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Exhibit 99.1
ANNEX B TO UNDERWRITING AGREEMENT
ESCROW AGREEMENT
THIS AGREEMENT made and entered into this ___ day of _____, 1997, by
and among Dayton General Systems, Inc., a Pennsylvania corporation (hereinafter
referred to as the "Issuer"), X. X. Xxxxxxx & Associates, a duly registered
broker/dealer under the Securities Exchange Act of 1934 and a member of the
National Association of Securities Dealers, Inc. (hereinafter referred to as the
"Underwriter"), Church Street Financial Corp., Xxxxx X. Xxxxx and Xxxxxx X.
Xxxxxxx (hereinafter collectively referred to as the "Selling Shareholders"),
and National Bank of Southern California, a national bank (hereinafter referred
to as the "Escrow Agent").
W I T N E S S E T H:
WHEREAS, the Issuer desires to make through the Underwriter a best
efforts public offering (the "Offering") of securities units, each consisting of
two shares of Issuer's common stock and a warrant to purchase one additional
share of common stock (hereinafter referred to as the "Units") at the rate of
$10.00 per Unit under an arrangement whereby a minimum of $5,500,000 of the
Units (or 550,000 Units) up to a maximum of $8,820,000 of the Units (or 882,000
Units) are to be offered by the Underwriter on a "best efforts, all-or-none"
basis, and the remaining Units are to be offered on a "best efforts" basis; and
WHEREAS, the Selling Shareholders desire to sell up to an aggregate of
36,000 shares of the Issuer's common stock owned by them (to be sold only after
the minimum number of Units is sold) as Units, with a warrant purchased from the
Issuer, through the Underwriter on the same terms as the Units offered by the
Issuer.
WHEREAS, the Offering is to be made pursuant to a registration
statement on Form SB-2 filed with the Securities and Exchange Commission under
the Securities Act of 1933, as amended, and pursuant to appropriate filings to
be made with the securities regulators of the various states in which the
Offering may be made, if and as required; and
WHEREAS, the parties wish to make provision to impound the cash
proceeds from the Units sold in the Offering in escrow, which cash proceeds are
to be released to the Issuer, the Selling Shareholders and the Underwriter in
accordance with the terms of this Agreement only in the event of the sale of and
payment for at least $5,500,000 of the Units and otherwise the escrowed cash
proceeds are to be returned by the Escrow Agent to the Unit purchaser(s); and
WHEREAS, the Escrow Agent has agreed to act as a depository only and is
not a party to nor has it reviewed or approved the content of the disclosure
documents prepared in connection with the Offering (hereinafter collectively
referred to as the "Prospectus") and is not responsible or liable in any manner
for the sufficiency, correctness, genuineness, or validity of any representation
concerning the Offering and undertakes no responsibility or liability for the
form thereof; and
WHEREAS, the Issuer, the Selling Shareholders, the Underwriter, and the
Escrow Agent desire to enter into an agreement with respect to the above
described escrow.
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NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and covenants contained herein, it is hereby agreed as follows:
1. On receipt thereof by the Underwriter, all cash proceeds from the
sale of any Units in the Offering shall be promptly delivered to the Escrow
Agent together with a written account of each sale, which account shall set
forth the purchaser's name and address, and amount of Units purchased. The
Escrow Agent shall not be required to nor have any responsibility in enforcing
collections of any check which has been delivered in payment of the purchase
price of each subscription.
2. During the entire term of this Agreement, all funds held by the
Escrow Agent as cash awaiting distribution shall be invested as collected by the
Escrow Agent in such short term cash equivalent or money market obligations
and/or investments (which may include deposits in the Escrow Agent's Commercial
Banking Department) as in the Escrow Agent's sole discretion may be appropriate
(the "Escrow Account"). All interest derived from investing funds held in the
Escrow Account shall accrue to the Escrow Account.
3. During the Escrow Period (as hereinafter defined), none of the
amounts deposited in the Escrow Account shall become the property of the Issuer
or any other entity, the Selling Shareholders or any other entity or be subject
to the debts of the Issuer or any other entity or the debts of the Selling
Shareholders or any other entity, except as expressly provided herein with
respect to all payments by the Escrow Agent to the Issuer and/or the Selling
Shareholders, and the Escrow Agent shall make or permit no disbursement from the
Escrow Account except as expressly provided herein.
