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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1999
-----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 025582
GRACE DEVELOPMENT, INC.
(Exact name of registrant as specified in its charter)
Colorado 84-1110469
(State or other Jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
1690 Chantilly Drive (678) 222-3030
Atlanta, Georgia 30324 (Registrant's telephone number
(Address of principal executive offices) including area code)
(zip code)
Securities registered pursuant to Section 12(b) of the Act:
Title to each class Name of each exchange on which registered
------------------- -----------------------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such short period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
___ ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value on February 29, 2000, of the voting stock held by
non-affiliates of the registrant was $213,896,260 (based on the closing bid
price for shares of the registrant's Common Stock as reported on the Nasdaq
Over-the-Counter Bulletin Board on that date). In determining this figure, the
registrant has assumed that all of its directors, officers and persons owning
10% or more of the outstanding Common Stock are affiliates. This assumption
shall not be deemed conclusive for any other purpose.
As of February 29, 2000, there were 75,895,903 shares of the registrant's
common stock, no par value, outstanding.
None of the following documents are incorporated by reference into the Form
10-K or this Form 10-K/A: (1) any annual report to security holders; (2) any
proxy or information statement; (3) any prospectus filed pursuant to Rule 424(b)
or (c) under the Securities Act of 1933.
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This Amendment No. 1 to Form 10-K supplements and amends the Annual Report
on Form 10-K for the year ended December 31, 1999 (the "Form 10-K"), filed on
April 14, 2000, of Grace Development, Inc., a Colorado corporation doing
business as Avana Communications (the "Company"). Capitalized terms used and
not otherwise defined herein have the meanings set forth in the Form 10-K.
PART I
ITEM 1. BUSINESS
RESTRICTED SECURITIES AND REGISTRATION RIGHTS
The text appearing in the Form 10-K under the caption "Restricted
Securities and Registration Rights" is hereby amended and restated in its
entirety as follows:
General. As of the date of this Form 10-K, the public market for the
Common Stock is limited. The Common Stock is listed on the Nasdaq Over-the-
Counter Bulletin Board System. No prediction can be made as to the effect, if
any, that future sales of shares of the Common Stock (including sales pursuant
to Rule 144) or the availability of shares of Common Stock for future sale will
have on the market price prevailing from time to time. Sales of substantial
amounts of Common Stock (including Common Stock issued upon the exercise of
options or warrants or the conversion of convertible securities), or the
perception that such sales could occur, could adversely affect prevailing market
prices of the Common Stock and impair the Company's ability to obtain additional
capital through the sale of equity securities. See "The market price of the
Company's Common Stock may drop significantly when the restrictions on resale
by many of the Company's existing stockholders lapse" under the caption "Factors
That May Affect the Company's Business, Operating Results and Financial
Condition, and the Price of the Common Stock."
Restricted Securities. The Common Stock owned by "Affiliates" of the
Company and the Common Stock that was issued in various private placements
exempt from registration under the Securities Act are "restricted securities"
under Rule 144 promulgated under the Securities Act and may not be sold in the
absence of registration under the Securities Act unless an exemption from
registration is available, including exemptions contained in Rule 144. In
general, under Rule 144 as currently in effect, a person (or persons whose
shares are aggregated with them in accordance with Rule 144) who has
beneficially owned "restricted securities" (defined generally as securities
acquired from the issuer or an Affiliate of the issuer in a transaction not
involving a public offering) for at least one year (including the holding period
of the previous owner of the securities, unless such previous owner was an
Affiliate of the issuer) would be entitled to sell within any three-month period
a number of shares of Common Stock that does not exceed the greater of 1% of the
then-outstanding shares of Common Stock or 1% of the average weekly trading
volume of shares of Common Stock on the Over-the-Counter Bulletin Board System
during the four calendar weeks preceding each such sale. Sales under Rule 144
are also subject to certain manner of sale provisions, notice requirements and
the availability of current public information about the Company.
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Any person (or persons whose shares are aggregated with them in accordance
with Rule 144) who is not deemed to have been an Affiliate of the Company at any
time during the three months preceding a sale, and who has beneficially owned
shares for at least two years (including any period of ownership of predecessor
non-affiliated holders), would be entitled to sell the shares under Rule 144(k)
without regard to the volume limitations, manner of sale provisions, notice
requirements or public information requirements. An "Affiliate" of the Company
is a person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or under common control with, the Company.
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As of March 31, 2000, 3,032,975 shares of the Company's Common Stock were
sold in registered offerings and, if held by non-affiliates, trade without
restrictions. An additional 4,566,987 shares of unregistered common stock have
been outstanding in excess of two years and, if held by non-affiliates, trade
without restrictions. To the knowledge of the Company, the following table sets
forth when certain substantial blocks of the Company's stock will meet the one
and two year holding requirements of Rule 144 and become eligible for trading
assuming the other requirements of Rule 144 can be met at that time.
<TABLE>
<CAPTION>
Affiliates and Non-
-------------------
Affiliates May Begin
--------------------
Trading Subject To
------------------
Volume Limitations,
-------------------
Manner Of Sale,
---------------
Notice And Public Non-Affiliates May Trade
----------------- ------------------------
Block Information Conditions Without Restrictions
----- ---------------------- ------------------------
<S> <C> <C> <C>
1. 35,886,751 shares of Common Stock held by former stockholders of New September 28, 2000 September 28, 2001
Millennium
2. 3,248,764 shares of Common Stock owned by Lucent September 28, 2000* September 28, 2001*
3. 16,641,628 shares of Common Stock exchanged for shares of New September 28, 2000* September 28, 2001*
Millennium common stock issued in the First Private Placement
4. 9,968,798 shares of Common Stock exchanged for shares of New September 28, 2000* September 28, 2001*
Millennium common stock issued in the Second Private Placement
5. 1,762,554 shares of Common Stock issued in the WebWizard Acquisition January 31, 2001 January 31, 2002
6. 2,150,000 shares of Common Stock issued in the P.V. Tel. Acquisition February 24, 2001* February 24, 2002*
7. 2,100,000 shares of Common Stock issued in the Third Private Placement March 1, 2001 March 1, 2002
8. 1,000,000 shares of Common Stock issued to James M. Blanchard as February 16, 2001 February 16, 2002
compensation for prior services
9. 650,000 shares of Common Stock issued to Louis Friedman pursuant to February 16, 2001 February 16, 2002
his Separation Agreement
10. 3,100,000 shares of Common Stock issued in the Alpha Computer March 31, 2001* March 31, 2002*
Acquisition
11. 3,000,000 shares of Common Stock issued in the Fourth Private April 14, 2001* April 14, 2002*
Placement
</TABLE>
____________
* The Company has granted registration rights to the holders of such shares
which, if exercised, would permit such shares to become freely transferable upon
the effectiveness of a registration statement under the Securities Act. See
"Registration Rights."
On March 30, 2000, the Company entered into an agency agreement with
DotPlanet.com, Inc. pursuant to which DotPlanet.com will attempt to attract new
customers for the Company's telecommunications, Internet and Web Hosting
services in exchange for commissions payable in the form of warrants to purchase
shares of the Company's Common Stock. The agreement provides for payment to
DotPlanet.com of warrants to purchase up to 1,000,000 shares of Common Stock at
an exercise price of $4.50 per share, based on attracting new customers for the
Company that generate certain monthly revenue targets.
On April 14, 2000, the Company's board of directors approved a Finders Fee
Agreement with One Up Ventures, LLC, an entity controlled by Louis Friedman,
former Chairman of the Board of the Company, providing for the payment to One Up
Ventures of 500,500 shares of
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Common Stock in consideration of One Up Ventures' services in connection with
the first closing under the Fourth Private Placement and up to 924,000
additional shares of Common Stock in connection with subsequent investments by
Greenlight under the Fourth Private Placement.
On April 14, 2000, the Company's board of directors also approved a form of
consulting agreement between the Company and Louis Friedman, doing business as
One Up Ventures or One Up Ventures Partners LP. Pursuant to the consulting
agreement, One Up Ventures will provide various strategic consulting services
for the Company, including arranging acquisitions, future financings and hiring
of key employees, in exchange for fees to be agreed upon between the Company and
Mr. Friedman on a case-by-case basis, payable in the form of Common Stock. The
consulting agreement has a term of one year, subject to extension upon mutual
agreement of the parties or early termination at the election of either party.
The consulting agreement was executed as of April 14, 2000.
In addition, on April 14, 2000, the Company's board of directors approved
the issuance to One Up Ventures of shares of Common Stock as follows: (i)
336,000 shares of Common Stock in consideration of One Up Ventures' services in
connection with the Third Private Placement, and (ii) 264,000 shares of the
Company's Common Stock in consideration of One Up Ventures' services in
connection with the recruiting and hiring of Benjamin F. Holcomb as the
Company's Chairman and Chief Executive Officer.
Registration Rights. The Company has granted "demand" and "piggyback"
registration rights to various stockholders in connection with the issuance of
shares of Common Stock in private equity financings and acquisitions. Subject
to the conditions provided in the registration rights agreements governing each
grant of registration rights (i) the demand registration rights permit holders
of the applicable shares to request one demand registration within a specified
time period, and (ii) the piggyback registration rights permit the holders of
the applicable shares to include their Common Stock in the registration by the
Company of Common Stock, except registrations on certain registration forms.
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The following table sets forth the significant blocks of the Company's
Common Stock that are subject to various types of registration rights. For a
more detailed description of these rights, see the description of each such
issuance set forth under the caption "Item 1. Business - Recent Company History"
or "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources."
<TABLE>
<CAPTION>
Block Registration Rights
----- -------------------
<S> <C> <C>
1. 16,808,918 shares of Common Stock exchanged for shares of New Millennium common stock issued in the Piggyback
First Private Placement
2. 9,968,798 shares of Common Stock exchanged for shares of New Millennium common stock issued in the Piggyback
Second Private Placement
3. 3,248,764 shares of Common Stock owned by Lucent Piggyback
4. 1,400,000 shares issued in the P.V. Tel. Acquisition Piggyback
5. 500,000 shares of Common Stock issued in the Alpha Computer Acquisition Piggyback
6. 3,000,000 shares of Common Stock issued in the Fourth Private Placement Demand and Piggyback
</TABLE>
6
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PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The text of Item 8 of the Form 10-K is hereby amended and supplemented by
adding thereto the following Report of Independent Accountants which is added to
include a conformed signature which was inadvertently omitted from the Report of
Independent Accountants that was filed with the Form 10-K.
GRACE DEVELOPMENT, INC. AND SUBSIDIARIES
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of GRACE DEVELOPMENT, INC. AND SUBSIDIARIES
We have audited the balance sheet of GRACE DEVELOPMENT, INC. AND
SUBSIDIARIES a Colorado Corporation as of December 31, 1999, and the related
statements of income, retained earnings, and cash flows for the year then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit. The financial statements of NEW MILLENNIUM MULTIMEDIA, INC. (the
"Predecessor") as of December 31, 1998, were audited by other auditors whose
report dated June 24, 1999, expressed an unqualified opinion on those
statements.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of GRACE DEVELOPMENT, INC. AND
SUBSIDIARIES as of December 31, 1999 and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.
Atlanta, Georgia
March 10, 2000 except with respect to the matters discussed in Note 18, as
to which the date is April 14, 2000.
/s/ Habif, Arogeti & Wynne, LLP
7
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The text of Item 10 of the Form 10-K is hereby amended and restated in its
entirety as follows:
The information presented under the caption "Item 1. Business -- Directors
and Executive Officers of the Company" in Part I of the Form 10-K, is
incorporated herein by reference.
Pursuant to the Agreement and Plan of Merger, dated August 20, 1999, which
governed the Grace Merger, the directors of New Millennium immediately prior to
the Grace Merger (Louis Friedman, Richard S. Granville, III, Lee H. Silverstein,
Peter A. Tierney and Ronald R. McCallum) became the initial directors of the
Company immediately after the Grace Merger. Additionally, pursuant to an
unwritten agreement among the parties to the Agreement and Plan of Merger, Jacob
Barrocas, the sole director of Old Grace immediately prior to the Grace Merger
and an affiliate of Signal Compression, Inc., the majority stockholder of Old
Grace, remained a member of the Board of the Company immediately after the Grace
Merger. James M. Blanchard was elected a director on September 30, 1999. Mr.
Friedman resigned as Chairman of the Board on December 8, 1999. Mr. Granville
and Mr. Baroccas resigned as directors on February 1, 2000. Mr. McCallum
resigned as a director on February 28, 2000. Benjamin F. Holcomb was elected
Chairman of the Board on February 18, 2000. As of the date of this Form 10-K/A,
the Board of Directors of the Company consists of Mr. Holcomb (Chairman), Mr.
Blanchard, Dr. Silverstein and Mr. Tierney.
The Board of Directors intends to meet regularly each quarter and following
each annual meeting of stockholders. Between September 28, 1999, and December
31, 1999, there were two meetings of the Board of Directors of the Company. On
September 30, 1999, the Board adopted a resolution creating a standing
Compensation Committee (the "Compensation Committee"). The Compensation
Committee is authorized to set and approve the compensation (including salary,
deferred compensation, bonuses, incentive compensation and all other types of
compensation or remuneration) of executive officers and other employees of the
Company receiving aggregate annual compensation in excess of $100,000. Members
of the Compensation Committee are Mr. Tierney and Dr. Silverstein. Between
September 28, 1999, and December 31, 1999, there were two meetings of the
Compensation Committee. Since the Grace Merger, all directors have attended at
least 75% of the meetings of the Board of Directors and the committees to which
they were assigned.
