ESCROW AGREEMENT
ESCROW AGREEMENT ("Agreement") dated as of August __, 1996, by and
between AMERICAN EQUITIES INCOME FUND, INC., a Delaware corporation (the
"Company"), MERRILL WEBER & CO., INC., an Illinois corporation (the "Underwriter"),
and REPUBLIC NATIONAL BANK OF NEW YORK ("Escrow Agent").
W I T N E S S E T H
WHEREAS, the Company intends to engage in a public offering of certain of its
securities (the "Offering"), which Offering contemplates minimum aggregate offering
proceeds of $500,000 and maximum aggregate offering proceeds of $15,000,000;
WHEREAS, there will be deposited into an escrow account with Escrow Agent from
time to time funds from prospective investors who wish to subscribe for securities offered in
connection with the Offering ("Subscribers"), which funds will be held in escrow and
distributed in accordance with the terms hereof; and
WHEREAS, the Escrow Agent is willing to act as an escrow agent in respect of the
Escrow Funds (as hereinafter defined) upon the terms and conditions set forth herein;
NOW, THEREFORE, for good and valuable considerations, the receipt and adequacy of
which are hereby acknowledged by each of the parties hereto, the parties hereto hereby agree
as follows:
1. Appointment of Escrow Agent. The Company hereby appoints the Escrow Agent as
escrow agent in accordance with the terms and conditions set forth herein, and the Escrow
Agent hereby accepts such appointment.
2. Delivery of Escrow Funds.
(a) The Company or the Underwriter shall deliver to the Escrow Agent checks or
wire transfers made payable to the order of "Republic National Bank of New York, Escrow
Agent for American Equities Income Fund, Inc." together with the Subscriber's mailing
address and social security number or tax identification number (if the aforesaid information
is not provided, the check will be returned or the amount of the wire transfer refunded). The
funds delivered to the Escrow Agent shall be deposited by the Escrow Agent into an interest
bearing account at Republic National Bank of New York entitled Republic National Bank of
New York, Escrow Agent for American Equities Income Fund, Inc. (the "Escrow Account")
and shall be held, invested and distributed by the Escrow Agent in accordance with the terms
hereof. The collected funds deposited into the Escrow Account are referred to herein as the
"Escrow Funds." The Escrow Agent shall acknowledge receipt of all Escrow Funds by
notifying the Company of deposits into the Escrow Account. The Escrow Agent shall give
such notice, in substantially the form attached hereto as Exhibit A, via facsimile on the next
business day following the business day on which the Escrow Funds are deposited into the
Escrow Account.
(b) The Escrow Agent shall have no duty or responsibility to enforce the collection
or demand payment of any funds deposited into the Escrow Account. If, for any reason, any
check deposited into the Escrow Account shall be returned unpaid to the Escrow Agent, the
sole duty of the Escrow Agent shall be to return the check to the Company.
3. Investment of the Escrow Funds.
(a) The Escrow Agent shall invest and reinvest the Escrow Funds and any interest
or income earned thereon in any of the investments listed on Schedule A attached hereto, at
the written direction of the Company. Notwithstanding the foregoing, the Escrow Agent
shall have the power to sell or liquidate the foregoing investments whenever the Escrow
Agent shall be required to release all or any portion of the Escrow Funds pursuant to Section
4 hereof. Any interest or income earned on the Escrow Funds shall be paid to the Company;
provided, however, that if the Escrow Funds are returned to Subscribers pursuant to Section
4(b) below, each Subscriber to whom Escrow Funds are returned shall also receive such
Subscriber's allocable portion of such interest or income.
(b) The Escrow Agent shall not have any liability for any loss sustained as a result
of any investment made as provided above, any liquidation of any such investment prior to
its maturity, or the failure of an authorized person of the Company to give the Escrow Agent
any written instruction to invest or reinvest the Escrow Funds or any earnings thereon.
4. Release of Escrow Funds. The Escrow Funds shall be paid by the Escrow Agent in
accordance with the following:
(a) provided that the Escrow Funds total at least $500,000 at or before 2:00 P.M.,
New York City time, on February __, 1997, or on any date prior thereto, the Escrow Funds
(or any portion thereof) shall be paid to the Company or as otherwise instructed by the
Company and the Underwriter, within one (1) business day after the Escrow Agent receives
a written release notice in substantially the form of Exhibit B attached hereto (a "Release
Notice") signed by an authorized person of the Company, and thereafter, the Escrow
Account will remain open for the purpose of depositing therein the subscription prices for
additional securities sold by the Company in the Offering, which additional Escrow Funds
shall be paid to the Company or as otherwise instructed by the Company upon receipt by the
Escrow Agent of a Release Notice as described above;
(b) if the Escrow Agent has not received a Release Notice from the Company at or
before 2:00 P.M., New York City time, on February __, 1997, and the Escrow Funds do
not total at least $500,000 at such time and date, then the Escrow Funds shall be returned to
Subscribers, with interest.
