<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 30, 1999
REGISTRATION NO. 333-92581
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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comstar.net, inc.
(Exact Name of Registrant as Specified in its Charter)
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<S> <C> <C>
GEORGIA 7379 58-2235514
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
2812 SPRING ROAD
SUITE 210
ATLANTA, GEORGIA 30339
(770) 485-6000
(770) 485-6100 (FACSIMILE)
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
CHRISTOPHER K. MARTIN, C.P.A.
CHIEF FINANCIAL OFFICER
comstar.net, inc.
2812 SPRING ROAD
SUITE 210
ATLANTA, GEORGIA 30339
(770) 485-6000
(770) 485-6100 (FACSIMILE)
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
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Copies to:
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<S> <C>
CHARLES D. VAUGHN, ESQ. M. HILL JEFFRIES, ESQ.
JENNIFER A. MCCOID, ESQ. MARC L. HARRISON, ESQ.
NELSON MULLINS RILEY & SCARBOROUGH, L.L.P. ALSTON & BIRD LLP
FIRST UNION PLAZA, SUITE 1400 ONE ATLANTIC CENTER
999 PEACHTREE STREET, N.E. 1201 WEST PEACHTREE STREET
ATLANTA, GEORGIA 30309 ATLANTA, GEORGIA 30309-3424
(404) 817-6000 (404) 881-7000
(404) 817-6050 (FACSIMILE) (404) 881-4777 (FACSIMILE)
</TABLE>
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this form is filed to register additional securities for any offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] __________
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] __________
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] __________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE(1) REGISTRATION FEE
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<S> <C> <C>
Units consisting of an 8% Senior Convertible Note with a
Stock Purchase Warrant......................................
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Common Stock, no par value, issuable upon conversion of 8%
Senior Convertible Notes(2)................................
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Common Stock, no par value, issuable upon exercise or
conversion of the Stock Purchase Warrants(2)(3)............
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Common Stock, no par value, issuable upon conversion of
outstanding debt into equity(4)............................
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Total....................................................... $6,019,863 $1,590(5)
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act of 1933.
(2) Pursuant to Rule 416, this Registration Statement covers additional shares
that may become issuable as a result of anti-dilution provisions contained
in the 8% Senior Convertible Notes and the Stock Purchase Warrants.
(3) The Common Stock aggregate offering price is based on the warrant exercise
price of $.01 per share in accordance with Rule 457(g).
(4) The Common Stock aggregate offering price is based on the dollar amount of
debt to be converted in accordance with Rule 457(f)(2).
(5) Previously paid.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table describes our expenses in connection with the offering
described in the registration statement. All amounts are estimates and may be
subject to future contingencies except the SEC registration fee and the NASD
fees:
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<S> <C>
SEC registration fee........................................ $ 1,590
NASD fees................................................... 1,102
Blue Sky fees and expenses.................................. 5,000
Printing and engraving...................................... 17,500
Legal fees and expenses..................................... 125,000
Accounting fees and expenses................................ 75,000
Escrow agent fees........................................... 5,000
Miscellaneous expenses...................................... 808
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Total..................................................... $ 231,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Georgia Business Corporation Code, as amended, permits a corporation to
eliminate or limit the personal liability of a director to the corporation or
its shareholders for monetary damages for breach of duty of care or other duty
as a director, except a corporation cannot eliminate or limit the liability of a
director for:
- an appropriation, in violation of his duties, of any business opportunity
of the corporation,
- acts or omissions which involve intentional misconduct or a knowing
violation of law,
- unlawful corporate distributions, or
- any transaction from which the director received an improper personal
benefit.
This provision relates only to breaches of duty by directors in their capacity
as directors, and not in any other corporate capacity, such as officers. It
limits liability only for breaches of fiduciary duties under the Georgia Code,
and not for violation of other laws, such as the federal securities laws. Our
articles of incorporation exonerate our directors from monetary liability to the
extent described above.
In addition to the rights provided by law that are described above, our
bylaws provide broad indemnification rights to our directors and the officers,
employees and agents as the directors may select, with respect to various civil
and criminal liabilities and losses that may be incurred by the director,
officer, agent or employee in any pending or threatened litigation or other
proceedings. This indemnification does not apply in the same situations
described above with respect to the exculpation from liability of our directors.
We are also obligated to reimburse directors and other parties for expenses,
including legal fees, court costs and expert witness fees, incurred by those
persons in defending against any of these liabilities and losses, as long as the
person in good faith believes that he or she complied with the applicable
standard of conduct with respect to the underlying accusations giving rise to
the liabilities or losses and agrees to repay to us any advances made under the
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bylaws if it is ultimately determined that the person is not entitled to
indemnification by us. Any amendment or other modification to the bylaws which
limits or otherwise adversely affects the rights to indemnification currently
provided in the bylaws shall apply only to proceedings based upon actions and
events occurring after the amendment and delivery of notice of it to the
indemnified parties. In addition, if the Georgia Code is ever amended to permit
greater elimination of liability, our articles provide that such greater
protection shall be given automatically to our directors without further board
or shareholder action unless required by law.
We have entered into separate indemnification agreements with each of our
directors and some of our officers. We have agreed, among other things, to
provide for indemnification and advancement of expenses in a manner and under
terms and conditions similar to those stated in the bylaws. Our shareholders
cannot void these agreements. In addition, we hold an insurance policy covering
directors and officers under which the insurer agrees to pay, subject to certain
exclusions, for any claim made against our directors and officers for a wrongful
act that they may become legally obligated to pay or for which we are required
to indemnify the directors or officers.
We believe that the above protections are necessary to attract and retain
qualified persons as directors and officers.
