SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
I.
II.
III. FORM 8-K
IV. FORM 8-KSB
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT: (Date of earliest event reported): August 20, 1999
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GRACE DEVELOPMENT, INC.
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(Exact name of registrant as specified in its charter)
COLORADO 0-25582 84-110469
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(State or other jurisdiction of (Commission File (IRS Employer
incorporation or organization) Number) Identification Number)
2685 So. Dayton Way, Unit 42, Denver, CO 80231
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(Address of principal executive offices, including zip code)
303-337-5700
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(Registrant's telephone number, including area code)
ITEM 5. Other Events
On August 20, 1999 the Registrant issued a press release announcing that
it has entered into an Agreement and Plan of
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Merger (the "Agreement"), dated as of August 20, 1999, which, among other terms,
provides for the merger (the "Merger") of a wholly-owned subsidiary of
Registrant with and into New Millennium Multimedia, Inc., a Georgia corporation
("New Millennium"), with New Millennium as the surviving corporation. A copy of
this press release is attached as Exhibit 99.1 to this Report. The parties to
the Agreement are Registrant, New Millennium, the shareholders of New
Millennium, Grace Newco, Inc. ("Newco"), a Georgia corporation and wholly-owned
subsidiary of Registrant, and Signal Compression, Inc. ("Signal"), a Nevada
corporation which is a principal shareholder of Registrant. The Merger is
intended to qualify as a tax-deferred reorganization under Section 368(a) of the
Internal Revenue Code. The Agreement is attached as Exhibit 2 to this Report.
The description of the Agreement and the Merger contained in this Report is
qualified in its entirety by reference to the Agreement.
Pursuant to the Agreement, in a series of simultaneous transactions, Newco
will merge into New Millennium, and the shareholders of NM will receive shares
of the common stock, no par value, of the Registrant (the "Common Stock") as
consideration for the Merger. At the effective time of the Merger, each share of
New Millennium's common stock, par value $1.00 per share ("NM Common Stock"),
will be converted into the right to receive 66.3013 shares of the Common Stock,
with an aggregate issuance to shareholders of New Millennium of 53,029,371
shares of Common Stock. Registrant currently has issued and outstanding
7,599,962 shares of Common Stock. All issued and outstanding shares of Newco ,
which were issued to Registrant prior to the Merger, will constitute all of the
issued and outstanding shares of New Millennium after the Merger. Outstanding
warrants and other rights to purchase NM Common Stock will be converted into
warrants or rights to purchase the Common Stock at the same conversion rate as
effective for New Millennium Common Stock in the Merger.
The Agreement contains customary representations and warranties by the
parties, including those relating to the organization and authority of the
parties; capitalization; financial condition and absence of material changes;
disclosure of material contracts, litigation, assets and encumbrances,
obligations, and proceedings; and transactions with affiliated parties. The
Agreement requires the resignation of all officers and directors of the
Registrant within 10 days after effectiveness of the Merger. Signal and
Registrant on the one hand, and New Millennium on the other, each have agreed to
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indemnify the other with respect to certain matters, including breaches of
representations and warranties contained in the Agreement and claims of third
parties. To secure the obligations of Signal and the Registrant under the
Agreement, Signal has agreed to pledge shares of Common Stock held by it to New
Millennium pursuant to a stock pledge agreement. At the closing of the
transactions contemplated by the Agreement, the Registrant will deliver to Jacob
Barrocas, its sole director and chief executive officer, a release of Mr.
Barrocas from all liabilities owed to the Registrant. The release agreement also
provides for indemnification of Mr. Barrocas against claims released thereby and
those asserted by third parties relating to the Registrant.
The principal conditions to closing the transactions contemplated by the
Agreement include (a) completion of due diligence activities; (b) the filing of
an information statement pursuant to Section 14(f) of the Securities Exchange
Act of 1934, as amended, with the Securities and Exchange Commission and the
mailing of such information statement to the holders of Common Stock; and (c)
the filing of amendments to certain of Registrant's reports filed with the
Securities and Exchange Commission, including certain annual reports on Form
10-KSB, certain quarterly reports on Form 10-QSB, and certain current reports on
Form 8-K. The Registrant anticipates that the Merger will be closed and become
effective by mid-September 1999.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits:
Exhibit 2: Agreement and Plan of Merger dated August 20, 1999.
Exhibit 99.1: Press Release of Merger dated August 20, 1999.
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GRACE DEVELOPMENT, INC.
Dated: September 3, 1999 By: /s/ Jacob Barrocas
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Jacob Barrocas
President and Treasurer
(Principal Executive and Financial Officer)
AGREEMENT AND PLAN OF MERGER
between and among
NEW MILLENNIUM MULTIMEDIA, INC.
GRACE DEVELOPMENT, INC.
GRACE NEWCO, INC.
SIGNAL COMPRESSION, INC.
and
THE INDIVIDUAL SHAREHOLDERS OF
NEW MILLENNIUM MULTIMEDIA, INC.
As of August 20, 1999
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TABLE OF CONTENTS
Page
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ARTICLE 1. THE MERGER 2
SECTION 1.1. Surviving Corporation.........................................2
SECTION 1.2. Articles of Incorporation.....................................2
SECTION 1.3. Bylaws........................................................2
SECTION 1.4. Directors.....................................................2
SECTION 1.5. Officers......................................................2
SECTION 1.6. Effective Time................................................2
ARTICLE 2. CONVERSION OF SHARES 2
SECTION 2.1. NM Stock......................................................2
SECTION 2.2. Fractional Shares.............................................3
SECTION 2.3. Exchange of NM Stock..........................................3
SECTION 2.4. Tax-Deferred Reorganization...................................4
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY,
MERGER SUB AND SIGNAL 4
SECTION 3.1. Organization..................................................4
SECTION 3.2. Authorization.................................................5
SECTION 3.3. Absence of Restrictions and Conflicts.........................5
SECTION 3.4. Capitalization; Ownership of Company Common Stock;
Subsidiaries ...............................................6
SECTION 3.5. SEC Reports and Company Financial Statements..................6
SECTION 3.6. Absence of Certain Changes....................................7
SECTION 3.7. Legal Proceedings.............................................8
SECTION 3.8. Compliance with Law...........................................8
SECTION 3.9. Company Material Contracts....................................9
SECTION 3.10. Tax Returns; Taxes...........................................10
SECTION 3.11. Officers, Directors and Employees............................10
SECTION 3.12. Company Employee Benefit Plans...............................10
SECTION 3.13. Labor Relations..............................................11
SECTION 3.14 Insurance....................................................11
SECTION 3.15. Title to and Condition of Properties.........................11
SECTION 3.16. Environmental Matters........................................12
SECTION 3.17. Patents, Trademarks, Trade Names.............................13
SECTION 3.18. Transactions with Affiliates.................................13
SECTION 3.19. Brokers, Finders and Investment Bankers......................14
SECTION 3.20. Disclosure...................................................14
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF NM AND THE NM SHAREHOLDERS 14
SECTION 4.1. Organization.................................................14
SECTION 4.2. Authorization................................................14
SECTION 4.3. Absence of Restrictions and Conflicts........................15
SECTION 4.4. Disclosure...................................................15
SECTION 4.5. Brokers, Finders and Investment Bankers......................15
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SECTION 4.6. Qualification of the Shareholders............................15
ARTICLE 5. CERTAIN COVENANTS AND AGREEMENTS 16
SECTION 5.1. Election to Board of Directors...............................16
SECTION 5.2. Compliance with Rule 14f-....................................16
ARTICLE 6. OTHER MATTERS 16
SECTION 6.1. Pledge Agreement.............................................16
SECTION 6.2. Opinion of Counsel to the Company and Signal.................16
SECTION 6.3. Opinion of Counsel to NM and the NM Shareholders.............17
SECTION 6.4. Release......................................................17
SECTION 6.5. SEC Filings..................................................17
ARTICLE 7. CLOSING 17
SECTION 7.1. Closing Date.................................................17
SECTION 7.2. Deliveries by the Company, the Surviving Corporation and
Signal ....................................................17
SECTION 7.3. Other Deliveries.............................................17
ARTICLE 8. INDEMNIFICATION 18
SECTION 8.1. Definitions..................................................18
SECTION 8.2. Agreement of Company Indemnitors to Indemnify................19
SECTION 8.3. Agreement of NM Indemnitors to Indemnify.....................19
SECTION 8.4. Procedures for Indemnification...............................20
SECTION 8.5. Third Party Claims...........................................21
SECTION 8.6. Other Rights and Remedies Not Affected.......................22
SECTION 8.7. Survival.....................................................22
SECTION 8.8. Time Limitations.............................................22
SECTION 8.9. Limitations as to Amount Payable by Company Indemnitors......23
SECTION 8.10. Subrogation..................................................23
SECTION 8.11. Appointment of Company Indemnitors' Representative...........23
SECTION 8.12. Payment......................................................24
ARTICLE 9. MISCELLANEOUS PROVISIONS 25
SECTION 9.1. Notices......................................................25
SECTION 9.2. Disclosure Letters and Exhibits..............................26
SECTION 9.3. Assignment; Successors in Interest...........................26
SECTION 9.4. Number; Gender...............................................26
SECTION 9.5. Captions.....................................................26
SECTION 9.6. Controlling Law; Jurisdiction; Integration; Amendment........27
SECTION 9.7. Knowledge....................................................27
SECTION 9.8. Severability.................................................27
SECTION 9.9. Counterparts.................................................27
SECTION 9.10. Enforcement of Certain Rights................................27
SECTION 9.11. Waiver.......................................................28
SECTION 9.12. Fees and Expenses............................................28
SECTION 9.13. Construction.................................................28
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of August 20, 1999 (the
"Agreement"), by and among NEW MILLENNIUM MULTIMEDIA, INC., a Georgia
corporation ("NM"); GRACE DEVELOPMENT, INC., a Colorado corporation (the
"Company"), GRACE NEWCO, INC., a Georgia corporation and wholly-owned subsidiary
of the Company ("Merger Sub"), SIGNAL COMPRESSION, INC., a Nevada corporation
("Signal") and each of the shareholders of NM listed on the signature pages
hereto, each of whom are referred to herein individually as an "NM Shareholder"
and collectively the "NM Shareholders."
