EXHIBIT 99.2
BAY NATIONAL CORPORATION
A Minimum of
900,000 Shares of Common Stock @ $10.00 per Share ($9,000,000)
Up To A Maximum of
1,500,000 Shares of Common Stock @ $10.00 per Share ($15,000,000)
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is made and entered into as of
September 15, 1999, by and between Bay National Corporation, a Maryland
corporation, Suite 120, 0000 X. Xxxxx Xxxx, Xxxxxxxxx, Xxxxxxxx 00000 (the
"Corporation"), and Xxxxx Brothers Xxxxxxxx & Co., a bank chartered under the
laws of the Commonwealth of Pennsylvania (the "Escrow Agent").
WHEREAS: The Corporation proposes to offer for sale and to sell, pursuant
to an initial public offering (the "Offering"), a minimum of 900,000 and up to a
maximum of 1,500,000 shares (the "Shares") of its common stock, $0.01 per share
(the "Common Stock"), at a price of Ten Dollars ($10.00) per Share; and
WHEREAS: The Corporation desires to establish an Escrow Account (as
defined herein) in which funds from subscribers will be deposited pending
completion of the Escrow Period (as defined herein) and Xxxxx Brothers Xxxxxxxx
& Co. agrees to serve as Escrow Agent in accordance with the terms and
conditions of this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Escrow. On or prior to the date of the commencement of the Offering
(the "Effective Date"), the Corporation shall establish an interest-bearing
escrow account with the Escrow Agent, which escrow account shall be entitled
"Xxxxx Brothers Xxxxxxxx & Co., Escrow Agent for Bay National Corporation" (the
"Escrow Account"). The Escrow Agent shall receive and disburse the proceeds from
the sale of Shares in accordance with the terms of this Agreement. The Company
will provide instructions to subscribers to make checks for subscriptions
payable to the order of "Xxxxx Brothers Xxxxxxxx & Co., Escrow Agent for Bay
National Corporation" or to wire funds directly to the Escrow Account. Any
checks received by the Escrow Agent that are made payable to a party other than
the Escrow Agent shall be returned to the Corporation.
2. Escrow Deposits and Subscriber Information. The Corporation shall
promptly deliver all monies received from subscribers for the payment of Shares
directly to the Escrow Agent together
with a written account of each sale, which account shall set forth, among other
things, the subscriber's name, address, social security number or taxpayer
identification number, the number of Shares purchased, the amount paid therefor,
and whether the consideration received was in the form of a check, draft or
money order. In addition, the Corporation shall promptly provide such
information to the Escrow Agent for all subscriptions made by wire transfer.
Fractional payments and incomplete accounts shall not be delivered to the Escrow
Agent. During the Escrow Period (as defined herein), the Escrow Agent shall
deposit all monies received into the Escrow Account, and all monies so deposited
are hereinafter referred to as the "Escrow Amount."
The period during which funds shall be held in escrow (the "Escrow
Period") shall begin on the Effective Date and shall terminate upon the earlier
to occur of the following dates:
A. The Escrow Release Date (as defined in Section 5) assuming
that as of such date the Escrow Agent has received at least
$9,000,000 in Collected Funds (as defined in Section 5).
B. 5:00 P.M. EST, January 31, 2000 (unless extended by the
Corporation to not later than 5:00 P.M., March 31, 2000); or
C. The date upon which a determination is made by the Corporation
to terminate the Offering prior to the sale of 900,000 Shares,
and the Escrow Agent is notified in writing by the Corporation
of such termination.
During the Escrow Period, the Corporation is aware and understands that
the Corporation is not entitled to any funds properly received into escrow and
accepted by the Escrow Agent and no amounts deposited in the Escrow Account
shall become the property of the Corporation or any other entity, or be subject
to the debts of the Corporation or any other entity, unless and until such funds
are transferred by the Escrow Agent to the Corporation subject to the provisions
of this Agreement.
3. Collection of Checks. During the Escrow Period, the Escrow Agent is
hereby authorized to forward each check for collection and, upon collection of
the proceeds of each check, deposit the collected proceeds in the Escrow
Account. As an alternative, the Escrow Agent may telephone the bank on which the
check is drawn to confirm that the check has been paid. Any check returned
unpaid shall be returned to the Corporation.