The placement agreement, which is filed as Exhibit 1.1 hereto, also
contains the placement agents' agreement to indemnify our directors and officers
and some other persons against civil liabilities specified in the agreement.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to our directors, officers and controlling persons under the
foregoing provisions, or otherwise, we have been advised that in the opinion of
the SEC this indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. If a claim for indemnification
against these liabilities (other than our payment of expenses incurred or paid
by one of our directors, officers or controlling persons in the successful
defense of any action, suit or proceeding) is asserted by the director, officer
or controlling person in connection with the securities being registered, we
will, unless in the opinion of our counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether that indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of that issue.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
(a) Issuances of Capital Stock
In May 1996, we issued and sold 1,000 shares of our common stock to 4
investors in exchange for services and other consideration equal to $1.00.
In November 1998, we recapitalized comstar.net by converting the 1,000
shares of common stock previously outstanding to 5,000,000 shares of common
stock series A and 5,000,000 shares of common stock series B.
Between November 23, 1998 and June 30, 1999, we sold 371,786 shares of
common stock series A at a price per share of $5.71 to 25 investors in a private
financing for a total of $2,122,744 in cash.
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(b) Certain Grants of Options
As of September 30, 1999, we had issued options to purchase 1,536,250
shares of common stock pursuant to the Amended and Restated 1999 Stock Option
and Incentive Plan and options to purchase 200,000 shares of common stock
pursuant to the Director Stock Option Plan.
No placement agents were involved in the foregoing sales of securities.
Each issuance of securities described above was made in reliance on one or more
of the exemptions from registration provided by Sections 3(a)(11), 3(b), 4(2)
and 4(6) of the Securities Act, Regulation D and Rule 701, as promulgated by the
SEC under the Securities Act. All recipients of securities in these transactions
were either (a) eligible participants in a compensatory plan or (b) accredited
investors who represented their intention to acquire the securities for
investment purposes only and not with a view to or for the sale in connection
with any distribution of those shares. We affixed appropriate legends to the
share certificates we issued in those transactions. All recipients of these
securities had adequate access, through their relationships with comstar.net, to
information about us. All of these securities are deemed restricted securities
for purposes of the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
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EXHIBIT
NUMBER DESCRIPTION
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<C> <C> <S>
1.1* -- Form of Placement Agreement.
1.2 -- Escrow Agreement.
2.1*+ -- Asset Purchase Agreement dated as of June 30, 1998 between
Athens' ISP, Inc. and the registrant.
3.1* -- Amended and Restated Articles of Incorporation dated
November 22, 1999.
3.2* -- Amended and Restated Bylaws.
4.1* -- See Exhibits 3.1 and 3.2 for provisions defining the rights
of comstar.net shareholders.
4.2* -- Form of 8% Senior Promissory Note (filed herewith as
Appendix A to the prospectus filed as a part of this
registration statement).
4.3* -- Form of Stock Purchase Warrant (filed herewith as Appendix B
to the prospectus filed as a part of this registration
statement).
4.4* -- Amended and Restated Shareholder Agreement dated December 1,
1998, Amendment No. 1 to Amended and Restated Shareholder
Agreement dated August 31, 1999.
4.5* -- Form of Shareholders Agreement (filed herewith as Appendix C
to the prospectus filed as a part of this registration
statement).
4.6* -- Form of Subscription Agreement (filed herewith as Appendix D
to the prospectus filed as a part of this registration
statement).
5.1* -- Opinion of Nelson Mullins Riley & Scarborough, L.L.P.
10.1* -- Amended and Restated 1999 Stock Option and Incentive Plan,
including form of Stock Option Agreement attached thereto.
10.2* -- Director Stock Option Plan, including form of Director Stock
Option Agreement attached thereto.
10.3* -- Form of Indemnification Agreement between comstar.net, inc.
and each of its directors and executive officers.
10.4* -- Lease of office space from The Emerson Center Company dated
September 30, 1999.
</TABLE>
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<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
10.5* -- Lease of office space from The Emerson Center Company dated
October 15, 1999.
10.6* -- Form of Network Services Agreement between comstar.net and
its customers.
10.7* -- Form of Internet Access Service Addendum to the Network
Services Agreement.
10.8* -- Form of Colocation Service Addendum to the Network Services
Agreement.
10.9* -- Form of Corporate Acceptable Use Policy Addendum to the
Network Services Agreement.
10.10* -- Form of Special Access Services Agreement between
comstar.net and its customers.
10.11* -- Form of Non-Solicitation, Confidentiality and Assignment
Agreement between comstar.net, inc. and each of its
employees.
10.12* -- Loan agreement dated July 21, 1999 between Premier Bank and
the registrant.
10.13* -- Modification Note dated July 21, 1999 and loan agreement
dated June 22, 1999 between Premier Bank and the registrant.
10.14* -- Letter Agreement dated July 1, 1998 between Samuel F. Dayton
and the registrant relating to repayment of loans to First
National Bank of Commerce.
10.15* -- Promissory Note dated November 9, 1999 given by the
registrant as maker in favor of Samuel F. Dayton as holder.
10.16* -- Loan Extension and Modification Agreement dated December 10,
1999 between the registrant, db Telecom Technologies, Inc.,
Samuel F. Dayton, James L. Bruce, Jr., J. Cary Howell and
Edward N. Landa.
21.1* -- Subsidiaries.
23.1* -- Consent of Nelson Mullins Riley & Scarborough, L.L.P.
(included in legal opinion filed as Exhibit 5.1).
23.2* -- Consent of Arthur Andersen LLP.
24.1* -- Power of Attorney (included on signature pages hereto).
27.1* -- Financial Data Schedule (for SEC use only).
</TABLE>
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* Previously filed.
+ We agree to furnish supplementally a copy of any omitted schedule or exhibit
to the SEC upon request, as provided in Item 601(b)(2) of Regulation S-K.
(b) Financial Statement Schedules
Schedule II -- Valuation and Qualifying Accounts
ITEM 17. UNDERTAKINGS.
