<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM 10-K
(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)
<TABLE>
<S> <C>
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)
</TABLE>
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Title to each class Name of each exchange on which registered
------------------- -----------------------------------------
<S> <C>
None None
</TABLE>
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.
Portions of the registrant's definitive Proxy Statement to be filed with
the Securities and Exchange Commission no later than 120 days after the
registrant's fiscal year ended December 31, 1999, and to be delivered to
stockholders in connection with the 2000 Annual Meeting of Stockholders are
incorporated in Part III by reference.
<PAGE>
GRACE DEVELOPMENT, INC.
INDEX
<TABLE>
<CAPTION>
REPORT: FORM 10-K Page
----
<S> <C>
PART I........................................................................................................... 3
ITEM 1. BUSINESS........................................................................................ 3
ITEM 2. PROPERTIES...................................................................................... 34
ITEM 3. LEGAL PROCEEDINGS............................................................................... 34
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............................................. 35
PART II.......................................................................................................... 36
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS........................... 36
ITEM 6. SELECTED FINANCIAL DATA......................................................................... 36
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS................................................................................. 37
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK..................................... 45
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..................................................... 45
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE................................................................................. 45
PART III......................................................................................................... 46
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT............................................. 46
ITEM 11. EXECUTIVE COMPENSATION......................................................................... 46
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT................................. 46
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................................. 46
PART IV.......................................................................................................... 47
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K............................... 47
SIGNATURES....................................................................................................... 49
CONSOLIDATED FINANCIAL STATEMENTS................................................................................ F-1
EXHIBIT INDEX.................................................................................................... E-1
</TABLE>
2
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
Grace Development, Inc., a Colorado corporation doing business as Avana
Communications ("Grace" or the "Company"), is a start-up company whose
predecessor was formed in 1998. The Company plans to become a full-service
integrated communications provider, offering a suite of "bundled" data and
communications services and products to small businesses and individuals in mid-
sized and smaller markets located primarily in the Southeastern United States,
and internet-related and long-distance services to customers nationally.
The Company believes that technological developments and economic factors
are driving a rapid convergence of products and services in the information
technology and telecommunications industries. However, management believes that
consumers find the rapidly growing and changing array of data and communications
technologies to be confusing, and that consumers are frustrated by the cost and
inconvenience of having to rely on multiple providers to obtain the services and
products they need. The Company intends to pursue profitable growth by offering
its customers simplified, affordable solutions to managing their information
technology and telecommunications needs in this converging environment.
The Company's strategy is to develop the capability to deliver to its
customers -- through facilities-based and resale networks -- an affordable
bundle of data, voice, internet-related, and eventually video, services and
products that are tailored to meet each customer's individual needs in one
account with one source of support and customer service. The Company intends to
offer, and assist its customers in selecting a customized "bundle" of, primary
functional services, which may include one or more of the following:
. internet access service
. local and long distance telephone
. enhanced telephone services (such as voice mail, call waiting,
conference calling and caller-ID)
. web page design, development and hosting
. dedicated circuits for voice, data and video
. frame relay transport services
. ATM (Asynchronous Transfer Mode)
. integrated wireless PCS (Personal Communication System)
. calling card services
. ISDN (Integrated Service Digital Network)
. SDSL (Symetrical Digital Subscriber Line), VoDSL (Voice Over Digital
Subscriber Line) and
ADSL (Asymetrical Digital Subscriber Line)
. OC-1 (Optical Carrier one) and OC-3 (Optical Carrier three)
. RAS ports (Random Access Server)
3
<PAGE>
Additionally, the Company may sell, install and maintain the following
products for customers and their end users:
. phone equipment; PBX equipment; voice-over equipment
. mini-computer, personal computers and servers
. internet appliances and convergence devices
. wireless communications devices
The array of services and products offered will be determined on a market-
by-market basis, depending on the population density and demographics of each
market, either through direct sales, resale agency arrangements or some
combination of the two. The Company plans to offer facilities-based services in
markets that can support the cost of the facilities infrastructure build-out,
and to offer services through resale or interconnection arrangements in markets
where build-out of facilities-based infrastructure would not be cost-effective.
Execution of Business Plan
The Company has developed a three-pronged strategy for implementing its
business plan: (a) acquisition of existing service providers and developing
technology-based service companies; (b) build-out of the Company's delivery
network, primarily in mid-sized and smaller (1.5 million persons or less)
markets located in the Southeastern United States; and (c) integration of the
products and services acquired or developed by the Company into a suite of
offerings, from which the Company will assist its customers in selecting a
"bundle" of products and services that will meet their needs on a simple and
affordable basis.
Acquisitions. The Company intends to be opportunistic and aggressive in
acquiring and consolidating independent technology providers that enhance the
array of products and services that the Company plans to offer to its customers,
that provide the Company with new or increased access to desirable markets or
that enhance its human resources.
Building Infrastructure. The Company intends to build-out its existing
network infrastructure where acceptable acquisition candidates or existing
network infrastructure do not exist and where the market size is such that the
cost of the build-out can be justified or where it is necessary in order to
reduce dependency on third parties. For instance, the Company may expand and
build infrastructure in smaller markets where current advanced network
infrastructure is unavailable, unplanned and the cost of entry and level of
competition are relatively low. In larger markets, the Company may develop and
deploy advanced fixed networks where such networks do not exist or where cost
effective access to existing networks is not available. In addition, the
Company may enter new markets by leasing or reselling existing services or
infrastructure to develop a large enough market share to support the cost of
building out the Company's own facilities.
Integration of Products and Services. As its product and service
capabilities expand, through acquisitions and internal development, the
Company's goal is to integrate those products and services into a suite of
offerings from which its customers may choose a bundle of products and services
which best suit their individual needs. The Company intends to differentiate
itself from its competitors, in part, by actively assisting its customers in
selecting the appropriate
4
<PAGE>
products and services to meet their needs on a simple and cost effective basis.
Management believes that such customer assistance will help build customer
loyalty and reduce customer attrition, while offering an opportunity for the
Company to "cross-sell" its more profitable products and services. In addition,
the Company believes that the integration of acquired or developed products and
services will permit it to establish a local presence in its targeted markets
while centralizing technological and administrative support services, whenever
possible, to capture operational efficiencies and economies of scale.
Additionally, to more quickly expand its customer base, geographic reach
and brand awareness, the Company may also act as a reseller of local, long
distance and other telecommunications services where it does not have facilities
in place.
Implementation of the Company's business plan has already begun. Since
November 1, 1999, the Company acquired (i) an Atlanta, Georgia-based ISP, (ii) a
Florida-based ASP that provides Web page design and hosting services, (iii) a
South Carolina-based CLEC, and (iv) a Florida-based computer services firm that
provides network maintenance management and installation services. As a result
of these acquisitions, the Company presently offers data and communications
services, including Internet connections, Web page design and hosting, and
"bundled" local, long distance and some enhanced telephone services, to
individuals and businesses in a limited number of markets in the Southeastern
United States.
Current Operations
Through its operating subsidiaries, the Company currently provides Internet
connections; Web page design and hosting services; local, long distance and
certain enhanced telephone services; and data network systems design,
installation and maintenance.
Internet Service Provider ("ISP")
The Company operates as an ISP primarily through its indirect wholly-owned
subsidiary Avana Communications Corporation, a Georgia corporation ("Avana").
Avana was acquired in May 1999. The Company currently provides Internet
connections to approximately 4,500 individuals and small and medium size
companies in the Atlanta, Georgia, market for a monthly service fee.
Additionally, the Company offers domain name registration and Web server co-
location services. The Company's ISP operations and systems are located in the
Company's primary operating facility in Atlanta, Georgia. The Company's ISP and
ASP operations make up its Internet segment. The information in Note 10 -
"Segment Reporting" of the Company's Consolidated Financial Statements is
incorporated herein by reference.
Application Service Provider ("ASP")
The Company operates as an ASP primarily through its indirect wholly-owned
subsidiary WebWizard, Inc., a Delaware corporation formerly based in Altamonte
Springs, Florida ("WebWizard"). The Company acquired WebWizard in January 2000.
The Company offers four primary products and services as an ASP: (i) licensing
of Internet and intranet Web page design software; (ii) Web page design and
implementation consulting services; (iii) Web hosting services; and (iv) online
database application services. The WebWizard design tool enables persons with
limited computer skills to build and maintain Web pages. It includes a fully
5
<PAGE>
integrated, seamless Web page design and maintenance tool that can be integrated
with many existing computer based database packages and includes a shopping cart
facility, catalog tools, forms tools, and content and contact management tools.
The Web page design tool is provided to end users who design and maintain their
own Web pages, and licensed to intermediary Web page designers and consultants
who design and maintain Web pages for end users. The Company also offers its
own Web page consulting services to design, build and maintain Web pages for
customers, including licensees. The Company will also host customers' Web pages
on its computer servers for a monthly service fee. The Company currently has
approximately 12 license holders of the WebWizard software -- through which the
Company reaches approximately 6,000 end users -- and over 300 customers for whom
it hosts Web sites. The Company's ASP customers are not concentrated in any
particular geographic region. WebWizard's operations and computer systems are
located in Altamonte Springs, Florida and redundantly supported in Atlanta,
Georgia.
Competitive Local Exchange Carrier ("CLEC") and Inter-Exchange Carrier ("IXC")
The Company, through its operating subsidiaries, operates as a CLEC and
IXC, offering local, long distance and certain enhanced telephone services. The
Company offers traditional local telephone products, long distance voice and
data services, operator services, prepaid calling cards and certain enhanced
services, including voice mail, call waiting, conference calling and caller-ID.
The Company currently provides such services to approximately 1,200 customers
and over 6,500 lines located primarily in the Southeastern United States.
The Company has negotiated interconnect agreements with BellSouth Corp.,
GTE Telecommunications Inc., Sprint Corp., and SBC Communications, as successor-
by-merger to Ameritech, all of which are ILECs. The Company has contracts to
resell long distance services with Qwest Communications International Inc. and
Global Crossing Ltd. The Company also has a contract to resell advanced network
services with ICG Communications involving a lease of high speed data
transmission facilities. Under those agreements, the Company purchases local
exchange, long distance and high speed data services at wholesale prices and
resells those services to its customers. As of March 31, 2000, the Company had
switching equipment and related computer hardware and software installed at a
facility in Johnson City, Tennessee, and to be installed in co-location
facilities in Atlanta, Georgia.
The Company's CLEC service is transparent to the customer, whose telephone
operates in precisely the same manner as it did prior to selecting the Company
as its local carrier. The customer receives its bill from the Company, rather
than from the ILEC. The Company is certified and operating as a CLEC in
Alabama, Florida, Illinois, Kentucky, Mississippi, North Carolina, South
Carolina, Tennessee and Virginia. The Company has filed for CLEC certification
in Louisiana and Ohio.
The Company is certified by the Federal Communications Commission ("FCC")
and the applicable state regulatory agencies to provide intrastate, interstate
and international long distance telephone services to customers in Alabama,
Florida, Georgia, Illinois, Kentucky, Louisiana, Mississippi, North Carolina,
Ohio, South Carolina, Tennessee, and Virginia. The Company's other long
distance telephone products are 800 Numbers and debit calling card services.
6
<PAGE>
In order to provide these products, the Company purchases long distance
telephone time from national carriers at wholesale rates based upon high volume
usage and its certifications as an IXC. The Company then resells this time to
its customers at its own retail rates which are generally priced below IXCs'
published, tariffed, basic retail rates. The Company's calling card products
operate similarly to the calling card products offered by the major carriers.
The Company's customers pay for their long distance calling usage through direct
billing.
The Company also has state tariffs to provide pre-paid local telephone
service in Alabama, Florida, Kentucky, North Carolina, Mississippi, South
Carolina, Tennessee and Virginia. This service is provided under the P.V. Tel.
brand. The Company has approximately 1,200 pre-paid local telephone service
customers.
The Company has an arrangement with Lucent Technologies, Inc. whereby
Lucent is to supply the Company with certain network infrastructure equipment
necessary for network expansion. As of December 31, 1999, Lucent held 4.4% of
the Company's Common Stock that was acquired by exercising warrants that were
awarded in connection with this agreement. Under the Lucent arrangement, Lucent
has made a non-binding commitment to lease to the Company up to $25 million in
equipment and services during 2000 and to provide the Company with a secured
non-revolving working capital line of credit of up to $3,125,000 at a rate of
$1.00 for every $8.00 in new equipment purchased or leased by the Company from
Lucent. The line of credit will be made available in tranches, as needed,
subject to credit review as the tranches are utilized. Any advance under the
line of credit would bear interest at a rate of 12.5%, payable as interest only
for the first three months, followed by 21 months of principal and interest.
Bundled Products and Services
As of March 31, 2000, the Company was offering "bundled" telecommunications
services in the Atlanta, Georgia, market consisting of long distance services,
800 toll free numbers, calling cards, Internet access, high speed data services
and Web page design and hosting. The Company's business plan calls for
additional services to be added in the future, including local telephone, local
area networks, wide area networks and installation, maintenance and servicing of
networks. The Company markets its bundled products and services through its own
direct sales force and through a variety of value added resellers ("VARs") and
other agents. In Alabama, Florida, Georgia, Kentucky, Mississippi, North
Carolina, South Carolina, Tennessee and Virginia, the Company offers bundled
local and long distance telephone service.
PREDECESSOR
The predecessor to the Company, New Millennium Multimedia, Inc., a Georgia
corporation ("New Millennium"), which resold local and long distance services in
the north Atlanta, Georgia, market was formed on October 7, 1998. On May 5,
1999, New Millennium acquired Avana Communications Corporation, a Georgia
corporation ("Avana"), an internet service provider which then had approximately
4,000 customers located primarily in the Atlanta, Georgia market.
On September 28, 1999, a wholly owned subsidiary of Grace Development, Inc.
merged with and into New Millennium (the "Grace Merger"). The defined term "Old
Grace" will be
7
<PAGE>
used to refer to Grace Development, Inc. prior to the Grace Merger. Each share
of New Millennium common stock was exchanged for 66.3013 shares of the Company's
Common Stock and a total of 66,246,933 shares of the Company's Common Stock were
issued to New Millennium stockholders. Although, as a result of the Grace
Merger, New Millennium became a wholly owned subsidiary of the Company, the
Grace Merger was accounted for as an acquisition of Old Grace by New Millennium
because, following the transaction, the former shareholders of New Millennium
owned a substantial majority of the Company's outstanding Common Stock.
Accordingly, the Consolidated Financial Statements of the Company are the
financial statements of New Millennium adjusted for the assumed acquisition of
the net assets of Old Grace in exchange for the issuance of the Company's Common
Stock. In accordance with purchase accounting principles, the net assets of New
Millennium were accounted for at their historical cost, and the net assets of
Old Grace were accounted for at their fair value as of September 28, 1999. No
goodwill was recorded as a result of the Grace Merger.
On November 8, 1999, Avana acquired substantially all of the business
assets of Rob Ballard and Sabrina Ballard d/b/a Northwest Georgia Internet.
Northwest Georgia Internet provides Internet access, Web hosting and Web design
to businesses and individuals located in areas northwest of Atlanta, Georgia.
The corporate headquarters of the Company, as well as its central operating
facility, are located at 1690 Chantilly Drive, Atlanta, Georgia 30324 (telephone
number 678-222-3030).
RECENT COMPANY HISTORY
WebWizard Acquisition
On January 31, 2000, a wholly owned subsidiary of the Company was merged
with and into WebWizard, Inc. ("WebWizard") (the "WebWizard Acquisition").
WebWizard's primary product is its Internet-accessible software platform for the
creation and management of Websites and Web-based applications which enable a
person, with little or no computer programming knowledge or special training, to
create Websites. WebWizard's Website development tools also include modules to
add e-commerce, forms-wizard, shopping cart, catalogue and contact manager
capabilities to a Website. A key feature of the product is its embedded content
management capability, which permits a Website administrator to monitor and
filter the content of distributed sites. WebWizard licenses its products to
Website developers, small merchants and other retail customers. It has more than
6,000 users and at least 12 licensing agreements in place with value-added
resellers in the consulting, e-commerce and communications industries.
WebWizard's assets include approximately $100,000 in computer hardware and
software which are used to support its product offerings. The Company intends to
continue to use such hardware and software to support WebWizard's activities.
The WebWizard Acquisition was consummated in accordance with the terms and
conditions of an Agreement and Plan of Merger, dated January 20, 2000. As a
result of the WebWizard Acquisition, WebWizard is an indirect wholly owned
subsidiary of the Company. The aggregate consideration paid to acquire
WebWizard was 1,762,554 shares of the Company's Common Stock (the "WebWizard
Consideration"), with 257,500 shares being held in escrow in connection with
certain indemnification obligations of the Seller until June 30, 2001. Of the
1,762,554 shares of the Company's Common Stock constituting the aggregate merger
consideration, 96,567 shares are to be issued by the Company directly to certain
persons on behalf of the former majority webwizard shareholder as a fee for
rendering financial advisory and broker services. The Company has also agreed
to issue an additional 10,343 shares of Common Stock as a finder's fee to one
individual. The
8
<PAGE>
WebWizard Acquisition was structured to qualify as a tax exempt reorganization
under Section 368(a) of the Internal Revenue Code.
The fair market value of the Common Stock comprising the WebWizard
Consideration was estimated to be $0.40 per share on January 31, 2000, making
the aggregate consideration $705,022. WebWizard's liabilities exceeded its
assets by approximately $290,000 at the time of the acquisition. As a result of
the WebWizard Acquisition, the Company estimates that it will record
approximately $1,000,000 of goodwill.
All of the 1,762,554 shares of the Company's Common Stock issued in the
WebWizard Acquisition are "restricted securities" under Rule 144 promulgated
under the Securities Act of 1933, as amended (the "Securities Act"). Such
securities may not be sold in the absence of registration under the Securities
Act unless an exemption from registration is available, including the exemptions
contained in Rule 144. See "Item 1. Business--Restricted Securities and
Registration Rights" below for a summary of the exemptions available under Rule
144.
On January 31, 2000, in connection with the WebWizard Acquisition, a wholly
owned subsidiary of the Company entered into an employment agreement with O.E.
"Randy" Ray, a former stockholder of WebWizard, which provides for Mr. Ray to
serve as Executive Vice President - Business Development of the subsidiary for a
term ending January 31, 2001. As compensation, Mr. Ray is entitled to (i)
receive a base salary of $90,000 per year, and (ii) participate in the Company's
incentive and bonus programs to the same extent as other senior executive
officers of the Company. In addition Mr. Ray was given the right to receive an
option to purchase 50,000 shares of the Company's Common Stock at an exercise
price of $3.25 per share to be granted pursuant to a stock option plan adopted
by the Board of Directors of the Company when a plan is adopted. Effective
April 3, 2000, in connection with the Alpha Computer Acquisition (as defined
below), Mr. Ray's base salary was increased from $90,000 per year to $140,000
per year.
On January 31, 2000, in connection with the WebWizard Acquisition, a wholly
owned subsidiary of the Company entered into an employment agreement with Wendy
Lewis, which provides for Ms. Lewis to serve as Vice President of Operations -
Applications Services Group of the subsidiary for a term ending January 31,
2001. As compensation, Ms. Lewis is entitled to receive (i) a base salary of
$75,000 per year, and (ii) participate in the Company's incentive and bonus
programs to the same extent as other senior executive officers of the Company.
In addition Ms. Lewis was given the right to receive an option to purchase
50,000 shares of the Company's Common Stock at an exercise price of $3.25 per
share pursuant to a stock option plan adopted by the Board of Directors of the
Company when a plan is adopted. Effective April 3, 2000, in connection with the
Alpha Computer Acquisition, Ms. Lewis' base salary was increased from $75,000
per year to $125,000 per year.
In connection with the WebWizard Acquisition, the Company also entered into
a six month consulting agreement with John Cavanaugh, a former stockholder of
WebWizard. Pursuant to the consulting agreement, Mr. Cavenaugh received 17,500
shares of Common Stock upon execution of the consulting agreement and is
entitled to $10,000 per month for the term of the agreement.
9
<PAGE>
P.V. Tel. Acquisition
On February 24, 2000, a wholly-owned subsidiary of the Company was merged
with and into P.V. Tel., Inc. ("P.V. Tel."), a South Carolina corporation (the
"P.V. Tel. Acquisition"). P.V. Tel. is a CLEC currently serving approximately
1,200 customers in small markets in South Carolina and Tennessee. P.V. Tel.'s
customer base is composed primarily of small and medium-sized businesses and
residential customers. Its service offerings include traditional local telephone
products, long distance voice and data services, operator services and prepaid
calling cards.
The P.V. Tel. Acquisition was consummated in accordance with the terms and
conditions of a Stock Exchange Agreement, dated February 15, 2000. Pursuant
thereto, a wholly-owned subsidiary of the Company acquired all of the capital
stock of P.V. Tel., and P.V. Tel. became an indirect wholly owned subsidiary of
the Company. The aggregate consideration was 2,150,000 shares of the Company's
Common Stock, with 750,000 shares being held in escrow until July 31, 2001. The
P.V. Tel. Acquisition was structured to qualify as a tax exempt reorganization
under Section 368(a) of the Internal Revenue Code.
The Company is currently in the process of obtaining an independent
appraisal of the valuation of the Common Stock issued in the P.V. Tel
Acquisition, and therefore has not determined the amount of goodwill to be
recognized.
All of the 2,150,000 shares of the Company's Common Stock issued in the
P.V. Tel Acquisition are "restricted securities" under Rule 144 promulgated
under the Securities Act. Such securities may not be sold in the absence of
registration under the Securities Act unless an exemption from registration is
available, including the exemptions contained in Rule 144. See "Item 1.
Business--Restricted Securities and Registration Rights" below for a summary of
the exemptions available under Rule 144.
Pursuant to a registration rights agreement (the "P.V. Tel. Registration
Rights Agreement") executed at the closing of the P.V. Tel. Acquisition, the
Company granted "piggyback" registration rights with respect to 1,400,000 of the
2,150,000 shares of Common Stock issued in the P.V. Tel. Acquisition. Subject
to the terms and conditions set forth in the registration rights agreement, the
piggyback registration rights permit, at any time prior to the one-year
anniversary of the closing, the holders of the covered shares to include these
shares in any registration by the Company of its Common Stock under the
Securities Act for sale to the public, other than a registration relating solely
to employee benefit plans, or a registration relating solely to a transaction
subject to Rule 145 under the Securities Act, or a registration on any
registration form that does not permit secondary sales.
Prior to consummating the P.V. Tel. Acquisition, the Company advanced to
P.V. Tel. approximately $450,000 for working capital purposes (the "Working
Capital Advances"), which advances were evidenced by two promissory notes made
by P.V. Tel. to the Company and guaranteed by the former stockholders of P.V.
Tel. At the closing of the Acquisition, the promissory notes evidencing the
Working Capital Advances were canceled and Peter Noce and Coastal Growth
Partners, L.P. ("Coastal") delivered to the Company promissory notes in
substitution for the two P.V. Tel. promissory notes. The indebtedness
represented by these substituted promissory notes is secured by the pledge of
85,800 shares of Common Stock by
10
<PAGE>
Peter Noce and 64,200 shares of Common Stock by Coastal. Pursuant to the
substituted promissory notes, if the Company has not afforded Mr. Noce or
Coastal the opportunity to register all of their respective shares that are
registrable pursuant to the P.V. Tel. Registration Rights Agreement by February
24, 2001, then the substituted note will be cancelled in full and the makers of
the notes will have no further liabilities or obligations thereunder to the
Company.
In connection with the P.V. Tel. Acquisition, the Company entered into an
employment agreement with Joseph Buck, a former stockholder of P.V. Tel., which
provides that that Mr. Buck will serve as Vice President of Engineering and
Infrastructure of the Company for a term ending February 7, 2001. Mr. Buck is
entitled to (i) a base salary of $92,000 per year, and (ii) an annual bonus
ranging from 43% to 75% of his annual salary if the Company achieves certain
annual objectives. In addition, Mr. Buck was granted the right to receive an
option to purchase 350,000 shares of Common Stock at an exercise price of $1.00
per share pursuant to a stock option plan approved by the Board of Directors
when a plan is adopted. The option is to vest at a rate of 175,000 shares on
March 1, 2001 and 175,000 shares on March 1, 2002.
Pursuant to the P.V. Tel. Acquisition, the Company also entered into an
employment agreement with Paul Reynolds, which provides that Mr. Reynolds will
serve as Vice President of Sales Engineering and Support of the Company for a
term ending February 7, 2002. Mr. Reynolds is entitled to (i) a base salary of
$82,000 per year, (ii) a signing bonus of $10,000, and (iii) an annual bonus
ranging from 43% to 75% of his annual salary if the Company attains certain
annual objectives. In addition, Mr. Reynolds was granted the right to receive
an option to purchase 350,000 shares of Common Stock at an exercise price of
$1.00 per share pursuant to a stock option plan approved by the Board of
Directors when a plan is adopted. The option shall vest at a rate of 175,000
shares on March 1, 2001 and 175,000 shares on March 1, 2002.
Alpha Computer Acquisition
On March 30, 2000, the Company acquired Alpha Computer Services, Inc.
("Alpha Computer"), a Florida corporation, pursuant to an Agreement and Plan of
Merger providing for the merger of Alpha Computer with and into an indirect
wholly-owned subsidiary of the Company (the "Alpha Computer Acquisition").
Alpha Computer is a Florida-based computer services firm that provides network
management and installation services.
The Company paid aggregate consideration in The Alpha Computer Acquisition
of 3,100,000 shares of the Company's Common Stock, with 620,000 being held in
escrow in connection with certain indemnification obligations of the Seller for
12 months following the closing. The Alpha Computer Acquisition was structured
to qualify as a tax exempt reorganization under Section 368(a) of the Internal
Revenue Code.
The Company is currently in the process of obtaining an independent
appraisal of the valuation of the Common Stock issued in the Alpha Computer
Acquisition, and therefore has not determined the amount of goodwill to be
recognized.
All of the 3,100,000 shares of the Company's Common Stock issued in the
Alpha Computer Acquisition are "restricted securities" under Rule 144
promulgated under the Securities Act. These securities may not be sold in the
absence of registration under the Securities Act unless an exemption from
registration is available, including the exemptions
11
<PAGE>
contained in Rule 144. See "Item 1. Business--Restricted Securities and
Registration Rights" below for a summary of the exemptions available under Rule
144.
Pursuant to a registration rights agreement executed at the closing of the
Alpha Computer Acquisition, the Company granted certain "piggyback" registration
rights with respect to 500,000 of the 3,100,000 shares of the Company's Common
Stock issued in the Alpha Computer Acquisition. Subject to certain conditions
set forth in the registration rights agreement, the piggyback registration
rights permit, at any time prior to the one year anniversary of the closing, the
holders of such shares to include such shares in any registration by the Company
of its Common Stock under the Securities Act for sale to the public, other than
a registration relating solely to employee benefit plans, or a registration
relating solely to a transaction subject to Rule 145 under the Securities Act,
or a registration on any registration form that does not permit secondary sales.
INTELLECTUAL PROPERTY
The Company has registered two trademarks with the United States Patent and
Trademark Office: "Avana" and "WebWizard." Management believes that each of
these trademarks may be important parts of the Company's future branding and
name recognition programs. An unrelated third party owns the Internet domain
name "Avana.com." The Company has reached an agreement in principal to purchase
the "Avana.com" Internet domain name and expects to consummate this transaction
in the near future. Unrelated third parties own the Internet domain names
"Webwizard.com," "Webwizard.net" and "Webwizard.org." One of these third
party's has alleged that it has a superior right to the use of the WebWizard
mark and has requested that the Company either cease using the WebWizard mark or
license the right to use such mark. The Company is currently investigating this
allegation. No formal claim or action has been filed opposing the Company's use
of either the Avana or WebWizard marks.
The Company intends to take appropriate action to solidify its claim to the
Avana and WebWizard marks and to challenge any adverse claims to such marks.
Intellectual property litigation is expensive and time consuming and could
divert management's attention away from running the business. If the Company
fails to protect its right to use these marks, it could be required either to
cease using such marks or to enter into license agreements for the use of such
marks. Such license agreements may not be available on terms acceptable to the
Company. Even if the Company secures the right to continue using the Avana and
WebWizard marks, its ability to prevent others from using the same or similar
marks may be limited, which could result in market confusion and detract from
the Company's brand recognition efforts. The Company's business, operating
results and financial condition could be materially adversely affected if it is
required either to cease using such marks or license the right to use such marks
or if it cannot prevent others from using the same or similar marks.
COMPETITION
The Company faces competition from many competitors with significantly
greater financial resources, well-established brand names and large, existing
installed customer bases. Moreover, the Company expects the level of competition
to intensify in the future. The
12
<PAGE>
Company faces significant competition in each of its three targeted service
categories: data, Internet and Web hosting; local access and voice services; and
integration services.
The Company believes that various legislative initiatives, including the
Telecommunications Act of 1996, have removed many of the remaining legislative
barriers to local exchange competition. Rules adopted to carry out the
provisions of the Telecommunications Act of 1996, however, remain subject to
pending administrative and judicial proceedings which could materially affect
local exchange competition. Moreover, in light of the passage of the
Telecommunications Act of 1996, regulators are providing ILECs with increased
pricing flexibility as competition increases. If ILECs are permitted to lower
their rates substantially or engage in excessive volume or term discount pricing
practices for their customers, the net income or cash flow of integrated
communication providers and CLECs, including the Company, could be materially
adversely affected. In addition, while the Company currently intends to compete
with AT&T, MCI WorldCom, Sprint and other IXCs in the long distance market, the
Telecommunications Act of 1996 permits the Regional Bell Operating Companies
("RBOCs") to provide long distance service in the same areas they are now
providing local service once certain criteria are met. Once the RBOCs begin to
provide such services, they will be in a position to offer single source local
and long distance service similar to that which the Company offers. Furthermore,
through acquisitions, AT&T and MCI Worldcom have entered the local exchange
services market, and other IXCs have announced their intent to enter the local
exchange services market which is facilitated by the Telecommunications Act's
requirement that ILECs permit others to use their local exchange facilities to
provide service to customers. The Company cannot predict the number of
competitors that will emerge as a result of existing or new federal and state
regulatory or legislative actions but increased competition with respect to
interexchange services and local exchange services from existing and new
entities could have a material adverse effect on the Company's business,
financial condition, results of operations and prospects.
Competition in each of the service categories targeted by the Company is
discussed below.
Data, Internet and Web Hosting Services.
The Company faces competition in the high-speed data services arena from
IXCs, ILECs, cable operators and other telecommunications companies. Many of
the Company's existing and potential competitors have financial and other
resources significantly greater than those of the Company.
The Company intends to compete with the larger IXCs on the basis of
superior service, a rapid response to technology and service trends, and a
regional focus. All of the major IXCs, including AT&T, MCI WorldCom and Sprint,
offer frame relay, ATM and IP based transport services, and several of the major
IXCs have announced plans to provide Internet services. The Company believes it
can compete favorably with these providers in its markets based on the features
and functions of its planned services, the high density of its planned networks,
and its in-house expertise. Aggressive pricing is expected to support continued
rapid growth, but will place pressure on operating margins.
13
<PAGE>
Many of the ILECs now offer services similar to the Company's planned data,
Internet, and Web hosting service. Because the RBOCs have not yet been
authorized to provide interexchange service inside the regions where they
provide local exchange service, they may offer these services only on an
intraLATA basis within their operating regions. The FCC, however, as a condition
of the merger between SBC and Ameritech, permitted the merged entity to provide
advanced data services using a separate subsidiary. The merged RBOC is forbidden
to favor its subsidiary over competing CLECs and is required to provide data
CLECs with discounted loops and other measures to enhance competition. Other
RBOCs presumably would be able to do the same. Out-of-region RBOCs may also
offer these data services on an interLATA basis. While the RBOCs generally
cannot interconnect their frame relay networks with each other, the Company may
interconnect its frame relay network with those of various RBOCs. As a result,
the Company could use certain RBOC services to keep its own costs down when
distributing into areas that cannot be more economically serviced on its own
network. The Company expects the RBOCs to aggressively expand their data,
Internet, and Web hosting services as regulatory developments permit them to
deploy in-region interLATA long distance networks. When the RBOCs are permitted
to provide such services, they will be in a position to offer single source
service similar to that being proposed by the Company. As part of its various
interconnection agreements, the Company has negotiated favorable rates for
unbundled ILEC network elements, including frame relay service elements. The
Company expects use of such network elements to decrease its costs, thereby
improving margins for this service.
The Company faces competition in the Internet services arena from various
technology and Internet related companies, including cable-based services
companies. Some of these companies have financial and other resources
significantly greater than those of the Company. The Company intends to compete
in this highly competitive market by offering high service levels, broad
technical expertise, strong customer service and value-added applications.
The market for managed Web site and application hosting conducted by the
Company is highly competitive. There are few substantial barriers to entry and
many of the Company's current competitors have substantially greater financial,
technical and marketing resources, larger customer bases, longer operating
histories, greater name recognition and more established relationships in the
industry than it possesses. Current and potential competitors in the market
include Web hosting service providers, ISPs, telecommunications companies and
large information technology outsourcing firms. Competitors may operate in one
or more of these areas and include companies such as AT&T, Cable & Wireless,
Concentric Network, Data Return, EDS, Exodus Communications,
Frontier/GlobalCenter, Globix, GTE, IBM, Intel, Level 3 Communications, MCI
WorldCom, Navisite, PSINet, Qwest Communications International, and US
Internetworking. The Company may be unable to achieve its operating and
financial objectives due to the significant competition in the Web hosting
industry.
Local Access and Voice Services.
In the Company's target market, the Southeastern United States, the Company
faces significant competition for the local services it intends to offer from
RBOCs and other ILECs, which currently maintain dominant market shares in their
local telecommunications markets. These companies all have long-standing
relationships with their customers and have financial, personnel and technical
resources substantially greater than those of the Company. Some of
14
<PAGE>
these companies also have indicated their intent to offer services as CLECs in
markets outside of their current territory.
The Company also faces competition in most markets in which it intends to
operate from one or more CLECs or integrated communication providers operating
fiber optic networks. Other local service providers without their own fiber
networks have operations or are initiating operations within one or more of the
Company's target service areas. MCI WorldCom, AT&T and certain cable television
providers, either alone or jointly with AT&T or another carrier, have entered
some or all of the Company's target markets. The Company also believes that
other telecommunications companies may enter the local exchange services market
within specific metropolitan areas served or targeted by the Company. Other
potential competitors of the Company include utility companies, other long
distance carriers, wireless carriers and private networks built by individual
business customers. Many of these entities are substantially larger and have
substantially greater financial resources than the Company. The Company cannot
predict the number of competitors that will emerge as a result of existing or
any new federal and state regulatory or legislative actions.
Competition in all of the Company's targeted geographic market areas is
based on quality, reliability, customer service and responsiveness, service
features and price. The Company intends to keep its prices at levels
competitive with those of the ILECs while providing a higher level of service
and responsiveness to its customers.
Although the ILECs are generally subject to greater pricing and regulatory
constraints than other local network service providers, ILECs, as noted above,
are achieving increased pricing flexibility for their local services as a result
of recent legislative and regulatory action designed to increase competition in
the local exchange market. The ILECs have continued to lower rates, resulting
in downward pressure on the price of certain dedicated and switched access
transport services to be offered by the Company and other CLECs. This price
erosion has decreased operating margins for these services. However, the
Company believes this effect will be more than offset by the increased revenues
available as a result of access to customers provided through the Company's
interconnection co-carrier agreements and the opening of local exchange service
to competition. In addition, the Company believes that lower rates for
dedicated access may benefit other services offered by the Company.
The Company will compete with AT&T, MCI WorldCom, Sprint and others in the
long distance services market. Many of these competitors have longstanding
relationships with their customers and have financial, personnel and technical
resources substantially greater than those of the Company. When, as expected,
the RBOCs are permitted to provide long distance services within their operating
regions they may provide substantial new competition to long distance providers.
In providing long distance services, the Company intends to focus on quality,
service and price to distinguish itself in a very competitive marketplace and
intends to build a loyal customer base by emphasizing its customer service and
bundled product portfolio.
Integration Services.
The Company faces competition in its planned systems integration business
from equipment manufacturers, RBOCs and other ILECs, long distance carriers and
systems
15
<PAGE>
integrators, many of which have financial and other resources significantly
greater than those of the Company. The Company intends to compete in this market
on the basis of its technical expertise and customer service.
GOVERNMENT REGULATION
Overview. The Company's telecommunications services are subject to varying
degrees of federal, state and local regulation. The FCC and state utility
commissions regulate telecommunications common carriers. A telecommunications
common carrier is a company which generally offers telecommunications services
to the public or to all prospective users on standardized rates and terms. The
Company's local exchange, interexchange and international services are all
common carrier services. The Company's systems integration business and
Internet services are not considered to be common carrier services, although
regulatory treatment of Internet services is evolving and it may become subject,
at least in part, to some form of common carrier regulation.
The FCC exercises jurisdiction over telecommunications common carriers, and
their facilities and services, to the extent they are providing interstate or
international communications. International authorities also may seek to
regulate international telecommunications services originating in the United
States. The various state regulatory commissions retain jurisdiction over
telecommunications carriers, and their facilities and services, to the extent
they are used to provide communications that originate and terminate within the
same state. The degree of regulation varies from state to state.
In recent years, the regulation of the telecommunications industry has been
in a state of transition as the United States Congress and various state
legislatures have passed laws seeking to foster greater competition in
telecommunications markets. The FCC and state utility commissions have adopted
many new rules to implement this legislation and encourage competition. These
changes, which have not been fully implemented, have created new opportunities
and challenges for the Company and its competitors. The following summary of
regulatory developments and legislation does not purport to describe all present
and proposed federal, state and local regulations and legislation affecting the
telecommunications industry. Certain of these and other existing federal and
state regulations are currently the subject of judicial proceedings, legislative
hearings and administrative proposals which could change, in varying degrees,
the manner in which this industry operates. Neither the outcome of these
proceedings, nor their impact upon the telecommunications industry or the
Company can be predicted at this time.
The regulatory status of telephone service over the Internet is presently
uncertain. The Company is unable to predict what regulations may be adopted in
the future or to what extent existing laws and regulations may be found by state
and federal authorities to be applicable to these services or the impact new or
existing laws and regulations may have on the Company's business. Specific
statutes and regulations addressing this service have not been adopted at this
time and the extent to which current laws and regulations at the state and
federal levels will be interpreted to include Internet telephone services has
not been determined. There can be no assurance that new laws or regulations
relating to these services or a determination that existing laws are applicable
to them will not have a material adverse effect on the Company's business.
16
<PAGE>
Federal Regulation. Although the Company is currently not subject to
price cap or rate of return regulation at the federal level and is not currently
required to obtain FCC authorization for the installation, acquisition or
operation of its domestic interexchange network facilities, it nevertheless must
comply with the requirements of common carriage under the Communications Act of
1934 (the "Communications Act"), as amended. Pursuant to the Communications
Act, the Company is subject to the general requirement that its charges and
regulations for communications services must be "just and reasonable" and that
it may not make any "unjust or unreasonable discrimination" in its charges or
regulations. The FCC also has jurisdiction to act upon complaints against any
common carrier for failure to comply with its statutory obligations. The
Communications Act also requires prior approval for the assignment of an
authorization to provide international service (but not domestic interexchange
service) or the transfer of control (for example, through the sale of stock) of
a company holding an international authorization. The FCC generally has the
authority to modify or terminate a common carrier's authority to provide
domestic interexchange or international service for failure to comply with
federal laws or the rules of the FCC. Fines or other penalties also may be
imposed for such violations. Carriers such as the Company also are subject to a
variety of miscellaneous regulations that, for instance, govern the
documentation and verifications necessary to change a consumer's long distance
carrier, require the filing of periodic reports, and restrict interlocking
directors and management. Certain other specific regulations applicable to the
Company are discussed below.
Comprehensive amendments to the Communications Act were made by the
Telecommunications Act of 1996 (the "Telecommunications Act"), which was signed
into law on February 8, 1996. The Telecommunications Act effected plenary
changes in regulation at both the federal and state levels that affect virtually
every segment of the telecommunications industry. The stated purpose of the
Telecommunications Act is to promote competition in all areas of
telecommunications. While it will take years for the industry to feel the full
impact of the Telecommunications Act, it is already clear that the legislation
provides the Company with both new opportunities and new challenges.
The Telecommunications Act requires ILECs to provide access to their
networks to competing carriers. Among other things, the Telecommunications Act
requires the ILECs to: (i) provide physical co-location, which allows CLECs such
as the Company and other interconnectors to install and maintain their own
network equipment in ILEC central offices, and virtual co-location if requested
or if physical co-location is demonstrated to be technically infeasible; (ii)
unbundle components of their local service networks so that other providers of
local service can compete for a wider range of local services; (iii) establish
"wholesale" rates for their services to promote resale by CLECs and other
competitors; (iv) establish number portability, which will allow a customer to
retain its existing phone number if it switches from the ILEC to a CLEC; (v)
establish dialing parity, which ensures that customers will not detect a quality
difference in dialing telephone numbers or accessing operators or emergency
services; and (vi) provide telecommunication carriers nondiscriminatory access
to telephone poles, ducts, conduits and rights-of-way. In addition, the
Telecommunications Act requires ILECs to compensate competitive carriers for
traffic originated by the ILECs and terminated on the competitive carriers'
networks.
The FCC is charged with establishing national guidelines to implement
certain portions of the Telecommunications Act. The FCC did so in its
Interconnection Order on August 8, 1996.
17
<PAGE>
On July 18, 1997, however, the United States Court of Appeals for the Eighth
Circuit issued a decision vacating the FCC's pricing rules, as well as certain
other portions of the FCC's interconnection rules, on the grounds that the FCC
had improperly intruded into matters reserved for state jurisdiction. On January
25, 1999, the Supreme Court largely reversed the Eighth Circuit's order, holding
that the FCC has general jurisdiction to implement the local competition
provisions of the Telecommunications Act. This action reestablishes the validity
of many of the FCC rules vacated by the Eighth Circuit. Although the Supreme
Court affirmed the FCC's authority to develop pricing guidelines, the Supreme
Court did not evaluate the specific pricing methodology adopted by the FCC and
has remanded the case to the Eighth Circuit for further consideration. In its
decision, the Supreme Court also vacated the FCC's rule that identifies the
unbundled network elements that ILECs must provide to CLECs. The Supreme Court
found that the FCC had not adequately considered certain statutory criteria for
requiring ILECs to make those network elements available to CLECs and must
reexamine the matter. On November 5, 1999, the FCC released an order reaffirming
and clarifying the obligation of ILECs to provide most of the unbundled network
elements it had previously identified, including local loops, network interface
devices and operations support systems. The FCC also required ILECs to provide
additional elements, not previously widely available. These elements include but
are not limited to new types of loops (including xDSL capable loops, sub loop
elements and dark fiber loops), interoffice dark fiber and high capacity
transport and inside wire. These rules are subject to appeal and many require
implementing action by state regulatory agencies.
In order to obtain access to an ILEC's network, a competitive carrier is
required to negotiate an interconnection agreement with the ILEC covering the
network elements it desires to use. In the event the parties can not agree, the
matter is submitted to the state public utility commission for binding
arbitration. To date, the Company has successfully negotiated interconnection
agreements with many of the ILECs in the areas the Company serves. These
interconnection agreements are of fixed duration, however, and several will
expire in the near future. These agreements must be renegotiated or re-
arbitrated. Expired agreements continue in effect as interim agreements until
replaced by new agreements. When the new agreements take effect they will
supercede the expired agreements and may be applied retroactively.
In addition, on November 18, 1999, the FCC ordered ILECs to share their
telephone lines with providers of high speed Internet access and other data
services. This action permits CLECs to obtain access to the high-frequency
portion of the local loop from the ILECs over which the ILEC provides voice
services. As a result, CLECs will be able to provide DSL-based services over
the same telephone lines simultaneously used by the ILEC for its voice services,
and will no longer need to purchase a separate local loop from the ILEC in order
to provide DSL services. This ruling may make it easier for CLECs, including
the Company and its competitors, to provide DSL services.
As a result of the pro-competitive provisions of the Telecommunications
Act, the Company has taken the steps necessary to be a provider of local
exchange services and has positioned itself to be a full service, integrated
telecommunications services provider. The Company has obtained local
certification in 10 states. The Company is also taking the steps necessary to
exercise its rights to interconnection, co-location and unbundled network
elements under the Telecommunications Act.
18
<PAGE>
The Telecommunications Act's interconnection requirements also apply to
interexchange carriers and to all other providers of telecommunications
services, although the terms and conditions for interconnection provided by
these carriers are not regulated as strictly as interconnection provided by the
ILECs. This may provide the Company with the ability to reduce its access costs
by interconnecting directly with non-ILECs, but may also cause the Company to
incur additional administrative and regulatory expenses in replying to
interconnection requests from other carriers.
As another part of its pro-competitive policies, the Telecommunications Act
frees the RBOCs from the judicial orders that prohibited their provision of
interLATA services. Specifically, the Telecommunications Act permits RBOCs to
provide long distance services outside their local service regions immediately,
and will permit them to provide in-region interLATA service upon demonstrating
to the FCC and state regulatory agencies that they have adhered to the FCC's
local exchange service interconnection regulations. Some RBOCs have filed
applications with various state public utility commissions and the FCC seeking
approval to offer in-region interLATA service. Some states have denied these
applications while others have approved them, but until recently, the FCC has
denied each of the RBOCs' applications brought before it because it found that
the RBOC had not sufficiently made its local network available to competitors.
In December 1999, however, the FCC approved a Bell Atlantic application for in
region interLATA service in New York, and SBC has recently filed an application
for in region interLATA service in Texas. The FCC is also considering a
proposal to permit RBOCs to offer immediately high speed, interLATA data
services within their operating regions if they do so through a separate
subsidiary, without first having to demonstrate that they have adhered to the
FCC interconnection regulations discussed above. In the interim, the FCC, as a
condition of the merger between SBC and Ameritech, permitted the merged entity
to provide advanced data services using a separate subsidiary. A similar
condition was accepted by Bell Atlantic as part of the process of obtaining in-
region interLATA service authority in New York. In both of these cases, the
RBOC is forbidden to favor its subsidiary over competing CLECs and is required
to provide data CLECs with discounted loops and other measures to enhance
competition. Other RBOCs presumably would be able to do the same.
The Telecommunications Act provides the FCC with the authority to forebear
from imposing any regulations it deems unnecessary, including requiring non-
dominant carriers to file tariffs. On November 1, 1996, in its first major
exercise of regulatory forbearance authority granted by the Telecommunications
Act, the FCC issued an order detariffing domestic interexchange services. The
order required mandatory detariffing and gave carriers nine months to withdraw
federal tariffs and move to contractual relationships with their customers.
This order subsequently was stayed by a federal appeals court, and it is unclear
at this time whether the detariffing order will be implemented. Until further
action is taken by the FCC or the courts, facilities based CLECs will continue
to maintain tariffs for these services. In June 1997, the FCC issued another
order stating that non-dominant carriers could withdraw their tariffs for
interstate access services. As a reseller, these tariffs do not apply to the
Company, the underlying service provider is responsible for these tariffs. If
the Company becomes a facilities based CLEC, the Company's facilities based CLEC
operations will be subject to these tariffs. The FCC does require facilities
based CLECs to obtain authority to provide service between the United States and
foreign points and to file tariffs on an ongoing basis for international
service.
19
<PAGE>
The Telecommunications Act also directs the FCC, in cooperation with state
regulators, to establish a Universal Service Fund that will subsidize carriers
that provide service to under-served individuals and in high cost areas. A
portion of carriers' contributions to the Universal Service Fund also will be
used to provide telecommunications related facilities for schools, libraries and
certain rural health care providers. The FCC released its order in June 1997.
This order requires the Company to contribute to the Universal Service Fund, but
may also allow the Company to receive payments from the Fund if it is deemed
eligible. Management does not expect the Company will receive any such funds.
For the last quarter of 1999, the FCC established payment rates for all
interexchange carriers, including the Company, that amount to 5.8% of eligible
interstate and international long distance end user service revenues for the
corresponding period of the previous year. The FCC allows all interexchange
carriers, including the Company, to recover the international and interstate
portions of these payments by passing the charges through to their customers.
In November 1999, the FCC revised its proposed methodology for subsidizing
service in certain high cost areas which may result in increases in the subsidy
program. The FCC's implementation of universal service requirements remains
subject to judicial and additional FCC review.
The FCC has fundamentally restructured the "access charges" that ILECs
charge to interexchange carriers and end user customers to connect to the ILEC's
network to permit ILECs subject to the FCC's price cap rules increased pricing
flexibility as competition becomes established in their markets. In August
1999, the FCC adopted an order providing additional pricing flexibility to ILECs
subject to price cap regulation in their provision of interstate access
services, particularly special access and dedicated transport. Some of the
actions taken by the FCC would immediately eliminate rate scrutiny for "new
services" and permit the establishment of additional geographic zones within a
market that would have separate rates. Additional and more substantial pricing
flexibility will be given to ILECs as specified levels of competition in a
market are reached through the co-location of competitive carriers and their use
of competitive transport. This flexibility will include, among other items,
customer specific pricing, volume and term discounts for some services and
streamlined tariffing.
As part of the same August order, the FCC initiated another proceeding to
consider increased pricing flexibility proposals for ILECs access charges. This
proceeding also will consider the reasonableness of CLEC access rates and seeks
comment on whether the FCC should adopt rules to regulate CLEC access charges.
In addition, the FCC's rulemaking is examining whether any statutory or
regulatory constraints prevent an IXC from declining to accept a CLEC's access
services, and if so under what circumstances. The outcome of this rulemaking
cannot be predicted. Other CLEC's have experienced similar problems and the FCC
has ruled on a complaint against AT&T that it must pay such access charges at
the CLEC's tariffed rate.
On May 21, 1999, a United States court of appeals reversed an FCC order
that had established the factors that are currently used to set the annual price
cap for ILEC access charges. The court ordered the FCC to further explain the
methodology it used in establishing those factors. This proceeding also is
ongoing.
On November 9, 1999, the FCC released a decision which concluded that
advanced services, such as Digital Subscriber Line Service, sold by ILECs to
Internet service providers and
20
<PAGE>
bundled by the Internet service provider with its other services are not subject
to the resale obligations of the Act. This decision will allow ILECs to provide
ISPs with special rate packages for DSL on terms and conditions not available to
the Company in its activity as a CLEC. The Company's Internet subsidiaries may
obtain such special pricing, however.
A dispute has arisen over the provision of the Telecommunications Act
requiring ILECs to compensate facilities-based CLECs for local calls originating
on the ILEC's network but terminating on the CLEC's network. Most ILECs argue
that they are not obligated to pay CLECs for local calls made to Internet
service providers. The CLEC industry has asked state regulatory commissions to
resolve this dispute. Although this does not impact the Company at present,
because it is not a facilities based CLEC, the Company may become eligible to
claim revenues for terminating such calls in the future if it becomes a
facilities based CLEC.
On February 25, 1999, the FCC ruled that Internet service provider traffic
is interstate traffic within the FCC's jurisdiction but that its current rules
neither require nor prohibit the payment of reciprocal compensation for these
calls ("ISP Rules"). The FCC determined that state commissions have authority
to interpret and enforce the reciprocal compensation provisions of existing
interconnection agreements and to determine the appropriate treatment of
Internet service provider traffic in arbitrating new agreements. The FCC also
requested comment on federal rules to govern compensation for these calls in the
future.
Prior to the FCC's adoption of the ISP Rules, 30 state commissions and
several federal and state courts ruled that reciprocal compensation arrangements
under existing interconnection agreements apply to calls to Internet service
providers. Four states, however, have ruled that in certain situations
reciprocal compensation arrangements are not applicable to calls to Internet
service providers under at least some agreements entered before the FCC
decision. Some regional Bell operating companies have asked state commissions
to reopen decisions requiring the payment of reciprocal compensation on Internet
service provider calls. Subsequent to the FCC decision, at least 19 state
commissions have reaffirmed their prior determinations or ruled for the first
time that reciprocal compensation was due under interconnection agreements
existing prior to the FCC decision. In some states where state commissions have
ruled that reciprocal compensation should be paid, the amount of such payment is
being disputed by the ILEC. In addition, there are ongoing disputes concerning
the appropriate treatment of Internet service provider traffic under new
interconnection agreements. These likely will be resolved in arbitration
proceedings or by new FCC rules. The United States Court of Appeals for the
District of Columbia Circuit on March 24, 2000, vacated and remanded the FCC's
ISP Rules and required the FCC to explain the rationale for its decision.
Specifically, the Court of Appeals requested the FCC to explain the
applicability of its end-to-end jurisdictional analysis to reciprocal
compensation requirement.
In 1994 Congress adopted the Communications Assistance for Law Enforcement
Act to insure the law enforcement agencies would be able to conduct properly
authorized electronic surveillance over the new digital and wireless media as
well as traditional wireline carriers. An interim technical standard was
released in 1997 and the FCC recently required carriers to have additional
capabilities requested by law enforcement authorities and directed that the
interim standard be revised. Some in the industry believe that the cost of
providing these additional capabilities are unreasonably high and the FCC's
decision has been appealed. The Company is
21
<PAGE>
not able to predict the outcome of this litigation or the cost of compliance
with whatever standards are ultimately developed.
State Regulation. To the extent that the Company provides
telecommunications services which originate and terminate within the same state,
it is subject to the jurisdiction of that state's public service commissions.
The Company currently provides some intrastate telecommunication services in 10
states and is subject to varying degrees of regulation by the public service
commissions of those states. The Company is currently certified in 12 states to
provide intrastate long distance services. The Company is certified as a CLEC
in 10 states and has CLEC certifications pending in two additional states. The
Company is constantly evaluating the competitive environment and may seek to
further expand its intrastate certifications into additional jurisdictions. The
Company is not subject to price cap or rate of return regulation in any state in
which it is currently certified to provide local exchange service.
The Telecommunications Act preempts state statutes and regulations that
restrict the provision of competitive local services. As a result of this
sweeping legislation, the Company will be free to provide the full range of
intrastate local and long distance services in all states in which it currently
operates, and in any states into which it may wish to expand. While this action
greatly increases the Company's addressable customer base, it also increases the
amount of competition to which the Company may be subject.
Although the Telecommunications Act's prohibition of state barriers to
competitive entry took effect on February 8, 1996, various legal and policy
matters still must be resolved before the Telecommunications Act's policies
promoting local competition are fully implemented. The Company continues to
support efforts at the state government level to encourage competition in its
markets under the federal law and to permit integrated communication providers
and CLECs to operate on the same basis and with the same rights as the ILECs.
Despite the still uncertain regulatory environment, the Company so far has been
successful in its pursuit of local certificates from state commissions and in
negotiating interconnection agreements with the ILECs which permit the Company
to meet its business objectives. However, the Company is now engaged in
negotiations for new interconnection agreements and the outcome of these
negotiations cannot now be predicted.
In most states, the Company is required to file tariffs setting forth the
terms, conditions and prices for services classified as intrastate (local and
intrastate long distance). Most states require the Company to list the services
provided and the specific rate for each service. Under different forms of
regulatory flexibility, the Company may be allowed to set price ranges for
specific services, and in some cases, prices may be set on an individual
customer basis. Some states also require the Company to seek the approval of
the local public service commission for the issuance of debt or equity
securities or other transactions which would result in a lien on the Company's
property used to provide intrastate service within those states. Many states
also require approval for the sale or acquisition of a telecommunications
company and require the filing of reports and payments of various fees. Like
the FCC, most states also consider complaints relating to a carrier's services
or rates within their jurisdictions.
Local Government Authorizations. The Company may be required to obtain
from municipal authorities street opening and construction permits to install
and expand its facilities in
22
<PAGE>
certain cities. In some cities, local partners or subcontractors may already
possess the requisite authorizations to construct or expand the Company's
network.
In some of the areas where the Company intends to provide service, it may
be subject to municipal franchise requirements and may be required to pay
license or franchise fees based on a percentage of gross revenue or other
formula. There are no assurances that certain municipalities that do not
currently impose fees will not seek to impose fees in the future, nor is there
any assurance that, following the expiration of existing franchises, fees will
remain at their current levels. The Telecommunications Act requires
municipalities to charge nondiscriminatory fees to all telecommunications
providers, but it is uncertain how quickly this requirement will be implemented
by particular municipalities in which the Company operates or plans to operate
or whether it will be implemented without a legal challenge initiated by the
Company or another integrated communications provider or CLEC. In some
municipalities the ILECs pay fees that have not been changed in many years. In
some situations rates for new CLECs have been set higher than the ILEC rates,
however, this practice appears to be diminishing. CLECs have been able to
successfully challenge these disproportionate rates, however, the municipalities
can effectively delay a CLEC's entry into a new market while the rate is
challenged. As a reseller of services, the Company is not required to obtain
municipal franchises, but it will have to do so in municipalities where it
becomes a facilities based CLEC in the future.
The Company also must obtain licenses to attach facilities to utility poles
to build and expand facilities. Because utilities that are owned by
cooperatives or municipalities are not subject to federal pole attachment
regulation, there is no assurance that the Company will be able to obtain pole
attachment from these utilities at reasonable rates, terms and conditions.
RESTRICTED SECURITIES AND REGISTRATION RIGHTS
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 and resale
of 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
23
<PAGE>
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,
and including the holding period of any seller of securities unless such seller
is an Affiliate, 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. Pursuant to
Rule 144(c), because the Company filed its Form 10-QSB for the quarter ended
September 30, 1999 late, adequate public information will be deemed not to be
available for Rule 144 purposes until the Company has timely filed all of the
reports it is required to file under Sections 13 and 15(d) of the Exchange Act
for one year. Thus, stockholders who have held their shares of Common Stock for
more than one year, but less than two years, and who would otherwise be
permitted to sell their shares of Common Stock pursuant to Rule 144, will not be
permitted to sell their shares pursuant to the exemption provided by Rule 144
until at least November 24, 2000. Therefore, such stockholders will be free to
sell their shares of Common Stock, subject to the volume and other resale
restrictions of Rule 144, provided the Company has timely filed all of its
required reports.
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 preceding
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.
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>
Non-Affiliates May
------------------
Trade Subject To
----------------
Manner Of Sale, Notice Non-Affiliates May
---------------------- ------------------
And Public Information Trade Without
---------------------- -------------
Block Conditions (1) Restrictions
----- -------------- ------------
<S> <C> <C>
1. 1,326,026 shares of Common Stock held by November 24, 2000 October 6, 2001
former stockholders of New Millennium (2)
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Non-Affiliates May
------------------
Trade Subject To
----------------
Manner Of Sale, Notice Non-Affiliates May
---------------------- ------------------
And Public Information Trade Without
---------------------- -------------
Block Conditions (1) Restrictions
----- -------------- ------------
<S> <C> <C>
2. 27,581,359 shares of Common Stock held by November 24, 2000 April 27, 2001
former stockholders of New Millennium (2)
3. 6,485,859 shares of Common Stock held by November 24, 2000 May 5, 2001
former stockholders of New Millennium (2)
4. 493,507 shares of Common Stock held by former November 24, 2000 July 29, 2001
stockholders of New Millennium (2)
5. 3,248,764 shares of Common Stock owned by November 24, 2000 August 29, 2001
Lucent
6. 16,641,628 shares of Common Stock exchanged November 24, 2000 July 29, 2001
for shares of New Millennium common stock
issued in the First Private Placement
7. 9,968,798 shares of Common Stock exchanged November 24, 2000 September 26, 2001
for shares of New Millennium common stock
issued in the Second Private Placement
8. 1,762,554 shares issued in the WebWizard January 31, 2001 January 31, 2002
Acquisition
9. 2,150,000 shares issued in the P.V. Tel. February 24, 2001 February 24, 2002
Acquisition
10. 2,100,000 shares issued in the Third Private March 1, 2001 March 1, 2002
Placement
11. 1,000,000 shares of Common Stock issued to March 17, 2001 March 17, 2002
Jim Blanchard
12. 650,000 shares of Common Stock issued to March 17, 2001 March 17, 2002
Louis Friedman
13. 3,100,000 shares of Common Stock issued in March 31, 2001 March 31, 2002
the Alpha Computer Acquisition
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
Non-Affiliates May
------------------
Trade Subject To
----------------
Manner Of Sale, Notice Non-Affiliates May
---------------------- ------------------
And Public Information Trade Without
---------------------- -------------
Block Conditions (1) Restrictions
----- -------------- ------------
<S> <C> <C>
14. 3,000,000 shares of Common Stock issued in April 14, 2001 April 14, 2002
the Fourth Private Placement
</TABLE>
(1) Because the Company's Form 10-QSB for the quarter ended September 30, 1999,
was filed late on November 24, 1999, shares that would otherwise be
eligible to trade with restrictions prior to November 24, 2000 may not.
(2) The time such stockholders are deemed to have owned such shares of Common
Stock is determined by tacking the time they held their shares of New
Millennium common stock to the time they have held their shares of the
Company's Common Stock for which their shares of New Millennium common
stock were exchanged.