4. The Escrow Period shall begin on the date of this Agreement, and
shall terminate on the first to occur of the following dates:
(a) ____________, 1997, unless extended for 90 days, at the discretion
of the Issuer by written agreement between the Issuer and Underwriter, provided
that a copy of such agreement is provided to the Escrow Agent;
(b) The date established by the agreement of the Issuer and the
Underwriter, provided that proceeds from the sale of at least $5,500,000 of the
Units offered in the Offering have been deposited with the Escrow Agent;
provided further that a copy of such agreement has been submitted to the Escrow
Agent.
5. If on the termination of the Escrow Period the Escrow Agent has
received the deposit of proceeds received from the sale of $5,500,000 or more of
the Units (i.e., 550,000 Units) offered, the Escrow Agent shall, upon receipt of
joint written instructions from the Underwriter and the Issuer, deliver and pay
over all deposits in the Escrow Account as follows: An amount equal to 90% of
the total proceeds (excluding the amounts due to the Selling Shareholders and
interest earned on such proceeds) shall be paid to Issuer, an amount equal to
10% of the total proceeds (excluding interest earned on such proceeds) shall be
payable to the Underwriter and an amount equal to the proceeds of the sale of
their shares shall be payable to the Selling Shareholders. Interest earned on
funds deposited in the Escrow Account shall be retained by the Escrow Agent and
paid out in accordance with Section
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6 hereof. The Escrow Agent, upon compliance with the foregoing, shall be
completely discharged and released of any further liabilities or
responsibilities herein.
6. The Issuer shall deposit with the Escrow Agent funds ("Interest
Funds") which shall be used, along with any interest earned on the Escrow
Account, to pay the interest due on funds paid into Escrow by the purchasers of
Units in the Offering prior to the expiration of the Escrow Period. Such
Interest Funds will be in an amount sufficient to cover the difference between
the interest earned on the Escrow Account and the amounts due to the purchasers
of the Units in the Offering. At the expiration of the Escrow Period, the Issuer
shall provide written instructions to the Escrow Agent to deliver and pay over
the interest due to the purchaser of Units in the Offering in such amounts as
specified in the written instructions.
7. (a) If the Issuer and the Underwriter reject any subscription for
which the Escrow Agent has already collected funds, the Escrow Agent shall
promptly issue a refund check to the rejected subscriber, inclusive of interest
earned thereon. If the Issuer and the Underwriter reject 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
to the rejected subscriber in the amount of the subscriber's original check
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 return the subscriber's check directly to the subscriber.
(b) If on the termination of the Escrow Period proceeds from the sale
of at least 550,000 Units ($5,500,000 total sales proceeds) have not been
deposited with the Escrow Agent, the Escrow Agent on the basis of its records of
the Escrow Account, shall return to each of the purchasers of Units in the
Offering the amounts paid in by them, with interest, for the purchaser of Units
and without any deductions. Each amount paid or payable to each purchaser
pursuant to this Escrow Agreement shall be deemed to be the property of each
purchaser, free and clear of any or all claims of Issuer or any of its
creditors, and the subscription agreements to purchaser the Units made and
entered into in connection with the Offering shall thereupon be deemed ipso
facto to be canceled without any further liability of said purchasers to pay for
the Units purchased. The Escrow Agent shall be required to make such payment
only to the person named in the written account of each sale to be furnished
pursuant to Paragraph 1. At such times as the Escrow Agent shall have made all
the payments and remittances provided for in this paragraph, the Escrow Agent
shall be completely discharged and released of any further liabilities and
responsibilities hereunder.
8. The Escrow Agent, in its actions pursuant to this Agreement, shall
be fully protected in every reasonable exercise of its discretion and shall have
no obligations hereunder either to Issuer or to any other party, except as
expressly set forth herein.
9. No purchaser of Units for which funds are deposited hereunder shall
have any right to have funds refunded except in accordance with the provisions
of paragraph 7 hereof.
10. The Escrow Agent shall not be obligated to issue any certificate of
deposit to the Issuer, the Underwriter or any other party or any other
instrument or document representing any interest in the deposited funds, but
written notice acknowledging receipt of the deposited funds will be delivered
from
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time to time by the Escrow Agent to the Issuer and the Underwriter. The Escrow
Agent shall not release any proceeds received until such proceeds are received
by the Escrow Agent in collected funds and subject to the provisions contained
in this Agreement.
11. In performing any of its duties hereunder, the Escrow Agent shall
not incur any liability to anyone for damages, losses, or expenses, except for
willful default or gross negligence, and it shall, accordingly, not incur any
such liability with respect to (i) any action taken or omitted in good faith
upon advice of its counsel, or (ii) any action taken or omitted in reliance upon
any instrument, including the written advice provided for herein, which the
Escrow Agent shall, in good faith, believe to be genuine, to have been signed or
presented by a proper person or persons, and to conform with the provisions of
this Agreement.
