNIFIED BY THE COMPANY FOR ALL COSTS AND REASONABLE
ATTORNEYS' FEES IN ITS CAPACITY AS ESCROW AGENT IN CONNECTION WITH ANY SUCH
INTERPLEADER ACTION OR OTHER SUIT AND SHALL BE FULLY PROTECTED IN SUSPENDING ALL
OR PART OF ITS ACTIVITIES UNDER THIS AGREEMENT UNTIL A JUDGMENT IN THE
INTERPLEADER ACTION OR OTHER SUIT IS ENTERED AND BECOMES FINAL.
13. CONSULTATION WITH COUNSEL . THE ESCROW AGENT MAY CONSULT WITH COUNSEL OF ITS
OWN CHOICE AND SHALL HAVE FULL AND COMPLETE AUTHORIZATION AND PROTECTION IN
ACCORDANCE WITH THE OPINION OF SUCH COUNSEL.
14. RESIGNATION OF ESCROW AGENT. THE ESCROW AGENT MAY RESIGN BY NOTICE TO THE
COMPANY GIVEN AT LEAST 30 DAYS PRIOR TO THE EFFECTIVE DATE OF RESIGNATION. IF A
SUCCESSOR ESCROW AGENT IS NOT APPOINTED BY THE COMPANY WITHIN THE 30-DAY OR
GREATER PERIOD, THE ESCROW AGENT MAY PETITION A COURT OF COMPETENT JURISDICTION
TO NAME A SUCCESSOR.
15. NOTICES. ALL NOTICES OR OTHER COMMUNICATION TO THE COMPANY, THE PLACEMENT
AGENT OR THE ESCROW AGENT SHALL BE IN WRITING AND SHALL BE DEEMED TO HAVE BEEN
PROPERLY GIVEN IF TRANSMITTED BY REGISTERED OR CERTIFIED MAIL OR HAND DELIVERY.
ALL NOTICES AND COMMUNICATION SHALL BE EFFECTIVE UPON RECEIPTS NOTICES SHALL BE
ADDRESSED AS FOLLOWS:
ESCROW AGENT:
SOUTHTRUST ASSET MANAGEMENT COMPANY OF FLORIDA
0000 XXXXXX XXXXXX, XXXXX 000
XXXXXXXX, XXXXXXX 00000
ATTN: XXXXX XXXXXXXX, VICE PRESIDENT
THE COMPANY:
FEDERAL MORTGAGE MANAGEMENT II, INC.
0000 XXXXXX XXXXXX, XXXXX 000
XXXXXXXX, XX 00000
ATTN: GUY S. XXXXX XXXXX, PRESIDENT
THE PLACEMENT AGENT:
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
0000 XXXXXX XXXXXX, XXXXX 000
XXXXXXXX, XX 00000
ATTN: GUY S. XXXXX XXXXX, PRESIDENT
16. COMPENSATION OF THE ESCROW AGENT. THE ESCROW AGENT SHALL BE COMPENSATED BY
THE COMPANY FOR ITS SERVICES UNDER THIS ESCROW AGREEMENT IN ACCORDANCE WITH THE
FEES SCHEDULED ON ANNEX I HERETO.
17. ENTIRE AGREEMENT. THIS ESCROW AGREEMENT CONSTITUTES THE ENTIRE AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE MODIFIED OR AMENDED IN ANY MANNER OTHER THAN
BY WRITTEN AGREEMENTS EXECUTED BY THE PARTIES.
18. GOVERNING LAW. THIS ESCROW AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA, EXCLUDING THE LAWS OF THE
STATE OF FLORIDA RELATING TO CONFLICT OF LAWS OF DIFFERENT JURISDICTIONS.
19. SEVERABILITY. IN CASE ANY ONE OR MORE PROVISIONS OF THIS ESCROW AGREEMENT
SHALL BE INVALID, ILLEGAL OR UNENFORCEABLE IN ANY RESPECT, THE VALIDITY OF THE
REMAINING PROVISIONS SHALL BE IN NO WAY AFFECTED.
20. CAPTIONS. CAPTIONS ARE USED ONLY FOR CONVENIENCE OF REFERENCE AND HAVE NO
OTHER SIGNIFICANCE OR EFFECT.
EXECUTED AS OF THE _________ DAY OF________________, 1996.
FEDERAL MORTGAGE MANAGEMENT II, INC.
BY __________________________
GUY S. XXXXX XXXXX, PRESIDENT
SOUTHTRUST ASSET MANAGEMENT COMPANY OF FLORIDA
BY______________________________
XXXXX XXXXXXXX, VICE PRESIDENT
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
BY______________________________
GUY S. XXXXX XXXXX, PRESIDENT
ANNEX I
TO ESCROW AGREEMENT EXISTING BETWEEN
FEDERAL MORTGAGE MANAGEMENT II, INC. (THE
"COMPANY"), SOUTHTRUST ASSET MANAGEMENT COMPANY
OF FLORIDA (THE "ESCROW AGENT") AND
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC. (THE
"PLACEMENT AGENT")
AS INDICATED IN THE ABOVE TITLE, A CERTAIN ESCROW AGREEMENT EXISTS BETWEEN THE
COMPANY, THE PLACEMENT AGENT AND THE ESCROW AGENT. THE PURPOSE OF THIS ANNEX I
IS TO SET FORTH THE INITIAL, RENEWAL AND CERTAIN FEES WHICH WILL BE CHARGED BY
THE ESCROW AGENT FOR ITS SERVICES UNDER THE ESCROW AGREEMENT.
BASE FEE $2,500
PER CHECK CHARGE FOR DISBURSEMENTS 40
RENEWAL CHARGE 1,000
THE ESCROW AGENT WILL NOT BE RESPONSIBLE FOR THE PREPARATION OF INTERNAL REVENUE
SERVICE FORMS 1099.