W I T N E S S E T H:
WHEREAS, certain of the parties hereto have entered into a tentative
agreement to combine the businesses of NM and the Company;
WHEREAS, the parties to such tentative agreement wish to more fully set
forth their agreement with respect to the combination of NM and the Company and
to consummate such transaction on the terms hereof;
WHEREAS, the respective Boards of Directors of NM, the Company and Merger
Sub each have approved this Agreement and the merger (the "Merger") of Merger
Sub with and into NM upon the terms and conditions contained herein and in
accordance with the Business Corporation Code of the State of Georgia (the
"GBCC");
WHEREAS, the Company, as the sole shareholder of Merger Sub, has approved
this Agreement, the Merger and the transactions contemplated hereby pursuant to
action taken by written consent in accordance with the requirements of the GBCC
and the Articles of Incorporation and the Bylaws of Merger Sub;
WHEREAS, Signal is the owner of a majority of the voting stock of the
Company (the "Controlling Stock");
WHEREAS, Signal has agreed to secure the obligations of the Company to the
NM Shareholders hereunder as set forth in Pledge Agreement (as hereinafter
defined); and
WHEREAS, the NM Shareholders have approved this Agreement, the Merger and
the transactions contemplated hereby pursuant to action taken by unanimous
written consent in accordance with the requirements of the GBCC and the Articles
of Incorporation and the Bylaws of NM;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements set forth herein, the parties hereto hereby agree as
follows:
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ARTICLE 1. THE MERGER
SECTION 1.1. Surviving Corporation. Subject to the provisions of this
Agreement and the GBCC, at the Effective Time (as hereinafter defined), Merger
Sub shall be merged with and into NM and the separate corporate existence of
Merger Sub shall cease. NM shall be the surviving corporation in the Merger
(hereinafter sometimes called the "Surviving Corporation") and shall continue
its corporate existence under the laws of the State of Georgia. The Merger shall
have the effects set forth in Section 14-2-1106 of the GBCC.
SECTION 1.2. Articles of Incorporation. The Articles of Incorporation of
NM shall be the Articles of Incorporation of the Surviving Corporation until
thereafter duly amended in accordance with its terms and the GBCC.
SECTION 1.3. Bylaws. The Bylaws of NM shall be the Bylaws the Surviving
Corporation until thereafter duly amended in accordance with their terms and the
GBCC.
SECTION 1.4. Directors. The directors of the Surviving Corporation shall
consist of the directors of NM immediately prior to the Effective Time and, as
of the Effective Time, all of such directors to hold office until their
respective successors are duly elected and qualified.
SECTION 1.5. Officers. The officers of the Surviving Corporation shall
consist of the officers of NM immediately prior to the Effective Time and,
effective as of the Effective Time, such officers to hold office until their
respective successors are duly elected and qualified.
SECTION 1.6. Effective Time. The parties hereto shall cause a certificate
of merger meeting the requirements of the GBCC (the "Certificate of Merger") to
be properly executed and filed on the Closing Date (as hereinafter defined) with
the Secretary of State of the State of Georgia. The Merger shall become
effective as of the filing of a properly executed Certificate of Merger. The
date and time when the Merger becomes effective is herein referred to as the
effective time (the "Effective Time").
ARTICLE 2.
CONVERSION OF SHARES
SECTION 2.1. NM Stock. As of the Effective Time, by virtue of the Merger
and any action on the part of any holder thereof:
2.1.1 Subject to Section 2.2, each share of the common stock, par value
$1.00 per share, of NM ("NM Stock") issued and outstanding immediately prior to
the Effective Time shall be converted into the right to receive 66.3013 shares
of the Company's common stock, no par value per share (the "Company Common
Stock") for an aggregate of 53,029,371 shares (the "Company Shares") (the
"Merger Consideration"), all of which Company Shares will be issued as of the
Effective Time and delivered to the NM Shareholders within ten (10) business
days following the Closing.
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2.1.2 Each share of common stock, no par value per share, of Merger Sub
that is issued and outstanding immediately prior to the Effective Time shall
remain outstanding and shall be unchanged after the Merger, all of which shares
shall be issued to the Company and shall thereafter constitute the only
outstanding shares of capital stock of the Surviving Corporation.
2.1.3 Each share of the NM Stock issued and outstanding immediately prior
to the Effective Time that is then held in the treasury of NM shall be cancelled
and retired and all rights in respect thereof shall cease to exist, without any
conversion thereof or payment of any consideration therefor.
2.1.4 Except as set forth in the NM Disclosure Letter (as hereinafter
defined), each warrant, stock option or other right, if any, to purchase shares
of NM Stock issued and outstanding immediately prior to the Effective Time shall
remain outstanding (whether or not such warrant, option or other right is then
exercisable), and the holder of any such warrant, option or right shall, upon
exercise thereof in accordance with the terms thereof, be entitled to receive
66.3013 shares of the Company Common Stock for each share of NM Stock that such
holder would otherwise be entitled to receive.
SECTION 2.2. Fractional Shares. No scrip or fractional shares of Company
Common Stock shall be issued pursuant to this Agreement. If any NM Shareholder
would otherwise have been entitled to a fractional share of Company Common Stock
hereunder, such NM Shareholder shall be entitled, after the later of (a) the
Effective Time or (b) the surrender of a Certificate or Certificates (as
hereinafter defined) that represent such shares of NM Stock, to receive from the
Company only the number of whole shares of Company Stock into which such NM
Shares are convertible.
SECTION 2.3. Exchange of NM Stock.
2.3.1 From and after the Effective Time, upon surrender of a certificate
or certificates which immediately prior thereto represented outstanding shares
of NM Stock duly endorsed in blank (the "Certificate" or "Certificates"), the
Certificate or Certificates so surrendered shall forthwith be canceled, and the
NM Shareholders thereafter shall be entitled to receive the Merger Consideration
in accordance with Sections 2.1 and 2.2 hereof. No portion of the Merger
Consideration to be received pursuant to Sections 2.1 and 2.2 upon exchange of a
Certificate may be issued to a person other than the person in whose name the
Certificate surrendered in exchange therefor is registered. From the Effective
Time until surrender in accordance with the provisions of this Section 2.3, each
Certificate shall represent for all purposes only the right to receive the
Merger Consideration. Delivery of certificates for the Company Shares in respect
of shares of NM that are made in accordance with the terms hereof shall be
deemed to have been made in full satisfaction of all rights pertaining to such
securities.
2.3.2 In the case of any lost, mislaid, stolen or destroyed Certificate, a
Shareholder may be required, as a condition precedent to delivery to the NM
Shareholders of the Merger Consideration, to deliver to the Company a bond in
such reasonable sum or a satisfactory
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indemnity agreement as the Company may direct as indemnity against any claim
that may be made against the Company or the Surviving Corporation with respect
to the Certificate alleged to have been lost, mislaid, stolen or destroyed.
2.3.3 After the Effective Time, there shall be no transfers on the stock
transfer books of the Surviving Corporation of the shares of NM Stock that were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for transfer, they
shall be canceled and exchanged for the Merger Consideration.
SECTION 2.4. Tax-Deferred Reorganization. The parties hereto shall use
their reasonable best efforts to cause the Merger to constitute a tax-deferred
reorganization under Code ss.368(a). The Company represents that as of the date
hereof, it has no plan or intention to liquidate, merge or cause the Surviving
Corporation to sell or otherwise dispose of its assets, or do any other act that
would jeopardize the qualification of the Merger contemplated by this Agreement
as a tax-deferred reorganization within the meaning of ss.368(a) of the Code.
All parties covenant to report on their applicable federal and state tax returns
the Merger and the consequences of the Merger consistently with the foregoing.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY, MERGER SUB AND SIGNAL
With such exceptions as may be set forth in a letter (the "Company
Disclosure Letter") delivered by the Company, Merger Sub and Signal to NM prior
to the execution hereof, and attached hereto as Exhibit 1, the Company, Merger
Sub and Signal, jointly and severally, hereby represent and warrant to NM as
follows:
SECTION 3.1. Organization. Each of the Company and Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted. Each of the Company and Merger Sub is duly qualified to
transact business, and is in good standing, as a foreign corporation or branch
of a foreign corporation in each jurisdiction where the character of its
activities requires such qualification, except where the failure to so qualify
would not have a material adverse effect on its assets, liabilities, results of
operations, financial condition, business or prospects. The Company Disclosure
Letter describes the minutes and records of the Company that have previously
been furnished to NM (the "Furnished Minutes"). The Furnished Minutes are the
only minutes of the Company in the possession, custody and control of the
Company and the Company, after due inquiry, has been unable to locate any other
minutes or other records of actions of the Board of Directors or shareholders of
the Company. Each of the Company and Merger Sub has heretofore made available to
NM accurate and complete copies of their respective Articles of Incorporation
and Bylaws, as currently in effect, and Merger Sub has made available to NM its
minutes books and stock records. The Company Disclosure Letter contains a true
and correct list of the jurisdictions in which each of the Company and Merger
Sub is qualified to do business as a foreign corporation or branch of a foreign
corporation.
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SECTION 3.2. Authorization. Each of the Company and Merger Sub has full
corporate power and authority to execute and deliver this Agreement and to
perform its obligations under this Agreement and to consummate the Merger and
the other transactions contemplated hereby. The execution and delivery of this
Agreement by the Company and Merger Sub and the performance by the Company and
Merger Sub of their respective obligations hereunder and the consummation of the
Merger and the other transactions provided for herein have been duly and validly
authorized by all necessary corporate action on their part. The Board of
Directors of each of the Company and Merger Sub has approved the execution,
delivery and performance of this Agreement and the consummation of the Merger
and the other transactions contemplated hereby. Signal has approved this
Agreement, the Merger and the transactions contemplated hereby in accordance
with the requirements of the laws of its jurisdiction of incorporation and its
Articles of Incorporation and Bylaws. This Agreement has been duly executed and
delivered by the Company, Merger Sub and Signal and constitutes the valid and
binding agreement of the Company, Merger Sub and Signal, enforceable against
each of them in accordance with its terms, subject to applicable bankruptcy,
insolvency and other similar laws affecting the enforceability of creditors'
rights generally, general equitable principles and the discretion of courts in
granting equitable remedies.
SECTION 3.3. Absence of Restrictions and Conflicts. The execution,
delivery and performance of this Agreement, the consummation of the Merger and
the other transactions contemplated by this Agreement and the fulfillment of and
compliance with the terms and conditions of this Agreement do not and will not,
with the passing of time or the giving of notice or both, violate or conflict
with, constitute a breach of or default under, result in the loss of any
material benefit under, or permit the acceleration of any obligation under, (i)
any term or provision of the Articles of Incorporation or Bylaws of the Company,
Merger Sub and Signal, (ii) any Company Material Contract (as hereinafter
defined), (iii) any judgment, decree or order of any court or governmental
authority or agency to which the Company, Merger Sub or Signal is a party or by
which the Company, Merger Sub and Signal or any of their respective properties
is bound, or (iv) any statute, law, regulation or rule applicable to the
Company, Merger Sub and Signal. Except for the filing and recordation of the
Certificate of Merger, no consent, approval, order or authorization of, or
registration, declaration or filing with, any governmental agency or public or
regulatory unit, agency, body or authority with respect to the Company, Merger
Sub or Signal is required in connection with the execution, delivery or
performance of this Agreement by the Company, Merger Sub or Signal or the
consummation of the transactions contemplated by this Agreement by the Company,
Merger Sub and Signal. The Company Disclosure Letter sets forth a list of all
agreements requiring the consent of any party thereto to any of the transactions
contemplated hereby.