We hereby undertake:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
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<PAGE> 6
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in the volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
We hereby undertake to provide to the placement agents, at the closing
specified in the placement agreement, notes and warrants in such denominations
and registered in such names as required by the placement agents to permit
prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the SEC this indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. If a claim for
indemnification against these liabilities (other than our payment of expenses
incurred or paid by one of our directors, officers or controlling persons in the
successful defense of any action, suit or proceeding) is asserted by the
director, officer or controlling person in connection with the securities being
registered, we will, unless in the opinion of our counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by us is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
We hereby undertake that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus we file pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this registration statement as of
the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amendment to the registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Atlanta,
State of Georgia, on this 29th day of December, 1999.
comstar.net, inc.
By: *
-----------------------------------
J. Cary Howell
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities listed and on the dates indicated.
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SIGNATURES TITLE DATE
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* Chief Executive Officer December 29, 1999
- --------------------------------------------- and Director (Principal
J. Cary Howell Executive Officer)
/s/ CHRISTOPHER K. MARTIN Chief Financial Officer December 29, 1999
- --------------------------------------------- and Treasurer
Christopher K. Martin (Principal Financial
and Accounting Officer)
* Chairman of the Board December 29, 1999
- ---------------------------------------------
Samuel F. Dayton
* Chief Technology Officer, December 29, 1999
- --------------------------------------------- Secretary and Director
Edward N. Landa
* Director December 29, 1999
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James L. Bruce, Jr.
* Director December 29, 1999
- ---------------------------------------------
Glenn W. Sturm
* Director December 29, 1999
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Stephen R. Gross
by: /s/ CHRISTOPHER K. MARTIN
- ---------------------------------------------
Christopher K. Martin, Attorney-in-fact
</TABLE>
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<PAGE> 8
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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<C> <C> <S>
1.1* -- Form of Placement Agreement.
1.2 -- Escrow Agreement.
2.1*+ -- Asset Purchase Agreement dated as of June 30, 1998 between
Athens' ISP, Inc. and the registrant.
3.1* -- Amended and Restated Articles of Incorporation dated
November 22, 1999.
3.2* -- Amended and Restated Bylaws.
4.1* -- See Exhibits 3.1 and 3.2 for provisions defining the rights
of comstar.net shareholders.
4.2* -- Form of 8% Senior Promissory Note (filed herewith as
Appendix A to the prospectus filed as a part of this
registration statement).
4.3* -- Form of Stock Purchase Warrant (filed herewith as Appendix B
to the prospectus filed as a part of this registration
statement).
4.4* -- Amended and Restated Shareholder Agreement dated December 1,
1998, Amendment No. 1 to Amended and Restated Shareholder
Agreement dated August 31, 1999.
4.5* -- Form of Shareholders Agreement (filed herewith as Appendix C
to the prospectus filed as a part of this registration
statement).
4.6* -- Form of Subscription Agreement (filed herewith as Appendix D
to the prospectus filed as a part of this registration
statement).
5.1* -- Opinion of Nelson Mullins Riley & Scarborough, L.L.P.
10.1* -- Amended and Restated 1999 Stock Option and Incentive Plan,
including form of Stock Option Agreement attached thereto.
10.2* -- Director Stock Option Plan, including form of Director Stock
Option Agreement attached thereto.
10.3* -- Form of Indemnification Agreement between comstar.net, inc.
and each of its directors and executive officers.
10.4* -- Lease of office space from The Emerson Center Company dated
September 30, 1999.
10.5* -- Lease of office space from The Emerson Center Company dated
October 15, 1999.
10.6* -- Form of Network Services Agreement between comstar.net and
its customers.
10.7* -- Form of Internet Access Service Addendum to the Network
Services Agreement.
10.8* -- Form of Colocation Service Addendum to the Network Services
Agreement.
10.9* -- Form of Corporate Acceptable Use Policy Addendum to the
Network Services Agreement.
10.10* -- Form of Special Access Services Agreement between
comstar.net and its customers.
10.11* -- Form of Non-Solicitation, Confidentiality and Assignment
Agreement between comstar.net, inc. and each of its
employees.
10.12* -- Loan agreement dated July 21, 1999 between Premier Bank and
the registrant.
10.13* -- Modification Note dated July 21, 1999 and loan agreement
dated June 22, 1999 between Premier Bank and the registrant.
10.14* -- Letter Agreement dated July 1, 1998 between Samuel F. Dayton
and the registrant relating to repayment of loans to First
National Bank of Commerce.
10.15* -- Promissory Note dated November 9, 1999 given by the
registrant as maker in favor of Samuel F. Dayton as holder.
10.16* -- Loan Extension and Modification Agreement dated December 10,
1999 between the registrant, db Telecom Technologies, Inc.,
Samuel F. Dayton, James L. Bruce, Jr., J. Cary Howell and
Edward N. Landa.
</TABLE>
<PAGE> 9
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
21.1* -- Subsidiaries.
23.1* -- Consent of Nelson Mullins Riley & Scarborough, L.L.P.
(included in legal opinion filed as Exhibit 5.1).
23.2* -- Consent of Arthur Andersen LLP.
24.1* -- Power of Attorney (included on signature pages hereto).
27.1* -- Financial Data Schedule (for SEC use only).
</TABLE>
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* Previously filed.
+ We agree to furnish supplementally a copy of any omitted schedule or exhibit
to the SEC upon request, as provided in Item 601(b)(2) of Regulation S-K.
<PAGE> 1
EXHIBIT 1.2
ESCROW AGREEMENT
This Escrow Agreement dated as of December 29, 1999, is by and among
comstar.net, inc., a Georgia corporation (the "Company"), and Scott &
Stringfellow, Inc., a Virginia corporation, and SunTrust Equitable Securities
Corporation, a Tennessee corporation (together with Scott & Stringfellow, Inc.,
the "Placement Agents"), to Branch Banking & Trust Company, a national banking
association ("Escrow Holder").
