EXHIBIT 10.3
FORM OF SUBSCRIPTION ESCROW AGREEMENT BETWEEN
SOVEREIGN CREDIT FINANCE I, INC.
AND
RIVER OAKS TRUST COMPANY,
AS ESCROW AGENT
FORM OF SUBSCRIPTION ESCROW AGREEMENT
THIS AGREEMENT made effective on _________, 1996 by and between Sovereign
Credit Finance I, Inc., a Texas corporation (the "Company") and River Oaks Trust
Company ("Agent").
WHEREAS, the Company is offering for subscription, up to $20,000,000 in
principal amount of its 11% Notes due October 15, 2000 (the "Notes") on the
terms and conditions set forth in the Prospectus (the "Prospectus") filed with
the Securities and Exchange Commission in connection with the Company's Form S-1
Registration Statement, File No. 333-4072; and
WHEREAS, the Company appoints the Agent to perform the services of
depository and escrow agent pursuant to the terms and conditions of this
Agreement with respect to subscriptions to the Company made by prospective
purchasers of the Notes (the "Investors");
NOW, THEREFORE, the parties hereto agree as follows:
1. Investor checks shall be delivered and made payable to Agent until the
earlier of (i) the date that Agent receives Investor checks aggregating at least
$500,000 (the "Minimum Subscription"), or (ii) March 31, 1997 (the "Subscription
Cut-off Date"). Participating Broker/Dealers shall transmit Investor checks and
subscription agreements to the Company by noon of the next business day
following receipt by the Broker/Dealer. The Company will then promptly forward
to Agent the Investor check together with a statement identifying such Investor
by name, address and Federal tax identification number, and Agent shall deposit
all subscription checks and other payments for the Notes by Investors which it
receives into an escrow account maintained by Agent (the "Escrow Fund").
2. The Company reserves the right to reject any subscription. The
Company shall promptly refund the subscription amount which has been rejected to
the Investor unless the subscription amount is on deposit with Agent, in which
case Agent, upon written direction of the Company, shall make such refund with
interest, if any, as soon as Agent has collected funds on such Investor's check.
3. Prior to the close of business on the Subscription Cut-Off Date, Agent
shall verify with the Company whether or not subscriptions for the Minimum
Subscription have been received.
4. If the Minimum Subscription has been received by Agent prior to the
close of business on the Subscription Cut-Off Date, the Company shall advise
Agent in writing that the subscription was successful. Agent shall then and
thereafter remit collected funds together with any interest earned thereon to
the Company at the
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Company's request and in the Company's sole discretion. Amounts received by
Agent in forms other than cash shall be available for transfer to the Company
or to the Investor, as the case may be, once Agent has collected funds.
5. If Agent has not received (i) Investor checks or other payments
evidencing the subscription of at least the Minimum Subscription prior to the
close of business on the Subscription Cut-Off Date, AND (ii) within a reasonable
time after the Subscription Cut-Off Date, written advice from the Company as
required by Paragraph 4 above concerning the success of the subscription, all
subscriptions and amounts paid in respect thereto shall be promptly returned to
the Investors together with any interest which has been earned thereon.
6. Agent shall have no authority or obligation to exercise discretion as
to the investment of the Escrow Fund, but will invest and reinvest the Escrow
Fund in short term debt obligations issued or guaranteed by, and bearing the
full faith and credit as to the repayment of full principal and interest of, the
United States of America, or will deposit the Escrow Fund in any time or savings
deposit of the Agent, not to exceed $100,000 at any one institution, of any
federally insured bank chartered and supervised by the United States of America
and holding FDIC (or its successor) insurance. It is understood that
subscription payments will not be invested or deposited until the later of (i)
three (3) business days after presentation of such payments to the Agent, or
(ii) the date that Agent has collected funds with respect thereto.
7. Agent shall be under no duty or responsibility to enforce collection
of any checks delivered to Agent hereunder. Agent shall promptly notify and
return to the Company any check or instrument received from the Company or
Investor upon which payment is refused, together with the related documents
which were delivered to Agent. If any check or instrument delivered to Agent
under this Agreement is uncollectible, Agent shall notify the Company and shall
deliver the returned check or instrument to the Company.
8. Agent shall provide all administrative and reporting services
contemplated by this Agreement to effect the purpose stated herein.
9. Agent is not a party to, nor is it bound by, any agreement out of
which this Agreement may arise including, but not limited to, the Prospectus.
Agent is not charged with notice of the existence of any agreement out of which
this Agreement may arise other than the Prospectus. Agent is not charged with
notice of the terms of the Prospectus (other than those recited herein).
10. The Agent may resign, for any reason, upon ten (10) days written
notice to the parties to this Agreement. Upon expiration of such ten (10) days
notice period (or as soon as practicable with
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respect to funds that are not collected funds at the expiration of such period),
the Agent shall deliver all cash or property in its possession under this
Agreement to any successor Agent appointed by the Company, or if no successor
Agent has been appointed, to any court of competent jurisdiction in Dallas
County, Texas. Upon either such delivery, Agent shall be released from any
and all liability under this Agreement.