Pursuant to the Securities Purchase Agreement with Greenlight Capital, L.P.
("Greenlight"), which governed the Fourth Private Placement, Greenlight has the
right to have a representative attend all meetings of the Company's Board of
Directors and its committees until the Greenlight Note is repaid in full and the
shares of Common Stock to which Greenlight is entitled have been registered with
the SEC as contemplated in the Fourth Private Placement.
8
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In May 1999, an involuntary petition for bankruptcy under Chapter 7 of the
Federal Bankruptcy Code was filed against Mr. Blanchard and Personal Solutions
Group, Inc. ("Personal Solutions"), a company owned by Mr. Blanchard. The
bankruptcy petition primarily resulted from Personal Solutions' default on
certain borrowings that were personally guaranteed by Mr. Blanchard. Mr.
Blanchard failed to timely respond to the involuntary petition, and an order
granting relief under Chapter 7 was granted on July 27, 1999. On February 2,
2000, the Bankruptcy Court issued an order releasing Mr. Blanchard from all of
his dischargeable debts and closing the bankruptcy case.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Company's executive officers and directors, and persons who own more than 10% of
the Common Stock, to file reports of ownership and changes in ownership on Forms
3, 4 and 5 with the SEC. Executive officers, directors and owners of more than
10% of the Common Stock are required by regulation to furnish the Company with
copies of all Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of such forms it has
received and written representations from certain reporting persons who were not
required to file a Form 5 for 1999, the Company believes that all of its
executive officers, directors and owners of more than 10% of the Common Stock
complied with all Section 16(a) filing requirements applicable to them in 1999
with respect to transactions prior to and during 1999, with the exception of (i)
the late filing of a Form 3 by Jacob Baroccas, a former director, for December
1997; (ii) the late filing of a Form 3 by Mr. Tierney, a director, for September
1999; (iii) the late filing of a Form 3 by M. Allen Weed, a beneficial owner of
more than 10% of the Common Stock, for September 1999; and (iv) the late filing
of a Form 5 by Mr. Granville, a former director and former Chief Executive
Officer, for 1999.
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ITEM 11. EXECUTIVE COMPENSATION
The text of Item 11 of the Form 10-K is hereby amended and restated in its
entirety as follows:
Summary of Cash and Certain Other Compensation
The following table shows the cash compensation paid by the Company and its
subsidiaries, as well as certain other compensation paid or accrued, for the
fiscal years ended December 31, 1998, and 1999, to the only person who served as
the Company's CEO during 1999 (the "Named Executive Officer"). Information with
respect to the Company's four other most highly compensated executive officers
employed by the Company as of the end of 1999, and two additional individuals
who were among the Company's five most highly compensated executive officers
during 1999, but who were not employed by the Company as of the end of 1999, is
omitted in accordance with SEC rules, as the total salary and bonus of each such
person during 1999 was less than $100,000. Fiscal year 1998 consists of the
period from October 6, 1998 (the date of inception of the Company's predecessor
entity, New Millennium) until December 31, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
---------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Awards Payouts
---------------------- -------
Name and Other Securities
Principal Position Annual Restricted Underlying All Other
as of Compen- Stock Options/ LTIP Compen-
December 31, 1999 Year Salary Bonus sation Awards SARs Payouts sation
- ------------------------------------------------------------------------------------------------------------------
Richard S. Granville, III 1999 $42,000 - - $86,000 - - -
Chief Executive Officer and 1998 - - - - - - -
Director(1)
</TABLE>
____________________
(1) Mr. Granville served as Chief Executive Officer and a director of New
Millennium from October 6, 1998, until September 28, 1999. He served as
Chief Executive Officer and a director of the Company from September 28,
1999 to February 1, 2000. The amount appearing in the "Salary" column for
Mr. Granville represents approximately $42,000 in cash paid to Mr.
Granville for services rendered as the Company's Chief Executive Officer.
The amount appearing under the "Restricted Stock Awards" column for Mr.
Granville represents 190,000 shares of common stock of New Millennium
awarded to Mr. Granville on April 27, 1999, which had a fair market value
of approximately $86,000 on the date of grant (based on an independent
appraisal that valued the shares of New Millennium common stock at $0.45
per share on April 30, 1999, which took into account, among other things,
the restrictions on transfer and holding periods applicable to such
shares).
Compensation of Directors
Employee directors of the Company are not paid for their service on the Board
of Directors or any Board committee. The Company does not currently have in
place any standard arrangements pursuant to which non-employee directors are
compensated for any services provided as a director. On February 16, 2000, the
Board of Directors approved a grant of 50,000 shares of unregistered Common
Stock to each of Jacob Barrocas, Peter A. Tierney and Dr. Lee H. Silverstein as
compensation for services rendered to the Company in their capacities as non-
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employee members of the Board of Directors from September 28, 1999, to February
16, 2000. It is expected that the Board of Directors will adopt a compensation
plan for non-employee directors, consisting of an annual retainer and meeting
fees, prior to the 2000 Annual Meeting of Shareholders.
Certain Agreements With Directors and Executive Officers
The Corporation has entered into certain agreements with the following
directors, former directors and the Named Executive Officer since the beginning
of 1999.
Separation Agreement and Consulting Agreement with Louis Friedman
- -----------------------------------------------------------------
From September 28, 1999, until he resigned on December 8, 1999, Mr.
Friedman served as Chairman of the Board of the Company.
In connection with Mr. Friedman's resignation, on December 8, 1999, Mr.
Friedman and the Company entered into a Separation Agreement (the "Friedman
Separation Agreement"), which provides for the Company to (i) pay One Up
Studios, LLC, an affiliate of Mr. Friedman, $20,000 as a fee for consulting
services previously rendered to the Company by Mr. Friedman; (ii) issue 650,000
shares of Common Stock, which had a fair market value of $260,000 on February
16, 2000, the date the grant was approved by the Board of Directors, to Mr.
Friedman in consideration of his resignation as Chairman and his execution of
the Friedman Separation Agreement (the fair market value of such shares was
based on an independent appraisal that valued the shares of Common Stock of the
Company at $0.40 per share on January 31, 2000, which took into account, among
other things, the restrictions on transfer and holding periods applicable to
such shares); and (iii) pay to Mr. Friedman cash in an amount necessary to
defray Mr. Friedman's actual income tax liability incurred in connection with
the issuance of the 650,000 shares, up to a maximum total payment of $150,000.
Additionally, the Friedman Separation Agreement provides that Mr. Friedman is
not entitled to any other payments or benefits from the Company for his prior
services, that Mr. Friedman will not disclose any of the Company's confidential
information to any third party and that Mr. Friedman will not solicit or employ
any person who is an employee or independent contractor of the Company
On April 14, 2000, the Company's board of directors approved (i) a form of
consulting agreement between the Company and Mr. Friedman, doing business as One
Up Ventures or One Up Ventures Partners LP (the "Friedman Consulting
Agreement"); and (ii) a Finders Agreement (the "Friedman Finders Agreement")
among the Company, One Up Ventures and Greenlight Capital, Inc. Pursuant to the
Friedman Consulting Agreement, One Up Ventures will provide various strategic
consulting services to the Company, including arranging acquisitions, future
financings and hiring of key employees, in exchange for fees to be agreed upon
between the Company and Mr. Friedman on a case-by-case basis, payable in the
form of Common Stock. The Friedman Consulting Agreement has a term of one year,
subject to extension upon mutual agreement of the parties or early termination
at the election of either party. The Friedman Consulting Agreement was executed
as of April 14, 2000.
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Also on April 14, 2000, the Company's Board of Directors approved the
following payments to One Up Ventures: (i) 336,000 shares of Common Stock in
consideration of prior services rendered by Mr. Friedman in connection with the
Third Private Placement; (ii) 264,000 shares of Common Stock in consideration of
prior services rendered by Mr. Friedman in connection with the Company's
employment of Benjamin F. Holcomb; and (iii) pursuant to the Finders Agreement,
500,500 shares of Common Stock in consideration of prior services rendered by
Mr. Friedman in connection with the first closing in the Fourth Private
Placement and up to 924,000 additional shares of Common Stock in connection with
subsequent investments by Greenlight in the Fourth Private Placement.
Separation Agreement with Richard S. Granville, III
- ---------------------------------------------------
Mr. Granville served as the Chief Executive Officer and a director of New
Millennium from its inception on October 6, 1998, until the Grace Merger on
September 28, 1999. From September 28, 1999, until he resigned on February 1,
2000, Mr. Granville served as Chief Executive Officer and a Director of the
Company. Between June 1999 and December 31, 1999, Mr. Granville received
approximately $42,000 in cash pursuant to an unwritten agreement with the
Company for services rendered as the Company's Chief Executive Officer. On
April 27, 1999, the Board of Directors of New Millennium granted Mr. Granville
190,000 shares of common stock of New Millennium, which had a fair market value
of approximately $86,000 on that date (based on an independent appraisal that
valued the shares of New Millennium common stock at $0.45 per share on April 30,
1999, which took into account, among other things, the restrictions on transfer
and holding periods applicable to such shares.)
In connection with Mr. Granville's resignation, on February 1, 2000, Mr.
Granville and the Company entered into a Separation Agreement (the "Granville
Separation Agreement"), which provides that, in consideration for his past
services, his resignation and his execution of the Granville Separation
Agreement, the Company is to pay Mr. Granville two cash severance payments of
$50,000 each on March 1, 2000, and June 1, 2000. Additionally, the Granville
Separation Agreement provides that Mr. Granville is not entitled to any other
payments or benefits from the Company, that Mr. Granville will not disclose any
of the Company's confidential information to any third party and that Mr.
Granville will not solicit or employ any person who is an employee or
independent contractor of the Company.
Amended and Restated Employment Agreement with James M. Blanchard
- -----------------------------------------------------------------
Mr. Blanchard served as a consultant to New Millennium from June 1999 until
September 28, 1999. On September 30, 1999, Mr. Blanchard was elected a Director
and President of the Company. Between June 1999 and December 31, 1999, Mr.
Blanchard received approximately $33,000 in cash pursuant to an unwritten
agreement with the Company for services rendered to the Company as an
independent consultant. On July 29, 1999, the Board of Directors of New
Millennium granted Mr. Blanchard 5,000 shares of common stock of New Millennium,
which had a fair market value of $16,000 on that date (based on the price of
$3.20 per share of New Millennium common stock in the First Private Placement
which took place during July 1999).
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On April 14, 2000, the Company amended and restated an employment agreement
with Mr. Blanchard (the "Blanchard Employment Agreement"), replacing an original
agreement that was ratified by the board of directors on February 16, 2000. The
Blanchard Employment Agreement provides that Mr. Blanchard will be employed as a
member of the Company's Board of Directors and as its President for an initial
term beginning December 1, 1999, and expiring on December 31, 2001. The
Blanchard Employment Agreement may be extended for an additional one-year period
on each anniversary of the effective date if both parties agree that it should
be extended. Additionally, the Blanchard Employment Agreement will not expire
prior to the expiration of 12 months after the occurrence of a Change in Control
(as defined in the Blanchard Employment Agreement) of the Company. Pursuant to
the Blanchard Employment Agreement, Mr. Blanchard is entitled to (i) a base
salary of $180,000 per year; and (ii) a special bonus equal to $180,000, payable
within ten days following the end of the Company's 2000 fiscal year if Mr.
Blanchard achieves certain performance objectives. The Blanchard Employment
Agreement also awarded Mr. Blanchard a stock grant of: (i) 1,000,000 shares to
be issued to Mr. Blanchard promptly following execution and delivery of the
Blanchard Employment Agreement as compensation for services rendered to the
Company from September 30, 1999, to February 16, 2000, by Mr. Blanchard, with
the understanding that the Company would loan to Mr. Blanchard an amount
sufficient to pay the withholding taxes payable with respect to the issuance of
the 1,000,000 shares of Common Stock; and (ii) an additional 1,000,000 shares of
Common Stock, to be issued on a contingent basis, with the understanding that
such additional 1,000,000 shares of Common Stock will vest on November 30, 2000,
if Mr. Blanchard is still employed by the Company on that date, or upon the
termination of Mr. Blanchard's employment with the Company if his employment is
terminated other than (a) for Cause (as defined in the Blanchard Employment
Agreement) or (b) upon voluntary resignation without Good Reason (as defined in
the Blanchard Employment Agreement). The purpose of the grant of the additional
1,000,000 shares was to provide Mr. Blanchard with an inducement to remain
employed by the Company and as further compensation for services to be rendered
by him after execution and delivery of the Blanchard Employment Agreement.
Additionally, pursuant to the Blanchard Employment Agreement, Mr. Blanchard is
entitled to all benefits and conditions of employment provided by the Company to
its executive officers, including insurance, participation in the Company's
vacation policy, and participation in (except during the first year of the
Blanchard Employment Agreement) any stock option or incentive compensation
plans, pension, profit sharing or other retirement plans. Mr. Blanchard is to be
reimbursed for all reasonable out-of-pocket business expenses incurred by him in
the direct performance of his duties during his employment with the Company. The
Blanchard Employment Agreement also provides that Mr. Blanchard will not (i)
disclose any of the Company's confidential information for two years following
the termination of his employment; (ii) compete with the Company while employed
by the Company; or (iii) solicit or employ any person who is an employee or
independent contractor of the Company for a period of one year following the
termination of his employment.
The Company may terminate Mr. Blanchard's employment at any time for Cause
or without Cause, and Mr. Blanchard may terminate his employment with the
Company at any time without Good Reason or, within one year following a Change
in Control of the Company, for Good Reason. If Mr. Blanchard's employment with
the Company is terminated by the Company for Cause or by Mr. Blanchard without
Good Reason, the Company will pay to Mr. Blanchard all
13
<PAGE>
accrued compensation and any then non-vested restricted stock (including the
additional 1,000,000 shares of Common Stock granted pursuant to the Blanchard
Employment Agreement) or stock options will be canceled.