If the Corporation rejects all or part of any subscription for which the
Escrow Agent has already collected funds, the Escrow Agent shall promptly issue
a refund check in the amount of the rejected subscription to the rejected
subscriber. If the Corporation rejects all or part of 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 in the
amount of the rejected subscription to the rejected subscriber 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
remit the subscriber's check directly to the subscriber. In any such event, the
Corporation shall deliver a "Notice of Rejection" to Escrow Agent substantially
in the form of Exhibit A, attached hereto and incorporated by reference herein,
and the Escrow Agent shall not take any action pursuant to this paragraph unless
it is in receipt of a Notice of Rejection.
4. Investment of Escrow Amount. The Escrow Amount shall be invested by the
Escrow Agent at the written direction of the Corporation only in 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 United States Government. In no event shall the Escrow Amount
be invested in instruments that would mature after January 31, 2000 or such date
not later than March 31, 2000 (in the event the Offering is extended by the
Corporation).
5. Escrow Release Date. "Qualifying Subscriptions" as used herein shall
mean all subscriptions that have been received and accepted by the Corporation.
If, at any time prior to the termination of the Escrow Period, the Corporation
has received Qualifying Subscriptions for at least $9,000,000 of Shares and
preliminary approval by the Office of the Comptroller of the Currency (the
"OCC") of the charter of the Corporation's proposed banking subsidiary, Bay
National Bank (the "Bank"), has been received, then the Corporation shall notify
the Escrow Agent and by instructions which shall accompany such notice (such
notice and such instructions to be referred to herein as the "Escrow Closing
Notice") given at least one (1) business day in advance of the date on which the
Corporation intends to obtain a release of funds from the Escrow Account (the
"Escrow Release Date"), shall specify the Escrow Release Date (which must be not
more than ten (10) days after the termination of the Escrow Period) and the
amount of Qualifying Subscriptions accepted by the Corporation as of the date of
the Escrow Closing Notice. The Escrow Closing Notice shall be substantially in
the form attached hereto and incorporated by reference herein as Exhibit B.
On the Escrow Release Date, the Escrow Agent, upon receipt of a
certificate (the "Closing Certificate" from the Corporation certifying that the
Corporation has accepted Qualifying Subscriptions for at least $9,000,000 in
Shares and that the OCC has granted preliminary approval to the Bank's charter,
shall pay to the Corporation the amount specified in the Escrow Closing Notice,
and shall additionally pay to the Corporation the interest earned on all
subscriptions. The Escrow Agent shall pay the Corporation in the form of the
Escrow Agent's check or a wire transfer directly to a non-escrow deposit account
(the "Deposit Account") established by the Corporation at the Escrow Agent or at
another depositary institution identified to the Escrow Agent. The Closing
Certificate shall be substantially in the form of Exhibit C, attached hereto and
incorporated by reference herein.
Notwithstanding anything to the contrary in this Agreement, in no event
will the Escrow Agent pay over any amount to the Corporation unless the Escrow
Agent has received at least $9,000,000 in Collected Funds. For purposes of this
Agreement, the term "Collected Funds" shall mean all funds received by the
Escrow Agent which have cleared normal banking channels and are in the form of
cash.
6. Subscriptions Received After Escrow Release Date. After the Escrow
Release Date, any subscriptions received by the Escrow Agent shall be endorsed
by the Escrow Agent to the Corporation and deposited directly into the Deposit
Account. Assuming the acceptance of such subscriptions, such deposits, upon
clearing normal banking channels, shall be immediately available for use by the
Corporation and the Escrow Agent shall have no obligations with respect to such
deposits.
7. Failure to Meet Conditions. If, prior to the termination of the Escrow
Period, the Escrow Agent has not received the Escrow Closing Notice, the Closing
Certificate and $9,000,000 in Collected Funds, then the Escrow Agent, upon
instructions from the Corporation (the "Refund Instructions") as to the name and
address of each subscriber, the subscription funds in the Escrow Account from
each subscriber and the interest earned by each subscriber on the subscriber's
subscription funds (such subscription funds and interest being referred to
herein as the "Refund Amount"), shall promptly refund to each subscriber the
subscriber's Refund Amount, without deduction, penalty, or expense to the
subscriber, in the form of the Escrow Agent's check and the Escrow Agent shall
inform the Corporation of its distribution of the funds. Interest received from
the investment of the Escrow Amount shall be credited to the subscribers in
proportion to the amounts deposited with respect to each subscriber and in
proportion to the number of days the collected Escrow Amount from each
subscriber was held in the Escrow Account. The purchase money returned to each
subscriber shall be free and clear of any and all claims of the Corporation or
any of its creditors. The Refund Instructions shall be substantially in the form
of Exhibit D, attached hereto and incorporated by reference herein.