SECTION 3.4. Capitalization; Ownership of Company Common Stock;
Subsidiaries.
3.4.1 Capitalization. The authorized capital stock of the Company consists
of 800,000,000 shares of Company Common Stock and 10,000,000 of preferred stock,
no par value, (the "Preferred Stock"), of which 7,599,962 shares of Company
Common Stock and no shares of
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Preferred Stock are issued and outstanding as of the date hereof. Except as set
forth in the Company Disclosure Letter, each such share of Company Common Stock
that is outstanding as of the date hereof is duly authorized, validly issued,
fully paid and nonassessable and free of pre-emptive rights. There are no
subscriptions, options, convertible securities, calls, rights, warrants or other
agreements, claims or commitments of any nature whatsoever obligating the
Company to issue, transfer, deliver or sell, or cause to be issued, transferred,
delivered or sold, additional shares of the capital stock or other securities of
the Company or obligating the Company to grant, extend or enter into any such
agreement or commitment.
3.4.2 Ownership. Signal is the record and beneficial owner of 4,995,000
shares of Company Common Stock; its relative share ownership is as set forth on
the Company Disclosure Letter (which also sets forth the record ownership of all
remaining shares of Company Common Stock); and, except as disclosed in the
Company Disclosure Letter, it owns all such shares free and clear of any liens,
claims, options, charges, encumbrances or rights of others.
3.4.3 Company Subsidiaries. The Company does not own, nor has it ever
owned, any subsidiary other than Merger Sub. The authorized capital stock of
Merger Sub consists of 1,000 shares of common stock, no par value per share, of
which 1,000 shares are issued and outstanding. All such issued and outstanding
shares are duly authorized, validly issued, fully paid, nonassessable and free
of preemptive rights. Except with respect to the transactions contemplated by
this Agreement, there are no subscriptions, options, convertible securities,
calls, rights, warrants or other agreements, claims or commitments of any nature
whatsoever obligating Merger Sub to issue, transfer, deliver or sell, or cause
to be issued, transferred, delivered or sold, additional shares of the capital
stock or other securities of Merger Sub or obligating Merger Sub to grant,
extend or enter into any such agreement or commitment.
SECTION 3.5. SEC Reports and Company Financial Statements. The Company has
filed or will file with the Securities and Exchange Commission (the "SEC") true
and complete copies of all forms, reports, schedules, statements and other
documents required to be filed by it since January 1, 1990 and through the date
hereof, under the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and the Securities Act of 1933, as amended (the "Securities Act") (such
forms, reports, schedules, statements and other documents, to the extent filed
and publicly available prior to the date of this Agreement, other than
preliminary filings, are referred to as the "SEC Reports"). The SEC Reports, at
the time filed, (a) did not or will not contain any untrue statement of material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading and (b) complied or will comply as to form
in all material respects with the applicable requirements of the Exchange Act
and the Securities Act. The financial statements of the Company (including the
related notes and schedules thereto) included or to be included in the SEC
Reports (the "Company Financial Statements") (i) comply or will comply as to
form in all material respects with applicable accounting requirements and with
the published rules and regulations of the SEC with respect thereto, (ii) have
been or will have been prepared in accordance with generally accepted accounting
principles ("GAAP") applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto, or, in the case of the
unaudited statements, as permitted by the Instructions to Form 10-QSB
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promulgated by the SEC) and (iii) fairly present or will fairly present
(subject, in the case of the unaudited statements, to normal year-end
adjustments) (A) the financial position of the Company, (B) the results of its
operations and (C) cash flows, in each case, as of the dates thereof or for the
period indicated, as the case may be. The books and records of the Company are
maintained on an accrual basis and the Company Financial Statements have been
prepared from, and are in accordance with, the books and records of the Company.
The Company has no liability or obligation of any nature whatsoever, whether
accrued, absolute, contingent or otherwise, required by to be reflected in the
Company Financial Statements other than (x) current liabilities and obligations
which are recurring in nature and not overdue on their terms, (y) liabilities
and obligations reflected and adequately provided for on the Company Financial
Statements and (z) liabilities and obligations arising in the ordinary course of
business of the Company since June 30, 1999 (none of which is an uninsured
liability for breach of contract, breach of warranty, tort, infringement, claim
or lawsuit). The Company Disclosure Letter sets forth a true and complete list
of all loss contingencies (within the meaning of Statement of Financial
Accounting Standards No. 5) of the Company exceeding $1,000 in the case of any
single loss contingency or $5,000 in the case of all loss contingencies.
SECTION 3.6. Absence of Certain Changes.
3.6.1 Certain Financial Matters; Property; Dividends. Since December 31,
1998, there has not been any financial activity, including, without limitation,
(i) any material adverse change in the assets, liabilities, results of
operations, financial condition, business or prospects of the Company, (ii) any
damage, destruction, loss or casualty to property or assets of the Company,
whether or not covered by insurance, which property or assets are material to
its operations or business, (iii) any declaration, setting aside or payment of
any dividend or distribution (whether in cash, stock or property) in respect of
the capital stock of the Company or any redemption or other acquisition by the
Company of any of the capital stock of the Company or any split, combination or
reclassification of shares of capital stock declared or made by the Company, or
(iv) any agreement to do any of the foregoing.
3.6.2 Other Changes. Since December 31, 1998, there have not been (i) any
losses suffered, (ii) any assets mortgaged, pledged or made subject to any lien,
charge or other encumbrance, (iii) any liability or obligation (absolute,
accrued or contingent) incurred or any material bad debt, contingency or other
reserve increase suffered, except, in each such case, in the ordinary course of
business and consistent with past practice, (iv) any claims, liabilities or
obligations (absolute, accrued or contingent) paid, discharged or satisfied,
other than the payment, discharge or satisfaction, in the ordinary course of
business and consistent with past practice, of claims, liabilities and
obligations reflected or reserved against in the Company Financial Statements or
incurred in the ordinary course of business and consistent with past practice
since the date of such financial statements, (v) any guarantees, checks, notes
or accounts receivable written off as uncollectible, except write-offs in the
ordinary course of business and consistent with past practice, (vi) any write
down of the value of any asset or investment on the Company's books or records,
except for depreciation and amortization taken in the ordinary course of
business and consistent with past practice, (vii) any cancellation of any debts
or waiver of any claims or rights of substantial value, or sale, transfer or
other disposition of any properties
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or assets (real, personal or mixed, tangible or intangible) of substantial
value, except, in each such case, in transactions in the ordinary course of
business and consistent with past practice and which in any event do not exceed
$5,000 in the aggregate, (viii) any single capital expenditure or commitment in
excess of $5,000 for additions to property or equipment, or aggregate capital
expenditures and commitments in excess of $5,000 for additions to property or
equipment, (ix) any material transactions entered into other than in the
ordinary course of business, (x) any agreements to do any of the foregoing, or
(xi) any other events, developments or conditions of any character that have had
or are reasonably likely to have a material adverse effect on the assets,
liabilities, results of operations, financial condition business or prospects of
the Company.
SECTION 3.7. Legal Proceedings. Except as set forth in the Company
Disclosure Letter, there are no suits, actions, claims, proceedings or
investigations pending or, to the best knowledge of the Company, threatened
against, relating to or involving the Company (or any of its officers or
directors) before any court, arbitrator or administrative or governmental body.
All pending or, to the best knowledge of the Company, threatened suits, actions,
claims, proceedings or investigations relating to or involving the Company (or
any of its officers or directors) before any court, arbitrator or administrative
or governmental body are adequately provided for in the Company Financial
Statements. Except as set forth in the Company Disclosure Letter, the Company is
not subject to any judgment, decree, injunction, rule or order of any court nor,
to the best knowledge of the Company, any other governmental restriction.
SECTION 3.8. Compliance with Law. Except as set forth in the Company
Disclosure Letter, the Company has all material authorizations, approvals,
licenses and orders of and from all governmental and regulatory officers and
bodies necessary to carry on its business as it is currently being conducted, to
own or hold under lease the properties and assets it owns or holds under lease
and to perform all of its obligations under the agreements to which it is a
party, and the Company has been and is in material compliance with all
applicable laws, regulations and administrative orders of any country, state or
municipality or of any subdivision thereof to which its business or its
employment of labor or its use or occupancy of properties or any part thereof
are subject, the failure to obtain or the violation of which would have a
material adverse effect upon its assets, liabilities, results of operations,
financial condition, business or prospects.
SECTION 3.9. Company Material Contracts. The Company Disclosure Letter
contains a correct and complete list of the following (hereinafter referred to
as the "Company Material Contracts"):
(i) all bonds, debentures, notes, mortgages, indentures or
guarantees to which the Company is a party or by which any of its properties or
assets (real, personal or mixed, tangible or intangible) is bound;
(ii) all leases to which the Company is a party or by which any of
its properties or assets (real, personal or mixed, tangible or intangible) is
bound;
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(iii) all loans and credit commitments to the Company which are
outstanding, together with a brief description of such commitments and the name
of each financial institution granting the same;
(iv) all contracts or agreements which limit or restrict the Company
from engaging in any business in any jurisdiction or limit or restrict others
from competing with the Company in any jurisdiction;
(v) all agreements and documentation evidencing currently
outstanding loans or advances made by the Company to or on behalf of its
customers other than trade credit extended in the ordinary course of the
Company's business; and
(vi) all existing contracts and commitments (other than those
described in subparagraphs (i), (ii), (iii), (iv) or (v) of this Section 3.9,
and the Company Benefit Plans (as hereinafter defined)) to which the Company is
a party or by which its respective properties or assets may be bound involving
an annual commitment or annual payment by any party thereto of more than $1,000
individually, or which have a fixed term extending more than twelve (12) months
from the date hereof and which involve a total commitment or payment by any
party thereto of more than $5,000.
True and complete copies of all Company Material Contracts, including all
amendments thereto, have been made available to NM. The Company Material
Contracts are valid and enforceable in accordance with their respective terms
with respect to the Company and, to the best knowledge of the Company, are valid
and enforceable in accordance with their respective terms with respect to any
other party thereto, in each case subject to applicable bankruptcy, insolvency
and other similar laws affecting the enforceability of creditors' rights
generally, general equitable principles and the discretion of courts in granting
equitable remedies. Except as set forth in the Company Disclosure Letter, there
is not under any of the Company Material Contracts any existing breach, default
or event of default by the Company or event that with notice or lapse of time or
both would constitute a breach, default or event of default by the Company nor
does the Company know of, and the Company has not received notice of, or made a
claim with respect to, any breach or default by any other party thereto.