If Mr. Blanchard's employment with the Company is terminated by the Company
due to Mr. Blanchard's disability or death, the Company shall pay to Mr.
Blanchard all accrued compensation. Any outstanding incentive awards, restricted
stock, performance shares or units, stock options, warrants and stock
appreciation rights granted to Mr. Blanchard will become immediately
exerciseable and 100% vested.
If Mr. Blanchard's employment with the Company is terminated by the Company
without Cause or by Mr. Blanchard for Good Reason within one year following a
Change in Control of the Company, Mr. Blanchard will be entitled to the
following: (i) the Company will pay Mr. Blanchard all accrued compensation;
(ii) the Company will pay Mr. Blanchard, as severance pay and in lieu of any
further compensation for periods subsequent to the termination date, an amount
in cash equal to one times his base salary; (iii) for twelve months the Company
will continue to provide Mr. Blanchard and his dependents and beneficiaries the
life insurance, disability, medical, dental and hospitalization benefits
generally made available to the Company's executive officers, provided that the
Company's obligation with respect to the foregoing benefits will be reduced to
the extent that Mr. Blanchard obtains any such benefits pursuant to a subsequent
employer's benefit plans; (iv) any outstanding incentive awards, restricted
stock, performance shares or units, stock options, warrants and stock
appreciation rights granted to Mr. Blanchard will become immediately
exerciseable and 100% vested; and (v) the Company will for a 12 month period
following the termination date provide Mr. Blanchard with office space and
secretarial assistance the same as or comparable to that provided to Mr.
Blanchard immediately prior to the termination date.
On April 14, 2000, the Company accepted a promissory note from Mr.
Blanchard in the amount of $141,800, which bears interest at a rate of 6.46% per
year, to cover the income tax withholding obligation associated with the initial
1,000,000 shares of Common Stock granted pursuant to the Blanchard Employment
Agreement (the "Blanchard Note"). On November 30, 2000, if Mr. Blanchard has not
been terminated for Cause (as defined in the Blanchard Employment Agreement) or
voluntarily resigned without Good Reason (as defined in the Blanchard Employment
Agreement) the Company will forgive 50% of the principal and accrued interest
then payable under the Blanchard Note. Mr. Blanchard will be obligated to pay
the remaining 50% of principal and accrued interest then payable under the
Blanchard Note.
Agreements with Ronald R. McCallum
- ----------------------------------
Mr. McCallum served as an independent consultant to New Millennium from
March 1, 1999 until June 11, 1999. He served as Chief Financial Officer and a
director of New Millennium from June 11, 1999, until September 28, 1999. He
served as Chief Financial Officer and Secretary and a director of the Company
from September 30, 1999, until February 28, 2000. Between March 1999 and
December 31, 1999, pursuant to unwritten agreements with New Millennium
and the
14
<PAGE>
Company, Mr. McCallum received approximately $43,000 in cash for services
rendered as Chief Financial Officer and Secretary and approximately $13,000 for
services rendered as an independent consultant. On April 27, 1999, the Board of
Directors of New Millennium granted Mr. McCallum 20,000 shares of common stock
of New Millennium, which had a fair market value of approximately $9,000 on that
date (based on an independent appraisal that valued the shares of New Millennium
common stock at $0.45 per share on April 30, 1999, which took into account,
among other things, the restrictions on transfer and holding periods applicable
to such shares).
Executive Employment Agreement with Benjamin F. Holcomb
- -------------------------------------------------------
On February 1, 2000, Mr. Holcomb entered into an Executive Employment
Agreement with the Company (the "Holcomb Employment Agreement"), which provides
for Mr. Holcomb to be employed as the Company's Chairman and Chief Executive
Officer for a period of two years beginning on February 18, 2000, the date the
Board of Directors approved the Holcomb Employment Agreement. The Holcomb
Employment Agreement will be extended automatically for an additional two year
term unless either party gives written notice to the other party not to extend
the term at least 90 days prior to the end of the first term. Additionally, the
Holcomb Employment Agreement will not terminate prior to the end of 24 months
after the occurrence of a Change in Control (as defined in the Holcomb
Employment Agreement) of the Company. Mr. Holcomb is entitled to receive: (i) a
base salary of $240,000 during the first year of his employment and $295,000
during the second year of his employment; (ii) a special bonus equal to
$240,000, payable on the first anniversary of his employment; and (iii) if Mr.
Holcomb achieves certain performance objectives set by the Board of Directors
within the first year, an incentive bonus as determined by the Board of
Directors. Additionally, the Company agreed to grant to Mr. Holcomb options to
purchase 4,500,000 shares of Common Stock, exerciseable at $0.35 per share
pursuant to a stock option plan to be adopted by the Company's Board of
Directors when such plan is adopted. One-third of the stock options vest and
become exerciseable immediately on the date of grant and one-third of the stock
options will vest on each subsequent anniversary of the date of the grant until
all such options are fully vested. The stock options will remain exerciseable
for ten years following the date of grant. In the event Mr. Holcomb is required
to pay income taxes with respect to his receipt of such options (and prior to
their exercise), the Company will loan him an amount equal to such tax until
such time as Mr. Holcomb exercises the options. The loan will be repaid pro rata
as the options are exercised. Additionally, Mr. Holcomb is entitled to all
benefits and conditions of employment provided by the Company to its executive
officers, including, without limitation, insurance, participation in the
Company's vacation policy, and participation in (except during the first two-
year term of the Holcomb Employment Agreement) any stock option or incentive
compensation plans, pension, profit sharing or other retirement plans. Mr.
Holcomb will be reimbursed for all reasonable out-of-pocket business expenses
incurred by him in the direct performance of his duties during his employment
with the Company. The Holcomb Employment Agreement also provides that Mr.
Holcomb will not (i) disclose any of the Company's confidential information for
two years following the termination of his employment; (ii) compete with the
company while employed by the Company; or (iii) solicit or employ any person who
is an employee or independent contractor of the Company for one year following
the termination of his employment.
15
<PAGE>
The Company may terminate Mr. Holcomb's employment at any time for Cause or
without Cause, and Mr. Holcomb may terminate his employment with the Company at
any time without Good Reason or, at anytime within one year of a Change of
Control (as defined in the Holcomb Employment Agreement") of the Company, with
Good Reason. If Mr. Holcomb's employment with the Company is terminated by the
Company for Cause or by Mr. Holcomb without Good Reason, the Company will pay to
Mr. Holcomb all accrued compensation and any then non-vested restricted stock or
stock options will be canceled.
If Mr. Holcomb's employment with the Company is terminated by the Company
due to Mr. Holcomb's disability or death, the Company will pay to Mr. Holcomb
all accrued compensation. Any outstanding incentive awards, restricted stock,
performance shares or units, stock options, warrants and stock appreciation
rights granted to Mr. Holcomb will become immediately exerciseable and 100%
vested.
If Mr. Holcomb's employment with the Company is terminated by the Company
without Cause or by Mr. Holcomb for Good Reason within one year following a
Change in Control of the Company, Mr. Holcomb will be entitled to the following:
(i) the Company will pay Mr. Holcomb all accrued compensation; (ii) the Company
will pay Mr. Holcomb, as severance pay and in lieu of any further compensation
for periods subsequent to the termination date, an amount in cash equal to two
times his annual base salary; (iii) for 24 months the Company will continue to
provide Mr. Holcomb and his dependents and beneficiaries the life insurance,
disability, medical, dental and hospitalization benefits generally made
available to the Company's executive officers at any time during the 90-day
period prior to the termination date or at any time thereafter, provided that
the Company's obligation with respect to the foregoing benefits will be reduced
to the extent that Mr. Holcomb obtains any such benefits pursuant to a
subsequent employer's benefit plans; (iv) any outstanding incentive awards,
restricted stock, performance shares or units, stock options, warrants and stock
appreciation rights granted to Mr. Holcomb will become immediately exerciseable
and 100% vested; (v) any excise tax incurred by Mr. Holcomb by reason of any
"excess parachute payment," because of a Change in Control of the Company will
be paid by the Company as well as any other extraordinary tax incurred because
of a similar event; and (vi) the Company will, at its sole expense, provide Mr.
Holcomb with office space and secretarial assistance the same or comparable to
that provided immediately prior to the termination date for a 24 month period
following the termination date.
Definition of Change in Control, Cause and Good Reason
- ------------------------------------------------------
In the Holcomb Employment Agreement and the Blanchard Employment Agreement,
the terms Change in Control, Cause and Good Reason are defined as follows:
Change in Control. A "Change in Control" includes the following events:
(i) a majority of the directors of the Company were not nominated or appointed
by the Company's Board of Directors; (ii) a majority of the outstanding voting
power of the Company is acquired or beneficially owned by any person or group;
or (iii) there shall have occurred: (A) a merger or consolidation of the Company
with or into another unrelated corporation; (B) a statutory
16
<PAGE>
exchange of shares of one or more classes or series of outstanding voting stock
of the Company for cash, securities or other property; (C) the sale or other
disposition of all or substantially all of the assets of the Company; or (D) the
liquidation or dissolution of the Company; unless more than 25% of the voting
stock of the surviving entity is beneficially owned by the employee or a group
that includes the employee.
Cause. A termination of employment is for "Cause" if the employee has been
convicted of a felony or a felony prosecution has been brought against the
employee or if the termination is evidenced by a resolution adopted in good
faith by two-thirds of the Company's Board of Directors that the employee (ii)
intentionally and continually failed substantially to perform his reasonably
assigned duties (other than a failure resulting from incapacity due to physical
or mental illness or from the assignment of duties that would constitute "Good
Reason") which failure continued for a period of at least thirty days after
written notice was delivered to the employee, or (iii) intentionally engaged in
illegal conduct or gross misconduct which results in material economic harm to
the Company.
Good Reason. "Good Reason" means a good faith determination by the employee
that any one or more of the following events has occurred without the employee's
consent: (i) the assignment to the employee of any duties inconsistent with the
employee's position and duties on the date the agreement was executed; (ii) a
reduction of the employee's base salary; (iii) any failure to pay the employee
any compensation or benefits to which he is entitled within five days of the
date due; (iv) requiring the employee to be based anywhere other than within
fifty miles of the employee's job location on the date the agreement was
executed; (v) a materially adverse reduction in the physical conditions under
which the employee performs his employment duties; (vi) the insolvency of the
Company or the filing of a voluntary or involuntary petition for bankruptcy of
the Company; (vii) any purported termination of the employee's employment for
Cause by the Company which does not comply with the terms of definition of
Cause; or (viii) any breach by the Company of any provision of the employment
agreement.
17
<PAGE>
Stock Options and SARs
During 1999, no grants of options or SARs were made to the Named Executive
Officer. Accordingly, the "Option/SAR Grants in Last Fiscal Year" table has been
omitted in accordance with SEC rules.
Option/SAR Exercises and Holdings
During 1999, the Named Executive Officer did not exercise any options or
SARs, and did not own any unexercised options or SARs. Accordingly, the
"Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values" table has been omitted in accordance with SEC rules.
Long-Term Incentive Awards
During 1999, no awards of performance shares or performance-based
restricted stock were made to the Named Executive Officer. Accordingly, the
"Long-Term Incentive Plans - Awards in Last Fiscal Year" table has been omitted
in accordance with SEC rules.
Pension Plans
Presently, the Company does not have any defined benefit or actuarial plans
under which benefits are determined by final compensation and years of service.
Accordingly, the "Pension Plans Table" has been omitted in accordance with SEC
rules.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee is composed of Mr. Tierney and Dr. Silverstein. No
member of the Compensation Committee had relationships, or engaged in
transactions, with the Company during 1999 of the type required to be disclosed
under the caption "Certain Relationships and Related Transactions."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The text of Item 12 of the Form 10-K is hereby amended and restated in its
entirety as follows:
18
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table shows, as of April 14, 2000 (unless otherwise indicated),
the direct and indirect beneficial ownership of Common Stock by: each director;
the Named Executive Officer; all directors and executive officers of the
Company as a group; and all persons beneficially owning more than 5% of the
outstanding Common Stock.
<TABLE>
<CAPTION>
Sole Voting and Aggregate
Investment Percentage
Name Power (1) Other Total Owned(2)
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Benjamin F. Holcomb 1,500,000(3) - 1,500,000 1.70%
James M. Blanchard 2,331,507 - 2,331,507 2.65
Dr. Lee H. Silverstein 2,354,244 30,000(4) 2,384,244 2.71
Peter A. Tierney 132,603 - 132,603
Richard S. Granville, III (5) 14,659,000 - 14,659,000 16.63
5326 Point South Drive
Gainesville, Georgia 30504
M. Allen Weed (6) 11,138,618 - 11,138,618 12.64
7395 Glenmore Way
Suwanee, Georgia 30029
All Directors and Executive
Officers as a Group
(12 persons)......... 6,409,070 30,000 6,439,070 7.31
</TABLE>
_______________
(1) Includes shares held in fiduciary capacities.
(2) Except as indicated, each person or group beneficially owns less than 1%
of the outstanding Common Stock.
(3) Consists of an aggregate 1,500,000 shares that may be acquired by Mr.
Holcomb within 60 days pursuant to vested options to acquire shares of
Common Stock granted pursuant to his employment agreement.
(4) Consists of shares held in trust for the benefit of certain relatives.