BACKGROUND STATEMENT
The Company desires to offer to subscribers for Minimum Subscriptions
(as defined Section 5(a) below) its investment units, consisting of a Series
1999 Convertible Note and a Stock Purchase Warrant (the "Units"), at a price per
unit of $50,000 (or such other price as specified by the Company or the
Placement Agents in a notice to Escrow Holder), as more particularly set forth
in a Registration Statement on Form S-1 (Reg. No. 333-92581) filed with the
Securities and Exchange Commission (the "Registration Statement").
In accordance with the Registration Statement, all payments received by
the Company or the Placement Agents in connection with subscriptions for Units
are required to be promptly forwarded to an Escrow Holder. The Company and the
Placement Agents desire to appoint the Escrow Holder to act as a Escrow Holder
pursuant to the terms of this Agreement, to accept and disburse funds and
subscription documents from subscribers, and Escrow Holder has agreed to accept
such appointment, in accordance with the terms of this Agreement
STATEMENT OF AGREEMENT
1. APPOINTMENT OF ESCROW HOLDER. Company and the Placement Agents
hereby appoint Escrow Holder to serve as Escrow Holder hereunder, and Escrow
Holder hereby accepts such appointment in accordance with the terms of this
Escrow Agreement.
2. ESTABLISHMENT OF THE ESCROW: Escrow Holder will open one or
more escrow accounts (the "Escrow"), and either the Company or the Placement
Agents, in accordance with Rule 15c2-4 under the Securities Exchange Act of
1934, as amended, will deliver to Escrow Holder from time to time, and in no
event later than noon on the next business day following receipt, for deposit
into the Escrow the full amount of each payment received from each subscriber
(the "Subscription Price"), together with the name, address and taxpayer
identification number of such subscriber, the number of Units subscribed for and
the amount paid therefor, and an I.R.S. Form W-9 completed and executed by each
subscriber. Escrow Holder shall have no obligation to accept monies, documents
or instructions from any party other than the Company or a Placement Agent with
respect to the Escrow. All monies so deposited will be in the form of a
subscriber's personal check in favor of "Branch Banking & Trust Company -
comstar.net, inc." or by wire transfer. Any check received from a subscriber
that is not made payable as described in the preceding sentence shall be
returned by the Company or a Placement Agent, as applicable, directly to the
subscriber by the end of the next business day
<PAGE> 2
following its receipt. Should any such check be returned to Escrow Holder as
uncollectable for any reason, Escrow Holder will charge the amount of such
unpaid check to Escrow, notify the Company of the amount of such return check,
the name of the subscriber and the reason for return, and hold such check
subject to further instructions from the Company or the Placement Agents. No
monies and other property in the Escrow shall be subject to any lien, claim or
offset by Escrow Holder or other creditors of the Company until and to the
extent such monies and property become available for distribution to Company
pursuant to the terms of this Agreement. Escrow Holder, Placement Agents and the
Company agree that this Agreement may be waived and not implemented if all
subscribers in this offering consent to depositing the Subscription Price
directly into a separate bank account of the Company until subscriptions for at
least $4,000,000 have been received pursuant to this offering, at which time the
funds will become the property of the Company, provided that if the Minimum
Subscriptions have not been received by the offering period as described in
Section 5(c) of this Agreement, then such funds shall be returned to the persons
entitled thereto.
3. INVESTMENT: The funds held in Escrow will be invested by the
Escrow Holder as the Placement Agents designate, and the Placement Agents shall
give directions to invest only in bank savings or money market accounts or any
other investment permitted by SEC Rule 15c2-4. No funds will be invested until
Escrow Holder receives an I.R.S. Form W-9 completed and executed by the
applicable subscriber and the subscriber's check has been collected in good
funds. If Escrow Holder has not received instructions from the Placement Agents
at any time that an investment decision must be made, Escrow Holder shall not
invest such funds. Each investment shall be made in the name of Escrow Holder in
its stated capacity as Escrow Holder. Notwithstanding anything to the contrary
contained herein, Escrow Holder may, without notice to Placement Agents or
Company, sell or liquidate any of the foregoing investments at any time if the
proceeds thereof are required for any release of funds permitted or required
hereunder, and Escrow Holder shall not be liable or responsible for any loss,
cost or penalty resulting from any such sale or liquidation. With respect to any
funds received by Escrow Holder for deposit into Escrow or any written
investment instruction of the Placement Agents received by Escrow Holder after
ten o'clock, a.m., Wilson, North Carolina, time, Escrow Holder shall not be
required to invest such funds or to effect such investment instruction until the
next day upon which banks in Wilson, North Carolina, are open for business.
4. CANCELLATION OF SUBSCRIPTIONS:
a. CANCELLATION BY THE COMPANY: The Company may reject or
cancel any subscription in whole or in part. If the Subscription Price for such
rejected or cancelled subscription has been delivered to Escrow Holder, the
Company will inform Escrow Holder of the rejection or cancellation, and Escrow
Holder upon receiving such notice will refund the funds then held in escrow with
respect to such cancelled subscription, and shall pay as soon as practicable to
the applicable subscriber, by certified or bank check and by first class mail,
such subscriber's share of income earned on the funds held in Escrow, each such
share to be calculated on a Pro Rata Basis (as defined in Section 5(b) below).
b. CANCELLATION BY SUBSCRIBERS: All Subscriptions are
irrevocable, and no subscriber will have any right to cancel or rescind the
subscription, except as required under the law of any jurisdiction in which the
shares are sold.
5. DISBURSEMENTS OF ESCROW FUNDS:
a. Completion of Minimum Offering. Subject to the provisions
of Section 5 hereof, Escrow Holder shall pay to Company the liquidated value of
the funds held in Escrow, by certified or bank check or by wire transfer, no
later than one (1) business day following receipt of documents substantially in
compliance with the following:
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<PAGE> 3
(1) a written notification (a "Minimum Offering Notice"),
signed by Placement Agents, which shall specify that
subscriptions for at least $4,000,000 in Units (the
"Minimum Subscriptions") have been received; that, to
the best of Placement Agent's knowledge after due
inquiry and review of its records, wire transfers or
federal funds checks in full payment for that number
of Units equal to or greater than the Minimum
Subscriptions have been received, deposited with and
collected by Escrow Holder; and that such
subscriptions have not been rejected or otherwise
terminated;
(2) an accounting of all subscriptions for Units received
and accepted by Company as of the date of the Minimum
Offering Notice, substantiating the sale of the
Minimum Subscriptions and indicating for each
subscription the Subscriber's name, the number and
total purchase price of subscribed Units, the date of
receipt by Company of the subscription documents and
subscriptions funds, and any rejection of such
subscription by Company, or other termination, for
whatever reason, of such subscription.