SECTION 3.10. Tax Returns; Taxes. The Company has duly filed all federal,
state, local and foreign tax returns required to be filed by it and has duly
paid or made adequate provision for the payment of all taxes which are due and
payable pursuant to such returns or pursuant to any assessment with respect to
taxes in such jurisdictions, whether or not in connection with such returns,
except for incidental interest and penalties which may be due and payable, but
which are not material in amount. The liability for taxes reflected in the
Company Financial Statements is sufficient for the payment of all unpaid taxes,
whether or not disputed, that are accrued or applicable for the period ended
June 30, 1999, and for all years and periods ended prior thereto. All
deficiencies asserted as a result of any examinations by the Internal Revenue
Service ("IRS") or any other taxing authority have been paid, fully settled or
adequately provided for in the Company Financial Statements. There are no
pending claims asserted for taxes of the Company or outstanding agreements or
waivers extending the statutory period of
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limitation applicable to any tax return of the Company for any period. The
Company has made all required estimated income tax deposits and all other
required tax payments or deposits and has complied for all prior periods in all
material respects with the tax withholding provisions of all applicable federal,
state, local, foreign and other laws. The Company has made available to NM true,
complete and correct copies of its federal income tax returns filed for each
taxable year since 1994 and made available such other tax returns requested by
NM.
SECTION 3.11. Officers, Directors and Employees. The Company Disclosure
Letter contains a true and complete list of all of the officers and directors of
the Company, specifying their office and annual rate of compensation, and a true
and complete list of all of the employees of the Company as of the date hereof
with whom the Company has a written employment agreement (other than providing
for at-will employment) or (ii) to whom the Company has made verbal or oral
commitments for employment on other than at-will basis which are binding on the
Company or (iii) who have an annual rate of compensation in excess of $25,000.
SECTION 3.12. Company Employee Benefit Plans.. For purposes of this
Section 3.12, the term "Company Benefit Plan" means any plan, program,
arrangement, fund, policy, practice or contract which, through which or under
which the Company provides benefits or compensation to or on behalf of employees
or former employees of the Company, whether formal or informal, whether or not
written, including, without limitation, the following: (i) Arrangements - any
bonus, incentive compensation, stock option, deferred compensation, commission,
severance pay, golden parachute or other compensation plan or rabbi trust; (ii)
ERISA Plans - any "employee benefit plan" (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")),
including, but not limited to, any multi-employer plan (as defined in Section
3(37) and Section 4001(a)(3) of ERISA), defined benefit plan, profit sharing
plan, money purchase pension plan, 401(k) plan, savings or thrift plan, stock
bonus plan, employee stock ownership plan, or any plan, fund, program,
arrangement or practice providing for medical (including post-retirement
medical), hospitalization, accident, sickness, disability, or life insurance
benefits; and (iii) Other Employee Fringe Benefits - any stock purchase,
vacation, scholarship, day care, prepaid legal services, dependent care,
telephone, automobile, dependent travel or other fringe benefit plans, programs,
arrangements, contracts or practices. Except as described in the Company
Disclosure Letter, the Company does not maintain, nor has it at any time
established or maintained, nor has it at any time been obligated to make, or
otherwise made, contributions to or under or otherwise participated in any
Company Benefit Plan.
SECTION 3.13. Labor Relations. The Company is in compliance in all
material respects with all federal, state and foreign laws respecting employment
and employment practices, terms and conditions of employment, wages and hours,
and is not engaged in any unfair labor or unlawful employment practice. The
Company has received no notice that there is any unlawful employment practice
discrimination charge involving the Company pending before the Equal Employment
Opportunity Commission ("EEOC"), EEOC- recognized state "referral agency" or any
other governmental agency. There is no unfair labor practice charge or complaint
against the Company pending before the National Labor Relations Board ("NLRB").
There is no
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labor strike, dispute, slowdown or stoppage actually pending or, to the best
knowledge of the Company, threatened against or involving or affecting the
Company, and no NLRB representation question exists respecting any of its
employees. No grievance or arbitration proceeding is pending against the Company
and, to the best knowledge of the Company, no written claim therefor exists.
There is no collective bargaining agreement that is binding on the Company.
SECTION 3.14. Insurance. To the knowledge of the Company, the Company has
not maintained any policies of insurance or any insurance coverages.
SECTION 3.15. Title to and Condition of Properties.
3.15.1 Title. The Company has good and valid title to or valid leasehold
interests in its properties reflected in the Company Financial Statements or
acquired after the date thereof (other than properties sold or otherwise
disposed of in the ordinary course of business), and all of such properties are
held free and clear of all title defects, liens, encumbrances and restrictions,
except, with respect to all such properties, (a) mortgages and liens securing
debt reflected as liabilities on the Company Financial Statements and (b)(i)
liens for current taxes and assessments not in default, (ii) mechanics',
carriers', workmen's, materialmen's, repairmen's, statutory or common law liens
either not delinquent or being contested in good faith, and (iii) encumbrances,
covenants, rights of way, building or use restrictions, easements, exceptions,
variances, reservations and other similar matters or limitations, if any, which
do not have a material adverse effect on the Company's use of the property
affected. Notwithstanding the immediately preceding sentence, the Company makes
no representation or warranty in this Section 3.15 or otherwise regarding the
validity of title to any such properties in which the Company has only a
leasehold interest.
3.15.2 Condition of Property. All personal property owned by the Company
or held by the Company pursuant to personal property leases that is material to
the conduct of the Company's business is in good operating condition and repair,
subject only to ordinary wear and tear, has been operated, serviced and
maintained properly within the recommendations and requirements of the
manufacturers thereof, and is suitable and appropriate for the use thereof made
and proposed to be made by the Company in its business and operations. The
personal property described in Section 3.15.1 and all real property leased by
the Company (the "Leased Real Property") and all personal property held by the
Company pursuant to the leases and licenses described in the Company Disclosure
Letter comprise all of the real property and personal property used by the
Company.
3.15.3 Encumbrances. (i) The Company is not in violation of, or default
under, any law pertaining to any of the Leased Real Property, and no notice of
violation of any law, or of any covenant, condition, restriction or easement
affecting any Leased Real Property or with respect to the use or occupancy
thereof, has been given to the Company by any person; (ii) all buildings,
facilities or other structures leased by the Company (collectively the
"Structures") (A) are in good operating condition and repair, (B) are adequate
and suitable for the purposes for which they are currently and proposed to be
used, and (C) are supplied with utilities and other services
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necessary for the operation of the Structures, and the business conducted by the
Company therein; (iii) to the best knowledge of the Company, no condemnation
proceeding is pending or threatened which would impair the occupancy, use or
value of any Leased Real Property; and (iv) to the best knowledge of the
Company, there are no (A) leases, subleases, licenses, concessions or other
agreements, written or oral, granting to any other person the right to acquire,
use or occupy any portion of, any Leased Real Property, (B) outstanding options
or rights of first refusal to purchase all or any portion of the Leased Real
Property or interest therein, or (C) persons (other than the Company) in
possession of any Leased Real Property.
SECTION 3.16. Environmental Matters. There has not been, during the period
commencing on the date on which the Company first leased, operated, managed or
occupied any parcel of real property (the "Real Estate") through and including
the Effective Time (the "Ownership Period"), any Pollution in violation of
applicable laws at the Real Estate; and, to the best knowledge of the Company,
(i) there was no Pollution in violation of applicable laws at any portion of the
Real Estate prior to the date of commencement of the Ownership Period, and (ii)
there are no past or present actions, activities, circumstances, conditions,
events or incidents that could form the basis of any claim against the Company
under any law relating to the pollution or protection of human health or the
environment. During the Ownership Period, (w) the use, storage, disposal and
transportation of all Hazardous Materials by the Company to, at and from the
Real Estate has been in material compliance with all applicable laws, (x) the
Company has not directly or indirectly disposed of any Hazardous Material at a
Superfund site, (y) there has been no Pollution at the Real Estate, and (z) the
Company has not received any notice alleging that any Pollution exists upon any
portion of the Real Estate. As used in this Section 3.16: (A) "Hazardous
Materials" shall mean any substance, waste or material that is defined or
classified as "toxic," "hazardous," "hazardous waste" or other words of similar
import by any law regulating or relating to the environment or regulating or
governing substances, wastes or materials that are deemed to pose a risk of
injury to health of persons or damage to property, including asbestos, petroleum
and petroleum-based products and including all substances, wastes and materials
defined or classified (i) as a "solid waste" or "hazardous waste" (as those
terms are defined in the Solid Waste Disposal Act, as amended (42 U.S.C. 6901 et
seq.)), (ii) as a "pollutant" or "toxic pollutant" (as those terms are defined
under the Clean Water Act, as amended (33 U.S.C. 1251 et seq.)), (iii) as an
"air pollutant" or "hazardous air pollutant" (as those terms are defined under
the Clean Air Act, as amended (42 U.S.C. 7401 et seq.)), (iv) as a "hazardous
substance" (as that term is defined in the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. 9601 et seq.) and amendments thereto),
or any other substance, waste or material regulated under applicable state laws
relating to the prevention and control of water, land, groundwater or air
pollution and contamination; and (B) "Pollution" shall mean the discharge,
disposal, release or emission of any Hazardous Materials in, upon, over, under
or across any parcel of land.
SECTION 3.17. Patents, Trademarks, Trade Names. The Company Disclosure
Letter sets forth a true and complete list of: (i) all patents, trademarks and
trade names (including all federal, state and foreign registrations pertaining
thereto) and all copyright registrations owned by The Company (collectively, the
"Proprietary Intellectual Property"); and (ii) all patents, trademarks, trade
names, copyrights and all technology and processes used by the
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Company in its business which are material thereto and are used pursuant to a
license or other right granted by a third party (collectively, the "Licensed
Intellectual Property" and, together with the Proprietary Intellectual Property,
herein referred to as "Intellectual Property"). A true and complete list of all
such licenses with respect to Licensed Intellectual Property is set forth in the
Company Disclosure Letter. Each of the federal, state and foreign registrations
pertaining to the Proprietary Intellectual Property is valid and in full force
and effect. All required filings in association with such registrations have
been properly made and all required fees have been paid. The Company owns, or
has the right to use pursuant to valid and effective agreements, all
Intellectual Property, and the consummation of the transactions contemplated
hereby will not alter or impair any such rights, except for such defects in
title or other matters which in the aggregate would not have a material adverse
effect on its assets, liabilities, results of operations, financial condition,
business or prospects. No claims are pending against the Company by any person
with respect to the use of any Intellectual Property or challenging or
questioning the validity or effectiveness of any license or agreement relating
to the same, and, to the best knowledge of The Company, the current use by the
Company of the Intellectual Property does not infringe on the rights of any
third party. The Company Disclosure Letter sets forth a list of all
jurisdictions in which the Company is operating under a tradename, and each
jurisdiction in which any such tradename is registered.