8. Duties of Escrow Agent. Escrow Agent shall have no liability or
obligation with respect to the Escrow Amount except for Escrow Agent's willful
misconduct or gross negligence. Escrow Agent's sole responsibility shall be for
the safekeeping and delivery of the Escrow Amount in accordance with the terms
of this Agreement. Escrow Agent shall have no implied duties or obligations and
shall not be charged with knowledge or notice of any fact or circumstance not
specifically set forth herein. Escrow Agent may rely upon any instrument, not
only as to its due execution, validity and effectiveness, but also as to the
truth and accuracy of any information contained therein, which Escrow Agent in
good faith believe to be genuine, to have been signed or presented by the person
or parties purporting to sign the same and to conform to the provisions of this
Agreement. In no event shall Escrow Agent be liable for incidental, indirect,
special, consequential or punitive damages. Escrow Agent shall not be obligated
to take any legal action or commence any proceeding in connection with the
Escrow Amount, any account in which the Escrow Amount is deposited or this
Agreement, or to appear in, prosecute or defend any such legal action or
proceeding. Escrow Agent may consult legal counsel selected by it in the event
of any dispute or question as to the construction of any of the provisions
hereof or of any other agreement or of its duties hereunder, and shall incur no
liability and shall be fully protected from any liability whatsoever in acting
in accordance with the opinion or instruction of such counsel. The Corporation
shall promptly pay, upon demand, the reasonable fees and expenses of any such
counsel.
9. Resignation and Removal of Escrow Agent. Escrow Agent may resign from
the performance of its duties hereunder at any time by giving ten (10) days'
prior written notice to the Corporation, or may be removed, with or without
cause, by the Corporation by written direction of the Corporation to Escrow
Agent at any time by the giving of ten (10) days' prior written notice to Escrow
Agent. Such resignation or removal shall take effect upon the appointment of a
successor Escrow Agent as provided hereinbelow. Upon any such notice of
resignation or removal, the Corporation shall appoint a successor Escrow Agent
hereunder, which shall be an entity authorized by applicable law to serve as an
escrow agent for the Offering. Upon the acceptance in writing of any appointment
as Escrow Agent hereunder by a successor Escrow Agent, such successor Escrow
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Escrow Agent, and the retiring Escrow
Agent shall be discharged from its duties and obligations under this Agreement,
but shall not be discharged from any liability for actions taken as Escrow Agent
hereunder prior to such succession. After any retiring Escrow Agent's
resignation or removal, the provisions of this Agreement shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Escrow
Agent under this Agreement.
10. Indemnification of Escrow Agent. From and at all times after the date
of this Agreement, the Corporation shall, to the fullest extent permitted by law
and to the extent provided herein, indemnify and hold harmless Escrow Agent and
each director, officer, partner, employee, attorney, agent and affiliate of
Escrow Agent (collectively, the "Indemnified Parties") against any and all
actions, claims (whether or not valid), losses, damages, liabilities, costs and
expenses of any kind or nature whatsoever (including without limitation
reasonable attorneys' fees, costs and expenses) incurred by or asserted against
any of the Indemnified Parties from and after the date hereof, whether direct,
indirect, or consequential, as a result of or arising from or in any way
relating to any claim, demand, suit, action or proceeding (including any inquiry
or investigation) by any person, whether threatened or initiated, asserting a
claim for any legal or equitable remedy against any person under any statute or
regulation, including, but not limited to, any federal or state securities laws,
or under any common law or equitable cause or otherwise, arising from or in
connection with the negotiation, preparation, execution, performance or failure
of performance of this Agreement or any transactions contemplated herein,
whether or not any such Indemnified Party is a party to any such action,
proceeding, suit or the target of any such inquiry or investigation; provided,
however, that no Indemnified Party shall have the right to be indemnified
hereunder for any liability finally determined by a court of competent
jurisdiction, subject to no further appeal, to have resulted solely from the
gross negligence or willful misconduct of such Indemnified Party. If any such
action or claim SHALL be brought or asserted against any Indemnified Party, such
Indemnified Party shall promptly notify the Corporation, in writing, and the
Corporation shall assume the defense thereof, including the employment of
counsel and the payment of all expenses, provided, however, that such counsel
shall be reasonably acceptable to Indemnified Party. Such Indemnified Party
shall, in its sole discretion, have the right to employ separate counsel in any
such action and to participate in the defense thereof, and the fees and expenses
of such counsel shall be paid by such Indemnified Party unless (a) the
Corporation agrees to pay such fees and expenses, or (b) the Corporation shall
fail to assume the defense of such action or proceeding or shall fail, in the
reasonable judgment of such Indemnified Party, to employ counsel satisfactory to
the Indemnified
Party in any such action or proceeding, or (c) the named parties to such action
or proceeding (including any impleaded parties) include both Indemnified Party
and the Corporation and Indemnified Party shall have been advised by counsel
that there may be one or more legal defenses available to it which are different
from or additional to those available to the Corporation. All such fees and
expenses payable by the Corporation pursuant to the foregoing sentence shall be
paid from time to time as incurred, both in advance of and after the final
disposition of such action or claim. All of the foregoing losses, damages, costs
and expenses of the Indemnified Parties shall be payable by the Corporation upon
demand by such Indemnified Party. The obligations of the Corporation under this
Section 10 shall survive any termination of this Agreement and the resignation
or removal of Escrow Agent.