(3) an opinion of counsel address to Escrow Holder that
(a) the Registration Statement has been declared
effective under the Securities Act of 1933, and (b)
to the best of its knowledge, no stop order has been
issued or threatened to be issued by the SEC or any
other federal or state regulatory authority in
connection with the Registration Statement or the
offering of Units pursuant thereto; and
(4) Such other certificates, notices or other documents
as Escrow Holder shall reasonably require.
Notwithstanding the foregoing, Escrow Holder shall not be obligated to disburse
funds from Escrow to Company if Escrow Holder has grounds to believe that (a)
checks in full payment for that number of Units equal to or greater than the
Minimum Subscriptions have not been received, deposited with and collected by
the Escrow Holder, or (b) any of the certifications and opinions provided
pursuant to this Section 5(a) are incorrect or incomplete.
After the initial disbursement of funds from Escrow to Company pursuant
to this Section 5(a), Escrow Holder shall pay to Company any additional funds
received with respect to the Units, by certified or bank check or wire transfer,
no later than one (1) business day after receipt.
b. Rejection of Any Subscription or Termination of the
Offering. No later than fifteen (15) business days after receipt by Escrow
Holder of written notice (i) from Company or Placement Agents that there will be
no closing of the sale of Units to subscribers, or (ii) from the SEC or any
other federal or state regulatory authority that a stop order has been issued
with respect to the Registration Statement and has remained in effect for at
least twenty (20) days, Escrow Holder shall refund to all subscribers the funds
then held in Escrow by certified or bank check and by first class mail, and
shall pay as soon as practicable to the
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<PAGE> 4
applicable subscriber(s), by certified or bank check and by first class mail,
each subscriber's share of income earned on the funds held in Escrow, each such
share to be calculated on a Pro Rata Basis. "Pro Rata Basis," with respect to
the allocation among subscribers of interest and other earnings held in the
Escrow, shall mean, for each subscriber, the subscriber's cash investment
multiplied by the number of days the cash investment of such subscriber was held
in interest-bearing investments pursuant to Section 3 hereof, multiplied by the
average yield earned on the invested funds held in Escrow during such period of
days.
c. Expiration of Offering Period. Notwithstanding
anything to the contrary contained herein, if Escrow Holder shall not have
received a Minimum Offering Notice on or before December 31, 1999 (or such later
date to which the Company and the Placement Agents extend the offering, but in
any event no later than January 15, 2000), Escrow Holder shall, within fifteen
(15) business days after such date and without any further instruction or
direction from Placement Agents or Company, return to each Subscriber, by
certified or bank check and by first class mail, the Subscription Price paid
made by such Subscriber, and shall pay as soon as practicable to the applicable
Subscriber(s), by certified or bank check and by first class mail, each
Subscriber's share of income earned on the Escrow Funds, each such share to be
calculated on a Pro Rata Basis.
6. SUSPENSION OF PERFORMANCE OR DISBURSEMENT INTO COURT. If, at
any time, there shall exist any dispute between Placement Agents, Company,
Escrow Holder, any Subscriber or any other person with respect to the holding or
disposition of any portion of the funds held in Escrow or any other obligations
of Escrow Holder hereunder, or if at any time Escrow Holder is unable to
determine, to Escrow Holder's sole satisfaction, the proper disposition of any
portion of the funds and other property held in Escrow or Escrow Holder's proper
actions with respect to its obligations hereunder, or if Placement Agents and
Company have not within 30 days of the furnishing by Escrow Holder of a notice
of resignation pursuant to Section 8 hereof appointed a successor Escrow Holder
to act hereunder, then Escrow Holder may, in its sole discretion, take either or
both of the following actions:
a. suspend the performance of any of its obligations
under this Escrow Agreement until such dispute or uncertainty shall be resolved
to the sole satisfaction of Escrow Holder or until a successor Escrow Holder
shall have been appointed (as the case may be); provided however, that Escrow
Holder shall continue to invest the Escrow Funds in accordance with Section 3
hereof; and/or
b. petition (by means of an interpleader action or any
other appropriate method) any court of competent jurisdiction for instructions
with respect to such dispute or uncertainty, and pay into such court all funds
and other property held by it in Escrow for holding and disposition in
accordance with the instructions of such court.
Escrow Holder shall have no liability to Placement Agents, Company, any
subscriber or any other person with respect to any such suspension of
performance or disbursement into court, specifically including any liability or
claimed liability that may arise, or be alleged to have arisen, out of or as a
result of any delay in the disbursement of funds held in Escrow or any delay in
or with respect to any other action required or requested of Escrow Holder.