SECTION 3.18. Transactions with Affiliates. No shareholder or any director
or officer of the Company, or any person with whom any such shareholder or any
director or officer has any direct or indirect relation by blood, marriage or
adoption, or any entity in which any such person owns any beneficial interest
(other than a publicly held corporation whose stock is traded on a national
securities exchange or in the over-the-counter market and less than 1% of the
stock of which is beneficially owned by all such persons), has any interest in:
(a) any contract, arrangement or understanding with, or relating to, the
business or operations of the Company; (b) any loan, arrangement, understanding,
agreement or contract for or relating to indebtedness of the Company; or (c) any
property (real, personal or mixed, tangible or intangible), used, or currently
intended to be used in, the business or operations of the Company.
SECTION 3.19. Brokers, Finders and Investment Bankers. Neither the Company
nor any of its officers, directors or employees has employed any broker, finder
or investment banker or incurred any liability for any investment banking fees,
financial advisory fees, brokerage fees or finders' fees in connection with the
transactions contemplated herein.
SECTION 3.20. Disclosure. No representation, warranty or covenant made by
the Company or Signal in this Agreement, the Company Disclosure Letter or any
Exhibit attached hereto contains an untrue statement of a material fact. Except
as set forth herein or in the Company Disclosure Letter, neither the Company nor
Signal know of any fact or circumstance which is reasonably likely to have a
material adverse effect on the assets, liabilities, results of operations,
financial condition, business or prospects of the Company.
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ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF NM
AND THE NM SHAREHOLDERS
With such exceptions as may be set forth in a letter (the "NM Disclosure
Letter") delivered by NM and the NM Shareholders to the Company prior to the
execution hereof, and attached hereto as Exhibit 2, NM and the NM Shareholders,
severally and not jointly, hereby represents and warrants to the Company and
Signal as follows:
SECTION 4.1. Organization. NM is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, and NM has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted. NM is duly qualified to transact business, and is in good standing,
as a foreign corporation in each jurisdiction where the character of its
activities requires such qualification, except where the failure to so qualify
would not have a material adverse effect on the assets, liabilities, results of
operations, financial condition, business or prospects of NM taken as a whole.
SECTION 4.2. Authorization. NM has full corporate power and authority to
execute and deliver this Agreement and to perform its respective obligations
under this Agreement and to consummate the Merger and the other transactions
contemplated hereby. The execution and delivery of this Agreement by NM and the
NM Shareholders and the performance by them of their respective obligations
hereunder and the consummation of the Merger and the other transactions provided
for herein have been duly and validly authorized by all necessary corporate or
other action on the part of each of NM and the NM Shareholders. This Agreement
has been duly executed and delivered by each of NM and the NM Shareholders and
constitutes the valid and binding agreement of each of them, enforceable against
each of NM and the NM Shareholders in accordance with its terms, subject to
applicable bankruptcy, insolvency and other similar laws affecting the
enforceability of creditors' rights generally, general equitable principles and
the discretion of courts in granting equitable remedies.
SECTION 4.3. Absence of Restrictions and Conflicts. The execution,
delivery and performance of this Agreement, the consummation of the Merger and
the other transactions contemplated by this Agreement, and the fulfillment of
and compliance with the terms and conditions of this Agreement do not and will
not, with the passing of time or the giving of notice or both, violate or
conflict with, constitute a breach of or default under, result in the loss of
any material benefit under, or permit the acceleration of any obligation under,
(i) any term or provision of the Articles of Incorporation or Bylaws of NM, (ii)
any contract material to the business and operations of NM, (iii) any judgment,
decree or order of any court or governmental authority or agency to which NM is
a party or by which NM or any of its properties is bound, or (iv) any statute,
law, regulation or rule applicable to NM, so as to have, in the case of
subsections (ii) through (iv) above, a material adverse effect on the assets,
liabilities, results of operations, financial condition, business or prospects
of NM taken as a whole. Except for filing and recordation of the Certificate of
Merger, no consent, approval, order or authorization of, or registration,
declaration or filing with, any government agency or public or regulatory unit,
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agency, body or authority with respect to NM is required in connection with the
execution, delivery or performance of this Agreement by NM or the NM
Shareholders or the consummation of the transactions contemplated by this
Agreement by NM or Merger Sub, the failure to obtain which would have a material
adverse effect upon the assets, liabilities, results of operations, financial
condition, business or prospects of NM taken as a whole.
SECTION 4.4. Disclosure. No representation, warranty or covenant made by
NM in this Agreement, the NM Disclosure Letter or any Exhibit hereto contains
any untrue statement of a material fact or omits to state a material fact
required to be stated herein or therein or necessary to make the statements
contained herein or therein not misleading.
SECTION 4.5. Brokers, Finders and Investment Bankers. Neither NM, any of
the NM Shareholders, nor any of their officers, directors or employees has
employed any broker, finder or investment banker or incurred any liability for
any investment banking fees, financial advisory fees, brokerage fees or finders'
fees in connection with the transactions contemplated herein.
SECTION 4.6. Qualification of the Shareholders. Each of the NM
Shareholders (i) is acquiring the Company Common Stock to be issued in
connection herewith for his own account and not with a view to, or for resale in
connection with, any distribution thereof; (ii) understands and acknowledges
that such Company Common Stock has not been registered under the Securities Act
or any state securities laws by reason of certain exemptions from the
registration provisions thereof which depend upon, among other things, the bona
fide nature of his investment intent as expressed herein; (iii) is able to bear
the economic risk of an investment in such Company Common Stock and has such
knowledge and experience in financial and business matters that he is capable of
evaluating the risks and merits of such Company Common Stock; (iv) has been
provided with all information or been given access to all information with
respect to the Company which he believes might affect its decision whether to
effect the Merger; and (v) understands and acknowledges that such Company Common
Stock will be "restricted securities" (as that term is defined in Rule 144 under
the Securities Act) and that the certificate representing such Company Common
Stock will bear a legend restricting transfer unless (A) the transfer is exempt
from the registration requirements under the Securities Act and/or any
applicable state securities law and an opinion of counsel reasonably
satisfactory to the Company that such transfer is exempt therefrom is delivered
the Company or (B) the transfer is made pursuant to an effective registration
statement under the Securities Act and any applicable state securities law. In
determining to proceed with the transactions contemplated hereby, each of the NM
Shareholders has relied solely on the results of his own independent
investigation with respect to the Company and the Company Shares, upon the
representations and statements of the Company set forth herein and upon the SEC
Reports.
ARTICLE 5.
CERTAIN COVENANTS AND AGREEMENTS
SECTION 5.1. Election to Board of Directors. The Company shall obtain the
written resignation of all directors and officers of the Company as NM or the NM
Shareholder
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may specify to the Company not less than 10 days prior to the Effective Time,
effective as of the Effective Time, and (b) shall take all action necessary to
cause the Board of Directors of the Company, at and immediately after the
Effective Time, to consist of those directors specified by NM or the NM
Shareholders in writing not less than 10 days prior to the Effective Time.
SECTION 5.2. Compliance with Rule 14f-1. Signal, as controlling
shareholder of the Company, shall cause the Company to comply on a timely basis
with Rule 14f-1 promulgated under the Exchange Act. NM shall cooperate in
effecting such compliance and shall supply the Company with all information
concerning it and its designees on the Board of Directors of the Company
required to be presented in accordance with such rule.
ARTICLE 6.
OTHER MATTERS
SECTION 6.1. Pledge Agreement. At the Closing, a pledge agreement
substantially in the form attached hereto as Exhibit 3 (the "Pledge Agreement")
shall be executed and delivered by Signal.
SECTION 6.2. Opinion of Counsel to the Company and Signal. At the Closing,
counsel for each of the Company and Signal, shall each deliver their respective
opinions, dated the Closing Date, in form and substance satisfactory to NM and
the NM Shareholders.
SECTION 6.3. Opinion of Counsel to NM and the NM Shareholders. At the
Closing, Rogers & Hardin LLP, counsel for NM and the NM Shareholders, shall
deliver its opinion, dated the Closing Date, in form and substance satisfactory
to each of the Company and Signal.
SECTION 6.4. Release. At the Closing, NM and the Company shall deliver a
release with respect to the obligations of certain officers of the Company,
substantially in the form attached hereto as Exhibit 4.
SECTION 6.5. SEC Filings. Prior to the Closing, the Company shall have
filed with the SEC (a) amendments to the SEC Reports previously filed with the
SEC, such amendments to be in form and substance satisfactory to NM; and (b) an
information statement pursuant to Section 14(f) of the Exchange Act, in form and
substances satisfactory to NM, such information statement to be filed not later
than ten (10) days prior to the Closing Date.
ARTICLE 7.
CLOSING
SECTION 7.1. Closing Date. The Closing shall take place at the offices of
Rogers & Hardin, LLP, 2700 International Tower, 229 Peachtree Street, Atlanta,
Georgia 30303 at 10:00 a.m., local time, on the first business day following the
satisfaction of all conditions to the obligations of the parties hereto, or at
such other time or place or on such other date as the
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parties hereto may agree to in writing (the "Closing Date"). The Closing shall
be effective as of 12:01 a.m., local time, on the Closing Date.
SECTION 7.2. Deliveries by the Company, the Surviving Corporation and
Signal. At the Closing, the Company, Merger Sub and/or Signal shall deliver the
following:
(i) Certificates for the Company Shares as specified by NM not later
than 10 days prior to the Effective Time;
(ii) Executed counterparts of the Pledge Agreement, accompanied by
Certificates for Company Common Stock pledged thereunder; and
(iii) An executed counterpart of the Certificate of Merger to the
Secretary of State of the State of Georgia.
SECTION 7.3. Other Deliveries. At the Closing, the following additional
deliveries shall be made:
(i) Counsel for the Company and Signal shall deliver to NM the
opinions specified in Section 6.3 hereof;
(ii) Counsel for NM and the NM Shareholders shall deliver to the
Company the opinion specified in Section 6.4 hereof;
(iii) The parties hereto shall execute and deliver such other
certificates, documents and things as their respective counsel deem to be
appropriate.
ARTICLE 8.
INDEMNIFICATION
SECTION 8.1. Definitions. For the purposes of this Article 8:
(i) "Company Indemnitors" shall mean the Company and Signal.
(ii) "Company Indemnitors' Representative" shall mean Signal, or
such other person or entity as Signal may designate in writing to the NM
Indemnitors' Representative.
(iii) "Company Indemnitees" shall mean the Company and Signal.
(iv) "Indemnification Claim" shall mean a claim for indemnification
hereunder.
(v) "Indemnitee" or "Indemnitees" shall mean one or more, as the
case may be, of the NM Indemnitees and the Company Indemnitees, without
distinction as the context requires.
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(vi) "Indemnitor" or "Indemnitors" shall mean one or more, as the
case may be, of the NM Indemnitors and the Company Indemnitors, without
distinction.
(vii) "Indemnitors Representative" shall mean NM.
(viii) "Losses" shall mean any and all demands, claims, actions or
causes of action, assessments, losses, damages (including special and
consequential damages), liabilities, costs and expenses, including interest,
penalties, cost of investigation and defense, and reasonable attorneys' and
other professional fees and expenses.