In the event that at any time the Escrow Agent shall receive from the Company written
instructions signed by an individual who is identified on Exhibit C attached hereto as a
person authorized to act on behalf of the Company, requesting the Escrow Agent to refund to
an individual or entity the amount of a collected check or other funds received by the Escrow
Agent from said individual or entity and deposited into the Escrow Account, the Escrow
Agent shall comply with such instructions provided that said funds are in the Escrow
Account and have not been paid by the Escrow Agent.
5. Acceptance by Escrow Agent. The Escrow Agent hereby accepts and agrees to
perform its obligations hereunder, provided that:
(a) The Escrow Agent may act in reliance upon any signature believed by it to be
genuine, and may assume that any person who has been designated by the Company to give
any written instructions, notice or receipt, or make any statements in connection with the
provisions hereof has been duly authorized to do so. The Escrow Agent shall have no duty
to make inquiry as to the genuineness, accuracy or validity of any statements or instructions
or any signatures on statements or instructions. The names and true signatures of each
individual authorized to act on behalf of the Company are set forth in Exhibit C attached
hereto.
(b) The Escrow Agent may act relative hereto in reliance upon advice of counsel in
reference to any matter connected herewith. The Escrow Agent shall not be liable for any
mistake of fact or error of judgment or law, or for any acts or omissions of any kind, unless
caused by its willful misconduct or gross negligence.
(c) The Company agrees to indemnify and hold the Escrow Agent harmless from
and against any and all claims, losses, costs, liabilities, damages, suits, demands, judgments
or expenses (including but not limited to reasonable attorneys' fees) claimed against or
incurred by Escrow Agent arising out of or related, directly or indirectly, to this Agreement.
(d) In the event that the Escrow Agent shall be uncertain as to its duties or rights
hereunder, the Escrow Agent shall be entitled to refrain from taking any action other than to
keep safely the Escrow Funds until it shall be directed otherwise by a court of competent
jurisdiction.
(e) The Escrow Agent shall have no duty, responsibility or obligation to interpret or
enforce the terms of any agreement other than Escrow Agent's obligations hereunder, and the
Escrow Agent shall not be required to make a request that any monies be delivered to the
Escrow Account, it being agreed that the sole duties and responsibilities of the Escrow Agent
shall be (i) to accept wire transfers, checks or other instruments for the payment of money
delivered to the Escrow Agent for the Escrow Account and deposit the Escrow Funds into
the Escrow Account, (ii) to invest and reinvest the Escrow Funds in accordance with the
written instructions of the Company as provided in Section 3, and (iii) to disburse or refrain
from disbursing the Escrow Funds as stated above, provided that the funds received by the
Escrow Agent have been collected and are available for withdrawal.
6. Fees. The Escrow Agent shall be entitled to receive from the Company a total of
$2,500 in fees for the services to be rendered by the Escrow Agent hereunder, and the
Escrow Agent hereby acknowledges receipt of such amount from the Company as payment in
full of such fees.
7. Resignation. The Escrow Agent may resign at any time by giving 30 days' notice of
such resignation to the Company. Upon providing such notice, the Escrow Agent shall have
no further obligations hereunder except to hold the Escrow Funds which it has received as of
the date on which it provided the notice of resignation as depositary. In such event, the
Escrow Agent shall not take any action until the Company has designated a banking
corporation, trust company, attorney or other person as successor. Upon receipt of such
written instructions signed by the Company, the Escrow Agent shall promptly deliver the
Escrow Funds to such successor and shall thereafter have no further obligations hereunder.
If such instructions are not received within 30 days following the effective date of such
resignation, then the Escrow Agent may deposit the Escrow Funds and any other amounts
held by it pursuant to this Agreement with a clerk of a court of competent jurisdiction
pending the appointment of a successor. In either case provided for in this Section 7, the
Escrow Agent shall be relieved from all liability thereafter arising with respect to the Escrow
Funds.
8. Termination. The Company may terminate the appointment of the Escrow Agent
hereunder upon written notice signed by an individual on behalf of the Company, each of
whose name and signature are included in Exhibit C attached hereto, specifying the date
upon which such termination shall take effect. In the event of such termination, the
Company shall, within 30 days of such notice, appoint a successor escrow agent and the
Escrow Agent shall, upon receipt of written instructions signed by the Company, turn over to
such successor escrow agent all of the Escrow Funds. Upon receipt of the Escrow Funds,
the successor escrow agent shall become the Escrow Agent hereunder and shall be bound by
all of the provisions hereof and the Escrow Agent shall be relieved of all further obligations
and released from all liability thereafter arising with respect to the Escrow Funds.
9. Notices. All notices, requests, demands and other communications required or
permitted to be given hereunder, shall be in writing and shall be deemed to have been duly
given when delivered personally, on the next business day after delivery to a recognized
overnight courier or mailed first class (postage prepaid) or when sent by facsimile to the
parties (which facsimile copy shall be followed, in the case of notices or other
communications sent to the Escrow Agent, by delivery of the original) at the following
addresses (or to such other address as a party may have specified by notice given to the other
parties pursuant to this provision).