These shares may be deemed to be beneficially owned under the rules and
regulations of the Securities and Exchange Commission (the "SEC"), but the
inclusion of such shares in the table does not constitute an admission of
beneficial ownership.
(5) As reported in a Form 5, filed February 16, 2000, Mr. Granville was the
direct beneficial owner of 14,659,000 shares of Common Stock on December
31, 1999.
(6) As reported in a Schedule 13D, dated September 28, 1999, Mr. Weed
beneficially owns 11,138,618 shares of Common Stock. Mr. Weed reported
that he exercises sole voting and investment power with respect to all
such shares.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The text of Item 13 is hereby amended and restated in its entirety as
follows:
Certain Relationships and Related Transactions
19
<PAGE>
From September 30, 1999, to February 16, 2000, while serving as President
and a director of the Company, Mr. Blanchard continued to be compensated as an
independent consultant to the Company. His total compensation from the Company
during that time period was: (i) approximately $38,000 in cash paid for services
rendered as an independent contractor; and (ii) pursuant to the Blanchard
Employment Agreement, 1,000,000 shares of Common Stock, which had a fair market
value of $400,000 on the date they were granted (based on an independent
appraisal, which valued the shares of the Company's Common Stock at $0.40 per
share on January 31, 2000, which took into account, among other things, the
restrictions on transfer and holding periods applicable to such shares), for
services rendered as an employee.
On April 14, 2000, the Company accepted a promissory note in the amount of
$141,800 from Mr. Blanchard to cover the income tax withholding obligation
associated with 1,000,000 shares of Common Stock granted to him pursuant to the
Blanchard Employment Agreement. The promissory note bears interest at a rate of
6.46% per year and, if not earlier prepaid, matures on the earlier to occur of
(i) the termination of Mr. Blanchard's employment or (ii) December 31, 2000.
On April 14, 2000, the Company's board of directors approved a Finders
Fee Agreement with One Up Ventures, LLC, an entity controlled by Louis Friedman,
former Chairman of the Board of the Company, providing for the payment to One Up
Ventures of 500,500 shares of Common Stock in consideration of One Up Ventures'
services in connection with the first closing under the Fourth Private Placement
and up to 924,000 additional shares of Common Stock in connection with
subsequent closings under the Fourth Private Placement. On April 14, 2000, the
Company's board of directors also approved a form of consulting agreement
between the Company and Louis Friedman, doing business as One Up Ventures or One
Up Ventures Partners LP. Pursuant to the consulting agreement, One Up Ventures
will provide various strategic consulting services for the Company, including
arranging acquisitions, future financings and hiring of key employees, in
exchange for fees to be agreed upon between the Company and Mr. Friedman on a
case-by-case basis, payable in the form of Common Stock. The consulting
agreement has a term of one year, subject to extension upon mutual agreement of
the parties or early termination at the election of either party. The consulting
agreement was executed as of April 14, 2000. In addition, on April 14, 2000, the
Company's board of directors approved the issuance to One Up Ventures of shares
of Common Stock as follows: (i) 336,000 shares of Common Stock in consideration
of One Up Ventures' services in connection with the Third Private Placement, and
(ii) 264,000 shares of Common Stock in consideration of One Up Ventures'
services in connection with the recruiting and hiring of Benjamin F. Holcomb as
the Company's Chairman and Chief Executive Officer.
20
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
GRACE DEVELOPMENT, INC.
(Registrant)
Date: May 1, 2000 By: /s/ Benjamin F. Holcomb
-----------------------
Benjamin F. Holcomb
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated.
By: /s/ Benjamin F. Holcomb By: /s/ Peter A. Tierney
----------------------- --------------------
Benjamin F. Holcomb Peter A. Tierney
Chairman and Chief Executive Officer Director
By: /s/ James M. Blanchard By: /s/ James C. Foregger
---------------------- ---------------------
James M. Blanchard James C. Foregger
Director; President Director of Finance
(principal financial officer)
By: /s/ Dr. Lee H. Silverstein By: /s/ Wendy L. Squires
-------------------------- --------------------
Dr. Lee H. Silverstein Wendy L. Squires
Director Controller
(principal accounting officer)
21
<PAGE>
EXHIBIT INDEX
-------------
Exhibit
-------
Number Exhibit Title
------- -------------
2.1 Stock Purchase Agreement, dated May 5, 1999, by and among New
Millennium Multimedia, Inc., Linda Key, John Youstin, Jr., Doug
Corner and Eric Rannye.*
2.2 Agreement and Plan of Merger, dated August 20, 1999, by and among
New Millennium Multimedia, Inc., Grace Development, Inc., Grace
Newco, Inc., Signal Compression, Inc. and the Individual
Shareholders of New Millennium Multimedia, Inc. (filed as exhibit
2.1 to the Registrant's Current Report on Form 8-K dated
September 28, 1999, and incorporated herein by reference).
2.3 Asset Purchase Agreement, dated November 8, 1999, by and among
Rob Ballard and Sabrina Ballard d/b/a Northwest Georgia Internet,
New Millennium Multimedia, Inc.*
2.4 Agreement and Plan of Merger, dated January 20, 2000, by and
among Avana Acquisition Sub, Inc., Grace Development, Inc., Web
Wizard, Inc., O.E. "Randy" Ray and John Cavenaugh (filed as
exhibit 2.2 to the Registrant's Current Report on Form 8-K dated
January 31, 2000, and incorporated herein by reference).
2.5 Stock Exchange Agreement, dated as of February 15, 2000, by and
among Grace Development, Inc., Avana Telecommunications Group,
Inc., P.V. Tel. Inc. and the Shareholders of P.V. Tel. Inc.
(filed as exhibit 2.2 to the Registrant's Current Report on Form
8-K dated February 24, 2000, and incorporated herein by
reference).
2.6 Agreement and Plan of Merger, dated March 28, 2000, by and
between Avana Acquisition Sub II, Inc., Grace Development, Inc.,
Alpha Computer Services, Inc. O.E. "Randy" Ray, Wendy Lewis and
Richard Warren (filed as exhibit 2.3 to the Registrant's Current
Report on Form 8-K dated March 30, 2000).
3.1 Articles of Incorporation of the Company.*
3.2 Bylaws of the Company (filed as exhibit 3(ii) to the Registrant's
Quarterly Report on Form 10-Q5B for the quarter ended September
30, 1999, and incorporated herein by reference).
10.1 Master Lease Agreement, dated as of May 21, 1999, between New
Millennium Multimedia, Inc. and Ascend Credit Corporation (filed
as exhibit 10.1 to the Registrant's Quarterly Report on Form
10-QSB for the quarter ended September 30, 1999, and incorporated
herein by reference).
10.2 Wholesale Services Agreement, dated as of September 21, 1999,
between New Millennium Multimedia, Inc. and Qwest Communications
Corporation (filed as exhibit 10.2 to the Registrant's Quarterly
Report on Form 10-QSB for the quarter ended September 30, 1999,
and incorporated herein by reference).
22
<PAGE>
10.3 ICG Authorized Distributor Agreement, dated September 28, 1999,
by and between ICG Telecom Group, Inc. and New Millennium
Multimedia, Inc. (filed as exhibit 10.3 to the Registrant's
Quarterly Report on Form 10-QSB for the quarter ended September
30, 1999, and incorporated herein by reference).
10.4 Executive Employment Agreement, dated as of December 1, 1999,
between Grace Development, Inc. and James Blanchard.*
10.5 Employment Agreement, dated as of January 28, 2000, between and
among Sharon S. Quaintance and Grace Development, Inc.*
10.6 Employment Agreement, dated as of January 31, 2000, between and
among O.E. "Randy" Ray and Avana Development Group, Inc.*
10.7 Employment Agreement, dated as of January 31, 2000, between and
among Wendy Lewis and Avana Development Group, Inc.*
10.8 Employment Agreement, dated as of January 31, 2000, between and
among R. Kenneth Merkey and Grace Development, Inc.*
10.9 Employment Agreement, dated as of February 7, 2000, between and
among Paul Reynolds and Grace Development, Inc.*
10.10 Employment Agreement, dated as of February 7, 2000, between and
among Joseph Buck and Grace Development, Inc.*
10.11 Executive Employment Agreement, dated as of February 1, 2000,
between Grace Development, Inc. and Benjamin Franklin
Holcomb.*
10.12 Executive Employment Agreement, dated as of March 1, 2000,
between Grace Development, Inc. and with Dennis P. Werner.*
10.13 Executive Employment Agreement, dated as of March 1, 2000,
between Grace Development, Inc. and Scott H. Barber.*
10.14 Separation Agreement, dated as of December 8, 1999, by and
between Louis Friedman and Grace Development, Inc.*
10.15 Separation Agreement, dated as of February 1, 2000, by and
between Richard S. Granville, III and Grace Development,
Inc.*
10.16 Separation Agreement, dated March 23, 2000, by and between R.
Kenneth Merkey and Grace Development, Inc.*
10.17 Letter, dated April 3, 2000, amending the Employment Agreement,
dated January 31, 2000, between and among O.E. "Randy" Ray and
Avana Development Group, Inc.*
10.18 Letter, dated April 3, 2000, amending the Employment Agreement,
dated January 31, 2000, between and among Wendy Lewis and Avana
Development Group, Inc.*
23
<PAGE>
10.19 Amended and Restated Executive Employment Agreement, dated April
14, 2000, between James M. Blanchard and Grace Development, Inc.
(refiled herewith to correct a typographical error)
10.20 Atlanta Commercial Board of Realtors Standard Commercial Lease
Agreement, dated September 1997.*
10.21 Consulting Agreement, dated April 14, 2000, by and between Grace
Development, Inc. and OneUp Ventures LLC.
21.1 Subsidiaries of the Company.*
23.1 Consent of Smith & Radigan, Certified Public Accountants,
LLC*
27.1 Financial Data Schedule.*
- -------------
* Previously filed with the Form 10-K on April 14, 2000.
24
<PAGE>
Exhibit 10.19
AMENDED AND RESTATED
EXECUTIVE EMPLOYMENT AGREEMENT
------------------------------
THIS EXECUTIVE EMPLOYMENT AGREEMENT (the "Agreement"), dated as of April
14, 2000, between GRACE DEVELOPMENT, INC., a Colorado corporation (the
"Company"), and JAMES M. BLANCHARD (the "Executive"), an individual resident of
the State of Georgia.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Company has employed Executive as President and Chief Operating
Officer since October, 1999 and wishes to continue to employ Executive in the
capacity of President but not as Chief Operating Officer, and Executive wishes
to serve in such position, on the terms and conditions set forth herein;
WHEREAS, the Company and Executive previously entered into an Executive
Employment Agreement, dated as of December 1, 1999 (the "Old Agreement");
WHEREAS, the Company and Executive acknowledge that the Old Agreement did
not accurately reflect the intent of the parties with respect to certain
agreements set forth therein;
WHEREAS, the Company and Executive now desire to enter into this Agreement
which serves to amend, restate, supersede and replace the Old Agreement to
reflect the actual intent of the parties;
WHEREAS, Company desires to assure the continued services of Executive on
behalf of Company on an objective and impartial basis and without distraction or
conflict of interest in the event of an attempt by any person to obtain control
of Company;
WHEREAS, the Company recognizes that when faced with a proposal for a
change of control of the Company, Executive will have a significant role in
helping the Company's Board of Directors (the "Board") assess the options and
advising the Board on what is in the best interests of the Company and its
stockholders, and it is necessary for Executive to be able to provide this
advice and counsel without being influenced by the uncertainties of his own
situation;
WHEREAS, Company desires reasonable protection of its confidential business
and customer information which it has developed at substantial expense and
assurance that Executive will not compete with Company for a reasonable period
of time after termination of his employment with Company, except as otherwise
provided herein:
WHEREAS, Company desires to provide fair and reasonable benefits to
Executive on the terms and subject to the conditions set forth in this
Agreement;
WHEREAS, prior to his election as President and Chief Operating Officer of
Company, and since June, 1999, Executive served as a consultant and executive
officer of New Millenium
<PAGE>
Multimedia, Inc., a Georgia corporation and, since September 28, 1999, a
wholly-owned subsidiary of the Company ("NM");
WHEREAS, in connection with the services rendered by Executive to NM, and
as an inducement to Executive to become employed by NM, Executive was promised
the award of shares of NM and, following the merger of a wholly-owned subsidiary
of the Company with and into NM, shares of the common stock, no par value, of
the Company (the "Common Stock"); and
WHEREAS, the Company desires to preserve the economic benefit to Executive
of such promises and agreements made by NM.
NOW, THEREFORE, in consideration of the premises and of the promises and
agreements hereinafter set forth, the parties hereto, intending to be legally
bound, do hereby agree as follows:
1. Term. The term (the "Term") of this Agreement shall be effective as of
----
December 1, 1999 (the "Effective Date"), except with respect to those provisions
herein that by their express terms become effective on the date hereof.
Executive shall continue as a member of the Company's board of directors and as
President of the Company for a period expiring on December 31, 2001 (the
"Initial Term"); provided, however, the Term may be extended for an additional
-------- -------
one-year period (each an "Additional Term") on each anniversary of the Effective
Date if both parties hereto agree to so extend the Agreement at least ninety
(90) days prior thereto; provided further, however, that the Term or an
---------------- -------
Additional Term shall not expire prior to the expiration of twelve (12) months
after the occurrence of a Change in Control (as hereinafter defined).