12. In consideration of this appointment by Escrow Agent, the Issuer
agrees to indemnify and hold Escrow Agent harmless as to any liability incurred
by Escrow Agent to any person, firm or corporation by reason of its having
accepted same or in carrying out any of the terms hereof, except as provided in
Section 11 herein, and to reimburse Escrow Agent for all its expenses, including
among other things, counsel fees and court costs incurred by reason of its
position or actions taken pursuant to this Agreement. The Issuer, Underwriter
and Selling Shareholders hereby agree that the Escrow Agent shall not be liable
to any of them for any actions taken by Escrow Agent pursuant to the terms
hereof.
13. Escrow Agent is hereby authorized, in its exclusive discretion, to
obey and comply with all writs, orders, judgments or decrees issued by any court
or administrative agency affecting any money, documents or things held by Escrow
Agent, Escrow Agent shall not be liable to any of the parties hereto, their
successors, heirs or personal representatives by reason of Escrow Agent's
compliance with any such writ, order, judgment or decree, notwithstanding if
such writ, order, judgment or decree is later reversed, modified, set aside or
vacated.
14. If any action be brought to interpret or enforce these
instructions, or any part thereof, the Issuer agrees to pay to Escrow Agent's
attorney fees, accounting fees, special and extra service fees and other costs
related to such action.
15. In the event the escrow established hereby is canceled, the Issuer
shall nevertheless pay to the Escrow Agent the initial fee together with all
costs and expenses of Escrow Agent, including attorney fees. Notwithstanding
anything in these instructions to the contrary, Escrow Agent may, in its sole
discretion, upon ten (10) days written notice to the Issuer, resign as Escrow
Agent and shall be entitled to reimbursement for those costs and expenses
incurred to the date of such resignation. Upon cancellation by the Issuer or
resignation by Escrow Agent, after deducting Escrow Agent's fees, costs and
expenses, the balance of any funds shall be returned to the Issuer who shall
have deposited same.
16. In the event that (a) Escrow Agent performs any services not
specifically provided for herein or (b) there is an assignment or attachment of
any interest in the subject matter of the escrow established hereby or any
modification thereof, or (c) any dispute or controversy arises hereunder, or (d)
Escrow Agent is named a party to, or intervenes in, any litigation pertaining to
this escrow or the subject matter thereof, Escrow Agent shall, in addition to
fees and charges for ordinary services, be
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reasonably compensated therefore and reimbursed for all costs and expenses,
including attorneys' fees, occasioned thereby.
Escrow Agent shall be entitled to an initial, non-refundable
set-up fee ("initial fee") of $1,000.00, payable concurrently with its
acceptance, and to additional compensation as follows: An additional $1.00 per
$1,000 of subscription funds deposited herein in excess of $1,500,000, wire
fees, messenger fees, $100.00 yearly hold-open fee (due if escrow open over 1
year from the date of these instructions), and/or any other reasonable and
necessary out-of-pocket expenses incurred by Escrow Agent, which shall be
deducted from the accrued interest, if any, and/or subscription funds as
incurred.
The Issuer, Underwriter and Selling Shareholders understand
that Escrow Agent will charge additional fees, including premium hourly fees,
for any services performed according to this Agreement, or any modification or
any service not specifically provided therein, that involve concerted effort,
employees working overtime, expedited handling of any aspect of the Escrow, or
other similar services.
17. These instructions may be executed in counterparts, each of which
so executed shall be deemed as original, irrespective of the date of its
execution and delivery, and said counterparts together shall constitute one and
the same instrument.
IN WITNESS WHEREOF, the Issuer and the Underwriter, and the Escrow
Agent have executed this Escrow Agreement on the day and year first above
written.
"ISSUER" DAYTON GENERAL SYSTEMS, INC.
By:
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Xxxxxx X. Xxxx, President
"UNDERWRITER" X. X. XXXXXXX & ASSOCIATES
By:
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Xxxxxx X. Xxxxxxx, Chairman and CEO
"SELLING SHAREHOLDERS" CHURCH STREET FINANCIAL CORP.
By:
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Its:
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Xxxxx X. Xxxxx
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Xxxxxx X. Xxxxxxx
Escrow Agent hereby acknowledges receipt of the Escrow Agreement and
hereby assigns Escrow No. _______________-GG to same. Upon receipt of the money
referred to in this Agreement, Escrow Agent agrees in consideration of the
foregoing to hold and dispose of the same in accordance with said Agreement, and
upon the terms and conditions set forth.
"ESCROW AGENT" NATIONAL BANK OF
SOUTHERN CALIFORNIA
By:
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Title:
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