11. Agent may act upon any notice, request, certificate, approval, consent
or other paper believed by it to be genuine and to be signed by the proper party
or parties. Agent shall not be required to take any action (or refrain from
taking any action) if, in the reasonable opinion of Agent, such action (or
inaction) could expose Agent to a risk of incurring costs, expenses or
liabilities against which Agent has not, in its reasonable opinion, received
adequate indemnity and security.
12. The Agent shall be entitled to compensation from the Company for
acting hereunder in accordance with the fee schedule attached as EXHIBIT A
hereto. Agent fees will be paid by the Company to the Agent in accordance with
the attached fee schedule. The Agent shall also be entitled to reimbursement of
out-of-pocket expenses incurred in connection with the performance of its
services as Agent, including reasonable fees and disbursements of legal counsel.
The Agent shall be entitled to payment of its fees and reimbursement of its
expenses out of the Escrow Fund and the rights of Investors and Company shall be
subordinate to the right of Agent to receive such payments hereunder in the
event that the funds in the Escrow Fund are insufficient to satisfy such
payments to the Agent.
13. Agent and its affiliates shall not be liable, responsible, or
accountable for damages or otherwise to the Company or any Broker/Dealer for any
act or omission under the provisions of this Agreement, unless such act or
omission constitutes gross negligence, willful misconduct, or fraud on behalf of
the Agent.
14. The Agent, its affiliates, and each of its officers, directors,
employees, agents and attorneys (collectively, the "Indemnified Parties") shall
be indemnified against and be held harmless by the Company from any and all
losses, costs, damages, expenses, claims and attorney's fees suffered or
incurred by the Indemnified Parties as a result of, in connection with or
arising from, or out of, but not limited to, the acts or omissions of any
Indemnified Party in performance of or pursuant to this Agreement, except such
acts or omissions as may result from such Indemnified Party's willful
misconduct, gross negligence or fraud.
15. The Agent shall not be responsible for the sufficiency or accuracy, or
the form, execution, validity or genuineness, of documents or securities now or
hereafter deposited or received hereunder, or of any endorsement thereon, or for
any lack of
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endorsement thereon, or for any description therein, nor shall it be
responsible or liable in any respect on account of the identity, authority or
rights of any person executing, depositing or delivering or purporting to
execute, deposit or deliver any such document, security or endorsement or
this Agreement, or on account of or by reason of forgeries, false
representations, or the exercise of its discretion in any particular manner,
nor shall the Agent be liable for any mistake of fact or of law or any error
of judgment, or for any act or omission, except as a result of its gross
negligence or willful malfeasance. The Agent's liability for any grossly
negligent performance or non-performance shall not exceed its fees and
charges in connection with the services provided hereunder. Under no
circumstances shall Agent be liable for any general or consequential damages
or damages caused, in whole or in part, by the action or inaction of the
Company or any of its agents or employees. Agent shall not be liable for any
damage, loss, liability or delay caused by accidents, strikes, fire, flood,
war, riot, equipment breakdown, electrical or mechanical failure, acts of God
or any cause which is reasonably unavailable or beyond its reasonable control.
16. In the event of any disagreement resulting in adverse claims or
demands being made in connection with the subject matter of this Agreement, or
in the event that the Agent is in doubt as to what action it should take
hereunder, the Agent may, at its option, refuse to comply with any claims or
demands on it, or refuse to take any other action hereunder so long as such
disagreement continues or such doubt exists, and in any such event, the Agent
shall not be or become liable in any way or to any person for its failure or
refusal to act, and the Agent shall be entitled to continue to refrain from
acting until (i) the rights of all parties have been fully and finally
adjudicated by a court of competent jurisdiction or (ii) all differences shall
have been adjudged and all doubt resolved by agreement among all of the
interested persons, and the Agent shall have been notified thereof in writing
signed by all such persons. In addition to the foregoing remedies, the Agent is
hereby authorized in the event of any doubt as to the course of action it should
take under this Agreement, to petition the District Court of Dallas County,
Texas, for instructions or to interplead the funds or assets so held into such
court. The parties agree to the jurisdiction of said court over their persons
as well as all amounts on deposit in the Escrow Fund.
17. Each party to this Agreement shall be deemed conclusively to have
given and delivered any notice, request or instruction required to be given or
delivered hereunder if the same is in writing, signed by such party and mailed
by first class mail, postage prepaid, addressed to the other party hereto, at
the address set forth below; provided, however, that the verification required
of Agent by Paragraph 3 above, shall be given orally (by telephone or in person)
by contacting the officer of the Company executing this Agreement on behalf of
the Company at (214) 960-
4
0196, and then confirmed in writing if the Company so requests. Any written
notices required by this Agreement shall be addressed as follows:
If to Agent: River Oaks Trust Company
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▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
If to Company: Sovereign Credit Finance I, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, III, President
18. This Agreement expressly and exclusively sets forth the duties of
Agent with respect to any and all matters pertinent hereto and no implied duties
or obligations shall be read into this Agreement against Agent.