(ix) "NM Indemnitees" shall mean NM, the NM Shareholders, the
Surviving Corporation, and their respective agents, representatives, employees,
officers, directors, shareholders, controlling persons and affiliates.
(x) "NM Indemnitors" shall mean NM and the Surviving Corporation,
jointly and severally.
(xi) "NM Indemnitors' Representative" shall mean NM.
(xii) "Third Party Claim" shall mean any claim, suit or proceeding
(including a binding arbitration or an audit by any taxing authority) that is
instituted against an Indemnitee by a person or entity other than an Indemnitor
and which, if prosecuted successfully, would result in a Loss or Losses for
which such Indemnitee is entitled to indemnification hereunder.
SECTION 8.2. Agreement of Company Indemnitors to Indemnify. Subject to the
terms and conditions of this Article 8, the Company Indemnitors, jointly and
severally, agree to indemnify, defend and hold harmless NM Indemnitees, and each
of them, from, against, for and in respect of any and all Losses asserted
against, or paid, suffered or incurred by, a NM Indemnitee and resulting from,
based upon or arising out of:
(i) the material inaccuracy or untruth of any representation or
warranty of the Company or Signal contained in or made pursuant to this
Agreement or the Company Disclosure Letter or in or made pursuant to any exhibit
furnished by the Company or the Company Indemnitors in connection herewith
regardless of whether the same was deliberate, reckless, negligent, innocent or
unintentional;
(ii) a breach of or failure to perform any covenant, undertaking,
condition or agreement of the Company or Signal or the Company Indemnitors made
in this Agreement or any Ancillary Agreement regardless of whether the same was
deliberate, reckless, negligent, innocent or unintentional;
(iii) the business or operations of the Company prior to the
Effective Time or the actions or omissions of the Company's officers, directors,
shareholders, employees or agents prior to the Effective Time, irrespective of
the date that any claim, suit or other course of action
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related thereto is filed or otherwise instituted, provided that the foregoing
shall not apply to any liability of the Company reflected in the Company
Financial Statements; or
(iv) any claim by any former shareholder of the Company, or any
predecessor thereto, involving the transactions contemplated hereby or any prior
transaction involving any shares of capital stock of the Company.
SECTION 8.3. Agreement of NM Indemnitors to Indemnify. Subject to the
terms and conditions of this Article 8, the NM Indemnitors, jointly and
severally, agree to indemnify, defend and hold harmless the Company Indemnitees,
and each of them, from, against, for and in respect of any and all Losses
asserted against, or paid, suffered or incurred by, each Company Indemnitee and
resulting from, based upon, arising out of or in connection with:
(i) the material inaccuracy or untruth of any representation or
warranty of any NM Indemnitor, contained in or made pursuant to this Agreement
or the NM Disclosure Letter or in or made pursuant to any exhibit furnished by
the NM Indemnitors, or either of them, in connection herewith regardless of
whether the same was deliberate, reckless, negligent, innocent or unintentional;
(ii) a breach of or failure to perform any covenant, undertaking,
condition or agreement of the NM Indemnitors, or either of them, made in this
Agreement or in any Ancillary Agreement regardless of whether the same was
deliberate, reckless, negligent, innocent or unintentional;.
(iii) the business or operations of NM prior to the Effective Time
or the actions or omissions of NM's officers, directors, shareholders, employees
or agents prior to the Effective Time, irrespective of the date that any claim,
suit or other course of action related thereto is filed or otherwise instituted,
provided that the foregoing shall not apply to any liability of NM reflected in
its more recent financial statements; or
(iv) any claim by any former shareholder of NM, or any predecessor
thereto, involving the transactions contemplated hereby or any prior transaction
involving any shares of capital stock of NM.
SECTION 8.4. Procedures for Indemnification. The obligations and
liabilities of the parties with respect to an Indemnification Claim shall be
subject to the following terms and conditions:
(i) an Indemnification Claim shall be made by a NM Indemnitee by
delivery of a written notice to the Company Indemnitors' Representative
requesting indemnification from the Company Indemnitors and specifying the basis
on which indemnification is sought and the amount of asserted Losses and, in the
case of a Third Party Claim, containing (by attachment or otherwise) such other
information as such Indemnitee shall have concerning such Third Party Claim;
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(ii) an Indemnification Claim shall be made by a Company Indemnitee
by delivery of a written notice to the NM Indemnitors' Representative requesting
indemnification and specifying the basis on which indemnification is sought and
the amount of asserted Losses and, in the case of a Third Party Claim,
containing (by attachment or otherwise) such other information as such
Indemnitee shall have concerning such Third Party Claim.
(iii) if the Indemnification Claim involves a Third Party Claim, the
procedures set forth in Section 8.5 hereof shall also be observed by the
Indemnitee and the Indemnitors Representative;
(iv) if the Indemnification Claim involves a matter other than a
Third Party Claim, the Indemnitors Representative shall have thirty (30) days to
object to such Indemnification Claim by delivery of a written notice of such
objection to such Indemnitee specifying in reasonable detail the basis for such
objection. Failure to object in a timely manner shall constitute a final and
binding acceptance of the Indemnification Claim by the Indemnitors
Representative on behalf of all the subject Indemnitors, and the Indemnification
Claim shall be paid in accordance with subsection (v) hereof; and
(v) upon determination of the amount of an Indemnification Claim,
whether by agreement between the Indemnitors Representative and the Indemnitee
or otherwise, the Indemnitors shall pay the amount of such Indemnification Claim
within ten (10) days of the date such amount is determined.
SECTION 8.5. Third Party Claims. The obligations and liabilities of the
parties hereunder with respect to a Third Party Claim shall be subject to the
following terms and conditions:
(i) the Indemnitee shall give the applicable Indemnitors
Representative written notice of a Third Party Claim promptly after receipt by
the Indemnitee of notice thereof, and the Indemnitors Representative, on behalf
of the Indemnitors, may undertake the defense, compromise and settlement thereof
by representatives of its own choosing reasonably acceptable to the Indemnitee.
If the Indemnitee fails to notify the Indemnitors Representative of such claim
within sixty (60) days of the Indemnitee's receipt of notice thereof, the
Indemnitors shall be relieved of any liability that they may have with respect
to such claim, unless the Indemnitees' Representative demonstrates that the
Indemnitors' defense of such claim is not prejudiced by such failure. The
assumption of the defense, compromise and settlement of any such Third Party
Claim by the Indemnitors Representative shall be an acknowledgment of the
obligation of the Indemnitors to indemnify the Indemnitee with respect to such
claim hereunder. If the Indemnitee desires to participate in, but not control,
any such defense, compromise and settlement, it may do so at its sole cost and
expense. If, however, the Indemnitors Representative fails or refuses to
undertake the defense of such Third Party Claim within ten (10) days after
written notice of such claim has been given to the Indemnitors Representative by
the Indemnitee, the Indemnitee shall have the right to undertake the defense,
compromise and settlement of such claim with counsel of its own choosing. In the
circumstances described in the immediately preceding sentence, the Indemnitee
shall, promptly upon its assumption of the defense of such
20
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claim, make an Indemnification Claim as specified in Section 8.3 which shall be
deemed an Indemnification Claim that is not a Third Party Claim for the purposes
of the procedures set forth herein;
(ii) if, in the reasonable opinion of the Indemnitee, any Third
Party Claim or the litigation or resolution thereof involves an issue or matter
which could have a material adverse effect on the business, operations, assets,
properties or prospects of the Indemnitee (including the administration of the
tax returns and responsibilities under the tax laws of the Indemnitee), the
Indemnitor shall consult with the Indemnitee with respect to the defense of such
claim and shall obtain the consent of the Indemnitee, which consent shall not be
unreasonably withheld or delayed, prior to the compromise and settlement of such
Third Party Claim undertaken by the Indemnitors Representative, and the
reasonable costs and expenses of the Indemnitee in connection therewith shall be
included as part of the indemnification obligations of the Indemnitors
hereunder;
(iii) no settlement of a Third Party Claim involving the asserted
liability of the Indemnitors under this Article 8 shall be made without the
prior written consent by or on behalf of the Indemnitors Representative, which
consent shall not be unreasonably withheld or delayed. Consent shall be presumed
in the case of settlements of $15,000 or less where the Indemnitors
Representative has not responded within five (5) business days of notice of a
proposed settlement. If the Indemnitors Representative assumes the defense of
such a Third Party Claim, (A) no compromise or settlement thereof may be
effected by the Indemnitors Representative without the Indemnitee's consent
unless (i) there is no finding or admission of any violation of law or any
violation of the rights of any person and no effect on any other claim that may
be made against the Indemnitee, (ii) the sole relief provided is monetary
damages that are paid in full by the Indemnitors, and (iii) the compromise or
settlement includes, as an unconditional term thereof, the giving by the
claimant or the plaintiff to the Indemnitee of a release, in form and substance
satisfactory to the Indemnitee, from all liability in respect of such Third
Party Claim, and (B) the Indemnitee shall have no liability with respect to any
compromise or settlement thereof effected without its consent; and
(iv) in connection with the defense, compromise or settlement of any
Third Party Claim, the parties to this Agreement shall execute such powers of
attorney as may reasonably be necessary or appropriate to permit participation
of counsel selected by any party hereto and, as may reasonably be related to any
such claim or action, shall provide access to the counsel, accountants and other
representatives of each party during normal business hours to all properties,
personnel, books, tax records, contracts, commitments and all other business
records of such other party and will furnish to such other party copies of all
such documents as may reasonably be requested (certified, if requested).
SECTION 8.6. Other Rights and Remedies Not Affected. The rights of the
Indemnitees under this Article 8 are independent of and in addition to such
rights and remedies as the Indemnitees may have at law or in equity or otherwise
for any misrepresentation, breach of warranty or the failure to fulfill any
agreement or covenant hereunder on the part of any
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Indemnitor, including the right to seek specific performance, recession or
restitution, none of which rights or remedies shall be affected or diminished
hereby.
SECTION 8.7. Survival. Subject to Section 8.8 hereof, all representations,
warranties and agreements contained in this Agreement or in any certificate,
schedule or exhibit attached to this Agreement, in each case as supplemented or
amended by the respective Indemnitors' Disclosure Letter, shall survive the
Closing notwithstanding any investigation conducted with respect thereto or any
knowledge acquired as to the accuracy or inaccuracy of any such representation
or warranty (but, with respect to the representations and warranties, only as of
the date of the Closing).
SECTION 8.8. Time Limitations.
8.8.1 The Company Indemnitors shall have no liability under Section 8.2,
unless on or before the expiration of eighteen months following the Closing Date
the Company Indemnitors are given notice asserting an Indemnification Claim with
respect thereto; provided, however, that an Indemnification Claim based upon a
breach of the representations and warranties of the Company Indemnitors
contained in (i) Sections 3.1, 3.2, 3.3, 3.4 and 3.15 may be made at any time
except as limited by law, and (ii) Sections 3.10 and 3.16 may be made at any
time prior to the expiration of the applicable statute of limitations relative
to the liability relating thereto.