On March 30, 2000, the Company entered into an agency agreement with
DotPlanet.com pursuant to which DotPlanet.com will the Company's
telecommunications, Internet and Web Hosting services in exchange for
commissions payable in the form of warrants to purchase shares of the Common
Stock. The agreement provides for payment to DotPlanet.com of warrants to
purchase up to 1,000,000 shares of the Company's Common Stock at an exercise
price of $4.50 per share, based on producing 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 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
form of consulting agreement approved by the Company's board 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 Company anticipates executing
the consulting agreement in the near future.
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
26
<PAGE>
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 J. 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.
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 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>
1. 16,808,918 shares of Common Stock exchanged for shares of New Piggyback
Millennium common stock issued in the First Private Placement
2. 9,968,798 shares of Common Stock exchanged for shares of New Piggyback
Millennium common stock issued in the 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. 1,400,000 shares issuable pursuant to conversion of the note Demand
issued in the Third Private Placement
6. 500,000 shares of Common Stock issued in the Alpha Computer Piggyback
Acquisition
7. 3,000,000 shares of Common Stock issued in the Fourth Private Demand and
Placement Piggyback
</TABLE>
FACTORS THAT MAY AFFECT THE COMPANY'S BUSINESS, OPERATING RESULTS AND FINANCIAL
CONDITION, AND THE PRICE OF THE COMMON STOCK
An investment in the Company's Common Stock involves a high degree of risk.
Investors should carefully consider the risks described below and the other
information in this
27
<PAGE>
Form 10-K when evaluating an investment in the Company's Common Stock. If any of
the following risks actually occurs, the Company's business, financial condition
or results of operations would likely suffer materially. As a result, the
trading price of the Company's Common Stock may decline substantially.
The Company's limited operating history makes it difficult to evaluate the
Company's business and prospects.
The Company, having commenced operations in its present form with the Avana
Acquisition in May 1999 and the Grace Merger in September 1999, operates
primarily as an ISP serving the Atlanta, Georgia Market. During the first
quarter of 2000, the Company expanded its operations as an ASP, CLEC and
provider of additional enhanced telecommunications products and services by
completing several significant acquisitions. Accordingly, there is a limited
operating history with which to evaluate the Company's business, strategies and
performance and the value of the Common Stock.
The Company has incurred losses and has experienced negative operating cash flow
to date and expects that the losses and negative operating cash flow will
continue and increase.
The Company has incurred significant losses and experienced negative
operating cash flow for each month since the Grace Merger. The Company expects
to continue to incur significant losses and negative operating cash flow for the
foreseeable future. If the Company's revenues do not grow as expected or capital
and operating expenditures exceed the Company's plans, the business, prospects,
financial condition and results of operations of the Company will be materially
adversely affected. As of December 31, 1999, the Company had an accumulated
deficit of approximately $3,115,833. The Company cannot be certain if or when
it will be profitable or if or when it will generate positive operating cash
flow. The Company expects its operating expenses to increase significantly as
it expands its business. In addition, the Company expects to make significant
additional capital expenditures in 2000 and in subsequent years. The Company
also expects to substantially increase its operating expenditures, particularly
network and operations and sales and marketing expenditures, as it implements
its business plan. However, there can be no assurance that the Company's
revenues will increase as a result of this increased spending.
The Company's business model is unproven, and may not be successful.
The Company does not know whether its business model and strategy will be
successful. If the assumptions underlying its business model are not valid or it
is unable to implement its business plan, achieve the predicted level of market
penetration or obtain the desired level of pricing for its services for
sustained periods, the Company's business, prospects, financial condition and
results of operations could be materially adversely affected. The Company has
adopted a strategy that is different from that of certain other Internet and
telecommunications companies. The Company intends to focus on marketing
"bundled" Internet, data and telecommunications products and services directly
to individuals and small and medium sized businesses in small and mid-sized
markets. In contrast, many of the Company's competitors focus on one or a small
subset of the products and services that the Company plans to offer and they
offer such products and services to intermediaries who, in turn, resell such
products and
28
<PAGE>
services to end users through their sales forces. In addition, many of these
competitors are currently focused primarily on offering their products and
services in large metropolitan areas. Certain of the Company's target markets
are within the larger metropolitan areas where its competitors are focused on
providing products and services. The Company's unproven business model makes it
difficult to predict the extent to which its services will achieve market
acceptance. To be successful, the Company must deploy its network in a
significant number of its selected markets and convince its target customers to
utilize its services. It is possible that the Company may never be able to
deploy its network as planned or achieve significant market acceptance,
favorable operating results or profitability.
If the Company fails to recruit qualified personnel in a timely manner and
retain its employees, it will not be able to execute its business plan and its
business will be harmed.
To meet its business plan, the Company needs to hire a substantial number
of qualified personnel, particularly sales and marketing, engineering and other
technical personnel. If the Company is unable to recruit qualified personnel in
a timely manner or to retain its employees, it will not be able to execute its
business plan. In particular, if the Company is unable to recruit and retain a
sufficient number of qualified personnel, including many who must be recruited
to work locally in the new markets where it provides or intends to provide
services, the Company may not be able to commence service as quickly as it
expects in those new markets and, as a result, its revenue growth may be lower
than it expects and its business may be harmed. The Company's industries are
characterized by intense competition for, and aggressive recruiting of, skilled
personnel, as well as a high level of employee mobility. Many of the Company's
future employees must be recruited to work locally in the new markets where the
Company intends to establish a presence. The combination of the Company's local
sales and marketing strategy and the competitive nature of its industries may
make it difficult to hire qualified personnel on a timely basis and to retain
its employees.
The Company's senior management team has little experience working together, and
the loss of key personnel could adversely affect the Company's business.
The Company depends on a small number of executive officers and other
members of its senior management to work effectively as a team, to execute its
business strategy and business plan, and to manage employees located throughout
the Southeastern United States. The loss of key managers or their failure to
work effectively as a team could have a material adverse effect on the Company's
business and prospects.
Failure to obtain space for the Company's equipment in the local telephone
companies' central offices in its target markets could adversely affect its
business.
The Company's strategy requires it to obtain space for its equipment in
those central offices of the traditional local telephone companies that already
serve a large number of its target customers. Failure to obtain required space
to locate its equipment in those central offices, known as collocation space, on
a timely basis could have a material adverse effect on the Company's business.
In addition to negotiating and entering into interconnection agreements with
traditional telephone companies, the Company must obtain collocation space in
each central office in which it intends to locate equipment. The Company may
not be able to secure
29
<PAGE>
collocation space in the central offices of its choice on a timely basis. The
Company expects that central office space will become increasingly scarce as
demand increases. In addition, the terms of the Company's co-location agreements
are generally one to two years and are subject to certain renegotiation, renewal
and termination provisions. Failure to obtain collocation space, or failure to
renew collocation agreements on reasonable terms, could have a material adverse
affect on the Company's business, operating results and financial condition.
The Company depends on two long distance carriers to connect its network.
Data is transmitted across the Company's network via transmission
facilities that it leases from Qwest Communications and Global Crossing Ltd.
Failure of these carriers to provide service or to provide quality service may
interrupt the use of the Company's services by its customers which may have a
material adverse affect on the Company's business, operating results and
financial condition.
The Company may not be able to continue to grow its business if it does not
obtain significant additional funds on acceptable terms during 2000.
The actual amount and timing of the Company's future capital requirements
will depend on the demand for its services and regulatory, technological and
competitive developments which could differ materially from the Company's
estimates. The Company may not be able to raise sufficient debt or equity
capital on terms that it considers acceptable, if at all. If the Company is
unable to obtain adequate funds on acceptable terms, its ability to deploy and
operate its network, fund its expansion or respond to competitive pressures
would be significantly impaired.
The Company may be subject to risks associated with acquisitions.
The Company made several significant acquisitions in 1999 and the first
quarter of 2000 and may acquire additional businesses in the future, although
the Company has no definitive agreements to do so at this time. Any acquisition,
including the recently-completed acquisitions, may not produce the revenue,
earnings or business synergies that the Company anticipates, and an acquired
business might not perform as the Company expects. If the Company pursues any
future acquisition, its management could spend a significant amount of time and
effort in identifying and completing the acquisition and may be distracted from
the operation of the Company's business. The Company will probably have to
devote a significant amount of management resources to integrating any acquired
business, including the businesses acquired in the past year, with its existing
operations, and such integration may not be successful.
30
<PAGE>
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.
As of March 31, 2000, the Company will have approximately 85,133,457 shares
of Common Stock outstanding. At such time approximately 82,100,482 shares, or
96.4%, of the Company's outstanding Common Stock was subject to restrictions on
resale under U.S. securities laws. As these restrictions on resale end,
beginning in November 2000, the market price of Common Stock could drop
significantly if holders of these shares sell them or are perceived by the
market as intending to sell them. These potential sales also may make it
difficult for the Company to sell equity securities in the future at a time and
price that the Company deems appropriate. See "Item 1. Business -- Restricted
Securities and Registration Rights."
FORWARD LOOKING STATEMENTS
Certain statements set forth in this Form 10-K of the Company constitute
forward looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and are subject to the safe harbor created by such
section. Such statements are identified by phrases such as "will likely
result," "are expected to," "will continue," "is anticipated," "estimated,"
"project," "believe," or similar expressions. Certain factors that could cause
results to differ materially from those described in the forward looking
statements are enumerated in Item 1. "Business--Factors that May Affect the
Company's Business, Operating Results and Financial Condition, and the Price of
the Common Stock" and elsewhere in this Form 10-K. This Annual Report on Form
10-K (including those items incorporated by reference), including the
Consolidated Financial Statements and the notes thereto, should be read in its
entirety for a complete understanding the Company's business, operating results
and financial condition.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The name and age of each director and executive officer of the Company as
of March 1, 2000, together with a brief description of the principal occupation
or employment of each such person during the past five years, is set forth
below. Executive officers serve at the pleasure of the board of directors and
are generally elected at each annual organizational meeting of the board of
directors. Directors are elected by the Company's stockholders each year at the
31
<PAGE>
Company's annual meeting of stockholders or, when the need arises, by a majority
of the remaining directors in order to fill vacancies on the board in between
annual meetings of stockholders.
Name Title Age
Benjamin F. Holcomb Chairman and Chief Executive Officer 48
James M. Blanchard Director, President 38
Dr. Lee H. Silverstein Director 40
Peter A. Tierney Director 40
Scott H. Barber Vice President, Chief Technology Officer 40
Joseph T. Buck Vice President, Engineering / Facilities 44
Nicholas E. Farsi Vice President, Chief Information Officer 47
James C. Foregger Director of Finance 53
Sharon S. Quaintance Vice President, Customer Operations 44
Paul A. Reynolds Vice President, Engineering / Support 36
Wendy L. Squires Controller and Corporate Secretary 31
Dennis P. Werner Vice President, Chief Operating Officer 50
Benjamin F. Holcomb. Mr. Holcomb was elected a director by the board of
directors on February 18, 2000, to fill the vacancy created upon the resignation
of Richard Granville. Mr. Holcomb became Chief Executive Officer of the Company
on February 18, 2000. Mr. Holcomb formerly was president of Europe and
Asia/Pacific for BellSouth International (1997 to 1999). Prior to that he was
president of BellSouth's American Cellular Communications unit (1987 to 1997).
He is a graduate of the University of Tennessee.
James M. Blanchard. Mr. Blanchard was elected a director by the board of
directors on September 30, 1999. Mr. Blanchard became President and Chief
Operating Officer of the Company on September 30, 1999. Mr. Blanchard
relinquished the title of Chief Operating Officer on March 1, 2000. Mr.
Blanchard joined Avana as a consultant in June 1999. From January 1999 to
September 1999, Mr. Blanchard was a consultant for Lifetech Corporation, The
Personal Solutions Group, Inc. and The International Communications & Media
Management Group, Inc. in addition to the Company. From April 1998 to January
1999 Mr. Blanchard served as senior officer of The Personal Solutions Group,
Inc. From April 1997 through March 1998 Mr. Blanchard served as the Senior Vice
President, Business Development of Entergy Corporation. From November 1992 to
March 1997 Mr. Blanchard served in a senior management capacity at Rollins, Inc.
Dr. Lee H. Silverstein. Dr. Silverstein was elected a director by the board
of directors on September 28, 1999, in connection with the Grace Merger. Dr.
Silverstein is a practicing periodontic surgeon and has been President and Chief
Operating Officer of Kennestone Peridontics, P.C., a periodontic surgical
practice, and its related entities, Kennestone Periodontics of Windy Hill, P.C.,
Kennestone Periodontics of Vinnings, P.C. and Kennestone Periodontics of
Marietta, P.C., since 1991. Dr. Silverstein is also President of Kennestone
Interactive, Inc., an educational center and recording studio engaged in
commercial ventures; Kennestone, LLC, a real estate holding company; and
Kennestone Periodontics, L.P., a holding company that purchases bulk supplies
for Kennestone Periodontics, P.C. and Kennestone, LLC. Dr. Silverstein
32
<PAGE>
is also a member of the Board of Directors of Partners at Park Place LLC, a real
estate holding company and the Ben Massel Dental Clinic.
Peter A. Tierney. Mr. Tierney was elected a director by the board of
directors on September 28, 1999, in connection with the Grace Merger. Mr.
Tierney has been President and Chief Operating Officer of Millennium Optical
Networks, Inc., a facilities based competitive local exchange carrier, since
January 1999. Prior to joining Millennium Optical, he was senior manager for
telecommunications services for MCI Telecommunications Corporation (1990 to
1995). Prior to that he held telecommunications sales positions with Time Warner
Communications (1995 to 1998).
Scott H. Barber. Mr. Barber became Vice President, Chief Technology
Officer of the Company on May 17, 1999. Prior to that he was Technology
Consultant at ICG Communications (1997 to 1999). Prior to that he was Network
Technical Consultant for IBM Value Added Resellers (1995 to 1997). Prior to
that he was an advisory Network Consultant and Account Sales Executive with IBM
(1984 to 1995). He earned his Bachelor and MBA degrees from Eastern Kentucky
University.
Joseph T. Buck. Mr. Buck became Vice President, Engineering/Facilities of
the Company on February 7, 2000. Prior to joining the Company, Mr. Buck was
President and COO of P.V. Tel.ecom Enterprises, Inc. a facilities based CLEC in
7 states (May 1997 to February 2000). Prior to that he served as Vice
President, Operations and Engineering at ICG Access Services (June 1994 to
November 1996).
Nicholas E. Farsi. Mr. Farsi became Vice President, Chief Information
Officer of the Company on March 2, 2000. Prior to joining the Company, Mr.
Farsi was an information technology senior director at BellSouth Cellular
Corporation (January 1994 to February 2000). He is a graduate of The Citadel
and completed technical courses at the Massachusetts Institute of Technology
(MIT).
James C. Foregger. Mr. Foregger joined the Company as Corporate Controller
in September 1999, and became Director of Finance in January 2000. Prior to
joining the Company Mr. Foregger was a financial consultant for FT Mortgage Co.,
Inc. (November 1997 to August 1999). In addition to his consulting endeavors,
Mr. Foregger was Vice President - Operations (Principal) at Dow Guarantee
Mortgage Corp. in Atlanta (August 1996 to October 1997). Prior to his
experience with Dow Guarantee, Mr. Foregger was Vice President - Operations for
Community Development at Woodside Development, LP. He holds a Bachelor of
Business Administration degree, in Accounting, from Florida Atlantic University.
Sharon S. Quaintance. Ms. Quaintance became Vice President, Customer
Operations of the Company on January 28, 2000. Ms. Quaintance joined the
Company after working as Director - Contract Management for CHR Solutions
(January 1997 to February 2000). Prior to that, she worked at GTE Corp. for 16
years in various regulatory, marketing, legislative, and public affairs
positions. She graduated from the University of Southern California and earned
an MBA, magna cum laude, from Loyola University.
33
<PAGE>
Paul A. Reynolds. Mr. Reynolds became Vice President, Engineering/Support
of the Company on February 7, 2000. Mr. Reynolds was a Vice President of
technology development for P.V. Tel. prior to its acquisition by the Company
(1997 to 2000). He previously served as a director of operations and facilities
for HomePlace of America, Inc. (1988 to 1996). He is a graduate of the
University of South Carolina.
Wendy L. Squires. Ms. Squires became Controller of the Company on January
10, 2000. She previously served as a Manager with Deloitte Consulting (1994 to
1999). She is a graduate of Georgia State University.
Dennis P. Werner. Mr. Werner became Vice President, Chief Operating
Officer of the Company on March 1, 2000. Prior to joining the Company, Mr.
Werner was Vice President of Sales at ChoicePoint, Inc. (1998 to 1999). Prior
to that he was a 25 year senior management employee with American Express
Company, Travel Related Services (1973 to 1998). He is a graduate of the
University of Kentucky and did post graduate work at the Colgate Darden Graduate
School, University of Virginia.
Employees
As of December 31, 1999, the Company had 55 employees. As of March 1,
2000, the Company had 94 employees. The Company believes that its relations
with its employees are good.
ITEM 2. PROPERTIES
The Company leases all of its offices and facilities and does not own any
real estate.
The Company's corporate headquarters and principal operations are located
in a 17,340 square foot facility located at 1690 Chantilly Drive, Atlanta
Georgia, 30324. This facility houses the Company's senior management and
corporate support staff, the Atlanta sales and marketing staff, the Atlanta
operations staff, the Company's principal Internet data and telecom facilities,
and the Company's centralized operations and customer support team.
The data center facilities are fully operational with state-of-the-art
fiber optic network access and filtered power and environmental controls
systems. Internal and co-location customer automation services include storage
management and content filtering options as well as an automated tape library
that backs up all servers once every 24 hours.
During the first quarter of 2000 the Company, through the acquisition of
WebWizard, acquired 4,300 square feet of leased premises at 650 Douglas Avenue,
Altamonte Springs, Florida 32714, which houses the WebWizard facilities. The
Company also acquired in the first quarter of 2000, 8,100 square feet of leased
premises at 250 Commerce Boulevard, Altamonte Springs, Florida 32714, pursuant
to the Alpha Acquisition.
ITEM 3. LEGAL PROCEEDINGS
The Company is party to various legal actions that are incidental to its
business. While the outcome of legal actions cannot be predicted with certainty,
the Company believes that the outcome of any of these proceedings, or all of
them combined, will not have a material adverse effect on its consolidated
financial position, results of operations or cash flows.
34
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the Company's stockholders
during the quarter ended December 31, 1999.
35
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Common Stock of the Company is listed on the Nasdaq Over-the-Counter
Bulletin Board and trades under the symbol "GCDV." As of December 31, 1999,
there were 574 shareholders of record of the Company's Common Stock. To date,
the Company has not paid any dividends on its Common Stock and does not expect
to pay any dividends in the foreseeable future. Instead, the Company intends to
retain any earnings to finance the growth and development of the Company's
businesses.
The following tables set forth the high and low bid prices of the Company's
Common Stock for each full quarterly period since the Company began doing
business in its present form on September 28, 1999 (the effective date of the
Grace Merger). Although, as a result of the Grace Merger, New Millennium became
a wholly owned subsidiary of the Company, the Grace Merger was accounted for as
an acquisition of Old Grace by New Millennium because, following the
transaction, the former shareholders of New Millennium owned a substantial
majority of the Company's outstanding Common Stock. Accordingly, the stock
prices of Old Grace prior to September 28, 1999 are not presented. The
quotations reflect inter-dealer prices, without retail mark-ups, markdowns or
commissions and may not represent actual transactions.
Year 1999
---------
High Low
----- ---
Fourth Quarter (Oct.-Dec.) $7.25 $4.00
Year 2000
---------
High Low
---- ---
First Quarter (Jan.-March) $7.25 $4.63
As of March 31, 2000, of the Company's 82,033,457 shares of Common Stock,
only 4,359,001 or 5.31%, was registered or could trade without restrictions
pursuant to Rule 144 promulgated under the Securities Act. See "Restricted
Securities and Registration Rights" for a description of when the Company
believes certain significant unregistered blocks of Common Stock will be
eligible to trade pursuant to Rule 144, assuming certain other conditions are
met. In addition, see "The market price of the Company's Common Stock may drop
significantly when restrictions on resale by many of the Company's existing
stockholders lapses" under the caption "Factors That May Affect The Company's
Business, Operating Results and Financial Condition, and the Price of the Common
Stock."
ITEM 6. SELECTED FINANCIAL DATA
36
<PAGE>
<TABLE>
<CAPTION>
For the Year Ended
December 31,
-----------------------------------------------------
1999 1998
-------------------- ----------------------
<S> <C> <C>
Statement of Operations Data:
Revenues $ 679,415 $ -
Loss from Operations (2,967,921) (20,855)
Total other income (expense) (127,171) 114
Net loss $(3,095,092) $(20,741)
Basic and diluted loss per common share (0.07) --
Cash dividends declared per common share -- --
Weighted average basic and diluted common shares(1) 44,367,250 --
As of December 31,
-----------------------------------------------------
1999 1998
-------------------- ----------------------
<S> <C> <C>
Selected Balance Sheet Data:
Cash and cash equivalents $ 102,481 3,719
Investments in certificates of deposit 3,700,000 --
Equipment and software 2,397,889 12,611
Total assets 7,598,815 17,150
Total liabilities 6,444,453 5,391
------
Stockholders' equity 1,154,362 11,759
------
Book value per share .02 --
Common shares issued and outstanding(1) 73,871,895 --
</TABLE>
(1) On September 28, 1999, a wholly-owned subsidiary of Old Grace was merged
with and into New Millennium in the Grace Merger. All of the shares of New
Millennium outstanding at the time of the Grace Merger were exchanged for a
total of 66,246,933 shares of the Company's common stock at a ratio of
66.3013 to 1.
(2) The Company believes that 410,000 shares of its Common Stock that are deemed
to be outstanding were not validly issued (the "Disputed Shares"). In
January 1995, Old Grace issued 80,000 of the Disputed Shares to an
unaffiliated third party in exchange for the recipient's contractual
obligation to identify an acquisition candidate and consummate a merger
between Old Grace and such candidate. No such merger was consummated. In
April, 1995, Old Grace issued 330,000 of the Disputed Shares to an
unaffiliated third party as a finders fee with respect to two transactions
which were never consummated. In May 1995, Old Grace issued to its transfer
agent a stop transfer order for all of the Disputed Shares. The Company has
commenced litigation seeking a court order declaring that the Disputed
Shares were not validly issued and are therefore not outstanding. Neither of
the parties adverse to the Company responded to the Company's claims within
the time period required by the court's rules, and the Company expects that
it will receive a default judgement against each adverse party in the near
future. The Company is treating the Disputed Shares as outstanding in this
Form 10-K and the accompanying Consolidated Financial Statements, and will
continue to so treat the Disputed Shares in all subsequent reports and
financial statements until such time as a judicial order is issued declaring
that the Disputed Shares were not validly issued.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis provides information that management
believes is relevant to an assessment and understanding of the consolidated
results of operations and financial condition of the Company. The discussion
should be read in conjunction with the Company's Consolidated Financial
Statements for the twelve months ended December 31, 1999 and 1998.
The predecessor to the Company, New Millennium, was formed on October 6,
1998, and merged with and into a subsidiary of Old Grace on September 28, 1999.
On May 5, 1999, New Millennium acquired Avana. Although, as a result of the
Grace Merger, New Millennium became a wholly owned subsidiary of the Company,
the Grace Merger was accounted for as an acquisition of Old Grace by New
Millennium because, following the transaction, the former shareholders of New
Millennium owned a substantial majority of the Company's outstanding Common
Stock. Accordingly, the Consolidated Financial Statements of the Company are
the financial statements of New Millennium adjusted for the assumed acquisition
of the net assets of Old Grace in exchange for the issuance of the Company's
Common Stock. In accordance with
37
<PAGE>
purchase accounting principles, the net assets of New Millennium were accounted
for at their historical cost, and the net assets of Old Grace were accounted for
at their fair value as of September 28, 1999. No goodwill was recorded as a
result of the Grace Merger.
This section does not contain a year-to-year comparison of the Company's
1999 and 1998 financial information because the 1998 financial information only
reflects a partial year of operations and the Company did not have any
significant operations in 1998.
RESULTS OF OPERATIONS
Revenues: Revenues for the year ended December 31, 1999, were derived from
telecommunications sales and commissions, and from providing Internet and Web
hosting services. Telecommunications revenues were $261,662 while Internet and
Web hosting revenues were $417,753. Revenues for the twelve month period ended
December 31, 1999, totaled $679,415. The acquisition of Avana Communications
Corporation was completed on May 5, 1999. The acquisition was accounted for as
a purchase and the results of Avana's operations were included in the
consolidated statement of operations from the date of acquisition.
Cost of Services: Cost of services for providing Internet service includes
salaries and wages of those employed in customer service and sales and in the
technical support areas needed to maintain and upgrade the system. Cost of
services for the year ended December 31, 1999, were $668,269.
Sales and Marketing Expenses: Sales and marketing expenses include the
cost of sales and marketing personnel, advertising costs for the Internet
operations and development of the promotional campaign for both
telecommunications sales and corporate branding. For the year ended December
31, 1999, sales and marketing expenses were $323,830. These expenses are
expected to increase as the Company pursues an aggressive sales effort.
General and Administrative Expenses: Included in General and
Administrative expenses are salaries and wages, professional fees, travel
expenses, office supplies and other general expenses. Expenses in these
categories increased due to growth in the number of employees, the closing of
the Grace Merger, increased costs related to potential acquisitions and related
financing activities. For the year ended December 31, 1999, General and
Administrative expenses were $2,313,825.
Depreciation and Amortization: Depreciation expenses are computed using
the straight-line method based upon estimated useful lives of the asset,
generally three to ten years. Goodwill and other intangible costs are amortized
over a 60-month period. For the twelve months ended December 31, 1999,
depreciation expense and amortization expense were $265,481 and $75,931,
respectively.
Interest Expense: The Company currently incurs interest expense on its
lines of credit and under capitalized leases. For the twelve months ended
December 31, 1999, interest expense was $169,360.
38
<PAGE>
Interest Income: The Company currently earns interest income on cash and
cash equivalents and investments. For the twelve months ended December 31,
1999, interest income was $42,189.
LIQUIDITY AND CAPITAL RESOURCES
For the twelve months ended December 31, 1999, the Company's operating
activities required net cash of $3,095,092. Working capital increased by
$8,334,168 for the twelve months ended December 31, 1999. Working capital was
increased by proceeds from the two private placements, as described in footnote
10 of the Consolidated Financial Statements, which increase was offset in part
by the current portion of leases capitalized during the twelve month period and
draws against the lines of credit used for the same period. Changes in net cash
from operations resulted primarily from the loss for the period offset in part
by non-cash items of depreciation, amortization and compensation paid in the
form of stock. The changes in net cash were also affected by an increase in
accounts receivable, prepaid expenses, other assets, advances to officers and
deferred revenue partially offset by an increase in accounts payable and accrued
liabilities.
Cash used for investing activities was $5,046,392 for the twelve months
ended December 31, 1999. The cash was used primarily to fund investments in
certificates of deposits totaling $3,700,000, which the Company has pledged as
collateral for its bank lines of credit. Expenditures of cash for property and
equipment were made totaling $392,579 for the twelve months ended December 31,
1999. Expenditures for acquisitions of businesses were net $519,314.
The following is a summary of the financing activities occurring in 1999
and prior to the filing date of this Form 10-K in 2000:
First Private Placement
During July 1999, New Millennium effected a private placement of 128 units
("Units") consisting of 2,000 shares of New Millennium common stock and a
warrant to purchase 1,333 shares of Grace Common Stock (the "First Private
Placement"). The Units were sold for $6,400 per Unit. The warrants are
exercisable at $4.50 per share of Grace Common Stock and expire on July 29,
2001. An aggregate of 251,000 shares of New Millennium common stock were issued
(which later converted into 16,641,628 shares of the Company's Common Stock in
the Grace Merger) and warrants to purchase 167,290 shares of Grace Common Stock
were granted for net proceeds of $777,600. The net proceeds were used for
reorganization expenses related to the Grace Merger and for working capital
requirements.
It was contemplated that warrant agreements setting forth the terms and
conditions of the warrants granted in the First Private Placement would be
executed. Such warrant agreements have yet to be executed. Grace believes that
such Warrant agreements will be executed in the near future.
At the time of the First Private Placement, New Millennium determined the
fair market value of shares of New Millennium common stock to be $3.20 per share
(or .05 per share of Company Common Stock, based on the exchange ratio in the
Grace Merger). At the time of the
39
<PAGE>
First Private Placement, New Millennium determined the fair market value of the
warrants for shares of Grace Common Stock to be $0.0 per warrant.
All of the shares of New Millennium common stock issued in the First
Private Placement (and the shares of the Company's Common Stock subsequently
exchanged for such shares in the Grace Merger) and the shares of Grace Common
Stock issuable upon the exercise of the warrants are "restricted securities"
under Rule 144 promulgated under the Securities Act of 1933, as amended (the
"Securities Act"). Such securities may not be sold in the absence of
registration under the Securities Act unless an exemption from registration is
available, including the exemptions contained in Rule 144. See "Item 1.
Business--Restricted Securities and Registration Rights" above for a summary of
the exemptions available under Rule 144.
All of the shares of New Millennium common stock issued in the First
Private Placement (and the shares of the Company's Common Stock subsequently
exchanged for such shares in the Grace Merger) and the shares of Grace Common
Stock issuable upon the exercise of the warrants were granted certain
"piggyback" registration rights. A registration rights agreement, setting forth
all of the specific terms and conditions of such piggyback registration rights,
was contemplated in the First Private Placement, but has yet to be executed.
Grace believes that such a registration rights agreement will be executed in the
near future. Subject to certain conditions that may be set forth in such a
registration rights agreement, the piggyback registration rights permit the
holders of such shares to include their shares in a registration by the Company
of its Common Stock under the Securities Act for sale to the public on Form S-1
or Form SB-2.
Second Private Placement
During September 1999, New Millennium effected another private placement of
shares of its common stock (the "Second Private Placement"). An aggregate of
150,356 shares of New Millennium common stock were issued for net proceeds of
$3,459,319. The net proceeds were used for reorganization expenses related to
the Grace Merger and for working capital requirements. The 150,356 shares of
New Millennium common stock were converted into 9,968,798 shares of the
Company's Common Stock in the Grace Merger.
At the time of the Second Private Placement, New Millennium determined the
fair market value of shares of New Millennium common stock to be $23.34 per
share.
All of the shares of New Millennium common stock issued in the Second
Private Placement (and the shares of the Company's Common Stock subsequently
exchanged for such shares in the Grace Merger) are "restricted securities" under
Rule 144 promulgated under the Securities Act. Such securities may not be sold
in the absence of registration under the Securities Act unless an exemption from
registration is available, including the exemptions contained in Rule 144. See
"Item 1. Business--Restricted Securities and Registration Rights" below for a
summary of the exemptions available under Rule 144.
All of the shares of New Millennium common stock issued in the Second
Private Placement (and the shares of the Company's Common Stock subsequently
exchanged for such shares in the Grace Merger) were granted certain "piggyback"
registration rights. Subject to certain conditions set forth in registration
rights agreements executed at the closing of the Second
40
<PAGE>
Private Placement, the piggyback registration rights permit the holders of such
shares to include their shares in a registration by the Company of its Common
Stock under the Securities Act for sale to the public (except with respect to
registrations on Forms S-4 or S-8 or another form not available for registering
such shares for sale to the public).
Third Private Placement
On March 1, 2000, the Company entered into a private placement agreement
with C&S Private Equity Fund, LP ("C&S"), pursuant to which the Company issued
to C&S 14 units ("C&S Units") for $100,000 per C&S Unit (the "Third Private
Placement"). Each C&S Unit consisted of (i) a $100,000 convertible senior
secured note of the Company and (ii) 150,000 shares of the Company's Common
Stock. An aggregate of 2,100,000 shares of the Company's Common Stock were
issued along with a convertible senior secured note payable to C&S in the
principal amount of $1,400,000. The net proceeds of $1,363,000, were used for
the purchase and working capital requirements of WebWizard and P.V. Tel. The
note was due March 2, 2001, and bore interest at a rate of 12% per year,
payable quarterly. $1,420,000 of the net proceeds from the Fourth Private
Placement were used to repay all of the outstanding interest and principal on
the note issued in the Third Private Placement.
Additionally, the private placement agreement provided that, if the Company
acquired Alpha Computer Services, Inc., C&S would have the option to purchase
from the Company, and the Company would have the option to sell to C&S, within
14 days after the Company's acquisition of Alpha Computers, a number of C&S
Units (not in excess of seven) as C&S should designate and as the Company may
require. The purchase price of each C&S Unit was to be $100,000. On March 31,
2000, the Company acquired Alpha Computer. Both C&S and the Company declined to
exercise their options and accordingly the options will expire on April 14,
2000.
The Company is currently in the process of obtaining an independent
appraisal of the valuation of the Common Stock and other securities issued in
the Third Private Placement.
All of the shares of the Company's Common Stock issued in the Third Private
Placement, and the shares issuable upon the conversion of the notes, are
"restricted securities" under Rule 144 promulgated under the Securities Act.
Such securities may not be sold in the absence of registration under the
Securities Act unless an exemption from registration is available, including
41
<PAGE>
the exemptions contained in Rule 144. See "Item 1. Business--Restricted
Securities and Registration Rights" below for a summary of the exemptions
available under Rule 144.
Pursuant to the private placement purchase agreement, certain "demand"
registration rights were granted with respect to the shares issuable upon
conversion of the notes. Subject to certain conditions set forth in the private
placement purchase agreement, the demand registration rights require that, on or
before November 1, 2000, the Company file a registration statement on Form S-3
(or such other form as may be available) with the SEC for the public sale by C&S
of the shares of Common Stock issuable upon conversion of the Notes, and that
the Company use its best efforts to cause such registration statement to become
effective not later than the maturity date of the notes. Upon discharge of the
notes, the Company's obligation to file a registration statement and cause it to
become effective shall terminate. For each day after the maturity date of the
notes that such registration statement is not effective, the Company shall pay
C&S $0.01 times the number of shares then required to be covered by such
registration statement. Such amounts will be payable daily and will accrue
interest (payable daily) at the rate of 18% per year.
Fourth Private Placement
On April 14, 2000, the Company entered into a Securities Purchase
Agreement (the "Fourth Private Placement") with Greenlight Capital, L.P. and
certain affiliates of Greenlight (the "Purchasers") pursuant to which the
Company agreed to issue for an aggregate purchase price of $6.5 million, (a)
3,000,000 shares of Common Stock, (b) the Company's 12% senior secured
convertible promissory notes with an original principal amount of $6,500,000
(the "Greenlight Notes") convertible into shares of Common Stock at a conversion
price of $1.00 per share, (c) stock purchase warrants (the "Greenlight
Warrants") to purchase 6,500,000 shares of Common Stock at an exercise price of
$1.00 per share, and (d)(1) options, exercisable on August 14, 2000 and December
14, 2000 to purchase for an aggregate purchase price of $4.5 million on each
date, (A) 1,575,000 shares of Common Stock, (B) Notes with an original principal
amount of $2,925,000 convertible into shares of Common Stock at a conversion
price of $1.00 per share, and (C) Warrants to purchase 2,925,000 shares of
Common Stock at an exercise price of $1.00 per share, and (2) an option,
exercisable on April 14, 2001, to purchase for an aggregate purchase price of
$4.5 million, (A) 1,050,000 shares of Common Stock, (B) Notes with an original
principal amount of $2,925,000 convertible into shares of Common Stock at a
conversion price of $1.50 per share, and (E) Warrants to purchase 1,950,000
shares of Common Stock at an exercise price of $1.50 per share. The Greenlight
Note is guaranteed by the significant subsidiaries of the Company and is secured
by all of the issued and outstanding capital stock of the Company's significant
subsidiaries. $1,420,251.88 of the net proceeds were used to repay all of the
outstanding principal and interest on the note issued in the Third Private
Placement, and the remainder of the net proceeds will be used for the Company's
working capital requirements.
All of the shares of Common Stock issued pursuant to the Fourth Private
Placement, including any shares issued pursuant to the Greenlight Note, the
Greenlight Warrant and the Greenlight Option are "restricted securities" under
Rule 144 promulgated under the Securities Act. Such securities may not be sold
in the absence of registration under the Securities Act unless an exemption from
registration is available, including the exemptions contained in Rule 144. See
"Item 1. Business--Restricted Securities and Registration Rights" below for a
summary of the exemptions available under Rule 144.
42
<PAGE>
Pursuant to a registration rights agreement executed at the closing of the
Fourth Private Placement, all of the shares of Common Stock issued pursuant to
the Fourth Private Placement, including any shares issued pursuant to the
Greenlight Note, the Greenlight Warrant and the Greenlight Option were granted
"demand" and "piggyback" registration rights. Subject to certain conditions set
forth in the registration rights agreement, the demand registration rights
require that, 30 days following the date on which the Company becomes eligible
to use Form S-3, the company use its reasonable best efforts to register the
applicable shares as soon as practicable. Subject to certain conditions set
forth in the registration rights agreement, the piggyback registration rights
permit the holders of the covered shares to include such shares in a
registration by the Company when and if the Company proposes to register any
Common Stock under the Securities Act for sale to the public on a form that
would also permit the registration of the covered shares (other that
registrations on Form S-8 or S-4).
Louis Friedman, former Chairman of the Company, is entitled to a finders
fee of 500,500 shares of Common Stock in connection with the Fourth Private
Placement.
Lines of Credit
The Company has a $650,000 line of credit with the BankTennessee, which it
uses for working capital purposes. The interest rate is 7.25% per annum, payable
monthly. The balance on the line of credit was $649,900 as of March 31, 1999.
The line of credit matures on July 29, 2000, and is secured by a Certificate of
Deposit in the amount of $700,000.
The Company has a $2,000,000 line of credit with Regions Bank, which it
uses for working capital. The interest rate is 5.998% per annum, payable
monthly. The balance on the line of credit was $1,990,000 as of March 31, 1999.
The line of credit was due to mature on March 24, 2000, and was extended to
September 24, 2000. The line of credit is secured by a Certificate of Deposit
in the amount of $2,000,000.
The Company has a $1,000,000 line of credit with Regions Bank, which it
uses for working capital purposes. The interest rate is 6.189% per annum,
payable monthly. The balance on the line of credit was $730,000 as of March 31,
1999. The line of credit matures on June 15, 2000, and is secured by a
Certificate of Deposit in the amount of $1,000,000.
On January 21, 2000, the Company obtained another line of credit from
Regions Bank in the amount of $1,000,000, and executed a note payable in that
amount. The Company will use this line of credit for working capital purposes.
The interest rate is 9.0% per annum, payable monthly. The balance on the line
of credit was $974,000 on March 31, 2000. The line of credit matures on March
24, 2001, and is secured by 500,000 shares of the Company's Common Stock that
are owned by Signal Compression, Inc.
Cash provided by financing activities was $6,932,511 for the twelve months
ended December 31, 1999. Cash provided consisted primarily of proceeds from
private placements of $4,009,299 and proceeds from line of credit borrowing of
$3,074,339. These amounts were partially offset by repayment on obligations
under capital leases of $151,127. A working capital loan in the amount of
$450,000 was funded and repaid during this twelve-month period.
43
<PAGE>
As of December 31, 1999, the Company had $102,480 in cash and cash
equivalents. The Company also had $3,700,000 in certificates of deposits less
offsetting related liabilities in the form of lines of credit of $3,074,339.
The net proceeds available from certificates of deposit less the corresponding
liability totaled $625,661. Combined with $102,481 above, the Company had
$728,142 to meet its current obligations and fund its operations. Management
believes this amount is not sufficient to enable the Company to expand its
business as currently planned. The Company will therefore require additional
capital to fund its anticipated operating losses and planned capital expenditure
requirements.
In order to fund these requirements, the Company anticipates that it will
be required to raise additional financing from public or private equity or debt
sources. Additionally, if the Company's plans or assumptions change (including
those with respect to the development of the network, the level of its
operations and its operating cash flow), if its assumptions prove inaccurate, if
it consummates additional investments or acquisitions, if it experiences
unexpected costs or competitive pressures, or if existing cash and any other
borrowings otherwise prove to be insufficient, the Company may be required to
seek additional capital sooner than expected. In the event that the Company is
unable to obtain such additional capital or is unable to obtain such additional
capital on acceptable terms, it may be required to reduce the scope of its
expansion, which could adversely affect its business prospects and its ability
to compete. There can be no assurances that the Company will be able to raise
equity capital, obtain capital leases or bank financing or incur other
borrowings on commercially reasonable terms, if at all, to fund any such
expansion.
To accelerate its growth rate and to finance the launch or build-out of
additional markets, the Company will consider obtaining financing from various
sources, including additional vendor financing provided by equipment suppliers,
project financing from commercial banks, bank lines of credit and the sale of
equity and debt securities. To the extent that the Company or any of its
subsidiaries issues debt, its leverage and debt service obligations will
increase.
As part of its business strategy, the Company intends to continue to
evaluate potential acquisitions; joint ventures and strategic alliances in
companies that own existing networks or companies that provide services that
complement the Company's existing businesses. The Company continues to consider
potential acquisitions from time to time. New sources of capital such as credit
facilities and other borrowings, and additional debt and equity investments in
the Company will be necessary to fund any material acquisitions and similar
strategic investments.
YEAR 2000 COMPLIANCE
The Company dedicated resources over the past several years to address the
potential hardware, software, and other computer and technology issues and
related concerns associated with the transition to the Year 2000 and to confirm
that its service providers took similar measures. As a result of these efforts,
the Company has not experienced any material disruptions in its operations in
connection with, or following, the transition to the Year 2000. Given that the
majority of the Company's telecommunications network infrastructure and critical
back office systems were acquired after 1997, Year 2000
44
<PAGE>
compliance was substantially ensured at the time of acquisition. The total cost
to complete the Company's Year 2000 compliance efforts was negligible. While the
Company tested its own mission-critical systems for Year 2000 compliance, the
Company does not control the systems of its suppliers, strategic partners and
customers. The Company received assurances prior to December 31, 1999, from its
suppliers and strategic partners regarding the Year 2000 readiness of their
systems.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has not invested in financial instruments that subject the
Company to material market risk. Financial instruments which the Company holds
are disclosed in Note 3 to the Company's Consolidated Financial Statements on
page F-12 herein.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by Item 8 is set forth on pages F-1 to F-8.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On July 10, 1999, the Company's board of directors appointed Dohan and
Company, P.A. ("Dohan") as certifying accountant of the Company. Dohan was
retained to audit the Company's financial records and provide audited financial
statements for the Company's fiscal years ended December 31, 1994, 1995, 1996,
1997 and 1998. From February 27, 1995 until the Company retained Dohan on July
10, 1999, the Company did not employ any independent accountants. Dohan was
dismissed by the Company on October 29, 1999. On November 2, 1999, the Company
engaged Habif, Arogeti & Wynne, LLP ("HAW") as the Company's certifying
accountant to audit the Company's financial statements for 1999. The information
contained in the Company's (1) Current Report on Form 8-K dated July 16, 1999,
as amended, and (2) Current Report on Form 8-K dated October 29, 1999, is
incorporated herein by reference.
45
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information presented under the caption "Information Concerning
Nominees," "Directors Continuing in Office," and "Section 16(a) Beneficial
Ownership Reporting Compliance" of the Company's definitive Proxy Statement for
the 2000 Annual Meeting of Stockholders (the "Year 2000 Proxy Statement") is
incorporated herein by reference. The Year 2000 Proxy Statement is expected to
be filed with the Securities and Exchange Commission no later than 120 days
after December 31, 1999. The information presented under the caption "Item 1.
Business -- Directors and Executive Officers of the Company" in Part I of this
Form 10-K, is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information presented under the captions "Compensation of Directors"
and "Executive Compensation" of the 2000 Proxy Statement (excluding, however,
the information presented under the subheadings "Compensation Committee Report
on Executive Compensation" and "Performance Graph") is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information presented under the caption "Security Ownership of Certain
Beneficial Owners and Management" of the 2000 Proxy is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information presented under the caption "Certain Relationships and
Related Transactions" of the 2000 Proxy Statement is incorporated herein by
reference.
46
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents filed as part of this report.
1. Financial Statements. The following consolidated financial statements
of the Company are set forth herein, beginning on page F-1:
(i) Report of Management.
(ii) Report of Independent Accountants.
(iii) Consolidated Balance Sheets.
(iv) Consolidated Statements of Operations.
(v) Consolidated Statements of Cash Flows.
(vi) Consolidated Statements of Shareholders' Equity.
(vii) Notes to the Consolidated Financial Statements.
2. Financial Statement Schedules.
None required.
3. Exhibits.
The exhibits that are required to be filed or incorporated by
reference herein are listed in the Exhibit Index. Exhibits 10.[4] to
10.[20] hereto constitute management contracts or compensatory plans
or arrangements required to be filed as exhibits hereto.
(b) Reports on Form 8-K.
1. Current Report on Form 8-K, dated September 28, 1999, filed October
13, 1999, disclosing the Grace Merger.
2. Current Report on Form 8-K, dated November 1, 1999, filed November 5,
1999, disclosing a change in the Company's certifying accountant from
Dohan and Company PA to Habif, Arogeti & Wynne, LLP.
3. Amendment No. 1, filed November 16, 1999, to the Current Report on
Form 8-K, dated September 28, 1999, amending the Company's disclosure
with respect to the Grace Merger.
47
<PAGE>
4. Amendment No. 2, filed December 8, 1999, to the Current Report on Form
8-K, dated September 28, 1999, amending the Company's disclosure with
respect to the Grace Merger.
5. Current Report on Form 8-K, dated December 21, 1999, filed December
21, 1999, disclosing the resignation of Louis Friedman as Chairman of
the Company's board of directors and the Company's continuing search
for a new Chairman and Chief Executive Officer.
6. Amendment No. 3, filed December 28, 1999, to the Current Report on
Form 8-K, dated September 28, 1999, amending the Company's disclosure
with respect to the Grace Merger.
48
<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: April 14, 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)
49
<PAGE>
GRACE DEVELOPMENT, INC.
AND SUBSIDIARIES
Consolidated Financial Statements
December 31, 1999 and 1998
F-1
<PAGE>
GRACE DEVELOPMENT, INC. AND SUBSIDIARIES
INDEX OF CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Item Page
- - ---- ----
<S> <C>
1. Report of Management............................................................................. F-3
2. Report of Independent Accountants................................................................ F-4
3. Consolidated Balance Sheets...................................................................... F-5
4. Consolidated Statements of Operations............................................................ F-7
5. Consolidated Financial Statements of Cash Flows.................................................. F-8
6. Consolidated Statements of Stockholders' Equity.................................................. F-9
7. Notes to the Consolidated Financial Statements................................................... F-10
</TABLE>
F-2
<PAGE>
GRACE DEVELOPMENT, INC. AND SUBSIDIARIES
REPORT OF MANAGEMENT
Grace Development, Inc. is responsible for the preparation, integrity,
and fair presentation of its published financial statements. The financial
statements have been prepared in accordance with generally accepted accounting
principles and include amounts based on informed judgments and estimates made by
management.
To fulfill its responsibilities, Grace maintains and continues to
refine a system of internal accounting controls. This system provides
reasonable, but not absolute, assurance at appropriate cost that the Company's
assets are safeguarded, transactions are executed in accordance with proper
management authorization, and the financial records are reliable for the
preparation of financial statements. The concept of reasonable assurance is
based on the recognition that the cost of maintaining a system of internal
accounting controls should not exceed related benefits. Grace's internal
controls system is supported by written policies and procedures, the Company's
internal audit function, and the selection and training of qualified personnel.
Grace's financial managers are responsible for implementing effective internal
control systems and monitoring their effectiveness.
As indicated in the report from our independent accountants, Habif,
Arogeti & Wynne, LLP performed an audit of Grace's consolidated financial
statements for the purpose of determining that the statements are presented
fairly, in all material respects, in conformity with generally accepted
accounting principles. The independent accountants are appointed annually by
Grace's board of directors based upon a recommendation by the board of
directors.
The board of directors, on behalf of the Company's stockholders,
oversees management's financial reporting responsibilities. The board of
directors meets periodically with the Company's management, internal auditors
and independent accountants to review internal accounting controls and financial
reporting practices and the nature, extent, and results of audit efforts. The
independent accountants and the internal auditors have direct and independent
access to the board of directors and senior management.
/s/ Benjamin F. Holcomb /s/ James M. Blanchard
- - ----------------------- ----------------------
Benjamin F. Holcomb James M. Blanchard
Chairman & Chief Executive Officer President
/s/ James C. Foregger /s/ Wendy L. Squires
- - --------------------------- --------------------
James C. Foregger Wendy L. Squires
Director of Finance Controller
F-3
<PAGE>
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.
F-4
<PAGE>
GRACE DEVELOPMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
<TABLE>
<CAPTION>
Predecessor
Entity
1999 1998
----------------------------------
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 102,481 $ 3,719
Investment in certificates of deposit 3,700,000 -
Accounts receivable, net of $ 10,500 allowance for doubtful 56,458 -
accounts at December 31, 1999
Prepaid expenses 156,599 -
Officer advances 25,012 820
------------------------------
Total current assets 4,040,550 4,539
Property and equipment, at cost
Leasehold improvements 45,468 -
Furniture and fixtures 84,949 -
Equipment and software 2,530,895 13,117
------------------------------
2,661,312 13,117
Accumulated depreciation and amortization (263,423) (506)
------------------------------
2,397,889 12,611
------------------------------
Other assets:
Goodwill, net of accumulated amortization of $75,931 at
December 31, 1999 600,547 -
Notes receivable - related party 434,500 -
Related Party Receivables 50,000 -
Other non-current assets 75,329 -
------------------------------
$ 7,598,815 $ 17,150
==============================
LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable 360,532 5,391
Deferred revenues 141,930 -
Accrued compensation - officers and directors 676,666
Accrued liabilities 218,182 -
Lines of credit 3,074,339 -
Current portion of obligations under capital lease 735,170 -
------------------------------
Total current liabilities 5,206,819 5,391
------------------------------
Obligations under capital leases, net of current portion 1,237,634 -
------------------------------
6,444,453 -
------------------------------
Stockholders' equity
Grace Common stock; no par value; 800,000,000 shares 4,270,195 -
authorized; 73,871,895 issued and outstanding at
December 31, 1999.
NMM Common Stock; $1.00 par value; 1,000,000 shares - 32,500
authorized; 32,500 shares issued and outstanding at
December 31, 1998
Accumulated deficit (3,115,833) (20,741)
------------------------------
Total stockholders' equity 1,154,362 11,759
------------------------------
$ 7,598,815 $ 17,150
==============================
</TABLE>
F-5
<PAGE>
See auditors' report and notes to consolidated financial statements
F-6
<PAGE>
GRACE DEVELOPMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Predecessor Company
For the Period from
October 6, 1998
For the Year (date of inception)
Ended Through December 31,
December 31, 1999 1998
--------------------- ----------------------
<S> <C> <C>
Revenues $ 679,415 -
Operating expenses
Cost of services 668,269
Sales and marketing expenses 323,830 13,203
General and administrative expenses 2,313,825 7,146
Depreciation and Amortization 341,412 506
----------------- ----------------
Total operating expenses 3,647,336 20,855
----------------- ----------------
Loss from operations (2,967,921) (20,855)
----------------- ----------------
Other income (expense)
Interest income 42,189 114
Interest expense (169,360) -
----------------- ----------------
Total other income (expense) (127,171) 114
----------------- ----------------
Loss before income taxes (3,095,092) (20,741)
Income tax expense - -
----------------- ----------------
Net loss $ (3,095,092) (20,741)
================= ================
Basic and diluted net loss per common share $ (0.07)
=================
Weighted average common shares outstanding 44,367,250
=================
</TABLE>
See auditors' report and notes to consolidated financial statements
F-7
<PAGE>
GRACE DEVELOPMENT, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
Predecessor
Company
For the Period
from October 6,
For the Year 1998 (date of
Ended December inception)
31, 1999 Through December
31, 1998
----------------- -------------------
<S> <C> <C>
Cash flows from operating activities
Net loss $ (3,095,092) $ (20,741)
Adjustments to reconcile net loss to net cash used in
operating activities -
Depreciation 265,481 506
Amortization of Goodwill 75,931 -
Allowance for doubtful accounts 10,500 -
Issuance of common stock for compensation 174,375 -
Changes in assets and liabilities from operations
Accounts receivable (66,757) -
Prepaid expenses (155,779) (820)
Officer advances (25,012) -
Other non-current assets (67,712) -
Related party receivables (50,000) -
Accounts payable 284,743 5,391
Deferred revenues (32,882) -
Accrued compensation - officers and directors 676,666 -
Accrued liabilities 218,182 -
----------------- -------------------
Net cash used in operating activities (1,787,356) (15,664)
----------------- -------------------
Cash flows from investing activities
Acquisition of property and equipment (392,579) (13,117)
Investments in certificates of deposits (3,700,000) -
Acquisition of business units (519,314) -
Issuance of notes receivable - related party (434,500) -
----------------- -------------------
Net cash used in investing activities (5,046,393) (13,117)
----------------- -------------------
Cash flows from financing activities
Net proceeds from lines of credit 3,074,339 -
Proceeds from note payable 450,000 -
Repayment of note payable (450,000) -
Repayment on obligations under capital leases (151,127) -
Net proceeds from issuance of common stock 4,009,299 32,500
----------------- -------------------
Net cash provided by financing activities 6,932,511 32,500
----------------- -------------------
Increase in cash and cash equivalents 98,762 3,719
Cash and cash equivalents at beginning of period 3,719 -
----------------- -------------------
Cash and cash equivalents at end of period $ 102,481 $ 3,719
================= ===================
Supplemental disclosure of cash flow information
---------------------------------------------------------------
Cash paid for interest $ 61,049 $ -0-
================= ===================
Supplemental activities of Non-Cash Transactions:
---------------------------------------------------------------
During the year of 1999 the Company acquired equipment
under several capital lease obligations totaling $2,123,930
Acquisition of business units: Total NWGA Avana
-------------------------------------------------- --------------- ----------------- -------------------
Goodwill $ 676,478 $ 143,494 $ 532,984
Assets acquired 142,067 26,506 115,561
Liabilities acquired (245,210) (245,210)
Stock issued (54,021) (10,000) (44,021)
--------------- ----------------- -------------------
Net cash $ 519,314 $ 160,000 $ 359,314
=============== ================= ===================
</TABLE>
See auditors' report and notes to consolidated financial statements
F-8
<PAGE>
GRACE DEVELOPMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999
AND FOR THE PERIOD OF OCTOBER 6, 1998 (DATE OF INCEPTION)
THROUGH DECEMBER 31, 1998, OF THE PREDECESSOR
<TABLE>
<CAPTION>
Common Stock Additional
---------------------------- Paid-In Accumulated
Shares Amount Capital Deficit Total
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Issuance of New Millennium Common stock $ 32,500 $ 32,500
Net loss for the period from October
6, 1998 (date of inception) through
December 31, 1998 (20,741) (20,741)
--------------------------------------------
Predecessor balance at December 31, 1998 32,500 (20,741) 11,759
--------------------------------------------
Shares issued in repayment of
Shareholder debt 31,000 31,000
Shares issued as compensation
to New Millennium shareholders 174,375 174,375
Shares issued for Avana acquisition 44,021 44,021
Private Placement of New
Millennium shares 777,600 777,600
Private Placement of New
Millennium shares 3,459,319 3,459,319
Warrants exercised 147,000 147,000
Warrant cancellation fees (395,620) (395,620)
Assumed purchase of net assets of
Grace at Predecessor cost 66,246,933 $4,270,195 (4,270,195)
-
Reverse acquisition of Grace
by New Millennium 7,599,962 (10,000) (10,000)
Shares issued for NWGA acquisition 25,000 10,000 10,000
Shares issued as compensation
Net loss for the twelve months ended
December 31, 1999 (3,095,092) (3,095,092)
------------------------------------------------------------------------
Balance at December 31, 1999 73,871,895 $4,270,195 $ - $(3,115,833) $1,154,362
========================================================================
</TABLE>
See auditors' report and notes to the Consolidated Financial Statements
F-9
<PAGE>
GRACE DEVELOPMENT, INC. And Subsidiaries
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 1999 and 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Description of the Company and Basis of Presentation:
Grace Development, Inc. ("Grace"), is an Integrated Communications Provider
("ICP") offering Telecommunication and Internet services ("ISP") to business and
residential customers located primarily in the Southeastern United States.
Telecommunication services currently offered are local and long distance, frame
relay, ATM, data private lines and calling cards.
The ISP operation focuses on serving individuals and small business. The
Company's service offerings include dial-up Internet access and business
services which are offered in various price and usage plans designed to meet the
needs of our subscribers. Business services include web hosting, which entails
maintaining a customer's web site; high speed, dedicated Internet access; web
page design; domain name registration and customer web server co-location.
Principles of consolidation and basis of financial reporting:
The consolidated financial statements include the accounts of Grace Development,
Inc. and its wholly owned subsidiaries (collectively the "Company"). All
significant inter-company accounts and transactions have been eliminated. The
financial statements of the Predecessor are the accounts of New Millennium
Multimedia, Inc., a Georgia corporation ("NMM").
Cash and Cash Equivalents:
Cash and cash equivalents consist of cash and other highly liquid debt
instruments with an original maturity of three months or less.
Property and Equipment:
Property and equipment is carried at cost. Depreciation is computed using the
straight-line method based on estimated useful lives of the assets, generally
two to ten years. Asset classifications and estimated useful lives are as
follows:
Leasehold Improvements Life of lease
Furniture & Fixtures 10 years
Equipment & Software 2 - 7 years
Goodwill:
The Company amortizes goodwill on a straight-line basis over a period of five
years.
Revenue Recognition:
The Company recognizes revenues for internet services as they are earned. Some
customers pay an annual fee for Internet services and the revenues are
recognized on a straight-line basis over
F-10
<PAGE>
the service period. Deferred revenue represents the portion of unearned Internet
Service Fees. The Company recognized revenue for telecommunications services
based upon minutes of traffic processed and contracted fees.
Income Taxes:
Income taxes are based on the loss for financial reporting purposes and reflect
a current asset for the estimated taxes recoverable in the current year tax
return and changes in deferred taxes. Deferred tax liabilities and assets are
recognized for the estimated tax effects of temporary differences between
financial reporting and taxable income (loss) for the loss carry-forwards based
on currently enacted tax laws and rates. A valuation allowance is used to reduce
deferred tax assets to the amount that is more likely than not to be realized.
Use of Estimates:
The preparation of financial statements in conformity with Generally Accepted
Accounting Principles ("GAAP") requires management to make estimates and
assumptions that affect the reported amounts of certain assets, liabilities, and
disclosures including the allowance for doubtful accounts, useful lives and
recoverability of long-term assets. Actual amounts could differ from those
estimates. Any adjustments applied to estimates are recognized in the year in
which such adjustments are determined.
Advertising:
The Company expenses advertising as incurred. The advertising costs for the year
ended December 31, 1999 and 1998, respectively, were $141,113 and $3,073.
2. MERGER AND REORGANIZATION:
Avana Acquisition:
On May 5, 1999, NMM completed its acquisition of Avana Communications
Corporation ("Avana"). The acquisition was accounted for as a purchase pursuant
to Accounting Principles Board Statement No.16, "Business Combinations" ("APB
16") and the result of Avana's operations were included in the Company's 1999
consolidated statements of operation from the date of acquisition. Total
consideration included the issuance of 6,485,858 shares of Grace stock (97,824
shares of NMM stock later converted to Grace stock at a 66.3013:1 ratio), and
cash of $364,000. The stock was valued at $0.45 per share based upon an
independent valuation. As a result of the merger, the Company recorded goodwill
of approximately $533,000. Goodwill is being amortized on a straight-line basis
over five years. Additionally, NMM agreed to pay contingent consideration of up
to $100,000, based upon Avana maintaining 95% of the acquired customer base for
one year following closing. The Company will record a liability when the
contingency is resolved and consideration is issued or becomes issuable.
New Millennium Multimedia, Inc.:
On September 28, 1999 a wholly owned subsidiary of the Company merged with NMM.
The shareholders of NMM exchanged 100% of the outstanding stock of NMM in
exchange for shares of Grace stock. Each share of NMM common stock was exchanged
for 66.3013 shares of Grace
F-11
<PAGE>
common stock and a total of 66,246,933 shares of Grace common stock were issued
to NMM stockholders. The merger is intended to qualify as a tax-deferred
reorganization under Section 368(a) of the Internal Revenue Code.
The acquisition set out in the preceding paragraph was accounted for as the
reverse acquisition of Grace by an "accounting entity" consisting of NMM and its
wholly-owned subsidiary; Avana, because following the transaction the former
shareholders of NMM were in control of the Company. Accordingly, the financial
statements of the Company are the financial statements of the "accounting
entity" adjusted for the assumed acquisition of the net assets of Grace in
exchange for the issuance of Grace common stock outstanding before the
transaction. The net assets of the Predecessor are accounted for at their
historical cost. In accordance with purchase accounting principles pursuant to
APB 16, the Company accounted for the net assets of Grace, acquired at the fair
value of such net assets as of September 28, 1999. No goodwill was recorded as a
result of this transaction.