11. Remuneration. The Corporation agrees to pay to the Escrow Agent and
the Escrow Agent agrees to accept as remuneration for services rendered as
Escrow Agent hereunder, a set-up fee of in the amount of Five Thousand Dollars
($5,000) and such other fees for services as the Corporation and the Escrow
Agent may agree. In addition, in the event that the Escrow Agent is required to
remit to the subscribers the respective amounts of their funds received under
this Agreement in accordance with Section 3 or Section 7 hereof, the Corporation
agrees to pay to the Escrow Agent an additional amount sufficient to reimburse
the Escrow Agent for its actual costs in disbursing such funds. However, no
fees, reimbursement for costs and expenses, indemnification for any damages, or
any monies whatsoever shall be paid out of or chargeable to the funds on deposit
in the Escrow Account.
12. Disputes. If the Corporation and/or any other party disagree on any
matter connected with the Escrow Account (a) the Escrow Agent may wait for a
settlement by appropriate legal proceedings or other means that the Escrow Agent
may require, and in such event the Escrow Agent will not be liable for interest
or damage, (b) the Escrow Agent will be entitled to such reasonable compensation
for services, costs and attorneys' fees as a court may award if the Escrow Agent
intervenes in or is made a party to any legal proceedings, (c) the Escrow Agent
shall be entitled to hold documents and funds deposited in the Escrow Account
pending settlement of the disagreement by any of the above means, and (d) the
Escrow Agent shall be entitled to file an interpleader action and deposit any
funds or property with an appropriate court.
13. Notices to Escrow Agent. Any written notice required to be given or
delivered to the Escrow Agent shall be deemed conclusively given and delivered
hereunder if the written notice is mailed, by registered or certified mail or by
overnight delivery service, addressed as follows:
Xxxxx X. Xxxxxxx, Xx.
Xxxxx Brothers Xxxxxxxx & Co.
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
14. Assignment. This Agreement may be assigned by a party hereto only with
the consent of the other party, and shall be binding on the successors and
permitted assigns of each of the parties.
15. Governing Law. This Agreement shall be governed, construed and
enforced in accordance with laws of the State of Maryland, without regard to the
principles of conflicts of laws.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
BAY NATIONAL CORPORATION
By:_________________________________
Xxxx X. Xxxxxx, President
XXXXX BROTHERS XXXXXXXX & CO.
By:_________________________________
Xxxxx X. Xxxxxxx, Xx., Manager
EXHIBIT A
---------
[BAY NATIONAL CORPORATION LETTERHEAD]
[DATE]
Xxxxx Brothers Xxxxxxxx & Co.
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxx, Xx.
Dear Xxxx:
This letter is being sent to you pursuant to Section 3 of that certain
Escrow Agreement (the "Escrow Agreement") dated as of September __, 1999 by and
between Xxxxx Brothers Xxxxxxxx & Co. ("Escrow Agent") and Bay National
Corporation (the "Corporation"). This letter shall constitute a Notice of
Rejection pursuant to said section. All capitalized terms used but not otherwise
defined in this letter shall have the meaning ascribed to the term in the Escrow
Agreement.