If to the Company, to: American Equities Income Fund, Inc.
East 80 Route 4
Paramus, New Jersey 07652
Attn: David S. Goldberg
Phone: (201) 368-5900
with a copy to: Bronson & Migliaccio
287 Bowman Avenue
Purchase, NY 10577
Attn: H. Bruce Bronson, Jr., Esq.
Phone: (914) 251-1212
If to the Underwriter: Merrill Weber & Co., Inc.
95 Revere Drive, Suite A
Northbrook, IL 60062-1585
Attn: Merrill Weber
Phone: (847) 291-9723
with a copy to: Holleb & Coff
55 East Monroe Street, Suite 4100
Chicago, IL 60603
Attn: Steven H. Shapiro, Esq.
Phone: (312) 807-4613
If to the Escrow Agent, to: Republic National Bank of New York
1356 Broadway
New York, NY 10018
Attn: Leonard Spector
First Vice President
Phone: (212) 947-0991
10. General.
(a) This Agreement shall be governed by and construed and enforced in accordance
with the laws of the State of New York applicable to agreements made and to be entirely
performed within such state.
(b) This Agreement sets forth the entire agreement and understanding of the parties
in respect to the matters contained herein or covered hereby and supersedes all prior
agreements, arrangements and understandings related thereto.
(c) All of the terms and conditions of this Agreement shall be binding upon, and
inure to the benefit of and be enforceable by, the parties hereto.
(d) This Agreement may be amended, modified, superseded or cancelled, and any of
the terms or conditions hereof may be waived, only by a written instruction executed by each
party hereto or, in the case of a waiver, by the party waiving compliance.
The failure of any party at any time or times to require performance of any provision hereof
shall in no manner affect its right at a later time to enforce the same. No waiver of any
party of any condition, or of the breach of any term contained in this Agreement, whether by
conduct or otherwise, in any one or more instances shall be deemed to be or construed as a
further or continuing waiver of any such condition or breach or a waiver of any other
condition or of the breach of any other term of this Agreement. No party may assign any
rights, duties or obligations hereunder unless all other parties have given their prior written
consent.
(e) If any provision included in this Agreement proves to be invalid or
unenforceable, it shall not affect the validity of the remaining provisions.
(f) This Agreement may be executed in several counterparts or by separate
instruments and all of such counterparts and instruments shall constitute one agreement,
binding on all of the parties hereto.
11. Tax Reporting.
The Escrow Agents sole tax reporting responsibility shall be to report under the
Company or the subscribers tax identification or social security number the amount of
interest earned and pay to such party.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first set forth above.
Tax Identification Number AMERICAN EQUITIES INCOME
FUND, INC.
22-3429295
By:
David S. Goldberg, CEO
MERRILL WEBER & CO., INC. REPUBLIC NATIONAL
BANK OF NEW YORK,
as Escrow Agent
By: By:
Merrill Weber, Leonard Spector
President First Vice-President
SCHEDULE A
Permitted Investments
Bank Accounts, including savings accounts and bank money-market accounts, short term
certificates of deposit issued by a bank, or short term securities issued or guaranteed by
the U.S. government; provided, that an investment in the above is not permissable if the
investment's maturity date extends beyond the anticipated contingency occurrence date,
unless the investment can be readily disposed of for cash by the time the contingency occurs
without dissipation of the offering proceeds invested.
EXHIBIT A
Forms of Receipt of Funds by Escrow Agent
[Republic National Bank of New York Letterhead]
[Date]
American Equities Income Fund, Inc.
East 80 Route 4
Paramus, NJ 07652
Dear Sirs:
Pursuant to Section 2(a) of the Escrow Agreement dated as of August __, 1996, we confirm
receipt of the amount of $ today for deposit into the Escrow Fund.
Very truly yours,
Name:
Title:
EXHIBIT B
Release Notice
Mr. Leonard Spector
Republic National Bank of New York
452 Fifth Avenue
New York, New York 10018
Dear Mr. Spector:
The undersigned hereby authorize and instruct Republic National Bank of New York, as
escrow agent, to release [$ ] of Escrow Funds from the Escrow Account and
to deliver such funds as follows:
[Insert Delivery Instructions]
IN WITNESS WHEREOF, this release has been executed on , 1996.
AMERICAN EQUITIES INCOME FUND,
INC.
By:
Its:
_________________________
By:
Its:
EXHIBIT C
Authorized Personnel
The Escrow Agent is authorized to accept instructions and notices signed or believed by the
Escrow Agent to be signed by any one of the following, each of whom is authorized to act
on behalf of the Company:
On Behalf of American Equities Income Fund, Inc. :
Name Title Signature
David S. Goldberg CEO, Treasurer,
Secretary and Director
Stephen A. Socha President and Director
Phillip C. Goldstick Chairman and Director