8.8.2 The NM Indemnitors shall have no liability under Section 8.3, unless
on or before the expiration of eighteen months following the Closing Date the NM
Indemnitors are given notice asserting an Indemnification Claim with respect
thereto; provided, however, that an Indemnification Claim based upon a breach of
the representations and warranties of the NM Indemnitors contained in Sections
4.1, 4.2, 4.3 and 4.4 may be made at any time except as limited by law.
SECTION 8.9. Limitations as to Amount Payable by Company Indemnitors. The
Indemnitors shall have no liability with respect to the matters described in
Section 8.2 (other than Section 8.2(iv)) with respect to the Company Indemnitors
and Section 8.3 with respect to the NM Indemnitors until the amount of any
Indemnification Claim shall exceed $15,000 (an "Eligible Claim") and then only
to the extent of any Losses with respect to such Eligible Claim in excess of
$15,000.00. At such time as the aggregate Losses with respect to Eligible Claims
exceed $75,000.00 (the "Threshold Amount"), the Indemnitors shall be obligated
to indemnify the Indemnitees for all Losses in excess of the Threshold Amount,
notwithstanding the amount of any Indemnification Claim. Notwithstanding the
foregoing, the limitations set forth in this Section 8.9 shall not apply to
Losses related to a breach of the representations and warranties contained in
Section 3.4.1 hereof, any intentional misrepresentation or breach of warranty by
the Indemnitors or any intentional failure to perform or comply with any
covenant or agreement by the Indemnitors, and the Indemnitors shall be liable
for all Losses with respect thereto.
SECTION 8.10. Subrogation. Upon payment in full of any Indemnification
Claim, whether such payment is effected by set-off or otherwise, or the payment
of any judgment or settlement with respect to a Third Party Claim, the
Indemnitors shall be subrogated to the extent
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of such payment to the rights of the Indemnitee against any person or entity
with respect to the subject matter of such Indemnification Claim or Third Party
Claim.
SECTION 8.11. Appointment of Company Indemnitors' Representative. Each
Company Indemnitor constitutes and appoints the Company Indemnitors'
Representative as his true and lawful attorney-in-fact to act for and on behalf
of such Company Indemnitor in all matters relating to or arising out of this
Article 8 and the liability or asserted liability of such Company Indemnitor
hereunder, including specifically, but without limitation, accepting and
agreeing to the liability of such Company Indemnitor with respect to any
Indemnification Claim, objecting to any Indemnification Claim, disputing the
liability of such Company Indemnitor, or the amount of such liability, with
respect to any Indemnification Claim and prosecuting and resolving such dispute
as herein provided, accepting the defense, compromise and settlement of any
Third Party Claim on behalf of such Company Indemnitor or refusing to accept the
same, settling and compromising the liability of such Company Indemnitor
hereunder, instituting and prosecuting such actions (including arbitration
proceedings) as the Company Indemnitors' Representative shall deem appropriate
in connection with any of the foregoing, retaining counsel, accountants,
appraisers and other advisers in connection with any of the foregoing, all for
the account of the Company Indemnitor, such Company Indemnitor agreeing to be
fully bound by the acts, decisions and agreements of the Company Indemnitor
Representative taken and done pursuant to the authority herein granted. Each
Company Indemnitor hereby agrees to indemnify and to save and hold harmless the
Company Indemnitors' Representative from any liability incurred by the Company
Indemnitors' Representative based upon or arising out of any act, whether of
omission or commission, of the Company Indemnitors' Representative pursuant to
the authority herein granted, other than acts, whether of omission or
commission, of the Company Indemnitors' Representative that constitute willful
misconduct in the exercise by the Company Indemnitors' Representative of the
authority herein granted. The death or incapacity of any Company Indemnitor
shall not terminate the authority and agency of the Company Indemnitors'
Representative. In the event of the resignation of a Company Indemnitors'
Representative, the resigning Company Indemnitors' Representative shall appoint
a successor either from among the Company Indemnitors or who shall otherwise be
acceptable to NM and who shall agree in writing to accept such appointment, and
the resigning Company Indemnitors' Representative's resignation shall not be
effective until such a successor shall be appointed. If the Company Indemnitor
Representative is a natural person and if such Company Indemnitors'
Representative should die or become incapacitated, then his successor shall be
appointed within thirty (30) days of his death or incapacity by a majority of
the Company Indemnitors, and such successor either shall be a Shareholder or
shall otherwise be acceptable to NM. The choice of a successor Company
Indemnitors' Representative appointed in any manner permitted above shall be
final and binding upon all of the Company Indemnitors. The decisions and actions
of any successor Company Indemnitors' Representative shall be, for all purposes,
those of a Company Indemnitors' Representative as if originally named herein.
SECTION 8.12. Payment. In the event that the Indemnitors are required to
make any payment under this Article 8, the Indemnitors shall promptly pay the
Indemnitee the amount so determined. The Company Indemnitors may satisfy any
indemnity obligation under this Article 8 by delivering shares of Company Common
Stock pursuant to the terms and conditions
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of the Pledge Agreement. If there should be a dispute as to the amount or manner
of determination of any indemnity obligation owed under this Article 8, the
Indemnitors shall nevertheless pay when due such portion, if any, of the
obligation as shall not be subject to dispute. The difference, if any, between
the amount of the obligation ultimately determined as properly payable under
this Article 8 and the portion, if any, theretofore paid shall bear interest as
provided below. If all or part of any indemnification obligation under this
Agreement is not paid when due, then the Indemnitors shall pay the Indemnitee
interest on the unpaid amount of the obligation for each day from the date the
amount became due until payment in full, payable on demand, at the fluctuating
rate per annum which at all times shall be the lowest rate of interest generally
charged from time to time by First Union National Bank, Atlanta, Georgia, and
publicly announced by such bank as its so-called "prime rate."
ARTICLE 9.
MISCELLANEOUS PROVISIONS
SECTION 9.1. Notices. All notices and other communications under this
Agreement shall be in writing and may be given by any of the following methods:
(i) personal delivery; (ii) registered or certified mail, postage prepaid,
return receipt requested; or (iii) overnight delivery service requiring
acknowledgment of receipt. Any such notice or communication shall be sent to the
appropriate party at its address given below (or at such other address for such
party as shall be specified by notice given hereunder):
To NM, Merger Sub or the Surviving Corporation:
New Millennium Multimedia, Inc.
1690 Chantilly Drive
Atlanta, Georgia 30324
Attn: Chief Executive Officer
with a copy to:
Rogers & Hardin LLP
2700 International Tower, Peachtree Center
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attn: Michael Rosenzweig, Esq.
To an NM Shareholder:
At the address specified on the signature pages of this Agreement
with a copy to:
Rogers & Hardin LLP
2700 International Tower, Peachtree Center
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229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attn: Michael Rosenzweig, Esq.
If to the Company:
Grace Development, Inc.
2685 South Dayton Way - Unit #42
Denver, Colorado 80230
Attn: Mr. Jacob Barrocas
with a copy to:
Lohf, Shaiman & Jacobs, P.C.
900 Cherry Tower
950 South Cherry Street
Denver, Colorado 80246-2666
Attn: Don D. Jacobson, Esq.
If to Signal:
Signal Compression, Inc.
3507 North Central Ave.
Suite 406
Phoenix, Arizona 85012
Attn: Mr. Eric Stevenson
with a copy to:
Avansino, Melarkey, Knobel, McMullen & Mulligan
165 West Liberty Street, Suite 210
Reno, Nevada 89501
Attn: John Mulligan, Esq.
All such notices and communications shall be deemed received upon (i)
actual receipt thereof by the addressee or (ii) actual delivery thereof to the
appropriate address as evidenced by an acknowledged receipt.
SECTION 9.2. Disclosure Letters and Exhibits. The Company Disclosure
Letter and the NM Disclosure Letter and all Exhibits hereto are hereby
incorporated into this Agreement and are hereby made a part hereof as if set out
in full in this Agreement.
SECTION 9.3. Assignment; Successors in Interest. No assignment or transfer
by NM, Merger Sub, Signal or the Company of their respective rights and
obligations hereunder shall be made except with the prior written consent of the
other parties hereto. This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their permitted
25
<PAGE>
successors and assigns, and any reference to a party hereto shall also be a
reference to a permitted successor or assign.
SECTION 9.4. Number; Gender. Whenever the context so requires, the
singular number shall include the plural and the plural shall include the
singular, and the gender of any pronoun shall include the other genders.
SECTION 9.5. Captions. The titles, captions and table of contents
contained in this Agreement are inserted herein only as a matter of convenience
and for reference and in no way define, limit, extend or describe the scope of
this Agreement or the intent of any provision hereof. Unless otherwise specified
to the contrary, all references to Articles and Sections are references to
Articles and Sections of this Agreement and all references to Exhibits are
references to Exhibits to this Agreement and the Company Disclosure Letter and
the NM Disclosure Letter.
SECTION 9.6. Controlling Law; Jurisdiction; Integration; Amendment. This
Agreement shall be governed by and construed and enforced in accordance with the
internal laws of the State of Georgia without reference to Georgia's choice of
law rules and each of the parties hereto hereby consents to personal
jurisdiction in any federal or state court in the State of Georgia. This
Agreement and the documents executed pursuant hereto supersede all negotiations,
agreements and understandings among the parties with respect to the subject
matter hereof and constitutes the entire agreement among the parties hereto,
this Agreement may not be amended, modified or supplemented except by written
agreement of the parties hereto.
SECTION 9.7. Knowledge. As used in this Agreement, the terms "the best
knowledge of the Company", "the best knowledge of Signal", "the best knowledge
of NM", "the best knowledge of the NM Shareholders", "known to the Company",
"known to Signal", "known to NM", "known to the NM Shareholders", or words of
similar import used herein with respect to the Company, Signal, NM and the NM
Shareholders shall mean the actual knowledge of each of the officers of the
Company, Signal and NM, as the case may be, in each case, together with the
knowledge a reasonable business person would have obtained after making
reasonable inquiry and after exercising reasonable diligence with respect to the
matters at hand, and in the case of the NM Shareholders, the actual knowledge of
each such shareholder.
SECTION 9.8. Severability. Any provision hereof which is prohibited or
unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction will not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by law, the parties hereto waive any
provision of law which renders any such provision prohibited or unenforceable in
any respect.
SECTION 9.9. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and it shall not be
necessary in making
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proof of this Agreement or the terms hereof to produce or account for more than
one of such counterparts.
SECTION 9.10. Enforcement of Certain Rights. Nothing expressed or implied
in this Agreement is intended, or shall be construed, to confer upon or give any
person, firm or corporation other than the parties hereto, and their successors
or assigns, any rights, remedies, obligations or liabilities under or by reason
of this Agreement, or result in such person, firm or corporation being deemed a
third party beneficiary of this Agreement.
