Escrow Agreement

ESCROW AGREEMENT


THIS AGREEMENT, dated as of this ____ day of February, 1999, by and among EVANS & MULLINIX, P.A. (hereafter called the "Escrow Agent"), SEQUOIA COMPANY, PIPER JAFFRAY, INC., custodian for the benefit of Terrence P. Dunn, JMO GROUP, MARK P. OFFILL, Trustee of the Jean Offill Grandchildren's Irrevocable Trust, DAVID W. OFFILL, and LARRY DAVIS and CONSTANCE DAVIS, husband and wife (hereinafter collectively and individually referred to as "Shareholders") and ADVANCED FINANCIAL, INC., a Delaware corporation (hereinafter referred to as "AFI").


W I T N E S S E T H:


WHEREAS, Shareholders, AFI and Cannon Financial Company ("Corporation") have entered into an Agreement of Reorganization dated February 5, 1999 ("Reorganization Agreement"), whereby Shareholders have agreed to sell and AFI has agreed to buy, all of the issued and outstanding stock of Corporation (the "Shares"); and


WHEREAS, pursuant to Section 1.03 of the Reorganization Agreement, Shareholders have placed in escrow the shares received by them from the payment of the Purchase Price with Escrow Agent to secure Shareholders' obligation to disgorge shares in the event that the Closing Owner's Equity is less than Six Hundred Thousand Dollars ($600,000) as set forth in Sections 1.03(b) and (c); and


WHEREAS, pursuant to Section 8 of the Reorganization Agreement, Shareholder have also agreed to place in escrow the shares received by them for the payment of the Purchase Price with Escrow Agent to secure Shareholders' indemnity obligations pursuant to Section 8.


NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants hereinafter set forth, the parties hereto agree as follows:


1. Definitions.


"Authorized Representative" means any person or persons empowered to authorize, approve or direct actions under this Escrow Agreement, on behalf of one (1) of the parties hereto, as established from time to time by resolution of the Board of Directors of the party represented thereby.


"Escrow Account" means the escrow account created by Paragraph 2 of this Escrow Agreement.


"Escrow Agent" means the agent at the time serving under this Escrow Agreement.


"Escrow Agreement" or "Agreement" means this Escrow Agreement.


"Escrowed Shares" means all shares deposited with Escrow Agent pursuant to Paragraph 3 of this Escrow Agreement.


2. Creation of the Escrow Account. There is hereby created and established with Escrow Agent the Escrow Account, to be held in the custody of Escrow Agent in accordance with this Escrow Agreement.


3. Deposit to the Escrow Account. Shareholders hereby deposit with Escrow Agent all shares received by them pursuant to the Reorganization Agreement, with properly endorsed stock powers attached thereto, appointing Escrow Agent as the agent to transfer said shares to AFI in the event the shares, or any part thereof, are forfeited pursuant to the terms and conditions of this Escrow Agreement.


4. Ownership of the Escrowed Shares. The Escrowed Shares shall be the property of Shareholders, subject to the terms and conditions of this Agreement.


5. Payment of Escrowed Shares. The Escrowed Shares shall be held in escrow pending compliance with Section 7 of the Agreement.


6. Income on Escrow Assets. All income earned on or stock dividends or stock splits in connection with the Escrowed Shares shall be added to the Escrow Account for use as set forth in connection with Paragraph 5 above.


7. Termination. This Escrow Agreement shall continue until the satisfaction of the following events:


(a) In the event that a disgorgement of shares is to occur by
Shareholders pursuant to the terms and conditions of Section 1.03(b) of the
Reorganization Agreement, the accounting firm or firms that, pursuant to
Section 1.03(d), are to make the decision on the number of shares to be
disgorged by Shareholders, pursuant to Section 1.03(b), shall calculate the
number of shares to be disgorged by Shareholders in total, pursuant to
Section 1.03(b), and provide notice of that amount to AFI, Shareholders and
Escrow Agent. Upon receipt of that notice, Escrow Agent shall send the
shares to be disgorged by Shareholders to AFI. Any shares not disgorged to
AFI, pursuant to Section 1.03(b) of the Reorganization Agreement, shall be
retained by Escrow Agent to be held in escrow pending satisfaction of
subsection (c) hereof.


(b) In the event that, pursuant to Section 1.03(c) of the
Reorganization Agreement, a disgorgement of shares by Shareholders is
applicable, the accounting firm or firms that, pursuant to Section 1.03(d),
are to make the decision on the number of shares to be disgorged by
Shareholders, pursuant to Section 1.03(c), shall calculate the number of
shares to be disgorged by Shareholders in total, pursuant to Section
1.03(c), and provide notice of that amount to AFI, Shareholders and Escrow
Agent. Upon receipt of that notice, Escrow Agent shall send the shares to
be disgorged by Shareholders to AFI. Any shares not disgorged to AFI,
pursuant to Section 1.03(c) of the Reorganization Agreement, shall be
retained by Escrow Agent to be held in escrow pending satisfaction of
subsection (c) below.


(c) The Escrowed Shares shall be held pending any claim for damages
being


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made by AFI against Shareholders pursuant to the terms of the indemnity set
forth in Section 8 of the Reorganization Agreement. In the event that AFI
has a claim for damages against Shareholders, it shall provide notice to
Shareholders pursuant to the terms and conditions of Section 8, with a copy
to Escrow Agent. Shareholders shall have thirty (30) days from receipt of
the notice in order to notify AFI and Escrow Agent of their objection to
the alleged damages. In the event that Shareholders do not object to said
damages, Escrow Agent shall turn over to AFI, to compensate AFI for the
damages, an amount of Escrowed Shares equal to the total damages claimed by
AFI divided by the per share selling price of AFI common stock on its then
applicable stock exchange on the date prior to distribution by Escrow Agent
to AFI. In the event that Shareholders object to the damages alleged by
AFI, Escrow Agent shall continue to hold said shares until a court of
competent jurisdiction has m ...