2. Employment and Duties. The Executive shall serve as the President of
---------------------
the Company, reporting only to Chairman of the Board and Chief Executive Officer
of the Company, and shall have such powers and duties as may from time to time
be prescribed by the Chief Executive Officer of the Company from and after the
date hereof, provided such duties are consistent with the Executive's position
as a senior executive of the Company. The Company shall provide the Executive
with a private office, secretarial and administrative assistance, office
equipment, supplies and other facilities and services suitable to the
Executive's position.
3. Salary. For all services to be rendered by the Executive pursuant to
------
this Agreement, the Company hereby agrees to pay the Executive a base salary
(the "Base Salary") at an annual rate of $180,000.00 per year during the first
year of the Initial Term, payable in accordance with the Company's payroll
practices in effect from time to time, and at a rate set by the Compensation
Committee of the Company's board of directors for any Additional Term. Any
increase in Base Salary or other compensation granted by the Compensation
Committee of the Company's board of directors shall in no way limit or reduce
any other obligation of the Company hereunder. Once established at an increased
specified rate, the Base Salary hereunder shall not thereafter be reduced, and
the term Base Salary used in this Agreement shall refer to the Base Salary as so
increased.
2
<PAGE>
4. Bonus and Special Stock Award.
-----------------------------
4.1 In addition to his Base Salary, upon completion of the first year
of the Initial Term, Executive shall receive a special bonus equal to
$180,000.00, payable within ten days following the end of the Company's
2000 fiscal year if Executive achieves each of the performance objectives
set forth in Exhibit A attached hereto. During the Initial Term, the bonus
---------
payments to Executive as set forth in this Section 4.1 shall be in lieu of
his participation in any other incentive bonus programs that have been or
may be established for other executive officers of the Company. Thereafter,
in the discretion of the Company's board of directors, the Executive may be
awarded for each calendar year during any subsequent Additional Term, an
annual bonus (an "Annual Bonus") either pursuant to a bonus or incentive
plan of the Company or otherwise on terms no less favorable than those
awarded to other executive officers of the Company.
4.2 In consideration of the Executive's past services to the Company
and NM prior to the Effective Date, promptly following the execution and
delivery of this Agreement, the Company shall issue to Executive 1,000,000
shares of Common Stock (the "Stock Grant"). The Stock Grant shall be valued
at $0.40 per share for an aggregate value of $400,000, based on the Common
Stock's per share value as of January 31, 2000, that being the date on
which the Company most recently obtained an independent valuation of the
Common Stock. The Company shall make a loan to Executive in an amount equal
to $141,800 (the "Loan"), that being an amount sufficient to pay the income
tax withholding payable with respect to the Stock Grant, calculated using a
28% Federal income tax rate, a 6% state income tax rate and the applicable
Medicare tax. The loan shall be evidenced by a promissory note in form and
substance reasonably satisfactory to the Company to be executed and
delivered by Executive to the Company as a condition to issuance of the
Stock Grant (the "Note") and shall mature and be payable in full, subject
to the provisions of Section 10.4 hereof, upon the earlier to occur of (i)
termination of Executive's employment hereunder and (ii) December 31, 2000.
In addition, as an inducement to the Executive to remain an employee of the
Company, promptly following the execution and delivery of this Agreement,
the Company shall grant to Executive 1,000,000 shares of Common Stock (the
"Contingent Stock Grant"), which shares shall become vested automatically
on November 30, 2000, unless Executive's employment with the Company is
terminated for Cause (as defined below) or as a result of a voluntary
resignation by Executive without Good Reason prior to November 30, 2000 in
accordance with the provisions of this Agreement, in which case the
Contingent Stock Grant shall be canceled and Executive shall have no claim
or right with respect thereto. The Executive acknowledges and agrees that
the Stock Grant and Contingent Stock Grant are in lieu of any other stock
option or stock incentive plans or programs that may be granted or extended
to other executive officers of the Company during the first year of the
Initial Term.
3
<PAGE>
4.3 Investment.
(1) Executive understands that no prospectus, offering circular or other
offering statement containing information with respect to the Company
and the Common Stock or with respect to the Company's business is being
issued and has made his own inquiry and analysis with respect to the
Company, the Common Stock, the Company's business and other material
factors affecting his investment in the Company Stock.
(2) The Common Stock was not offered to Executive by means of publicly
disseminated advertisements or sales literature, or as a part of a
general solicitation, nor is he aware of any offers made to other
persons by such means.
(3) Executive acknowledges that he has either been supplied with or has had
access to information to which a reasonable investor would attach
significance in making investment decisions, and has had the
opportunity to ask questions and receive answers from knowledgeable
individuals concerning the Company, its business and the Common Stock
so that as a reasonable investor, he has been able to make an informed
decision to receive the Common Stock hereunder. In determining to
proceed with this investment, Executive has relied solely on the
results of his own independent investigation with respect to the Common
Stock, the Company and upon the representations and statements of the
Company set forth herein. Such representations and statements by the
Company constitute the sole and exclusive representations, warranties,
covenants and statements of the Company or any of its officers,
directors, shareholders or other affiliates to Executive in connection
with this investment, and Executive understands, acknowledges and
agrees that all other representations, warranties, covenants and
statements of any kind or nature, whether oral or contained in any
writing other than this Separation Agreement are specifically
disclaimed by the Company.
(4) Executive understands that the Common Stock (a) is not being registered
(or, with respect to state securities or Blue Sky laws, otherwise
qualified for sale) under the Securities Act of 1933, as amended (the
"Act"), or under the securities or Blue Sky laws and regulations of any
state including, without limitation, Section 10-5-5 of the Georgia
Securities Act of 1973, in reliance upon exemptions from registration,
(b) will not be traded in any
4
<PAGE>
securities market, (c) will not be readily marketable, and (d) cannot be
sold, transferred or otherwise disposed of unless subsequently registered
under the Act and applicable state securities or Blue Sky laws or pursuant
to an exemption from such registration which is available at the time of
desired sale, and will bear a legend to that effect.
(5) Executive is taking the Common Stock for his own account and not with a
view to resale or other distribution thereof inconsistent with or in
violation of the federal securities laws or the securities or Blue Sky laws
of any state. Executive is taking the Common Stock for his own account and
not for the account of any other person or entity. No other person or
entity will have any interest, beneficial or otherwise, in the Common Stock
except for Executive. Executive is not obligated to transfer the Common
Stock or any portion thereof to any other person or entity nor does
Executive have any agreement or understanding to do so.
(6) Executive is aware that the Company will be under no obligation to register
the Common Stock, or any portion thereof, or to comply with any exemption
available for the offer or sale of the Common Stock, or any portion
thereof, without registration.
(7) Executive acknowledges and agrees that he may not, directly or indirectly,
sell, assign, pledge, give, subject to lien or security interest or
otherwise dispose of or encumber (collectively, "Transfer") any of the
Common Stock unless, prior to making any Transfer of any Common Stock
(other than a Transfer to the Company), (a) he gives written notice to the
Company describing the manner of such proposed disposition in reasonable
detail and (b) he delivers to the Company an opinion of counsel acceptable
to the Company to the effect that neither the sale nor the proposed
transfer will result in any violation of applicable state securities laws,
the Act or the securities law of any other jurisdiction.
(8) Executive confirms that he has been advised that he should rely on his own
professional accounting, tax, legal and financial advisors with respect to
an investment in the Company and the Common Stock, and obtain, to the
extent Executive deems necessary, such professional advice with respect to
the risks inherent in an investment in the Common Stock and the suitability
of an investment in the Common Stock in light of his financial condition
5
<PAGE>
and investment needs. Executive further represents and
warrants that he is an Accredited Investor as such term is
defined in Regulation D under the Securities Act.
(9) Executive shall indemnify and hold harmless the Company, its
officers, directors and employees and any of its professional
advisors, from and against any and all loss, damage,
liability or expense, including costs and reasonable
attorneys' fees, to which they may become subject or which
they may incur by reason of or in connection with any
misrepresentation Executive has made herein, any breach of
any of his representations or warranties made in this Section
4, or his failure to fulfill any of my covenants or
agreements herein.
5. Benefits. The Executive shall be entitled to all benefits and
--------
conditions of employment provided by the Company to its executive officers,
including, without limitation, insurance, participation in the Company's
vacation policy, and participation in (except during the Initial terms as
described in Section 4 hereof) any stock option or incentive compensation plans,
pension, profit sharing or other retirement plans, subject (in each case) to the
terms of such plans and any provisions, rules, regulations and laws applicable
to such plans.
6. Reimbursement for Business Expenses. The Executive shall be reimbursed
-----------------------------------
for all reasonable out-of-pocket business expenses incurred by him in the direct
performance of his duties during his employment with the Company pursuant to the
terms of this Agreement and in accordance with the Company's policies in effect
from time to time. All requests for reimbursement shall be substantiated by
invoices and other pertinent data reasonably satisfactory to the Company.
7. Performance. The Executive shall devote all of his working time and
-----------
efforts to the business and affairs of the Company and to the diligent, faithful
and competent performance of the duties and responsibilities assigned to him
pursuant to this Agreement, except for vacations, weekends and holidays.
Notwithstanding the foregoing, the Executive may render charitable, civic and
outside board services so long as such services do not materially interfere with
the Executive's ability to discharge his duties, including, without limitation,
such outside services as the Executive is currently performing.
8. Non-Disclosure of Proprietary Information; Non-Competition; Non-
---------------------------------------------------------------
Solicitation.
- ------------
8.1. Confidential Information; Trade Secrets. As used in this
---------------------------------------
Agreement, the term "Confidential Information" shall mean valuable, non-
public, competitively sensitive data and information relating to the
Company's business or the business of any entity affiliated with the
Company, other than Trade Secrets (as defined below). "Confidential
Information" shall include, among other things, information specifically
designated as a
6
<PAGE>
Trade Secret that is, notwithstanding the designation, determined by a
court of competent jurisdiction not to be a "trade secret" under applicable
law. As used in this Agreement, the term "Trade Secrets" shall mean
information or data of or about the Company or any entity affiliated with
the Company, including, without limitation, technical or nontechnical data,
formulas, patterns, compilations, programs, devices, methods, techniques,
drawings, processes, financial data, financial plans, product plans, or
lists of actual or potential customers or suppliers, that (i) derive
economic value, actual or potential, from not being generally known to, and
not being readily ascertainable by proper means by, other persons who can
obtain economic value from their disclosure or use; and (ii) are subject of
efforts that are reasonable under the circumstances to maintain their
secrecy. To the extent that the foregoing definition is inconsistent with a
definition of "trade secret" under applicable law, the foregoing definition
shall be deemed amended to the extent necessary to render it consistent
with applicable law.
8.2. Non-Disclosure. The Executive will be exposed to Trade Secrets and
--------------
Confidential Information as a result of his employment by the Company as
provided in this Agreement. The Executive acknowledges and agrees that any
unauthorized disclosure or use of any of the Trade Secrets or Confidential
Information of the Company would be wrongful and would likely result in
immediate and irreparable injury to the Company. In consideration of the
Executive's right to employment (or continued employment) under the terms
of this Agreement, except as appropriate in connection with the performance
of his obligations under this Agreement, the Executive shall not, without
the express prior written consent of an officer of the Company other than
the Executive, redistribute, market, publish, disclose or divulge to any
other person or entity, or use or modify for use, directly or indirectly,
in any way for any person or entity (i) any Confidential Information during
the Term of this Agreement and for a period of two (2) years after the
final date of the Term of this Agreement; and (ii) any Trade Secrets at any
time (during or after the Term of this Agreement) during which such
information or data shall continue to constitute a "trade secret" under
applicable law. The Executive agrees to cooperate with any reasonable
confidentiality requirements of the Company. The Executive shall
immediately notify the Company or any unauthorized disclosure or use of any
Trade Secrets or Confidential Information of which the Executive becomes
aware.
8.3. Non-Competition. The Executive shall not, either directly or
---------------
indirectly, alone or in partnership, be connected or concerned with or
participate in any other competing business or pursuit during any
employment by the Company, except that the Executive may own up to three
percent of the outstanding securities of a competing business the
securities of which are registered with the Securities and Exchange
Commission if such company is subject to the periodic reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934
Act").
8.4. Non-Solicitation. For a period of one (1) year immediately following
----------------
any termination of the Executive's employment, the Executive will not
solicit, or participate in any solicitation of, the customers, suppliers,
Executives or representatives of the Company (or any of its subsidiaries or
affiliated companies) to breach any contract with
7
<PAGE>
the Company, terminate any relationship with the Company or leave the
Company. For purposes of this Agreement, Customers shall be limited to
actual customers or actively- sought prospective customers of the Company
or any subsidiary or affiliate of the Company with whom the Executive has
had substantial contact during the Term of this Agreement.
9. Certain Definitions.
-------------------
9.1 Accrued Compensation. For purposes of this Agreement, "Accrued
--------------------
Compensation" shall mean an amount which shall include all amounts earned
or accrued through the "Termination Date" (as hereinafter defined) but not
paid as of the Termination Date, including, without limitation, (i) Base
Salary, (ii) reimbursement for reasonable and necessary expenses incurred
by the Executive on behalf of the Company during the period ending on the
Termination Date, (iii) vacation pay, (iv) bonuses, including, without
limitation, any Annual Bonus, and incentive compensation, and (v) all other
amounts to which the Executive is entitled under any compensation plan of
the Company at the times such payments are due.
9.2 Base Amount. For purposes of this Agreement, "Base Amount" shall
-----------
mean the Executive's annual Base Salary at the highest rate in effect on,
or at any time during the ninety (90) day period prior to, the Termination
Date and shall include all amounts of the Executive's Base Salary that are
deferred under any qualified and non-qualified Executive benefit plans of
the Company or any other agreement or arrangement.