SECTION 9.11. Waiver. At any time prior to the Effective Time, the parties
hereto, by or pursuant to action taken by their respective Boards of Directors
in the case of NM, Merger Sub and the Company, may, to the extent legally
permitted: (i) extend the time for the performance of any of the obligations or
other acts of any other party; (ii) waive any inaccuracies in the
representations or warranties of any other party contained in this Agreement or
in any document or certificate delivered pursuant hereto; (iii) waive compliance
or performance by any other party with any of the covenants, agreements or
obligations of such party contained herein; and (iv) waive the satisfaction of
any condition that is precedent to the performance by the party so waiving of
any of its obligations hereunder. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party. A waiver by one party of the
performance of any covenant, agreement, obligation, condition, representation or
warranty shall not be construed as a waiver of any other covenant, agreement,
obligation, condition, representation or warranty. A waiver by any party of the
performance of any act shall not constitute a waiver of the performance of any
other act or an identical act required to be performed at a later time.
SECTION 9.12. Fees and Expenses. Each party hereto shall pay its own fees,
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby, including the fees, costs and expenses of its
financial advisors, accountants and counsel (collectively, the "Expenses").
SECTION 9.13. Construction. Any reference herein to any federal, state,
local or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. As
used herein: (i) "including" shall mean including without limitation; (ii)
"person" shall mean any individual, partnership, firm, corporation, association,
trust, unincorporated organization or other entity, as well as any other
syndicate or group that would be deemed to be a person under Section 13(d)(3) of
the Exchange Act; and (iii) "law" shall mean any federal, state or local law,
rule, regulation or governmental requirement of any kind, and the rules,
regulations, guidelines, directives and orders promulgated thereunder. Nothing
in the Company Disclosure Letter or the NM Disclosure Letter shall be deemed
adequate to disclose an exception to a representation or warranty made herein
unless the Company Disclosure Letter or the NM Disclosure Letter, as the case
may be, identifies the exception with reasonable particularity and describes the
relevant facts in reasonable detail. The parties intend that each
representation, warranty and covenant contained herein shall have independent
significance. If any party has breached any warranty, representation or covenant
contained herein in any respect, the fact that there exists another
representation, warranty or
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<PAGE>
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the party has not breached shall not detract from or
mitigate the fact that the party is in breach of the first representation,
warranty or covenant.
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IN WITNESS WHEREOF, each of the Shareholders has duly executed and
delivered this Agreement, and NM, Merger Sub, Signal and The Company have each
caused this Agreement to be duly executed under seal and delivered on its behalf
by an officer or representative thereto duly authorized, all as of the date
first above written.
GRACE DEVELOPMENT, INC.
By:
---------------------------------------
Its: President
NEW MILLENNIUM MULTIMEDIA, INC.
By:
---------------------------------------
Its: President
GRACE NEWCO, INC.
By:
---------------------------------------
Its: President
SIGNAL COMPRESSION, INC.
By:
---------------------------------------
Its: President
(Signatures continued on next page)
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NM SHAREHOLDERS:
____________________________________(SEAL)
Richard S. Granville, III
1690 Chantilly Dr.
Atlanta, GA 30324
No. of Shares: 213,000
____________________________________(SEAL)
Scott H. Barber
6486 Williamson Ave. N.E.
Atlanta, GA 30097
No. of Shares: 10,000
____________________________________(SEAL)
Sean T. Duffy
4380 Canterbury Walk Dr.
Duluth, GA 30097
No. of Shares: 20,000
____________________________________(SEAL)
Linda W. Key
1401 Johnson Ferry Rd. Ste. 328/PMB-C33
Marietta, GA 30062
No. of Shares: 38,578
____________________________________(SEAL)
Ronald R. McCallum
5838 Fairwood Walk NW
Acworth, GA 30101
No. of Shares: 20,000
____________________________________(SEAL)
Bruno Leo Pasquali
1016 Cameron Bridge Way
Alpharetta, GA 30022
No. of Shares: 5,000
(Signatures continued on next page)
30
<PAGE>
____________________________________(SEAL)
John J. Youstin, Jr.
820 Marshview Close
Roswell, GA 30076
No. of Shares: 38,578
____________________________________(SEAL)
M. Allen Weed
7395 Glenmora Way
Suwanee, GA 30024
No. of Shares: 168,000
____________________________________(SEAL)
David A. Hopkins
4525 Doyle St.
Tucker, GA 30084
No. of Shares: 10,000
____________________________________(SEAL)
Eric D. Raney
2966 Howell Mill Rd.
Atlanta, GA 30327
No. of Shares: 10,000
____________________________________(SEAL)
Douglas Corner
3400 Turtle Cove Road Way
Marietta, GA 30067
No. of Shares: 10,668
____________________________________(SEAL)
James Blanchard
7742 Spalding Dr. Ste. 468
Norcross, GA 30092
No. of Shares: 5,000
(Signatures continued on next page)
31
<PAGE>
____________________________________(SEAL)
Louis Friedman
430 Overview Drive
Atlanta, GA 30327
No. of Shares: 10,000
____________________________________(SEAL)
American Express Trust Company
c/o Cornelius B. Prior, Jr.
As Custd for the Cornelius B Prior, Jr.
Roth Conversion IRA
St. Thomas, V.I. 00801
No. of Shares: 14,000
____________________________________(SEAL)
Andrew B. Worden
301 W. 57th Street Apt. 29C
New York, NY 10019
No. of Shares: 1,000
____________________________________(SEAL)
James R. Callahan
350 Welwyn Walk
Alpharetta, GA 30022
No. of Shares: 2,000
____________________________________(SEAL)
Bruce Turry
985 Lancaster Walk
Atlanta, GA 30328
No. of Shares: 4,000
(Signatures continued on next page)
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<PAGE>
____________________________________(SEAL)
Scott H. Barber
6486 Williamson Avenue N.E.
Atlanta, GA 30328
No. of Shares: 8,000
____________________________________(SEAL)
Successeay Holdings Limited
39Fl., Shun Tak Center
200, Connought Road Central
Hong Kong
No. of Shares: 2,000
____________________________________(SEAL)
Michelle Jaffe
141 Great Neck Rd
Great Neck, NY 11021
No. of Shares: 8,000
____________________________________(SEAL)
Peter Tierney
77 Central Drive
Briarcliff, Manor, NY 10510
No. of Shares: 2,000
____________________________________(SEAL)
Evansville Limited
P.O. Box 438
Road Town, Tortoga
British Virgin Islands
No. of Shares: 12,000
(Signatures continued on next page)
33
<PAGE>
____________________________________(SEAL)
Andrew B. Worden Retirement Plan
301 West 57th Street Apt. 29C
New York, NY 10019
No. of Shares: 15,000
____________________________________(SEAL)
E. Scott Crist
2700 Post Oak Blvd. #100
Houston, TX 77056
No. of Shares: 3,000
____________________________________(SEAL)
Basem K. Toma
7014 Spring Ridge Rd
Cary, NC 27511
No. of Shares: 8,000
____________________________________(SEAL)
Todd Hammer
4365 Park Brooke Trace
Alpharetta, GA 30022
No. of Shares: 26,000
____________________________________(SEAL)
Dr. Lee Silverstein
2070 South Park Place suite 200 17 units
Atlanta, GA 30039
No. of Shares: 34,000
____________________________________(SEAL)
Timothy A. Jenkins
4175 Bradford Walk Trail
Buford, GA 30519
No. of Shares: 4,000
(Signatures continued on next page)
34
<PAGE>
____________________________________(SEAL)
Michael S. Ward
407 S. Royal Palm Way
Tampa, FL 33609
No. of Shares: 40,000
____________________________________(SEAL)
Amware Logistics Services of Arkansas Inc.
4600 Frontage Road
Forest Park, GA 30297
No. of Shares: 6,000
____________________________________(SEAL)
R. Earl Davis
3530 Kates Way
Duluth, GA 30097
No. of Shares: 2,000
____________________________________(SEAL)
Charles S. Ackerman
1130 West Conway Road
Atlanta, GA 30327
No. of Shares: 12,000
____________________________________(SEAL)
Alvin H. Einbender
230 Park Avenue 7th Floor
New York City, NY 10169
No. of Shares: 2,000
(Signatures continued on next page)
35
<PAGE>
____________________________________(SEAL)
Barry F. Nathanson
6 Shore Cliff Place
Great Neck, NY 11023
No. of Shares: 26,000
____________________________________(SEAL)
Ari Abraham Berman
175 W. Wieuca Road N.W.
Atlanta, GA 30342
No. of Shares: 8,000
____________________________________(SEAL)
Roger J. Brummond
310 Brookshore Lake Lane
Alpharetta, GA 30022
No. of Shares: 2,000
36
Exhibit 99.1: Press Release by Grace Development, Inc. dated August 20,
1999.
Grace Development, Inc. & New Millennium Multimedia, Inc. announce signing of
Agreement and Plan of Merger
Source: Business Wire
DENVER, Aug 20, 1999 (BUSINESS WIRE) -- Grace Development, Inc. (Nasdaq: GCDV)
and New Millennium Multimedia, Inc., d/b/a Avana, announced today that they have
signed a definitive agreement to combine the two companies. Jacob Barrocas,
President of Grace Development and Richard S. Granville, Chairman & CEO of New
Millennium, speaking for their respective companies, stated that they expected
to close the transaction within the next two weeks.
Grace Development is a development stage company, which seeks qualified business
acquisition opportunities. New Millennium, doing business as Avana
(WWW.Avana.net), is a communications company based in Atlanta, which is
developing a wireless voice, data and video network to enable customers to
bypass incumbent former regional Bell operating companies for service. Avana has
applied competitive local exchange carrier status in nine southeastern states
and currently has service offerings in Georgia, North Carolina, Tennessee and
Alabama.
Over the next few months, Avana, together with network facilities providers,
will begin to deploy a radio/microwave telephony network, which, when
implemented, can provide residential and commercial customers with local, long
distance, high-speed Internet access and cellular/paging services. Avana intends
to utilize a "One Company - One Bill" approach to service billing. Avana uses
several network facilities providers, including ICG Communications (Nasdaq:
ICGX) for ATM, frame relay and PRI service for interconnection and Qwest
Communications (Nasdaq: QWST) for long distance and VOIP services. Avana also
has an ongoing relationship with Lucent Technologies (NYSE: LU) for network
solutions and implementation services.
Any statements contained herein that are not historical facts are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Grace Development and New Millennium caution
readers that there can be no assurance that the actual results or business
conditions will not differ materially from those projected or suggested in such
forward-looking statements as a result of various factors, including, but not
limited to, the availability of capital to continue development plans and
programs. Although expectations reflected in the forward-looking statements are
believed
37
<PAGE>
to be reasonable, neither Grace Development nor New Millennium can make any
assurances that such plans and programs will be developed or, if developed, will
be successfully implemented.
38