Please be advised that the Corporation has rejected the subscription of
_____________, [name and address] (the "Subscriber") in the amount of __________
(the "Rejection Amount"). Subscription funds from the Subscriber were forwarded
to the Escrow Agent on _____________ [date].
Accordingly, (i) if the Escrow Agent has already collected funds from the
Subscriber's subscription, the Escrow Agent shall promptly issue a refund check
in the Rejection Amount to the Subscriber; (ii) if the Escrow Agent has not yet
collected funds from the Subscriber's subscription, but has submitted the
Subscriber's check for collection, the Escrow Agent shall promptly issue a
refund check in the Rejection Amount to the Subscriber after the Escrow Agent
has cleared such funds; and (iii) if the Escrow Agent has not yet submitted the
Subscriber's check for collection, the Escrow Agent shall promptly remit the
Subscriber's check directly to the Subscriber.
Please call me if you have any questions regarding the foregoing.
Sincerely,
Xxxx X. Xxxxxx, President,
Bay National Corporation
EXHIBIT B
---------
[BAY NATIONAL CORPORATION LETTERHEAD]
[DATE]
Xxxxx Brothers Xxxxxxxx & Co.
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxx, Xx.
Dear Xxxx:
This letter is being sent to you pursuant to Section 5 of that certain
Escrow Agreement (the "Escrow Agreement") dated as of September __, 1999 by and
between Xxxxx Brothers Xxxxxxxx & Co. ("Escrow Agent") and Bay National
Corporation (the "Corporation"). This letter shall constitute the Escrow Closing
Notice referred to in said section. All capitalized terms used but not otherwise
defined in this letter shall have the meaning ascribed to the term in the Escrow
Agreement.
As of _________ [date], the Company has received Qualifying Subscriptions
for $______ in Shares and has received preliminary approval by the OCC of the
Bank's charter.
Accordingly, it is now appropriate for the subscription funds to be
released from escrow. We request that $___________, which represents funds for
Qualifying Subscriptions accepted as of the date of this letter, along with
interest that has accrued on such amount, be released from the Escrow Account on
___________ [date] at _____________ p.m. (the "Escrow Release Date") to the
Company's account at ____________________ (Account No. _______________).
Please call me if you have any questions regarding the foregoing.
Sincerely,
Xxxx X. Xxxxxx, President,
Bay National Corporation
EXHIBIT C
---------
CERTIFICATE OF BAY NATIONAL CORPORATION
The undersigned, the duly elected and acting President of Bay National
Corporation, a Maryland corporation (the "Corporation"), hereby certifies to
Xxxxx Brothers Xxxxxxxx & Co. (the "Escrow Agent") to the best of the
undersigned's knowledge, information and belief, that, as of the date hereof,
the Corporation has accepted Qualifying Subscriptions for at least $9,000,000 in
Shares and the OCC has granted preliminary approval to the Bank's charter.
All capitalized terms used but not otherwise defined in this Certificate
shall have the meaning ascribed to the term in that certain Escrow Agreement
dated as of September __, 1999 by and between the Escrow Agent and the
Corporation.
IN WITNESS WHEREOF, the undersigned has executed this Certificate, under
seal, as of the __ day of ___________, 1999.
____________________________
Xxxx X. Xxxxxx, President,
EXHIBIT D
---------
[BAY NATIONAL CORPORATION LETTERHEAD]
[DATE]
Xxxxx Brothers Xxxxxxxx & Co.
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxx, Xx.
Dear Xxxx:
This letter is being sent to you pursuant to Section 7 of that certain
Escrow Agreement (the "Escrow Agreement") dated as of September __, 1999 by and
between Xxxxx Brothers Xxxxxxxx & Co. ("Escrow Agent") and Bay National
Corporation (the "Corporation"). This letter shall constitute the Refund
Instructions pursuant to said section. All capitalized terms used but not
otherwise defined in this letter shall have the meaning ascribed to the term in
the Escrow Agreement.
Please send to each subscriber named on Attachment A hereto a check drawn
from the Escrow Account in the amount of the subscriber's subscription funds and
interest earned on such funds (such amounts being set forth on Attachment A).
Please advise us upon your distribution of the appropriate checks to the persons
named on Attachment A.
Please call me if you have any questions regarding the foregoing.
Sincerely,
Xxxx X. Xxxxxx, President,
Bay National Corporation
ATTACHMENT A
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Name and Address Subscriber's
of Subscriber Subscription Funds Interest Refund Due
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