Pro forma Financial Statements (unaudited):
The following unaudited pro-forma statement of operations of Grace Development,
Inc. gives retroactive effect to the merger with Avana Communications, Inc. as
if it had occurred on January 1, 1999. This statement was prepared by management
based on historical financial information and may not be indicative of actual
results of operations that would have been achieved had the transaction taken
place at the date indicated.
For the Year Ended December 31, 1999:
<TABLE>
<CAPTION>
As Reported Adjustments Pro Forma
------------- ----------- -------------
<S> <C> <C> <C>
Revenues $ 679,415 $ 313,908 $ 993,323
Net Loss $ (3,095,092) $ (77,781) $ (3,172,873)
Earnings per Share $ (.07) $ (0.00) $ (.07)
For the Year Ended December 31, 1998:
Revenues $ -0- $ 833,509 $ 833,509
Net loss $ (20,741) $ (218,345) $ (239,086)
</TABLE>
Acquisitions:
On November 8, 1999 the Company acquired substantially all the business assets
of Rob Ballard and Sabrina Ballard d/b/a Northwest Georgia Internet for $160,000
in cash and 25,000 shares of the Company's common stock. The transaction was
accounted for as a purchase under APB 16. Goodwill of approximately $143,500 was
recorded as a result of this transaction. Goodwill is being amortized on a
straight-line basis over five years. Northwest Georgia Internet provides
Internet access, web hosting and web design to businesses and individuals
located in areas northwest of Atlanta, Georgia.
F-12
<PAGE>
3. INVESTMENTS IN CERTIFICATES OF DEPOSIT:
The Company accounts for its investments under Financial Accounting Standards
Board ("FASB") No. 115 "Accounting for Certain Investments in Debt and Equity
Securities". As of December 31, 1999 investments consisted of the following:
Maturity Date Interest Rate Amount
-------------- ------------- -----------
Certificate of Deposit March 24, 2000 4.4980% $ 2,000,000
Certificate of Deposit June 15, 2000 4.6890% 1,000,000
Certificate of Deposit July 29, 2000 5.2500% 700,000
-----------
$ 3,700,000
===========
These certificates of deposit are pledged against lines of credit (see Note 7).
4. ACCOUNTS RECEIVABLE:
The Company does not have a secured interest in its accounts receivable; however
it does have legal recourse for defaulted amounts. The maximum accounting loss
from the credit risk associated with accounts receivable is the face amount of
the receivable recorded, less any allowance for doubtful accounts.
5. NOTES RECEIVABLE:
On October 14, 1999, the Company executed a letter of intent to acquire 100% of
the outstanding stock of The Telephone Company of Central Florida ("TCCF") from
TCCF's parent company; Phoenix International Industries, Incorporated
("Phoenix"). During negotiations, the Company advanced $100,000 to TCCF, which
is guaranteed by the Chief Executive Officer of Phoenix. The Company has since
abandoned its efforts to acquire TCCF, and has commenced collection efforts. The
Company is uncertain that these efforts will be successful, therefore the
advance has been charged to operations as of December 31, 1999.
In December 1999, the Company advanced $250,000 to PVTelcom Enterprises,
Incorporated, for working capital purposes (the "Working Capital Advances") in
connection with negotiations to acquire the company. In December 1999, the
Company advanced an additional $184,500. The first advance is evidenced by a
note receivable dated November 1, 1999, and bears interest at 9% due annually.
At the closing of the acquisition, (see Subsequent Events Note 17) the
promissory note evidencing the Working Capital Advances was canceled and two
shareholders of P.V. Tel. delivered to the Company, promissory notes totaling
$450,000, in substitution therefore together with accrued interest. The
indebtedness, represented by these substituted promissory notes, is secured by
150,000 shares of Grace common stock owned by the two noteholders.
F-13
<PAGE>
6. COMMITMENTS AND CONTINGENCIES:
Concentrations of Credit Risk:
The Company maintains the majority of its cash deposits and investments at three
financial depository institutions. The amount of the accounting loss due to
credit risk the Company would incur if the financial depository institutions
failed would be the cash deposits in excess of the $100,000 amount per depositor
that is federally insured. The amount at risk totaled $3,500,000 at December 31,
1999.
Operating Leases:
The Company leases office space and equipment under several operating lease
agreements. Rent expense for the office space and equipment totaled $79,650 and
$ 0, for the years ended December 31, 1999 and 1998, respectively. At December
31, 1999 future minimum lease payments under non-cancelable leases having
remaining terms in excess of one year are as follows:
2000 $ 199,615
2001 188,712
2002 188,712
2003 188,712
2004 94,356
---------
$ 860,107
=========
Obligations Under Capital Lease:
The Company leases equipment under various capital lease obligations. $2,123,931
of the equipment is included in the property and equipment section of the
balance sheet. All of the equipment was acquired in 1999, and amortization was
$213,683 for the year ended December 31, 1999. The capitalized cost and
accumulated amortization at December 31, 1999 were as follows:
1999
-----------
Total Equipment Placed in Service $ 2,123,931
Accumulated amortization (201,603)
-----------
Book Value $ 1,922,328
===========
The future minimum lease payments under the capital leases at December 31, 1999:
2000 $ 1,055,599
F-14
<PAGE>
2001 946,424
2002 508,663
-----------
2,510,686
Less amount representing interest (537,882)
-----------
1,972,804
Less current portion (735,170)
-----------
$ 1,237,634
===========
Note Payable:
On April 26, 1999, the Company signed a $600,000 promissory note with Lucent
Technologies, Inc. ("Lucent"). Lucent advanced the Company $450,000 and made
available an additional $150,000 based on the Company's customer list. The note
bore interest at a rate of 10% per annum, payable monthly. The note was secured
with fixed assets of the Company. The Company repaid the note in total on
September 29, 1999.
7. LINES OF CREDIT:
The Company has a line of credit with the Bank of Tennessee to provide working
capital of up to $650,000. The interest rate is 7.25% per annum payable monthly.
The balance on the line of credit was $649,900 on December 31, 1999. The line of
credit is secured by a Certificate of Deposit and the line of credit matures on
July 29, 2000.
The Company has a line of credit with Regions Bank to provide working capital of
up to $2,000,000. The interest rate is 5.998% per annum payable monthly. The
balance on the line of credit was $1,999,659 on December 31, 1999. The line of
credit is secured by a Certificate of Deposit and the line of credit matures on
March 24, 2000.
The Company has a second line of credit with Regions Bank to provide working
capital of up to $1,000,000. The interest rate is 6.189% per annum payable
monthly. The balance on the line of credit was $424,780 on December 31, 1999.
The line of credit is secured by a Certificate of Deposit and the line of credit
matures on June 15, 2000.
8. PREFERRED STOCK:
The Company is authorized to issue 10,000,000 shares of preferred stock with no
par value. The preferred stock may be issued, by the Board of Directors, in one
or more series. The Board of Directors shall determine the distinguishing
features of each series including preferences, rights and restrictions, by
resolution upon the establishment of such series. No shares of preferred stock
had been issued as of December 31, 1999.
F-15
<PAGE>
9. INCOME TAXES:
The Company did not provide any current or deferred federal or state income tax
provision or benefit for any of the periods presented because it has experienced
operating losses since inception. The Company has provided a full valuation
allowance on the deferred tax asset, consisting primarily of net operating loss
carryforwards, because of uncertainty regarding its realizability. At December
31, 1999, the Company had net operating loss carryforwards of approximately
$6,400,000 related to federal, and state jurisdictions. Substantially all of
these carryforwards will begin to expire at various times starting in 2004.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets are approximately as follows:
<TABLE>
<CAPTION>
December 31,
------------
Predecessor
1999 1998
----------------------------------
<S> <C> <C>
Net operating loss carryforwards $ 1,820,000 $ 7,000
Allowance for doubtful account 4,000 -
Accumulated depreciation and amortization (92,000) -
----------- --------
Accrued officer compensation 255,000 7,000
=========== ========
1,987,000 -
=========== ========
Valuation allowance (1,987,000) (7,000)
=========== ========
Net deferred tax asset $ -0- $ -0-
=========== ========
</TABLE>
10. SEGMENT REPORTING:
The Company operates two business segments: Telecommunications sales and
services and Internet service including dial-up accounts, web hosting and web
design services.
December 31
-------------------------------------
1999 1998
------------ ---------
Revenues:
Telecommunications $ 261,662 $ -
Internet Services 417,753 -
------------ ---------
$ 679,415 $ -
Loss
Telecommunications $ (2,660,231) $ (20,741)
Internet Services (434,861) -
------------ ---------
F-16
<PAGE>
$ (3,095,092) $ (20,741)
Depreciation and Amortization:
Telecommunications $ 204,730 $ 506
Internet Services $ 136,682 -
------------ ---------
$ 341,412 $ 506
Identifiable Net Assets:
Telecommunications $ 1,438,733 $ 13,117
Internet Services 959,156
------------ ---------
$ 2,397,889 $ 13,117
11. PRIVATE PLACEMENTS:
During July 1999, NMM effected a private placement of shares of its common
stock. The shares were sold at $3.20 per share. For every three shares of NMM
common stock sold, warrants were issued to the purchaser, which gives the
purchaser the right to purchase two shares of Grace common stock at $4.50 per
share. In aggregate, 251,000 shares of NMM common stock and 167,292 warrants for
Grace common stock were issued for net proceeds of $777,600. All warrants expire
July 29, 2001. The shares of NMM common stock were converted to Grace common
stock at a ratio of 66.3013:1.
During September 1999, NMM effected a private placement of shares of its common
stock. The shares were sold at $23.34 per share. In aggregate, 150,356 shares of
NMM common stock were issued for net proceeds of $3,459,319. The shares were
converted to Grace stock at a ratio of 6.3013:1.
12. STOCK COMPENSATION:
NMM issued 387,500 shares of its common stock in consideration for services
rendered prior to the merger with Avana. The shares were valued at $174,375 and
a non-cash expense was recorded to the statement of operations. The shares were
converted to Grace common stock at a ratio of 66.3013:1.
13. STOCK WARRANTS:
On April 26, 1999, NMM entered into several capital lease agreements (Note 4)
and a secured note payable agreement (Note 5) with Lucent. As part of these
financing agreements, NMM issued a warrant to purchase a maximum of 200,000
shares of NMM stock at a price of $3 per share. In September 1999, Lucent
exercised the warrant and purchased 49,000 shares of NMM
F-17
<PAGE>
stock (later converted to 3,248,764 shares of Grace stock) for $147,000. The
warrants were valued at $0 based on the following assumptions:
Risk free interest rate 5.5%
Life 7 years
FMV of stock on date of grant $.45 per share
Volatility not applicable
On September 27, 1999, NMM paid Lucent $395,620 to cancel the remaining 151,000
warrants issued.
14. RELATED PARTY TRANSACTIONS:
The Company entered into an agreement with Falcon Consulting Company ("Falcon")
for consulting services and paid the company $200,000 for the year ended
December 31, 1999. Andrew Worden, President of Falcon, is a shareholder of
Grace.
Richard S. Granville, former Chairman of the Company, has personally guaranteed
certain debt of the Company.
[Consulting Agreement with Louis Friedman and fees for past transactions.]
15. STOCK OPTIONS:
The Company has not yet adopted a stock option plan but has awarded stock
options to directors, officers, and employees. The options vest over 2 years and
expire 120 days after vesting. At December 31, 1999, zero options were vested.
Weighted Average
Number of Options Exercise Price
Outstanding
December 31, 1998 0 n/a
Awarded 1,592,540 $1.00
--------- -----
Outstanding
December 31, 1999 1,592,540 $1.00
========= =====
The Company follows Accounting Principles Board Opinion 25, Accounting for Stock
Issued to Employees, to account for stock option and employee stock purchase
plans.
An alternative method of accounting for stock options is SFAS 123, Accounting
for Stock-Based Compensation. Under SFAS 123, employee stock options are valued
at grant date using the Black-Scholes valuation model, and compensation cost is
recognized ratably over the vesting period. Had compensation cost for the
Company's stock option and employee stock purchase plans been determined based
on the Black-Scholes value at the grant dates for awards, pro forma income
statements for 1999 would have been as follows:
As reported Adjustments Pro Forma
----------- ----------- ---------
Net Loss (3,095,092) (637,016) (3,732,108)
(.01) (.08)
F-18
<PAGE>
Earnings per share (.07)
The fair value of cash options are estimated on the date of the grant under the
following assumptions:
Risk free interest rate: 6.5%
Life: 4 years
Dividends: none
Volatility: 41%
Weighted average grant debt fair value: $0.40
16. ECONOMIC DEPENDENCY:
Commissions received from ICG Telecom Group, Inc. for leasing ICG's high speed
data and communications lines to the Company's customers were approximately
$222,000 and accounted for 33% of revenues for the year ended December 31, 1999.
17. SUBSEQUENT EVENTS:
Web Wizard, Inc. Acquisition:
In January 2000, a wholly owned subsidiary of Grace completed its acquisition of
Web Wizard, Inc. ("Web Wizard"). The acquisition will be accounted for as a
purchase pursuant to Accounting Principles Board Statement No.16, "Business
Combinations" ("APB 16") and the result of Web Wizard's operations will be
included in the Company's 2000 consolidated statements of operation from the
date of acquisition. Total consideration for the acquisition was the issuance of
1,287,554 shares of Grace stock. 257,510 of these shares will be held in escrow
until June 30, 2001, to benefit Grace in the event of any adverse claims arising
out of the purchase of Web Wizard.
As a result of the merger, the Company will record goodwill of approximately
$1,000,000. Goodwill will be amortized on a straight-line basis over five years.
Additionally, Grace issued 475,000 shares to former shareholders of Web Wizard
to extinguish certain pre-acquisition debt of Web Wizard to its shareholders.
P. V. Tel, Inc. Acquisition:
In February 2000, a wholly owned subsidiary of Grace completed its acquisition
of P.V. Tel, Inc. ("PVTel"). The acquisition will be accounted for as a purchase
pursuant to APB 16, and as a result, PVTel's operations will be included in the
Company's 2000 consolidated statements of operation from the date of
acquisition. Total consideration for the acquisition was the issuance of
2,150,000 shares of Grace stock. 750,000 of these shares will be held in escrow
until July 31, 2001, to benefit Grace in the event of any adverse claims arising
out of the purchase of PVTel.
Prior to the consummation of the P.V. Tel. Acquisition, the Company advanced to
P.V. Tel. approximately $450,000 for working capital purposes (the "Working
Capital Advances"), which advances were evidenced by a promissory note given by
P.V. Tel. to the Company. At the closing of the Acquisition, the promissory note
evidencing the Working Capital Advances were canceled and two shareholders of
P.V. Tel. delivered to the Company promissory notes in substitution thereof. The
indebtedness, represented by these substituted promissory notes, is secured by
150,000 shares of Grace common stock owned by the two noteholders.
Repayment of the notes is contingent upon the makers being afforded the right to
register their stock in any subsequent registration by the Company during the
term of the note, and as further defined in the Registration Rights Agreement.
The notes bear interest at the rate of 9% per annum payable upon maturity. In
the event that the makers are not afforded the opportunity to
F-19
<PAGE>
register their stock within the prescribed period, then the notes and all
obligations under the notes shall be cancelled and all secured interests will be
released.
The Company has not determined the amount of Goodwill that will be recorded as a
result of this transaction. Goodwill will be amortized on a straight-line basis
over five years.
Third Private Placement:
On March 1, 2000, the Company entered into a private placement agreement with
C&S Private Equity Fund, LP ("C&S)", pursuant to which the Company issued to C&S
14 units ("C&S Units") for $100,00 per C&S Unit (the "Third Private Placement").
Each C&S Unit consisted of (i) a $100,000 convertible senior secured note of the
Company and (ii) 150,000 shares of the Company's Common Stock. An aggregate of
2,100,000 shares of the Company's Common Stock were issued along with a
convertible senior secured note payable to C&S in the principal amount of
$1,400,000. The net proceeds of $1,363,000, were used for the purchase and
working capital requirements of WebWizard and P.V. Tel. The note is due March 2,
2001, and bears interest at a rate of 12% per year, payable quarterly. If the
note is not paid at maturity, interest will accrue on the unpaid principal and
interest at a rate of 18% per year, and C&S will have the right to convert the
unpaid principal and interest into shares of the Company's Common Stock at a
conversion price equal to the lesser of $1.00 per share or 50% of the average
closing price of a share of Common Stock during the last three trading days
prior to such conversion. The note is secured by: (i) all of the shares of
capital stock of WebWizard and P.V. Tel. owned by the Company; (ii) all of the
assets and properties of WebWizard and P.V. Tel.; and all of the Company's
right, title and interest in the accounts, contract rights and receivables of
WebWizard and P.V. Tel. Until the notes are paid in full or converted, the
Company may not, without written consent of C&S, (i) incur any indebtedness for
borrowed money that would obligate the Company to pay any portion of the
principal of such borrowings before the principal and interest on the notes have
been paid in full, and (ii) prepay or repurchase any indebtedness for borrowed
money. $1,420,000 of the net proceeds from the Fourth Private Placement were
used to repay all of the outstanding interest and principal on the note issued
in the Third Private Placement.
Additionally, the private placement agreement provides that, if the Company
acquires Alpha Computer Services, Inc., C&S shall have the option to purchase
from the Company, and the Company shall have the option to sell to C&S, within
14 days after the Company's acquisition of Alpha Computers, such number of C&S
&Units (not in excess of seven) as C&S shall designate and as the Company may
require. The purchase price of each such C&S Unit will be $100,000. On March 30,
2000, the Company acquired Alpha Computer. Neither the Company nor C&S exercised
its option with respect to seven C&S units for proceeds of $700,000.
All of the shares of the Company's Common Stock issued in the Third Private
Placement, and the shares issuable upon the conversion of the notes, as
"restricted securities" under Rule 144 promulgated under the Securities Act.
Such securities may not be sold in the absence of registration under the
Securities Act unless an exemption from registration is available, including the
exemptions contained in Rule 144. See "Item 1. Business--Restricted Securities
and Registration Rights" below for a summary of the exemptions available under
Rule 144.
Pursuant to the private placement purchase agreement, certain "demand"
registration rights were granted with respect to the shares issuable upon
conversion of the notes. Subject to certain conditions set forth in the private
placement purchase agreement, the demand registration rights require that, on or
before November 1, 2000, the Company file a registration statement on Form
F-20
<PAGE>
S-3 (or such other form as may be available) with the SEC for the public sale by
C&S of the shares of Common Stock issuable upon conversion of the Notes, and
that the Company use its best efforts to cause such registration statement to
become effective not later than the maturity date of the notes. Upon discharge
of the notes, the Company's obligation to file a registration statement and
cause it to become effective shall terminate. For each day after the maturity
date of the notes that such registration statement is not effective, the Company
shall pay C&S $0.01 times the number of shares then required to be covered by
such registration statement. Such amounts will be payable daily and will accrue
interest (payable daily) at the rate of 18% per year.
Stock Options:
On February 1, 2000, pursuant to a new two year Executive Employment Agreement,
the Company awarded Benjamin F. Holcomb options to purchase 4,500,000 shares of
the Company's Common Stock at $0.35 per share. As a result, the Company will
record a non-cash charge to operations in the first quarter of 2000.
Additionally the Company awarded 3,387,880 options to purchase the Company's
Common Stock to employees. The options are exercisable at prices ranging from
$1.00 to $3.25. The options vest over periods ranging from two to five years.
These options have not been ratified by the Board of Directors of the Company.
Line of Credit:
On January 21, 2000, the Company obtained a $1,000,000 line of credit from
Regions Bank. The interest rate is 9.0% per annum, payable monthly. The line of
credit originally matured on April 21, 2000, however, has been extended to March
24, 2001, and is secured by 500,000 shares of the Company's Common Stock that is
owned by Signal Compression, Inc. The line of credit is personally guaranteed by
Richard S. Granville.
Stock Compensation
On April 14, 2000 the Company amended and restated an employment agreement with
the President of the Company. The original agreement was ratified by the board
of directors on February 16, 2000. The amended agreement awarded a stock grant
of 1,000,000 shares of the Company's Common Stock as compensation for prior
services rendered, and 1,000,000 shares of restricted stock, which vests on
December 1, 2000, for future services to be rendered. Additionally the Company
accepted a promissory note in the amount of $141,800 from the President of the
Company to cover the income taxes associated with the stock grant.
On February 16, 2000 pursuant to a separation agreement the Company awarded
Louis Friedman 650,000 shares of the Company's common stock for prior services
rendered during 1999. The shares were valued at $260,000 and a non-cash expense
was recorded to the statement of operations for the year ended December 31,
1999. Additionally, the Company agreed to pay up to $150,000 to cover the taxes
associated with the stock grant.
F-21
<PAGE>
18. ADDITIONAL SUBSEQUENT EVENTS
Equipment Lease:
In March 2000, the Company entered into a lease with General Electric Capital
Corporation for approximately $3,500,000 of equipment and software that it has
acquired from Lucent Technologies, Inc. The lease term is for 36 months and has
a graduated payment schedule over the first six months. The lease has an
effective rate of 12.59% and will be treated as a Capital Lease in accordance
with Financial Accounting Standards Board Statement No. 13 ("SFAS #13"). The
lease contains a bargain purchase option at the end of the lease.
Fourth Private Placement
On April 14, 2000, the Company entered into a Securities Purchase
Agreement (the "Fourth Private Placement") with Greenlight Capital, L.P. and
certain affiliates of Greenlight (the "Purchasers") pursuant to which the
Company agreed to issue for an aggregate purchase price of $6.5 million, (a)
3,000,000 shares of Common Stock, (b) the Company's 12% senior secured
convertible promissory notes with an original principal amount of $6,500,000
(the "Greenlight Notes") convertible into shares of Common Stock at a conversion
price of $1.00 per share, (c) stock purchase warrants (the "Greenlight
Warrants") to purchase 6,500,000 shares of Common Stock at an exercise price of
$1.00 per share, and (d)(1) options, exercisable on August 14, 2000 and December
14, 2000 to purchase for an aggregate purchase price of $4.5 million on each
date, (A) 1,575,000 shares of Common Stock, (B) Notes with an original principal
amount of $2,925,000 convertible into shares of Common Stock at a conversion
price of $1.00 per share, and (C) Warrants to purchase 2,925,000 shares of
Common Stock at an exercise price of $1.00 per share, and (2) an option,
exercisable on April 14, 2001, to purchase for an aggregate purchase price of
$4.5 million, (A) 1,050,000 shares of Common Stock, (B) Notes with an original
principal amount of $2,925,000 convertible into shares of Common Stock at a
conversion price of $1.50 per share, and (C) Warrants to purchase 1,950,000
shares of Common Stock at an exercise price of $1.50 per share. The Greenlight
Note is guaranteed by all of the subsidiaries of the Company and is secured by
all of the issued and outstanding capital stock of all of the Company's
subsidiaries. $1,420,000 of the net proceeds were used to repay all of the
outstanding principal and interest on the note issued in the Third Private
Placement, and the remainder of the net proceeds will be used for the Company's
working capital requirements.
All of the shares of Common Stock issued pursuant to the Fourth Private
Placement, including any shares issued pursuant to the Greenlight Note, the
Greenlight Warrant and the Greenlight Option are "restricted securities" under
Rule 144 promulgated under the Securities Act. Such securities may not be sold
in the absence of registration under the Securities Act unless an exemption from
registration is available, including the exemptions contained in Rule 144. See
"Item 1. Business--Restricted Securities and Registration Rights" below for a
summary of the exemptions available under Rule 144.
Pursuant to a registration rights agreement executed at the closing of
the Fourth Private Placement, all of the shares of Common Stock issued pursuant
to the Fourth Private Placement, including any shares issued pursuant to the
Greenlight Note, the Greenlight Warrant and the Greenlight Option were granted
"demand" and "piggyback" registration rights. Subject to certain conditions set
forth in the registration rights agreement, the demand registration rights
require that, 30 days following the date on which the Company becomes eligible
to use Form S-3, the company use its reasonable best efforts to register the
applicable shares as soon as
F-22
<PAGE>
practicable. Subject to certain conditions set forth in the registration rights
agreement, the piggyback registration rights permit the holders of the covered
shares to include such shares in a registration by the Company when and if the
Company proposes to register any Common Stock under the Securities Act for sale
to the public on a form that would also permit the registration of the covered
shares (other that registrations on Form S-8 or S-4).
Alpha Computer Acquisition:
On March 30, 2000, the Company entered into an agreement and plan of merger for
the merger of Alpha Computer Services, Inc. ("Alpha Computer"), a Florida
corporation, with and into an indirect wholly owned subsidiary of the Company
(the "Alpha Computer Acquisition"). The Alpha Acquisition closed on March 31,
2000, with Alpha Computer becoming an indirect wholly owned subsidiary of the
Company. The acquisition will be accounted for as a purchase pursuant to
Accounting Principles Board Statement No.16, "Business Combinations" ("APB 16")
and the result of Alpha Computer operations will be included in the Company's
2000 consolidated statements of operation from the date of acquisition. Total
consideration for the acquisition was the issuance of 3,100,000 shares of Grace
stock. An additional 620,000 shares will be held in escrow until March 30, 2001,
to benefit Grace in the event of any adverse claims arising out of the purchase
of Alpha Computer
The Company has not determined how much goodwill will be recorded as a result of
this transaction. Goodwill will be amortized on a straight-line basis over five
years.
Line of Credit
The Company has a $2,000,000 line of credit with Regions Bank which matured on
March 24, 2000. The line of credit was extended to September 24, 2000.
F-23
<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-QSB 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).
E-1
<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.
10.19 Amended and Restated Executive Employment Agreement, dated April 14,
2000, between James M. Blanchard and Grace Development, Inc.
E-2
<PAGE>
10.20 Atlanta Commercial Board of Realtors Standard Commercial Lease
Agreement September 1997.
23.1 Consent of Smith & Radigan, Certified Public Accountants, LLC
27.1 Financial Data Schedule.
E-3
<PAGE>
Exhibit 2.1
NEW MILLENNIUM MULTIMEDIA, INC.
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is made and entered into this
5th day of May, 1999 by and among NEW MILLENNIUM MULTIMEDIA, INC., a Georgia
corporation having its principal place of business at 6131 Oakbrook Parkway,
Norcross, Georgia 30093 (hereinafter "New Millennium") and Linda Key, John
Youstin, Jr., Doug Corner and Eric Ranney (hereinafter jointly and severally
"Sellers") of AVANA COMMUNICATIONS CORPORATION, a Georgia corporation having its
principal place of business at 1155 Hammond Drive, Building D, Suite 4080,
Atlanta, Georgia (hereinafter "Avana").
W I T N E S S E T H
WHEREAS, Sellers own or have rights to all of the capital stock, and
interests therein, of Avana, and
WHEREAS, NEW MILLENNIUM wishes to buy, and Sellers wish to sell, subject to
the provisions of this Agreement, all right, title and interest in such capital
stock.
NOW, THEREFORE, in consideration of the mutual covenants, promises and
agreements contained herein, the parties agree as follows:
1. Purchase and Sale and License
-----------------------------
1.01. Purchase and Sale of Avana Shares. NEW MILLENNIUM agrees to acquire
----------------------------------
from Sellers and Sellers agree to transfer, assign, convey and deliver to NEW
MILLENNIUM at the Closing, all right, title and interest in and to an aggregate
of Sixty-Eight Thousand, One Hundred Seventy-Three (68,173) shares of capital
stock of Avana (hereinafter the "Avana Shares"), representing all of the current
issued and outstanding Avana Shares, in exchange for a total purchase price of
Four Hundred and Fifty Thousand Dollars ($450,000) and an aggregate Ninety-Seven
Thousand, Eight Hundred and Thirty (97,830) shares of common stock of NEW
MILLENNIUM (hereinafter the "NEW MILLENNIUM Shares"). Sellers shall receive a
number of NEW MILLENNIUM Shares as follows: Linda Key - 38,578 Shares, John
Youstin - 38,578 Shares, Doug Corner - 10,668 Shares, Eric Ranney - 10,000
Shares and the sum of Fourteen Thousand Dollars ($14,000) cash. Such exchange
is intended as an exchange exempt from registration under the Georgia Securities
Act of 1973 by virtue of Section 10-5-9(13) thereof. One Hundred Thousand
Dollars ($100,000.00) of the cash price specified above shall be contingent upon
retention of at least ninety-five percent (95%) of the aggregate number of
accounts currently serviced by Avana for one (1) year following the Closing
Date. Any account attrition above five percent (5%) of the total number of
accounts held as of the date of closing, which accounts are not replaced within
thirty (30) days, and which are not attributable to any negligence or fault of
NEW MILLENNIUM, shall reduce the deferred cash balance by Two Hundred Dollars
($200.00) per account. The deferred amount shall be payable on the anniversary
date of the Closing or immediately upon the sale by NEW MILLENNIUM of more than
twenty-five percent (25%) of the aggregate accounts previously serviced by
Avana, payable in proportionate shares based upon Avana Stock ownership to Linda
Key, John Youstin, Eric Ranney and Doug Corner. NEW MILLENNIUM Shares received
by Sellers shall not be subject to dilution in a future stock issue
<PAGE>
except in the same proportion as NEW MILLENNIUM Shares owned by Messrs.
Granville, Weed and Duffy.
1.02. Proprietary Rights. In addition to the shares exchanged pursuant to
-------------------
Section 1.01, effective at the Closing, Sellers hereby grant to NEW MILLENNIUM a
royalty-free, irrevocable, nonexclusive license (assignable by NEW MILLENNIUM or
any successor in interest to any of its business) to use all other intangible
assets of Sellers, including patents, patent applications, copyrights,
inventions, trade secrets, and other technical know-how, which at or prior to
Closing, Avana uses or has used in connection with its business or operations.
Such license, with respect to copyrighted works heretofore published by any of
the Sellers, is limited to a right to use consistent with such copyrights.
2. Closing
-------
Unless extended by NEW MILLENNIUM, the Closing of the transactions
contemplated hereby shall be held on May 5, 1999 at 2:30 p.m. at the Law Office
of Karen T. White, 3483 Satellite Boulevard, Suite 200, Duluth, Georgia, or as
shall otherwise be mutually agreed to in writing by the parties. The date on
which the Closing occurs is herein referred to variously as the "Closing Date"
and the "Closing."
2.01. Sellers. At or before the Closing, Sellers shall deliver or cause to
-------
be delivered to NEW MILLENNIUM:
(a) certificates representing the Avana Shares duly endorsed for transfer
and conveyance to NEW MILLENNIUM;
(b) a corporate resolution of the Board of Directors and stockholders of
Avana approving the transactions contemplated by this Agreement;
(c) the resignation of each officer and director of Avana, effective on
the Closing Date;
(d) a list of all accounts in which the funds or other assets of Avana are
deposited, and
(e) the corporate records, including the charter documents, minutes of
meetings and actions of the board of directors and minutes of meetings and
actions of the stockholders, the corporate seal and all books of accounts of
Avana.
2.02. NEW MILLENNIUM. At Closing, NEW MILLENNIUM shall deliver to the
---------------
respective Sellers a stock certificate in the name of each Seller representing
the number of NEW MILLENNIUM Shares described in Section 1.01;
3. Representations and Warranties of Avana and Sellers.
----------------------------------------------------
Except as set forth in the disclosure schedule delivered to NEW MILLENNIUM
on the date hereof, and signed by the President and Secretary of Avana (the
"Avana Disclosure Schedule"), the sections of which are numbered to correspond
to the subsection numbers of this Agreement, Avana hereby represents and
warrants to NEW MILLENNIUM as follows:
3.01. Organization, Qualification.
----------------------------
-2-
<PAGE>
(a) Avana is a corporation duly organized, validly existing and in good
standing under the laws of the State of Georgia. Avana has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as now being conducted and is duly qualified and in good
standing to do business in each jurisdiction in which the property owned, leased
or operated by it or the nature of the business conducted by it makes such
qualification necessary, except where the failure to have such power and
authority or to be so duly qualified and in good standing would not, in the
aggregate, have a material adverse effect on the business, operations or
financial condition of Avana. Avana has no assets, offices or operations
located in any place other than within the state of Georgia.
(b) Avana has delivered to NEW MILLENNIUM complete and accurate copies of
its Articles of Incorporation and Bylaws, each as amended, minutes of all its
directors' and shareholder meetings, and a shareholder list correctly setting
forth the record ownership as of the date of this Agreement of all outstanding
shares and all outstanding rights to purchase or convert into shares of the
stock of Avana.
3.02. Capitalization. As of the Closing Date, Avana shall have authorized
---------------
capital stock of 100,000 shares of Common Stock, without par value, of which
68,173 shares will be issued and outstanding as of such date. All such
outstanding shares of Avana capital stock have been duly authorized, validly
issued, fully paid and nonassessable and are not subject to preemptive rights
created by statute, the Articles of Incorporation or Bylaws of Avana or any
agreement to which Avana is a party or by which it is bound. As of the Closing
Date there will be no outstanding rights, warrants, options, agreements or
commitments giving anyone any right to require Avana to sell or issue any
capital stock or other securities. Between the date hereof and the Closing,
Avana will not, without the prior written consent of NEW MILLENNIUM, issue any
additional shares of stock, stock options, warrants, convertible notes or other
securities exercisable for or convertible into shares of equity securities of
Avana. The Avana Disclosure contains a listing of all outstanding shareholders
and persons holding rights to acquire any equity interest in Avana.
3.03. Subsidiaries. Avana does not have and has never had any subsidiaries
-------------
and does not directly or indirectly own any equity interest in, or any interest
convertible into or exchangeable for any equity or similar interest in, any
corporation, partnership, joint venture or other business association or entity.
3.04. Authority Relative to this Agreement. Avana has full corporate power
-------------------------------------
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby and thereby have
been duly and validly authorized by the Board of Directors, and as of the
Closing Date will have been duly and validly authorized by the shareholders of
Avana, and no other corporate proceedings on the part of Avana are necessary for
Avana to authorize this Agreement or to consummate the transactions contemplated
hereby and thereby. This Agreement has been duly and validly executed and
delivered by Avana. This Agreement constitutes the valid and binding agreement
of Avana, enforceable against Avana in accordance with its terms.
3.05. Consents and Approvals; No Violation. Except as may be required by
-------------------------------------
the Securities Act of 1933, as amended (the "Securities Act"), state securities
laws, and applicable corporate law, there is no requirement applicable to Avana
to make any filing with, or to obtain any permit,
-3-
<PAGE>
authorization, consent or approval of, any governmental or regulatory authority
as a condition to the lawful consummation by Avana of the transactions
contemplated by this Agreement. Avana does not know of any reason why any
required permit, authorization, consent or approval could not be obtained.
Neither the execution and delivery of this Agreement by Avana nor the
consummation by Avana of the transactions contemplated by this Agreement will
(a) conflict with or result in any breach of any provision of the Articles of
Incorporation or Bylaws of Avana, (b) result in a material breach or default (or
give rise to any right of termination, cancellation or acceleration) under any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
license agreement, lease or other material contract, instrument or obligation to
which Avana is a party or by which Avana or any of its assets may be bound, (c)
or violate in any material respect any statute, rule, regulation, order, writ,
injunction or decree applicable to Avana or any of its assets, or (d) result in
the creation of any material (individually or in the aggregate) liens, charges
or encumbrances on any of the material assets of Avana.
3.06. Financial Statements of Avana. Avana has delivered to NEW MILLENNIUM
------------------------------
(i) an unaudited balance sheet of Avana as of March 31, 1999, and an unaudited
statement of operations, stockholders' equity and cash flows for the fiscal
years ended December 31, 1998 (the "Avana Financials"). Said Financials shall be
updated within thirty (30) days following the completion of each fiscal quarter
between the date of execution and Closing. The Avana Financials have been
prepared in accordance with generally accepted accounting principles, applied on
a consistent basis throughout the periods covered by such statements. The Avana
Financials, with any notes thereto, are in accordance with the books and records
of Avana and present fairly Avana's financial position and results of operations
and cash flows as of the dates and for the periods indicated therein.
3.07. Undisclosed Liabilities. Avana does not have any material
------------------------
liabilities, whether absolute, accrued, contingent or otherwise, and whether due
or to become due, except for those liabilities which (i) are accrued or fully
reserved against in the balance sheet of the Avana Financials; or (ii) are of a
normally recurring nature and were incurred after December 31, 1998 in the
ordinary course of business consistent with past practice. Section 3.07 of the
Avana Disclosure Schedule lists all liabilities of Avana incurred after December
31, 1998 which are of a type required to be disclosed or reflected in financial
statements and which either (A) are not in the ordinary course of business, or
(B) exceed $5,000 with respect to any single transaction or single series of
related transactions. NEW MILLENNIUM acknowledges disclosure of potential
liability of Avana to MCI-WorldCom, Inc.
3.08. Absence of Changes. Since March 31, 1999, there has not been:
-------------------
(a) any material adverse change in the business, assets, liabilities,
financial condition, results of operations or prospects of Avana taken as a
whole;
(b) any material damage, destruction or casualty loss, whether or not
covered by insurance, to any. assets or properties of Avana that amounts to more
than $5,000 in the aggregate;
(c) any increase in the compensation payable or to become payable by Avana
to its employees (other than adjustments consistent with prior practice) or any
increase in any bonus, insurance, pension or other employee benefit plan or
program, payment or arrangement (other
-4-
<PAGE>
than adjustments consistent with prior practice) made to, for or with any such
directors, officers or employees except as contemplated by this Agreement;
(d) any termination or notification of intended termination of a
relationship with any material customer or supplier of Avana;
(e) any entry by Avana into any commitment or transaction exceeding $5,000
in any instance (including, without limitation, any borrowing or capital
expenditure;
(f) any material change by Avana in accounting methods, principles or
practices;
(g) any repurchase or retirement of any securities of Avana, or any
declaration, payment or setting aside for payment of any dividend or other
distribution (whether in cash, stock or property) with respect to the capital
stock of Avana;
(h) any act, omission or event which would be prohibited after the date of
this Agreement under Section 4.1 hereof;
(i) any sales returns or allowances not adequately provided for by the
reserve in the Unaudited Financial Statements;
(j) recognition of revenue on any transaction where a substantial or
contingent right of return exists; or
(k) any agreement, whether in writing or otherwise, to take any action
described in this Section 3.08.
3.09. Properties and Inventories. Avana has good and marketable title to,
---------------------------
valid leasehold interests in or other valid right to use all of the material
assets used in its operations or necessary for the conduct of its business,
subject to no security interests, licenses, encumbrances, restrictions or
adverse claims, except as disclosed in the notes to the Avana Financials and
except for any lien for taxes not yet due and payable and except for any
statutory liens for which payment is not delinquent.
3.10. Real Property. Section 3.10 of the Avana Disclosure Schedule
--------------
contains a list and description of all real property owned and all real property
leased by Avana. Prior to the Closing, Avana will provide NEW MILLENNIUM with
copies of all of the referenced leases. Avana has either fee simple title or
enforceable leasehold interests in all property shown in the Avana Disclosure
Schedule.
3.11. Insurance. Avana has fire, casualty and general liability insurance
----------
policies, with extended coverage (subject to deductibles) sufficient to cover
the material assets, properties and business of Avana. All such policies
maintained by Avana are identified in Section 3.11 of the Avana Disclosure
Schedule. Prior to the Closing, Avana will make copies of each of such policies
available to NEW MILLENNIUM. Avana has not, to its knowledge, done anything by
way of action or inaction which might invalidate any of such policies in whole
or in part.
3.12. Litigation. Except as set forth in Section 3.12 of the Avana
-----------
Disclosure Schedule, Avana is not engaged in, nor has it been threatened with,
any material litigation (which for this
-5-
<PAGE>
purpose shall mean a potential liability in excess of $5,000 or potential
liabilities in the aggregate in excess of $5,000), arbitration, investigation or
other legal proceeding relating to Avana or its business, property or employee
benefit plans or policies, nor, to the knowledge of Avana, is there any valid
basis for any such proceeding.
3.13. Purchase, Sale and Other Agreements.
------------------------------------
(a) All of the following (whether written or oral) to which Avana is a
party or to which Avana is subject are identified in Section 3.13 of the Avana
Disclosure Schedule:
(i) every contract or agreement for the purchase by Avana of
inventory, supplies, equipment or other real or personal property, or the
procurement of services, except individual purchase orders, or aggregate
purchase orders to a single vendor, involving payments of less than $1,000;
(ii) lease of equipment, machinery or other personal property
involving aggregate annual payments in excess of $1,000;
(iii) contract or agreements for the sale or lease of products or
furnishing of services by Avana, except individual purchase orders, or aggregate
purchase orders from a single customer, involving payments of less than $1,000;
(iv) joint venture, partnership or other contract or arrangement
involving the sharing of profits;
(v) contract or agreement, other than in the ordinary course of
business, relating to the purchase or acquisition, by merger or otherwise, of a
significant portion of the business, assets or securities of Avana by any other
person or of any other person by Avana;
(vi) contract or agreement containing a covenant or covenants which
purport to limit to a material extent the ability or right of Avana to engage in
any lawful business activity or compete with any person or entity; or
(vii) material contract or agreement not otherwise described in this
Section 3.13 which is not terminable by and without penalty to Avana within six
months after the date of this Agreement.
(b) A complete and accurate copy of each written contract, agreement and
other document identified in Section 3.13 of the Avana Disclosure Schedule will
be made available to NEW MILLENNIUM prior to the Closing. Each contract,
agreement or arrangement identified in Section 3.13 of the Avana Disclosure
Schedule is, except to the extent fully performed at the date hereof, in full
force and effect and valid and binding in accordance with its terms in all
material respects; there is no material default under any such material
contract, agreement or arrangement; and no party to any such contract, agreement
or arrangement has notified Avana that it intends to cancel, withdraw, modify or
amend such contract, agreement or arrangement.
3.14. Licenses, Trademarks, Patents and Other Rights. To the best of
-----------------------------------------------
Avana's knowledge, Avana owns, is licensed or otherwise entitled to use, or can
obtain the right to use on a basis which is commercially reasonable, all
patents, trademarks, trade names, service marks, copyrights, if any, and other
proprietary rights, necessary to the business of Avana as currently
-6-
<PAGE>
conducted or as contemplated by its current business plan. Section 3.14(a) of
the Avana Disclosure Schedule lists all Avana patents and registered trademarks,
trade names and service marks and copyrights, and applications for any of the
foregoing, and all licenses, the subject matter of which is incorporated into
any Avana product, to which Avana is a party (the "Avana Intellectual
Property"), other than licenses to readily available commercial software. Except
as set forth in Section 3.14(b) of the Avana Disclosure Schedule, no claims
(including any request to enter into a license agreement) have been asserted or
threatened by any person (i) to the effect that any activity in which Avana is
engaged infringes on any patents or other proprietary rights, (ii) against the
use by Avana of any trademarks, trade names, technology, know-how or processes
necessary for the operation of the business of Avana as currently conducted or
presently contemplated, or (iii) challenging or questioning the validity or
effectiveness of any of the Avana Intellectual Property; and Avana is not aware
of any valid basis for any such claim. To the best of its knowledge, no party is
infringing the Avana Intellectual Property.
3.15. Employees.
----------
(a) Section 3.15(a) of the Avana Disclosure Schedule identifies all
consulting or employment agreements and other agreements with individual
consultants or employees to which Avana is a party and which are either
currently effective or will become effective at the Closing, as well as any
employee handbooks, policy manuals and job application forms used by Avana.
Copies of all such written agreements will be delivered to NEW MILLENNIUM prior
to the Closing. Also shown on Section 3.15(a) of the Avana Disclosure Schedule
are the names and dates of hire of each full-time employee of Avana and as of
April 1, 1999, each such person's base salary (excluding sales commissions and
bonuses) and accrued vacation pay. No officer, manager or other key employee of
Avana has notified Avana of an intention to terminate employment or to seek a
material change in his terms of employment, except as identified in the Avana
Disclosure Schedule.
(b) Section 3.15(b) of the Avana Disclosure Schedule contains a complete
list of "Plans" consisting of each employment, severance or other similar
contract, arrangement or policy (written or oral) and each plan or arrangement
(written or oral) providing for insurance coverage, workers' compensation,
disability benefits, supplemental unemployment benefits, vacation benefits,
retirement benefits or deferred compensation, profit sharing, bonuses, stock
options, stock appreciation rights, stock purchases or other forms of incentive
compensation or post-retirement insurance, compensation or benefits which is
maintained or administered by Avana, or to which Avana contributes, and which
covers any employee or former employee of Avana or under which Avana has any
liability, including" employee welfare benefit plan," "employee benefit plan"
and "employee pension benefit plan" as defined under ERISA;
(c) With respect to the Plans, Avana shall deliver to NEW MILLENNIUM
prior to the Closing, a copy of each Plan and any amendment(s) thereto, together
with (i) any written descriptions or summaries thereof, (ii) all trust
agreements, insurance contracts, annuity contracts or other funding instruments,
and (iii) the last two annual reports (IRS Form 5500 Series, together with all
required schedules) prepared in connection with any such Plan. The Plans comply,
to the extent applicable, with the requirements of ERISA and the Code, and any
Plan intended to be qualified under Section 401(a) of the Code has been
determined by the Internal Revenue Service (the "IRS") to be so qualified;
-7-
<PAGE>
(d) Section 3.15(d) of the Avana Disclosure Schedule identifies all
collective bargaining agreements to which Avana is a party or by which Avana is
bound. There are no strikes or labor disputes or lawsuits, unfair labor or
unlawful employment practice charges, contract grievances or similar charges or
actions pending or threatened by any of the employees, former employees or
employment applicants of Avana that could have a material adverse effect on
Avana.
(e) To Avana's knowledge, no employee of Avana is obligated under any
agreement or judgment that would conflict with such employee's obligation to use
his best efforts to promote the interests of Avana or would conflict with
Avana's business as conducted or proposed to be conducted. To Avana's
knowledge, no employee of Avana is in violation of the terms of any employment
agreement or any other agreement relating to such employee's relationship. with
any previous employer and no litigation is pending or threatened with regard
thereto.
3.16. Borrowing and Guarantees. Section 3.16 of the Avana Disclosure
-------------------------
Schedule identifies all agreements and undertakings pursuant to which Avana (a)
is borrowing or is entitled to borrow any money, (b) is lending or has committed
itself to lend any money, or (c) is or may become a guarantor or surety with
respect to the obligations of any person. Complete and accurate copies of all
such written agreements will be delivered to NEW MILLENNIUM prior to the
Closing.
3.17. Bank Accounts and Powers of Attorney. Section 3.17 of the Avana
-------------------------------------
Disclosure Schedule identifies all bank and credit card accounts used in
connection with the operations of Avana whether or not such accounts are held in
the name of Avana and lists their respective signatories, and lists the names of
all persons holding a power of attorney from Avana and summarizes the terms
thereof.
3.18. Compliance with Contracts. Avana has performed all material
--------------------------
obligations required to be performed by it as of the date of this Agreement
under each material contract, obligation, commitment, agreement, undertaking,
arrangement or lease referred to in this Agreement or the Avana Disclosure
Schedule and has not received any notice that it is in default thereunder. To
its knowledge no other party is in default under such material agreements. The
Merger and the actions contemplated thereby will not conflict with or result in
a breach of the terms, conditions or provisions of any such material agreement
or cause any acceleration of maturity of any such material agreements.
3.19. Compliance with Laws. Avana has substantially complied with all
---------------------
laws, regulations, judgments, decrees or orders of any court or governmental
agency or entity applicable in any material respect to the conduct of its
business.
3.20. Taxes. All United States, foreign, state and local tax returns and
------
reports (collectively "Returns") required to be filed to date with respect to
the operations of Avana have been accurately prepared in all material respects
and duly filed, or an extension therefrom has been duly obtained, and, except
for Taxes contested in good faith and disclosed in Section 3.20 of the Avana
Disclosure Schedule, all Taxes payable have been paid when due; there is no
examination or audit known to Avana or any claim, asserted deficiency or
assessment for additional Taxes in progress, pending, or threatened, nor to the
knowledge of Avana is there any reasonable basis for the assertion of any such
claim, deficiency or assessment; no material special charges, penalties, fines,
liens, or similar encumbrances have been asserted against Avana with respect to
payment of or failure to pay any Taxes which have not been paid or resolved
without further liability to
-8-
<PAGE>
Avana. Avana has not executed or filed with any taxing authority any agreements
extending the period for assessment or collection of any Taxes. Proper amounts
have been withheld by Avana from its employees' compensation payments for all
periods in compliance with the tax withholding provisions of applicable federal
and state laws. Avana is not a party to any tax-sharing or tax-allocation
agreement, nor does Avana owe any amounts under any tax-sharing or tax-
allocation agreement. As used in this Agreement, "Taxes" means all taxes,
however denominated, imposed by any federal, territorial, state, local or
foreign government or any agency or political subdivision of any such
government, which taxes shall include, without limiting the generality of the
foregoing, all income or profits taxes (including but not limited to, federal
income taxes and state income taxes), payroll and employee withholding taxes,
unemployment insurance, social security taxes, sales and use taxes, ad valorem
taxes, excise taxes, franchise taxes, gross receipts taxes, business license
taxes, occupation taxes, real and personal property taxes, stamp taxes,
environmental taxes, transfer taxes, workers' compensation, Pension Benefit
Guaranty Corporation premiums and other governmental charges, and other
obligations of the same or of a similar nature to any of the foregoing, which
are required to be paid, withheld or collected.
3.21. Transactions with Associates of Management. Except as otherwise
-------------------------------------------
disclosed herein, no executive officer or director of Avana has, either directly
or indirectly through another entity, any material interest in any property or
assets of Avana (except as a shareholder). It is hereby acknowledged that Linda
Key is a principal of Key Computers, Inc., which is an equipment lessor to
Avana.
3.22. Accounts Receivable. All accounts receivable reflected on the
--------------------
balance sheet of Avana as of December 31, 1998 are bona fide, arose in the
ordinary course of business in the aggregate amount thereof.
3.23. Investment Banking and Finder Fees. Avana has not incurred nor will
-----------------------------------
incur any obligation for investment banking or finder fees in connection with
this Agreement or the transactions contemplated hereby.
3.24. Investment Representations. Sellers understand and acknowledge that
---------------------------
the NEW MILLENNIUM Shares will not be registered under the Securities Act nor
qualified under the securities law of Georgia, by virtue of exemptions thereto.
Each of the Sellers (either alone or in conjunction with his or her professional
advisers) has such experience and knowledge in investment, financial and
business matters in investments similar to the stock of the NEW MILLENNIUM that
they are capable of protecting their own interest in connection therewith and
qualifying for such exemptions. Further, each Seller is acquiring the NEW
MILLENNIUM Shares for investment purposes only for Seller's own account, and not
on behalf of any other person nor with a view to, or for resale in connection
with any distribution thereof. Sellers understand that the certificates
representing the NEW MILLENNIUM Shares will be stamped with a legend
substantially in the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SECURITIES")
HAVE BEEN ISSUED AND SOLD IN RELIANCE UPON EXEMPTIONS FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933 (THE "1933 ACT")
AND SECTION 10-5-9(13) OF THE OFFICIAL CODE OF GEORGIA ANNOTATED
(THE "GEORGIA CODE"). THE SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD OR TRANSFERRED OTHER THAN (I) PURSUANT TO AN EFFECTIVE
REGISTRATION OR AN EXEMPTION THEREFROM UNDER THE 1933 ACT AND THE
GEORGIA CODE AND (II) UPON RECEIPT BY THE ISSUER OF EVIDENCE
SATISFACTORY TO IT OF COMPLIANCE WITH THE 1933 ACT, THE
-9-
<PAGE>
GEORGIA CODE AND THE APPLICABLE SECURITIES LAWS OF ANY OTHER
JURISDICTION. THE ISSUER SHALL BE ENTITLED TO REQUIRE AN OPINION
OF COUNSEL SATISFACTORY TO IT WITH RESPECT TO COMPLIANCE WITH THE
ABOVE LAWS.
3.25. Tax sequences. Although the exchange of shares and subsequent
--------------
liquidation of Avana contemplated by this Agreement, which liquidation shall be
completed as promptly as commercially feasible following the Closing, is
intended to be a "tax free reorganization" pursuant to Section 368(a)(1)(C) of
the Internal Revenue Code of 1986, as amended, and in reliance in part on
Revenue Ruling 67-274, Seller understands that no assurance is given by NEW
MILLENNIUM that such transaction shall be deemed by the Internal Revenue Service
to be a transaction upon which no gain or loss is recognized. Each Seller
assumes the obligation for the payment of taxes, if any, related to any gain or
loss to such Seller as a result of the transactions contemplated by this
Agreement.
4. Representations and Warranties of NEW MILLENNIUM.
-------------------------------------------------
NEW MILLENNIUM hereby represents and warrants to the Sellers as follows:
4.01. Capitalization. The authorized capital stock of NEW MILLENNIUM
---------------
consists of One Million (1,000,000) shares of common stock, of which Four
Hundred and Thirty-Six Thousand (436,000) shares are issued and outstanding, all
of which outstanding shares are duly authorized, validly issued, fully paid and
nonassessable. In addition, NEW MILLENNIUM has agreed to issue warrants to
equipment suppliers to NEW MILLENNIUM covering an aggregate of 200,000 shares of
common stock. NEW MILLENNIUM has no other outstanding subscriptions, warrants,
options, rights, agreements or arrangements to issue its capital stock or other
securities. NEW MILLENNIUM is under no obligation to purchase, redeem or
otherwise acquire any of its securities.
4.02. Issuance and Delivery of NEW MILLENNIUM Shares. The issuance and
-----------------------------------------------
delivery of the NEW MILLENNIUM Shares has been duly authorized, and such shares,
when issued and delivered in accordance with the terms of this Agreement, shall
be duly authorized, validly issued, fully paid and nonassessable.
4.03. Organization. NEW MILLENNIUM (a) is a corporation (i) duly
-------------
organized, validly existing and in good standing under the laws of the State of
Georgia, and (ii) duly qualified and in good standing as a foreign corporation
in each state in which it does business, except where the failure to so qualify
would not have a materially adverse effect on its business or assets, and (b)
has the corporate power and authority to own its properties and to carry on its
business as now being conducted.
4.04. Authority, Binding Agreement. This Agreement has been approved by
-----------------------------
the Board of Directors of NEW MILLENNIUM. No consents, authorizations or
approvals, whether of a governmental agency or instrumentality or otherwise, are
necessary in order to enable NEW MILLENNIUM to enter into and perform this
Agreement. This Agreement constitute legal, valid and binding obligations of NEW
MILLENNIUM and is enforceable against NEW MILLENNIUM in accordance with its
terms.
4.05. Litigation. There is no suit, action or other legal or
----------
administrative proceeding pending or threatened against NEW MILLENNIUM, and to
its knowledge, no circumstances exist
-10-
<PAGE>
or have occurred which may lead to any suit, action, proceeding or investigation
which could materially and adversely affect its business, assets or financial
condition. NEW MILLENNIUM has received no notice from any federal, state or
local governmental agency asserting any violation by NEW MILLENNIUM of any law,
ordinance or regulation.
4.06. Special Shareholders' Meeting. There shall be a specially called
------------------------------
meeting of the shareholders of NEW MILLENNIUM to be held ten (10) days after
closing for the purpose of amending the corporate Bylaws to increase the number
of Directors to four (4), and to vote upon the nomination of Seller John
Youstin, Jr. to the Board of Directors.
5. Conditions to the Closing.
--------------------------
The obligations of the parties hereunder are subject to the satisfaction at
or by the Closing of each of the conditions set forth below. Any of such
conditions may be waived by the other party but only in writing.
5.01. Compliance with Terms. On the Closing Date, all the terms,
----------------------
conditions and covenants of this Agreement to be complied with and performed by
the respective parties shall have been complied with and performed in all
material respects.
5.02. No Material Change in Avana. There shall be no material change in
----------------------------
the business, assets, liabilities or financial condition of Avana from that set
forth in Schedule 3 hereto; and there shall be no significant change in the
personnel of Avana, except for the hiring of such personnel by NEW MILLENNIUM
and such other actions as NEW MILLENNIUM shall have consented to in writing.
5.03. Employment Agreements. John Youstin, Jr. and Linda Key shall each
----------------------
have executed and delivered an employment contract in the form attached hereto
as Schedule 5.04.
5.04. Opinions of Counsel. At or before the Closing:
--------------------
a) NEW MILLENNIUM shall have received an opinion of counsel for Avana,
dated as of the Closing, to the effect that:
(i) Avana is a corporation duly organized, validly existing and in
good standing under the laws of the State of Georgia, and has the corporate
power and authority to own its properties and to carry on its business as now
being conducted. To the knowledge of such counsel, Avana is duly qualified and
in good standing as a foreign corporation in each state in which it does
business, except where the failure to so qualify would not have a materially
adverse effect on its business or assets.
(ii) No consents, authorizations or approvals, whether of Avana
(other than the approvals provided for herein), governmental agencies or
instrumentalities or otherwise, are necessary in order to enable Sellers to
enter into and perform this Agreement. This Agreement constitute legal, valid
and binding obligations of the Sellers and is enforceable against the Sellers in
accordance with its terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting enforcement of creditors' rights generally or by principles governing
the availability of equitable remedies.
-11-
<PAGE>
(iii) Based in part on the representations of NEW MILLENNIUM, the
transfer and conveyance of the Avana Shares and the issuance and delivery of the
NEW MILLENNIUM Shares, in each case pursuant to the terms of this Agreement, is
exempt from registration or qualification under any "Blue Sky," securities or
similar laws of the state of Georgia by virtue of exemptions thereto.
b) Avana shall have received an opinion of counsel for NEW MILLENNIUM,
dated as of the Closing, to the effect that:
(i) NEW MILLENNIUM is a corporation duly organized, validly existing
and in good standing under the laws of the State of Georgia, and has the
corporate power and authority to own its properties and to carry on its business
as now being conducted. To the knowledge of such counsel, NEW MILLENNIUM is duly
qualified and in good standing as a foreign corporation in each state in which
it does business, except where the failure to failure to so qualify would not
have a materially adverse effect on its business or assets.
(ii) All corporate and other actions required to be taken by or on
the part of NEW MILLENNIUM to authorize it to enter into and perform this
Agreement have been duly taken. No consents, authorizations or approvals,
whether of governmental agencies or instrumentalities or otherwise, are
necessary in order to enable NEW MILLENNIUM to enter into and perform this
Agreement. This Agreement constitute legal, valid and binding obligations of NEW
MILLENNIUM and is enforceable against NEW MILLENNIUM in accordance with its
terms, except as such enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting enforcement of
creditors' rights generally or by principles governing the availability of
equitable remedies.
(iii) based in part on the representations of the Sellers, the
transfer and conveyance of the Avana Shares and the issuance and delivery of the
NEW MILLENNIUM Shares, in each case pursuant to the terms of this Agreement, is
exempt from registration under the Securities Act of 1933, as amended, by virtue
of Section 4(2) thereof and from the qualification requirements of the
securities law of Georgia.
5.05. Escrow. The principals of Avana have executed personal guarantees
-------
regarding certain accounts. NEW MILLENNIUM shall establish an escrow of Thirty-
Eight Thousand Dollars ($38,000.00) to ensure payment on said personal
guarantees.
6. Covenants
---------
6.01. Waiver. Each of the Sellers hereby waives any claim or cause of
-------
action such Seller may have against Linda Key and John Youstin, Jr. based on a
claim that the consideration for the NEW MILLENNIUM Shares, as initially
negotiated by him on behalf of Sellers, was insufficient or otherwise
inadequate.
6.02. Right of First Refusal. No Seller (nor any estate of a Seller, in
-----------------------
the event of a Seller's death) shall dispose of any of his or her NEW MILLENNIUM
Shares, until such Seller shall have first offered, for a period of thirty (30)
days, to sell such shares to NEW MILLENNIUM at the same sales price and terms of
payment. If NEW MILLENNIUM does not purchase all of the shares offered before
the expiration of the foregoing 30 day period, then such Seller may dispose of
such shares in any lawful manner during a period of one hundred and eighty (180)
days following the
-12-
<PAGE>
end of such notice period, except that such Seller shall not sell any shares to
any other person at a lower price or upon more favorable terms than those
offered to NEW MILLENNIUM. The foregoing rights of first refusal shall terminate
upon the closing of an underwritten public offering of NEW MILLENNIUM Common
Stock pursuant to a registration statement under the Securities Act.
Each Seller understands that the certificates representing the NEW
MILLENNIUM Shares shall bear a legend substantially as follows:
The transfer, sale, assignment, encumbrance, or alienation of the
shares represented by this certificate is restricted by a "right
of first refusal" provision in favor of the issuer contained in a
stock purchase agreement among the issuer and certain of its
shareholders, dated April 27, 1999. A copy of such agreement is
available for inspection during normal business hours at the
principal executive office of the issuer. All terms and
conditions of such restrictive provision are incorporated herein
by reference.
