PROCEEDS ESCROW AGREEMENT
Agreement entered on the ________ day of ____________________, 1998 by
and among Transition Auto Finance II, Inc. ("Issuer"), Great Nation
Investment Corporation ("Dealer"), and Texas Community Bank, a National
Association, as defined by Section 3(a)(6) of the Securities and Exchange Act
of 1934, (the "Escrow Agent").
WHEREAS, with the assistance of Dealer, the Issuer proposes to offer and
sell up to $10,000,000 aggregate principal amount of its Redeemable 11%
Secured Notes (the "Notes") to be issued under a Trust Indenture between the
Issuer and Trust Management Inc. Trustee (the "Trustee").
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. The Escrow Agent agrees to act as escrow agent in connection with
the offering and sale of Notes and, as such, to establish an appropriate
account and to receive the proceeds from the sale of the Notes for deposit
therein until the earlier of the termination of this Agreement or the
termination of the offering and sale of the Notes (the "Termination Date").
2. Checks or other items for the payment of all or a part of the
purchase price of the Notes (all such items together with all proceeds
thereof, the "Escrowed Property") shall be payable to Escrow Agent, or
endorsed by the Dealer or Issuer to Texas Community Bank and delivered daily
to Escrow Agent. The Escrow Agent will credit the proceeds to an escrow cash
account (the "Escrow Account") to be held by it under the terms of this
Agreement subject to Rule 15c2-4 under the Securities Act of 1934. All
subscribers' checks or other items for the payment of the purchase price of
Notes shall be transmitted by Dealer to the Escrow Agent by noon of the next
business day upon receipt by Dealer.
3. The Escrowed Property, together with all interest earned thereon,
shall be held by the Escrow Agent until the earlier of (a) the time that the
Escrow Agent has received proceeds from the sale of the Notes in the
aggregate principal amount of $250,000, or more, or (b) the date of
___________________ at which time the escrow will terminate.
4. Upon termination of the escrow, the Escrow Agent shall release the
Escrowed Property, together with all interest earned thereon to be
distributed to either (a) the Issuer, or such other party or parties, as
required to carry out the purpose of the Note offering if the minimum amount
of the Notes have been sold within the required time period described above,
or (b) the subscribers if the minimum amount of Notes have not been sold
within such period.
5. If at any time to the completion of this escrow said Escrow Agent
is advised by the appropriate securities or state agency that the
registration to sell said notes has been revoked, said Escrow Agent shall
thereupon return all funds and the interest earned thereon to the respective
subscribers.
6. Escrow Agent shall deposit all funds received in insured accounts
such that each Investor that deposits funds is insured to the maximum amount
allowed under FDIC regulations, irrespective of the aggregate amount of funds
received from all Investors. The Escrow Agent shall invest such collected
funds deposited in the Escrow Account in short term investments to the extent
permitted by the Texas Banking Commission, provided however, that any such
funds held subject to any minimum escrow contingency shall be invested
subject to Rule 15c2-4. The Escrow Agent shall in no event be liable for any
loss resulting from any change in interest rates applicable to funds so
invested.
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Interest on funds invested pursuant to this Section shall accrue from
the date of investment of such funds until such funds are released from
escrow pursuant to paragraph 4.
7. The Escrow Agent's and Dealer's obligations and duties in
connections herewith are confined to those specifically enumerated in this
Agreement. The Escrow Agent and Dealer shall not be in any manner liable or
responsible for the sufficiency, correctness, genuineness or validity of any
instruments received by or deposited with them or with reference to the form
of execution thereof, or the identity, authority, or rights of any person
executing, delivering, or depositing same, and neither the Escrow Agent nor
the Dealer shall be liable for any loss that may occur by reason of forgery,
false representation or the exercise of their discretion in any particular
manner or for any other reason, except for their own gross negligence or
willful misconduct.
8. Escrow Agent shall receive compensation for its services as set
forth in the separate schedule of fees as made a part hereof by reference.
9. The Escrow Agent may act pursuant to the written advice of counsel
with respect to any matter relating to this Escrow Agreement and shall not be
liable for any action taken or omitted in accordance with such advice.
10. The Escrow Agent (and any other successor escrow agent) may at any
time resign as such by delivering all of the Escrowed Property to the
successor escrow agent jointly designated by the other parties hereto in
writing, or to any court of competent jurisdiction, whereupon the Escrow
Agent shall be discharged of and from any and all further obligations arising
in connection with this Escrow Agreement. The resignation of the Escrow
Agent will take effect on the earlier of (a) the appointment of a successor
(including a court of competent jurisdiction), or (b) the day which is thirty
(30) days after the date of delivery of its written notice of resignation to
the other parties hereto. If at that time the Escrow Agent has not received
a designation of a successor escrow agent, the Escrow Agent's sole
responsibility after that time shall be to safekeep the Escrowed Property
until receipt of a designation of successor escrow agent or a written
disposition instruction by the Issuer and Dealer or a final order of a court
of competent jurisdiction.
11. If any controversy arises between the parties hereto or with any
third person, the Escrow Agent shall not be required to determine the same or
to take any action but may await the settlement of any such controversy by
final appropriate legal proceeding, or otherwise as the Escrow Agent may
require, or the Escrow Agent may, in its discretion, institute such
appropriate interpleader or other proceedings in connection therewith as it
may deem proper, notwithstanding anything in this Agreement to the contrary.
In any such event, the Escrow Agent shall not be liable for interest or
damages to the Issuer or subscribers. In the event Escrow Agent should
institute, or be named as a party in, any legal proceedings to determine the
lawful owner of the Escrowed Property, Escrow Agent shall be entitled to
recover from the contending parties to said legal proceedings, reasonable
attorney's fees and expenses which shall be incurred by Escrow Agent in said
proceedings.
12. This Escrow Agreement shall be binding upon and inure solely to the
benefit of the parties hereto and their respective successors and assigns,
heirs, administrators, and representatives and shall not be enforceable by or
inure to the benefit of any third party except as provided in Section 10 with
respect to a resignation by the Escrow Agent. No party may assign any of its
rights or obligations under this Escrow Agreement without the written consent
of the other parties. This Escrow Agreement shall be construed in accordance
with and governed by the laws of the State of Texas with regard to conflict
of law principals.
13. This Escrow Agreement may only be modified in writing by all of the
parties hereto, and no waiver hereunder shall be effective unless in writing
signed by the party to be charged.
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IN WITNESS WHEREOF, the parties hereto have executed this agreement as of
the day and year first above written.
DEALER: GREAT NATION INVESTMENT
CORPORATION
By:
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Date:
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Attest:
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ISSUER: TRANSITION AUTO FINANCE II,
INC.
By:
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Date:
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Attest:
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ESCROW AGENT: TEXAS COMMUNITY BANK
A National Association
By:
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Date:
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Attest:
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