9.3 Cause. For purposes of this Agreement, a termination of
-----
employment is for "Cause" if the Executive has been convicted of a felony
or a felony prosecution has been brought against the Executive or if the
termination is evidenced by a resolution adopted in good faith by a
majority of the Company's board of directors that the Executive (i)
intentionally and continually failed substantially to perform his
reasonably assigned duties with the Company (other than a failure resulting
from the Executive's incapacity due to physical or mental illness or from
the Executive's assignment of duties that would constitute "Good Reason"
(as hereinafter defined)) which failure continued for a period of at least
thirty (30) days after a written notice of demand for substantial
performance has been delivered to the Executive specifying the manner in
which the Executive has failed substantially to perform, or (ii)
intentionally engaged in illegal conduct or gross misconduct which results
in material economic harm to the Company; provided, however, that no
-------- -------
termination of the Executive's employment shall be for Cause as set forth
in clause (ii) above until (x) there shall have been delivered to the
Executive a copy of a written notice setting forth that the Executive was
guilty of the conduct set forth in clause (ii) and specifying the
particulars thereof in detail, and (y) the Executive shall have been
provided an opportunity to be heard in person by the Company's board of
directors (with the assistance of the Executive's counsel if the Executive
so desires). Any termination of the Executive's employment by the Company
hereunder shall be deemed to be a termination other than for Cause unless
it meets all requirements of this Section 9.3.
8
<PAGE>
9.4 Change in Control. For purposes of this Agreement, a "Change in
-----------------
Control" shall have occurred if:
(1) a majority of the directors of the Company shall be persons other
than persons: (A) for whose election proxies shall have been
solicited by the Company's board of directors, or (B) who are
then serving as directors appointed by the Company's board of
directors to fill vacancies on the board of directors caused by
death or resignation (but not by removal) or to fill newly-
created directorships;
(2) a majority of the outstanding voting power of the Company shall
have been acquired or beneficially owned (as defined in Rule 13d-
3 under the 1934 Act or any successor rule thereto) by any person
(other than the Company, a subsidiary of the Company, an
affiliate of the Company or the Executive) or Group (as defined
below), which Group does not include the Executive; or
(3) there shall have occurred:
(a) a merger or consolidation of the Company with or into another
corporation (other than (1) a merger or consolidation with a
subsidiary of the Company or (2) a merger or consolidation in
which (a) the holders of voting stock of the Company
immediately prior to the merger as a class continue to hold
immediately after the merger at least a majority of all
outstanding voting power of the surviving or resulting
corporation or its parent and (b) all holders of each
outstanding class or series of voting stock of the Company
immediately prior to the merger or consolidation have the
right to receive substantially the same cash, securities or
other property in exchange for their voting stock of the
Company as all other holders of such class or series);
(b) a statutory exchange of shares of one or more classes or
series of outstanding voting stock of the Company for cash,
securities or other property;
(c) the sale or other disposition of all or substantially all of
the assets of the Company (in one transaction or a series of
transactions); or
9
<PAGE>
(d) the liquidation or dissolution of the Company;
unless more than twenty-five percent (25%) of the voting stock (or the
voting equity interest) of the surviving corporation or the
corporation or other entity acquiring all or substantially all of the
assets of the Company (in the case of a merger, consolidation or
disposition of assets) or of the Company or its resulting parent
corporation (in the case of a statutory share exchange) is
beneficially owned by the Executive or a Group that includes the
Executive.
9.5 Group. For purposes of this Agreement, "Group" shall mean any
-----
two or more persons acting as a partnership, limited partnership,
syndicate, or other group acting in concert for the purpose of acquiring,
holding or disposing of voting stock of the Company.
9.6 Disability. For purposes or this Agreement, "Disability" shall
----------
mean a physical or mental infirmity which impairs the Executive's ability
to substantially perform his duties with the Company for a period of one
hundred eighty (180) consecutive days and the Executive has not returned to
his full time employment prior to the Termination Date as stated in the
"Notice of Termination" (as hereinafter defined).
9.7 Good Reason. For purposes of this Agreement, "Good Reason" shall
-----------
mean a good faith determination by the Executive, in the Executive's
reasonable judgment, that any one or more of the following events has
occurred after the date hereof, without the Executive's express written
consent:
(1) the assignment to the Executive of any duties inconsistent
with the Executive's position (including, without
limitation, status, titles and reporting requirements),
authority, duties or responsibilities as in effect
immediately prior to the date hereof, or any other action by
the Company that results in a material diminution in such
position, authority, duties or responsibilities, excluding
for this purpose isolated and inadvertent action not taken
in bad faith and remedied by the Company promptly after
receipt of notice thereof given by the Executive;
(2) a reduction by the Company in the Executive's Base Salary,
as the same may be increased from time to time;
(3) any failure to pay the Executive any compensation or
benefits to which he is entitled within five (5) days of the
date due;
(4) the Company's requiring the Executive to be based anywhere
other than within fifty (50) miles of the Executive's job
location as of the date hereof, except for reasonably
required travel on the
10
<PAGE>
Company's business which is not greater than such travel
requirements prior to the date hereof;
(5) the taking of any action by the Company that would
materially adversely affect the physical conditions existing
in or under which the Executive performs his employment
duties;
(6) the insolvency or the filing (by any party, including the
Company) of a petition for bankruptcy by the Company;
(7) any purported termination of the Executive's employment for
Cause by the Company which does not comply with the terms of
Section 9.3 hereof; or
(8) any breach by the Company of any provision of this
Agreement.
The Executive's right to terminate his employment pursuant to this
Section 9.7 shall not be affected by his incapacity due to physical or
mental illness.
9.8 Notice of Termination. For purposes of this Agreement, "Notice
---------------------
of Termination" shall mean a written notice or termination from the Company
of the Executive's employment which indicates the specific termination
provision in this Agreement relied upon and which sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated.
9.9 Termination Date. For purposes of this Agreement, "Termination
----------------
Date" shall mean, in the case of the Executive's death, his date of death,
in the case of the Executive's voluntary termination, the last day of
employment, and in all other cases (other than in the case of a successor
or an assignee, which is provided for in Section 12.1 hereof), the date
specified in the Notice of Termination; provided, however, that if the
-------- -------
Executive's employment is terminated by the Company for Cause or due to
Disability, the date specified in the Notice of Termination shall be at
least thirty (30) days from the date the Notice of Termination is given to
the Executive; and provided further that in the case of Disability the
-------- -------
Executive shall not have returned to the full-time performance of his
duties during such period of at least thirty (30) days.
10. Benefits and Payments Upon Termination of Employment.
----------------------------------------------------
10.1 Compensation and Benefits. If, during the term of this
-------------------------
Agreement, the Executive's employment with the Company shall be terminated, the
Executive shall be entitled to the following compensation and benefits in the
following circumstances:
(1) If the Executive's employment with the Company shall be
terminated by the Company for Cause pursuant to Section
11.1 or
11
<PAGE>
by Executive pursuant to Section 11.3 hereof, then the
Company shall pay to the Executive all Accrued Compensation
and the Contingent Stock Grant and any other then non-vested
restricted stock or stock options shall be canceled and any
rights of Executive with respect thereto shall be
terminated.
(2) If the Executive's employment with the Company shall be
terminated by the Company due to Disability or by reason of
the Executive's death, then the Company shall pay to the
Executive all Accrued Compensation and the restrictions on
any outstanding incentive awards (including, without
limitation, restricted stock and granted performance shares
or units) under any incentive plan or arrangement shall
lapse and such incentive award shall become 100% vested, all
stock options, warrants and stock appreciation rights
granted to the Executive on or prior to the date of this
Agreement shall become immediately exercisable and 100%
vested and, notwithstanding anything to the contrary
contained in the plan, agreement or other instrument
relating to such stock option, warrant or stock appreciation
rights with regard to the period of time within which such
stock option, warrant or stock appreciation rights must be
exercised following the Executive's termination of
employment or provision of services to the Company, all such
stock options, warrants and stock appreciation rights may be
exercised at any time and from time to time until the one
(1) year anniversary of the Termination Date, and all
performance units granted to the Executive shall become 100%
vested.
(3) If the Executive's employment with the Company shall be
terminated (A) by the Company pursuant to Section 11.2
hereof or (B) by the Executive pursuant to Section 11.4
hereof, then the Executive shall be entitled to the
following:
i) the Company shall pay the Executive all Accrued
Compensation;
ii) the Company shall pay the Executive as severance pay
and in lieu of any further compensation for periods
subsequent to the Termination Date an amount in cash
equal to one (1) times the Base Amount;
iii) for twelve (12) months or such longer period as may be
provided by the terms of the appropriate program,
practice or policy, the Company shall, at its expense,
continue on
12
<PAGE>
behalf of the Executive and his dependents and
beneficiaries the life insurance, disability, medical,
dental and hospitalization benefits generally made
available to the Company's executive officers at any
time during the 90-day period prior to the Termination
Date or at any time thereafter, provided that the
--------
Company's obligation hereunder with respect to the
foregoing benefits shall be limited to the extent that
the Executive obtains any such benefits pursuant to a
subsequent employer's benefit plans, in which case the
Company may reduce the coverage of any benefits it is
required to provide the Executive hereunder as long as
the aggregate coverages and benefits of the combined
benefit plans are no less favorable to the Executive
than the coverages and benefits required to be
provided hereunder;
iv) the restrictions on any outstanding incentive awards
(including, without limitation, restricted stock and
granted performance shares or units) under any
incentive plan or arrangement shall lapse and such
incentive award shall become 100% vested, all stock
options, warrants and stock appreciation rights
granted to the Executive on or prior to the date of
this Agreement shall become immediately exercisable
and 100% vested and, notwithstanding anything to the
contrary contained in the plan, agreement or other
instrument relating to such stock option, warrant or
stock appreciation rights with regard to the period of
time within which such stock option, warrant or stock
appreciation rights must be exercised following the
Executive's termination of employment or provision of
services to the Company, all such stock options,
warrants and stock appreciation rights may be
exercised at any time and from time to time until the
one (1) year anniversary of the Termination Date, and
all performance units granted to the Executive shall
become 100% vested; and
v) the Company shall, at its sole expense as incurred,
provide for a twelve (12) month period following the
Termination Date the Executive with office space and
secretarial assistance the same as or comparable to
that provided to the Executive immediately prior to
the Termination Date.
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<PAGE>
(4) The amounts provided for in subsection 10.1(1) shall be
payable to Executive in a lump-sum on the Termination Date.
The amounts provided for in subsection 10.1(3) shall be
payable to the Executive in substantially equal biweekly
installments for a twelve (12) month period commencing on
the Termination Date and otherwise in accordance with the
Company's payroll practices in effect from time to time.
(5) The Executive shall not be required to mitigate the amount
of any payment provided for in this Agreement by seeking
other employment or otherwise, and no such payment shall be
offset or reduced by the amount of any compensation or
benefits provided to the Executive in any subsequent
employment, except as provided in subsection 10.1(3)(iii).
10.2 No Severance. The severance pay and benefits provided for in
------------
this Section 10 shall be in lieu of any other severance or termination pay to
which the Executive may be entitled under any Company severance or termination
plan, program, practice or arrangement.
10.3 Other Compensation and Benefit. The Executive's entitlement to
------------------------------
any other compensation or benefits shall be determined in accordance with the
Company's Executive benefit plans and other applicable programs, policies and
practices then in effect.
10.4 Payment of Loan Upon Expiration of the Initial Term. If the
---------------------------------------------------
Initial Term expires and Executive has not been terminated for Cause or
voluntarily resigned without Good Reason as of the date of expiration of the
Initial Term, then the Company will forgive 50% of the principal and accrued
interest then payable under the Note. Executive will be obligated to pay off the
remaining 50% of principal and accrued interest then payable under the Note.
11. Termination. The Executive's employment hereunder may be terminated
-----------
without any breach of this Agreement only in accordance with this Section 11.
11.1 Termination by the Company for Cause. The Company may terminate
------------------------------------
the Executive's employment at any time for Cause by providing to the
Executive a Notice of Termination, whereupon the Executive shall be
entitled to all of the benefits and payments provided for under Section 10
hereof.
11.2 Termination by the Company without Cause. The Company may
----------------------------------------
terminate the Executive's employment at any time without Cause by providing
to the Executive a Notice of Termination, whereupon the Executive shall be
entitled to all of the benefits and payments provided for under Section 10
hereof.
14
<PAGE>
11.3 Termination by the Executive. The Executive's employment may be
----------------------------
terminated by the Executive at any time by providing the Company with
notice of such termination and specifying in the notice the effective date
of such termination, which shall not be less than one hundred twenty (120)
days after giving such notice, whereupon the Executive's employment shall
terminate on the date specified in such notice and the Executive shall be
entitled to all of the benefits and payments provided for under Section 10
hereof; provided, however, that following receipt of such notice, the
-------- -------
Company may specify, in its discretion, the date on which the Executive's
employment shall terminate so long as the date so specified is not more
than one hundred twenty (120) days after the date on which the Executive
shall have given notice, in which case the Executive's employment shall
terminate on the date so specified by the Company.
11.4 Termination by the Executive for Good Reason following a Change
---------------------------------------------------------------
of Control. For a one (1) year period following a Change of Control, the
----------
Executive's employment may be terminated by Executive for Good Reason at
any time during such one (1) year period by providing the Company with a
notice of such termination and specifying in the notice the effective date
of such termination, whereupon the Executive's employment shall terminate
on the date specified in such notice and the Executive shall be entitled to
all of the benefits and payments provided for under Section 10 hereof.