Any transfer, sale, assignment, encumbrance, or alienation of any NEW
MILLENNIUM Shares (voluntarily or involuntarily) other than according to the
terms of this Section 6.02 is void.
6.03. Non-Competition Agreement. Those Sellers who are not offered
--------------------------
employment with NEW MILLENNIUM, or if offered, decline same, covenant and agree
that they shall not enter into competition with NEW MILLENNIUM as part of their
consideration for the transaction. Prior to closing, each such Seller shall
have executed and delivered a non-competition contract in the form attached
hereto as Schedule 6.03.
7. Miscellaneous.
--------------
7.01. Other Documents. Sellers shall, at any time after the Closing upon
----------------
the request of NEW MILLENNIUM, execute and deliver to NEW MILLENNIUM such
documents or instruments of conveyance, license or assignment or take such other
action as is reasonably necessary to complete the transfer of the Avana Shares
or other transactions contemplated by this Agreement or to perfect the interest
of NEW MILLENNIUM therein. Further, the parties agree to take all actions and
file such documents required to comply with Georgia securities laws, including
the filing any notices as contemplated by Section 1.01.
7.02. Costs. Except as otherwise specifically provided herein, NEW
------
MILLENNIUM shall pay the Closing costs and transfer cost applicable to this
Agreement and the transfer of NEW MILLENNIUM Shares hereunder. Each party
hereto shall bear the costs of their respective counsel and all other legal fees
and costs related thereto. Both NEW MILLENNIUM and Sellers each hold the other
harmless from any obligation for the payment of any finders fees or commissions
in connection with the transactions contemplated by this Agreement as a result
of any action of the indemnifying party.
7.03. Invalidity, Modification and Waiver. If any provision of this
------------------------------------
Agreement shall be held to be invalid or void, the remaining provisions shall
nevertheless remain in effect. No provision of this Agreement may be modified
and the performance or observance thereof may not be waived except by written
agreement of the parties affected thereby. No waiver of any violation or
nonperformance of any provision of this Agreement shall be deemed to be a waiver
of any subsequent violation or nonperformance of the same or any other provision
of this Agreement.
-13-
<PAGE>
7.04. Disputes, Choice of Law. This Agreement, the performance of the
------------------------
parties hereunder and any disputes related hereto shall be governed by the laws
of the state of Georgia and subject to the exclusive jurisdiction of the courts
therein. If either party shall initiate a legal proceeding to enforce its
rights hereunder, the prevailing party in such legal proceedings shall be
entitled to recover from the other party all costs, expenses and reasonable
attorney's fees incurred in connection with such proceedings.
7.05. Abandonment. If this Agreement shall fail to Close as provided for
------------
in Section 2 as a result of a failure of any of the conditions precedent set
forth in Section 5, all further obligations of the parties hereto under this
Agreement shall terminate without further liability, and each party shall bear
its own costs incident to the negotiation, preparation and anticipated Closing
of this Agreement. In such event, each party shall return any data, material or
assets of the other party received by it in contemplation of the Closing.
7.06. Entire Agreement. This Agreement is and represents the entire
-----------------
agreement between the parties hereto with respect to the subject matter hereof
and supersedes any prior or contemporaneous discussions or agreements related
thereto.
7.07. Counterparts. This Agreement may be executed in two or more
-------------
counterparts, all of which shall be originals and enforceable, and together
shall constitute a single agreement.
7.08. Time is of the Essence. Time is of the essence as to all provisions
-----------------------
of this Agreement.
7.09. Number and Gender. Whenever required by the context, the singular
------------------
number shall include the plural and the masculine gender shall include the
feminine and the neuter.
7.10. Headings. Headings of sections, subsections, and paragraphs in this
---------
Agreement are for convenience only and neither limit nor amplify the provisions
of this Agreement.
-14-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized representative as of the date first
written above.
NEW MILLENNIUM MULTIMEDIA, INC AVANA COMMUNICATIONS CORPORATION
By /s/ Richard S. Granville, III By /s/ Linda Key
------------------------------------ --------------------------------
President President
By /s/ M. Alan Weed By /s/ John Youstin Jr.
------------------------------------ --------------------------------
Secretary Secretary
SELLERS:
Linda Key /s/ Linda Key
- - ------------------ -----------------------(L.S.)
John Youstin Jr. /s/ John Youstin Jr.
- - ------------------ -----------------------(L.S.)
Eric Ranney /s/ Eric Ranney
- - ------------------ -----------------------(L.S.)
Doug Corner /s/ Doug Corner
- - ------------------ -----------------------(L.S.)
(Name) (Signature)
EXHIBITS
--------
Schedule 1.01 - Promissory Notes
Schedule 3-Avana Disclosure Schedule
Schedule 5.03 - Employment Agreements
Schedule 5.05 - Escrow Agreement
Schedule 6.03 - Non-Competition Agreements
-15-
<PAGE>
Exhibit 2.3
ASSET PURCHASE AGREEMENT
between
ROB BALLARD AND SABRINA BALLARD
d/b/a NORTHWEST GEORGIA INTERNET
("Seller")
NEW MILLENIUM MULTIMEDIA, INC.
("Purchaser")
and
GRACE DEVELOPMENT, INC.
Dated: November 8, 1999
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
1. DEFINITIONS....................................................... 2
2. PURCHASE AND SALE OF ASSETS....................................... 2
2.1 Sale of Assets.............................................. 2
2.2 No Assumption of Liabilities................................ 2
2.3 Assets and Liabilities as of the Closing Date............... 3
2.4 Purchase Price.............................................. 3
2.5 Telephone and Other Numbers................................. 3
2.6 Other Instruments........................................... 3
2.8 Allocation of Purchase Price................................ 3
2.7 [Omitted]
2.9 Prorations.................................................. 4
2.10 Employment Agreements....................................... 4
3. SELLER'S REPRESENTATIONS AND WARRANTIES........................... 4
3.1 Organization................................................ 4
3.2 Due Authorization........................................... 4
3.3 No Default.................................................. 4
3.4 Licenses and Regulations.................................... 5
3.5 No Collective Bargaining.................................... 5
3.6 Title to Assets............................................. 5
3.7 Condition of Assets......................................... 5
3.8 Taxes....................................................... 5
3.9 Financial Statements........................................ 6
3.10 Litigation; Judgments....................................... 6
3.11 Contracts and Agreements.................................... 6
3.12 No Violation of Law......................................... 7
3.13 Material Changes............................................ 7
3.14 Insurance................................................... 7
3.15 Consents.................................................... 7
3.16 Environmental, Health and Safety Laws....................... 8
3.17 Employee Benefits........................................... 8
3.18 Employees................................................... 9
3.19 Representations and Warranties.............................. 9
3.20 Books and Records........................................... 9
</TABLE>
<PAGE>
<TABLE>
<S> <C>
4. PURCHASER'S REPRESENTATIONS AND WARRANTIES........................ 9
4.1 Organization................................................ 9
4.2 Due Authorization........................................... 10
4.3 No Litigation............................................... 10
4.4 Binding Effect; Authority................................... 10
4.5 Representations and Warranties.............................. 10
5. REPRESENTATIONS AND WARRANTIES OF GDI............................. 10
5.1 Organization; Power; Qualification.......................... 10
5.2 Authority................................................... 11
5.3 Consents.................................................... 11
5.4 GDI Shares.................................................. 11
5.5 Capitalization.............................................. 11
5.6 Litigation.................................................. 11
5.7 SEC Filings................................................. 12
5.8 Correctness of Representations.............................. 12
6. SURVIVAL AND INDEMNIFICATION...................................... 12
6.1 Survival.................................................... 12
6.2 Indemnification............................................. 12
6.3 No Brokers.................................................. 12
7. CLOSING........................................................... 13
7.1 Date and Place of Closing................................... 13
7.2 Seller's Obligations at Closing............................. 13
7.3 Purchaser's Obligations at Closing.......................... 13
8. GENERAL PROVISIONS................................................ 14
8.1 Termination of Employees.................................... 14
8.2 No Waivers.................................................. 14
8.3 Assignment.................................................. 14
8.4 Binding Agreement........................................... 14
8.5 Severability................................................ 14
8.6 Time of Essence............................................. 14
8.7 Captions Headings........................................... 14
8.8 Entire Agreement............................................ 14
8.9 Notices..................................................... 14
8.10 Remedies Cumulative and Nonexclusive........................ 15
8.11 Governing Law............................................... 15
8.12 Pronouns.................................................... 15
</TABLE>
<PAGE>
<TABLE>
<S> <C>
8.13 References to Other Documents............................... 15
8.14 Counterparts................................................ 16
8.15 Expenses.................................................... 16
8.16 Bulk Sales.................................................. 16
</TABLE>
<PAGE>
EXHIBITS
--------
"A" Assets
"B" Premises Lease
"C" Personal Property Leases
"D" List of Assumed Liabilities
"E" Form of Employment Agreement
"F" Financial Statements
SCHEDULES
---------
3.6 Exceptions to Title to Assets
3.11 Contracts
3.17 Benefit Plans
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
ASSET PURCHASE AGREEMENT (the "Agreement") made this 1st day of October
___, 1999, by and between ROB BALLARD AND SABRINA BALLARD, D/B/A NORTHWEST
GEORGIA INTERNET ("Seller"), and NEW MILLENIUM MULTIMEDIA, INC., a Georgia
corporation ("Purchaser"), and GRACE DEVELOPMENT, INC., a Colorado corporation
("GDI").
WITNESSETH:
WHEREAS, Seller has agreed to sell and Purchaser has agreed to buy certain
assets of the business owned and operated by Seller which consists of the sale
of Internet services that support multiple telecommunications services (the
"Business"), the same being located _____________________________, Georgia (the
"Premises"); and
WHEREAS, GDI owns 100% of the issued and outstanding stock of Purchaser.
NOW THEREFORE, for and in consideration of the mutual promises and
covenants undertaken herein, Seller, Purchaser and GDI (collectively, the
"Parties" and each individually as "Party") do hereby agree as follows:
1. DEFINITIONS
-----------
As used herein, the following terms shall have the following meanings
unless the context otherwise requires:
1.1 "Assets" shall mean all of the assets referred to in Section 2.1
hereof.
1.2 "Closing" shall mean the simultaneous execution of this Agreement and
consummation of the transactions contemplated herein, as described in Section 6
hereof.
1.3 "Closing Date" shall mean the date on which Closing shall occur, which
date shall be of equal date herewith.
1.4 "Employment Agreements" shall mean the employment agreements
substantially in the form of Exhibit "E" and referred to in Section 2.10 hereof.
1.5 "Premises" shall mean the leased premises occupied by Seller and
identified on Exhibit "B" attached hereto.
1.6 "Purchase Price" shall mean the purchase price payable pursuant to
Section 2.2 hereof.
1.7 "Seller" shall mean, jointly and severally, and individually and
collectively, Rob Ballard and Sabrina Ballard, d/b/a Northwest Georgia Internet.
<PAGE>
2. PURCHASE AND SALE OF ASSETS
---------------------------
2.1 Sale of Assets.
--------------
(a) Upon the terms and conditions set forth herein, Seller shall
sell, assign, convey, transfer and deliver to Purchaser, and Purchaser shall
purchase and acquire from Seller, certain of the assets of Seller's Business
(collectively the "Assets"), including, but not limited to: (i) property and
equipment listed or referred to on Exhibit "A" attached hereto and incorporated
herein by this reference; (ii) any other equipment, fixed assets, machinery,
appliances, computer programs, licenses for software, intangible property,
furniture, furnishings, computers, and fixtures, wherever situated and owned or
leased by the Seller and relating to the Business; (iii) supply information,
customer lists, telephone numbers, books, records and other information used or
useful in the Business, wherever situated; (iv) deferred charges, advance
payments, prepaid items, rights of offset and credits, of all kinds; (v) all
licenses, permits, authorizations, and other rights or privileges relating to
the operation of the Business, to the extent assignable; (vi) all right, title
and interest of Seller in the Premises lease described on Exhibit "B" attached
hereto (the "Premises Lease"); (vii) all right, title and interest of Seller in
those certain leases relating to the Business identified on Exhibit "C" attached
hereto (collectively, the "Leases"); and (vii) all of Seller's right, title and
interest in the name "Northwest Georgia Internet" and any variations thereof,
and all other trade names, domain names, websites, copyrights, or any
applications therefor, and all other intangible assets owned or leased by the
Seller and relating to the Business.
(b) Seller shall retain all cash and employee receivables in
existence as of the Closing Date.
2.2 No Assumption of Liabilities.
----------------------------
(a) Purchaser shall not assume or be obligated to pay or discharge
any liabilities, debts or obligations of Seller, including, but not limited to,
payroll, employee compensation, benefit plan obligations or any type of taxes of
Seller except for those specific liabilities listed on Exhibit "D" attached
hereto and made a part hereof, which shall be collectively referred to herein as
the "Assumed Liabilities". In addition, Purchaser shall not assume or be
obligated to pay or discharge Seller's obligations under any contracts, leases
or obligations, other than the Premises Lease or the Leases. All liabilities not
expressly assumed by Purchaser shall be the sole responsibility of Seller.
Without limiting the foregoing, all trade and other obligations of Seller,
including any amounts owed to AT&T for "800" service shall be fully paid and
satisfied on or before the Closing Date.
(b) None of the debts, liabilities and obligations of Purchaser
hereunder shall be expanded, increased, broadened or enlarged as to the rights
or remedies of third parties against Purchaser as compared to the rights or
remedies which such third parties would have had against Seller had the
acquisition of the Assets not taken place. Nothing contained herein shall be
<PAGE>
deemed to foreclose or prevent Purchaser from contesting in good faith any of
Seller's or Purchaser's duties and liabilities to third parties.
2.3 Assets and liabilities as of the Closing Date.
---------------------------------------------
The Assets to be sold and purchased hereunder, and the Assumed Liabilities,
shall all be determined on as of the Closing Date. All of the Exhibits setting
forth such Assets and Assumed Liabilities shall be amended and updated to and
through the Closing Date.
2.4 Purchase Price.
--------------
(a) Amount. The purchase price for the Assets ("Purchase Price")
------
shall be paid in full, at Closing, as follows: (i) $160,000 in cash; and (ii)
the issuance to Seller by GDI of 25,000 fully paid and non-assessable shares
(the "Shares) of the common stock, no par value of GDI ("GDI Common Stock").
(b) Seller Representations. Seller understands acknowledges and
----------------------
agrees that the GDI Shares to be issued to Seller in connection with the
transactions contemplated herein will not be registered for sale under the
Securities Act of 1933, as amended (the "Act"), or any state securities laws
(collectively, with the Act, the "Securities Laws") and will be issued in
reliance upon certain exemptions from the registration requirements of the
Securities Laws. In connection therewith, Seller hereby represents and warrants
that: (i) Seller is acquiring the GDI Shares for Seller's own account, for
investment purposes only and with no view to the resale or other distribution
thereof; (ii) Seller understands that Seller must hold the GDI Shares
indefinitely unless and until they are subsequently registered for sale under
the Securities Laws or appropriate exemptions for resale are then available,
including limited resales permitted under Rule 144; (iii) GDI is under no
obligation to register any of the GDI Shares for sale under the Securities Laws
or to make Rule 144 available for resale of any GDI Shares; (iv) Seller has
evaluated the merits and risks associated with acquiring the GDI Shares as
contemplated herein and has conducted such inquiries and investigation of GDI as
Seller has deemed necessary or appropriate in order to evaluate this investment'
and (v) a legend relating to the restrictions on transferability referred to
herein will be placed on certificates for the GDI Shares.
2.5 Telephone and Other Numbers. Seller shall exercise its best efforts
---------------------------
to transfer to Purchaser Seller's telephone numbers for the Business, any Ip
numbers used in the Business, any domain names owned or used by Seller in the
Business and any similar assets.
2.6 Other Instruments. Seller agrees from time to time to execute and
-----------------
deliver to Purchaser (or its designee) such other documents, instruments and
writings as may be reasonably requested by Purchaser or its counsel to give full
effect to the transaction described in this Agreement.
<PAGE>
2.7 [Omitted]
---------
2.8 Allocation of Purchase Price. The Purchase Price will be allocated to
----------------------------
the various Assets as directed by Purchaser, and Seller agrees to report such
allocation to the Internal Revenue Service.
2.9 Prorations. All rents, charges, fees and expenses relating to the
----------
Business shall be prorated as of the Closing Date, with all such expenses for
the period of time prior to the Closing Date to be paid by Seller.
2.10 Employment Agreements. At Closing, Rob Ballard and Sabrina Ballard
---------------------
shall enter into Employment Agreements with Purchaser substantially in the form
of Exhibit "E" hereto which shall contain non-competition provisions
satisfactory to Purchaser.
3. SELLER'S REPRESENTATIONS AND WARRANTIES
---------------------------------------
Seller hereby represents and warrants to Purchaser and GDI as follows:
3.1 Organization. Seller is a sole proprietorship organized and
------------
validly existing under the laws of the State of Georgia and has full power and
authority (i) to own or lease the Premises and to carry on the Business as it is
now being conducted, (ii) to enter into this Agreement and to sell, convey,
transfer, assign and deliver the Assets to the Purchaser as provided herein, and
(iii) to carry out the other transactions and agreements contemplated hereby.
3.2 Due Authorization. Seller has full power and legal capacity to
-----------------
execute and deliver this Agreement and to perform Seller's obligations
hereunder. The execution, delivery and performance of this Agreement and each of
the other agreements contemplated hereby and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action of the Seller. This Agreement has been duly executed and
delivered by the Seller and is a valid and binding obligation of the Seller,
fully enforceable in accordance with its terms. Neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will: (i) conflict with or violate any law, ordinance or regulation or
any decree or order of any court or administrative or other governmental body
which is either applicable to, binding upon or enforceable against the Seller;
(ii) except where consent is required and obtained, result in any breach of or
default under any mortgage, lease, promissory note, contract, purchase order,
indenture, trust or other instrument or written agreement which is either
binding upon or enforceable against the Seller , including the Premises Lease
and the Leases.
3.3 No Default. The Seller is not in default with respect to any
----------
material liabilities or obligations which are related to the Assets or the
Business, and all such liabilities or obligations incurred or accrued have been
paid and discharged as they become due and all such liabilities and obligations
have been, as of and through the Closing Date, incurred in and ordinary course
of business. All taxes, wages, utilities, rent on the Premises and operation of
the Business
<PAGE>
through the Closing are current and not past due. The transactions contemplated
by this Agreement neither violate nor otherwise give rise to any claim or cause
of action under Sections 544 or 548 of the United States Bankruptcy Code or
O.C.G.A. Sections 18-2-20 et. seq.
-- ---
3.4 Licenses and Regulations. All licenses required in the present
------------------------
operation of the Business are current and valid. Seller is in compliance with
all federal, state and local laws and regulations respecting employment and
employment practices, the Premises and the operation of the Business. Seller has
not received any notice of violation of any applicable zoning regulation,
ordinance, regulation or requirement relating to its operations or properties,
whether owned or leased, and there is no such violation or grounds therefor
which could adversely affect the operation of the Business.
3.5 No Collective Bargaining. Seller is not bound by any collective
------------------------
bargaining agreement or any other employment contract.
3.6 Title to Assets. Except as otherwise set forth on Schedule 3.6,
---------------
Seller is the sole and exclusive owner of and has good and marketable title to
all of the Assets, free and clear of all liens, mortgages, pledges, encumbrances
or charges of every kind, nature, and description whatsoever.
3.7 Condition of Assets. All of the Assets are in normal operating
-------------------
condition and reasonable state of repair, subject only to ordinary wear and tear
and are all of the assets necessary for the conduct of the Business as presently
conducted.
3.8 Taxes.
-----
(a) As of the Closing Date, Seller has no liability (other than has
been accrued for on its financial statements) for unpaid federal, foreign,
state, local, income taxes, sales or use taxes, payroll or other employer-
related taxes for which Seller may be liable in its own right or as transferee
or successor to or from any other corporation, person, association, partnership,
joint venture or other entity. In addition, on the date hereof Seller has filed
or will have filed all federal, foreign, state, county and local income,
franchise, sales, payroll and other employer-related, property and other tax
returns or reports required to be filed, and all of such returns or reports are
or will be true and correct in all material respects.
(b) Notwithstanding anything herein to the contrary, all income,
franchise, property, ad valorem, sales or use tax liabilities due by Seller
relating to the Assets prior to the Closing Date shall be the sole and absolute
responsibility of Seller.
(c) All monies required to be withheld by Seller from its employees
for income taxes, social security and unemployment insurance taxes or other
similar charges or assessments have been collected or withheld and either paid
to the respective governmental agencies or set aside in accounts for such
purpose. Seller has paid any and all amounts due to any governmental agency,
bureau, board or department for worker's compensation insurance or claims, and
there are no pending or to the best of Seller's knowledge, threatened
investigations,
<PAGE>
proceedings, audits, deficiencies or assessments, with respect to worker's
compensation matters of Seller.
(d) All tax returns of Seller delivered to Purchaser (including, but
not limited to, the Federal income tax return for 1998) are true and correct and
present fairly the financial position of Seller and are in accordance with the
books and records of Seller.
3.9 Financial Statements.
--------------------
(a) Seller has delivered to Purchaser the Financial Statements listed
on Exhibit "F" attached hereto and incorporated by reference (the "Historical
Financial Statements") and an interim balance sheet and related statement of
income of Seller as of September 30, 1999 (the "Interim Financial Statements").
The Historical Financial Statements and the Interim Financial Statements are
collectively referred to herein as the "Financial Statements";
(b) The Financial Statements present fairly the financial condition
of the Seller as at and for the periods indicated therein and have been prepared
from the books and records of the Seller and are true, complete and correct and
have been prepared on a consistent basis;
(c) The Financial Statements show or reflect all known assets and
liabilities of the Seller and the reserves, if any, contained therein are
adequate for all known or anticipated losses;
(d) The Financial Statements do not contain any material special or
non-recurring items of income or expense during the periods covered thereby or
any write up or evaluation of any assets; and
(e) The Financial Statements reflect all adjustments necessary for a
fair presentation of the financial information contained therein.
3.10 Litigation; Judgments. There are not now any pending or to the best
---------------------
knowledge of Seller, threatened, any suits, actions or litigation, or
administrative, arbitration or other proceedings, governmental investigations
or, inquiries, affecting the Business or the Assets or any change in the
environmental, or other laws, regulations or ordinances, affecting the Business
or the Assets, at law or in equity, or both, or by any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which might, individually or in the
aggregate, adversely affect the Business or the Assets. There are no unsatisfied
judgments against Seller or decrees, orders, writs or injunctions to which the
Business or the Assets are subject.
3.11 Contracts and Agreements. All contracts, leases, understandings or
------------------------
agreements relating to the Business to which Seller is a party or by which
Seller is bound with respect to the Business or the Assets (including the
Premises Lease and the Leases) are listed in Schedule 3.11.
<PAGE>
All of such contracts, leases, understandings and agreements are valid and
binding and in full force and effect and are fully assignable to Purchaser
without the necessity of any consents. Seller is not in default in connection
with any indebtedness or under any contract, lease, agreement or other
commitment relating to the Business or the Assets to which it is a party, and
Seller has not received any notice claiming a default thereto, and each contract
or commitment relating to the Business or the Assets to which Seller is a party
or by which Seller is bound is in full force and effect in accordance with its
terms.
3.12 No Violation of Law. Seller has not been and shall not be as of the
-------------------
Closing Date (by virtue of any action, omission to act, contract to which it is
a party or any occurrence or state of facts whatsoever) in material violation of
any applicable local, state or federal law, ordinance, regulation, order,
injunction or decree, or any other requirement of any governmental body, agency
or authority or court binding on it, or relating to its property or business or
its advertising, sales, referral or pricing practices.
3.13 Material Changes. Since September 1, 1999, Seller has operated the
----------------
Business only in the ordinary course and in connection with the Assets or the
Business:
(i) the Business has not incurred any presently existing
obligation or liability, whether absolute or contingent, except
current liabilities incurred, and obligations under contracts entered
into, in the ordinary course of business none of which, individually
or in the aggregate involves more than $5,000 in payments or
liabilities in a twelve (12) month period;
(ii) the Business has not incurred any adverse changes in its
financial condition, assets, properties, liabilities or business,
other than changes in the ordinary course of business, none of which
changes, in the aggregate, has been materially adverse;
(iii) the Business has not lost any customers or business which,
taken as a whole, would have a material adverse effect on the
Business or the Assets; and
(iv) the Business has not suffered any damage, destruction or
loss, whether or not covered by insurance, materially and adversely
affecting any of the Assets or the Business.
3.14 Insurance. All of the insurance policies of Seller for the Business
---------
will be outstanding and in full force and effect on the Closing Date and are
valid and enforceable. Seller is not in default with respect to the provisions
of any such policies and has not failed to give any notice or present any
material claim thereunder in a due and timely fashion. All of such policies are
listed on Schedule 3.14.
3.15 Consents. Except for the Premises Lease and the Leases, no consent,
--------
approval or authorization of any governmental authority or other persons or
entities is required in connection with the execution, delivery or performance
of this Agreement by Seller and the consummation
<PAGE>
of the transactions contemplated herein, other than corporate authority on
behalf of Seller. Seller will diligently pursue and obtain any and all necessary
consents required for the execution and delivery of this Agreement and the
consummation of the transactions contemplated herein, including any consents
necessary for the valid and effective assignment to Purchaser of the Premises
Lease and the Leases.
3.16 Environmental, Health and Safety Laws. In the conduct of the
-------------------------------------
Business and the operation and use of the Assets, Seller is and as of the
Closing Date will be, in compliance in all material respects with all of the
requirements of all applicable federal, state and local environmental, health or
safety laws, regulations, permits and administrative or judicial orders and
decrees, as such laws may be amended or modified ("Environmental/Health Laws"),
and Seller is not: (a) the subject of any governmental evaluations or
investigation; or (b) the subject of any federal or state investigation or
administrative proceeding evaluating whether any remedial action is necessary to
respond to the release of any hazardous substance, as defined pursuant to any
Environmental Law. In the conduct of the Business and the operation and use of
the Assets, Seller has not been issued, and Seller is not obligated under law to
obtain any license, permit or permission relevant to the Business and relating
to the generation, handling, storage, transportation or disposal of any
hazardous substance.
3.17 Employee Benefits.
-----------------
(a) The Seller does not have any material obligation, contingent or
otherwise, under any professional services agreement, consulting or non-compete
agreement, employment contract, employment agreement or collective bargaining
agreement, or any other agreement or plan providing for any benefits,
liabilities or obligations or any disability plans or policies or any pension or
retirement plans, stock bonus, savings, bonus plan, or non-terminable employment
arrangement, group insurance, group hospitalization or any other employee
benefit plan, except as listed on Schedule 3.17 (the "Benefit Plans"). With the
exception of the Benefit Plans, Seller does not maintain, participate in, or
contribute to any "employee pension benefit plan" as defined in Section 3(2) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")
(including without limitation any such plan intended to be a "qualified" plan
under Section 401 of the Internal Revenue Code of 1986, as amended (the "Code")
or any multi-employer employee pension benefit plan within the meaning of
Section 414(f) of the Code or Section 3(37) of ERISA).
(b) Seller does not maintain any "employee welfare benefit plan" (as
such term is defined in Section 3(1) of ERISA), except the plans listed in
Schedule 3.17 (the "Welfare Plans"). Except as listed in Schedule 3.17, the
Welfare Plans comply in all material respects with ERISA and the Code, including
the health plan continuation coverage requirements added by the Consolidated
Budget Reconciliation Act of 1986.
(c) All accrued contributions and other payments under the Benefit
and Welfare Plans (collectively, the "Plans") required to be made by or on
behalf of Seller for all periods ending on the Closing Date have been fully paid
or there are reserves sufficient to fund all unfunded liabilities incurred
thereunder through the Closing Date.
<PAGE>
(d) (1) Seller has performed all obligations required to be
performed by it under the Plans, (2) all Plans are, and have been, in
compliance, in all material respects, with the requirements prescribed by
statutes (including but not limited to ERISA and the Code) orders, or
governmental rules or regulations applicable to such Plans, (3) Seller has not
engaged in any "prohibited transaction" as such term is defined in section 4975
of the Code or section 406 of ERISA, which could, following the Closing Date,
subject any Plan (or its related trust), Seller or any of their officers,
directors or employees, Purchaser or any of its officers, directors or employees
to the tax or penalty imposed under section 4975 of the Code or section 502(k)
of ERISA and, (4) there are no actions, suits or claims pending or threatened
(other than routine claims for benefits), or which could reasonably be expected
to be asserted, against any Plan or against its assets, or against Seller with
respect to a Plan.
(e) Purchaser shall have no liability with respect to any Benefit or
Welfare Plan or with respect to any claims relating thereof.
3.18 Employees. Except as disclosed in writing by Seller to Purchaser,
---------
there are no employment agreements or compensation agreements or understandings
in effect with respect to any employees of the Business. There are no
employment-related claims, lawsuits, or administrative proceedings pending or,
to the knowledge of Seller, threatened with respect to any employee or former
employee of Seller.
3.19 Representations and Warranties. No investigation or analysis or
------------------------------
inspection conducted by Purchaser pursuant to this Agreement shall in any way
limit, modify, impair or affect any of the foregoing representations and
warranties. All of the representations and warranties of Seller and Henderson
herein shall be true and correct on and as of the Closing Date as if given and
made on the Closing Date. No representation or warranty of Seller or Henderson
contained herein or in any schedule furnished to Purchaser pursuant hereto
contains any untrue statement of a material fact or omits to state any material
fact necessary in order to make the statements contained herein or therein not
misleading.
3.20 Books and Records. All books, records and financial information
-----------------
of Seller which have been provided to Purchaser for inspection are true, correct
and complete, and contain no material omission with respect to the Business or
operations or status of the Seller or the Assets.
4. PURCHASER'S REPRESENTATIONS AND WARRANTIES.
------------------------------------------
Purchaser represents and warrants to Seller as follows:
4.1 Organization. Purchaser is a corporation duly organized, legally
------------
existing and in good standing under the laws of its state of incorporation and
has full corporate power, ability and authority (i) to enter into this Agreement
and (ii) to carry out the other transactions and agreements contemplated hereby.
<PAGE>
4.2 Due Authorization. The execution, delivery and performance of this
-----------------
Agreement and each of the other agreements contemplated hereby and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action of the Purchaser. This Agreement
has been duly executed and delivered by the Purchaser and is a valid and binding
obligation of the Purchaser, fully enforceable in accordance with its terms.
Neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will: (i) conflict with or violate any
provision of Purchaser's articles of incorporation or bylaws, or any law,
ordinance or regulation or any decree or order of any court or administrative or
other governmental body which is either applicable to, binding upon or
enforceable against the Purchaser; or (ii) result in any breach of or default
under any material mortgage, contract, agreement, indenture, trust or other
instrument which is either binding upon or enforceable against the Purchaser.
4.3 No Litigation. There are no existing suits, governmental proceedings,
-------------
or litigation pending or, to the knowledge of Purchaser, threatened against the
Purchaser or its properties which could materially affect the Assets, the
Business, or the financial condition of Purchaser. Purchaser has not filed any
voluntary petition in bankruptcy, nor has been served with or otherwise received
notice of any involuntary petition in bankruptcy having been filed against
Purchaser.
4.4 Binding Effect; Authority. Subject to the terms and conditions
-------------------------
hereof, this Agreement, the Employment Agreements and the other closing
documents constitute legal, valid and binding obligations of Purchaser,
enforceable in accordance with its respective terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws affecting generally the
rights of creditors and by general principles of equity.
4.5 Representations and Warranties. All of the representations and
------------------------------
warranties of the Purchaser herein shall be true and correct on and as of the
Closing Date as if given and made on the Closing Date. No representation or
warranty of Purchaser contained herein or in any schedule furnished to pursuant
hereto contains any untrue statement of material fact or omits to state any
material fact necessary in order to make the statements contained herein or
therein not misleading.
5. REPRESENTATIONS AND WARRANTIES OF GDI
-------------------------------------
GDI hereby represents and warrants to Seller as follows:
5.1 Organization; Power; Qualification. GDI is a corporation duly
----------------------------------
organized, validly existing and in good standing under the laws of its state of
incorporation. GDI has the corporate power and authority to own or lease and
operate its properties to carry on its business as now being conducted, and is
duly qualified and in good standing and authorized to do business as a foreign
corporation in each jurisdiction in which the character of its properties or the
nature of its business requires such qualification and authorization.
<PAGE>
5.2 Authority.
---------
(a) All corporate or other action required to be taken by GDI to authorize
the execution, delivery and performance of this Agreement and its obligations
hereunder, has been duly and validly taken and shall be in full force and effect
on and as of the Closing Date. This Agreement, together with any other
documents, agreements, certificates or writings contemplated herein represent
the valid, legal and binding obligations of GDI in accordance with their
respective terms.
(b) Neither the execution nor the deliver of this Agreement or any other
agreement referred to herein by GDI, nor the performance by GDI of its
obligations thereunder, does or will constitute a violation of, or with notice
or lapse of time, or both, result in a breach or default under (including the
right to accelerate any amounts due by GDI thereunder): (i) the Articles of
Incorporation or by-laws of GDI; (ii) any material contract, indenture or
agreement to which GDI is a party; (iii) any judgment, decree or order of any
court or governmental authority or agency to which GDI is a party or by which
GDI or its properties are bound; or (iv) any statute, law, regulation or rule
applicable to GDI.
5.3 Consents. No authorization, approval, or consent of and no
--------
registration or filing with, any governmental or regulatory official body or
authority is required in connection with the execution, delivery or performance
by GDI of this Agreement.
5.4 GDI Shares. The GDI Shares, when issued and delivered as
----------
contemplated by this Agreement, will be duly authorized, validly issued, fully
paid and non-assessable. None of the GDI Shares is subject to any liens or other
rights, and there are no options, warrants, purchase agreements, put agreements,
call agreements or other agreements to which GDI is a party which relate to or
affect the transfer of the GDI Shares.
5.5 Capitalization. The authorized capital stock of GDI consists of
--------------
800 million shares of common stock, no par value, of which a total of _____
million shares are presently issued and outstanding, and 100 million shares are
reserved for issuance under employee and executive incentive plans; ______
shares of Preferred Stock, none of which has been issued or is outstanding.
Based upon the representations and warranties of the Seller in Section 2.4(b)
herein, the GDI Shares will be issued to Seller in compliance with applicable
and available exemptions from the registration requirements of the Securities
Laws.
5.6 Litigation. There is no litigation, arbitration or other similar
----------
proceeding pending or, to the knowledge of GDI, threatened, against or affecting
GDI, its properties or rights or which pertains to the transactions contemplated
by this Agreement and which would have a material adverse effect on GDI or its
consolidated financial condition. GDI is not a party or subject to the
provisions of any judgment, order, writ, injunction, decree or award of any
court, arbitration, or governmental or regulatory official body or authority
which may adversely affect GDI or the transactions contemplated hereby.
<PAGE>
5.7 SEC Filings. During 1999, GDI has filed all periodic and other
-----------
reports and information required to be filed by GDI with the Commission pursuant
to The Securities Exchange Act of 1934, as amended. All of such reports did not
contain or will not contain any untrue statement of a material fact or omit or
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of GDI included in such documents
and reports were prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto) and fairly present in all material
respects according to generally accepted accounting principles, the financial
position of GDI as of the date thereof and the results of its operations and its
cash flows for the period then ended, in the case of the unaudited interim
financial statements, subject to normal year-end audit adjustments and the
absence of complete footnote disclosures.
5.8 Correctness of Representations. No representation or warranty of
------------------------------
GDI in this Agreement or in any statement, certificate or schedule furnished by
GDI pursuant hereto, contains or, on the Closing Date will contain, any untrue
statement of a material fact or omits or, on the Closing Date will omit, to
state any material fact necessary in order to make the statements contained
therein not misleading, and all such statements, representations, warranties,
certificates and schedules will be true and complete on and as of the Closing
Date as though made on that date.
6. SURVIVAL AND INDEMNIFICATION.
----------------------------
6.1 Survival. All representations warranties, agreements and covenants
--------
made and given herein shall survive the execution and delivery of this Agreement
and the Closing.
6.2 Indemnification. Each party ("Indemnitor") shall indemnify and
---------------
save the other ("Indemnitee") harmless from any actions, claims, losses,
damages, demands or expense (including without limitation all court costs and
reasonable attorney's fees on account thereof) suffered or incurred by the
Indemnitee, its respective successors, heirs, personal representatives or
assigns, arising from (i) any untruthfulness of any representation made by the
Indemnitor in this Agreement or in any document delivered to Indemnitee by or on
behalf of Indemnitor pursuant to this Agreement, or (ii) breach of any covenant
or warranty of the Indemnitor contained in this Agreement or in any document
delivered to Indemnitee by or on behalf of Indemnitor pursuant to this
Agreement. The Indemnitee shall notify the Indemnitor promptly of any written
actions, claims or demands against the Indemnitee of which the Indemnitor is
responsible hereunder. Each party shall cooperate fully with the other, and the
Indemnitor shall control such defense and the right to litigate, settle, appeal
(provided it pays the cost of any required appeal bond), compromise or otherwise
deal with any such claim or resulting judgment; provided that such settlement,
compromise or other resolution of such claim does not result in any liability to
the Indemnitee.
6.3 No Brokers. The Seller, the Purchaser and GDI each represent to
----------
the other that no broker was involved in, or is owed any commission pursuant to,
this Agreement or the consummation of any transactions associated therewith.
Each party shall indemnify and hold the other Party harmless from the
commission, fee or claim of any person employed or retained or
<PAGE>
claiming to be employed or retained by the former to bring about, or to
represent it in, the transactions contemplated hereby.
7. CLOSING
-------
7.1 Date and Place of Closing. The Closing shall take place on
-------------------------
_______________, 1999, at the offices of GDI, 1609 Chantilly Road, Atlanta,
Georgia 30324 simultaneously with the execution and delivery of this Agreement
and shall be effective as of 12:00 midnight, Atlanta, Georgia time on such date.
7.2 Seller's Obligations at Closing. At the time of Closing, Seller shall
-------------------------------
deliver to the Purchaser:
7.2.1 Executed bills of sale and other instruments in a
form satisfactory to Purchaser and its counsel as may be
necessary to transfer all of the Assets to the Purchaser and to
consummate the transactions called for by this Agreement;
7.2.2 possession of the Premises, together with the
keys thereto;
7.2.3 an incumbency certificate in form satisfactory
to Purchaser's counsel;
7.2.4 the executed Employment Agreements; and
7.2.5 such other agreements, assignments, certificates and
documents as Purchaser may reasonably require in order to
consummate the transactions contemplated herein.
7.3 Purchaser's Obligations at Closing. At the time of Closing, Purchaser
----------------------------------
and GDI shall deliver to Seller:
7.3.1 Purchaser's incumbency certificate;
7.3.2 copies of resolutions adopted by the board of
directors of the Purchaser authorizing the transactions
contemplated by this Agreement, certified as of the Closing Date
by a secretary of assistant secretary of Purchaser;
7.3.3 the cash portion of the purchase price and the GDI
Shares; and
7.3.4 such other agreements, assignments, certificates and
documents as Seller may reasonably require in order to consummate
the transactions contemplated herein.
<PAGE>
8. GENERAL PROVISIONS
------------------
8.1 Termination of Employees. On the Closing Date, Seller shall
------------------------
terminate the employment of all of its employees, effective as of the Closing
Date. Seller shall be solely responsible for any and all employee benefits,
including without limitation, severance, vacation or termination pay, any taxes,
unemployment claims, workers' compensation claims and any and all similar
matters. Purchaser intends to hire all of such employees as of the Closing Date.
8.2 No Waivers. No party shall be deemed to waive any of its rights,
----------
powers or remedies hereunder unless such waiver is in writing and signed by said
Party. No delay or omission by any Party in exercising any of said rights,
powers, or remedies shall operate as a waiver thereof. Nor shall a waiver signed
by any Party or any breach of the covenants, conditions or agreements binding on
the other Party on one occasion be construed as a waiver or consent to such
breach on any future occasion or a waiver of any other covenant, condition, or
agreement herein contained.
8.3 Assignment. No portion of this Agreement may be assigned by either
----------
Party, and any attempt to do so shall be null and void. No person or entity not
a party hereto shall have any interest herein or be deemed a third party
beneficiary hereof, and nothing herein contained shall be construed to create
any rights enforceable by any other person or third party.
8.4 Binding Agreement. This Agreement shall be binding upon and inure to
-----------------
the benefit of the Parties and their respective legatees, distributees, legal
representatives, successors and assigns.
8.5 Severability. Any provision of this Agreement held or determined
------------
by a court (or other legal authority) of competent jurisdiction to be illegal,
invalid or unenforceable in any jurisdiction shall be deemed separate, distinct
and independent, and shall be ineffective to the extent of such holding or
determination without (i) invalidating the remaining provisions of this
Agreement in that jurisdiction or (ii) affecting the legality, validity or
enforceability of such provision in any other jurisdiction.
8.6 Time of Essence. Time is of the essence of this Agreement.
---------------
8.7 Captions Headings. Captions and paragraph headings used in this
-----------------
Agreement are for convenience only and shall not be used to interpret any
provision hereof.
8.8 Entire Agreement. This Agreement constitutes the entire agreement and
----------------
understanding of the Parties with respect to the subject matter hereof, and is
intended as the Parties' final expression and complete and exclusive statement
of the terms thereof, superseding all prior or contemporaneous agreements,
representations, promises and understandings, whether written or oral, and may
be amended or modified only be an instrument in writing signed by both Parties.
<PAGE>
8.9 Notices. Any notice required or permitted to be given hereunder
-------
shall be (a) in writing, (b) effective on the first business day following the
date of receipt, and (c) delivered by one of the following means: (i) by
facsimile, e-mail or personal delivery; (ii) by prepaid, overnight package
delivery or courier service; or (iii) by the United States Postal Service, first
class, certified mail, return receipt requested, postage prepaid. All notices
given under this Agreement shall be addressed, in the case of Seller, as
follows:
Rob & Sabrina Ballard
---------------------------------
344 So. Wall Street
---------------------------------
Calhoun, GA 30701
---------------------------------
_________________________________
and, in the case of Purchaser or GDI, as follows:
Grace Development, Inc.
1609 Chantilly Rd.
Atlanta, Georgia 30324
Attn: Mr. James Blanchard, President
or to such other addresses of which the Parties have been advised in writing by
any of the above-described means. Personal delivery to a Party or to any
officer, partner, agent, or employee of such Party at its address herein shall
constitute receipt. The following shall also constitute receipt: (i) a Party's
rejection or other refusal to accept notice, and (ii) the inability to deliver
to a Party because of a changed address of which no notice has been received by
the other Party. Notwithstanding the foregoing, no notice of change of address
shall be effective until ten (10) days after the date of receipt thereof. This
Section shall not be construed in any way to affect or impair any waiver of
notice or demand herein provided.
8.10 Remedies Cumulative and Nonexclusive. Unless stated otherwise,
------------------------------------
all remedies provided for in this Agreement shall be cumulative, nonexclusive
and in addition to, but not in lieu of, any other remedies available to either
Party at law, in equity, or otherwise.
8.11 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Georgia.
8.12 Pronouns. Pronouns used herein shall be construed as masculine,
--------
feminine, or neuter, and both singular and plural, as the context may require,
and the term "person" shall include an individual, corporation, association,
partnership, trust, and other organization.
8.13 References to Other Documents. All references herein to any document,
-----------------------------
instrument, or agreement shall be deemed to refer to such document, instrument,
or agreement as the same may be amended, modified, restated, supplemented, or
replaced from time to time.
<PAGE>
8.14 Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which shall be deemed an original and all of which taken
together shall constitute one and the same Agreement.
8.15 Expenses. All expenses and fees of the parties hereto relating to
--------
this transaction shall be paid by the party incurring them.
8.16 Bulk Sales. All parties hereby indemnify and agree to hold each
----------
other harmless from any failure to comply with the Bulk Sales Law as enacted in
Georgia.
IN WITNESS WHEREOF, the Parties have caused their duly authorized
officers to execute this Agreement the day and year first above written.
/s/ Robert Ballard
--------------------------------
Rob Ballard
/s/ Sabrina Ballard
--------------------------------
Sabrina Ballard
d/b/a NORTHWEST GEORGIA INTERNET
NEW MILLENIUM MULTIMEDIA, INC.
By: /s/ James Blanchard
-----------------------------
Name: James Blanchard
---------------------------
Title: President
--------------------------
GRACE DEVELOPMENT, INC.
By: /s/ Richard Granville III
-----------------------------
Name: Richard Granville III
---------------------------
Title: CEO
--------------------------
<PAGE>
Exhibit 3.1
ARTICLES OF INCORPORATION
OF
GRACE DEVELOPMENT, INC.
The undersigned incorporator, being a natural person over the age of
eighteen years, and desiring to form a body corporate under the laws of the
state of Colorado, does hereby sign, verify and deliver in duplicate to the
Secretary of State of the state of Colorado, these Articles of Incorporation:
ARTICLE I
---------
NAME
----
The name of the Corporation shall be GRACE DEVELOPMENT, INC.
ARTICLE II
----------
PERIOD OF DURATION
------------------
The Corporation shall exist in perpetuity, from and after the date of
filing these Articles of Incorporation with the Secretary of State of the state
of Colorado unless dissolved according to law.
ARTICLE III
-----------
PURPOSES AND POWERS
-------------------
1. Purposes. Except as restricted by these Articles of Incorporation, the
--------
Corporation is organized for the purpose of transacting all lawful business for
which corporations may be incorporated pursuant to the Colorado Corporation
Code.
2. General Powers. Except as restricted by these Articles of
--------------
Incorporation, the Corporation shall have and may exercise all powers and rights
which a corporation may exercise legally pursuant to the Colorado Corporation
Code.
3. Issuance of Shares. The Board of Directors of the Corporation may
------------------
divide and issue any class of stock of the Corporation in series pursuant to a
resolution properly filed with the Secretary of State of the state of Colorado.
<PAGE>
ARTICLE IV
----------
CAPITAL STOCK
-------------
The aggregate number of shares which this Corporation shall have authority
to issue is Eight Hundred Million (800,000,000) shares of no par value each,
which shares shall be designated "Common Stock"; and Ten Million (10,000,000)
shares of no par value each, which shares shall be designated "Preferred Stock"
and which may be issued in one or more series at the discretion of the Board of
Directors. In establishing a series, the Board of Directors shall give to it a
distinctive designation so as to distinguish it from the shares of all other
series and classes, shall fix the number of shares in such series, and the
preferences, rights and restrictions thereof. All shares of any one series shall
be alike in every particular except as otherwise provided by these Articles of
Incorporation or the Colorado Corporation Code.
1. Dividends. Dividends in cash, property or shares shall be paid upon
---------
the Preferred Stock for any year on a cumulative or noncumulative basis as
determined by a resolution of the Board of Directors prior to the issuance of
such Preferred Stock, to the extent earned surplus for each such year is
available, in an amount as determined by a resolution of the Board of Directors.
Such Preferred Stock dividends shall be paid pro rata to holders of Preferred
Stock as determined by a resolution of the Board of Directors prior to the
issuance of such Preferred Stock. No other dividend shall be paid on the
Preferred Stock.
Dividends in cash, property or shares of the Corporation may be paid upon
the Common Stock, as and when declared by the Board of Directors, out of funds
of the Corporation to the extent and in the manner permitted by law, except that
no Common Stock dividend shall be paid for any year unless the holders of
Preferred Stock, if any, shall receive the maximum allowable Preferred Stock
dividend for such year.
2. Distribution in Liquidation. Upon any liquidation, dissolution or
---------------------------
winding up of the Corporation, and after paying or adequately providing for the
payment of all its obligations, the remainder of the assets of the Corporation
shall be distributed, either in cash or in kind, first pro rata to the holders
of the Preferred Stock until an amount to be determined by a resolution of the
Board of Directors prior to issuance of such Preferred Stock, has been
distributed per share, and, then, the remainder pro rata to the holders of the
Common Stock.
3. Redemption. The Preferred Stock may be redeemed in whole or in part as
----------
determined by a resolution of the Board of
2
<PAGE>
Directors prior to the issuance of such Preferred Stock, upon prior notice to
the holders of record of the Preferred Stock, published, mailed and given in
such manner and form and on such other terms and conditions as may be prescribed
by the Bylaws or by resolution of the Board of Directors, by payment in cash or
Common Stock for each share of the Preferred Stock to be redeemed, as determined
by a resolution of the Board of Directors prior to the issuance of such
Preferred Stock. Common Stock used to redeem Preferred Stock shall be valued as
determined by a resolution of the Board of Directors prior to the issuance of
such Preferred Stock. Any rights to or arising from fractional shares shall be
treated as rights to or arising from one share. No such purchase or retirement
shall be made if the capital of the Corporation would be impaired thereby.
If less than all the outstanding shares are to be redeemed, such redemption
may be made by lot or pro rata as may be prescribed by resolution of the Board
of Directors; provided, however, that the Board of Directors may alternatively
invite from shareholders offers to the Corporation of Preferred Stock at less
than an amount to be determined by a resolution of the Board of Directors prior
to issuance of such Preferred Stock, and when such offers are invited, the Board
of Directors shall then be required to buy at the lowest price or prices
offered, up to the amount to be purchased.
From and after the date fixed in any such notice as the date of redemption
(unless default shall be made by the Corporation in the payment of the
redemption price), all dividends on the Preferred Stock thereby called for
redemption shall cease to-accrue-and-all rights of the holders-thereof as
stockholders of the Corporation, except the right to receive the redemption
price, shall cease and terminate.
Any purchase by the Corporation of the shares of its Preferred Stock shall
not be made at prices in excess of said redemption price.
4. Voting Rights; Cumulative Voting. Each outstanding share of Common
--------------------------------
Stock shall be entitled to one vote and each fractional share of Common Stock
shall be entitled to a corresponding fractional vote on each matter submitted to
a vote of shareholders. A majority of the shares of Common Stock entitled to
vote, represented in person or by proxy, shall constitute a quorum at a meeting
of shareholders. Except as otherwise provided by these Articles of Incorporation
or the Colorado Corporation Code, if a quorum is present, the affirmative vote
of a majority of the shares represented at the meeting and entitled to vote on
the subject matter shall be the act of the shareholders. When, with respect to
any action to be
3
<PAGE>
taken by shareholders of the Corporation, the laws of Colorado require the vote
or concurrence of the holders of two-thirds of the outstanding shares, of the
shares entitled to vote thereon, or of any class or series, such action shall be
taken by the vote or concurrence of a majority of such shares or class or series
thereof. Cumulative voting shall not be allowed in the election of directors of
the Corporation.
Shares of Preferred Stock shall only be entitled to such vote as is
determined by the Board of Directors prior to the issuance of such stock, except
as required by law, in which case each share of Preferred Stock shall be
entitled to one vote.
5. Denial of Preemptive Rights. No holder of any shares of the
---------------------------
Corporation, whether now or hereafter authorized, shall have any preemptive or
preferential right to acquire any shares or securities of the Corporation,
including shares or securities held in the treasury of the Corporation.
6. Conversion Rights. Holders of shares of Preferred Stock may be granted
-----------------
the right to convert such Preferred Stock to Common Stock of the Corporation on
such terms as may be determined by the Board of Directors prior to issuance of
such Preferred Stock.
ARTICLE V
---------
TRANSACTION WITH INTERESTED DIRECTORS
-------------------------------------
No contract or other transaction between the Corporation and one or more or
its directors or any other corporation, firm, association or entity in which one
or more of its directors are directors or officers or are financially interested
shall be either void or voidable solely because of such relationship or interest
or solely because such directors are present at the meeting of the Board of
Directors or a committee thereof which authorizes, approves or ratifies such
contract' or transaction or solely because their votes are counted for such
purpose if:
(a) The fact of such relationship or interest is disclosed or known to the
Board of Directors or committee which authorizes, approves, or ratifies the
contract or transaction by a vote or consent sufficient for the purpose without
counting the votes or consents of such interested directors; or
(b) The fact of such relationship or interest is disclosed or known to the
shareholders entitled to vote or they authorize, approve, or ratify such
contract or transaction by vote or written consent; or
4
<PAGE>
(c) The contract or transaction is fair and reasonable to the Corporation.
Common or interested directors may be counted in determining the presence
of a quorum at a meeting of the Board of Directors or a committee thereof which
authorizes, approves, or ratifies such contract or transaction.
ARTICLE VI
----------
CORPORATE OPPORTUNITY
---------------------
The officers, directors and other members of management of the Corporation
shall be subject to the doctrine of "corporate opportunities" only insofar as it
applies to business opportunities in which the Corporation has expressed an
interest as determined from time to time by the Corporation's Board of Directors
as evidenced by resolutions appearing in the Corporation's minutes. Once such
areas of interest are delineated, all such business opportunities within such
areas of interest which come to the attention of the officers, directors and
other members of management of the Corporation shall be disclosed promptly to
the Corporation and made available to it. The Board of Directors may reject any
business opportunity presented to it and thereafter any officer, director or
other member of management may avail himself of such opportunity. Until such
time as the Corporation, through its Board of Directors, has designated an area
of interest, the officers, directors and other members of management of the
Corporation shall be free to engage in such areas of interest on their own and
this doctrine shall not limit the rights of any officer, director or other
member of management of the Corporation to continue a business existing prior to
the time that such area of interest is designated by the Corporation. This
provision shall not be construed to release any employee of the Corporation
(other than an officer, director or member of management) from any duties which
he may have to the Corporation.
ARTICLE VII
-----------
INDEMNIFICATION
---------------
A director of the Corporation shall not be personally liable to the
Corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability to the Corporation or to its
shareholders for monetary damages for (i) any breach of the directors' duty of
loyalty to the Corporation or to its shareholders; (ii) acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law; (iii) acts specified in Section 7-5-114 of the
5
<PAGE>
Colorado Corporation Code; or (iv) any transaction from which the director
derived an improper personal benefit.
If the Colorado Corporation Code is hereafter amended to authorize the
further elimination or limitation of the liability of a director, then the
liability of a director of the Corporation shall be eliminated or limited to the
fullest extent permitted by the Colorado Corporation Code, as so amended.
Any repeal or modification of the foregoing provisions of this Article by
the shareholders of the Corporation shall not affect adversely any right or
protection of a director of the Corporation in respect of any acts or omissions
of such director occurring prior to the time of such repeal or modification.
ARTICLE VIII
------------
AMENDMENTS
----------
The Corporation reserves the right to amend its Articles of Incorporation
from time to time in accordance with the Colorado Corporation Code.
ARTICLE IX
----------
ADOPTION AND AMENDMENT OF BYLAWS
--------------------------------
The initial Bylaws of the Corporation shall be adopted by its Board of
Directors. Subject to repeal or change by action of the shareholders, the power
to alter, amend or repeal the Bylaws or adopt new Bylaws shall be vested in the
Board of Directors. The Bylaws may contain any provisions for the regulation and
management of the affairs of the Corporation not inconsistent with law or these
Articles of Incorporation.
ARTICLE X
---------
REGISTERED OFFICE AND REGISTERED AGENT
--------------------------------------
The address of the initial registered office of the Corporation is 6950 E.
Belleview Avenue, Suite 201, Englewood, Colorado 80111, and the name of the
initial registered agent at such address is Gary A. Agron. Either the registered
office or the registered agent may be changed in the manner permitted by law.
6
<PAGE>
ARTICLE XI
----------
INITIAL BOARD OF DIRECTORS
--------------------------
The number of directors of the Corporation shall be fixed by the Bylaws of
the Corporation, with the provision that there need be only as many directors as
there are shareholders in the event that the outstanding shares are held of
record by fewer than three shareholders. The initial Board of Directors of the
Corporation shall consist of one (1) director. The name and address of the
person who shall serve as director until the first annual meeting of
shareholders and until his successor is elect and shall qualify is as follows:
Name Address
---- -------
Gary A. Agron 6950 E. Belleview Avenue
Suite 201
Englewood, Colorado 80111
ARTICLE XII
-----------
INCORPORATOR
------------
The name and address of the incorporator is as follows:
Name Address
---- -------
Gary A. Agron 6950 E. Belleview Avenue
Englewood, Colorado 80111
IN WITNESS WHEREOF, the above-named, incorporator has signed these
Articles of Incorporation this 4th day of January, 1989.
/s/ Gary A. Agron
-----------------------
Gary A. Agron
7
<PAGE>
EXHIBIT 10.4
EXECUTIVE EMPLOYMENT AGREEMENT
------------------------------
THIS EXECUTIVE EMPLOYMENT AGREEMENT (the "Agreement") is made and entered
into as of December 1, 1999 between GRACE DEVELOPMENT, INC., a Colorado
corporation (the "Company"), and JAMES 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 its President and Chief
Operating Officer since October, 1999 and wishes to continue to employ Executive
in such capacities, and Executive wishes to serve in such position, on the terms
and conditions set forth herein;
WHEREAS, Executive desires to be assured of a secure minimum compensation
from Company for his services over a defined term;
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 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.
<PAGE>
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 have an effective
----
date of December 1, 1999 (the "Effective Date"). Executive shall continue as a
member of the Company's board of directors and as President and Chief Operating
Officer of the Company for a period of one (1) year from the Effective Date
(the "Initial Term"); provided, however, the Term shall be extended
--------- -------
automatically for an additional one-year period(each an "Additional Term") on
each anniversary of the Effective Date unless either party hereto gives written
notice to the other party not to so extend at least ninety (90) days prior
thereto, in which case no further extension shall occur; provided further,
----------------
however, that notwithstanding any such notice by the Company not to extend, the
- - -------
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 and
---------------------
Chief Operating Officer 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 such officer, provided that
--------
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.
4. Bonus and Special Stock Award.
-----------------------------
(a) 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(a) 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
2
<PAGE>
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.
(b) In consideration of the Executive's services to the Company and
NM prior to the Effective Date, and as an inducement to the Executive to
continue his employment with the Company, promptly following the execution and
delivery of this Agreement, the Company shall issue to Executive 2,000,000
shares of Common Stock (the "Stock Grant"). Executive acknowledges and agrees
that the Stock Grant is 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 Initial Term.
(c) Investment.
(i) 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.
(ii) 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.
(iii) 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.
(iv) 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
3
<PAGE>
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 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.
(v) 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.
(vi) 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.
(vii) 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.
(viii) 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 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.
(ix) Executive shall indemnify and hold harmless the Company,
its officers, directors and employees and any of its professional advisors,
from and against
4
<PAGE>
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 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 non-technical
data, formulas, patterns, compilations, programs, devices, methods,
techniques, drawings, processes, financial data, financial plans,
product plans, or
5
<PAGE>
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 of
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 the Company, terminate any relationship with the
6
<PAGE>
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 two-thirds (2/3) 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
7
<PAGE>
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.
9.4. Change in Control. For purposes of this Agreement, a "Change
-----------------
in Control" shall have occurred if:
(i) 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;
(ii) 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
(iii) 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
(D) the liquidation or dissolution of the Company;
8
<PAGE>
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 of 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.
-----------
9.7.1. For purposes of this Agreement, "Good Reason" shall
mean a good faith determination by the Executive, in the Executive's
sole and absolute judgment, that any one or more of the following
events has occurred, without the Executive's express written consent:
(i) 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;
(ii) a reduction by the Company in the Executive's
Base Salary, as the same may be increased from time to time;
(iii) any failure to pay the Executive any
compensation or benefits to which he is entitled within five (5)
days of the date due;
(iv) 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 Company's business which is not
greater than such travel requirements prior to the date hereof;
9
<PAGE>
(v) 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;
(vi) the insolvency or the filing (by any party, including
the Company) of a petition for bankruptcy by the Company;
(vii) 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
(viii) any breach by the Company of any provision of this
Agreement.
9.7.2. The Executive's right to terminate his employment
pursuant to this Section 9 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 of 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:
(i) If the Executive's employment with the Company shall be
terminated by the Company for Cause or pursuant to Section 11.3
hereof, then the Company
10
<PAGE>
shall pay to the Executive all Accrued Compensation.
(ii) 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.
(iii) 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:
(1) the Company shall pay the Executive all Accrued
Compensation;
(2) 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;
(3) 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 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
11
<PAGE>
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;
(4) 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
(5) 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.
(iv) The amounts provided for in subsection 10.1(i) shall be
payable to Executive in a lump-sum on the Termination Date. The
amounts provided for in subsection 10.1(iii) shall be payable to the
Executive in substantially equal bi-weekly installments for a twelve
(12) month period commending on the Termination Date and otherwise in
accordance with the Company's payroll practices in effect from time to
time.
(iiii) 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(iii)(3).
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.
12
<PAGE>
10.3. Other Compensation and Benefits. 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.
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.
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
13
<PAGE>
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 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
<PAGE>
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 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:
Rogers & Hardin, LLP
2700 International Tower
229 Peachtree Street NE
Atlanta, Georgia 30303
Attention: Michael Rosenzweig
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
15
<PAGE>
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. This Agreement constitutes the entire agreement
----------------
between the parties hereto and supersedes all prior agreements (if any),
understandings and arrangements (oral or written) between the parties hereto.