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<PAGE> 5
7. FEES:
a. Fees. Escrow Holder shall be entitled to an initial,
non refundable, set-up fee of $______ payable concurrently with its acceptance,
and upon opening of this Escrow, plus actual expenses incurred in performing its
duties hereunder. The Company and the Placement Agents, jointly and severally,
will pay Escrow Holder's fees and expenses provided that upon the close of the
Escrow, Escrow Holder may withhold from any amounts disbursed to the Company the
amount of its then earned but unpaid fees and expenses.
b. Disbursements from Escrow to Pay Escrow Holder. The
Escrow Holder is authorized to and may disburse from time to time, to itself or
to any Indemnified Party from the Escrow (to the extent of Company's rights
thereto), the amount of any compensation and reimbursement of out-of-pocket
expenses due and payable hereunder (including any amount to which Escrow Company
or any Indemnified Party is entitled to seek indemnification pursuant to Section
9 hereof). Escrow Holder shall notify Company of any disbursement from the
Escrow to itself or to any Indemnified Party in respect of any compensation or
reimbursement hereunder and shall furnish to Company copies of all related
invoices and other statements.
c. Security and Offset. Company hereby grants to Escrow
Holder and the Indemnified Parties a security interest in and lien upon the
Escrow (to the extent of Company's rights thereto) to secure all obligations
hereunder, and Escrow Holder and the Indemnified Parties shall have the right to
offset the amount of any compensation or reimbursement due any of them hereunder
(including any claim for indemnification pursuant to Section 9 hereof) against
the Escrow (to the extent of Company's rights thereto). If for any reason the
funds in Escrow available to Escrow Holder and the Indemnified Parties pursuant
to such security interest or right of offset are insufficient to cover such
compensation and reimbursement, Company shall promptly pay such amounts to
Escrow Holder and the Indemnified Parties upon receipt of an itemized invoice.
8. RESIGNATION AND REMOVAL OF ESCROW HOLDER. Escrow Holder may
resign from the performance of its duties hereunder at any time by giving ten
(10) days' prior written notice to Placement Agents and Company or may be
removed, with or without cause, by Placement Agents and Company, acting jointly
in writing, at any time by the giving of ten (10) days' prior written notice to
Escrow Holder. Such resignation or removal shall take effect upon the
appointment of a successor Escrow Holder as provided herein. Upon any such
notice of resignation or removal, Placement Agents and Company jointly shall
appoint a successor Escrow Holder hereunder, which shall be a "bank," as defined
in Section 3(a)(6) of the Securities Exchange Act of 1934, as amended. Upon any
failure of the Company and the Placement Agents to appoint a successor within
thirty (30) days after the effective date of such resignation or removal, the
Escrow Holder, at the Company's expense, may petition any court of competent
jurisdiction for the appointment of a successor, which shall be a "bank," as
defined in Section 3(a)(6) of the Securities Exchange Act of 1934, as amended.
Upon the acceptance in writing of any appointment as Escrow Holder hereunder by
a successor Escrow Holder, such successor Escrow Holder shall thereupon succeed
to and become vested with all the rights, powers, privileges and duties of the
retiring Escrow Holder, and the retiring Escrow Holder shall be discharged from
its duties and obligations under this Escrow Agreement, but shall not be
discharged from any liability for actions taken as Escrow Holder hereunder prior
to such succession. After any
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<PAGE> 6
retiring Escrow Holder's resignation or removal, the provisions of this Escrow
Agreement shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Escrow Holder under this Escrow Agreement.
9. LIABILITY OF ESCROW HOLDER.
a. Escrow Holder shall have no liability or obligation
with respect to the Escrow except for Escrow Holder's willful misconduct or
gross negligence. Escrow Holder's sole responsibility shall be for the
safekeeping, investment, and disbursement of the funds and property held in
Escrow in accordance with the terms of this Escrow Agreement. Escrow Holder
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 Holder 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 Holder shall 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 Escrow
Agreement. In no event shall Escrow Holder be liable for incidental, indirect,
special, consequential or punitive damages. Escrow Holder shall not be obligated
to take any legal action or commence any proceeding in connection with the funds
or property held in Escrow or this Escrow Agreement, or to appear in, prosecute
or defend any such legal action or proceeding. Without limiting the generality
of the foregoing, Escrow Holder shall not be responsible for or required to
enforce any of the terms or conditions of any subscription agreement with any
subscriber or any other agreement between Company, Placement Agents and/or any
Subscriber. Escrow Holder shall not be responsible or liable in any manner for
the performance by Company or any subscriber of their respective obligations
under any subscription agreement nor shall Escrow Holder be responsible or
liable in any manner for the failure of Company, Placement Agents or any third
party (including any subscriber) to honor any of the provisions of this Escrow
Agreement, the provisions of law or the terms of the Registration Statement or
any other offering documents. Escrow Holder 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 its duties hereunder, and shall incur no liability
and shall be fully indemnified from any liability whatsoever in acting in
accordance with the opinion or instruction of such counsel. Company and
Placement Agents, jointly and severally, shall promptly pay, upon demand, the
reasonable fees and expenses of any such counsel.
b. The Escrow Holder is authorized, in its sole
discretion, to comply with orders issued or process entered by any court with
respect to the Escrow Funds, without determination by the Escrow Holder of such
court's jurisdiction in the matter. If any portion of the Escrow Funds is at any
time attached, garnished or levied upon under any court order, or in case the
payment, assignment, transfer, conveyance or delivery of any such property shall
be stayed or enjoined by any court order, or in case any order, judgment or
decree shall be made or entered by any court affecting such property or any part
thereof, then and in any such event, the Escrow Holder is authorized, in its
sole discretion, to rely upon and comply with any such order, writ, judgment or
decree which it is advised by legal counsel selected by it is binding upon it
without the need for appeal or other action; and if the Escrow Holder complies
with any such order, writ, judgment or decree, it shall not be liable to any of
the parties hereto or to any other
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<PAGE> 7
person or entity by reason of such compliance even though such order, writ,
judgment or decree may be subsequently reversed, modified, annulled, set aside
or vacated.
10. INDEMNIFICATION OF ESCROW HOLDER. From and at all times after
the date of this Escrow Agreement, Company shall, to the fullest extent
permitted by law, indemnify and hold harmless the Escrow Holder and each
director, officer, employee, attorney, agent and affiliate of Escrow Holder
(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, including without limitation Company or Placement
Agents, 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 Escrow 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 Company in writing, and Company shall assume the defense
thereof, including the employment of counsel and the payment of all expenses.