11.5 Termination Upon Disability. The Company may terminate the
---------------------------
Executive's employment upon the Disability of the Executive by providing to
the Executive a Notice of Termination, whereupon the Executive shall be
entitled to all of the benefits and payments provided for under Section 10
hereof.
11.6 Death. In the event of the Executive's death during his
-----
employment hereunder, the Executive's employment shall be automatically
terminated, whereupon the Executive shall be entitled to all of the
benefits and payments provided under Section 10 hereof.
12. Successors and Assigns.
----------------------
12.1 Assumption and Agreement. This Agreement shall be binding upon
------------------------
and shall inure to the benefit of the Company, its successors and assigns, and
the Company will require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) or assign, by agreement in form and
substance satisfactory to the Executive, to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession or assignment had
taken place. Failure of the Company to obtain such assumption and agreement
prior to the effectiveness of any such succession or assignment shall be a
breach of this Agreement and shall entitle the Executive to compensation from
the Company in the same amount and on the same terms as he would be entitled to
hereunder if his employment had been terminated pursuant to Section 11.2 hereof,
except that for purposes of implementing the foregoing, the date on which any
such succession or assignment becomes effective shall be deemed the Termination
Date hereunder. As used in the Agreement, Company shall mean the Company as
hereinbefore
15
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defined and any successor or assign that executes and delivers the agreement
provided for in this Section 12.1 or which otherwise becomes bound by all the
terms and provisions of this Agreement by operation of law.
12.2 Rights of Executive. This Agreement and all rights of the
-------------------
Executive hereunder shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devises and legatees. If the Executive should
die while any amounts would still be payable to him hereunder if he had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to the Executive's devise,
legatee or other designee or, if there be no such designee, to the Executive's
estate.
13. Injunctive Relief. The Company and the Executive agree that damages
-----------------
are an inadequate remedy for, and that the Company or any successor to the
business of the Company would be irreparably harmed by, any breach of Section 8
of this Agreement, and that the Company, any successor to the business of the
Company or any permitted assignee of the Company shall be entitled to equitable
relief in the form of a preliminary or permanent injunction upon any breach of
Section 8 hereof.
14. Notices. For the purpose of this Agreement, notices and all other
-------
communications to either party hereunder provided for in the Agreement shall be
in writing and shall be deemed to have been duly given when delivered in person
or mailed by first-class mail or airmail, postage prepaid, addressed:
If to the Executive:
Mr. James M. Blanchard
9010-2 Nesbitt Ferry Road
Alpharetta, GA 30022
If to the Company:
Grace Development, Inc.
1690 Chantilly Drive
Atlanta, Georgia 30324
with a copy to:
Hunton & Williams
Riverfront Plaza, East Tower
951 East Byrd Street
Richmond, Virginia 23219
Attention: Gary E. Thompson, Esq.
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or to such other address(es) as either party may have furnished to the other
party in writing in accordance with this Section.
15. Miscellaneous. No provision of this Agreement may be amended,
-------------
modified or waived unless such amendment, modification or waiver (i) is agreed
to in writing and is signed by the Executive and a representative of the
Company, its successor or permitted assignee and (ii) has been approved by the
board of directors of the Company, its successor or any permitted assignee of
the Company. No waiver by either party to this Agreement at any time of breach
by the other party of, or compliance by the other party with, any condition or
provision of this Agreement to be performed by the other party shall be deemed
to be a waiver of similar or dissimilar provisions or conditions at the same or
any prior or subsequent time. No agreements or representations, oral or
otherwise, expressed or implied, with respect to the subject matter of this
Agreement have been made by either party that are not expressly set forth in
this Agreement.
16. Validity. The invalidity or unenforceability of any provision or
--------
provisions of this Agreement shall not affect the validity or enforceability of
the other provisions of this Agreement, which other provisions shall remain in
full force and effect, nor shall the invalidity or unenforceability of a portion
of any provision of this Agreement affect the validity or enforceability of the
balance of such provision.
17. Counterparts. This document may be executed in two or more
------------
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute a single agreement.
18. Headings. The headings of the paragraphs contained in this document
--------
are for reference purposes only and shall not, in any way, affect the meaning or
interpretation of any provision of this Agreement.
19. Applicable Law. This Agreement shall be governed by and construed in
--------------
accordance with the internal substantive laws, and not the choice of law rules,
of the State of Georgia.
20. Arbitration. Any controversy or claim arising out of or relating to
-----------
this Agreement or the breach thereof, other than the provisions of Section 9
hereof, shall, on the written request of one party served upon the other, be
settled by binding arbitration in Fulton County, Georgia in accordance with the
commercial arbitration rules then recognized by the American Arbitration
Association, and judgment upon the award rendered may be entered and enforced in
any court having jurisdiction thereof.
21. Entire Agreement; Return and Cancellation of Stock Certificate Issued
---------------------------------------------------------------------
in Error. This Agreement constitutes the entire agreement between the parties
- --------
hereto and supersedes all prior agreements, understandings and arrangements
(oral or written) between the parties hereto, including without limitation the
Old Agreement and the letter agreement between the parties dated October 5,
1999. Simultaneously with the execution and delivery of this Agreement by the
parties, and as a condition to the effectiveness of this Agreement and the
17
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issuance to the Executive of 1,000,000 shares of the Common Stock provided for
under Section 4.2 hereof, Executive shall deliver into the possession of the
Company the original stock certificate for 2,000,000 shares of the Company's
common stock which was previously issued in error and the Company shall cancel
such certificate as if it had never been issued. Simultaneously, the Company
will deliver to the Executive a stock certificate for 1,000,000 shares of the
Company's common stock in accordance with Section 4.2.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
and delivered by its duly authorized officer, and the Executive has executed and
delivered this Agreement, all as of the date first written above.
GRACE DEVELOPMENT, INC.
By: /s/ Benjamin F. Holcomb
------------------------------------
Benjamin F. Holcomb,
Chairman and Chief Executive Officer
/s/ James M. Blanchard
---------------------------------------
JAMES M. BLANCHARD
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Exhibit 10.21
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (this "Agreement") is made and entered into
as of the 14th day of April 2000, by and between Grace Development, Inc., doing
business as Avana Communications (hereinafter "Company") and OneUp Ventures LLC
(hereinafter "Consultant").
BACKGROUND
Consultant's manager is a past chairman of the Company's board of
directors and has a significant equity investment in the Company. Consultant
has knowledge and expertise which is valuable to the Company and for which
Company desires to engage Consultant. In consideration of the promises herein
made and undertaken, Company and Consultant, intending to be legally bound,
covenant and agree as follows:
SECTION 1
SCOPE OF SERVICES
1.1 Consultant shall provide the following business consulting services
(the "Services") on the terms and conditions of this Agreement, when and to the
extent requested to do so in writing by Benjamin F. Holcomb, the Company's
Chairman and Chief Executive Officer ("Mr. Holcomb"), but only to the extent Mr.
Holcomb and Consultant reach agreement as to the compensation with respect to
such Services in each case:
. Marketing and Long Term Planning. Consultant shall meet with the
--------------------------------
senior management of the Company to comment on Company strategic
planning and the implementation of long term strategies and
business plans.
. General Financial Planning and Consulting. Consultant will meet
-----------------------------------------
with the senior management of Company to comment on financial
structures for completing various aspects of the Company business
and strategic plans. Consultant will provide general financial
advice to the Company and, to the extent reasonably requested by
the Company, shall review and comment on specific Company financial
matters. Consultant will use reasonable efforts to identify persons
or entities who may be interested in participating in debt or
equity transactions on terms and conditions satisfactory to the
Company and which are consistent with the Company's strategic plan;
provided, however, that the Company shall not be obligated to pay
Consultant or any of Consultant's affiliates or designees any
broker's fee or finder's fee, commission or other similar
compensation in connection with any such transaction, except to the
extent the Company expressly agrees to do so in a binding written
agreement with Consultant. Consultant will comment on the
performance of the Company's accountants. Notwithstanding the
foregoing,
<PAGE>
Consultant will not render legal or accounting advice.
. Management Consulting. Consultant will assist the Company in
---------------------
specific executive recruiting and hiring projects identified by the
Chairman of the Board of Directors and CEO of the Company.
. Business Expansion Consulting. Consultant will identify potential
-----------------------------
acquisition and business expansion opportunities consistent with
the Company's strategic plan and shall comment on and advise the
Company with respect to specific potential transactions brought to
his attention by the Board of Directors; provided, however, that
the Company shall not be obligated to pay Consultant or any of
Consultant's affiliates or designees any broker's fee or finder's
fee, commission or other similar compensation in connection with
any such transaction, except to the extent the Company expressly
agrees to do so in a binding written agreement with Consultant.
1.2 Consultant shall expend such time providing the Services as shall be
reasonable or appropriate in order to perform such Services to the reasonable
satisfaction of the Company in light of the compensation agreed to with respect
to such services pursuant to Section 5 hereof, and shall provide its own working
space, facilities, and materials required in order to perform the Services
hereunder. To the extent it is necessary or desirable to perform work on
Company's premises, the Company shall provide to Consultant reasonable working
space, facilities and materials.
1.3 Company acknowledges that Consultant is not engaged in the business of
effecting transactions in securities and is not registered as a broker-dealer
under federal or state securities laws. To the extent that Services to be
rendered hereunder will, or may, result in any purchase, sale or investment in
stock or other securities of the Company or any other entity (a "Securities
Transaction"), Consultant's only duty shall be to identify potential transaction
participants. Consultant will not participate in any sales effort, make any
representation regarding securities or the Company or participate in
negotiations regarding any possible Securities Transactions, nor shall
Consultant give to any participant in a Securities Transaction any advice or
information regarding the value of any securities or the business of Company.
SECTION 2
TERM OF AGREEMENT
2.1 This Agreement shall commence on the date and year first above
written, and unless terminated earlier pursuant to the terms of this Agreement,
shall continue until the 1st anniversary of the date of this Agreement. This
Agreement may be terminated (i) by the Company immediately upon delivery to the
Consultant of written notice of termination or (ii) by Consultant immediately
upon written notice of termination.
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<PAGE>
2.2 Within 30 days of termination of this Agreement, Consultant shall
submit to Company a final Invoice for any fees theretofore accrued under this
Agreement.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF CONSULTANT
Consultant represents and warrants to the Company as follows:
3.1 It has the right to provide the Services to the Company;
3.2 It and its employees and representatives have the requisite training
and expertise to perform the Services for the Consultant and do not require any
training from the Company to perform the Services;
3.3 To the best knowledge of Consultant, the performance of the Services
will not violate (i) any applicable federal, state or local law, rule,
ordinance, regulation or order, (ii) any contracts with third parties or (iii)
any third-party rights in any patent, trademark, copyright, trade secret or
similar right.
3.4 During the term of this Agreement, it intends to offer services
similar to services provided to third parties that are not affiliated with the
Company;
3.5 It is the lawful owner or licensee of any software programs or other
materials to be used by Consultant in its performance of the Services and
Consultant has all rights necessary to convey to Company the unencumbered
ownership of any reports, data, work-product or other tangible result of the
Services provided hereunder. Consultant hereby represents, warrants and
covenants that the reports, data, work-product or other tangible result of the
Services provided hereunder shall not violate or infringe any patent, copyright,
trademark, trade secret or other proprietary right of any third party;
3.6 Neither it nor its employees belong to any guild or union; and
3.7 It maintains a principal place of business separate and apart from the
Company's place of business.
SECTION 4
INDEPENDENT CONTRACTOR RELATIONSHIP
4.1 Consultant agrees to provide the Services as an independent contractor
to the Company. Consultant will not be, and will not be deemed to be, an
employee of the Company.
4.2 Consultant will control the manner, methods and details of performance
of his Services, but will be responsible to the Company for the results of his
efforts.
3
<PAGE>
4.3 Consultant will not be entitled to any benefits the Company may
provide for its employees.
4.4 Consultant will not be an agent of the Company for any purpose and
will not have any authority to bind or commit the Company in any way unless and
to the extent expressly authorized in writing by the Company's Chief Executive
Officer.
4.5 Consultant will be responsible for reporting his income and paying any
applicable taxes (including but not limited to federal, state, and local income
taxes, Social Security and Medicare taxes, and unemployment taxes) to federal,
state, and local taxing agencies, as required by law.
4.6 Consultant will be responsible for maintaining, at his expense, (i)
any liability insurance that may be necessary or prudent to cover any claims
against him that may arise from his performing services under this Agreement,
and (ii) any licensure that may be required in connection with the Services.
Upon the Company's request, Consultant will furnish to the Company evidence that
such insurance coverage is in effect and that such licenses are current.
4.7 Consultant may perform consulting services for or accept employment
with other Persons during the term of this Agreement, provided that Consultant
shall not permit such other services or employment to conflict or interfere
unreasonably with his performance of Services under this Agreement. This
provision includes, but is not limited to, any engagement or employment whose
time or effort requirements would interfere unreasonably with Consultant's
performance of Services for the Company, and any engagement or employment that
would raise an actual or potential conflict of interest with the Company.
4.8 The Company has the right to engage other consultants or to hire
employees to perform services the same as or similar to those provided by
Consultant during the term of this Agreement.