16
<PAGE>
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/ Lee Silverstein
----------------------------
Lee Silverstein
Chairman Compensation
Committee of the Board of
Directors
/s/ James Blanchard
-------------------------------
JAMES BLANCHARD
17
<PAGE>
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT ("Agreement") is dated as of January 28, 2000,
between and among SHARON S. QUAINTANCE, a resident of the State of Texas
("Employee"), and GRACE DEVELOPMENT, INC., a Colorado corporation (the
"Company").
W I T N E S S E T H:
-------------------
WHEREAS, the Company is engaged in the business of providing internet
access, internet provider services, e-commerce application and hosting services,
telecommunications and wireless telecommunications services, and integrated
voice, video and data communications products and services (collectively, the
"Scope of Business"); and
WHEREAS, the Company and Employee each desire to enter into this Agreement,
pursuant to which Employee will be employed by the Company on the terms and
conditions hereinafter set forth, and to make certain other agreements;
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:
SECTION 1. Employment. Subject to the terms hereof, the Company hereby
----------
employs Employee, and Employee hereby accepts such employment. Employee shall
devote her Full Time and best efforts to rendering services on behalf of the
Company. As used herein, "Full Time" shall mean working during normal business
hours to accomplish her duties and responsibilities with appropriate timeliness,
and such term shall not preclude Employee's devoting incidental time to the
management of her non-Company related business and personal affairs, during
normal business hours nor shall it preclude her participating in other affairs
during non-business hours.
SECTION 2. Position, Authority and Duties.
------------------------------
(a) Position. Employee shall serve as Vice President - Corporate
--------
Development of the Company and, as such, Employee shall report directly to the
Company's President. Employee shall be responsible for the development and
implementation of operational and strategic initiatives relating to the
deployment of competitive local exchange carrier and interexchange carrier
capabilities of the Company and its affiliated companies and such additional
duties and responsibilities as the President may determine and direct.
(b) Location. Employee's office shall be located in the metropolitan
--------
Atlanta, Georgia area, and Employee shall be required to relocate as a condition
of her continued
<PAGE>
employment by the Company. Provided that Employee shall have relocated her
principal residence to Atlanta, Georgia no later than August 1, 2000, the
Company shall reimburse the Employee for any reasonable moving expenses actually
incurred by the Employee to the extent that the Employee can show to the
satisfaction of the Company that a corresponding deduction is allowable to the
Employee pursuant to Section 217 of the Internal Revenue Code of 1986, as
amended (the "Code"), thereby resulting in such payment not being characterized
as "wages" for purposes of the payroll and FICA withholding requirements
pursuant to sections 3401(a)(15) and 3121(a)(11) of the Code, respectively,
provided, however, that in no event shall the Company be obligated to reimburse
- - -------- --------
Employee for such expenses in excess of Fifty Thousand Dollars ($50,000). No
reimbursement of relocation expenses hereunder shall be paid (and the Swing Loan
(as hereinafter defined), if made, shall be immediately reimbursed to the
Company) if Employee does not relocate her principal residence to Atlanta,
Georgia by August 1, 2000.
(c) Relocation Advance. In addition to reimbursement of relocation
------------------
expenses in accordance with Section 2(b) above, the Company shall advance to
Employee the sum of Twenty Thousand Dollars ($20,000) upon Employee's closing on
the purchase of a principal residence located in the Atlanta, Georgia
metropolitan area, provided, however, that Employee shall not have previously
-------- -------
closed on the sale of her principal residence in Dallas, Texas (the "Swing
Loan"). Employee agrees that the Swing Loan shall be repaid in full to the
Company upon the closing of the sale of her principal residence in Dallas,
Texas.
SECTION 3. Term. The term of this Agreement shall begin on the date
----
hereof (the "Effective Date") and shall continue until the earlier of (a) the
date that is two (2) year following the Effective Date (the "Term") or (b) the
occurrence of a Terminating Event.
As used herein, "Terminating Event" shall mean:
(i) the death or Total Disability of Employee ("Total Disability"
meaning the failure of Employee to perform her normal required services
hereunder at her office for a period of three (3) consecutive months, by
reason of Employee's mental or physical disability as so determined by a
licensed physician selected by the Company reasonably satisfactory to
Employee);
(ii) the mutual written agreement of the parties hereto to terminate
Employee's employment hereunder;
(iii) the Company's termination of Employee's employment
hereunder, upon thirty (30) days' prior written notice to Employee, for
"Cause." For the purposes of this Agreement, "Cause" for termination of
Employee's employment shall exist (a) if Employee is convicted of (from
which no appeal may be taken), or pleads guilty to, any act of fraud,
misappropriation or embezzlement, or any felony, (b) if, in the sole
determination of the Board of Directors of the Company, Employee has
engaged in conduct or activities materially damaging to the business of the
Company (it being understood, however, that neither conduct nor activities
pursuant
2
<PAGE>
to Employee's exercise of her good faith business judgment nor
unintentional physical damage to any property of the Company by Employee
shall be a ground for such a determination by the Board of Directors of the
Company) after written notice with specificity as to the conduct or
activities complained of and a reasonable opportunity is given to Employee
to cure the same, or (c) if Employee has failed without reasonable cause to
devote her Full Time and best efforts to the business of the Company and,
after notice from the Company of such failure, Employee at any time
thereafter again so fails; or
(iv) the Employee terminates this Agreement for "Good Reason." For the
purposes of this agreement "Good Reason" for the Employee's termination of
this Agreement shall exist if (a) the Company breaches a material provision
of this agreement and such breach is not remedied within thirty (30) days
following receipt by the Company of notice given by the Employee of such
breach, or (b) the Company materially alters the title, duties or
responsibilities of Employee without obtaining prior written consent to
such change.
SECTION 4. Compensation and Benefits.
-------------------------
4.1 Salary and Other Compensation.
-----------------------------
(a) Salary. Employee shall be paid a salary by the Company at
------
the annual rate of One Hundred Fourteen Thousand Dollars ($114,000), which
salary shall be payable bi-weekly in accordance with the payroll payment
practices from time to time adopted by the Company ("Base Salary"). Thereafter,
Employee's salary shall be as determined by the President of the Company.
(b) Bonuses. Employee shall be eligible to participate in the
-------
Company's incentive and bonus programs, including, without limitation, any stock
option programs, to the same extent as other senior executive officers of the
Company.
(c) Stock Options. In addition, as an inducement to Employee to
-------------
remain in the employ of the Company during the Term, the Company shall issue to
Employee options to purchase Three Hundred Thousand (300,000) shares of Common
Stock at an exercise price of One Dollar ($1.00) per share. The options to be
issued pursuant to this Section 4.1(c) shall be issued pursuant to a stock
option plan to be approved by the Board of Directors as promptly as practicable,
and shall vest at the rate of 62,500 shares on each of April 30, July 31,
October 31, 2000 and 112,500 shares shall vest on January 31, 2001.
4.2 Insurance.
---------
(a) Life and Other Insurance. The Company shall, at its
------------------------
expense, provide or arrange for and keep in effect, during the term of
Employee's employment hereunder, so long as she is insurable, such group term
life insurance, travel accident,
3
<PAGE>
accidental death and dismemberment insurance and long-and short-term disability
insurance, or their equivalents, as is provided from time to time for other
senior executive officers of the Company.
(b) Medical Insurance. During the term of Employee's employment
-----------------
hereunder, the Company shall, at its expense, provide or arrange for and keep in
effect, hospitalization, major medical and similar medical and health insurance
for Employee and her family, to the same extent as is provided from time to time
for other senior executive officers of the Company.
4.3 Vacation. Employee shall be entitled to the same number of days
--------
of paid vacation during each year of her employment hereunder as is allowed to
other senior executive officers of the Company, but in no event less than two
(2) weeks of paid vacation per year.
4.4 Retirement Benefits. During the term of her employment
-------------------
hereunder, Employee shall have the same right as other senior executive officers
of the Company to participate in all profit-sharing, pension and other
retirement plans as are now, or as may hereafter be, established by the Company.
4.5 Out-of-Pocket Expenses. The Company shall reimburse Employee for
----------------------
all reasonable out-of-pocket expenses incurred by Employee in connection with
the performance of her duties hereunder upon presentation of appropriate
vouchers therefor.
SECTION 5. Termination.
-----------
(a) Notice of Termination. Any termination of Employee's employment
---------------------
by the Company or by Employee (other than termination for death pursuant to
subparagraph (i) of Section 3) shall be communicated by written Notice of
Termination to the other party hereto. For purposes of this Agreement, a "Notice
of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Employee's employment under the provision so indicated.
(c) Date of Termination. "Date of Termination" shall mean (i) if
-------------------
Employee's employment is terminated by her death, the date of her death, (ii) if
Employee's employment is terminated for Total Disability pursuant to
subparagraph (i) of Section 3 hereof, thirty (30) days after Notice of
Termination is given (provided that Employee shall not have returned to the
performance of her duties on a full-time basis during such thirty (30) day
period), (iii) if Employee's employment is terminated for Cause pursuant to
subparagraph (iii) of Section 3 hereof, the date specified in the Notice of
Termination, and (iv) if Employee's employment is terminated for any other
reason, the date on which a Notice of Termination is given; provided, however,
-------- -------
that, in all instances, if within thirty (30) days after any Notice of
Termination is given, the party receiving such Notice of Termination notifies
the other party that a dispute exists concerning the termination, the Date
4
<PAGE>
of Termination shall be the date on which the dispute is finally determined,
either by mutual written agreement of the parties, by a final judgment order or
decree of a court of competent jurisdiction (the time for appeal therefrom
having expired and no appeal having been perfected).
(d) Exclusive Provisions. Employee may not be terminated by the
--------------------
Company and Employee may not terminate her employment hereunder except as
provided in this Section 5.
SECTION 6. Compensation Upon Termination or During Disability.
--------------------------------------------------
(a) In the Event of Death. If Employee's employment shall be
---------------------
terminated by reason of her death, the Company shall pay to such person as she
shall designate in a notice filed with the Company, or, if no such person shall
be designated, to her estate as a lump sum death benefit, the amount of her
accrued but unpaid full Base Salary to the date of her death in addition to any
payments Employee's spouse, beneficiaries or estate may be entitled to receive
pursuant to any pension or employee benefit plan or life insurance policy
presently maintained by the Company, and such payments shall fully discharge the
Company's obligations hereunder. All stock options granted to the employee from
and after the date hereof shall become vested and immediately exercisable as of
the date of Employee's death in accordance with the plan or plans pursuant to
which such options are to be issued. If no stock option plan exists at the time
of Employee's death, Employee's beneficiaries or the estate shall be able to
exercise any such options within eighteen (18) months of the date of Employee's
death.
(b) In the Event of Physical or Mental Illness. During any period
------------------------------------------
that Employee fails to perform her duties hereunder as a result of incapacity
due to physical or mental illness, Employee shall continue to receive her full
Base Salary and bonus payments until Employee's employment is terminated for
Total Disability pursuant to subparagraph (i) of Section 3 hereof. After
termination, Employee shall be paid her Base Salary at the rate in effect at the
time Notice of Termination is given less, in each case, any disability payments
otherwise payable by or pursuant to plans provided by the Company and actually
paid to Employee in substantially equal monthly installments over the remaining
term hereof, and the Company shall have no further obligations to Employee under
this Agreement. All stock options granted to the employee from and after the
date hereof shall become vested and immediately exercisable as of the date of
the Notice of Termination given in respect of Total Disability in accordance
with the plan or plans pursuant to which such options are to be issued. If no
stock option plan exists at the time of termination, employee shall be able to
exercise such options within six (6) months of the date of the Notice of
Termination.
(c) Cause. If Employee's employment shall be terminated for Cause,
-----
the Company shall pay Employee the amount of her accrued but unpaid Base Salary
through the Date of Termination at the rate in effect at the time Notice of
Termination is given and the Company shall have no further obligations to
Employee under this Agreement. If Employee's employment shall be terminated for
Cause, the Employee shall reimburse the Company in full for all relocation
expenses paid or reimbursed by the Company pursuant to Section 2(b) of this
Agreement and the Swing Loan, if then outstanding.
5
<PAGE>
(d) Wrongful Termination. If in breach of this Agreement, the
--------------------
Company shall terminate Employee's employment other than in the manner allowed
pursuant to Section 3 hereof (a purported termination pursuant to Section 3
hereof which is disputed and finally determined not to have been proper shall be
a termination by the Company in breach of this Agreement), or if Employee
terminates this Agreement for Good Reason, then:
(i) the Company shall pay Employee her full Base Salary and any
other benefits payable hereunder, such as unreimbursed relocation or out-of-
pocket expenses, through the Date of Termination at the rate in effect at the
time Notice of Termination is given;
(ii) the Company shall continue to reimburse Employee for relocation
expenses in accordance with Section 2(b) hereof;
(iii) in lieu of any further salary payments to Employee for periods
subsequent to the Date of Termination, the Company shall pay as severance pay to
Employee an amount equal to twenty-five percent (25%) of the sum of (i) the
annual Base Salary at the highest rate in effect during the twelve (12) months
immediately preceding the Date of Termination and (ii) the highest annual bonus
payments paid or accrued pursuant to this Agreement, with such amount being paid
to Employee in substantially equal monthly installments for a three (3) month
period following the Date of Termination; and
(iv) all stock options granted to the Employee hereunder and from
and after the date hereof shall become vested and immediately exercisable in
accordance with the plans or plans pursuant to which such options are to be
issued. If no stock option plan exists at the time of such termination, Employee
shall be able to exercise such options at her discretion within six (6) months
of the date of termination of her employment.
(e) Voluntary Termination by Employee. If Employee terminates her
---------------------------------
employment with the Company voluntarily, then:
(i) the Company shall pay Employee her full Base Salary through the
Date of Termination at the rate in effect at the time Notice of Termination is
given;
(ii) all unvested options granted shall terminate and vested options
may be exercised in accordance with the terms of the plan or plans pursuant to
which such options are to be issued; and
(iii) if Employee voluntarily terminates her employment with the
Company prior to the first anniversary of the date hereof, the Employee shall
reimburse the Company in full for all relocation expenses paid or reimbursed by
the Company pursuant to Section 2(b) of this Agreement and the Swing Loan, if
then outstanding.
(f) Mitigation. Employee shall not be required to mitigate the
----------
amount of any payment provided for in this Section 6 by seeking other employment
or otherwise, nor shall the amount of any payment provided for in this Section 6
be reduced by any compensation earned by Employee as the result of employment by
another employer after the Date of Termination.
SECTION 7. Successors; Binding Agreement.
-----------------------------
(a) Successor Companies. The Company shall require any successor
-------------------
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or
6
<PAGE>
substantially all of the business and/or assets of the Company, by agreement in
form and substance reasonably satisfactory to Employee, 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 had taken
place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle Employee to compensation from the Company in the same amount and
on the same terms as she would be entitled to hereunder if she terminated her
employment for Good Reason as set forth in Section 3(iv), except that for
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which executes and delivers
the Agreement provided for in this Section 7(a) or which otherwise becomes bound
by all the terms and provisions of this Agreement by operation of law.
(b) Executive's Estate and Heirs. This Agreement and all rights of
----------------------------
Employee hereunder shall inure to the benefit of and be enforceable by
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If Employee should die
while any amounts would still be payable to him hereunder if she had continued
to live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to Employee's devisee, legatee, or
other designee or, if there be no such designee, to Employee's estate.
SECTION 8. Restrictive Covenants.
---------------------
(a) The Employee acknowledges that (i) the covenants herein are
necessary to protect the goodwill and other value of the Company; (ii) at the
Effective Date the Company will have bargained and paid adequate and sufficient
consideration for the restrictive covenants herein; and (iii) the Company is
employing the Employee in reliance on the covenants of this Section 8 in view of
the unique and essential nature of the services the Employee is to perform
hereunder and the irreparable injury that would befall the Company should the
Employee breach such covenants.
(b) The Employee further acknowledges that her services hereunder are
of a special, unique and extraordinary character and that her position with the
Company will place him in a position of confidence and trust with the customers
and employees of the Company and allow her access to Confidential Information
(as hereinafter defined).
(c) The Employee further acknowledges that the type and periods of
restrictions imposed by the covenants in this Section 8 are fair and reasonable
and that such restrictions will not prevent the Employee from earning a
livelihood.
7
<PAGE>
(d) The Employee further acknowledges that, as of the Effective Date
(i) the Company is engaged in the Scope of Business; (ii) the Company conducts
its business activity in and throughout the Area (as hereinafter defined); and
(iii) Competing Businesses (as hereinafter defined) are engaged in businesses
like and similar to the business of the Company.
(e) Having acknowledged the foregoing, the Employee covenants and
agrees with the Company that she will not, directly or indirectly:
(i) while she is in the Company's employ and after the termination
of her employment for any reason whatsoever (whether voluntarily or
involuntarily), disclose, use or otherwise exploit, except as may be
necessary in the performance of her duties hereunder, any Confidential
Information disclosed to the Employee or of which the Employee became
aware by reason of her employment with the Company;
(ii) while she is in the Company's employ and through the period
ending one (1) year after the termination of her employment for any
reason whatsoever (whether voluntarily or involuntarily), employ or
attempt to employ or assist anyone else in employing in any Competing
Business in the Area any managerial or employee of the Company
(whether or not such employment is full time or is pursuant to a
written contract with the Company); and
(iii) while she is in the Company's employ and through the period
ending one (1) year after the termination of her employment (whether
voluntarily or involuntarily) for any reason whatsoever, except for
(a) termination by the Company without cause or (b) termination by the
Employee for "good reason" or (c) expiration of the Term, engage in or
render any services to or be employed by any Competing Business in the
Area in a capacity substantially similar to the capacity in which
Employee is employed by the Company hereunder, whether as a director,
officer, shareholder, owner, employee or as a consultant (other than
as the owner of less than five (5%) percent of the shares of a
publicly-owned corporation whose shares are traded on a national
securities exchange or on the NASDAQ National Market System).
(f) The Employee agrees that upon the termination of her employment
for any reason whatsoever (whether voluntarily or involuntarily), she will not
take with him or retain without written authorization, and she will promptly
deliver to the Company, originals and all copies of all papers, files or other
documents containing any Confidential
8
<PAGE>
Information and all other belonging to the Company and in her possession or
under her control.
(g) For purposes of this Section 8, the term (a) "Area" means any
state within the United States of America; (b) "Competing Business" means the
Scope of Business or such other line of business in which the Company is
actively engaged at the Date of Termination; and (c) "Confidential Information"
means any and all data, knowledge and information relating to the business of
the Company (whether or not constituting a trade secret) that is, has been or
will be obtained by or disclosed to the Employee or of which the Employee became
or becomes aware as a consequence of or through her relationship with the
Company and that has value to the Company and is not generally known by its
competitors, provided, however, that no information will be deemed confidential
-------- -------
unless it is known to the Employee to be confidential information or has been
reduced to writing and marked clearly and conspicuously as confidential
information. Confidential Information shall not include any data or information
that has been voluntarily disclosed to the public by the Company (except where
such public disclosure has been made without authorization by the Company), or
that has been independently developed and disclosed by others, or that otherwise
enters the public domain through lawful means. Confidential Information
includes, but is not limited to, information relating to the Company's financial
affairs, processes, services, customers, Employee or employees, compensation,
research, development, purchasing, accounting or marketing.
(h) The Employee acknowledges that irreparable loss and injury would
result to the Company upon the breach of any of the covenants contained in this
Section 8 and that damages arising out of such breach would be difficult to
ascertain. The Employee hereby agrees that, in addition to all other remedies
provided at law or in equity, the Company may petition and obtain from a court
of law or equity both temporary and permanent injunctive relief to prevent a
breach by the Employee of any covenant contained in this Section 8. The parties
hereto agree that all references to the Company in this Section 8 shall include,
unless the context otherwise requires, all subsidiaries (if any) of the Company.
SECTION 9. Miscellaneous.
-------------
9.1 Confidentiality.
---------------
(a) Employee recognizes and acknowledges that in the course of
her employment with the Company, as contemplated by this Agreement, and as a
result of the position of trust that she will hold under this Agreement, she
will obtain private and confidential information and proprietary data relating
to the Company, including, without limitation, financial information, product
and design information, marketing information, customer lists and other data
that are valuable assets and property rights of the Company (collectively
referred to as "Confidential Information"). Employee agrees that she will not,
9
<PAGE>
during the term of this Agreement or any time after the termination of this
Agreement, either directly or indirectly, disclose or use any Confidential
Information acquired during her employment with the Company, unless (i) the
Confidential Information has been made public through no action or fault of the
Employee, or (ii) its disclosure is requested or compelled by applicable law or
regulatory agency. Employee further agrees that after the termination of this
Agreement, or at such other time as the Company requests, Employee will return
to the Company all documents, papers and records constituting Confidential
Information, and all copies of same in Employee's possession and control.
(b) Employee acknowledges that irreparable loss and injury would
result to the Company upon the breach of any of the covenants contained in this
Section 9.1 and that damages arising out of such breach would be difficult to
ascertain. Employee agrees that, in addition to all other remedies provided at
law or at equity, the Company may petition and obtain from a court of law or
equity both temporary and permanent injunctive relief to prevent a breach by
Employee of any covenant contained in this Section 9.1.
9.2 Binding Effect. This Agreement shall inure to the benefit of and
--------------
shall be binding upon Employee, her executor, administrator, heirs, personal
representatives and assigns, and upon the Company and its successors and
assigns; provided, however, that the obligations and duties of Employee may not
-------- -------
be assigned or delegated.
9.3 Governing Law. This Agreement shall be deemed to be made in, and
-------------
in all respects shall be interpreted, construed and governed by and in
accordance with, the laws of the State of Georgia, without giving effect to
principles of conflicts of laws.
9.4 Invalid Provisions. The parties herein hereby agree that the
------------------
agreements, provisions and covenants contained in this Agreement are severable
and divisible, that none of such agreements, provisions or covenants depends
upon any other provision, agreement or covenant for its enforceability, and that
each such agreement, provision and covenants constitutes an enforceable
obligation between the Company and Employee. Consequently, the parties hereto
agree that neither the invalidity nor the unenforceability of any agreement,
provision or covenant of this Agreement shall affect the other agreements,
provisions or covenants hereof, and this Agreement shall remain in full force
and effect and be construed in all respects as if such invalid or unenforceable
agreement, provision or covenant were omitted.
9.5 Headings. The section and paragraph headings contained in this
--------
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
9.6 Notices. All communications provided for hereunder shall be in
-------
writing and shall be deemed to be given when delivered in person or deposited in
the United States mail, first class, registered mail, return receipt requested,
with proper postage prepaid, and
10
<PAGE>
(a) If to Employee, addressed to:
Sharon S. Quaintance
9932 Lakeway Court
Dallas, Texas 75230
(b) If to the Company, addressed to:
Grace Development, Inc.
1690 Chantilly Drive
Atlanta, Georgia 30327
Attention: Chief Executive Officer
or at such other place or places or to such other person or persons as shall be
designated in writing by the parties hereto in the manner provided above for
notices.
9.7 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
9.8 Waiver of Breach. The waiver by the Company of a breach of any
----------------
provision, agreement or covenant of this Agreement by Employee shall not operate
or be construed as a waiver of any prior or subsequent breach of the same or any
other provision, agreement or covenant by Employee.
9.9 Entire Agreement. This Agreement is intended by the parties
----------------
hereto to be the final expression of their agreement with respect to the subject
matter hereof and is the complete and exclusive statement thereof
notwithstanding any representation or statements to the contrary heretofore
made. This Agreement may be modified only by a written instrument signed by each
of the parties hereto.
11
<PAGE>
IN WITNESS WHEREOF, Employee has executed this Agreement, and the Company
has caused this Agreement to be duly executed by its duly authorized officers
and has caused its proper corporate seal to be affixed hereto, and the parties
have caused this Agreement to be delivered, all on the day and year first
written above.
/s/ Sharon S. Quaintance
---------------------------------
SHARON S. QUAINTANCE
GRACE DEVELOPMENT, INC.
By: /s/ James Blanchard
------------------------------
Its: President
------------------------
12
<PAGE>
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT ("Agreement") is dated as of January 31, 2000,
between and among O.E. "Randy" RAY, a resident of the State of Florida
("Employee"), and AVANA DEVELOPMENT GROUP, INC., a Georgia corporation (the
"Company").
W I T N E S S E T H:
-------------------
WHEREAS, the Company is engaged in the business of providing internet
access, internet provider services, e-commerce application and hosting services,
telecommunications and wireless telecommunications services, and integrated
voice, video and data communications products and services (collectively, the
"Scope of Business"); and
WHEREAS, the Company and Employee each desire to enter into this Agreement,
pursuant to which Employee will be employed by the Company on the terms and
conditions hereinafter set forth, and to make certain other agreements;
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:
SECTION 1. Employment. Subject to the terms hereof, the Company hereby
----------
employs Employee, and Employee hereby accepts such employment. Employee shall
devote his Full Time and best efforts to rendering services on behalf of the
Company. As used herein, "Full Time" shall mean working during normal business
hours to accomplish his duties and responsibilities with appropriate timeliness,
and such term shall not preclude Employee's devoting incidental time to the
management of his personal affairs, during normal business hours nor shall it
preclude his participating in other affairs during non-business hours.
SECTION 2. Position, Authority and Duties.
------------------------------
(a) Position. Employee shall serve as Executive Vice President-
--------
Business Development of the Company and, as such, Employee shall report directly
to the Company's President. Employee shall be responsible for the development
and implementation of strategic licensing and acquisition-related relationships
for the Company and its affiliated companies and such additional duties and
responsibilities as the President may determine and direct.
<PAGE>
(b) Location. Employee's office shall be located in the metropolitan
--------
Orlando, Florida area
SECTION 3. Term. The term of this Agreement shall begin on the date hereof
----
(the "Effective Date") and shall continue until the earlier of (a) the date that
is one (1) year following the Effective Date (the "Term") or (b) the occurrence
of a Terminating Event.
As used herein, "Terminating Event" shall mean:
(i) the death or Total Disability of Employee ("Total Disability"
meaning the failure of Employee to perform his normal required services
hereunder at his office for a period of three (3) consecutive months, by
reason of Employee's mental or physical disability as so determined by a
licensed physician selected by the Company reasonably satisfactory to
Employee);
(ii) the mutual written agreement of the parties hereto to terminate
Employee's employment hereunder; or
(iii) the Company's termination of Employee's employment hereunder,
upon thirty (30) days' prior written notice to Employee, for "Cause." For
the purposes of this Agreement, "Cause" for termination of Employee's
employment shall exist (a) if Employee is convicted of (from which no
appeal may be taken), or pleads guilty to, any act of fraud,
misappropriation or embezzlement, or any felony, (b) if, in the sole
determination of the Board of Directors of the Company, Employee has
engaged in conduct or activities materially damaging to the business of the
Company (it being understood, however, that neither conduct nor activities
pursuant to Employee's exercise of his good faith business judgment nor
unintentional physical damage to any property of the Company by Employee
shall be a ground for such a determination by the Board of Directors of the
Company) after written notice with specificity as to the conduct or
activities complained of and a reasonable opportunity is given to Employee
to cure the same, or (c) if Employee has failed without reasonable cause to
devote his Full Time and best efforts to the business of the Company and,
after notice from the Company of such failure, Employee at any time
thereafter again so fails.
(iv) the Employee terminates this Agreement for "Good Reason." For
the purposes of this agreement "Good Reason" for the Employee's termination
of this Agreement shall exist if (a) the Company breaches a material
provision of this agreement and such breach is not remedied within thirty
(30) days following receipt by the Company of notice given by the Employee
of such breach, or (b) the Company materially alters the title, duties or
responsibilities of Employee without obtaining prior written consent to
such change.
SECTION 4. Compensation and Benefits.
-------------------------
4.1 Salary and Other Compensation.
-----------------------------
(a) Salary. Employee shall be paid a salary by the Company at
------
the annual rate of Ninety Thousand Dollars ($90,000), which salary shall be
payable bi-weekly in accordance with the payroll payment practices from time to
time adopted by the Company ("Base Salary"). Thereafter, Employee's salary shall
be as determined by the Chief Executive Officer of the Company.
2
<PAGE>
(b) Bonuses. Employee shall be eligible to participate in the
-------
Company's incentive and bonus programs, including, without limitation, any stock
option programs, to the same extent as other senior executive officers of the
Company.
(c) Stock Options. In addition, as an inducement to Employee to
-------------
remain in the employ of the Company during the Term, the Company shall issue to
Employee options to purchase an additional Fifty Thousand (50,000) shares of
Common Stock at an exercise price of Three Dollars and Twenty-Five Cents ($3.25)
per share. The options to be issued pursuant to this Section 4.1(c) shall be
issued pursuant to a stock option plan to be approved by the Board of Directors
as promptly as practicable.
4.2 Insurance.
---------
(a) Life and Other Insurance. The Company shall, at its
------------------------
expense, provide or arrange for and keep in effect, during the term of
Employee's employment hereunder, so long as he is insurable, such group term
life insurance, travel accident, accidental death and dismemberment insurance
and long-and short-term disability insurance, or their equivalents, as is
provided from time to time for other senior executive officers of the Company.
(b) Medical Insurance. During the term of Employee's employment
-----------------
hereunder, the Company shall, at its expense, provide or arrange for and keep in
effect, hospitalization, major medical and similar medical and health insurance
for Employee
3
<PAGE>
and his family, to the same extent as is provided from time to time for other
senior executive officers of the Company.
4.3 Vacation. Employee shall be entitled to the same number of days
--------
of paid vacation during each year of his employment hereunder as is allowed to
other senior executive officers of the Company, but in no event less than two
(2) weeks of paid vacation per year.
4.4 Retirement Benefits. During the term of his employment hereunder,
-------------------
Employee shall have the same right as other senior executive officers of the
Company to participate in all profit-sharing, pension and other retirement plans
as are now, or as may hereafter be, established by the Company.
4.5 Out-of-Pocket Expenses. The Company shall reimburse Employee for
----------------------
all reasonable out-of-pocket expenses incurred by Employee in connection with
the performance of his duties hereunder upon presentation of appropriate
vouchers therefor.
SECTION 5. Termination.
-----------
(a) Notice of Termination. Any termination of Employee's employment
---------------------
by the Company or by Employee (other than termination for death pursuant to
subparagraph (i) of Section 3) shall be communicated by written Notice of
Termination to the other party hereto. For purposes of this Agreement, a "Notice
of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Employee's employment under the provision so indicated.
(c) Date of Termination. "Date of Termination" shall mean (i) if
-------------------
Employee's employment is terminated by his death, the date of his death, (ii) if
Employee's employment is terminated for Total Disability pursuant to
subparagraph (i) of Section 3 hereof, thirty (30) days after Notice of
Termination is given (provided that Employee shall not have returned to the
performance of his duties on a full-time basis during such thirty (30) day
period), (iii) if Employee's employment is terminated for Cause pursuant to
subparagraph (iii) of Section 3 hereof, the date specified in the Notice of
Termination, and (iv) if Employee's employment is terminated for any other
reason, the date on which a Notice of Termination is given; provided, however,
-------- -------
that, in all instances, if within thirty (30) days after any Notice of
Termination is given, the party receiving such Notice of Termination notifies
the other party that a dispute exists concerning the termination, the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, by a final judgment order or decree
of a court of competent jurisdiction (the time for appeal therefrom having
expired and no appeal having been perfected).
4
<PAGE>
(d) Exclusive Provisions. Employee may not be terminated by the
--------------------
Company and Employee may not terminate his employment hereunder except as
provided in this Section 5.
SECTION 6. Compensation Upon Termination or During Disability.
--------------------------------------------------
(a) In the Event of Death. If Employee's employment shall be
---------------------
terminated by reason of his death, the Company shall pay to such person as he
shall designate in a notice filed with the Company, or, if no such person shall
be designated, to his estate as a lump sum death benefit, the amount of his
accrued but unpaid full Base Salary to the date of his death in addition to any
payments Employee's spouse, beneficiaries or estate may be entitled to receive
pursuant to any pension or employee benefit plan or life insurance policy
presently maintained by the Company, and such payments shall fully discharge the
Company's obligations hereunder. All stock options granted to the Employee from
and after the date hereof shall become vested and immediately exercisable as of
the date of Employee's death in accordance with the plan or plans pursuant to
which such options are to be issued.
(b) In the Event of Physical or Mental Illness. During any period
------------------------------------------
that Employee fails to perform his duties hereunder as a result of incapacity
due to physical or mental illness, Employee shall continue to receive his full
Base Salary and bonus payments until Employee's employment is terminated for
Total Disability pursuant to subparagraph (i) of Section 3 hereof. After
termination, Employee shall be paid his Base Salary at the rate in effect at the
time Notice of Termination is given less, in each case, any disability payments
otherwise payable by or pursuant to plans provided by the Company and actually
paid to Employee in substantially equal monthly installments over the remaining
term hereof, and the Company shall have no further obligations to Employee under
this Agreement. All stock options granted to the Employee from and after the
date hereof shall become vested and immediately exercisable as of the date of
the Notice of Termination given in respect of total Disability in accordance
with the plan or plans pursuant to which such options are to be issued.
(c) Cause. If Employee's employment shall be terminated for Cause,
-----
the Company shall pay Employee the amount of his accrued but unpaid Base Salary
through the Date of Termination at the rate in effect at the time Notice of
Termination is given and the Company shall have no further obligations to
Employee under this Agreement.
(d) Wrongful. If, in breach of this Agreement, the Company shall
--------
terminate Employee's employment other than in the manner allowed pursuant to
Section 3 hereof (a purported termination pursuant to Section 3 hereof which is
disputed and finally determined not to have been proper shall be a termination
by the Company in breach of this Agreement), or if Employee terminates this
Agreement for Good Reason, then:
(i) the Company shall pay Employee his full Base Salary through the
Date of Termination at the rate in effect at the time Notice of Termination is
given;
(ii) in lieu of any further salary payments to Employee for periods
subsequent to the Date of Termination, the Company shall pay as severance pay to
Employee an amount equal to twenty-five percent (25%) of the sum of (i) the
annual Base Salary at the
5
<PAGE>
highest rate in effect during the twelve (12) months immediately preceding the
Date of Termination and (ii) the highest annual bonus payments paid or accrued
pursuant to this Agreement, with such amount being paid to Employee in
substantially equal monthly installments for a three (3) month period following
the Date of Termination; and
(iii) all stock options granted to the Employee from and after the
date hereof shall become vested and immediately exercisable in accordance with
the plans or plans pursuant to which such options are to be issued.
(e) Voluntary Termination by Employee. If Employee terminates his
---------------------------------
employment with the Company voluntarily, then:
(i) the Company shall pay Employee his full Base Salary through the
Date of Termination at the rate in effect at the time Notice of Termination is
given; and
(ii) all unvested options granted shall terminate and vested options
may be exercised in accordance with the terms of the plan or plans pursuant to
which such options are to be issued.
(f) Mitigation. Employee shall not be required to mitigate the
----------
amount of any payment provided for in this Section 6 by seeking other employment
or otherwise, nor shall the amount of any payment provided for in this Section 6
be reduced by any compensation earned by Employee as the result of employment by
another employer after the Date of Termination.
SECTION 7. Successors; Binding Agreement.
-----------------------------
(a) Successor Companies. The Company shall require any successor
-------------------
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company, by
agreement in form and substance reasonably satisfactory to Employee, 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 had taken place. Failure of the Company to obtain such agreement
prior to the effectiveness of any such succession shall be a breach of this
Agreement and shall entitle Employee to compensation from the Company in the
same amount and on the same terms as he would be entitled to hereunder if he
terminated his employment for Good Reason, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined and any successor to
its business and/or assets as aforesaid which executes and
6
<PAGE>
delivers the Agreement provided for in this Section 7(a) or which otherwise
becomes bound by all the terms and provisions of this Agreement by operation of
law.
(b) Executive's Estate and Heirs. This Agreement and all rights of
----------------------------
Employee hereunder shall inure to the benefit of and be enforceable by
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If Employee 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 Employee's devisee, legatee, or
other designee or, if there be no such designee, to Employee's estate.
SECTION 8. Restrictive Covenants.
---------------------
(a) The Employee acknowledges that (i) the covenants herein are
necessary to protect the goodwill and other value of the Company; (ii) at the
Effective Date the Company will have bargained and paid adequate and sufficient
consideration for the restrictive covenants herein; and (iii) the Company is
employing the Employee in reliance on the covenants of this Section 8 in view of
the unique and essential nature of the services the Employee is to perform
hereunder and the irreparable injury that would befall the Company should the
Employee breach such covenants.
(b) The Employee further acknowledges that his services hereunder are
of a special, unique and extraordinary character and that his position with the
Company will place him in a position of confidence and trust with the customers
and employees of the Company and allow his access to Confidential Information
(as hereinafter defined).
(c) The Employee further acknowledges that the type and periods of
restrictions imposed by the covenants in this Section 8 are fair and reasonable
and that such restrictions will not prevent the Employee from earning a
livelihood.
(d) The Employee further acknowledges that, as of the Effective Date
(i) the Company is engaged in the Scope of Business; (ii) the Company conducts
its business activity in and throughout the Area (as hereinafter defined); and
(iii) Competing Businesses (as hereinafter defined) are engaged in businesses
like and similar to the business of the Company.
(e) Having acknowledged the foregoing, the Employee covenants and
agrees with the Company that he will not, directly or indirectly:
(i) while he is in the Company's employ and after the termination of
his employment for any reason whatsoever (whether voluntarily or
involuntarily), disclose, use or otherwise exploit, except as may be
necessary in the performance of his duties hereunder, any Confidential
Information
7
<PAGE>
disclosed to the Employee or of which the Employee became aware by
reason of his employment with the Company;
(ii) while he is in the Company's employ and through the period
ending one (1) year after the termination of his employment for any
reason whatsoever (whether voluntarily or involuntarily), employ or
attempt to employ or assist anyone else in employing in any Competing
Business in the Area any managerial or employee of the Company
(whether or not such employment is full time or is pursuant to a
written contract with the Company); and
(iii) while he is in the Company's employ and through the period
ending one (1) year after the termination of his employment (whether
voluntarily or involuntarily) for any reason whatsoever, except for
(a) termination by the Company without cause or (b) termination by the
Employee for "good reason" or (c) expiration of the Term without
renewal pursuant to Section 3 hereof by virtue of notice of nonrenewal
given by the Company to the Employee pursuant to Section 3 hereof,
engage in or render any services to or be employed by any Competing
Business in the Area in a capacity substantially similar to the
capacity in which Employee is employed by the Company hereunder,
whether as a director, officer, shareholder, owner, employee or as a
consultant (other than as the owner of less than five (5%) percent of
the shares of a publicly-owned corporation whose shares are traded on
a national securities exchange or on the NASDAQ National Market
System).
(f) The Employee agrees that upon the termination of his employment
for any reason whatsoever (whether voluntarily or involuntarily), he will not
take with him or retain without written authorization, and he will promptly
deliver to the Company, originals and all copies of all papers, files or other
documents containing any Confidential Information and all other property
belonging to the Company and in his possession or under his control.
(g) For purposes of this Section 8, the term (a) "Area" means the
United States of America; (b) "Competing Business" means the Scope of Business
or such other line of business in which the Company is actively engaged at the
Date of Termination; and (c) "Confidential Information" means any and all data,
knowledge and information relating to the business of the Company (whether or
not constituting a trade secret) that is, has been or will be obtained by or
disclosed to the Employee or of which the Employee became or becomes aware as a
consequence of or through his relationship with the Company and that has value
to the Company and is not generally known by its competitors, provided, however,
-------- -------
that no information will be deemed confidential unless it is known to the
Employee to be confidential information or has been reduced to writing and
marked clearly
8
<PAGE>
and conspicuously as confidential information. Confidential Information shall
not include any data or information that has been voluntarily disclosed to the
public by the Company (except where such public disclosure has been made without
authorization by the Company), or that has been independently developed and
disclosed by others, or that otherwise enters the public domain through lawful
means. Confidential Information includes, but is not limited to, information
relating to the Company's financial affairs, processes, services, customers,
Employee or employees, compensation, research, development, purchasing,
accounting or marketing.
(h) The Employee acknowledges that irreparable loss and injury would
result to the Company upon the breach of any of the covenants contained in this
Section 8 and that damages arising out of such breach would be difficult to
ascertain. The Employee hereby agrees that, in addition to all other remedies
provided at law or in equity, the Company may petition and obtain from a court
of law or equity both temporary and permanent injunctive relief to prevent a
breach by the Employee of any covenant contained in this Section 8. The parties
hereto agree that all references to the Company in this Section 8 shall include,
unless the context otherwise requires, all subsidiaries (if any) of the Company.
(i) Notwithstanding the foregoing, nothing herein shall be construed
as modifying or otherwise abrogating Employee's obligations under that certain
Agreement and Plan of Merger dated as of January 20, 2000 between affiliates of
the Company, Employee and the other parties named therein, including, without
limitation, Employee's obligations under (S)8(e) thereof.
SECTION 9. Miscellaneous.
-------------
9.1 Confidentiality.
---------------
(a) Employee recognizes and acknowledges that in the course of his
employment with the Company, as contemplated by this Agreement, and as a result
of the position of trust that he will hold under this Agreement, he will obtain
private and confidential information and proprietary data relating to the
Company, including, without limitation, financial information, product and
design information, marketing information, customer lists and other data that
are valuable assets and property rights of the Company (collectively referred to
as "Confidential Information"). Employee agrees that he will not, during the
term of this Agreement or any time after the termination of this Agreement,
either directly or indirectly, disclose or use any Confidential Information
acquired during his employment with the Company, unless (i) the Confidential
Information has been made public through no action or fault of the Employee, or
(ii) its disclosure is requested or compelled by applicable law or regulatory
agency. Employee further agrees that after the termination of this Agreement, or
at such other time as the Company requests, Employee will return to the Company
all documents, papers and records constituting Confidential Information, and all
copies of same in Employee's possession and control.
(b) Employee acknowledges that irreparable loss and injury would
result to the Company upon the breach of any of the covenants contained in this
Section 9.1 and that damages arising out of such breach would be difficult to
ascertain. Employee agrees that, in addition to all other remedies provided at
law or at equity, the Company may petition and
9
<PAGE>
obtain from a court of law or equity both temporary and permanent injunctive
relief to prevent a breach by Employee of any covenant contained in this Section
9.1.
9.2 Binding Effect. This Agreement shall inure to the benefit of and
--------------
shall be binding upon Employee, his executor, administrator, heirs, personal
representatives and assigns, and upon the Company and its successors and
assigns; provided, however, that the obligations and duties of Employee may not
-------- -------
be assigned or delegated.
9.3 Governing Law. This Agreement shall be deemed to be made in, and
-------------
in all respects shall be interpreted, construed and governed by and in
accordance with, the laws of the State of Florida, without giving effect to
principles of conflicts of laws.
9.4 Invalid Provisions. The parties herein hereby agree that the
------------------
agreements, provisions and covenants contained in this Agreement are severable
and divisible, that none of such agreements, provisions or covenants depends
upon any other provision, agreement or covenant for its enforceability, and that
each such agreement, provision and covenants constitutes an enforceable
obligation between the Company and Employee. Consequently, the parties hereto
agree that neither the invalidity nor the unenforceability of any agreement,
provision or covenant of this Agreement shall affect the other agreements,
provisions or covenants hereof, and this Agreement shall remain in full force
and effect and be construed in all respects as if such invalid or unenforceable
agreement, provision or covenant were omitted.
9.5 Headings. The section and paragraph headings contained in this
--------
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
9.6 Notices. All communications provided for hereunder shall be in
-------
writing and shall be deemed to be given when delivered in person or deposited in
the United States mail, first class, registered mail, return receipt requested,
with proper postage prepaid, and
(a) If to Employee, addressed to:
O.E. "Randy" Ray
650 Douglas Avenue, Suite 1020
Altamonte Springs, Florida 32714
(b) If to the Company, addressed to:
Grace Development, Inc.
1690 Chantilly Drive
Atlanta, Georgia 30327
Attention: Chief Executive Officer
or at such other place or places or to such other person or persons as shall be
designated in writing by the parties hereto in the manner provided above for
notices.
10
<PAGE>
9.7 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
9.8 Waiver of Breach. The waiver by the Company of a breach of any
----------------
provision, agreement or covenant of this Agreement by Employee shall not operate
or be construed as a waiver of any prior or subsequent breach of the same or any
other provision, agreement or covenant by Employee.
9.9 Entire Agreement. This Agreement is intended by the parties
----------------
hereto to be the final expression of their agreement with respect to the subject
matter hereof and is the complete and exclusive statement thereof
notwithstanding any representation or statements to the contrary heretofore
made. This Agreement may be modified only by a written instrument signed by each
of the parties hereto.
IN WITNESS WHEREOF, Employee has executed this Agreement, and the Company
has caused this Agreement to be duly executed by its duly authorized officers
and has caused its proper corporate seal to be affixed hereto, and the parties
have caused this Agreement to be delivered, all on the day and year first
written above.
/s/ Randy Ray
------------------------------
O.E. "RANDY" RAY
AVANA DEVELOPMENT GROUP, INC.
By: /s/ James Blanchard
-------------------------
Its: President
--------------------
11
<PAGE>
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT ("Agreement") is dated as of January 31, 2000,
between and among WENDY LEWIS, a resident of the State of Florida ("Employee"),
and AVANA DEVELOPMENT GROUP, INC., a Georgia corporation (the "Company").
W I T N E S S E T H:
-------------------
WHEREAS, the Company is engaged in the business of providing internet
access, internet provider services, e-commerce application and hosting services,
telecommunications and wireless telecommunications services, and integrated
voice, video and data communications products and services (collectively, the
"Scope of Business"); and
WHEREAS, the Company and Employee each desire to enter into this Agreement,
pursuant to which Employee will be employed by the Company on the terms and
conditions hereinafter set forth, and to make certain other agreements;
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:
SECTION 1. Employment. Subject to the terms hereof, the Company hereby
----------
employs Employee, and Employee hereby accepts such employment. Employee shall
devote his Full Time and best efforts to rendering services on behalf of the
Company. As used herein, "Full Time" shall mean working during normal business
hours to accomplish his duties and responsibilities with appropriate timeliness,
and such term shall not preclude Employee's devoting incidental time to the
management of his personal affairs, during normal business hours nor shall it
preclude his participating in other affairs during non-business hours.
SECTION 2. Position, Authority and Duties.
------------------------------
(a) Position. Employee shall serve as Vice President of Operations
--------
Applications Services Group of the Company and, as such, Employee shall report
directly to the Company's President. Employee shall be responsible for the
development and implementation of strategic licensing and acquisition-related
relationships for the Company and its affiliated companies and such additional
duties and responsibilities as the President may determine and direct.
<PAGE>
(b) Location. Employee's office shall be located in the metropolitan
--------
Orlando, Florida area
SECTION 3. Term. The term of this Agreement shall begin on the date hereof
----
(the "Effective Date") and shall continue until the earlier of (a) the date that
is one (1) year following the Effective Date (the "Term") or (b) the occurrence
of a Terminating Event.
As used herein, "Terminating Event" shall mean:
(i) the death or Total Disability of Employee ("Total Disability"
meaning the failure of Employee to perform his normal required services
hereunder at his office for a period of three (3) consecutive months, by
reason of Employee's mental or physical disability as so determined by a
licensed physician selected by the Company reasonably satisfactory to
Employee);
(ii) the mutual written agreement of the parties hereto to terminate
Employee's employment hereunder;
(iii) the Company's termination of Employee's employment hereunder,
upon thirty (30) days' prior written notice to Employee, for "Cause." For
the purposes of this Agreement, "Cause" for termination of Employee's
employment shall exist (a) if Employee is convicted of (from which no
appeal may be taken), or pleads guilty to, any act of fraud,
misappropriation or embezzlement, or any felony, (b) if, in the sole
determination of the Board of Directors of the Company, Employee has
engaged in conduct or activities materially damaging to the business of the
Company (it being understood, however, that neither conduct nor activities
pursuant to Employee's exercise of his good faith business judgment nor
unintentional physical damage to any property of the Company by Employee
shall be a ground for such a determination by the Board of Directors of the
Company) after written notice with specificity as to the conduct or
activities complained of and a reasonable opportunity is given to Employee
to cure the same, or (c) if Employee has failed without reasonable cause to
devote his Full Time and best efforts to the business of the Company and,
after notice from the Company of such failure, Employee at any time
thereafter again so fails; or
(iv) the Employee terminates this Agreement for "Good Reason." For
the purposes of this agreement "Good Reason" for the Employee's termination
of this Agreement shall exist if (a) the Company breaches a material
provision of this agreement and such breach is not remedied within thirty
(30) days following receipt by the Company of notice given by the Employee
of such breach, or (b) the Company materially alters the title, duties or
responsibilities of Employee without obtaining prior written consent to
such change.
SECTION 4. Compensation and Benefits.
-------------------------
4.1 Salary and Other Compensation.
-----------------------------
(a) Salary. Employee shall be paid a salary by the Company at
------
the annual rate of Seventy-Five Thousand Dollars ($75,000), which salary shall
be payable bi-weekly in accordance with the payroll payment practices from time
to time adopted by the Company ("Base Salary"). Thereafter, Employee's salary
shall be as determined by the Chief Executive Officer of the Company.
2
<PAGE>
(b) Bonuses. Employee shall be eligible to participate in the
-------
Company's incentive and bonus programs, including, without limitation, any stock
option programs, to the same extent as other senior executive officers of the
Company.
(c) Stock Options. In addition, as an inducement to Employee to
-------------
remain in the employ of the Company during the Term, the Company shall issue to
Employee options to purchase an additional Fifty Thousand (50,000) shares of
Common Stock at an exercise price of Three Dollars and Twenty-Five Cents ($3.25)
per share. The options to be issued pursuant to this Section 4.1(c) shall be
issued pursuant to a stock option plan to be approved by the Board of Directors
as promptly as practicable.
4.2 Insurance.
---------
(a) Life and Other Insurance. The Company shall, at its expense,
------------------------
provide or arrange for and keep in effect, during the term of Employee's
employment hereunder, so long as he is insurable, such group term life
insurance, travel accident, accidental death and dismemberment insurance and
long-and short-term disability insurance, or their equivalents, as is provided
from time to time for other senior executive officers of the Company.
3
<PAGE>
(b) Medical Insurance. During the term of Employee's employment
-----------------
hereunder, the Company shall, at its expense, provide or arrange for and keep in
effect, hospitalization, major medical and similar medical and health insurance
for Employee and his family, to the same extent as is provided from time to time
for other senior executive officers of the Company.
4.3 Vacation. Employee shall be entitled to the same number of days
--------
of paid vacation during each year of his employment hereunder as is allowed to
other senior executive officers of the Company, but in no event less than two
(2) weeks of paid vacation per year.
4.4 Retirement Benefits. During the term of his employment
-------------------
hereunder, Employee shall have the same right as other senior executive officers
of the Company to participate in all profit-sharing, pension and other
retirement plans as are now, or as may hereafter be, established by the Company.
4.5 Out-of-Pocket Expenses. The Company shall reimburse Employee for
----------------------
all reasonable out-of-pocket expenses incurred by Employee in connection with
the performance of his duties hereunder upon presentation of appropriate
vouchers therefor.
SECTION 5. Termination.
-----------
(a) Notice of Termination. Any termination of Employee's employment
---------------------
by the Company or by Employee (other than termination for death pursuant to
subparagraph (i) of Section 3) shall be communicated by written Notice of
Termination to the other party hereto. For purposes of this Agreement, a "Notice
of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Employee's employment under the provision so indicated.
(c) Date of Termination. "Date of Termination" shall mean (i) if
-------------------
Employee's employment is terminated by his death, the date of his death, (ii) if
Employee's employment is terminated for Total Disability pursuant to
subparagraph (i) of Section 3 hereof, thirty (30) days after Notice of
Termination is given (provided that Employee shall not have returned to the
performance of his duties on a full-time basis during such thirty (30) day
period), (iii) if Employee's employment is terminated for Cause pursuant to
subparagraph (iii) of Section 3 hereof, the date specified in the Notice of
Termination, and (iv) if Employee's employment is terminated for any other
reason, the date on which a Notice of Termination is given; provided, however,
-------- -------
that, in all instances, if within thirty (30) days after any Notice of
Termination is given, the party receiving such Notice of Termination notifies
the other party that a dispute exists concerning the termination, the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, by a final judgment order or decree
of a court of competent jurisdiction (the time for appeal therefrom having
expired and no appeal having been perfected).
4
<PAGE>
(d) Exclusive Provisions. Employee may not be terminated by the
--------------------
Company and Employee may not terminate his employment hereunder except as
provided in this Section 5.
SECTION 6. Compensation Upon Termination or During Disability.
--------------------------------------------------
(a) In the Event of Death. If Employee's employment shall be
---------------------
terminated by reason of his death, the Company shall pay to such person as he
shall designate in a notice filed with the Company, or, if no such person shall
be designated, to his estate as a lump sum death benefit, the amount of his
accrued but unpaid full Base Salary to the date of his death in addition to any
payments Employee's spouse, beneficiaries or estate may be entitled to receive
pursuant to any pension or employee benefit plan or life insurance policy
presently maintained by the Company, and such payments shall fully discharge the
Company's obligations hereunder. All stock options granted to the Employee from
and after the date hereof shall become vested and immediately exercisable as of
the date of Employee's death in accordance with the plan or plans pursuant to
which such options are to be issued.
(b) In the Event of Physical or Mental Illness. During any period
------------------------------------------
that Employee fails to perform his duties hereunder as a result of incapacity
due to physical or mental illness, Employee shall continue to receive his full
Base Salary and bonus payments until Employee's employment is terminated for
Total Disability pursuant to subparagraph (i) of Section 3 hereof. After
termination, Employee shall be paid his Base Salary at the rate in effect at the
time Notice of Termination is given less, in each case, any disability payments
otherwise payable by or pursuant to plans provided by the Company and actually
paid to Employee in substantially equal monthly installments over the remaining
term hereof, and the Company shall have no further obligations to Employee under
this Agreement. All stock options granted to the Employee from and after the
date hereof shall become vested and immediately exercisable as of the date of
the Notice of Termination given in respect of Total Disability in accordance
with the plan or plans pursuant to which such options are to be issued.
(c) Cause. If Employee's employment shall be terminated for Cause,
-----
the Company shall pay Employee the amount of his accrued but unpaid Base Salary
through the Date of Termination at the rate in effect at the time Notice of
Termination is given and the Company shall have no further obligations to
Employee under this Agreement.
(d) Wrongful Termination. If in breach of this Agreement, the
--------------------
Company shall terminate Employee's employment other than in the manner allowed
pursuant to Section 3 hereof (a purported termination pursuant to Section 3
hereof which is disputed and finally determined not to have been proper shall be
a termination by the Company in breach of this Agreement), or if Employee shall
terminate this Agreement for Good Reason, then:
(i) the Company shall pay Employee his full Base Salary through the
Date of Termination at the rate in effect at the time Notice of Termination is
given;
(ii) in lieu of any further salary payments to Employee for periods
subsequent to the Date of Termination, the Company shall pay as severance pay to
Employee an amount equal to twenty-five percent (25%) of the sum of (i) the
annual Base Salary at the
5
<PAGE>
highest rate in effect during the twelve (12) months immediately preceding the
Date of Termination and (ii) the highest annual bonus payments paid or accrued
pursuant to this Agreement, with such amount being paid to Employee in
substantially equal monthly installments for a three (3) month period following
the Date of Termination; and
(iii) all stock options granted to the Employee from and after the
date hereof shall become vested and immediately exercisable in accordance with
the plans or plans pursuant to which such options are to be issued.
(e) Voluntary Termination by Employee. If Employee terminates her
---------------------------------
employment with the Company voluntarily, then:
(i) the Company shall pay Employee her full Base Salary through the
Date of Termination at the rate in effect at the time Notice of Termination is
given and;
(ii) all unvested options granted shall terminate and vested options
may be exercised in accordance with the terms of the plan or plans pursuant to
which such options are to be issued.
(f) Mitigation. Employee shall not be required to mitigate the
----------
amount of any payment provided for in this Section 6 by seeking other employment
or otherwise, nor shall the amount of any payment provided for in this Section 6
be reduced by any compensation earned by Employee as the result of employment by
another employer after the Date of Termination.
SECTION 7. Successors; Binding Agreement.
-----------------------------
(a) Successor Companies. The Company shall require any successor
-------------------
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company, by
agreement in form and substance reasonably satisfactory to Employee, 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 had taken place. Failure of the Company to obtain such agreement
prior to the effectiveness of any such succession shall be a breach of this
Agreement and shall entitle Employee to compensation from the Company in the
same amount and on the same terms as he would be entitled to hereunder if he
terminated his employment for Good Reason, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined and any successor to
its business and/or assets as aforesaid which executes and
6
<PAGE>
delivers the Agreement provided for in this Section 7(a) or which otherwise
becomes bound by all the terms and provisions of this Agreement by operation of
law.
(b) Executive's Estate and Heirs. This Agreement and all rights of
----------------------------
Employee hereunder shall inure to the benefit of and be enforceable by
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If Employee 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 Employee's devisee, legatee, or
other designee or, if there be no such designee, to Employee's estate.
SECTION 8. Restrictive Covenants.
---------------------
(a) The Employee acknowledges that (i) the covenants herein are
necessary to protect the goodwill and other value of the Company; (ii) at the
Effective Date the Company will have bargained and paid adequate and sufficient
consideration for the restrictive covenants herein; and (iii) the Company is
employing the Employee in reliance on the covenants of this Section 8 in view of
the unique and essential nature of the services the Employee is to perform
hereunder and the irreparable injury that would befall the Company should the
Employee breach such covenants.
(b) The Employee further acknowledges that his services hereunder are
of a special, unique and extraordinary character and that his position with the
Company will place him in a position of confidence and trust with the customers
and employees of the Company and allow his access to Confidential Information
(as hereinafter defined).
(c) The Employee further acknowledges that the type and periods of
restrictions imposed by the covenants in this Section 8 are fair and reasonable
and that such restrictions will not prevent the Employee from earning a
livelihood.
(d) The Employee further acknowledges that, as of the Effective Date
(i) the Company is engaged in the Scope of Business; (ii) the Company conducts
its business activity in and throughout the Area (as hereinafter defined); and
(iii) Competing Businesses (as hereinafter defined) are engaged in businesses
like and similar to the business of the Company.
(e) Having acknowledged the foregoing, the Employee covenants and
agrees with the Company that she will not, directly or indirectly:
(i) while she is in the Company's employ and after the termination of
her employment for any reason whatsoever (whether voluntarily or
involuntarily), disclose, use or otherwise exploit, except as may be
necessary in the performance of his duties hereunder, any Confidential
Information
7
<PAGE>
disclosed to the Employee or of which the Employee became aware by
reason of her employment with the Company;
(ii) while she is in the Company's employ and through the period
ending one (1) year after the termination of her employment for any
reason whatsoever (whether voluntarily or involuntarily), employ or
attempt to employ or assist anyone else in employing in any Competing
Business in the Area any managerial or employee of the Company
(whether or not such employment is full time or is pursuant to a
written contract with the Company); and
(iii) while she is in the Company's employ and through the period
ending one (1) year after the termination of her employment (whether
voluntarily or involuntarily) for any reason whatsoever, except for
(a) termination by the Company without cause or (b) termination by the
Employee for "good reason" or (c) expiration of the Term without
renewal pursuant to Section 3 hereof by virtue of notice of nonrenewal
given by the Company to the Employee pursuant to Section 3 hereof,
engage in or render any services to or be employed by any Competing
Business in the Area in a capacity substantially similar to the
capacity in which Employee is employed by the Company hereunder,
whether as a director, officer, shareholder, owner, employee or as a
consultant (other than as the owner of less than five (5%) percent of
the shares of a publicly-owned corporation whose shares are traded on
a national securities exchange or on the NASDAQ National Market
System).
(f) The Employee agrees that upon the termination of her employment
for any reason whatsoever (whether voluntarily or involuntarily), she will not
take with her or retain without written authorization, and she will promptly
deliver to the Company, originals and all copies of all papers, files or other
documents containing any Confidential Information and all other property
belonging to the Company and in his possession or under her control.
(g) For purposes of this Section 8, the term (a) "Area" means the
United States of America; (b) "Competing Business" means the Scope of Business
or such other line of business in which the Company is actively engaged at the
Date of Termination; and (c) "Confidential Information" means any and all data,
knowledge and information relating to the business of the Company (whether or
not constituting a trade secret) that is, has been or will be obtained by or
disclosed to the Employee or of which the Employee became or becomes aware as a
consequence of or through his relationship with the Company and that has value
to the Company and is not generally known by its competitors, provided, however,
-------- -------
that no information will be deemed confidential unless it is known to the
Employee to be confidential information or has been reduced to writing and
marked clearly
8
<PAGE>
and conspicuously as confidential information. Confidential Information shall
not include any data or information that has been voluntarily disclosed to the
public by the Company (except where such public disclosure has been made without
authorization by the Company), or that has been independently developed and
disclosed by others, or that otherwise enters the public domain through lawful
means. Confidential Information includes, but is not limited to, information
relating to the Company's financial affairs, processes, services, customers,
Employee or employees, compensation, research, development, purchasing,
accounting or marketing.