Such Indemnified Party shall, in its sole discretion, have the right to employ
separate counsel (who may be selected by such Indemnified Party in its sole
discretion) 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,
except that Company shall be required to pay such fees and expenses if (a)
Company agrees to pay such fees and expenses, or (b) Company shall fail to
assume the defense of such action or proceeding or shall fail, in the reasonable
discretion of such Indemnified Party, to employ counsel satisfactory to the
Indemnified Party in any such action or proceeding, (c) Company is the plaintiff
in any such action or proceeding or (d) the named parties to any such action or
proceeding (including any impleaded parties) include both Indemnified Party and
Company, 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 Company. Company shall be liable to pay fees
and expenses of counsel pursuant to the preceding sentence. All such fees and
expenses payable by Company 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. The obligations of Company under this
Section 10 shall survive any termination of this Escrow Agreement and the
resignation or removal of Escrow Holder.
11. FACSIMILE: The Company agrees that Escrow Holder may, but need
not, honor and follow instructions, amendments or other orders ("orders") which
shall be provided by telephone facsimile transmission ("faxed") to Escrow Holder
in connection with this escrow and
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may act thereon without further inquiry and regardless of by whom or by what
means the actual or purported signature of the Company may have been affixed
thereto if such signature in Escrow Holder's sole judgment resembles the
signature of the Company. The Company indemnifies and holds Escrow Holder free
and harmless from any and all liability, suits, claims or causes of action which
may arise from loss or claim of loss resulting from any forged, improper,
wrongful or unauthorized faxed order. The Company agrees to pay all attorney
fees and cost incurred by Escrow Holder (or allocable to its in-house counsel),
in connection with said claim(s).
12. REPRESENTATIONS AND WARRANTIES:
a. Company makes the following representations and
warranties to Escrow Holder:
(1) Company is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Georgia, and has
full power and authority to execute and deliver this Escrow Agreement and to
perform its obligations hereunder;
(2) This Escrow Agreement has been duly approved by all
necessary corporate action of Company, including any necessary shareholder
approval, has been executed by duly authorized officers of Company, and
constitutes a valid and binding agreement of Company, enforceable in accordance
with its terms.
(3) The execution, delivery, and performance by Company
of this Escrow Agreement will not violate, conflict with, or cause a default
under the articles of incorporation or bylaws of Company, any applicable law or
regulation, any court order or administrative ruling or decree to which Company
is a party or any of its property is subject, or any agreement, contract,
indenture, or other binding arrangement to which Company is a party or any of
its property is subject. The execution, delivery and performance of this
Agreement is consistent with and accurately described in the Registration
Statement, and the allocation of interest and other earnings to subscribers as
set forth herein has been properly described therein.
(4) No party other than the parties hereto and the
prospective subscribers have, or shall have, any lien, claim or security
interest in funds and other property held in Escrow or any part thereof. No
financing statement under the Uniform Commercial Code is on file in any
jurisdiction claiming a security interest in or describing (whether specifically
or generally) the Escrow or any part thereof.
(5) Company hereby acknowledges that the status of Escrow
Holder is that of agent only for the limited purposes set forth herein, and
hereby represents and covenants that no representation or implication shall be
made that the Escrow Holder has investigated the desirability or advisability of
investment in the Units or has approved, endorsed or passed upon the merits of
the investment therein and that the name of the Escrow Holder has not and shall
not be used in any manner in connection with the offer or sale of the Units
other than to state that the Escrow Holder has agreed to serve as Escrow Holder
for the limited purposes set forth herein.
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(6) All of the representations and warranties of Company
contained herein are true and complete as of the date hereof and will be true
and complete at the time of any deposit to or disbursement from the Escrow.
b. Each Placement Agent, as to itself and not as to the
other Placement Agent, makes the following representations and warranties to
Escrow Holder:
(1) Placement Agent is a corporation duly organized,
validly existing, and in good standing under the laws of its state of
incorporation and has full power and authority to execute and deliver this
Escrow Agreement and to perform its obligations hereunder;
(2) This Escrow Agreement has been duly approved by all
necessary corporate action of Placement Agent, has been executed by a duly
authorized officer of Placement Agent, and constitutes a valid and binding
agreement of Placement Agent, enforceable in accordance with its terms.
(3) The execution, delivery, and performance by Placement
Agent of this Escrow Agreement will not violate, conflict with, or cause a
default under the articles of incorporation or bylaws of Placement Agent, any
applicable law, regulation or license, any court order or administrative ruling
or decree to which Placement Agent is a party or any of its property is subject,
or any agreement, contract, indenture, or other binding arrangement to which
Placement Agent is a party or any of its property is subject. The execution,
delivery and performance of this Agreement is consistent with and accurately
described in the Registration Statement, and the allocation of interest and
other earnings to subscribers as set forth herein has been properly described
therein.
(4) The wire transfer of funds to Escrow Holder or the
deposit with Escrow Holder of federal funds checks from subscribers pursuant
hereto shall be deemed a representation and warranty by Placement Agent that
each such wire transfer or federal funds check represents a bona fide sale to
the subscriber described therein of the amount of Units set forth therein,
subject to and in accordance with the terms of the Registration Statement.
(5) Placement Agent hereby acknowledges that the status
of Escrow Holder is that of agent only for the limited purposes set forth
herein, and hereby represents and covenants that no representation or
implication shall be made that the Escrow Holder has investigated the
desirability or advisability of investment in the Units or has approved,
endorsed or passed upon the merits of the investment therein and that the name
of the Escrow Holder has not and shall not be used in any manner in connection
with the offer or sale of the Units other than to state that the Escrow Holder
has agreed to serve as Escrow Holder for the limited purposes set forth herein.
(6) All of the representations and warranties of
Placement Agents contained herein are true and complete as of the date hereof
and will be true and complete at the time of any deposit to or disbursement from
the Escrow Funds.
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13. OTHER:
(a) NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed to have been validly served,
given or delivered five (5) days after deposit in the United States mails, by
certified mail with return receipt requested and postage prepaid, when delivered
personally, one (1) day after delivery to any overnight courier, or when
transmitted by facsimile transmission facilities, and addressed to the party to
be notified as follows:
If to Company at: 2812 Spring Road, Suite 210
Atlanta, Georgia 30339
Phone Number: (770) 485-6000
Fax Number: (770) 486-6100
ATTENTION: Cary Howell
If to Placement Agents at: Scott & Stringfellow, Inc.