SECTION 5
FEES, EXPENSES AND PAYMENT
5.1 At the time Consultant is requested to perform a Service under this
Agreement, Consultant and Company will agree to the specific compensation which
Consultant will earn for performing such Services, subject to the following:
(a) For Business Expansion Consultation Services under this Agreement,
Consultant's agreed fee will be earned and payable to Consultant upon the
Closing (as defined below) of each Resulting Transaction (as defined below) and
will not be reduced or offset by any fee or other remuneration directly or
indirectly paid or payable to Consultant by anyone other than Company unless the
parties expressly agree to such reduction or offset; provided, however, that
Consultant will, upon presentation to the Company of any proposal, referral or
introduction relating to a potential transaction, disclose in writing to the
Chairman of the Board and Chief Executive Officer of the Company any fee or
other remuneration paid or payable to Consultant
4
<PAGE>
by any other Person in connection with the proposed transaction, including
without limitation any direct or indirect ownership interest of Consultant in
any Introduced Party. Consultant from time to time may also employ the services
of a co-finder to locate funding sources, acquisitions, joint ventures and
mergers and other Introduced Persons (hereafter defined). Should Consultant
employ the services of a co-finder, the Consultant will promptly disclose to the
Company the identity of the co-finder and any fee agreement the Consultant
enters into or has entered into with the co-finder, and the Company agrees to
split the finder's fee payable to Consultant, as agreed to between the Company
and Consultant, between Consultant and the co-finder; provided, however, that in
no event will the aggregate amount of finders' fees paid or payable by the
Company to Consultant and any co-finder(s) exceed the finder's fee payable to
Consultant pursuant to the fee agreement between the Company and Consultant.
(i) For purposes of this Agreement, "Resulting Transaction" means a
Securities Transaction involving the Company, or any of its affiliates, and
any Introduced Person, or any of the following transactions which has the
substantive effect of providing the Company or any of its affiliates, or
any Introduced Person with benefits the same as, or similar to, those
intended to be conferred in a potential transaction originally presented to
the Introduced Person by Consultant, or in which the Company, or any of its
affiliates, and any Introduced Person engage after an introduction by
Consultant during the term of this Agreement or within 270 days after
termination of this Agreement regardless of whether the original
transaction itself is consummated: (A) any acquisition of the capital stock
or assets of, or share exchange, consolidation, merger, or other similar
business combination transaction with, an Introduced Person; (B) any loan
of money or other extension of credit between Company or any of its
Affiliates and an Introduced Person; or (C) any furnishing of goods,
services or facilities between Company and an Introduced Person;
(ii) For purposes of this Agreement, "Introduced Person" means any
Person to whom Consultant has presented a written proposal that has been
approved in writing by the Chief Executive Officer of the Company and as to
whom Consultant has given written disclosure of identity to the Chief
Executive Officer of the Company, or who is referred in writing by
Consultant to the Company during the term of this Agreement; provided,
however, that "Introduced Person" shall not include any Person with whom
any member of the Company's senior management or any director of the
Company was already acquainted at the time of Consultant's referral, either
by virtue of a past transaction between the Company and such Person or
otherwise;
(iii) For purposes of this Agreement, "Person" includes natural
persons, unincorporated associations, trusts, corporations, partnerships
and other entities;
(iv) For purposes of this Agreement, "Closing" means the first date
on which Company or any Introduced Person becomes obligated to pay
consideration to the other with respect to a Resulting Transaction pursuant
to the terms of any written agreement among the parties with respect
thereto; and
5
<PAGE>
(b) For Management Consulting Services in connection with the recruiting
or hiring of executives introduced by Consultant to the Company, Consultant's
agreed fee shall be payable upon payment by the Company of the executive's first
regular payment of base salary.
5.2 At least every 30 days during the term of this Agreement, Consultant
shall submit an invoice (an "Invoice") generally describing the Services
rendered during the preceding 30 days, including the amount of time expended by
Consultant and the results of the Services provided, and setting forth the
compensation due Consultant as agreed upon pursuant to Section 5.1.
5.3 The compensation paid pursuant to this Agreement shall be the sole
compensation due Consultant in connection with its performance of the Services
and the performance of any and all of Consultant's other duties and obligations
hereunder, and shall be inclusive of any out-of-pocket costs or expenses
incurred by Consultant or any of its employees, agents or contractors, except
that the Company shall reimburse Consultant for any such expenses that are
approved in advance by the Company and are identified by Consultant in a
detailed and itemized written list of such expenses along with copies of all
related bills, receipts and/or invoices. Consultant shall be responsible for
retaining any additional consultants and for performing any other procedures
required in connection with Consultant's performance of the Services and shall
be solely responsible for paying any and all costs or expenses related thereto.
Consultant shall also be solely responsible for paying any and all salaries,
benefits, taxes, costs and expenses of its employees.
SECTION 6
TAXES
6.1 Because Consultant is not a Company employee: (a) Company will not
withhold FICA (Social Security) from Consultant's payments; (b) Company will not
make state or federal unemployment insurance contributions on behalf of
Consultant or its personnel; (c) Company will not withhold state and federal
income tax from payment to Consultant; (d) Company will not make disability
insurance contributions on behalf of Consultant; (e) Company will not obtain
workers' compensation insurance on behalf of Consultant. Notwithstanding the
foregoing, the Company shall withhold federal and any applicable state or local
income tax from payments hereunder that it reasonably determines to be required
under the Internal Revenue Code, as it may be amended, and the regulations
promulgated thereunder from time to time, and any applicable state revenue code
and regulations.
SECTION 7
PROPRIETARY INFORMATION/CONFIDENTIALITY
7.1 Consultant understands and acknowledges that during the term of this
Agreement, Consultant and its manager, Louis Friedman, will be exposed to
Confidential Information (as defined below) which is proprietary and which
rightfully belongs to the Company. Consultant agrees that it and its manager
will not use or cause to be used for its or its manager's own benefit,
6
<PAGE>
either directly or indirectly, or disclose any of such Confidential Information
at any time, either during or after termination of this Agreement, without the
Company's prior written consent. Consultant shall take all reasonable steps to
safeguard such Confidential Information that is within its possession or control
and to protect such information against disclosure, misuse, loss or theft.
Consultant's obligations under this paragraph with respect to any specific
Confidential Information shall cease when that specific Confidential Information
becomes publicly known or when it is disclosed by any person, firm, corporation
or business entity which is not bound by the terms of a confidentiality
agreement with the Company. The term "Confidential Information" shall mean any
information not generally known in the relevant trade or industry, which was
obtained from the Company, or which was learned as a result of the performance
of any services by Consultant on behalf of the Company, and which falls within
the following general categories:
(a) information concerning Trade Secrets of the Company;
(b) information concerning existing or contemplated products,
services, technology, designs, processes and research or product
developments of the Company;
(c) information concerning business plans, sales or marketing
methods, methods of doing business, customer lists, customer usages and
requirements, or supplier information of the Company; and
(d) any other confidential information which the Company may
reasonably have the right to protect by patent, copyright or by keeping it
secret and confidential.
As used herein, the term "Trade Secrets" shall mean any scientific or
technical data, information, design, process, procedure, formula, or
improvement that is commercially valuable to Company and is not generally
known in the industry.
7.2 (a) Consultant acknowledges that in the course of providing Services
pursuant to this Agreement it will become familiar with the Company's and its
subsidiaries' Trade Secrets and with other Confidential Information and that its
Services will be of special, unique and extraordinary value to the Company and
its subsidiaries. Therefore, Consultant agrees that, during the term of this
Agreement (the "Non-Compete Period"), it and its manager will not directly or
indirectly, either for itself or any other person, own, manage, control,
participate in, consult with, render services for, permit its name to be used by
or in any manner engage in any business competing with the businesses of the
Company or its subsidiaries as such businesses exist or are in process on the
date of the termination of this Agreement, within (i) the City of Atlanta and
(ii) all cities, counties and towns contiguous to either the City of Atlanta.
Nothing herein will prohibit Consultant or any affiliate of Consultant from
being a passive owner of not more than 5% of the outstanding stock of any class
of a corporation which is publicly traded, so long as Consultant has no active
participation in the business of such corporation.
7
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(b) During the Non-Compete Period, Consultant will not directly or
indirectly through another person (i) induce or attempt to induce any employee
of the Company or any subsidiary to leave the employ of the Company or such
subsidiary, or in any way interfere with the relationship between the Company or
any subsidiary and any employee thereof, (ii)hire any person who was an employee
of the Company or any subsidiary at any time during the term of this Agreement,
or (iii) induce or attempt to induce any customer, supplier, licensee or other
business relation of the Company or any subsidiary to cease doing business with
the Company or such subsidiary, or in any way interfere with the relationship
between any such customer, supplier, licensee or business relation and the
Company or any subsidiary.
(c) During the Non-Compete Period, Consultant agrees not to take any
action that materially interferes with or disrupts the Company's business or its
relationships with its customers, suppliers or employees.
7.3 Consultant acknowledges and agrees that the Company will disclose
publicly its relationship with Consultant and the material terms thereof in
order to comply with the requirements of the federal securities laws.
SECTION 8
INDEMNIFICATION
8.1 The Company shall indemnify and hold harmless Consultant, and
Consultant's affiliates, agents and employees ("Indemnitees"), against any and
all losses, liabilities, claims, damages or expenses whatsoever (including
reasonable legal expenses) ("Losses") to the extent such Losses arise out of or
are based upon: (i) any representation, or any untrue statement of a material
fact contained in any information given, by the Company to any participant in a
Securities Transaction or any omission by the Company to state therein a
material fact necessary to make the statements made not misleading; (ii) any
untrue statement of a material fact contained in any application or other
papers, filed by the Company with any state or federal agency; or (iii) any act
or omission of the Company or any of its agents or employees any other violation
of state or federal securities laws based on statements, actions or inactions of
the Company, or its agents or employees.
8.2 Consultant hereby indemnifies and agrees to defend and hold harmless
the Company and its affiliates and their respective directors, officers,
employees, representatives, and agents from and against any and all Losses to
the extent such Losses arise out of or are based upon (i) Consultant's breach of
any of Consultant's covenants, agreements, obligations or duties hereunder, and
(ii) Consultant's breach of any of the representations and warranties made by
Consultant in Section 3 hereof.
8.3 If the indemnification provided for in this Section 8 is unavailable
to or insufficient to hold harmless the indemnified party in respect of any
Losses, the indemnifying party shall in lieu of indemnifying such indemnified
party contribute to the amount paid or payable by such indemnified party as a
result of such Losses in such proportion as is appropriate to reflect not only
(a) the relative benefits received by the Company and any person who may be
8
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alleged to be in control of the Company within the meaning of Section 15 of the
Securities Exchange Act of 1934 (the " Controlling Person") on the one hand and
the Consultant on the other, but also (b) the relative fault of (i) the Company
and its Controlling Persons and (ii) the Consultant in connection with the
actions, inactions, statements or omissions which resulted in such Losses, as
well as any other relevant equitable considerations. The Company and the
Consultant agree that it would not be just and equitable if contribution
pursuant to this Section 8 were determined by pro rata allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to above in this subsection. The amount paid or payable
by the indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this Section
8.3 shall be deemed to include any legal or other expenses to which such
indemnified party would be entitled if Section 8 were applied.
8.4 The Company's and Consultant's respective obligations under this
Section 8 shall survive the completion of the Services and the termination or
cancellation of this Agreement for any reason for a period of 5 years.
SECTION 9
NON-CIRCUMVENTION
Company agrees not to, directly or through intermediaries, agents or
otherwise indirectly, circumvent or interfere with the business relationship
existing between the Consultant and any Introduced Person.
SECTION 10
INVESTMENTS IN INTRODUCED PERSONS
Company acknowledges that Consultant or one or more of its members or its
affiliates may be an investor in one or more of the Introduced Persons.
Consultant covenants and agrees to disclose in writing any such investment in
an Introduced Person upon referring the Company to the Introduced Person or the
Introduced Person to the Company.
SECTION 11
MISCELLANEOUS
11.1 The Finder's Fee Agreement among the Company, Consultant and
Greenlight Capital, Inc. dated April 14, 2000 was executed in contemplation of
this Agreement and each of the terms and provisions of this Agreement, including
but not limited to the provisions of Section 8 hereof shall apply thereto.
9
<PAGE>
11.2 Consultant shall not assign, transfer, or subcontract this Agreement
or any of its obligations hereunder without the prior written consent of
Company; provided, however, that Consultant may assign its right to receive
payments hereunder to such third parties as Consultant may designate by written
notice to Company.
11.3 This Agreement shall be governed and construed in all respects in
accordance with the laws of the State of Georgia as they apply to a contract
executed, delivered, and performed solely in such State.
11.4 The parties are and shall be independent contractors to one another,
and nothing herein shall be deemed to cause this Agreement to create an agency,
partnership, or joint venture between the parties. Nothing in this Agreement
shall be interpreted or construed as creating or establishing the relationship
of employer and employee between Company and either Consultant or any employee
or agent of Consultant.
11.5 All notices required or permitted hereunder shall be in writing
addressed to the respective parties as set forth on the signature page, unless
another address shall have been designated, and shall be delivered by hand or by
registered or certified mail, postage prepaid.
11.6 This Agreement and the Invoices rendered pursuant hereto constitute
the entire agreement of the parties hereto and supersedes all prior
representations, proposals, discussions, and communications, whether oral or in
writing. This Agreement may be modified only in writing and shall be enforceable
in accordance with its terms when signed by the party sought to be bound.
10
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives, on the date and year first above
written.
Grace Development, Inc. d/b/a
Avana Communications, Inc.
By: /s/ Benjamin F. Holcomb
Title: Benjamin F. Holcomb, Chairman of the
Board and Chief Executive Officer
Date: April 14, 2000
Address for correspondence:
1600 Chantilly Drive
Atlanta, GA 30324
OneUp Ventures LLC
By: /s/ Louis S. Friedman
Title: Louis S. Friedman, Manager
Date: April 14, 2000
Address for correspondence:
5920 Roswell Road, Suite B-107
Atlanta, GA 30328
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