(h) The Employee acknowledges that irreparable loss and injury would
result to the Company upon the breach of any of the covenants contained in this
Section 8 and that damages arising out of such breach would be difficult to
ascertain. The Employee hereby agrees that, in addition to all other remedies
provided at law or in equity, the Company may petition and obtain from a court
of law or equity both temporary and permanent injunctive relief to prevent a
breach by the Employee of any covenant contained in this Section 8. The parties
hereto agree that all references to the Company in this Section 8 shall include,
unless the context otherwise requires, all subsidiaries (if any) of the Company.
SECTION 9. Miscellaneous.
-------------
9.1 Confidentiality.
---------------
(a) Employee recognizes and acknowledges that in the course of her
employment with the Company, as contemplated by this Agreement, and as a result
of the position of trust that he will hold under this Agreement, she will obtain
private and confidential information and proprietary data relating to the
Company, including, without limitation, financial information, product and
design information, marketing information, customer lists and other data that
are valuable assets and property rights of the Company (collectively referred to
as "Confidential Information"). Employee agrees that she will not, during the
term of this Agreement or any time after the termination of this Agreement,
either directly or indirectly, disclose or use any Confidential Information
acquired during her employment with the Company, unless (i) the Confidential
Information has been made public through no action or fault of the Employee, or
(ii) its disclosure is requested or compelled by applicable law or regulatory
agency. Employee further agrees that after the termination of this Agreement, or
at such other time as the Company requests, Employee will return to the Company
all documents, papers and records constituting Confidential Information, and all
copies of same in Employee's possession and control.
(b) Employee acknowledges that irreparable loss and injury would
result to the Company upon the breach of any of the covenants contained in this
Section 9.1 and that damages arising out of such breach would be difficult to
ascertain. Employee agrees that, in addition to all other remedies provided at
law or at equity, the Company may petition and
9
<PAGE>
obtain from a court of law or equity both temporary and permanent injunctive
relief to prevent a breach by Employee of any covenant contained in this Section
9.1.
9.2 Binding Effect. This Agreement shall inure to the benefit of and
--------------
shall be binding upon Employee, his executor, administrator, heirs, personal
representatives and assigns, and upon the Company and its successors and
assigns; provided, however, that the obligations and duties of Employee may not
-------- -------
be assigned or delegated.
9.3 Governing Law. This Agreement shall be deemed to be made in, and
-------------
in all respects shall be interpreted, construed and governed by and in
accordance with, the laws of the State of Florida, without giving effect to
principles of conflicts of laws.
9.4 Invalid Provisions. The parties herein hereby agree that the
------------------
agreements, provisions and covenants contained in this Agreement are severable
and divisible, that none of such agreements, provisions or covenants depends
upon any other provision, agreement or covenant for its enforceability, and that
each such agreement, provision and covenants constitutes an enforceable
obligation between the Company and Employee. Consequently, the parties hereto
agree that neither the invalidity nor the unenforceability of any agreement,
provision or covenant of this Agreement shall affect the other agreements,
provisions or covenants hereof, and this Agreement shall remain in full force
and effect and be construed in all respects as if such invalid or unenforceable
agreement, provision or covenant were omitted.
9.5 Headings. The section and paragraph headings contained in this
--------
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
9.6 Notices. All communications provided for hereunder shall be in
-------
writing and shall be deemed to be given when delivered in person or deposited in
the United States mail, first class, registered mail, return receipt requested,
with proper postage prepaid, and
(a) If to Employee, addressed to:
Wendy Lewis
650 Douglas Avenue, Suite 1020
Altamonte Springs, Florida 32714
(b) If to the Company, addressed to:
Grace Development, Inc.
1690 Chantilly Drive
Atlanta, Georgia 30327
Attention: Chief Executive Officer
or at such other place or places or to such other person or persons as shall be
designated in writing by the parties hereto in the manner provided above for
notices.
10
<PAGE>
9.7 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
9.8 Waiver of Breach. The waiver by the Company of a breach of any
----------------
provision, agreement or covenant of this Agreement by Employee shall not operate
or be construed as a waiver of any prior or subsequent breach of the same or any
other provision, agreement or covenant by Employee.
9.9 Entire Agreement. This Agreement is intended by the parties
----------------
hereto to be the final expression of their agreement with respect to the subject
matter hereof and is the complete and exclusive statement thereof
notwithstanding any representation or statements to the contrary heretofore
made. This Agreement may be modified only by a written instrument signed by each
of the parties hereto.
IN WITNESS WHEREOF, Employee has executed this Agreement, and the Company
has caused this Agreement to be duly executed by its duly authorized officers
and has caused its proper corporate seal to be affixed hereto, and the parties
have caused this Agreement to be delivered, all on the day and year first
written above.
/s/ Wendy Lewis
-----------------------------
WENDY LEWIS
AVANA DEVELOPMENT GROUP, INC.
By: /s/ James Blanchard
-------------------------
Its: President
---------------------
11
<PAGE>
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT ("Agreement") is dated as of January 31, 2000,
between and among R. KENNETH MERKY, a resident of the State of Connecticut
("Employee"), and AVANA DEVELOPMENT GROUP, INC., a Georgia corporation (the
"Company").
W I T N E S S E T H:
-------------------
WHEREAS, the Company is engaged in the business of providing internet
access, internet provider services, e-commerce application and hosting services,
telecommunications and wireless telecommunications services, and integrated
voice, video and data communications products and services (collectively, the
"Scope of Business"); and
WHEREAS, the Company and Employee each desire to enter into this Agreement,
pursuant to which Employee will be employed by the Company on the terms and
conditions hereinafter set forth, and to make certain other agreements;
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:
SECTION 1. Employment. Subject to the terms hereof, the Company hereby
----------
employs Employee, and Employee hereby accepts such employment. Employee shall
devote his Full Time and best efforts to rendering services on behalf of the
Company. As used herein, "Full Time" shall mean working during normal business
hours to accomplish his duties and responsibilities with appropriate timeliness,
and such term shall not preclude Employee's devoting incidental time to the
management of his personal affairs, during normal business hours nor shall it
preclude his participating in other affairs during non-business hours.
SECTION 2. Position, Authority and Duties.
------------------------------
(a) Position. Employee shall serve as Senior Vice President -
--------
Business Development of the Company and, as such, Employee shall report directly
to the Company's Executive Vice President - Business Development. Employee shall
be responsible for the development and implementation of strategic licensing and
acquisition-related relationships for the Company and its affiliated companies
and such additional duties and responsibilities as the Executive Vice President
- - - Business Development may determine and direct.
<PAGE>
(b) Location. Employee's office shall be located in the metropolitan
--------
Atlanta, Georgia area, and Employee shall be required to relocate as a condition
of his continued employment by the Company. Provided that Employee shall have
relocated his principal residence to Atlanta, Georgia no later than August 1,
2000, the Company shall reimburse the Employee for any reasonable moving
expenses actually incurred by the Employee to the extent that the Employee can
show to the satisfaction of the Company that a corresponding deduction is
allowable to the Employee pursuant to Section 217 of the Internal Revenue Code
of 1986, as amended (the "Code"), thereby resulting in such payment not being
characterized as "wages" for purposes of the payroll and FICA withholding
requirements pursuant to sections 3401(a)(15) and 3121(a)(11) of the Code,
respectively, provided, however, that in no event shall the Company be obligated
-----------------
to reimburse Employee for such expenses in excess of Twenty Thousand Dollars
($20,000). No reimbursement of relocations expenses hereunder shall be paid if
Employee does not relocate his principal residence to Atlanta, Georgia by August
1, 2000.
SECTION 3. Term. The term of this Agreement shall begin on the date
----
hereof (the "Effective Date") and shall continue until the earlier of (a) the
date that is one (1) year following the Effective Date (the "Term") or (b) the
occurrence of a Terminating Event.
As used herein, "Terminating Event" shall mean:
(i) the death or Total Disability of Employee ("Total Disability"
meaning the failure of Employee to perform his normal required services
hereunder at his office for a period of three (3) consecutive months, by
reason of Employee's mental or physical disability as so determined by a
licensed physician selected by the Company reasonably satisfactory to
Employee);
(ii) the mutual written agreement of the parties hereto to terminate
Employee's employment hereunder; or
(iii) the Company's termination of Employee's employment hereunder,
upon thirty (30) days' prior written notice to Employee, for "Cause." For
the purposes of this Agreement, "Cause" for termination of Employee's
employment shall exist (a) if Employee is convicted of (from which no
appeal may be taken), or pleads guilty to, any act of fraud,
misappropriation or embezzlement, or any felony, (b) if, in the sole
determination of the Board of Directors of the Company, Employee has
engaged in conduct or activities materially damaging to the business of the
Company (it being understood, however, that neither conduct nor activities
pursuant to Employee's exercise of his good faith business judgment nor
unintentional physical damage to any property of the Company by Employee
shall be a ground for such a determination by the Board of Directors of the
Company) after written notice with specificity as to the conduct or
activities complained of and a reasonable opportunity is given to Employee
to cure the same, or (c) if Employee has failed without reasonable cause to
devote his Full Time and best efforts to the business of the
2
<PAGE>
Company and, after notice from the Company of such failure, Employee at any
time thereafter again so fails; or,
(iv) the Employee terminates this Agreement for "Good Reason." For the
purposes of this agreement "Good Reason" for the Employee's termination of this
Agreement shall exist if (a) the Company breaches a material provision of this
agreement and such breach is not remedied within thirty (30) days following
receipt by the Company of notice given by the Employee of such breach, or (b)
the Company materially alters the title, duties or responsibilities of Employee
without obtaining prior written consent to such change.
SECTION 4. Compensation and Benefits.
-------------------------
(a) Salary. Employee shall be paid a salary by the Company at
the annual rate of Eighty-Two Thousand Five Hundred Dollars ($82,500), which
salary shall be payable bi-weekly in accordance with the payroll payment
practices from time to time adopted by the Company ("Base Salary"). Thereafter,
Employee's salary shall be as determined by the Chief Executive Officer of the
Company.
(b) Bonuses. Employee shall be eligible to participate in the
-------
Company's incentive and bonus programs, including, without limitation, any stock
option programs, to the same extent as other senior executive officers of the
Company.
(c) Stock Options. In addition, as an inducement to Employee to
-------------
remain in the employ of the Company during the Term, the Company shall issue to
Employee options to purchase an additional One Hundred Thousand (100,000) shares
of Common Stock at an exercise price of One Dollar ($1.00) per share. The
options to be issued pursuant to this Section 4.1(c) shall be issued pursuant to
a stock option plan to be approved by the Board of Directors as promptly as
practicable.
3
<PAGE>
4.2 Insurance.
---------
(a) Life and Other Insurance. The Company shall, at its
------------------------
expense, provide or arrange for and keep in effect, during the term of
Employee's employment hereunder, so long as he is insurable, such group term
life insurance, travel accident, accidental death and dismemberment insurance
and long-and short-term disability insurance, or their equivalents, as is
provided from time to time for other senior executive officers of the Company.
(b) Medical Insurance. During the term of Employee's employment
-----------------
hereunder, the Company shall, at its expense, provide or arrange for and keep in
effect, hospitalization, major medical and similar medical and health insurance
for Employee and his family, to the same extent as is provided from time to time
for other senior executive officers of the Company.
4.3 Vacation. Employee shall be entitled to the same number of days
--------
of paid vacation during each year of his employment hereunder as is allowed to
other senior executive officers of the Company, but in no event less than two
(2) weeks of paid vacation per year.
4.4 Retirement Benefits. During the term of his employment
-------------------
hereunder, Employee shall have the same right as other senior executive officers
of the Company to participate in all profit-sharing, pension and other
retirement plans as are now, or as may hereafter be, established by the Company.
4.5 Out-of-Pocket Expenses. The Company shall reimburse Employee for
----------------------
all reasonable out-of-pocket expenses incurred by Employee in connection with
the performance of his duties hereunder upon presentation of appropriate
vouchers therefor.
SECTION 5. Termination.
-----------
(a) Notice of Termination. Any termination of Employee's employment
---------------------
by the Company or by Employee (other than termination for death pursuant to
subparagraph (i) of Section 3) shall be communicated by written Notice of
Termination to the other party hereto. For purposes of this Agreement, a "Notice
of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Employee's employment under the provision so indicated.
(c) Date of Termination. "Date of Termination" shall mean (i) if
-------------------
Employee's employment is terminated by his death, the date of his death, (ii) if
Employee's employment is terminated for Total Disability pursuant to
subparagraph (i) of Section 3 hereof, thirty (30) days after Notice of
Termination is given (provided that Employee shall not have returned to the
performance of his duties on a full-time basis during such thirty (30) day
period), (iii) if Employee's employment is terminated for Cause pursuant to
4
<PAGE>
subparagraph (iii) of Section 3 hereof, the date specified in the Notice of
Termination, and (iv) if Employee's employment is terminated for any other
reason, the date on which a Notice of Termination is given; provided, however,
that, in all instances, if within thirty (30) days after any Notice of
Termination is given, the party receiving such Notice of Termination notifies
the other party that a dispute exists concerning the termination, the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, by a final judgment order or decree
of a court of competent jurisdiction (the time for appeal therefrom having
expired and no appeal having been perfected).
(d) Exclusive Provisions. Employee may not be terminated by the
--------------------
Company and Employee may not terminate his employment hereunder except as
provided in this Section 5.
SECTION 6. Compensation Upon Termination or During Disability.
--------------------------------------------------
(a) In the Event of Death. If Employee's employment shall be
---------------------
terminated by reason of his death, the Company shall pay to such person as he
shall designate in a notice filed with the Company, or, if no such person shall
be designated, to his estate as a lump sum death benefit, the amount of his
accrued but unpaid full Base Salary to the date of his death in addition to any
payments Employee's spouse, beneficiaries or estate may be entitled to receive
pursuant to any pension or employee benefit plan or life insurance policy
presently maintained by the Company, and such payments shall fully discharge the
Company's obligations hereunder. All stock options granted to the employee from
and after the date hereof shall become vested and immediately exercisable as of
the date of Employee's death in accordance with the plan or plans pursuant to
which such options are to be issued.
(b) In the Event of Physical or Mental Illness. During any period
------------------------------------------
that Employee fails to perform his duties hereunder as a result of incapacity
due to physical or mental illness, Employee shall continue to receive his full
Base Salary and bonus payments until Employee's employment is terminated for
Total Disability pursuant to subparagraph (i) of Section 3 hereof. After
termination, Employee shall be paid his Base Salary at the rate in effect at the
time Notice of Termination is given less, in each case, any disability payments
otherwise payable by or pursuant to plans provided by the Company and actually
paid to Employee in substantially equal monthly installments over the remaining
term hereof, and the Company shall have no further obligations to Employee under
this Agreement. All stock options granted to the employee from and after the
date hereof shall become vested and immediately exercisable as of the date of
the Notice of Termination given in respect of Total Disability in accordance
with the plan or plans pursuant to which such options are to be issued.
(c) Cause. If Employee's employment shall be terminated for Cause,
-----
the Company shall pay Employee the amount of his accrued but unpaid Base Salary
through the Date of Termination at the rate in effect at the time Notice of
Termination is given and the Company shall have no further obligations to
Employee under this Agreement.
(d) Wrongful Termination. If in breach of this Agreement, the
--------------------
Company shall terminate Employee's employment other than in the manner allowed
pursuant to Section 3
5
<PAGE>
hereof (a purported termination pursuant to Section 3 hereof which is disputed
and finally determined not to have been proper shall be a termination by the
Company in breach of this Agreement), then:
(i) the Company shall pay Employee his full Base Salary through the
Date of Termination at the rate in effect at the time Notice of Termination is
given;
(ii) in lieu of any further salary payments to Employee for periods
subsequent to the Date of Termination, the Company shall pay as severance pay to
Employee an amount equal to twenty-five percent (25%) of the sum of (i) the
annual Base Salary at the highest rate in effect during the twelve (12) months
immediately preceding the Date of Termination and (ii) the highest annual bonus
payments paid or accrued pursuant to this Agreement, with such amount being paid
to Employee in substantially equal monthly installments for a three (3) month
period following the Date of Termination; and
(iii) all stock options granted to the Employee from and after the
date hereof shall become vested and immediately exercisable in accordance with
the plans or plans pursuant to which such options are to be issued.
(e) Voluntary Termination by Employee. If Employee terminates his
---------------------------------
employment with the Company voluntarily, then:
(i) the Company shall pay Employee his full Base Salary through the
Date of Termination at the rate in effect at the time Notice of Termination is
given;
(ii) all unvested options granted shall terminate and vested options
may be exercised in accordance with the terms of the plan or plans pursuant to
which such options are to be issued.
(f) Mitigation. Employee shall not be required to mitigate the
----------
amount of any payment provided for in this Section 6 by seeking other employment
or otherwise, nor shall the amount of any payment provided for in this Section 6
be reduced by any compensation earned by Employee as the result of employment by
another employer after the Date of Termination.
SECTION 7. Successors; Binding Agreement.
-----------------------------
(a) Successor Companies. The Company shall require any successor
-------------------
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company, by
agreement in form and substance reasonably satisfactory to Employee, to
expressly assume and agree to perform
6
<PAGE>
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. Failure of the
Company to obtain such agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle Employee to
compensation from the Company in the same amount and on the same terms as he
would be entitled to hereunder if he terminated his employment for Good Reason,
except that for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Date of Termination. As
used in this Agreement, "Company" shall mean the Company as hereinbefore defined
and any successor to its business and/or assets as aforesaid which executes and
delivers the Agreement provided for in this Section 7(a) or which otherwise
becomes bound by all the terms and provisions of this Agreement by operation of
law.
(b) Executive's Estate and Heirs. This Agreement and all rights of
----------------------------
Employee hereunder shall inure to the benefit of and be enforceable by
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If Employee 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 Employee's devisee, legatee, or
other designee or, if there be no such designee, to Employee's estate.
SECTION 8. Restrictive Covenants.
---------------------
(a) The Employee acknowledges that (i) the covenants herein are
necessary to protect the goodwill and other value of the Company; (iii) at the
Effective Date the Company will have bargained and paid adequate and sufficient
consideration for the restrictive covenants herein; and (iv) the Company is
employing the Employee in reliance on the covenants of this Section 8 in view of
the unique and essential nature of the services the Employee is to perform
hereunder and the irreparable injury that would befall the Company should the
Employee breach such covenants.
(b) The Employee further acknowledges that his services hereunder are
of a special, unique and extraordinary character and that his position with the
Company will place him in a position of confidence and trust with the customers
and employees of the Company and allow his access to Confidential Information
(as hereinafter defined).
(c) The Employee further acknowledges that the type and periods of
restrictions imposed by the covenants in this Section 8 are fair and reasonable
and that such restrictions will not prevent the Employee from earning a
livelihood.
(d) The Employee further acknowledges that, as of the Effective Date
(i) the Company is engaged in the Scope of Business; (ii) the Company conducts
its business activity in and throughout the Area (as hereinafter defined); and
(iii) Competing Businesses (as hereinafter defined) are engaged in businesses
like and similar to the business of the Company.
7
<PAGE>
(e) Having acknowledged the foregoing, the Employee covenants and
agrees with the Company that he will not, directly or indirectly:
(i) while he is in the Company's employ and after the termination of
his employment for any reason whatsoever (whether voluntarily or
involuntarily), disclose, use or otherwise exploit, except as may be
necessary in the performance of his duties hereunder, any Confidential
Information disclosed to the Employee or of which the Employee became
aware by reason of his employment with the Company;
(ii) while he is in the Company's employ and through the period
ending one (1) year after the termination of his employment for any
reason whatsoever (whether voluntarily or involuntarily), employ or
attempt to employ or assist anyone else in employing in any Competing
Business in the Area any managerial or employee of the Company
(whether or not such employment is full time or is pursuant to a
written contract with the Company); and
(iii) while he is in the Company's employ and through the period
ending one (1) year after the termination of his employment (whether
voluntarily or involuntarily) for any reason whatsoever, except for
(a) termination by the Company without cause or (b) termination by the
Employee for "good reason" or (c) expiration of the Term without
renewal pursuant to Section 3 hereof by virtue of notice of nonrenewal
given by the Company to the Employee pursuant to Section 3 hereof,
engage in or render any services to or be employed by any Competing
Business in the Area in a capacity substantially similar to the
capacity in which Employee is employed by the Company hereunder,
whether as a director, officer, shareholder, owner, employee or as a
consultant (other than as the owner of less than five (5%) percent of
the shares of a publicly-owned corporation whose shares are traded on
a national securities exchange or on the NASDAQ National Market
System).
(f) The Employee agrees that upon the termination of his employment
for any reason whatsoever (whether voluntarily or involuntarily), he will not
take with him or retain without written authorization, and he will promptly
deliver to the Company, originals and all copies of all papers, files or other
documents containing any Confidential Information and all other property
belonging to the Company and in his possession or under his control.
(g) For purposes of this Section 8, the term (a) "Area" means the
United States of America; (b) "Competing Business" means the Scope of Business
or such other
8
<PAGE>
line of business in which the Company is actively engaged at the Date of
Termination; and (c) "Confidential Information" means any and all data,
knowledge and information relating to the business of the Company (whether or
not constituting a trade secret) that is, has been or will be obtained by or
disclosed to the Employee or of which the Employee became or becomes aware as a
consequence of or through his relationship with the Company and that has value
to the Company and is not generally known by its competitors, provided, however,
that no information will be deemed confidential unless it is known to the
Employee to be confidential information or has been reduced to writing and
marked clearly and conspicuously as confidential information. Confidential
Information shall not include any data or information that has been voluntarily
disclosed to the public by the Company (except where such public disclosure has
been made without authorization by the Company), or that has been independently
developed and disclosed by others, or that otherwise enters the public domain
through lawful means. Confidential Information includes, but is not limited to,
information relating to the Company's financial affairs, processes, services,
customers, Employee or employees, compensation, research, development,
purchasing, accounting or marketing.
(h) The Employee acknowledges that irreparable loss and injury would
result to the Company upon the breach of any of the covenants contained in this
Section 8 and that damages arising out of such breach would be difficult to
ascertain. The Employee hereby agrees that, in addition to all other remedies
provided at law or in equity, the Company may petition and obtain from a court
of law or equity both temporary and permanent injunctive relief to prevent a
breach by the Employee of any covenant contained in this Section 8. The parties
hereto agree that all references to the Company in this Section 8 shall include,
unless the context otherwise requires, all subsidiaries (if any) of the Company.
SECTION 9. Miscellaneous.
-------------
9.1 Confidentiality.
---------------
(a) Employee recognizes and acknowledges that in the course of his
employment with the Company, as contemplated by this Agreement, and as a result
of the position of trust that he will hold under this Agreement, he will obtain
private and confidential information and proprietary data relating to the
Company, including, without limitation, financial information, product and
design information, marketing information, customer lists and other data that
are valuable assets and property rights of the Company (collectively referred to
as "Confidential Information"). Employee agrees that he will not, during the
term of this Agreement or any time after the termination of this Agreement,
either directly or indirectly, disclose or use any Confidential Information
acquired during his employment with the Company, unless (i) the Confidential
Information has been made public through no action or fault of the Employee, or
(ii) its disclosure is requested or compelled by applicable law or regulatory
agency. Employee further agrees that after the
9
<PAGE>
termination of this Agreement, or at such other time as the Company requests,
Employee will return to the Company all documents, papers and records
constituting Confidential Information, and all copies of same in Employee's
possession and control.
(b) Employee acknowledges that irreparable loss and injury would
result to the Company upon the breach of any of the covenants contained in this
Section 9.1 and that damages arising out of such breach would be difficult to
ascertain. Employee agrees that, in addition to all other remedies provided at
law or at equity, the Company may petition and obtain from a court of law or
equity both temporary and permanent injunctive relief to prevent a breach by
Employee of any covenant contained in this Section 9.1.
9.2 Binding Effect. This Agreement shall inure to the benefit of and
--------------
shall be binding upon Employee, his executor, administrator, heirs, personal
representatives and assigns, and upon the Company and its successors and
assigns; provided, however, that the obligations and duties of Employee may not
-------- -------
be assigned or delegated.
9.3 Governing Law. This Agreement shall be deemed to be made in, and
-------------
in all respects shall be interpreted, construed and governed by and in
accordance with, the laws of the State of Georgia, without giving effect to
principles of conflicts of laws.
9.4 Invalid Provisions. The parties herein hereby agree that the
------------------
agreements, provisions and covenants contained in this Agreement are severable
and divisible, that none of such agreements, provisions or covenants depends
upon any other provision, agreement or covenant for its enforceability, and that
each such agreement, provision and covenants constitutes an enforceable
obligation between the Company and Employee. Consequently, the parties hereto
agree that neither the invalidity nor the unenforceability of any agreement,
provision or covenant of this Agreement shall affect the other agreements,
provisions or covenants hereof, and this Agreement shall remain in full force
and effect and be construed in all respects as if such invalid or unenforceable
agreement, provision or covenant were omitted.
9.5 Headings. The section and paragraph headings contained in this
--------
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
9.6 Notices. All communications provided for hereunder shall be in
-------
writing and shall be deemed to be given when delivered in person or deposited in
the United States mail, first class, registered mail, return receipt requested,
with proper postage prepaid, and
(a) If to Employee, addressed to:
R. Kenneth Merkey
40 Samp Mortar Drive
Fairfield, Connecticut 06430
10
<PAGE>
(b) If to the Company, addressed to:
Grace Development, Inc.
1690 Chantilly Drive
Atlanta, Georgia 30327
Attention: Chief Executive Officer
or at such other place or places or to such other person or persons as shall be
designated in writing by the parties hereto in the manner provided above for
notices.
9.7 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
9.8 Waiver of Breach. The waiver by the Company of a breach of any
----------------
provision, agreement or covenant of this Agreement by Employee shall not operate
or be construed as a waiver of any prior or subsequent breach of the same or any
other provision, agreement or covenant by Employee.
9.9 Entire Agreement. This Agreement is intended by the parties
----------------
hereto to be the final expression of their agreement with respect to the subject
matter hereof and is the complete and exclusive statement thereof
notwithstanding any representation or statements to the contrary heretofore
made. This Agreement may be modified only by a written instrument signed by each
of the parties hereto.
IN WITNESS WHEREOF, Employee has executed this Agreement, and the Company
has caused this Agreement to be duly executed by its duly authorized officers
and has caused its proper corporate seal to be affixed hereto, and the parties
have caused this Agreement to be delivered, all on the day and year first
written above.
/s/ R. Kenneth Merkey
--------------------------------
R. KENNETH MERKEY
AVANA DEVELOPMENT GROUP, INC.
By: /s/ James Blanchard
-----------------------------
Its: President
-----------------------
11
<PAGE>
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT ("Agreement") is dated as of February 7, 2000,
between and among PAUL REYNOLDS, a resident of the State of South Carolina
("Executive"), and GRACE DEVELOPMENT, INC., a Colorado corporation (the
"Company").
W I T N E S S E T H:
-------------------
WHEREAS, the Company is engaged in the business of providing internet
access, internet provider services, e-commerce application and hosting services,
telecommunications and wireless telecommunications services, and integrated
voice, video and data communications products and services (collectively, the
"Scope of Business"); and
WHEREAS, the Company and Executive each desire to enter into this
Agreement, pursuant to which Executive will be employed by the Company on the
terms and conditions hereinafter set forth, and to make certain other
agreements;
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:
SECTION 1. Employment. Subject to the terms hereof, the Company hereby
----------
employs Executive, and Executive hereby accepts such employment. Executive shall
devote his Full Time and best efforts to rendering services on behalf of the
Company. As used herein, "Full Time" shall mean working during normal business
hours to accomplish his duties and responsibilities with appropriate timeliness,
and such term shall not preclude Employee's devoting incidental time to the
management of his non-Company related business and personal affairs, during
normal business hours nor shall it preclude his participating in other affairs
during non-business hours.
SECTION 2. Position, Authority and Duties.
------------------------------
(a) Position. Executive shall serve as Vice President of Sales
--------
Engineering and Support of the Company and, as such, Executive shall report
directly to the Company's Chief Operating Officer. Executive shall be
responsible for the development and implementation of operational and strategic
initiatives relating to the deployment of the companies published business plan
and such additional duties and responsibilities as the company may determine and
direct.
(b) Location. Executive's office shall be located in the metropolitan
--------
Atlanta, Georgia area and may require extensive travel. Executive shall be
required to relocate as a condition of his continued employment by the Company.
Provided that Executive shall
<PAGE>
have relocated his principal residence to Atlanta, Georgia no later than August
1, 2000, the Company shall reimburse the Executive for any reasonable moving
expenses actually incurred by the Executive to the extent that the Executive can
show to the satisfaction of the Company that a corresponding deduction is
allowable to the Executive pursuant to Section 217 of the Internal Revenue Code
of 1986, as amended (the "Code"), thereby resulting in such payment not being
characterized as "wages" for purposes of the payroll and FICA withholding
requirements pursuant to Sections 3401 (a)(15) and 3121 (a)(11) of the Code,
respectively, provided, however, that in no event shall the Company be obligated
------------------
to reimburse Executive for such expenses in excess of Twenty Five Thousand
Dollars ($25,000). No reimbursement of relocation expenses hereunder shall be
paid if Executive does not relocate his principal residence to Atlanta, Georgia
by August 1, 2000.
SECTION 3. Term. The term of this Agreement shall begin on the date hereof
----
(the "Effective Date") and shall continue until the earlier of (a) the date that
is two (2) years following the Effective Date (the "Term"), or (b) the
occurrence of a Terminating Event.
As used herein, "Terminating Event" shall mean:
(i) the death or Total Disability of Executive ("Total Disability"
meaning the failure of Executive to perform his normal required services
hereunder at his office for a period of three (3) consecutive months, by
reason of Executive's mental or physical disability as so determined by a
licensed physician selected by the Company reasonably satisfactory to
Executive);
(ii) the mutual written agreement of the parties hereto to terminate
Executive's employment hereunder;
(iii) the Company's termination of Executive's employment hereunder,
upon thirty (30) days' prior written notice to Executive, for "Cause." For
the purposes of this Agreement, "Cause" for termination of Executive's
employment shall exist (a) if Executive is convicted of (from which no
appeal may be taken), or pleads guilty to, any act of fraud,
misappropriation or embezzlement, or any felony, (b) if, in the sole
determination of the Board of Directors of the Company, Executive has
engaged in conduct or activities materially damaging to the business of the
Company (it being understood, however, that neither conduct nor activities
pursuant to Executive's exercise of his good faith business judgment nor
unintentional physical damage to any property of the Company by Executive
shall be a ground for such a determination by the Board of Directors of the
Company) after written notice with specificity as to the conduct or
activities complained of and a reasonable opportunity is given to Executive
to cure the same, or (c) if Executive has failed without reasonable cause
to devote his Full Time and best efforts to the business of the Company
and, after notice from the Company of such failure, Executive at any time
thereafter again so fails; or
2
<PAGE>
(iv) the Executive terminates this Agreement for "Good Reason." For
the purposes of this agreement "Good Reason" for the Executive's
termination of this Agreement shall exist if (a) the Company breaches a
material provision of this agreement and such breach is not remedied within
thirty (30) days following receipt by the Company of notice given by the
Executive of such breach, or (b) the Company materially alters the title,
duties or responsibilities of Executive without obtaining prior written
consent to such change.
SECTION 4. Compensation and Benefits.
-------------------------
4.1 Salary and Other Compensation.
-----------------------------
(a) Salary. Executive shall be paid a salary by the Company at
------
the annual rate of Eighty Two Thousand Dollars ($82,000), which salary shall be
payable bi-weekly in accordance with the payroll payment practices from time to
time adopted by the Company ("Base Salary"). Thereafter, Executive's salary
shall be as determined by the Company.
(b) Bonuses. Executive shall be paid a signing bonus of $10,000.
-------
Executive shall be eligible to participate in the Company's incentive and bonus
programs, including, without limitation, any stock option programs, to the same
extent as other senior executive officers of the Company. The bonus program will
provide a scaled structure to the executive, ranging from 43% to 75% of annual
salary based on the obtainment of company objectives achieved ranging from 80%
to 150% of planned annual objectives. During the next planning quarter,
objectives will be further outlined and agreed upon and used for determination
of bonus eligibility. Any bonus paid during the calendar year will be utilized
in a calculation of annual earnings. In addition, any bonus paid prior to
disbursement of bonus described herein shall be settled against year-end
disbursements.
(C) Stock Options. In addition, as an inducement to Executive to
-------------
enter into and remain in the employ of the Company during the Term, the Company
shall issue to Executive options to purchase Three Hundred Fifty Thousand
(350,000) shares of Common Stock at an exercise price of One Dollar ($1.00) per
share. The options to be issued pursuant to this Section 4.1(c) shall be issued
pursuant to stock option plan to be approved by the Board of Directors and are
restricted in accordance with rule 144F, and shall vest at the rate of 175,000
shares on March 1, 2001 and 175,000 shares shall vest on March 1, 2002. If no
other stock option plan exists at the time any of the optioned shares have
vested, Executive shall be able to exercise such options within five (5) years
from date of vestment at his discretion with no other restrictions or
limitations.
3
<PAGE>
4.2 Insurance.
---------
(a) Life and Other Insurance. The Company shall, at its expense,
------------------------
provide or arrange for and keep in effect, during the term of Executive's
employment hereunder, so long as he is insurable, such group term life
insurance, travel accident, accidental death and dismemberment insurance and
long-and short-term disability insurance, or their equivalents, as is provided
from time to time for other senior executive officers of the Company.
(b) Medical Insurance. During the term of Executive's employment
-----------------
hereunder, the Company shall, at its expense, provide or arrange for and keep in
effect, hospitalization, major medical and similar medical and health insurance
for Executive and his family, to the same extent as is provided from time to
time for other senior executive officers of the Company.
4.3 Vacation. Executive shall be entitled to the same number of days
--------
of paid vacation during each year of his employment hereunder as is allowed to
other senior executive officers of the Company, but in no event less than two
(2) weeks of paid vacation per year.
4.4 Retirement Benefits. During the term of his employment hereunder,
-------------------
Executive shall have the same right as other senior executive officers of the
Company to participate in all profit-sharing, pension and other retirement plans
as are now, or as may hereafter be, established by the Company.
4.5 Out-of-Pocket Expenses. The Company shall reimburse Executive for
----------------------
all reasonable out-of-pocket expenses incurred by Executive in connection with
the performance of his duties hereunder upon presentation of appropriate
vouchers therefor.
SECTION 5. Termination.
-----------
(a) Notice of Termination. Any termination of Executive's employment
---------------------
by the Company or by Executive (other than termination for death pursuant to
subparagraph (i) of Section 3) shall be communicated by written Notice of
Termination to the other party hereto. For purposes of this Agreement, a "Notice
of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Executive's employment under the provision so indicated.
(b) Date of Termination. "Date of Termination" shall mean (i) if
-------------------
Executive's employment is terminated by his death, the date of his death, (ii)
if Executive's employment is terminated for Total Disability pursuant to
subparagraph (i) of Section 3 hereof, thirty (30) days after Notice of
Termination is given (provided that Executive shall not have returned to the
performance of his duties on a full-time basis during such thirty (30) day
period), (iii) if Executive's employment is terminated for Cause pursuant to
subparagraph (iii) of Section 3 hereof, the date specified in the Notice of
Termination, and
4
<PAGE>
(iv) if Executive's employment is terminated for any other reason, the date on
which a Notice of Termination is given; provided, however, that, in all
-------- -------
instances, if within thirty (30) days after any Notice of Termination is given,
the party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, the Date of Termination shall be the
date on which the dispute is finally determined, either by mutual written
agreement of the parties, by a final judgment order or decree of a court of
competent jurisdiction (the time for appeal therefrom having expired and no
appeal having been perfected).
(c) Exclusive Provisions. Executive may not be terminated by the
--------------------
Company and Executive may not terminate his employment hereunder except as
provided in this Section 5.
SECTION 6. Compensation Upon Termination or During Disability.
--------------------------------------------------
(a) In the Event of Death. If Executive's employment shall be
---------------------
terminated by reason of his death, the Company shall pay to such person as his
shall designate in a notice filed with the Company, or, if no such person shall
be designated, to his estate as a lump sum death benefit, the amount of his
accrued but unpaid full Base Salary to the date of his death and any other
benefits payable hereunder, such as un-reimbursed relocation and out-of-pocket
expenses, such payments to be in addition to any payments Executive's spouse,
beneficiaries or estate may be entitled to receive pursuant to any pension or
executive benefit plan or life insurance policy presently maintained by the
Company, and such payments shall fully discharge the Company's obligations
hereunder. All stock options granted to the executive from and after the date
hereof shall become vested and immediately exercisable as of the date of
Executive's death in accordance with the plan or plans pursuant to which such
options are to be issued. If no stock option plan exists at the time of
Executive's death, Executive's beneficiaries or the estate shall be able to
exercise any such options within eighteen (18) months of the date of Executive's
death.
(b) In the Event of Physical or Mental Illness. During any period
------------------------------------------
that Executive fails to perform his duties hereunder as a result of incapacity
due to physical or mental illness, Executive shall continue to receive his full
Base Salary and bonus payments until Executive's employment is terminated for
Total Disability pursuant to subparagraph (i) of Section 3 hereof. After
termination, Executive shall be paid his Base Salary at the rate in effect at
the time Notice of Termination is given less, in each case, any disability
payments otherwise payable by or pursuant to plans provided by the Company and
actually paid to Executive in substantially equal monthly installments over the
remaining term hereof, and other benefits payable hereunder, such as un-
reimbursed relocation and out-of-pocket expenses, and the Company shall have no
further obligations to Executive under this Agreement. All stock options granted
to the executive from and after the date hereof shall become vested and
immediately exercisable as of the date of the Notice of Termination given in
respect of Total Disability in accordance with the plan or plans pursuant to
which such options are to be issued. If no stock option plan exists at the time
of termination, executive
5
<PAGE>
shall be able to exercise such options within six (6) months of the date of the
Notice of Termination.
(c) Cause. If Executive's employment shall be terminated for Cause,
-----
the Company shall pay Executive the amount of his accrued but unpaid Base Salary
through the Date of Termination at the rate in effect at the time Notice of
Termination is given and the Company shall have no further obligations to
Executive under this Agreement. If Executive's employment shall be terminated
for Cause within the first twelve (12) months of employment, the Executive shall
reimburse the Company in full for all relocation expenses paid or reimbursed by
the Company pursuant to Section 2(b) of this Agreement and the Swing Loan, if
then outstanding.
(d) Wrongful Termination. If in breach of this Agreement, the
--------------------
Company shall terminate Executive's employment other than in the manner allowed
pursuant to Section 3 hereof (a purported termination pursuant to Section 3
hereof which is disputed and finally determined not to have been proper shall be
a termination by the Company in breach of this Agreement), or if Executive
terminates this Agreement for Good Reason, then:
(i) the Company shall pay Executive his full Base Salary and any
other benefits payable hereunder, such as un-reimbursed relocation or out-of-
pocket expenses, through the Date of Termination at the rate in effect at the
time Notice of Termination is given;
(ii) the company shall continue to reimburse Executive for relocation
expenses in accordance with Section 2(b) hereof;
(iii) in lieu of any further salary payments to Executive for periods
subsequent to the Date of Termination, the Company shall pay as severance pay to
Executive an amount equal to twenty-five percent (25%) of the sum of (i) the
annual Base Salary at the highest rate in effect during the twelve (12) months
immediately preceding the Date of Termination and (ii) the highest annual bonus
payments paid or accrued pursuant to this Agreement, with such amount being paid
to Executive in substantially equal monthly installments for a three (3) month
period following the Date of Termination; and
(iv) all stock options granted to the Executive hereunder and from
and after the date hereof shall become vested and immediately exercisable in
accordance with the plans or plans pursuant to which such options are to be
issued. If no stock option plan exists at the time of such termination,
Executive shall be able to exercise such options at his discretion within six
(6) months of the date of termination of his employment.
(e) Voluntary Termination by Executive. If Executive terminates his
----------------------------------
employment with the Company voluntarily, then:
(i) the Company shall pay Executive his full Base Salary through the
Date of Termination at the rate in effect at the time Notice of Termination is
given;
6
<PAGE>
(ii) all unvested options granted shall terminate and vested options
may be exercised in accordance with the terms of the plan or plans pursuant to
which such options are to be issued; and
(iii) if Executive voluntarily terminates his employment with the
Company prior to the first anniversary of the date hereof, the Executive shall
reimburse the Company in full for all relocation expenses paid or reimbursed by
the Company pursuant to Section 2(b) of this Agreement and the Swing Loan, if
then outstanding.
(f) Mitigation. Executive shall not be required to mitigate the
----------
amount of any payment provided for in this Section 6 by seeking other employment
or otherwise, nor shall the amount of any payment provided for in this Section 6
be reduced by any compensation earned by Executive as the result of employment
by another employer after the Date of Termination.
SECTION 7. Successors; Binding Agreement.
-----------------------------
(a) Successor Companies. The Company shall require any successor
-------------------
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company, by
agreement in form and substance reasonably satisfactory to 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 had taken place. Failure of the Company to obtain such agreement
prior to the effectiveness of any such succession shall be a breach of this
Agreement and shall entitle Executive to compensation from the Company in the
same amount and on the same terms as he would be entitled to hereunder if he
terminated his employment for Good Reason as set forth in Section 3(iv), except
that for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of Termination. As used in
this Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid, which executes and
delivers the Agreement provided for in this Section 7(a) or which otherwise
becomes bound by all the terms and provisions of this Agreement by operation of
law.
(b) Executive's Estate and Heirs. This Agreement and all rights of
----------------------------
Executive hereunder shall inure to the benefit of and be enforceable by
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If Executive should die
while any amounts would still be payable to his 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 Executive's devisee, legatee, or
other designee or, if there be no such designee, to Executive's estate.
7
<PAGE>
SECTION 8. Restrictive Covenants.
---------------------
(a) The Executive acknowledges that (i) the covenants herein are
necessary to protect the goodwill and other value of the Company; (ii) at the
Effective Date the Company will have bargained and paid adequate and sufficient
consideration for the restrictive covenants herein; and (iii) the Company is
employing the Executive in reliance on the covenants of this Section 8 in view
of the unique and essential nature of the services the Executive is to perform
hereunder and the irreparable injury that would befall the Company should the
Executive breach such covenants.
(b) The Executive further acknowledges that his services hereunder
are of a special, unique and extraordinary character and that his position with
the Company will place his in a position of confidence and trust with the
customers and executives of the Company and allow his access to Confidential
Information (as hereinafter defined).
(c) The Executive further acknowledges that the type and periods of
restrictions imposed by the covenants in this Section 8 are fair and reasonable
and that such restrictions will not prevent the Executive from earning a
livelihood.
(d) The Executive Company is engaged in the Scope of Business; (ii)
the Company conducts its business activity in and throughout the Area (as
hereinafter defined); and (iii) Competing Businesses (as hereinafter defined)
are engaged in businesses like and similar to the business of the Company.
(e) Having acknowledged the foregoing, the Executive covenants and
agrees with the Company that he will not, directly or indirectly:
(i) while he is in the Company's employ and after the termination of
his employment for any reason whatsoever (whether voluntarily or
involuntarily), disclose, use or otherwise exploit, except as may be
necessary in the performance of his duties hereunder, any Confidential
Information disclosed to the Executive or of which the Executive
became aware by reason of his employment with the Company;
(ii) while he is in the Company's employ and through the period ending
one (1) year after the termination of his employment for any reason
whatsoever (whether voluntarily or involuntarily), employ or attempt
to employ or assist anyone else in employing in any Competing Business
in the Area any managerial or executive of the Company (whether or not
such employment is full time or is pursuant to a written contract with
the Company); and
8
<PAGE>
(iii) while he is in the Company's employ and through the period
ending one (1) year after the termination of his employment (whether
voluntarily or involuntarily) for any reason whatsoever, except for
(a) termination by the Company without cause or (b) termination by the
Executive for "good reason" or (c) expiration of the Term, engage in
or render any services to or be employed by any Competing Business in
the Area in a capacity substantially similar to the capacity in which
Executive is employed by the Company hereunder, whether as a director,
officer, shareholder, owner, executive or as a consultant (other than
as the owner of less than five (5%) percent of the shares of a
publicly-owned corporation whose shares are traded on a national
securities exchange or on the NASDAQ National Market System).
(f) The Executive agrees that upon the termination of his
employment for any reason whatsoever (whether voluntarily or involuntarily), he
will not take with him or retain without written authorization, and he will
promptly deliver to the Company, originals and all copies of all papers, files
or other documents containing any Confidential Information and all other
property belonging to the Company and in his possession or under his control.
(g) For purposes of this Section 8, the term (a) "Area" means any
state within the United States of America within which the Company is operating;
(b) "Competing Business" means the Scope of Business or such other line of
business in which the Company is actively engaged at the Date of Termination;
and (c) "Confidential Information" means any and all data, knowledge and
information relating to the business of the Company (whether or not constituting
a trade secret) that is, has been or will be obtained by or disclosed to the
Executive or of which the Executive became or becomes aware as a consequence of
or through his relationship with the Company and that has value to the Company
and is not generally known by its competitors, provided, however, that no
-------- -------
information will be deemed confidential unless it is known to the Executive to
be confidential information or has been reduced to writing and marked clearly
and conspicuously as confidential information. Confidential Information shall
not include any data or information that has been voluntarily disclosed to the
public by the Company (except where such public disclosure has been made without
authorization by the Company), or that has been independently developed and
disclosed by others, or that otherwise enters the public domain through lawful
means. Confidential Information includes, but is not limited to, information
relating to the Company's financial affairs, processes, services, customers,
Executive or executives, compensation, research, development, purchasing,
accounting or marketing.
(h) The Executive acknowledges that irreparable loss and injury
would result to the Company upon the breach of any of the covenants contained in
this Section 8 and that damages arising out of such breach would be difficult to
ascertain. The Executive
9
<PAGE>
hereby agrees that, in addition to all other remedies provided at law or in
equity, the Company may petition and obtain from a court of law or equity both
temporary and permanent injunctive relief to prevent a breach by the Executive
of any covenant contained in this Section 8. The parties hereto agree that all
references to the Company in this Section 8 shall include, unless the context
otherwise requires, all subsidiaries (if any) of the Company.
SECTION 9. Miscellaneous.
-------------
9.1 Confidentiality.
---------------
(a) Executive recognizes and acknowledges that in the course of his
employment with the Company, as contemplated by this Agreement, and as a result
of the position of trust that he will hold under this Agreement, he will obtain
private and confidential information and proprietary data relating to the
Company, including, without limitation, financial information, product and
design information, marketing information, customer lists and other data that
are valuable assets and property rights of the Company (collectively referred to
as "Confidential Information"). Executive agrees that he will not, during the
term of this Agreement or any time after the termination of this Agreement,
either directly or indirectly, disclose or use any Confidential Information
acquired during his employment with the Company, unless (i) the Confidential
Information has been made public through no action or fault of the Executive, or
(ii) its disclosure is requested or compelled by applicable law or regulatory
agency. Executive further agrees that after the termination of this Agreement,
or at such other time as the Company requests, Executive will return to the
Company all documents, papers and records constituting Confidential Information,
and all copies of same in Executive's possession and control.
(b) Executive acknowledges that irreparable loss and injury would
result to the Company upon the breach of any of the covenants contained in this
Section 9.1 and that damages arising out of such breach would be difficult to
ascertain. Executive agrees that, in addition to all other remedies provided at
law or at equity, the Company may petition and obtain from a court of law or
equity both temporary and permanent injunctive relief to prevent a breach by
Executive of any covenant contained in this Section 9.1.
9.2 Binding Effect. This Agreement shall inure to the benefit of and
--------------
shall be binding upon Executive, his executor, administrator, heirs, personal
representatives and assigns, and upon the Company and its successors and
assigns; provided, however, that the obligations and duties of Executive may not
-------- -------
be assigned or delegated.
9.3 Governing Law. This Agreement shall be deemed to be made in, and
-------------
in all respects shall be interpreted, construed and governed by and in
accordance with, the laws of the State of Georgia, without giving effect to
principles of conflicts of laws.
9.4 Invalid Provisions. The parties herein hereby agree that the
------------------
agreements, provisions and covenants contained in this Agreement are severable
and
10
<PAGE>
divisible, that none of such agreements, provisions or covenants depends upon
any other provision, agreement or covenant for its enforceability, and that each
such agreement, provision and covenants constitutes an enforceable obligation
between the Company and Executive. Consequently, the parties hereto agree that
neither the invalidity nor the unenforceability of any agreement, provision or
covenant of this Agreement shall affect the other agreements, provisions or
covenants hereof, and this Agreement shall remain in full force and effect and
be construed in all respects as if such invalid or unenforceable agreement,
provision or covenant were omitted.
9.5 Headings. The section and paragraph headings contained in this
--------
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
9.6 Notices. All communications provided for hereunder shall be in
-------
writing and shall be deemed to be given when delivered in person or deposited in
the United States mail, first class, registered mail, return receipt requested,
with proper postage prepaid, and
(a) If to Executive, addressed to:
Paul Reynolds
928 Folly Road
Myrtle Beach, South Carolina 29577
(b) If to the Company, addressed to:
Grace Development, Inc.
1690 Chantilly Drive
Atlanta, Georgia 30324
Attention: Chief Executive Officer
or at such other place or places or to such other person or persons as shall be
designated in writing by the parties hereto in the manner provided above for
notices.
9.7 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
9.8 Waiver of Breach. The waiver by the Company of a breach of any
----------------
provision, agreement or covenant of this Agreement by Executive shall not
operate or be construed as a waiver of any prior or subsequent breach of the
same or any other provision, agreement or covenant by Executive.
9.9 Entire Agreement. This Agreement is intended by the parties
----------------
hereto to be the final expression of their agreement with respect to the subject
matter hereof and is
11
<PAGE>
the complete and exclusive statement thereof notwithstanding any representation
or statements to the contrary heretofore made. This Agreement may be modified
only by a written instrument signed by each of the parties hereto.
IN WITNESS WHEREOF, Executive has executed this Agreement, and the Company
has caused this Agreement to be duly executed by its duly authorized officers
and has caused its proper corporate seal to be affixed hereto, and the parties
have caused this Agreement to be delivered, all on the day and year first
written above.
/s/ Paul Reynolds
------------------------------
PAUL REYNOLDS
GRACE DEVELOPMENT, INC.
By: /s/ James Blanchard
---------------------------
Its: President
----------------------
12
<PAGE>
EXHIBIT 10.10
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT ("Agreement") is dated as of February 7, 2000,
between and among JOSEPH BUCK, a resident of the State of Tennessee
("Executive"), and GRACE DEVELOPMENT, INC., a Colorado corporation (the
"Company").
W I T N E S S E T H:
-------------------
WHEREAS, the Company is engaged in the business of providing internet
access, internet provider services, e-commerce application and hosting services,
telecommunications and wireless telecommunications services, and integrated
voice, video and data communications products and services (collectively, the
"Scope of Business"); and
WHEREAS, the Company and Executive each desire to enter into this
Agreement, pursuant to which Executive will be employed by the Company on the
terms and conditions hereinafter set forth, and to make certain other
agreements;
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:
SECTION 1. Employment. Subject to the terms hereof, the Company hereby
----------
employs Executive, and Executive hereby accepts such employment. Executive
shall devote his Full Time and best efforts to rendering services on behalf of
the Company. As used herein, "Full Time" shall mean working during normal
business hours to accomplish his duties and responsibilities with appropriate
timeliness, and such term shall not preclude Executive's devoting incidental
time to the management of his non-Company related business and personal affairs,
during normal business hours nor shall it preclude his participating in other
affairs during non-business hours.
SECTION 2. Position, Authority and Duties.
------------------------------
(a) Position. Executive shall serve as Vice President of Engineering
--------
and Infrastructure of the Company and, as such, Executive shall report directly
to the Company's Chief Technology Officer. Executive shall be responsible for
the development and implementation of operational and strategic initiatives
relating to the deployment of the companies published business plan and such
additional duties and responsibilities as the company may determine and direct.
(b) Location. Executive's office shall be located in the Kingsport,
--------
Tennessee area and may be required to relocate to Atlanta. Extensive travel
will be required for this position.
<PAGE>
SECTION 3. Term. The term of this Agreement shall begin on the date
----
hereof (the "Effective Date") and shall continue until the earlier of (a) the
date that is one (1) year following the Effective Date (the "Term"), or (b) the
occurrence of a Terminating Event.
As used herein, "Terminating Event" shall mean:
(i) the death or Total Disability of Executive ("Total Disability"
meaning the failure of Executive to perform his normal required services
hereunder at his office for a period of three (3) consecutive months, by
reason of Executive's mental or physical disability as so determined by a
licensed physician selected by the Company reasonably satisfactory to
Executive);
(ii) the mutual written agreement of the parties hereto to terminate
Executive's employment hereunder;
(iii) the Company's termination of Executive's employment hereunder,
upon thirty (30) days' prior written notice to Executive, for "Cause." For
the purposes of this Agreement, "Cause" for termination of Executive's
employment shall exist (a) if Executive is convicted of (from which no
appeal may be taken), or pleads guilty to, any act of fraud,
misappropriation or embezzlement, or any felony, (b) if, in the sole
determination of the Board of Directors of the Company, Executive has
engaged in conduct or activities materially damaging to the business of the
Company (it being understood, however, that neither conduct nor activities
pursuant to Executive's exercise of his good faith business judgment nor
unintentional physical damage to any property of the Company by Executive
shall be a ground for such a determination by the Board of Directors of the
Company) after written notice with specificity as to the conduct or
activities complained of and a reasonable opportunity is given to Executive
to cure the same, or (c) if Executive has failed without reasonable cause
to devote his Full Time and best efforts to the business of the Company
and, after notice from the Company of such failure, Executive at any time
thereafter again so fails; or
(iv) the Executive terminates this Agreement for "Good Reason." For
the purposes of this agreement "Good Reason" for the Executive's
termination of this Agreement shall exist if (a) the Company breaches a
material provision of this agreement and such breach is not remedied within
thirty (30) days following receipt by the Company of notice given by the
Executive of such breach, or (b) the Company materially alters the title,
duties or responsibilities of Executive without obtaining prior written
consent to such change.
2
<PAGE>
SECTION 4. Compensation and Benefits.
-------------------------
4.1 Salary and Other Compensation.
-----------------------------
(a) Salary. Executive shall be paid a salary by the Company at
------
the annual rate of Ninety Two Thousand Dollars ($92,000), which salary shall be
payable bi-weekly in accordance with the payroll payment practices from time to
time adopted by the Company ("Base Salary"). Thereafter, Executive's salary
shall be as determined by the Company.
(b) Bonuses. Executive shall be eligible to participate in the
-------
Company's incentive and bonus programs, including, without limitation, any stock
option programs, to the same extent as other senior executive officers of the
Company. The bonus program will provide a scaled structure to the executive,
ranging from 43% to 75% of annual salary based on the obtainment of company
objectives achieved ranging from 80% to 150% of planned annual objectives.
During the next planning quarter, objectives will be further outlined and agreed
upon and used for determination of bonus eligibility.
(c) Stock Options. In addition, as an inducement to Executive
-------------
to enter into and remain in the employ of the Company during the Term, the
Company shall issue to Executive options to purchase Three Hundred Fifty
Thousand (350,000) shares of Common Stock at an exercise price of One Dollar
($1.00) per share. The options to be issued pursuant to this Section 4.1(c)
shall be issued pursuant to stock option plan to be approved by the Board of
Directors and are restricted in accordance with rule 144F, and shall vest at the
rate of 175,000 shares on March 1, 2001 and 175,000 shares shall vest on March
1, 2002. If no other stock option plan exists at the time any of the optioned
shares have vested, Executive shall be able to exercise such options at his
discretion with no restrictions or limitations.
4.2 Insurance.
---------
(a) Life and Other Insurance. The Company shall, at its
------------------------
expense, provide or arrange for and keep in effect, during the term of
Executive's employment hereunder, so long as he is insurable, such group term
life insurance, travel accident, accidental death and dismemberment insurance
and long-and short-term disability insurance, or their equivalents, as is
provided from time to time for other senior executive officers of the Company.
(b) Medical Insurance. During the term of Executive's
-----------------
employment hereunder, the Company shall, at its expense, provide or arrange for
and keep in effect, hospitalization, major medical and similar medical and
health insurance for Executive and his family, to the same extent as is provided
from time to time for other senior executive officers of the Company.
3
<PAGE>
4.3 Vacation. Executive shall be entitled to the same number of days
--------
of paid vacation during each year of his employment hereunder as is allowed to
other senior executive officers of the Company, but in no event less than two
(2) weeks of paid vacation per year.
4.4 Retirement Benefits. During the term of his employment
-------------------
hereunder, Executive shall have the same right as other senior executive
officers of the Company to participate in all profit sharing, pension and other
retirement plans as are now, or as may hereafter be, established by the Company.
4.5 Out-of-Pocket Expenses. The Company shall reimburse Executive
----------------------
for all reasonable out-of-pocket expenses incurred by Executive in connection
with the performance of his duties hereunder upon presentation of appropriate
vouchers therefor.
SECTION 5. Termination.
-----------
(a) Notice of Termination. Any termination of Executive's employment
---------------------
by the Company or by Executive (other than termination for death pursuant to
subparagraph (i) of Section 3) shall be communicated by written Notice of
Termination to the other party hereto. For purposes of this Agreement, a "Notice
of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Executive's employment under the provision so indicated.
(c) Date of Termination. "Date of Termination" shall mean (i) if
-------------------
Executive's employment is terminated by his death, the date of his death, (ii)
if Executive's employment is terminated for Total Disability pursuant to
subparagraph (i) of Section 3 hereof, thirty (30) days after Notice of
Termination is given (provided that Executive shall not have returned to the
performance of his duties on a full-time basis during such thirty (30) day
period), (iii) if Executive's employment is terminated for Cause pursuant to
subparagraph (iii) of Section 3 hereof, the date specified in the Notice of
Termination, and (iv) if Executive's employment is terminated for any other
reason, the date on which a Notice of Termination is given; provided, however,
-------- -------
that, in all instances, if within thirty (30) days after any Notice of
Termination is given, the party receiving such Notice of Termination notifies
the other party that a dispute exists concerning the termination, the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, by a final judgment order or decree
of a court of competent jurisdiction (the time for appeal therefrom having
expired and no appeal having been perfected).
(d) Exclusive Provisions. Executive may not be terminated by the
--------------------
Company and Executive may not terminate his employment hereunder except as
provided in this Section 5.
4
<PAGE>
SECTION 6. Compensation Upon Termination or During Disability.
--------------------------------------------------
(a) In the Event of Death. If Executive's employment shall be
---------------------
terminated by reason of his death, the Company shall pay to such person as his
shall designate in a notice filed with the Company, or, if no such person shall
be designated, to his estate as a lump sum death benefit, the amount of his
accrued but unpaid full Base Salary to the date of his death and any other
benefits payable hereunder, such as un-reimbursed relocation and out-of-pocket
expenses, such payments to be in addition to any payments Executive's spouse,
beneficiaries or estate may be entitled to receive pursuant to any pension or
executive benefit plan or life insurance policy presently maintained by the
Company, and such payments shall fully discharge the Company's obligations
hereunder. All stock options granted to the executive from and after the date
hereof shall become vested and immediately exercisable as of the date of
Executive's death in accordance with the plan or plans pursuant to which such
options are to be issued. If no stock option plan exists at the time of
Executive's death, Executive's beneficiaries or the estate shall be able to
exercise any such options within eighteen (18) months of the date of Executive's
death.
(b) In the Event of Physical or Mental Illness. During any period
------------------------------------------
that Executive fails to perform his duties hereunder as a result of incapacity
due to physical or mental illness, Executive shall continue to receive his full
Base Salary and bonus payments until Executive's employment is terminated for
Total Disability pursuant to subparagraph (i) of Section 3 hereof. After
termination, Executive shall be paid his Base Salary at the rate in effect at
the time Notice of Termination is given less, in each case, any disability
payments otherwise payable by or pursuant to plans provided by the Company and
actually paid to Executive in substantially equal monthly installments over the
remaining term hereof, and other benefits payable hereunder, such as un-
reimbursed relocation and out-of-pocket expenses, and the Company shall have no
further obligations to Executive under this Agreement. All stock options granted
to the executive from and after the date hereof shall become vested and
immediately exercisable as of the date of the Notice of Termination given in
respect of Total Disability in accordance with the plan or plans pursuant to
which such options are to be issued. If no stock option plan exists at the time
of termination, executive shall be able to exercise such options within six (6)
months of the date of the Notice of Termination.