909 East Main Street
Richmond, VA 23219
ATTENTION: M. Kent Warner
Facsimile Number: (804) 649-2615
And
SunTrust Equitable Securities Corporation
800 Nashville City Center
Nashville, TN 37219
ATTENTION: David Jones
Facsimile Number: (615) 780-4187
If to the Escrow
Holder at: Branch Banking & Trust Company
Corporate Trust Services
P.O. Box 2887
223 West Nash Street
Wilson, North Carolina 27893
ATTENTION: Margaret Smith
Facsimile Number: (252) 246-4968
or to such other address as each party may designate for
itself by like notice.
(b) Time of Essence. Time is of the essence in the
performance of the obligations under this Agreement.
(c) Counterparts. This Escrow Agreement may be executed
in counterparts, each of which so executed shall, irrespective of the date of
its execution and delivery, be deemed an original, and said counterparts
together shall constitute one and the same instrument.
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(d) Governing Law. This Escrow Agreement shall be
governed by, and shall be construed according to, the internal laws and judicial
decisions of the State of North Carolina.
(e) Consent to Jurisdiction and Venue. In the event that
any party hereto commences a lawsuit or other proceeding relating to or arising
from this Agreement, the parties hereto agree that the United States District
Court for the Eastern District of North Carolina shall have the sole and
exclusive jurisdiction over any such proceeding. If all such courts lack federal
subject matter jurisdiction, the parties agree that the Superior Court Division
of the General Court of Justice of Wilson County, North Carolina shall have sole
and exclusive jurisdiction. Any of these courts shall be proper venue for any
such lawsuit or judicial proceeding and the parties hereto waive any objection
to such venue. The parties hereto consent to and agree to submit to the
jurisdiction of any of the courts specified herein and agree to accept service
or process to vest personal jurisdiction over them in any of these courts.
(f) Amendment or Waiver. This Escrow Agreement may be
changed, waived, discharged or terminated only by a writing signed by each
Placement Agent, Company and Escrow Holder. No delay or omission by any party in
exercising any right with respect hereto shall operate as a waiver. A waiver on
any one occasion shall not be construed as a bar to, or waiver of, any right or
remedy on any future occasion.
(g) Severability. To the extent any provision of this
Escrow Agreement is prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining provisions
of this Escrow Agreement.
(h) Entire Agreement. This Escrow Agreement constitutes
the entire agreement between the parties relating to the acceptance, collection,
holding, investment and disbursement of the Escrow and sets forth in their
entirety the obligations and duties of the Escrow Holder with respect to the
Escrow and supersedes all prior and contemporaneous agreements and
understandings of the parties with respect thereto.
(i) Binding Effect. All of the terms of this Escrow
Agreement, as amended from time to time, shall be binding upon, inure to the
benefit of and be enforceable by the respective successors and assigns of
Placement Agents, Company and Escrow Holder.
(j) Termination. Upon the first to occur of the
disbursement of all amounts in the Escrow or deposit of all amounts in Escrow
into court, this Escrow Agreement shall terminate and Escrow Holder shall have
no further obligation or liability whatsoever with respect to this Escrow
Agreement or the Escrow.
(k) Dealings. The Escrow Holder and any stockholder,
director, officer or employee of the Escrow Holder may buy, sell, and deal in
any of the securities of the Company and become pecuniarily interested in any
transaction in which the Company may be interested, and contract and lend money
to the Company and otherwise act as fully and freely as though it were not
Escrow Holder under this Agreement. Nothing herein shall preclude the Escrow
Holder from acting in any other capacity for the Company or any other entity.
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(l) Tax Reporting. Each of the parties hereto agrees
that, for tax reporting purposes, all interest or other income earned from the
investment of the Escrow Funds in any tax year shall (i) to the extent such
interest or other income is distributed by the Escrow Holder to any person or
entity pursuant to the terms of this Escrow Agreement during such tax year, be
allocated to such person or entity, and (ii) otherwise shall be allocated to
Company. The Company's federal tax identification number is 58-2235514.
(m) Force Majeure. The Escrow Holder shall not be
responsible for delays or failures in performance resulting from acts beyond its
control. Such acts shall include but not be limited to acts of God, strikes,
lockouts, riots, acts of war, epidemics, governmental regulations superimposed
after the fact, fire, communication line failures, computer viruses, power
failures, earthquakes or other disasters.
(n) Reproduction of Documents. This Escrow Agreement and
all documents relating hereto, including, without limitation, (a) consents,
waivers and modifications which may hereafter be executed, and (b) certificates
and other information previously or hereafter furnished, may be reproduced by
any photographic, photostatic, microfilm, optical disk, micro-card, miniature
photographic or other similar process. The parties agree that any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding, whether or not the original is in
existence and whether or not such reproduction was made by a party in the
regular course of business, and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
[Remainder of Page Intentionally Left Blank.]
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IN WITNESS WHEREOF, the parties have executed this Escrow Agreement as
of the date hereof.
"COMPANY"
comstar.net, inc., a Georgia corporation
By: /s/ James C. Howell
------------------------------------------
Its: James C. Howell, CEO
-----------------------------------------
"PLACEMENT AGENTS"
Scott & Stringfellow, Inc., a Virginia corporation
By: /s/ M. Kent Warner
------------------------------------------
Its Director
------------------------------------------
SunTrust Equitable Securities Corporation,
a Tennessee corporation
By: /s/ David Allan Jones
------------------------------------------
Its Managing Director
------------------------------------------
"ESCROW HOLDER"
Branch Banking & Trust Company,
a national banking association
By: /s/ Margaret H. Smith
------------------------------------------
Its: Vice President
-----------------------------------------
13