19. Unless and until the Escrow Fund is delivered to the Company under
Paragraph 4, it is specifically recognized and agreed that the Company shall not
have any right, title or interest in such funds; it being the intention of the
parties hereto that the Escrow Fund shall not be subject to claims against the
Company or any of its affiliates unless and until the Minimum Subscriptions are
achieved and delivery of the funds thereof is made, as aforesaid, and the escrow
account hereunder is ended.
20. THIS ESCROW AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF TEXAS, EXCEPT THAT THE PORTIONS OF THE TEXAS TRUST
CODE, SECTION 111.001, ET SEQ. OF THE PROPERTY CODE, V.A.T.S. CONCERNING
FIDUCIARY DUTIES AND LIABILITIES OF TRUSTEE SHALL NOT APPLY TO THIS AGREEMENT.
THE PARTIES EXPRESSLY WAIVE SUCH DUTIES AND LIABILITIES, IT BEING THEIR INTENT
TO CREATE SOLELY AN AGENCY RELATIONSHIP AND HOLD AGENT LIABLE ONLY IN THE EVENT
OF ITS GROSS NEGLIGENCE, WILLFUL MISCONDUCT OR IN ORDER TO OBTAIN THE LOWER FEE
SCHEDULE RATES AS SPECIFICALLY NEGOTIATED WITH AGENT. ANY LITIGATION CONCERNING
THE SUBJECT MATTER OF THIS AGREEMENT SHALL BE EXCLUSIVELY PROSECUTED IN THE
COURTS OF DALLAS COUNTY, TEXAS, AND ALL PARTIES CONSENT TO THE EXCLUSIVE
JURISDICTION AND VENUE OF THOSE COURTS. This Agreement shall inure to and be
binding upon the parties hereto, their successors and assigns. The terms of
this Agreement shall commence with the date hereof and shall continue until the
offering of the Minimum Subscriptions is achieved or fails to be achieved by the
Subscription Cut-Off Date, and the Escrow Fund is disposed of under Paragraphs 4
or 5. All protections and indemnities benefitting Agent (and any other
Indemnified Party) are cumulative of any other rights it (or they) may have by
law or otherwise, and shall survive the termination of this Agreement or the
resignation or removal of the Agent.
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21. Except as otherwise required by law, neither Agent nor any successor
Agent shall be required to obtain or post a bond or any other security in
connection with the performance of its services hereunder.
22. No amendment to this Agreement shall be binding unless such amendment
is in writing and signed by the Agent or any successor Agent and the Company.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by duly authorized representatives as of the date
first above written.
COMPANY:
SOVEREIGN CREDIT FINANCE I, INC.
By:
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▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, III, President
AGENT:
RIVER OAKS TRUST COMPANY
By:
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Name:
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Title:
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EXHIBIT A
FEE SCHEDULE
ACCEPTANCE FEE. All legal instruments will be reviewed by counsel for the
River Oaks Trust Company prior to account acceptance. All legal expenses
incurred in this review and during the period of escrow will be borne by the
parties in interest.
SUBSCRIPTION ESCROW. Receiving deposits from two or more investors or
subscribers, providing investor recordkeeping, investment of funds as directed,
and disbursement of funds on initial closing; there is a $5,000 minimum per year
or for any portion of a year.
Up to $10,000,000 in aggregate deposits .060%
Next $20,000,000 in aggregate deposits .040%
Next $20,000,000 in aggregate deposits .010%
Next $20,000,000 in aggregate deposits .009%
Balance of deposits .006%
Minimum annual fee: $5,000 for any portion of the year
IN CASE OF RETURN OF SUBSCRIPTION FUNDS TO INVESTORS:
Allocation of interest, disbursements, 1099
reporting relating to return of
subscription funds $7 per participant
NOTE: This fee structure is limited to 500 participants; an additional
charge of $1.00 per participant will apply if the aggregate
escrow exceeds 500 participants.
TRANSACTION CHARGES. Normal transactions including book entries, cash
receipts and disbursements, and wire transfers will be done at no charge.
Foreign securities will be assessed transaction fees as incurred.
INSTALLATION CHARGES. Software installation in connection with on-line
services will be done for an initial set up fee of $250.00 and will include four
hours of user training. Installation and training at Company's offices will be
billed based on an hourly rate of $35 per hour.
ON-LINE ACCESS CHARGES. For accounts with on-line access capability, a time
usage fee will be assessed at the per minute rate currently in effect.
EXTRAORDINARY SERVICES AND OUT-OF-POCKET EXPENSES. For services which cannot
be presently anticipated but which may be necessary or desirable, a reasonable
fee will be charged based on nature of the work, time involved, and
responsibility involved.