(c) Cause. If Executive's employment shall be terminated for Cause,
-----
the Company shall pay Executive the amount of his accrued but unpaid Base Salary
through the Date of Termination at the rate in effect at the time Notice of
Termination is given and the Company shall have no further obligations to
Executive under this Agreement. If Executive's employment shall be terminated
for Cause within the first twelve (12) months of employment, the Executive shall
reimburse the Company in full for all relocation expenses paid or reimbursed by
the Company pursuant to Section 2(b) of this Agreement and the Swing Loan, if
then outstanding
5
<PAGE>
(d) Wrongful Termination. If in breach of this Agreement, the
--------------------
Company shall terminate Executive's employment other than in the manner allowed
pursuant to Section 3 hereof (a purported termination pursuant to Section 3
hereof which is disputed and finally determined not to have been proper shall be
a termination by the Company in breach of this Agreement), or if Executive
terminates this Agreement for Good Reason, then:
(i) the Company shall pay Executive his full Base Salary and any
other benefits payable hereunder, such as un-reimbursed relocation or out-of-
pocket expenses, through the Date of Termination at the rate in effect at the
time Notice of Termination is given;
(ii) the company shall continue to reimburse Executive for
relocation expenses in accordance with Section 2(b) hereof;
(iii) in lieu of any further salary payments to Executive for periods
subsequent to the Date of Termination, the Company shall pay as severance pay to
Executive an amount equal to twenty-five percent (25%) of the sum of (i) the
annual Base Salary at the highest rate in effect during the twelve (12) months
immediately preceding the Date of Termination and (ii) the highest annual bonus
payments paid or accrued pursuant to this Agreement, with such amount being paid
to Executive in substantially equal monthly installments for a three (3) month
period following the Date of Termination; and
(iv) all stock options granted to the Executive hereunder and from
and after the date hereof shall become vested and immediately exercisable in
accordance with the plans or plans pursuant to which such options are to be
issued. If no stock option plan exists at the time of such termination,
Executive shall be able to exercise such options at his discretion within six
(6) months of the date of termination of his employment.
(e) Voluntary Termination by Executive. If Executive terminates
----------------------------------
his employment with the Company voluntarily, then:
(i) the Company shall pay Executive his full Base Salary through the
Date of Termination at the rate in effect at the time Notice of Termination is
given;
(ii) all unvested options granted shall terminate and vested options
may be exercised in accordance with the terms of the plan or plans pursuant to
which such options are to be issued; and
(iii) if Executive voluntarily terminates his employment with the
Company prior to the first anniversary of the date hereof, the Executive shall
reimburse the Company in full for all relocation expenses paid or reimbursed by
the Company pursuant to Section 2(b) of this Agreement and the Swing Loan, if
then outstanding.
6
<PAGE>
(f) Mitigation. Executive shall not be required to mitigate the
----------
amount of any payment provided for in this Section 6 by seeking other employment
or otherwise, nor shall the amount of any payment provided for in this Section 6
be reduced by any compensation earned by Executive as the result of employment
by another employer after the Date of Termination.
SECTION 7. Successors; Binding Agreement.
-----------------------------
(a) Successor Companies. The Company shall require any successor
-------------------
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company, by
agreement in form and substance reasonably satisfactory to 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 had taken place. Failure of the Company to obtain such agreement
prior to the effectiveness of any such succession shall be a breach of this
Agreement and shall entitle Executive to compensation from the Company in the
same amount and on the same terms as he would be entitled to hereunder if he
terminated his employment for Good Reason as set forth in Section 3(iv), except
that for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of Termination. As used in
this Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid, which executes and
delivers the Agreement provided for in this Section 7(a) or which otherwise
becomes bound by all the terms and provisions of this Agreement by operation of
law.
(b) Executive's Estate and Heirs. This Agreement and all rights of
----------------------------
Executive hereunder shall inure to the benefit of and be enforceable by
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If Executive should die
while any amounts would still be payable to his 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 Executive's devisee, legatee, or
other designee or, if there be no such designee, to Executive's estate.
SECTION 8. Restrictive Covenants.
---------------------
(a) The Executive acknowledges that (i) the covenants herein are
necessary to protect the goodwill and other value of the Company; (ii) at the
Effective Date the Company will have bargained and paid adequate and sufficient
consideration for the restrictive covenants herein; and (iii) the Company is
employing the Executive in reliance on the covenants of this Section 8 in view
of the unique and essential nature of the services the Executive is to perform
hereunder and the irreparable injury that would befall the Company should the
Executive breach such covenants.
7
<PAGE>
(b) The Executive further acknowledges that his services hereunder
are of a special, unique and extraordinary character and that his position with
the Company will place his in a position of confidence and trust with the
customers and executives of the Company and allow his access to Confidential
Information (as hereinafter defined).
(c) The Executive further acknowledges that the type and periods of
restrictions imposed by the covenants in this Section 8 are fair and reasonable
and that such restrictions will not prevent the Executive from earning a
livelihood.
(d) The Executive further acknowledges that, as of the Effective Date
(i) the Company is engaged in the Scope of Business; (ii) the Company conducts
its business activity in and throughout the Area (as hereinafter defined); and
(iii) Competing Businesses (as hereinafter defined) are engaged in businesses
like and similar to the business of the Company.
(e) Having acknowledged the foregoing, the Executive covenants and
agrees with the Company that he will not, directly or indirectly:
(i) while he is in the Company's employ and after the termination of
his employment for any reason whatsoever (whether voluntarily or
involuntarily), disclose, use or otherwise exploit, except as may be
necessary in the performance of his duties hereunder, any Confidential
Information disclosed to the Executive or of which the Executive
became aware by reason of his employment with the Company;
(ii) while he is in the Company's employ and through the period
ending one (1) year after the termination of his employment for any
reason whatsoever (whether voluntarily or involuntarily), employ or
attempt to employ or assist anyone else in employing in any Competing
Business in the Area any managerial or executive of the Company
(whether or not such employment is full time or is pursuant to a
written contract with the Company); and
(iii) while he is in the Company's employ and through the period
ending one (1) year after the termination of his employment (whether
voluntarily or involuntarily) for any reason whatsoever, except for
(a) termination by the Company without cause or (b) termination by the
Executive for "good reason" or (c) expiration of the Term, engage in
or render any services to or be employed by any Competing Business in
the Area in a capacity substantially similar to the capacity in which
Executive is employed by the Company hereunder, whether as a director,
officer, shareholder, owner, executive or as a consultant (other than
as the owner of less than five (5%) percent of the shares of a
publicly-owned corporation whose shares are
8
<PAGE>
traded on a national securities exchange or on the NASDAQ National
Market System).
(f) The Executive agrees that upon the termination of his employment
for any reason whatsoever (whether voluntarily or involuntarily), he will not
take with him or retain without written authorization, and he will promptly
deliver to the Company, originals and all copies of all papers, files or other
documents containing any Confidential Information and all other property
belonging to the Company and in his possession or under his control.
(g) For purposes of this Section 8, the term (a) "Area" means any
state within the United States of America within which the Company is operating;
(b) "Competing Business" means the Scope of Business or such other line of
business in which the Company is actively engaged at the Date of Termination;
and (c) "Confidential Information" means any and all data, knowledge and
information relating to the business of the Company (whether or not constituting
a trade secret) that is, has been or will be obtained by or disclosed to the
Executive or of which the Executive became or becomes aware as a consequence of
or through his relationship with the Company and that has value to the Company
and is not generally known by its competitors, provided, however, that no
-------- -------
information will be deemed confidential unless it is known to the Executive to
be confidential information or has been reduced to writing and marked clearly
and conspicuously as confidential information. Confidential Information shall
not include any data or information that has been voluntarily disclosed to the
public by the Company (except where such public disclosure has been made without
authorization by the Company), or that has been independently developed and
disclosed by others, or that otherwise enters the public domain through lawful
means. Confidential Information includes, but is not limited to, information
relating to the Company's financial affairs, processes, services, customers,
Executive or executives, compensation, research, development, purchasing,
accounting or marketing.
(h) The Executive acknowledges that irreparable loss and injury would
result to the Company upon the breach of any of the covenants contained in this
Section 8 and that damages arising out of such breach would be difficult to
ascertain. The Executive hereby agrees that, in addition to all other remedies
provided at law or in equity, the Company may petition and obtain from a court
of law or equity both temporary and permanent injunctive relief to prevent a
breach by the Executive of any covenant contained in this Section 8. The parties
hereto agree that all references to the Company in this Section 8 shall include,
unless the context otherwise requires, all subsidiaries (if any) of the Company.
SECTION 9. Miscellaneous.
-------------
9.1 Confidentiality.
---------------
9
<PAGE>
(a) Executive recognizes and acknowledges that in the course of his
employment with the Company, as contemplated by this Agreement, and as a result
of the position of trust that he will hold under this Agreement, he will obtain
private and confidential information and proprietary data relating to the
Company, including, without limitation, financial information, product and
design information, marketing information, customer lists and other data that
are valuable assets and property rights of the Company (collectively referred to
as "Confidential Information"). Executive agrees that he will not, during the
term of this Agreement or any time after the termination of this Agreement,
either directly or indirectly, disclose or use any Confidential Information
acquired during his employment with the Company, unless (i) the Confidential
Information has been made public through no action or fault of the Executive, or
(ii) its disclosure is requested or compelled by applicable law or regulatory
agency. Executive further agrees that after the termination of this Agreement,
or at such other time as the Company requests, Executive will return to the
Company all documents, papers and records constituting Confidential Information,
and all copies of same in Executive's possession and control.
(b) Executive acknowledges that irreparable loss and injury would
result to the Company upon the breach of any of the covenants contained in this
Section 9.1 and that damages arising out of such breach would be difficult to
ascertain. Executive agrees that, in addition to all other remedies provided at
law or at equity, the Company may petition and obtain from a court of law or
equity both temporary and permanent injunctive relief to prevent a breach by
Executive of any covenant contained in this Section 9.1.
9.2 Binding Effect. This Agreement shall inure to the benefit of and
--------------
shall be binding upon Executive, his executor, administrator, heirs, personal
representatives and assigns, and upon the Company and its successors and
assigns; provided, however, that the obligations and duties of Executive may not
-------- -------
be assigned or delegated.
9.3 Governing Law. This Agreement shall be deemed to be made in, and
-------------
in all respects shall be interpreted, construed and governed by and in
accordance with, the laws of the State of Georgia, without giving effect to
principles of conflicts of laws.
9.4 Invalid Provisions. The parties herein hereby agree that the
------------------
agreements, provisions and covenants contained in this Agreement are severable
and divisible, that none of such agreements, provisions or covenants depends
upon any other provision, agreement or covenant for its enforceability, and that
each such agreement, provision and covenants constitutes an enforceable
obligation between the Company and Executive. Consequently, the parties hereto
agree that neither the invalidity nor the unenforceability of any agreement,
provision or covenant of this Agreement shall affect the other agreements,
provisions or covenants hereof, and this Agreement shall remain in full force
and effect and be construed in all respects as if such invalid or unenforceable
agreement, provision or covenant were omitted.
10
<PAGE>
9.5 Headings. The section and paragraph headings contained in this
--------
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
9.6 Notices. All communications provided for hereunder shall be in
-------
writing and shall be deemed to be given when delivered in person or deposited in
the United States mail, first class, registered mail, return receipt requested,
with proper postage prepaid, and
(a) If to Executive, addressed to:
Joseph Buck
1009 Radcliff Avenue
Kingsport, Tennessee 37664
(b) If to the Company, addressed to:
Grace Development, Inc.
1690 Chantilly Drive
Atlanta, Georgia 30324
Attention: Chief Executive Officer
or at such other place or places or to such other person or persons as shall be
designated in writing by the parties hereto in the manner provided above for
notices.
9.7 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
9.8 Waiver of Breach. The waiver by the Company of a breach of any
----------------
provision, agreement or covenant of this Agreement by Executive shall not
operate or be construed as a waiver of any prior or subsequent breach of the
same or any other provision, agreement or covenant by Executive.
9.9 Entire Agreement. This Agreement is intended by the parties
----------------
hereto to be the final expression of their agreement with respect to the subject
matter hereof and is the complete and exclusive statement thereof
notwithstanding any representation or statements to the contrary heretofore
made. This Agreement may be modified only by a written instrument signed by each
of the parties hereto.
11
<PAGE>
IN WITNESS WHEREOF, Executive has executed this Agreement, and the Company
has caused this Agreement to be duly executed by its duly authorized officers
and has caused its proper corporate seal to be affixed hereto, and the parties
have caused this Agreement to be delivered, all on the day and year first
written above.
/s/ Joseph Buck
---------------------------------------
JOSEPH BUCK
GRACE DEVELOPMENT, INC.
By: /s/ James Blanchard
----------------------------------
Its: President
------------------------------
12
<PAGE>
EXHIBIT 10.11
EXECUTIVE EMPLOYMENT AGREEMENT
------------------------------
THIS EXECUTIVE EMPLOYMENT AGREEMENT (the "Agreement") is made and entered
into as of February 1, 2000 between GRACE DEVELOPMENT, INC., a Colorado
corporation (the "Company"), and BENJAMIN FRANKLIN HOLCOMB (the "Executive"), an
individual resident of the State of Georgia.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Company wishes to employ Executive as its Chairman of the Board
and Chief Executive Officer, and Executive wishes to serve in such position, on
the terms and conditions set forth herein;
WHEREAS, Executive desires to be assured of a secure minimum compensation
from Company for his services over a defined term;
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 to provide fair and reasonable benefits to
Executive on the terms and subject to the conditions set forth in this
Agreement; and
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.
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 begin on the date
----
that the Company's board of directors shall have approved and ratified this
Agreement and shall have elected Executive a member and Chairman of the
Company's board of directors and as Chief Executive Officer of the Company (the
"Effective Date") and shall continue in effect for a period of two (2) years
from the Effective Date (the "Initial Term"); provided, however, the Term shall
-------- -------
be reset automatically for two-year period (each an "Additional Term") on each
anniversary of
<PAGE>
the Effective Date unless either party hereto gives written notice to the other
party not to so extend at least ninety (90) days prior thereto, in which case no
further extension shall occur; provided further, however, that notwithstanding
---------------- -------
any such notice by the Company not to extend, the Term shall not expire prior to
the expiration of twenty-four (24) months after the occurrence of a Change in
Control (as hereinafter defined).
2. Employment and Duties. The Executive shall serve as the Chairman of
---------------------
the Company's board of directors, and Chief Executive Officer (CEO) of the
Company, reporting only to the board, and shall have such powers and duties as
may from time to time be prescribed by the board, provided that 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 $240,000.00 per year during the first
year of the Initial Term and $295,000 during the second 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.
4. Bonus and Special Option Award.
------------------------------
(a) In addition to his Base Salary, upon completion of the first year of
the Initial Term, Executive shall receive (i) a special bonus equal to
$240,000.00, payable on the first anniversary of Executive's employment with the
Company; and (ii) if Executive achieves each of the performance objectives set
by the board of directors within the first year of the Initial Term, the Company
will pay to Executive an incentive bonus as determined by the Board of Directors
that such performance objectives have been met. During the first year of the
Initial Term, the bonus payments to Executive as set forth in Section 4(a)(i)
and (ii) hereof shall be in lieu of his participation in any other incentive
bonus programs, for performance year 2000, that have been or may be established
for other senior 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 the remainder of the Initial Term and 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 senior executive officers of the Company.
(b) The Company agrees to grant to Executive options to purchase 4,500,000
shares of the common stock, no par value, of the Company at an option exercise
price equal to $.35 per
2
<PAGE>
share (the "Discounted Stock Options"). Such options shall be issued to
Executive pursuant to a plan to be adopted by the Company's board of directors,
and the terms of the grant shall provide, among other things, (i) that 33 1/3%
of the Discounted Stock Options so granted shall vest and become immediately
exercisable on the date of grant and thereafter, 33 1/3% shall vest as of the
last day of each succeeding calendar year following the date of grant until all
such options shall be fully vested; (ii) the Discounted Stock Options may be
exercised, once vested, up to ten years following the date of grant and (iii)
will be adjusted for splits and stock dividends as appropriate. Executive
acknowledges and agrees that the Discounted Stock Options to be granted pursuant
hereto 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 Initial Term. In the event the executive is required, by the
IRS, to pay taxes prior to the executive exercising the options, the Company
will loan the executive an amount equal to assessed tax, at favorable rates,
until such time as the executive exercises these options. This loan will be
repaid pro rata as options are exercised. It also agreed that the stock related
to these options shall be registered for general trading at the first available
opportunity but in any case not later than other existing shareholders with
similarly restricted stock.
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.
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
3
<PAGE>
(as defined below). "Confidential Information" shall include, among other
things, information specifically designated as a 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 non-technical 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 of any unauthorized disclosure or use of any Trade Secrets or
Confidential Information of which the Executive becomes aware. Such
confidential information may be disclosed as required by a court of law
without written authorization as noted above. In addition, information
which at one time might have been considered confidential but becomes
known in the public domain will no longer be considered confidential or a
trade secret.
8.3. Non-Competition. The Executive shall not, either directly or
---------------
indirectly, alone or in partnership, be connected or concerned with or
participate
4
<PAGE>
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 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 two-thirds (2/3) 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
5
<PAGE>
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.
9.4. Change in Control. For purposes of this Agreement, a
-----------------
"Change in Control" shall have occurred if:
(i) 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;
(ii) 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
6
<PAGE>
(iii) 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
(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 of this Agreement, "Disability" shall
----------
mean a physical or mental infirmity which impairs or is likely to impair 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.
-----------
9.7.1. For purposes of this Agreement, "Good Reason" shall
mean a good faith determination by the Executive, in the Executive's
sole and absolute
7
<PAGE>
judgment, that any one or more of the following events has occurred,
without the Executive's express written consent:
(i) 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;
(ii) a reduction by the Company in the Executive's Base
Salary, as the same may be increased from time to time;
(iii) any failure to pay the Executive any compensation or
benefits to which he is entitled within five (5) days of the date
due;
(iv) 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 Company's business which is not greater
than such travel requirements prior to the date hereof;
(v) 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;
(vi) the insolvency or the filing (by any party, including
the Company) of a petition for bankruptcy by the Company;
(vii) 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
(viii) any breach by the Company of any provision of this
Agreement.
9.7.2. The Executive's right to terminate his employment
pursuant to this Section 9 shall not be affected by his incapacity due
to physical or mental illness.
8
<PAGE>
9.8. Notice of Termination. For purposes of this Agreement, "Notice
---------------------
of Termination" shall mean a written notice of 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:
(i) If the Executive's employment with the Company shall be
terminated by the Company for Cause or pursuant to Section 11.3
hereof, then the Company shall pay to the Executive all Accrued
Compensation.
(ii) 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.
9
<PAGE>
(iii) 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:
(1) the Company shall pay the Executive all Accrued
Compensation;
(2) 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 two (2) times the
Base Amount;
(3) for twenty-four (24) 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 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 coverage's and benefits of the combined
benefit plans are no less favorable to the Executive than the
coverage's and benefits required to be provided hereunder;
(4) 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
10
<PAGE>
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
(5) Any excise tax incurred by executive by reason of
"parachute tax", because of a change in control will
be paid by the company as well as any other
extraordinary tax isssues occurring because of the
similar event:
(6) the Company shall, at its sole expense as
incurred, provide for a twenty-four (24) 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.
(iv) The amounts provided for in subsection 10.1(i) shall be
payable to Executive in a lump-sum on the Termination Date. The
amounts provided for in subsection 10.1(iii) shall be payable to the
Executive in substantially equal bi-weekly installments for a twenty-
four (24) month period commending on the Termination Date and
otherwise in accordance with the Company's payroll practices in effect
from time to time.
(v) 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(iii)(3).
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 Benefits. 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.
11. Termination. The Executive's employment hereunder may be terminated
-----------
without any breach of this Agreement only in accordance with this Section 11.
11
<PAGE>
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.
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. 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. In addition, during the term of this agreement,
without a change of control, the executive may terminate his
employment for Good Reason based on the criteria described in section
9.7.1.
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
<PAGE>
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 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. Fees and Expenses. The Company shall pay all legal fees and related
-----------------
expenses incurred by the Executive as they become due as a result of or in
connection with the defense of any action brought against Executive by
BellSouth Company or its affiliated companies arising out of that certain
BellSouth Employee Agreement Regarding Intellectual Property and Nonsolicitation
of Employees dated February 20, 1978 (the "BellSouth Agreement"); provided,
however, that the Company shall have no such obligation, and Executive agrees to
reimburse the Company for any such fees and expenses so advanced to Executive,
if a final determination is
13
<PAGE>
made by a court, arbitration panel or other judicial or administrative body that
Executive knowingly and willfully breached the terms of the BellSouth Agreement.
15. 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. Benjamin Franklin Holcomb
12005 Fox Road
Alpharetta, GA 30055
If to the Company:
Grace Development, Inc.
1690 Chantilly Drive
Atlanta, Georgia 30324
with a copy to:
Rogers & Hardin, LLP
2700 International Tower
229 Peachtree Street NE
Atlanta, Georgia 30303
Attention: Michael Rosenzweig
or to such other address(es) as either party may have furnished to the other
party in writing in accordance with this Section.
16. 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.
14
<PAGE>
17. 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.
18. 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.
19. 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.
20. 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.
21. 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.
23. Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties hereto and supersedes all prior agreements (if any),
understandings and arrangements (oral or written) between the parties hereto.
15
<PAGE>
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/ James Blanchard
--------------------------
James Blanchard
President
/s/ Benjamin Franklin Holcomb
-----------------------------
BENJAMIN FRANKLIN HOLCOMB
/s/ Dr. Lee H. Silverstein
-----------------------------
Compensation Committee Chair
Dr. Lee H. Silverstein, Director
16
<PAGE>
Exhibit 10.12
EXECUTIVE EMPLOYMENT AGREEMENT
------------------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of
March 1, 2000 between GRACE DEVELOPMENT, INC., a Colorado corporation (the
"Company"), and DENNIS P. WERNER (the "Executive"), an individual resident of
the State of Georgia.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Company wishes to employ Executive as its Chief Operating Officer,
and Executive wishes to serve in such position, on the terms and conditions set
forth herein;
WHEREAS, Executive desires to be assured of a secure minimum compensation
from Company for his services over a defined term;
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 may have a significant role in
helping the Company's Executive Committee (the "Committee") assess the options
and advising the Committee 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 to provide fair and reasonable benefits to
Executive on the terms and subject to the conditions set forth in this
Agreement; and
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.
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 begin on the date
----
that the Company's committee has approved this Agreement, and (the "Effective
Date") shall continue in effect for a period of two (2) years from the Effective
Date (the "Initial Term"); provided, however, the Term shall be extended
-------- -------
automatically for an additional two-year period(each an "Additional Term") on
each anniversary of the Effective Date unless either party hereto gives written
notice to the other party not to so extend at least ninety (90) days prior
thereto, in which case no further extension shall occur; provided further,
----------------
however, that notwithstanding any such notice by the Company not to extend, the
- - -------
Term shall not expire prior to the expiration of twenty-four (24) months after
the occurrence of a Change in Control (as hereinafter defined).
<PAGE>
2. Employment and Duties. The Executive shall serve as the Chief
---------------------
Operating Officer of the Company, reporting to the President, and shall have
such powers and duties as may from time to time be prescribed by the committee,
provided that 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 $150,000.00 per year during 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
committee of directors for any Additional Term. Any increase in Base Salary or
other compensation granted by the compensation committee of the Company's
committee 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.
4. Bonus and Special Option Award.
------------------------------
(a) In addition to his Base Salary, upon completion of the first year of
the Initial Term, Executive shall receive (i) a special bonus equal to no less
than 50% of Base Salary and no more than 100% of Base Salary, payable on the
first anniversary of Executive's employment with the Company; provided the
Executive achieves each of the performance objectives set forth in Exhibit A
---------
attached hereto within the first year of the Initial Term. During the first
year of the Initial Term, the bonus payments to Executive will be no less than
$50,000 as set forth in Section 4(a)(i) and (ii) hereof 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 committee of directors, the Executive may be awarded
for each calendar year during the remainder of the Initial Term and 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.
(b) The Company agrees to grant to Executive options to purchase 500,000
shares of the common stock, no par value, of the Company at an option exercise
price equal to $1.00 per share (the "Discounted Stock Options"). Such options
shall be issued to Executive pursuant to a plan to be adopted by the Company's
committee of directors, and the terms of the grant shall provide, among other
things, (i) that 50% of the Discounted Stock Options so granted shall vest and
become exercisable on the first anniversary date of grant and thereafter,50%
shall vest as of the last day of each succeeding calendar year following the
date of grant until all such options shall be fully vested; and (ii) the
Discounted Stock Options may be exercised, once vested, up to ten years
following the date of grant. Executive acknowledges and agrees that the
Discounted Stock Options to be granted pursuant hereto are in lieu of any other
stock option or stock incentive
2
<PAGE>
plans or programs that may be granted or extended to other executive officers of
the Company during the Initial Term.
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. In exception, Executive will be entitled to a minimum of 4 weeks
vacation annually, nonaccruing.
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 committee 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 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 non-technical
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
3
<PAGE>
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 of 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 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
4
<PAGE>
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 if the termination is evidenced by a resolution adopted in
good faith by two-thirds (2/3) of the Company's committee 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 committee 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.
5
<PAGE>
9.4. Change in Control. For purposes of this Agreement, a
-----------------
"Change in Control" shall have occurred if:
(i) 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 committee of directors, or (B) who are then
serving as directors appointed by the Company's committee of directors
to fill vacancies on the committee of directors caused by death or
resignation (but not by removal) or to fill newly-created
directorships;
(ii) 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
(iii) 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
(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
6
<PAGE>
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 of 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.
-----------
9.7.1. For purposes of this Agreement, "Good Reason" shall
mean a good faith determination by the Executive, in the
Executive's sole and absolute judgment, that any one or more of
the following events has occurred, without the Executive's
express written consent:
(i) a reduction by the Company in the Executive's
Base Salary, as the same may be increased from time to time;
(i) any failure to pay the Executive any
compensation or benefits to which he is entitled within five
(15) days of the date due;
(iii) 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 Company's business which is
not greater than such travel requirements prior to the date
hereof;
(iii) 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;
(viii) 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
(vi) any breach by the Company of any provision of
this Agreement.
9.7.2. The Executive's right to terminate his
employment pursuant
7
<PAGE>
to this Section 9 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 of 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:
(i) If the Executive's employment with the Company shall be
terminated by the Company for Cause or pursuant to Section 11.3
hereof, then the Company shall pay to the Executive all Accrued
Compensation.
(ii) 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
8
<PAGE>
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.
(iii) 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:
(1) the Company shall pay the Executive all Accrued
Compensation;
(2) 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 50% of the Base
Amount;
(3) for six (6) 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 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;
(4) 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
9
<PAGE>
time until the tenth (10th) year anniversary of the Termination
Date, and all performance units granted to the Executive shall
become 100% vested; and
(iv) The amounts provided for in subsection 10.1(i) shall be
payable to Executive in a lump-sum on the Termination Date. The
amounts provided for in subsection 10.1(iii) shall be payable to the
Executive in substantially equal bi-weekly installments for a six (6)
month period commending on the Termination Date and otherwise in
accordance with the Company's payroll practices in effect from time to
time.
(iiii) 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(iii)(3).
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 Benefits. 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.
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.
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
10
<PAGE>
termination, which shall not be less than ninety (90) 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 ninety (90) 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
11
<PAGE>
or assignment becomes effective shall be deemed the Termination Date
hereunder. As used in the Agreement, Company shall mean the Company as
hereinbefore 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.
15. 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:
Dennis P. Werner
7570 Brigham Drive
Atlanta, GA 30350
If to the Company:
Grace Development, Inc.
1690 Chantilly Drive
Atlanta, Georgia 30324
or to such other address(es) as either party may have furnished to the other
party in writing in accordance with this Section.
12
<PAGE>
16. 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 committee 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.
17. 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.
18. 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.
19. 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.
20. 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.
21. 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.
23. Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties hereto and supersedes all prior agreements (if any),
understandings and arrangements (oral or written) between the parties hereto.
13
<PAGE>
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 III
---------------------------------
Benjamin F. Holcomb III
Chief Executive Officer
By: /s/ James M. Blanchard
---------------------------------
James M. Blanchard
President
/s/ Dennis P. Werner
------------------------------------
DENNIS P. WERNER
14
<PAGE>
EXHIBIT 10.13
EXECUTIVE EMPLOYMENT AGREEMENT
------------------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of
March 1, 2000 between GRACE DEVELOPMENT, INC., a Colorado corporation (the
"Company"), and SCOTT H. BARBER (the "Executive"), an individual resident of the
State of Georgia.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Company wishes to employ Executive as its Chief Technical Officer,
and Executive wishes to serve in such position, on the terms and conditions set
forth herein;
WHEREAS, Executive desires to be assured of a secure minimum compensation
from Company for his services over a defined term;
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 may have a significant role in
helping the Company's Executive Committee (the "Committee") assess the options
and advising the Committee 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 to provide fair and reasonable benefits to
Executive on the terms and subject to the conditions set forth in this
Agreement; and
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.
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 begin on the date
----
that the Company's committee has approved this Agreement, and (the "Effective
Date") shall continue in effect for a period of two (2) years from the Effective
Date (the "Initial Term"); provided, however, the Term shall be extended
-------- -------
automatically for an additional two-year period (each an "Additional Term") on
each anniversary of the Effective Date unless either party hereto gives written
notice to the other party not to so extend at least ninety (90) days prior
thereto, in which case no further extension shall occur; provided further,
----------------
however, that notwithstanding any such notice by the Company not to extend, the
- - -------
Term shall not expire prior to the expiration of twenty-four (24) months after
the occurrence of a Change in Control (as hereinafter defined).
<PAGE>
2. Employment and Duties. The Executive shall serve as the Chief
---------------------
Technical Officer of the Company, reporting to senior management of the Company,
and shall have such powers and duties as may from time to time be prescribed by
the committee, provided that 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 $150,000.00 per year during 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
committee of directors for any Additional Term. Any increase in Base Salary or
other compensation granted by the compensation committee of the Company's
committee of directors shall in no way limit or reduce any other obligation of
the Company hereunder. Once established at an increased specified rate, the term
Base Salary used in this Agreement shall refer to the Base Salary as so
increased.
4. Bonus and Special Option Award.
------------------------------
(a) In addition to his Base Salary, upon completion of the first year of
the Initial Term, Executive shall receive (i) a special bonus equal to no less
than 50% of Base Salary and no more than 100% of Base Salary, payable on the
first anniversary of Executive's employment with the Company; provided the
Executive achieves each of the performance objectives. Thereafter, in the
discretion of the Company's committee of directors, the Executive may be awarded
for each calendar year during the remainder of the Initial Term and 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.
(b) The Company agrees to grant to Executive options to purchase 500,000
shares of the common stock, no par value, of the Company at an option exercise
price equal to $1.00 per share (the "Stock Options"). Such options shall be
issued to Executive pursuant to a plan to be adopted by the Company's committee
of directors, and the terms of the grant shall provide, among other things, (i)
that 50% of the Stock Options so granted shall vest and become exercisable on
the first anniversary date of grant and thereafter, 50% shall vest as of the
last day of each succeeding calendar year following the date of grant until all
such options shall be fully vested; and (ii) the Stock Options may be exercised,
once vested, up to ten years following the date of grant. Executive
acknowledges and agrees that the Stock Options to be granted pursuant hereto 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
Initial Term.
2
<PAGE>
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. In exception, Executive will be entitled to a minimum of 4 weeks
vacation annually, nonaccruing.
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 committee 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 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 non-technical
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
3
<PAGE>
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 of 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 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.
4
<PAGE>
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 if the termination is evidenced by a resolution adopted in
good faith by two-thirds (2/3) of the Company's committee 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 committee 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.
5
<PAGE>
9.4. Change in Control. For purposes of this Agreement, a
-----------------
"Change in Control" shall have occurred if:
(i) 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 committee of directors, or (B) who are then
serving as directors appointed by the Company's committee of directors
to fill vacancies on the committee of directors caused by death or
resignation (but not by removal) or to fill newly-created
directorships;
(ii) 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
(iii) 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
(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
6
<PAGE>
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 of 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.
-----------
9.7.1. For purposes of this Agreement, "Good Reason" shall
mean a good faith determination by the Executive that any one or more
of the following events has occurred:
(i) a reduction by the Company in the Executive's Base
Salary, as the same may be increased from time to time;
(ii) 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 Company's business which is not greater
than such travel requirements prior to the date hereof;
(ii) 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;
(iv) 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
(v) any breach by the Company of any provision of this
Agreement.
9.7.2. The Executive's right to terminate his employment
pursuant to this Section 9 shall not be affected by his incapacity due
to physical or mental illness.
7
<PAGE>
9.8. Notice of Termination. For purposes of this Agreement,
---------------------
"Notice of Termination" shall mean a written notice of 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:
(i) If the Executive's employment with the Company shall be
terminated by the Company for Cause or pursuant to Section 11.3
hereof, then the Company shall pay to the Executive all Accrued
Compensation.
(ii) 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
8
<PAGE>
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.
(iii) 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:
(1) the Company shall pay the Executive all Accrued
Compensation;
(2) 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 25% of the Base
Amount;
(3) six (6) 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 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;
(4) 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
9
<PAGE>
time until the tenth (10th) year anniversary of the Termination
Date, and all performance units granted to the Executive shall
become 100% vested; and
(iv) The amounts provided for in subsection 10.1(i) shall be
payable to Executive in a lump-sum on the Termination Date. The
amounts provided for in subsection 10.1(iii) shall be payable to the
Executive in substantially equal bi-weekly installments for a six (6)
month period commending on the Termination Date and otherwise in
accordance with the Company's payroll practices in effect from time to
time.
(iiii) 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(iii)(3).
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 Benefits. 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.
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.
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
ninety (90) days after giving such notice, whereupon the Executive's
employment shall terminate on the date specified in
10
<PAGE>
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 ninety
(90) 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
11
<PAGE>
hereinbefore 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.
15. 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:
Scott H. Barber
6486 Williamson Avenue N.E.
Atlanta, GA 30097
If to the Company:
Grace Development, Inc.
1690 Chantilly Drive
Atlanta, Georgia 30324
or to such other address(es) as either party may have furnished to the other
party in writing in accordance with this Section.
16. 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
committee 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
12
<PAGE>
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.
17. 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.
18. 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.
19. 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.
20. 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.
21. 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.
23. Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties hereto and supersedes all prior agreements (if any),
understandings and arrangements (oral or written) between the parties hereto.
13
<PAGE>
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 III
----------------------------
Benjamin F. Holcomb III
Chief Executive Officer
By: /s/ James M. Blanchard
----------------------------
James M. Blanchard
President
/s/ Scott H. Barber
--------------------------------
SCOTT H. BARBER
14
<PAGE>
EXHIBIT 10.14
SEPARATION AGREEMENT
THIS SEPARATION AGREEMENT ("Separation Agreement"), is made and entered
into as of December 8, 1999, by and between LOUIS FRIEDMAN, an individual
residing in the State of Georgia ("Friedman"), and GRACE DEVELOPMENT, INC., a
Colorado corporation (the "Company").
WITNESSETH:
WHEREAS, Friedman has been serving as a director and Chairman of the Board
of Directors of the Company;
WHEREAS, Friedman and the Company agree that Friedman's service as a
director and Chairman of the Board of Directors of the Company should be ended;
and
WHEREAS, Friedman and the Company desire to resolve fully and finally all
issues between them that arise or may arise out of the cessation of Friedman's
service with the Company.
NOW THEREFORE, in consideration of the premises and mutual promises herein
contained and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, it is agreed as follows:
AGREEMENT:
1. Resignation. Friedman and the Company agree that effective as of 5:00 p.m.
-----------
Eastern Time on December 8, 1999 (the "Termination Date"), Friedman shall, and
hereby does, voluntarily and permanently resign his positions as director and
Chairman of the Board of Directors and member of any committee of, or for, the
Company and each of its subsidiaries and affiliates. Concurrently herewith,
Friedman is executing and delivering to the Company a letter of resignation in
the form attached as Exhibit 1 hereto (the "Resignation Letter"). Each of the
---------
Company's obligations under this Separation Agreement is subject to the
execution and delivery to the Company by Friedman of this Separation Agreement
and the Resignation Letter. This Separation Agreement shall be effective upon
such execution and delivery by Friedman and execution of this Separation
Agreement by the Company.
2. Payments and Benefits.
---------------------
(a) Consulting Fee. On January 3, 2000, the Company shall pay to OneUp
Studios, LLC as a fee for certain consulting services previously rendered to the
Company by Friedman cash in the amount of $20,000.
(b) Stock Issuance. As further payment to Friedman in consideration of his
resignation as a director and Chairman of the Board of Directors of the Company
and his execution, delivery and performance of the terms of this Separation
Agreement, the Company shall (i) issue to Friedman, no sooner than January 3,
2000 and not later than January 15, 2000,
<PAGE>
650,000 shares of the common stock, no par value (the "Common Stock"), of the
Company, and (ii) pay to Friedman, in four payments not to exceed $37,500 each
on March 31, 2000, June 30, 2000 September 30, 2000 and December 31, 2000, cash
in an amount necessary to defray Friedman's actual income tax liability incurred
in connection with the issuance of the Common Stock, up to a maximum total
payment of $150,000. In connection with the Company's issuance of the Common
Stock, the Company further agrees to provide Friedman with an appraisal of such
Common Stock.
(c) No Other Payments or Benefits. Friedman acknowledges and agrees that,
other than the payments described specifically in this Separation Agreement,
Friedman shall not be entitled to receive on or after the Termination Date any
other benefits, payments, bonuses, severance, termination benefits or
compensation of any kind or for any reason, specifically including but not
limited to any earned or unearned wages, bonuses, payments, benefits, commission
payments, stock options (whether vested or unvested), stock or any other
benefit, payment or compensation of any kind or from any source; provided,
--------
however, that if, and as to the extent that Friedman and the Company contract
- - -------
for the provision of consulting services to the Company by Friedman, Friedman
and the Company will agree with respect to appropriate compensation therefor
(the "Future Consulting Fees").
3. Investment.
----------
(a) Friedman 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.
(b) The Common Stock was not offered to Friedman 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.
(c) Friedman 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, Friedman 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
Friedman in connection with this investment, and Friedman understands,
acknowledges and agrees that all other representations, warranties,
/s/ L.F.
----------------------
Initials
2
<PAGE>
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.
(d) Friedman understands that the Common Stock (i) 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, (ii) will not be traded in any securities
market, (iii) will not be readily marketable, and (iv) 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.
(e) Friedman 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.
Friedman 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 Friedman. Friedman is
not obligated to transfer the Common Stock or any portion thereof to any other
person or entity nor does Friedman have any agreement or understanding to do so.
(f) Friedman 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.
(g) Friedman 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), (i) he gives written notice to the Company describing
the manner of such proposed disposition in reasonable detail and (ii) 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.
(h) Friedman 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
Friedman 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 and
investment needs. Friedman further represents and warrants that he is an
Accredited Investor as such term is defined in Regulation D under the Securities
Act.
(i) Friedman 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,
/s/ L. F.
----------------------
Initials
3
<PAGE>
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 Friedman has made herein, any breach of any of his
representations or warranties made in this Section 3, or his failure to fulfill
any of my covenants or agreements herein.
4. No Derogatory Statements.
------------------------
(a) Friedman further agrees that, as part of the consideration for this
Separation Agreement, he will not, directly or indirectly, in any capacity or
manner, take any action or cause any action to be taken which would be
detrimental to the interests of the Company, its subsidiaries or affiliates and
their respective officers, directors, agents and employees, including, without
limitation, making, causing, encouraging or assisting to be made any statements,
comments or remarks, whether oral, verbal, in writing or electronically
transmitted, which might reasonably be considered to be derogatory, defamatory
or critical of, or negative towards, or to malign, harm, defame, disparage or
damage the reputation and good name of, the Company, its subsidiaries or
affiliates, or their respective officers, directors, agents and employees.
(b) The Company further agrees that, as part of the consideration for this
Separation Agreement, it will not, directly or indirectly, in any capacity or
manner, make, cause, encourage or assist to be made any statements, comments or
remarks, whether oral, verbal, in writing or electronically transmitted, which
might reasonably be considered to be derogatory, defamatory or critical of, or
negative towards, or to malign, harm, defame, disparage or damage the reputation
and good name of, Friedman.
5. Nondisclosure. Friedman represents, covenants and agrees that he will keep
-------------
the terms and facts of this Separation Agreement, and negotiations and
discussions related hereto, completely and strictly confidential, and that he
will not, directly or indirectly, in any capacity or manner, discuss with, or
disclose to, anyone, including, without limitation, reporters and analysts, any
information concerning this Separation Agreement, the matters contemplated
herein or matters related to Friedman's service with or departure or resignation
from the Company, or any negotiations and discussions related hereto or thereto;
provided, however, that Friedman may disclose information regarding this
Separation Agreement in confidence to his spouse, accountant, tax advisor and
legal counsel, after obtaining the agreement of any such person to also maintain
the confidentiality of such information in accordance herewith, and provided
further that if Friedman is compelled as a matter of law to disclose such
information, Friedman will promptly notify the Company in order to permit the
Company to seek a protective order or take other appropriate action with respect
to such disclosure, and Friedman will cooperate in the Company's efforts to
obtain such protective order or other reasonable assurance that confidential
treatment will be accorded such information, and if such protective order is not
obtained, Friedman may disclose to the party or authority compelling such
disclosure such part of such information as is required by law to be disclosed.
Friedman will immediately refer to Mr. James Blanchard and/or the Company's
investor relations department (without further comments or response) all
contacts, questions and requests for information, from analysts, reporters or
otherwise, regarding the Company or Friedman's resignation, employment with or
departure from the Company.
/s/ L.F.
----------------------
Initials
4
<PAGE>
Notwithstanding the foregoing, Friedman and the Company agree that a mutually
agreeable press release announcing Friedman's resignation as a director and
Chairman of the Board of Directors of the Company shall be issued by the Company
as soon as practicable after the execution and delivery of this Separation
Agreement.
6. Mutual Releases.
---------------
(a) General Release of Claims.
(i) As a material inducement to the Company to enter into this
Separation Agreement, and in partial exchange for the consideration recited
herein, Friedman hereby irrevocably and unconditionally releases, acquits and
forever discharges the Company and each of the Company's owners, stockholders,
predecessors, successors, assigns, agents, directors, officers, employees,
representatives, attorneys, divisions, subsidiaries, affiliates (and agents,
directors, officers, employees, representatives and attorneys of such divisions,
subsidiaries and affiliates), and all persons acting by, through, under or in
concert with any of them (collectively, "Releasees"), or any of them, from any
and all charges, complaints, claims, liabilities, obligations, promises,
agreements, controversies, damages, actions, causes of action, suits, rights,
demands, costs, losses, debts and expenses (including attorney's fees and costs
actually incurred), of any nature whatsoever pertaining to Friedman's service
with or resignation or separation from the Company, whether known or unknown,
which Friedman now has, owns or holds, or claims to have, own or hold, or which
Friedman at any time hereafter may have, own or hold, or claim to have, own or
hold, against each or any of the Releasees (collectively, "Claims"), except for
the duties and obligations expressly assumed by the Company in this Separation
Agreement. Friedman acknowledges and agrees that he is releasing and giving up
any right which he may have under any contract entered with the Company, and
under any federal or state law or political subdivision thereof, including the
Age Discrimination in Employment Act, which prohibits age discrimination in
employment; Title VII of the Civil Rights Act of 1964, which prohibits
discrimination in employment based on race, color, national origin, religion or
sex; the Equal Pay Act, which prohibits paying men and women unequal pay for
equal work; or any other federal, state or local laws or regulations prohibiting
employment discrimination. Friedman also acknowledges and agrees that he is
releasing and giving up any claims he has or may have had for wrongful
discharge. Notwithstanding anything herein to the contrary, nothing herein
shall in any way affect Friedman's right to receive Future Consulting Fees.
(ii) As a material inducement to Friedman to enter into this
Separation Agreement, and in partial exchange for the consideration recited
herein, the Company hereby irrevocably and unconditionally releases, acquits and
forever discharges Friedman and each of Friedman's successors, assigns, agents,
representatives, attorneys, and all persons acting by, through, under or in
concert with any of them (collectively, "Friedman Releasees"), or any of them,
from any and all charges, complaints, claims, liabilities, obligations,
promises, agreements, controversies, damages, actions, causes of action, suits,
rights, demands, costs, losses, debts and expenses (including attorney's fees
and costs actually incurred), of any nature whatsoever pertaining to services
with or resignation or separation from the Company, whether known or
/s/ L.F.
----------------------
Initials
5
<PAGE>
unknown, which the Company now has, owns or holds, or claims to have, own or
hold, or which the Company at any time hereafter may have, own or hold, or claim
to have, own or hold, against each or any of the Friedman Releasees
(collectively, "Company Claims"), except for the duties and obligations
expressly assumed by Friedman in this Separation Agreement.
(b) No Breach.
(i) Friedman agrees that the Company has not breached any oral or
written employment or other agreement, contract or understanding, including,
without limitation, the Employment Agreement, which exists or may have existed
between Friedman and the Company with respect to any aspect of Friedman's
service with, or separation or resignation of employment from, the Company or
with respect to any other matter whatsoever as of the time of execution of this
Separation Agreement. Friedman further agrees that the Company has not violated
any law, statute, rule, regulation or ordinance of the United States or of any
state or political subdivision thereof, including, without limitation, the Age
Discrimination in Employment Act, with respect to any aspect of Friedman's
service with, or separation or resignation of employment from, the Company or
with respect to any other matter whatsoever as of the time of execution of this
Separation Agreement.
(ii) The Company agrees that Friedman has not breached any oral or
written employment or other agreement, contract or understanding, including,
without limitation, the Employment Agreement, which exists or may have existed
between Friedman and the Company with respect to any aspect of Friedman's
service with, or separation or resignation of employment from, the Company or
with respect to any other matter whatsoever as of the time of execution of this
Separation Agreement. The Company further agrees that Friedman has not violated
any law, statute, rule, regulation or ordinance of the United States or of any
state or political subdivision thereof, including, without limitation, the Age
Discrimination in Employment Act, with respect to any aspect of Friedman's
service with, or separation or resignation of employment from, the Company or
with respect to any other matter whatsoever as of the time of execution of this
Separation Agreement.
(c) No Complaints or Charges Filed.
(i) Friedman represents that he has not filed any complaints or
charges against the Company or its subsidiaries or affiliates with any local,
state or federal agency or court related to Friedman's service with or
separation or resignation from the Company, that Friedman will not do so at any
time hereafter, relating to any action or events that predate the date hereof,
and that if any such agency or court assumes jurisdiction of any such complaint
or charge against the Company or its subsidiaries or affiliates on behalf of
Friedman, Friedman will request such agency or court to withdraw from the
matter.
(ii) The Company represents that it has not filed any complaints or
charges against Friedman with any local, state or federal agency or court
related to Friedman's service with or separation or resignation from the
Company, that the Company will not do so at any time
/s/ L. F.
----------------------
Initials
6
<PAGE>
hereafter, relating to any action or events that predate the date hereof, and
that if any such agency or court assumes jurisdiction of any such complaint or
charge against Friedman on behalf of the Company, the Company will request such
agency or court to withdraw from the matter.
(d) Acknowledgement of Waiver of All Claims.
(i) Friedman expressly acknowledges that this Separation Agreement is
intended to include in its effect, without limitation, all Claims which Friedman
does not know or suspect to exist in Friedman's favor at the time of execution
hereof, and that this Separation Agreement contemplates the extinguishment of
any such Claim or Claims, as they may pertain to Friedman's service with or
separation or resignation from the Company.
(ii) The Company expressly acknowledges that this Separation
Agreement is intended to include in its effect, without limitation, all Company
Claims which the Company does not know or suspect to exist in the Company's
favor at the time of execution hereof, and that this Separation Agreement
contemplates the extinguishment of any such Company Claim or Claims, as they may
pertain to Friedman's service with or separation or resignation from the
Company.
(e) No Admission. This Separation Agreement shall not in any way be
construed as an admission by either party of any wrongful conduct whatsoever
against any person or party, and both parties specifically disclaim any
liability to or wrongful conduct against any other person or party. It is
acknowledged by each party that this Separation Agreement is mutually sought and
for the benefit of each to resolve all disputed claims and controversies.
7. Confidentiality. In partial exchange for the consideration recited herein,
---------------
Friedman hereby convenants and agrees as follows:
(a) Friedman shall not disclose to any person or entity or use, at any
time, any information not in the public domain or generally known in the
industry, in any form, acquired by Friedman while employed by the Company or any
predecessor to the Company's business, and relating to the Company, its
subsidiaries or affiliates, including but not limited to information regarding
customers, vendors, suppliers, trade secrets, training programs, manuals or
materials, technical information, contracts, systems, procedures, mailing lists,
know-how, trade names, improvements, price lists, financial or other data
(including the revenues, costs or profits associated with any of the Company's
services), business plans, code books, invoices and other financial statements,
computer programs, software systems, databases, discs and printouts, plans
(business, technical or otherwise), customer and industry lists, correspondence,
internal reports, personnel files, sales and advertising material, telephone
numbers, names, addresses or any other compilation of information, written or
unwritten, which is or was used in the business of the Company or any
subsidiaries or affiliates thereof. Friedman agrees and acknowledges that all of
such information, in any form, and copies and extracts thereof, are and shall
remain the sole and exclusive property of the Company. On or before the
Termination Date, Friedman shall return to the Company the originals and all
copies of any such information provided to or acquired by Friedman in connection
with the
/s/ L. F.
----------------------
Initials
7
<PAGE>
performance of his duties for the Company, and shall return to the Company all
files, correspondence and/or other communications received, maintained and/or
originated by Friedman during the course of his employment.
(b) The parties have entered into this Separation Agreement in good faith
and for the reasons set forth in the recitals hereto and assume that this
Section is legally binding. If for any reason, this Section is not binding
because of its term, then the parties agree that this Section shall be deemed
effective for the longest period of time as may be legally enforceable. The
parties hereto agree that: (i) the covenants and agreements of Friedman
contained in this Section are reasonably necessary to protect the interests of
the Company, (ii) the period of restriction contained in this Section is fair
and reasonable and is not greater than is necessary for the protection of the
Company in light of the substantial harm that the Company will suffer should
Friedman breach any of the provisions of said covenants or agreements; (iii) the
covenants and agreements of Friedman contained in this Section are material
inducements for the Company to enter into this Separation Agreement; (iv) the
nature, kind and character of the activities Friedman is prohibited to engage in
are reasonable and necessary to protect the Company and (v) the Company's and
its subsidiaries' business is international in scope, and the Company and its
subsidiaries compete with other businesses that are or could be located
throughout North America. Friedman hereby represents and warrants to the
Company that, by reason of the abilities and experience of Friedman, the
enforcement of the covenants and agreements set forth in this Section will not
prevent Friedman from obtaining other suitable employment or earning a
livelihood in his profession.
(c) Friedman acknowledges that the rights and privileges granted to the
Company in this Section are of special and unique character, which gives them a
peculiar value, the loss of which may not be reasonably or adequately
compensated for by damages in an action of law, and that a breach thereof by
Friedman of this Section will cause the Company great and irreparable injury and
damage. Accordingly, Friedman hereby agrees that the Company shall be entitled
to remedies of injunction, specific performance or other equitable relief to
prevent a breach of this Section by Friedman, without any requirement on the
part of the Company to prove actual damages or to post or secure any bond (which
requirements are hereby waived). This provision shall not be construed as a
waiver of, and shall be in addition to, any other rights or remedies the Company
may have for damages or otherwise.
8. Voluntary Agreement. Friedman represents and agrees that he has thoroughly
-------------------
considered all aspects of this Separation Agreement and that he has been advised
by the Company that he should discuss any and all aspects of this matter with an
attorney chosen by Friedman, that Friedman has carefully read and fully
understands all of the provisions of this Separation Agreement and that Friedman
is voluntarily entering into this Separation Agreement of his own free will,
without coercion, and in exchange for the consideration recited herein.
Friedman further understands that the Company is relying on this and all other
representations he has made herein.
/s/ L. F.
----------------------
Initials
8
<PAGE>
9. Indemnification.
---------------
(a) As a further material inducement to the Company to enter into this
Separation Agreement, Friedman hereby agrees to indemnify and hold the Company
harmless from and against all loss, cost, damage or expense, including, without
limitation, attorneys' fees, incurred by the Company, arising out of (i) any
breach or alleged breach of this Separation Agreement by Friedman, or (ii)
Friedman's service with the Company.
(b) As a further material inducement to Friedman to enter into this
Separation Agreement, the Company hereby agrees to indemnify and hold Friedman
harmless from and against all loss, cost, damage or expense, including, without
limitation, attorneys' fees, incurred by Friedman, arising out of (i) any breach
or alleged breach of this Separation Agreement by the Company, or (ii)
Friedman's service with the Company.
10. No Other Representations. Friedman represents and acknowledges that in
------------------------
executing this Separation Agreement, Friedman does not rely and has not relied
upon any representation or statements made by the Company or the Releasees or by
any of the Company's or Releasees' agents, representatives or attorneys with
regard to the subject matter, basis or effect of this Separation Agreement or
otherwise, except as set out herein.
11. Successors. This Separation Agreement shall be binding upon Friedman and
----------
the Company and upon their respective heirs, administrators, representatives,
executors, successors and assigns, and shall enure to the benefit of Friedman,
the Company and the Releasees and Friedman Releasees and each of them, and to
their respective heirs, administrators, representatives, executors, successors
and assigns. This Separation Agreement is personal to Friedman, and Friedman
may not assign or transfer any interests in, or rights or benefits under, this
Separation Agreement.
12. Review; Revocation.
------------------
(a) Pursuant to the Older Workers Benefit Protection Act of 1990, Friedman
understands and acknowledges that he has been given a period of twenty-one (21)
days to review and consider this Separation Agreement before signing it.
Friedman understands that he may use as much of this twenty-one (21)-day period
as he wishes prior to signing.
(b) Friedman may revoke this Separation Agreement within seven (7) days
after Friedman's signing it, as evidenced by the date set forth on the signature
page hereof. revocation can be made by delivering a written notice of
revocation to Mr. James Blanchard, 1690 Chantilly Drive, Atlanta, Georgia
30324. For such revocation to be effective, written notice must be received by
Mr. Blanchard no later than 5:00 p.m. Eastern Time on the seventh (7th) day
after Friedman signs this Separation Agreement, as evidenced by the date set
forth on the signature page hereof. If Friedman revokes this Separation
Agreement, it shall not be effective or enforceable and Friedman will not
receive the benefits, payment or rights described herein and shall immediately
return or repay to the Company in full any benefits, payments or property
described herein that he may already have received.
/s/ L.F.
----------------------
Initials
9
<PAGE>
13. Notices. Any notice required or permitted to be given under this
-------
Separation Agreement shall be sufficient if in writing and if delivered by hand
or by certified or registered mail or by a nationally recognized overnight
delivery service, postage or other charges pre-paid, and addressed to: Louis
Friedman, at the address set forth in the Company's records (if such notice is
addressed to Friedman), or to Mr. James Blanchard, 1690 Chantilly Drive,
Atlanta, Georgia 30324 (if such notice is addressed to the Company), or such
other address as may be designated by a party hereto in written notice to the
other party hereto. Such notice shall be deemed to have been given or made on
the date of delivery, if delivered by hand, or on the next following date if
sent by mail or overnight delivery service.
14. Default. In the event of a default or breach by Friedman of this
-------
Separation Agreement, then the payments, conveyances and benefits to or for the
benefit of Friedman under Section 2 hereof, shall thereupon cease and be
terminated (and this Separation Agreement shall otherwise remain in full force
and effect). In addition, the Company shall have the right to pursue (i) such
legal remedies as may be available to it to recover from Friedman any damages
suffered by the Company, including attorneys' fees, as a result of such default
or breach, and (ii) any equitable remedy or action, including injunctive relief,
as may be appropriate under the circumstances to protect the Company against or
from such default or breach, or continuation thereof.
15. Choice of Law; Attorneys' Fees. This Separation Agreement is made and
------------------------------
entered into in the State of Georgia and shall, in all respects, be interpreted,
enforced and governed under the laws of said State, without regard for the
principles of conflicts of laws thereof. Any action or proceedings brought by a
party seeking to enforce any provisions of, or based upon any right arising out
of, this Separation Agreement may be brought against any of the parties hereto
in the courts of the State of Georgia or, if it has or can acquire jurisdiction,
in a United States District Court for the State of Georgia, and each of the
parties consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue laid therein. If legal action is commenced by either party to enforce or
defend its rights under this Separation Agreement, the prevailing party in such
action shall be entitled to recover its costs and reasonable attorneys' fees in
addition to any other relief granted.
16. Miscellaneous. The language of all parts of this Separation Agreement
-------------
shall, in all cases, be construed as a whole, according to its plain meaning,
and not strictly for or against any of the parties, and rules of interpretation
or construction of contracts that would construe any ambiguity against the
draftsman shall not apply. Should any provision of this Separation Agreement be
declared or be determined by any court to be illegal or invalid, the validity of
the remaining parts, terms or provisions shall not be affected thereby and said
illegal or invalid part, term or provision shall be deemed not to be part of
this Separation Agreement. As used in this Separation Agreement, the singular or
plural number shall be deemed to include the other whenever the context so
indicates or requires. This Separation Agreement may be executed in two or more
counterparts, each of which shall for all purposes be deemed to be an original
but each of which, when so executed, shall constitute but one and the same
instrument. This Separation Agreement sets forth the entire agreement between
the parties hereto and fully supersedes any and all prior
/s/ L. F.
----------------------
Initials
10
<PAGE>
agreements or understandings between the parties hereto pertaining to the
subject matter hereof. This Separation Agreement may not be changed orally, but
only by an instrument in writing signed by the party against whom enforcement of
any waiver, change, modification, extension or discharge is sought. The section
and paragraph headings contained in this Separation Agreement are for
convenience of reference, and shall not limit or control, or be used to
construe, the meaning of any provision herein. Any delay or omission by any
party hereto in exercising any right hereunder shall not operate as a waiver of
such right.
PLEASE READ CAREFULLY. THIS SEPARATION AGREEMENT INCLUDES A RELEASE OF ALL
KNOWN AND UNKNOWN CLAIMS.
WHEREFORE, to signify their agreement to the terms of this Separation
Agreement, which consists of 11 typewritten pages, not including exhibits
hereto, each of the parties hereto have executed this Separation Agreement on
the date set forth immediately above such party's signature which appears below.
EXECUTED this 8th day of December, 1999.
/s/ Louis Friedman
------------------------------
Louis Friedman
Notary: /s/ Glenda Abbott
---------------------------------
My Commission Expires: /s/ GLENDA ABBOTT
------------------
NOTARY PUBLIC GUINNETT COUNTY GEORGIA
MY COMMISSION EXPIRES AUGUST 03 2001
EXECUTED this 8th day of December, 1999.
GRACE DEVELOPMENT, INC.
By: /s/ James M. Blanchard
-------------------------------
Name: James M. Blanchard
Title: President
Notary: /s/ Glenda Abbott
---------------------------------
My Commission Expires: /s/ GLENDA ABBOTT
------------------
NOTARY PUBLIC GUINNETT COUNTY GEORGIA
MY COMMISSION EXPIRES AUGUST 03 2001
/s/ L.F.
----------------------
[SEAL] Initials
11
<PAGE>
EXHIBIT 1
Resignation
-----------
/s/ L.F.
----------------------
Initials
12
<PAGE>
Resignation
-----------
The Board of Directors
Grace Development, Inc.
1690 Chantilly Drive
Atlanta, Georgia 30324
Gentlemen:
The undersigned, Louis Friedman, hereby resigns from any and all positions
held by the undersigned as a director, Chairman of the Board of Directors and
member of any committee of Grace Development, Inc., a Colorado corporation (the
"Company"), and each of the subsidiaries and affiliates of the Company, such
resignation to be effective as of 5:00 p.m. Eastern Time on December 8, 1999.
EXECUTED and dated as of this 8th day of December, 1999.
/s/ Louis Friedman
-------------------------------
Louis Friedman
/s/ L.F.
----------------------
Initials
13
<PAGE>
Exhibit 10.15
SEPARATION AGREEMENT
THIS SEPARATION AGREEMENT ("Separation Agreement"), is made and entered
into as of February 1, 2000, by and between RICHARD S. GRANVILLE, III, an
individual residing in the State of Georgia ("Granville"), and GRACE
DEVELOPMENT, INC., a Colorado corporation (the "Company").
WITNESSETH:
WHEREAS, Granville has been serving as Chief Executive Officer and a member
of the Board of Directors of the Company;
WHEREAS, Granville and the Company agree that Granville's service as Chief
Executive Officer and a member of the Board of Directors of the Company should
be ended; and
WHEREAS, Granville and the Company desire to resolve fully and finally all
issues between them that arise or may arise out of the cessation of Granville's
service with the Company.
NOW THEREFORE, in consideration of the premises and mutual promises herein
contained and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, it is agreed as follows:
AGREEMENT:
1. Resignation. Granville and the Company agree that effective as of 5:00 p.m.
-----------
Eastern Time on February 1, 2000 (the "Termination Date"), Granville shall, and
hereby does, voluntarily and permanently resign his positions as Chief Executive
Officer and as a member of the Board of Directors and member of any committee
of, or for, the Company and each of its subsidiaries and affiliates.
Concurrently herewith, Granville is executing and delivering to the Company a
letter of resignation in the form attached as Exhibit 1 hereto (the "Resignation
---------
Letter"). Each of the Company's obligations under this Separation Agreement is
subject to the execution and delivery to the Company by Granville of this
Separation Agreement and the Resignation Letter. This Separation Agreement
shall be effective upon such execution and delivery by Granville and execution
of this Separation Agreement by the Company.
2. Payments and Benefits.
---------------------
(a) Severance Fee. On March 1, 2000 and June 1, 2000 the Company shall
pay to Granville two cash severance payments in equal installments of $50,000
each for a total of $100,000.00. Granville shall be responsible for the payment
of all federal, state and local payroll or other employment taxes with respect
to such severance payments. In addition there are currently outstanding expenses
and a charge due to both to Granville and the company in which it is agreed that
upon confirmation of these charges both parties will remedy and due balances on
or before Mach 31 2000.
<PAGE>
(b) Personal Guarantees; Company Property; Credit Cards. Promptly
following the Termination Date, Granville will (i) return all Company credit
cards previously provided to Granville; (ii) return all personal property owned
by the Company that is in Granville possession and control, and (iii) deliver to
the Company a listing of all obligations of the Company for which Granville has
provided personal guarantees or other financial assurances. The Company will use
its best efforts to effect the release of Granville from any such obligations,
such releases to be effected not later than December 31, 2000. Granville
acknowledges and agrees that any personal charges made on credit cards of the
Company will be reimbursed to the Company by deducting such amounts due and
owing from any severance payments to be made pursuant to Section 2(a).
(c) No Other Payments or Benefits. Granville acknowledges and agrees that,
other than the payments described specifically in this Separation Agreement,
Granville shall not be entitled to receive on or after the Termination Date any
other benefits, payments, bonuses, severance, termination benefits or
compensation of any kind or for any reason, specifically including but not
limited to any earned or unearned wages, bonuses, payments, benefits, commission
payments, stock options (whether vested or unvested), stock or any other
benefit, payment or compensation of any kind or from any source; provided,
--------
however, that if, as and to the extent that Granville and the Company contract
- - -------
for the provision of consulting services to the Company by Granville, Granville
and the Company will agree with respect to appropriate compensation therefor
(the "Future Consulting Fees").
3. No Derogatory Statements.
------------------------
(a) Granville further agrees that, as part of the consideration for this
Separation Agreement, he will not, directly or indirectly, in any capacity or
manner, take any action or cause any action to be taken which would be
detrimental to the interests of the Company, its subsidiaries or affiliates and
their respective officers, directors, agents and employees, including, without
limitation, making, causing, encouraging or assisting to be made any statements,
comments or remarks, whether oral, verbal, in writing or electronically
transmitted, which might reasonably be considered to be derogatory, defamatory
or critical of, or negative towards, or to malign, harm, defame, disparage or
damage the reputation and good name of, the Company, its subsidiaries or
affiliates, or their respective officers, directors, agents and employees.
(b) The Company further agrees that, as part of the consideration for this
Separation Agreement, it will not, directly or indirectly, in any capacity or
manner, make, cause, encourage or assist to be made any statements, comments or
remarks, whether oral, verbal, in writing or electronically transmitted, which
might reasonably be considered to be derogatory, defamatory or critical of, or
negative towards, or to malign, harm, defame, disparage or damage the reputation
and good name of, Granville.
4. Compliance with Securities Laws. Granville covenants and agrees to continue
-------------------------------
to comply with the provisions of the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, applicable state "blue sky" laws
and all rules and regulations promulgated thereunder (collectively, the
"Securities Laws") as such laws, rules and regulations apply to him.
/s/ R. G.
--------------------------
Initials
2
<PAGE>
Granville acknowledges that, as of the date hereof, he is in possession of
material, nonpublic information regarding the Company, and agrees that he will
refrain from the purchase and sale of any of the Company's securities and from
disclosing such information to any other person, unless and until the Company,
or its counsel, shall advise him that such restriction no longer applies.
Granville also acknowledges that he has received copies of the Company's
proposed policy with respect to compliance with the Securities Laws and related
rules and regulations, and agrees to abide by such policy and the rules and
regulations referenced therein.
5. Nondisclosure. Granville represents, covenants and agrees that he will
-------------
keep the terms and facts of this Separation Agreement, and negotiations and
discussions related hereto, completely and strictly confidential, and that he
will not, directly or indirectly, in any capacity or manner, discuss with, or
disclose to, anyone, including, without limitation, reporters and analysts, any
information concerning this Separation Agreement, the matters contemplated
herein or matters related to Granville's service with or departure or
resignation from the Company, or any negotiations and discussions related hereto
or thereto; provided, however, that Granville may disclose information regarding
this Separation Agreement in confidence to his spouse, accountant, tax advisor
and legal counsel, after obtaining the agreement of any such person to also
maintain the confidentiality of such information in accordance herewith, and
provided further that if Granville is compelled as a matter of law to disclose
such information, Granville will promptly notify the Company in order to permit
the Company to seek a protective order or take other appropriate action with
respect to such disclosure, and Granville will cooperate in the Company's
efforts to obtain such protective order or other reasonable assurance that
confidential treatment will be accorded such information, and if such protective
order is not obtained, Granville may disclose to the party or authority
compelling such disclosure such part of such information as is required by law
to be disclosed. Granville will immediately refer to Mr. James Blanchard and/or
the Company's investor relations department (without further comments or
response) all contacts, questions and requests for information, from analysts,
reporters or otherwise, regarding the Company or Granville's resignation,
employment with or departure from the Company. Notwithstanding the foregoing,
Granville and the Company agree that a mutually agreeable press release
announcing Granville's resignation as Chief Executive Officer and a member of
the Board of Directors of the Company shall be issued by the Company as soon as
practicable after the execution and delivery of this Separation Agreement.
6. Releases.
--------
(a) General Release of Claims. As a material inducement to the Company to
enter into this Separation Agreement, and in partial exchange for the
consideration recited herein, Granville hereby irrevocably and unconditionally
releases, acquits and forever discharges the Company and each of the Company's
owners, stockholders, predecessors, successors, assigns, agents, directors,
officers, employees, representatives, attorneys, divisions, subsidiaries,
affiliates (and agents, directors, officers, employees, representatives and
attorneys of such divisions, subsidiaries and affiliates), and all persons
acting by, through, under or in concert with any of them (collectively,
"Releasees"), or any of them, from any and all charges, complaints, claims,
liabilities, obligations, promises, agreements, controversies, damages, actions,
causes of action,
/s/ R. G.
-----------------------
Initials
3
<PAGE>
suits, rights, demands, costs, losses, debts and expenses (including attorney's
fees and costs actually incurred), of any nature whatsoever pertaining to
Granville's service with or resignation or separation from the Company, whether
known or unknown, which Granville now has, owns or holds, or claims to have, own
or hold, or which Granville at any time hereafter may have, own or hold, or
claim to have, own or hold, against each or any of the Releasees (collectively,
"Claims"), except for the duties and obligations expressly assumed by the
Company in this Separation Agreement. Granville acknowledges and agrees that he
is releasing and giving up any right which he may have under any contract
entered with the Company, and under any federal or state law or political
subdivision thereof, including the Age Discrimination in Employment Act, which
prohibits age discrimination in employment; Title VII of the Civil Rights Act of
1964, which prohibits discrimination in employment based on race, color,
national origin, religion or sex; the Equal Pay Act, which prohibits paying men
and women unequal pay for equal work; or any other federal, state or local laws
or regulations prohibiting employment discrimination. Granville also
acknowledges and agrees that he is releasing and giving up any claims he has or
may have had for wrongful discharge. Notwithstanding anything herein to the
contrary, nothing herein shall in any way affect Granville's right to receive
Future Consulting Fees.
(b) No Breach. Granville agrees that the Company has not breached any oral
or written employment or other agreement, contract or understanding, including,
without limitation, the Employment Agreement, which exists or may have existed
between Granville and the Company with respect to any aspect of Granville's
service with, or separation or resignation of employment from, the Company or
with respect to any other matter whatsoever as of the time of execution of this
Separation Agreement. Granville further agrees that the Company has not
violated any law, statute, rule, regulation or ordinance of the United States or
of any state or political subdivision thereof, including, without limitation,
the Age Discrimination in Employment Act, with respect to any aspect of
Granville's service with, or separation or resignation of employment from, the
Company or with respect to any other matter whatsoever as of the time of
execution of this Separation Agreement.
(c) No Complaints or Charges Filed. Granville represents that he has not
filed any complaints or charges against the Company or its subsidiaries or
affiliates with any local, state or federal agency or court related to
Granville's service with or separation or resignation from the Company, that
Granville will not do so at any time hereafter, relating to any action or events
that predate the date hereof, and that if any such agency or court assumes
jurisdiction of any such complaint or charge against the Company or its
subsidiaries or affiliates on behalf of Granville, Granville will request such
agency or court to withdraw from the matter.
(d) Acknowledgement of Waiver of All Claims. Granville expressly
acknowledges that this Separation Agreement is intended to include in its
effect, without limitation, all Claims which Granville does not know or suspect
to exist in Granville's favor at the time of execution hereof,
/s/ R. G.
-----------------------
Initials
4
<PAGE>
and that this Separation Agreement contemplates the extinguishment of any such
Claim or Claims, as they may pertain to Granville's service with or separation
or resignation from the Company.
(e) No Admission. This Separation Agreement shall not in any way be
construed as an admission by either party of any wrongful conduct whatsoever
against any person or party, and both parties specifically disclaim any
liability to or wrongful conduct against any other person or party. It is
acknowledged by each party that this Separation Agreement is mutually sought and
for the benefit of each to resolve all disputed claims and controversies.
7. Confidentiality and Non-solicitation. In partial exchange for the
------------------------------------
consideration recited herein, Granville hereby covenants and agrees as follows:
(a) Granville shall not disclose to any person or entity or use, at any
time, any information not in the public domain or generally known in the
industry, in any form, acquired by Granville while employed by the Company or
any predecessor to the Company's business, and relating to the Company, its
subsidiaries or affiliates, including but not limited to information regarding
customers, vendors, suppliers, trade secrets, training programs, manuals or
materials, technical information, contracts, systems, procedures, mailing lists,
know-how, trade names, improvements, price lists, financial or other data
(including the revenues, costs or profits associated with any of the Company's
services), business plans, code books, invoices and other financial statements,
computer programs, software systems, databases, discs and printouts, plans
(business, technical or otherwise), customer and industry lists, correspondence,
internal reports, personnel files, sales and advertising material, telephone
numbers, names, addresses or any other compilation of information, written or
unwritten, which is or was used in the business of the Company or any
subsidiaries or affiliates thereof. Granville agrees and acknowledges that all
of such information, in any form, and copies and extracts thereof, are and shall
remain the sole and exclusive property of the Company. On or before the
Termination Date, Granville shall return to the Company the originals and all
copies of any such information provided to or acquired by Granville in
connection with the performance of his duties for the Company, and shall return
to the Company all files, correspondence and/or other communications received,
maintained and/or originated by Granville during the course of his employment.
(b) Granville covenants that he will not, directly or indirectly, whether
for his own account or the account of any other person or entity for a period
commencing on the Termination Date and ending on December 31, 2001, solicit,
employ or otherwise engage as an employee, independent contractor or otherwise,
any person who is an employee, or is acting as an employee, independent
contractor or agent of, the Company, its subsidiaries or affiliated companies,
or in any manner induce or attempt to induce any such employee, independent
contractor or agent of the Company, its subsidiaries or affiliated companies, to
terminate his or her employment with the Company, its subsidiaries or affiliated
companies.
/s/ R. G.
-----------------------
Initials
5
<PAGE>
(c) The parties have entered into this Separation Agreement in good faith
and for the reasons set forth in the recitals hereto and assume that this
Section is legally binding. If for any reason, this Section is not binding
because of its term, then the parties agree that this Section shall be deemed
effective for the longest period of time as may be legally enforceable. The
parties hereto agree that: (i) the covenants and agreements of Granville
contained in this Section are reasonably necessary to protect the interests of
the Company, (ii) the period of restriction contained in this Section is fair
and reasonable and is not greater than is necessary for the protection of the
Company in light of the substantial harm that the Company will suffer should
Granville breach any of the provisions of said covenants or agreements; (iii)
the covenants and agreements of Granville contained in this Section are material
inducements for the Company to enter into this Separation Agreement; (iv) the
nature, kind and character of the activities Granville is prohibited to engage
in are reasonable and necessary to protect the Company and (v) the Company's and
its subsidiaries' business is international in scope, and the Company and its
subsidiaries compete with other businesses that are or could be located
throughout North America. Granville hereby represents and warrants to the
Company that, by reason of the abilities and experience of Granville, the
enforcement of the covenants and agreements set forth in this Section will not
prevent Granville from obtaining other suitable employment or earning a
livelihood in his profession.
(d) Granville acknowledges that the rights and privileges granted to the
Company in this Section are of special and unique character, which gives them a
peculiar value, the loss of which may not be reasonably or adequately
compensated for by damages in an action of law, and that a breach thereof by
Granville of this Section will cause the Company great and irreparable injury
and damage. Accordingly, Granville hereby agrees that the Company shall be
entitled to remedies of injunction, specific performance or other equitable
relief to prevent a breach of this Section by Granville, without any requirement
on the part of the Company to prove actual damages or to post or secure any bond
(which requirements are hereby waived). This provision shall not be construed as
a waiver of, and shall be in addition to, any other rights or remedies the
Company may have for damages or otherwise.
8. Voluntary Agreement. Granville represents and agrees that he has thoroughly
-------------------
considered all aspects of this Separation Agreement and that he has been advised
by the Company that he should discuss any and all aspects of this matter with an
attorney chosen by Granville, that Granville has carefully read and fully
understands all of the provisions of this Separation Agreement and that
Granville is voluntarily entering into this Separation Agreement of his own free
will, without coercion, and in exchange for the consideration recited herein.
Granville further understands that the Company is relying on this and all other
representations he has made herein.
9. Indemnification.
---------------
(a) As a further material inducement to the Company to enter into this
Separation Agreement, Granville hereby agrees to indemnify and hold the Company
harmless from and against all loss, cost, damage or expense, including, without
limitation, attorneys' fees, incurred
/s/ R. G.
--------------------------
Initials
6
<PAGE>
by the Company, arising out of (i) any breach or alleged breach of this
Separation Agreement by Granville, or (ii) Granville's service with the Company.
(b) As a further material inducement to Granville to enter into this
Separation Agreement, the Company hereby agrees to indemnify and hold Granville
harmless from and against all loss, cost, damage or expense, including, without
limitation, attorneys' fees, incurred by Granville, arising out of (i) any
breach or alleged breach of this Separation Agreement by the Company, or (ii)
Granville's service with the Company.
10. No Other Representations. Granville represents and acknowledges that in
------------------------
executing this Separation Agreement, Granville does not rely and has not relied
upon any representation or statements made by the Company or the Releasees or by
any of the Company's or Releasees' agents, representatives or attorneys with
regard to the subject matter, basis or effect of this Separation Agreement or
otherwise, except as set out herein.
11. Successors. This Separation Agreement shall be binding upon Granville and
----------
the Company and upon their respective heirs, administrators, representatives,
executors, successors and assigns, and shall enure to the benefit of Granville,
the Company and the Releasees and Granville Releasees and each of them, and to
their respective heirs, administrators, representatives, executors, successors
and assigns. This Separation Agreement is personal to Granville, and Granville
may not assign or transfer any interests in, or rights or benefits under, this
Separation Agreement.
12. Review; Revocation. Granville may revoke this Separation Agreement within
------------------
seven (7) days after Granville's signing it, as evidenced by the date set forth
on the signature page hereof. Revocation can be made by delivering a written
notice of revocation to Mr. James Blanchard, 1690 Chantilly Drive, Atlanta,
Georgia 30324. For such revocation to be effective, written notice must be
received by Mr. Blanchard no later than 5:00 p.m. Eastern Time on the seventh
(7th) day after Granville signs this Separation Agreement, as evidenced by the
date set forth on the signature page hereof. If Granville revokes this
Separation Agreement, it shall not be effective or enforceable and Granville
will not receive the benefits, payment or rights described herein and shall
immediately return or repay to the Company in full any benefits, payments or
property described herein that he may already have received.
13. Notices. Any notice required or permitted to be given under this
-------
Separation Agreement shall be sufficient if in writing and if delivered by hand
or by certified or registered mail or by a nationally recognized overnight
delivery service, postage or other charges pre-paid, and addressed to: Richard
S. Granville, III, at the address set forth in the Company's records (if such
notice is addressed to Granville), or to Mr. James Blanchard, 1690 Chantilly
Drive, Atlanta, Georgia 30324 (if such notice is addressed to the Company), or
such other address as may be designated by a party hereto in written notice to
the other party hereto. Such notice shall be deemed to have been given or made
on the date of delivery, if delivered by hand, or on the next following date if
sent by mail or overnight delivery service.
/s/ R. G.
--------------------------
Initials
7
<PAGE>
14. Default. In the event of a default or breach by Granville of this
-------
Separation Agreement, then the payments, conveyances and benefits to or for the
benefit of Granville under Section 2 hereof, shall thereupon cease and be
terminated (and this Separation Agreement shall otherwise remain in full force
and effect). In addition, the Company shall have the right to pursue (i) such
legal remedies as may be available to it to recover from Granville any damages
suffered by the Company, including attorneys' fees, as a result of such default
or breach, and (ii) any equitable remedy or action, including injunctive relief,
as may be appropriate under the circumstances to protect the Company against or
from such default or breach, or continuation thereof.
15. Choice of Law; Attorneys' Fees. This Separation Agreement is made and
------------------------------
entered into in the State of Georgia and shall, in all respects, be interpreted,
enforced and governed under the laws of said State, without regard for the
principles of conflicts of laws thereof. Any action or proceedings brought by a
party seeking to enforce any provisions of, or based upon any right arising out
of, this Separation Agreement may be brought against any of the parties hereto
in the courts of the State of Georgia or, if it has or can acquire jurisdiction,
in a United States District Court for the State of Georgia, and each of the
parties consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue laid therein. If legal action is commenced by either party to enforce or
defend its rights under this Separation Agreement, the prevailing party in such
action shall be entitled to recover its costs and reasonable attorneys' fees in
addition to any other relief granted.
16. Miscellaneous. The language of all parts of this Separation Agreement
-------------
shall, in all cases, be construed as a whole, according to its plain meaning,
and not strictly for or against any of the parties, and rules of interpretation
or construction of contracts that would construe any ambiguity against the
draftsman shall not apply. Should any provision of this Separation Agreement be
declared or be determined by any court to be illegal or invalid, the validity of
the remaining parts, terms or provisions shall not be affected thereby and said
illegal or invalid part, term or provision shall be deemed not to be part of
this Separation Agreement. As used in this Separation Agreement, the singular or
plural number shall be deemed to include the other whenever the context so
indicates or requires. This Separation Agreement may be executed in two or more
counterparts, each of which shall for all purposes be deemed to be an original
but each of which, when so executed, shall constitute but one and the same
instrument. This Separation Agreement sets forth the entire agreement between
the parties hereto and fully supersedes any and all prior agreements or
understandings between the parties hereto pertaining to the subject matter
hereof. This Separation Agreement may not be changed orally, but only by an
instrument in writing signed by the party against whom enforcement of any
waiver, change, modification, extension or discharge is sought. The section and
paragraph headings contained in this Separation Agreement are for convenience of
reference, and shall not limit or control, or be used to construe, the meaning
of any provision herein. Any delay or omission by any party hereto in
exercising any right hereunder shall not operate as a waiver of such right.
PLEASE READ CAREFULLY. THIS SEPARATION AGREEMENT INCLUDES A RELEASE OF ALL
KNOWN AND UNKNOWN CLAIMS.
/s/ R. G.
--------------------------
Initials
8
<PAGE>
WHEREFORE, to signify their agreement to the terms of this Separation
Agreement, which consists of 11 typewritten pages, not including exhibits
hereto, each of the parties hereto have executed this Separation Agreement on
the date set forth immediately above such party's signature which appears below.
EXECUTED this 1st day of March 2000.
/s/ Richard S. Granville, III
-----------------------------------
Richard S. Granville, III
Notary:______________________________
My Commission Expires:_______________
EXECUTED this 1st day of March 1999.
GRACE DEVELOPMENT, INC.
By: /s/ James M. Blanchard
------------------------------------
Name: James M. Blanchard
Title: President
Notary: /s/ Glenda Abbott
-------------------------------
My Commission Expires: 09-03-2001
----------------
GLENDA ABBOTT
NOTARY PUBLIC GWINNETT COUNTY GEORGIA
MY COMMISSION EXPIRES AUGUST 03 2001
__________________________
Initials
9
<PAGE>
EXHIBIT 1
Resignation
-----------
/s/ R. G.
--------------------------
Initials
10
<PAGE>
Resignation
-----------
The Board of Directors
Grace Development, Inc.
1690 Chantilly Drive
Atlanta, Georgia 30324
Gentlemen:
The undersigned, Richard S. Granville III, hereby resigns from any and all
positions held by the undersigned as a director, Chairman of the Board of
Directors and member of any committee of Grace Development, Inc., a Colorado
corporation (the "Company"), and each of the subsidiaries and affiliates of the
Company, such resignation to be effective as of 5:00 p.m. Eastern Time on
February 1, 2000.
EXECUTED and dated as of this 1st day of February 2000.
/s/ Richard S. Granville, III
----------------------------------
Richard S. Granville, III
/s/ R. G.
--------------------------
Initials
11
<PAGE>
EXHIBIT 10.16
SEPARATION AGREEMENT
THIS SEPARATION AGREEMENT ("Separation Agreement"), is made and entered
into as of March 23, 2000, by and between R. Kenneth Merkey, an individual
residing in the State of Connecticut ("Merkey"), and AVANA DEVELOPMENT GROUP,
INC., a Georgia corporation (the "Company").
WITNESSETH:
WHEREAS, Merkey and the Company are each parties to that certain Employment
Agreement dated as of January 15, 2000 (the "Employment Agreement") pursuant to
which Merkey is serving as Senior Vice President - Business Development of the
Company;
WHEREAS, Merkey and the Company agree that Merkey's service as Senior Vice
President - Business Development of the Company should be ended; and
WHEREAS, Merkey and the Company desire to resolve fully and finally all
issues between them that arise or may arise out of the cessation of Merkey's
service with the Company.
NOW THEREFORE, in consideration of the premises and mutual promises herein
contained and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, it is agreed as follows:
AGREEMENT:
1. Resignation. Merkey and the Company agree that effective as of 5:00 p.m.
-----------
Eastern Time on March 23, 2000 (the "Termination Date"), Merkey shall, and
hereby does, voluntarily and permanently resign his positions as Senior Vice
President - Business Development of the Company. Concurrently herewith, Merkey
is executing and delivering to the Company a letter of resignation in the form
attached as Exhibit 1 hereto (the "Resignation Letter"). Each of the Company's
---------
obligations under this Separation Agreement is subject to the execution and
delivery to the Company by Merkey of this Separation Agreement and the
Resignation Letter. This Separation Agreement shall be effective upon such
execution and delivery by Merkey and execution of this Separation Agreement by
the Company.
2. Payments and Benefits.
---------------------
(a) Payroll Continuation. Notwithstanding the Termination Date, the
Company shall continue Merkey on the payroll as a regular, full time employee
through March 31, 2000.
(b) \Severance Fee. The Company shall pay to Merkey a cash severance
payment equal to $40,000.00, payable in three (3) monthly installments of
$13,333.33, commencing April
<PAGE>
30, 2000 and continuing on the last day of each of May and June, 2000. Merkey
shall be responsible for the payment of all federal, state and local payroll or
other employment taxes with respect to such severance payments.
(c) Company Property; Credit Cards; Temporary Living Reimbursement.
Promptly following the Termination Date, Merkey will (i) return all Company
credit cards previously provided to Merkey; and (ii) return all personal
property owned by the Company that is in Merkey possession and control. Merkey
acknowledges and agrees that any personal charges made on credit cards of the
Company, if any, will be reimbursed to the Company by deducting such amounts due
and owing from any severance payments to be made pursuant to Section 2(a). With
respect to any business expenses or temporary living expenses incurred by Merkey
prior to March 24, 2000, the Company agrees to reimburse Merkey for such
expenses upon submission by Merkey to the Company of appropriate documentation
with respect thereto.
(d) Stock Options. Pursuant to the terms of the Employment Agreement,
Merkey was awarded certain options to purchase 100,000 shares of the common
stock, no par value (the "Common Stock") of Grace Development, Inc., a Colorado
corporation and parent company to the Company, at an exercise price of $1.00 per
share (the "Options"). The Company acknowledges and agrees that as of the
Termination Date, such Options are vested and may be exercised by Merkey at any
time for a period of five (5) years following the Termination Date.
(e) No Other Payments or Benefits. Merkey acknowledges and agrees that,
other than the payments described specifically in this Separation Agreement,
Merkey shall not be entitled to receive on or after the Termination Date any
other benefits, payments, bonuses, severance, termination benefits or
compensation of any kind or for any reason, specifically including but not
limited to any earned or unearned wages, bonuses, payments, benefits, commission
payments, stock options (whether vested or unvested), stock or any other
benefit, payment or compensation of any kind or from any source; provided,
--------
however, that if, as and to the extent that Merkey and the contract for the
- - -------
provision of consulting services to the Company by Merkey, Merkey and the
Company will agree with respect to appropriate compensation therefor (the
"Future Consulting Fees").
3. No Derogatory Statements.
------------------------
(a) Merkey further agrees that, as part of the consideration for this
Separation Agreement, he will not, directly or indirectly, in any capacity or
manner, take any action or cause any action to be taken which would be
detrimental to the interests of the Company, its subsidiaries or affiliates and
their respective officers, directors, agents and employees, including, without
limitation, making, causing, encouraging or assisting to be made any statements,
comments or remarks, whether oral, verbal, in writing or electronically
transmitted, which might reasonably be considered to be derogatory, defamatory
or critical of, or negative towards, or to malign, harm, defame, disparage or
damage the reputation and good name of, the Company, its subsidiaries or
affiliates, or their respective officers, directors, agents and employees.
/s/ K. M.
----------------------
Initials
2
<PAGE>
(b) The Company further agrees that, as part of the consideration for this
Separation Agreement, it will not, directly or indirectly, in any capacity or
manner, make, cause, encourage or assist to be made any statements, comments or
remarks, whether oral, verbal, in writing or electronically transmitted, which
might reasonably be considered to be derogatory, defamatory or critical of, or
negative towards, or to malign, harm, defame, disparage or damage the reputation
and good name of, Merkey.
4. Compliance with Securities Laws. Merkey covenants and agrees to continue to
-------------------------------
comply with the provisions of the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, applicable state "blue sky" laws
and all rules and regulations promulgated thereunder (collectively, the
"Securities Laws") as such laws, rules and regulations apply to him. Merkey
acknowledges that, as of the date hereof, he is in possession of material,
nonpublic information regarding the Company, and agrees that he will refrain
from the purchase and sale of any of the Company's securities and from
disclosing such information to any other person, unless and until the Company,
or its counsel, shall advise him that such restriction no longer applies. Merkey
also acknowledges that he has received copies of the Company's proposed policy
with respect to compliance with the Securities Laws and related rules and
regulations, and agrees to abide by such policy and the rules and regulations
referenced therein.
5. Nondisclosure. Merkey represents, covenants and agrees that he will keep
-------------
the terms and facts of this Separation Agreement, and negotiations and
discussions related hereto, completely and strictly confidential, and that he
will not, directly or indirectly, in any capacity or manner, discuss with, or
disclose to, anyone, including, without limitation, reporters and analysts, any
information concerning this Separation Agreement, the matters contemplated
herein or matters related to Merkey's service with or departure or resignation
from the Company, or any negotiations and discussions related hereto or thereto;
provided, however, that Merkey may disclose information regarding this
Separation Agreement in confidence to his spouse, accountant, tax advisor and
legal counsel, after obtaining the agreement of any such person to also maintain
the confidentiality of such information in accordance herewith, and provided
further that if Merkey is compelled as a matter of law to disclose such
information, Merkey will promptly notify the Company in order to permit the
Company to seek a protective order or take other appropriate action with respect
to such disclosure, and Merkey will cooperate in the Company's efforts to obtain
such protective order or other reasonable assurance that confidential treatment
will be accorded such information, and if such protective order is not obtained,
Merkey may disclose to the party or authority compelling such disclosure such
part of such information as is required by law to be disclosed. Merkey will
immediately refer to Mr. James Blanchard and/or the Company's investor relations
department (without further comments or response) all contacts, questions and
requests for information, from analysts, reporters or otherwise, regarding the
Company or Merkey's resignation, employment with or departure from the Company.
Notwithstanding the foregoing, Merkey and the Company agree that a mutually
agreeable press release announcing Merkey's resignation as Chief Executive
Officer and a member of the Board of Directors of the Company shall be issued by
the Company as soon as practicable after the execution and delivery of this
Separation Agreement.
/s/ K. M.
-----------------
Initials
3
<PAGE>
6. Releases.
--------
(a) General Release of Claims. As a material inducement to the Company to
enter into this Separation Agreement, and in partial exchange for the
consideration recited herein, Merkey hereby irrevocably and unconditionally
releases, acquits and forever discharges the Company and each of the Company's
owners, stockholders, predecessors, successors, assigns, agents, directors,
officers, employees, representatives, attorneys, divisions, direct or indirect
parent companies, subsidiaries, affiliates (and agents, directors, officers,
employees, representatives and attorneys of such divisions, subsidiaries and
affiliates), and all persons acting by, through, under or in concert with any of
them (collectively, "Releasees"), or any of them, from any and all charges,
complaints, claims, liabilities, obligations, promises, agreements,
controversies, damages, actions, causes of action, suits, rights, demands,
costs, losses, debts and expenses (including attorney's fees and costs actually
incurred), of any nature whatsoever, including, without limitation, any services
provided at any time by Merkey to the Company or any Releasees, whether directly
or indirectly or pertaining to Merkey's service with or resignation or
separation from the Company, whether known or unknown, which Merkey now has,
owns or holds, or claims to have, own or hold, or which Merkey at any time
hereafter may have, own or hold, or claim to have, own or hold, against each or
any of the Releasees (collectively, "Claims"), except for the duties and
obligations expressly assumed by the Company in this Separation Agreement.
Merkey acknowledges and agrees that he is releasing and giving up any right
which he may have under any contract entered with the Company, and under any
federal or state law or political subdivision thereof, including the Age
Discrimination in Employment Act, which prohibits age discrimination in
employment; Title VII of the Civil Rights Act of 1964, which prohibits
discrimination in employment based on race, color, national origin, religion or
sex; the Equal Pay Act, which prohibits paying men and women unequal pay for
equal work; or any other federal, state or local laws or regulations prohibiting
employment discrimination. Merkey also acknowledges and agrees that he is
releasing and giving up any claims he has or may have had for wrongful
discharge. Notwithstanding anything herein to the contrary, nothing herein
shall in any way affect Merkey's right to receive Future Consulting Fees.
(b) No Breach. Merkey agrees that the Company has not breached any oral or
written employment or other agreement, contract or understanding, including,
without limitation, the Employment Agreement, which exists or may have existed
between Merkey and the Company with respect to any aspect of Merkey's service
with, or separation or resignation of employment from, the Company or with
respect to any other matter whatsoever as of the time of execution of this
Separation Agreement. Merkey further agrees that the Company has not violated
any law, statute, rule, regulation or ordinance of the United States or of any
state or political subdivision thereof, including, without limitation, the Age
Discrimination in Employment Act, with respect to any aspect of Merkey's service
with, or separation or resignation of employment from, the Company or with
respect to any other matter whatsoever as of the time of execution of this
Separation Agreement.
/s/ K. M.
-----------------
Initials
4
<PAGE>
(c) No Complaints or Charges Filed. Merkey represents that he has not
filed any complaints or charges against the Company or its subsidiaries or
affiliates with any local, state or federal agency or court related to Merkey's
service with or separation or resignation from the Company, that Merkey will not
do so at any time hereafter, relating to any action or events that predate the
date hereof, and that if any such agency or court assumes jurisdiction of any
such complaint or charge against the Company or its subsidiaries or affiliates
on behalf of Merkey, Merkey will request such agency or court to withdraw from
the matter.
(d) Acknowledgement of Waiver of All Claims. Merkey expressly acknowledges
that this Separation Agreement is intended to include in its effect, without
limitation, all Claims which Merkey does not know or suspect to exist in
Merkey's favor at the time of execution hereof, and that this Separation
Agreement contemplates the extinguishment of any such Claim or Claims, as they
may pertain to Merkey's service with or separation or resignation from the
Company.
(e) No Admission. This Separation Agreement shall not in any way be
construed as an admission by either party of any wrongful conduct whatsoever
against any person or party, and both parties specifically disclaim any
liability to or wrongful conduct against any other person or party. It is
acknowledged by each party that this Separation Agreement is mutually sought and
for the benefit of each to resolve all disputed claims and controversies.
7. Confidentiality and Non-solicitation. In partial exchange for the
------------------------------------
consideration recited herein, Merkey hereby covenants and agrees as follows:
(a) Merkey shall not disclose to any person or entity or use, at any time,
any information not in the public domain or generally known in the industry, in
any form, acquired by Merkey while employed by the Company or any predecessor to
the Company's business, and relating to the Company, its subsidiaries or
affiliates, including but not limited to information regarding customers,
vendors, suppliers, trade secrets, training programs, manuals or materials,
technical information, contracts, systems, procedures, mailing lists, know-how,
trade names, improvements, price lists, financial or other data (including the
revenues, costs or profits associated with any of the Company's services),
business plans, code books, invoices and other financial statements, computer
programs, software systems, databases, discs and printouts, plans (business,
technical or otherwise), customer and industry lists, correspondence, internal
reports, personnel files, sales and advertising material, telephone numbers,
names, addresses or any other compilation of information, written or unwritten,
which is or was used in the business of the Company or any subsidiaries or
affiliates thereof. Merkey agrees and acknowledges that all of such information,
in any form, and copies and extracts thereof, are and shall remain the sole and
exclusive property of the Company. On or before the Termination Date, Merkey
shall return to the Company the originals and all copies of any such information
provided to or acquired by Merkey in connection with the performance of his
duties for the Company, and shall return to the Company all files,
/s/ K. M.
-----------------
Initials
5
<PAGE>
correspondence and/or other communications received, maintained and/or
originated by Merkey during the course of his employment.
(b) Merkey covenants that he will not, directly or indirectly, whether for
his own account or the account of any other person or entity for a period
commencing on the Termination Date and ending on December 31, 2001, solicit,
employ or otherwise engage as an employee, independent contractor or otherwise,
any person who is an employee, or is acting as an employee, independent
contractor or agent of, the Company, its subsidiaries or affiliated companies,
or in any manner induce or attempt to induce any such employee, independent
contractor or agent of the Company, its subsidiaries or affiliated companies, to
terminate his or her employment with the Company, its subsidiaries or affiliated
companies.
(c) The parties have entered into this Separation Agreement in good faith
and for the reasons set forth in the recitals hereto and assume that this
Section is legally binding. If for any reason, this Section is not binding
because of its term, then the parties agree that this Section shall be deemed
effective for the longest period of time as may be legally enforceable. The
parties hereto agree that: (i) the covenants and agreements of Merkey contained
in this Section are reasonably necessary to protect the interests of the
Company, (ii) the period of restriction contained in this Section is fair and
reasonable and is not greater than is necessary for the protection of the
Company in light of the substantial harm that the Company will suffer should
Merkey breach any of the provisions of said covenants or agreements; (iii) the
covenants and agreements of Merkey contained in this Section are material
inducements for the Company to enter into this Separation Agreement; (iv) the
nature, kind and character of the activities Merkey is prohibited to engage in
are reasonable and necessary to protect the Company and (v) the Company's and
its subsidiaries' business is international in scope, and the Company and its
subsidiaries compete with other businesses that are or could be located
throughout North America. Merkey hereby represents and warrants to the Company
that, by reason of the abilities and experience of Merkey, the enforcement of
the covenants and agreements set forth in this Section will not prevent Merkey
from obtaining other suitable employment or earning a livelihood in his
profession.
(d) Merkey acknowledges that the rights and privileges granted to the
Company in this Section are of special and unique character, which gives them a
peculiar value, the loss of which may not be reasonably or adequately
compensated for by damages in an action of law, and that a breach thereof by
Merkey of this Section will cause the Company great and irreparable injury and
damage. Accordingly, Merkey hereby agrees that the Company shall be entitled to
remedies of injunction, specific performance or other equitable relief to
prevent a breach of this Section by Merkey, without any requirement on the part
of the Company to prove actual damages or to post or secure any bond (which
requirements are hereby waived). This provision shall not be construed as a
waiver of, and shall be in addition to, any other rights or remedies the Company
may have for damages or otherwise.
8. Voluntary Agreement. Merkey represents and agrees that he has thoroughly
-------------------
considered all aspects of this Separation Agreement and that he has been advised
by the Company that he
/s/ K. M.
-----------------
Initials
6
<PAGE>
should discuss any and all aspects of this matter with an attorney chosen by
Merkey, that Merkey has carefully read and fully understands all of the
provisions of this Separation Agreement and that Merkey is voluntarily entering
into this Separation Agreement of his own free will, without coercion, and in
exchange for the consideration recited herein. Merkey further understands that
the Company is relying on this and all other representations he has made herein.
9. Indemnification.
---------------
(a) As a further material inducement to the Company to enter into this
Separation Agreement, Merkey hereby agrees to indemnify and hold the Company
harmless from and against all loss, cost, damage or expense, including, without
limitation, attorneys' fees, incurred by the Company, arising out of (i) any
breach or alleged breach of this Separation Agreement by Merkey, or (ii)
Merkey's service with the Company.
(b) As a further material inducement to Merkey to enter into this
Separation Agreement, the Company hereby agrees to indemnify and hold Merkey
harmless from and against all loss, cost, damage or expense, including, without
limitation, attorneys' fees, incurred by Merkey, arising out of (i) any breach
or alleged breach of this Separation Agreement by the Company, or (ii) Merkey's
service with the Company.
10. No Other Representations. Merkey represents and acknowledges that in
------------------------
executing this Separation Agreement, Merkey does not rely and has not relied
upon any representation or statements made by the Company or the Releasees or by
any of the Company's or Releasees' agents, representatives or attorneys with
regard to the subject matter, basis or effect of this Separation Agreement or
otherwise, except as set out herein.
11. Successors. This Separation shall be binding upon Merkey and the Company
----------
and upon their respective heirs, administrators, representatives, executors,
successors and assigns, and shall enure to the benefit of Merkey, the Company
and the Releasees and Merkey Releasees and each of them, and to their respective
heirs, administrators, representatives, executors, successors and assigns. This
Separation Agreement is personal to Merkey, and Merkey may not assign or
transfer any interests in, or rights or benefits under, this Separation
Agreement.
12. Review; Revocation. Merkey may revoke this Separation Agreement within
------------------
seven (7) days after Merkey's signing it, as evidenced by the date set forth on
the signature page hereof. Revocation can be made by delivering a written
notice of revocation to Mr. James Blanchard, 1690 Chantilly Drive, Atlanta,
Georgia 30324. For such revocation to be effective, written notice must be
received by Mr. Blanchard no later than 5:00 p.m. Eastern Time on the seventh
(7th) day after Merkey signs this Separation Agreement, as evidenced by the date
set forth on the signature page hereof. If Merkey revokes this Separation
Agreement, it shall not be effective or enforceable and Merkey will not receive
the benefits, payment or rights described herein and shall immediately return or
repay to the Company in full any benefits, payments or property described herein
that he may already have received.
/s/ K. M.
-----------------
Initials
7
<PAGE>
13. Termination of Employment Agreement. Effective as of the Termination Date,
-----------------------------------
the Employment Agreement is terminated and shall be of no further force and
effect.
14. Notices. Any notice required or permitted to be given under this
-------
Separation Agreement shall be sufficient if in writing and if delivered by hand
or by certified or registered mail or by a nationally recognized overnight
delivery service, postage or other charges pre-paid, and addressed to: Richard
S. Merkey, III, at the address set forth in the Company's records (if such
notice is addressed to Merkey), or to Mr. Ben Holcomb, 1690 Chantilly Drive,
Atlanta, Georgia 30324 (if such notice is addressed to the Company), or such
other address as may be designated by a party hereto in written notice to the
other party hereto. Such notice shall be deemed to have been given or made on
the date of delivery, if delivered by hand, or on the next following date if
sent by mail or overnight delivery service.
15. Default. In the event of a default or breach by Merkey of this Separation
-------
Agreement, then the payments, conveyances and benefits to or for the benefit of
Merkey under Section 2 hereof, shall thereupon cease and be terminated (and this
Separation Agreement shall otherwise remain in full force and effect). In
addition, the Company shall have the right to pursue (i) such legal remedies as
may be available to it to recover from Merkey any damages suffered by the
Company, including attorneys' fees, as a result of such default or breach, and
(ii) any equitable remedy or action, including injunctive relief, as may be
appropriate under the circumstances to protect the Company against or from such
default or breach, or continuation thereof.
16. Choice of Law; Attorneys' Fees. This Separation Agreement is made and
------------------------------
entered into in the State of Georgia and shall, in all respects, be interpreted,
enforced and governed under the laws of said State, without regard for the
principles of conflicts of laws thereof. Any action or proceedings brought by a
party seeking to enforce any provisions of, or based upon any right arising out
of, this Separation Agreement may be brought against any of the parties hereto
in the courts of the State of Georgia or, if it has or can acquire jurisdiction,
in a United States District Court for the State of Georgia, and each of the
parties consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue laid therein. If legal action is commenced by either party to enforce or
defend its rights under this Separation Agreement, the prevailing party in such
action shall be entitled to recover its costs and reasonable attorneys' fees in
addition to any other relief granted.
17. Miscellaneous. The language of all parts of this Separation Agreement
-------------
shall, in all cases, be construed as a whole, according to its plain meaning,
and not strictly for or against any of the parties, and rules of interpretation
or construction of contracts that would construe any ambiguity against the
draftsman shall not apply. Should any provision of this Separation Agreement be
declared or be determined by any court to be illegal or invalid, the validity of
the remaining parts, terms or provisions shall not be affected thereby and said
illegal or invalid part, term or provision shall be deemed not to be part of
this Separation Agreement. As used in this Separation Agreement, the singular or
plural number shall be deemed to include the other whenever the context so
indicates or requires. This Separation Agreement may be executed in two or more
/s/ K. M.
--------------
Initials
8
<PAGE>
counterparts, each of which shall for all purposes be deemed to be an original
but each of which, when so executed, shall constitute but one and the same
instrument. This Separation Agreement sets forth the entire agreement between
the parties hereto and fully supersedes any and all prior agreements or
understandings between the parties hereto pertaining to the subject matter
hereof. This Separation Agreement may not be changed orally, but only by an
instrument in writing signed by the party against whom enforcement of any
waiver, change, modification, extension or discharge is sought. The section and
paragraph headings contained in this Separation Agreement are for convenience of
reference, and shall not limit or control, or be used to construe, the meaning
of any provision herein. Any delay or omission by any party hereto in exercising
any right hereunder shall not operate as a waiver of such right.
PLEASE READ CAREFULLY. THIS SEPARATION AGREEMENT INCLUDES A RELEASE OF ALL
KNOWN AND UNKNOWN CLAIMS.
WHEREFORE, to signify their agreement to the terms of this Separation
Agreement, which consists of 10 typewritten pages, not including exhibits
hereto, each of the parties hereto have executed this Separation Agreement on
the date set forth immediately above such party's signature which appears below.
EXECUTED this 5th day of April, 2000.
/s/ R. Kenneth Merkey
-------------------------------
R. Kenneth Merkey
Witness: /s/ Sharon S. Quaintance
-----------------------------
Name: Sharon S. Quaintance
-----------------------------
EXECUTED this 5th day of April, 2000.
GRACE DEVELOPMENT, INC.
By: /s/ James M. Blanchard
------------------------------------
Name: James M. Blanchard
Title: President
Witness: /s/ James C. Foregger
---------------------
_________________
Initials
9
<PAGE>
Name: James C. Foregger
-------------------------
GRACE DEVELOPMENT, INC.
By: /s/ Ben Holcomb
-------------------------------------
Name: Ben Holcomb
Title: Chairman & CEO
_________________
Initials
10
<PAGE>
EXHIBIT 1
Resignation
-----------
/s/ K. M.
----------------
Initials
11
<PAGE>
Resignation
-----------
The Board of Directors
Grace Development, Inc.
1690 Chantilly Drive
Atlanta, Georgia 30324
Gentlemen:
The undersigned, R. Kenneth Merkey, hereby resigns from any and all
positions held by the undersigned as an officer of Grace Development, Inc., a
Colorado corporation (the "Company"), and each of the subsidiaries and
affiliates of the Company, such resignation to be effective as of 5:00 p.m.
Eastern Time on March 23, 2000.
EXECUTED and dated as of this 5th day of April, 2000.
/s/ R. Kenneth Merkey
------------------------------
R. Kenneth Merkey
/s/ K. M.
-----------------
Initials
12
<PAGE>
EXHIBIT 10.17
O.E. "Randy" Ray
256 New Gate Loop
Heathrow, FL 32746
April 3, 2000
Dear Randy,
Congratulations to us all on the closing of the Alpha Computer merger with
Avana! We are very happy to have the deal consummated and be able to get on to
the work at hand.
This letter is to put in process the agreement that entitles you to a pay
increase, from $90,000 to $140,000, at the closing of the Alpha merger. The
remainder of your original employment agreement will remain in effect. This pay
increase will be effective April 3, 2000, which is the first work day
immediately following closing of the merger of March 31, 2000.
We're looking forward to great things ahead with Alpha on our team.
With highest regard,
/s/ Benjamin Holcomb
- - --------------------------------------
Benjamin Holcomb
CEO
<PAGE>
EXHIBIT 10.18
Wendy Lewis
256 New Gate Loop
Heathrow, FL 32746
April 3, 2000
Dear Wendy,
Congratulations to us all on the closing of the Alpha Computer merger with
Avana! We are very happy to have the deal consummated and be able to get on to
the work at hand.
This letter is to put in process the agreement that entitles you to a pay
increase, from $75,000 to $125,000, at the closing of the Alpha merger. The
remainder of your original employment agreement will remain in effect. This
pay increase will be effective April 3, 2000, which is the first work day
immediately following closing of the merger of March 31, 2000.
We're looking forward to great things ahead with Alpha on our team.
With highest regard,
/s/ Benjamin Holcomb
- - -------------------------------------
Benjamin Holcomb
CEO
<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.
4. Bonus and Special Stock Award.
-----------------------------
2
<PAGE>
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
upon expiration of the Initial Term, 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 expiration
of the Initial Term 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
Initial Term.
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
3
<PAGE>
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
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.
4
<PAGE>
(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 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
5
<PAGE>
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 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
6
<PAGE>
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
--------------
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 (it) 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 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 thc 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
7
<PAGE>
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.
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;
8
<PAGE>
(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 or the assets of the Company (in one transaction or
a series of transactions); or
(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
<PAGE>
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 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.
10
<PAGE>
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 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
11
<PAGE>
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 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;
12
<PAGE>
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.
(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.
13
<PAGE>
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. If the Executive has not been terminated for
---------------
Cause or voluntarily resigned without Good Reason as of December 31, 2000, 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.
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
14
<PAGE>
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 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:
15
<PAGE>
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.
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.
16
<PAGE>
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
issuance to the Executive of 1,000,000 shares of the Common 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
17
<PAGE>
EXHIBIT 10.20
ATLANTA COMMERCIAL BOARD OF REALTORS
STANDARD COMMERCIAL LEASE AGREEMENT
SEPTEMBER 1997
THIS LEASE is made by and among The Mulberry Group (hereinafter called
"Landlord"), and New Millennium Multi Media, Inc., DBA Avana (hereinafter called
"Tenant"), and Cushman & Wakefield of Georgia, Inc. (hereinafter called
"Broker").
WITNESSETH:
PREMISES
1. Landlord, for and in consideration of the rents, covenants,
agreements, and stipulations hereinafter mentioned, provided for and contained
herein to be paid, kept and performed by Tenant, leases and rents unto Tenant,
and Tenant hereby leases and takes upon the terms and conditions which
hereinafter appear, the following described property (hereinafter called the
"Premises"), to wit:
and being known as 1690 Chantilly Drive, Atlanta, Georgia 30324.
No easement for light or air is included in the Premises.
TERM
2. The Tenant shall have and hold the Premises for a term of 60 months
beginning on the 15th day of July, 1999, and ending on the 14th day of July,
2004, at midnight, unless sooner terminated as hereinafter provided.
RENTAL
3. Tenant agrees to pay to Landlord, without demand, deduction or setoff,
an annual rental of $150,000 payable in equal monthly installments of $12,500 in
advance on the first day of each calendar month during the term hereof. Upon
execution of this Lease, Tenant shall pay the first full month's rent due
hereunder. Rental for any period during the term hereof which is for less than
one month shall be a prorated portion of the monthly rental due.
LATE CHARGES
4. If Landlord fails to receive all or any portion of a rent payment
within ten (10) days after it becomes due, Tenant shall pay Landlord, as
additional rental, a late charge equal to five percent (5%) of the overdue
amount. The parties agree that such late charge represents a fair and
reasonable estimate of the costs Landlord will incur by reason of such late
payment.
SECURITY DEPOSIT
5. Tenant shall deposit with Landlord upon execution of this Lease
$12,500 as security deposit which shall be held by Landlord, without liability
to Tenant for any interest
<PAGE>
thereon, as security for the full and faithful performance by Tenant of each and
every term, covenant and condition of this Lease of Tenant. If any of the rents
or other charges or sums payable by Tenant to Landlord shall be overdue and
unpaid or should Landlord make payments on behalf of Tenant, or should Tenant
fail to perform any of the terms of this Lease, then Landlord may, at its
option, appropriate and apply the security deposit, or so much thereof as may be
necessary to compensate Landlord toward the payment of the rents, charges or
other sums due from Tenant, or towards any loss, damage or expense sustained by
Landlord resulting from such default on the part of Tenant; and in such event
Tenant shall upon demand restore the security deposit to the original sum
deposited. In the event Tenant furnishes Landlord with proof that all utility
bills have been paid through the date of Lease termination and performs all of
Tenant's other obligations under this Lease, the security deposit shall be
returned in full to Tenant within thirty (30) days after the date of the
expiration or sooner termination of the term of this Lease and the surrender of
the Premises by Tenant in compliance with the provisions of this Lease.
UTILITY BILLS
6. Tenant shall pay all utility bills, including, but not limited to
water, sewer, gas, electricity, fuel, light and heat bills for the Premises, and
Tenant shall pay all charges for garbage collection or other sanitary services.
COMMON AREA COSTS; RULES AND REGULATIONS
7. If the Premises are part of a larger building or group of buildings,
Tenant shall pay as additional rental monthly, in advance, its pro rata share of
common area maintenance costs as hereinafter more particularly set forth in the
Special Stipulations, The Rules and Regulations attached hereto are made a part
of this Lease. Tenant agrees to perform and abide by those Rules and
Regulations and such other Rules and Regulations as may be made from time to
time by Landlord.
USE OF PREMISES
8. The Premises shall be used for office purposes only and no other. The
Premises shall not be used for any illegal purposes, or in any manner to create
any nuisance or trespass, or in any manner to vitiate the insurance or increase
the rate of insurance on the Premises.
ABANDONMENT OF THE PREMISES
9. Tenant agrees not to abandon or vacate the Premises during the term of
this Lease and agrees to use the Premises for the purposes herein leased until
the expiration hereof.
INDEMNITY; INSURANCE
11. Tenant agrees to and hereby does indemnify and save Landlord harmless
against all claims for damages to persons or property by reason of Tenant's use
or occupancy of the Premises, and all expenses incurred by Landlord because
thereof, including attorney's fees and
2
<PAGE>
court costs. Supplementing the foregoing and in addition thereto, Tenant shall
during the term of this Lease and any extension or renewal thereof, and at
Tenant's expense, maintain in full force and effect comprehensive general
liability insurance with limits of $500,000.00 per person and $1,000,000.00 per
incident, and property damage limits of $100,000.00, which insurance shall
contain a special endorsement recognizing and insuring any liability accruing to
Tenant under the first sentence of this paragraph 11, and naming Landlord as
additional insured. Tenant shall provide evidence of such insurance to Landlord
prior to the commencement of the term of this Lease. Landlord and Tenant each
hereby release and relieve the other, and waive its right of recovery, for loss
or damage arising out of or incident to the perils insured against which perils
occur in, on or about the Premises, whether due to the negligence of Landlord or
Tenant or their Brokers, employees, contractors and/or invitees, to the extent
that such loss or damage is within the policy limits of said comprehensive
general liability insurance. Landlord and Tenant shall, upon obtaining the
policies of insurance required, give notice to the insurance carrier or carriers
that the foregoing mutual waiver of subrogation is contained in this Lease.
REPAIRS BY LANDLORD
12. Landlord agrees to keep in good repair the roof, foundations and
exterior walls of the Premises (exclusive of all glass and exclusive of all
exterior doors) and underground utility and sewer pipes outside the exterior
walls of the building, except repairs rendered necessary by the negligence or
intentional wrongful Acts of Tenant, its brokers, employees or invitees. If the
Premises are part of a larger building or group of buildings, then to the extent
that the grounds are common areas, Landlord shall maintain the grounds
surrounding the building, including paving, the moving of grass, care of shrubs
and general landscaping. Tenant shall promptly report in writing to Landlord
any defective condition known to it which Landlord is required to repair and
failure so to report such conditions shall make Tenant responsible to Landlord
for any liability incurred by Landlord by reason of such conditions.
REPAIRS BY TENANT
13. Tenant accepts the Premises in their present condition and as suited
for the use intended by Tenant. Tenant shall, throughout the initial term of
this Lease, and any extension or renewal thereof, at its expense, maintain in
good order and repair the Premises, including the building, heating and air
conditioning equipment (including, but not limited to, replacement of parts,
compressors, air handling units and heating units) and other improvements
located thereon, except those repairs expressly required to be made by Landlord
hereunder and those noted in paragraph 41 as Landlord's responsibility. Tenant
agrees to return the Premises to Landlord at the expiration, or prior to
termination of this Lease, in as good condition and repair as when first
received, natural wear and tear, damage by store, fire, lightning, earthquake or
other casualty alone excepted.
ALTERATIONS
14. Tenant shall not make any alterations, additions, or improvements to
the Premises without Landlord's prior written consent. Tenant shall promptly
remove any alterations, additions, or improvements constructed in violation of
this Paragraph 14 upon Landlord's written
3
<PAGE>
request. All approved alterations, additions, and improvements will be
accomplished in a good and workmanlike manner, in conformity with all applicable
laws and regulations, and a contractor approved by Landlord, free of any liens
or encumbrances. Landlord may require Tenant to remove any alterations,
additions or improvements (whether or not made with Landlord's consent) at the
termination of this Lease and to restore the Premises to its prior condition,
all at Tenant's expense. All alterations, additions and improvements which
Landlord has not required Tenant to remove shall become Landlord's property and
shall be surrendered to Landlord upon the termination of this Lease, except that
Tenant may remove any of Tenant's machinery or equipment which can be removed
without material damage to the Premises. Tenant shall repair, at Tenant's
expense, any damage to the Premises caused by the removal of any such machinery
or equipment.
REMOVAL OF FIXTURES
15. Tenant may (if not in default hereunder) prior to the expiration of
this Lease, or any extension or renewal thereof, remove all fixtures and
equipment which it has placed in the Premises, provided Tenant repairs all
damage to the Premises caused by such removal.
DESTRUCTION OF OR DAMAGE TO PREMISES
16. If the Premises are totally destroyed by storm, fire, lightning,
earthquake or other casualty, this Lease shall terminate as of the date of such
destruction and rental shall be accounted for as between Landlord and Tenant as
of that date. If the Premises are damaged but not wholly destroyed by any such
casualties, rental shall abate in such proportion as use of Premises has been
destroyed and Landlord shall restore the Premises to substantially the same
condition as before damage as speedily as is practicable, whereupon full rental
shall recommence.
GOVERNMENTAL ORDERS
17. Tenant agrees, at its own expense, to comply promptly with all
requirements of any legally constituted public authority made necessary by
reason of Tenant's occupancy of the Premises. Landlord agrees to comply
promptly with any such requirements if not made necessary by reason of Tenant's
occupancy. It is mutually agreed, however, between Landlord and Tenant, that if
in order to comply with such requirements, the cost to Landlord or Tenant, as
the case may be, shall exceed a sum equal to one year's rent, then Landlord or
Tenant who is obligated to comply with such requirements may terminate this
Lease by giving written notice of termination to the other party by certified
mail, which termination shall become effective sixty (60) days after receipt of
such notice and which notice shall eliminate the necessity of compliance with
such requirements by giving such notice unless the party giving such notice of
termination shall, before termination become effective, pay to the party giving
notice all cost of compliance in excess of one year's rent, or secure payment of
said sum in manner satisfactory to the party giving notice.
4
<PAGE>
CONDEMNATION
18. If the whole of the Premises, or such portion thereof as will make the
Premises unusable for the purposes herein leased, are condemned by any legally
constituted authority for any public use or purposes, then in either of said
events the term hereby granted shall cease from the date when possession thereof
is taken by public authorities, and rental shall be accounted for as between
Landlord and Tenant as of said date. Such termination, however, shall be
without prejudice to the rights of either Landlord or Tenant to recover
compensation and damage caused by condemnation from the condemner. It is
further understood and agreed that neither the Tenant nor Landlord shall have
any rights in any award made to the other by any condemnation authority
notwithstanding the termination of the Lease as herein provided. Broker may
become a party to the condemnation proceeding for the purposes of enforcing his
rights under this paragraph.
ASSIGNMENT AND SUBLETTING
19. Tenant shall not, without the prior written consent of Landlord, which
shall not be unreasonably withheld, assign this Lease or any interest hereunder,
or sublet the Premises or any part thereof, or permit the use of the Premises by
any party other than the Tenant. Consent to any assignment or sublease shall
not impair this provision and all later assignments or subleases shall be made
likewise only on the prior written consent of Landlord. The assignee of Tenant,
at the option of Landlord, shall become liable to Landlord for all obligations
of Tenant hereunder, but no sublease or assignment by Tenant shall relieve
Tenant of any liability hereunder.
EVENTS OF DEFAULT
20. The happening of any one or more of the following events (hereinafter
any one of which may be referred re as an "Event of Default") during the term of
this Lease, or any renewal or extension thereof, shall constitute a breach of
this lease on the part of the Tenant: (A) Tenant fails to pay the rental as
provided for herein; (B) Tenant abandons or vacates the Premises; (C) Tenant
fails to comply with or abide by and perform any other obligation imposed upon
Tenant under this Lease; (D) Tenant is adjudicated bankrupt; (E) a permanent
receiver is appointed for Tenant's property and such receiver is not removed
within sixty (60) days after written notice from Landlord to Tenant to obtain
such removal; (F) Tenant, either voluntarily or involuntarily, takes advantage
of any debt or relief proceedings under the present or future law, whereby the
rent or any part thereof is, or is proposed to be reduced or payment thereof
deferred; (G) Tenant makes an assignment for benefit of creditors; or (H)
Tenant's effects are levied upon or attached under process against Tenant, which
is not satisfied or dissolved within thirty (30) days after written notice from
Landlord to Tenant to obtain satisfaction thereof.
REMEDIES UPON DEFAULT
21. Upon the occurrence of an Event of Default, Landlord, in addition to
any and all other rights or remedies it may have at law or in equity, shall have
the option of pursuing any one or more of the following remedies:
5
<PAGE>
(A) Landlord may terminate this Lease by giving notice of termination, in
which event this Lease shall expire and terminate on the date specified in such
notice of termination, with the same force and effect as though the date so
specified were the date herein originally fixed as the termination date of the
term of this Lease, and all rights of Tenant under this Lease and in and to the
Premises shall expire and terminate, and Tenant shall remain liable for all
obligations under this Lease arising up to the date of such termination and
Tenant shall surrender the Premises to Landlord on the date specified in such
notice;
(B) Landlord may terminate this Lease as provided in paragraph 21(A)
hereof and recover from Tenant all damages Landlord may incur by reason of
Tenant's default, including, without limitation, a sum which, at the date of
such termination, represents the then value of the excess, if any, of (i) the
monthly rental and additional rent for the period commencing with the day
following the date of such termination and ending with the date hereinbefore set
for the expiration of the full term hereby granted, over (ii) the aggregate
reasonable rental value of the Premises (less reasonable brokerage commissions,
attorneys' fees and other costs relating to the reletting of the Premises) for
the same period, all of which excess sum shall be deemed immediately due and
payable.
(C) Landlord may, without terminating this Lease, declare immediately due
and payable all monthly rental and additional rent due and coming under this
Lease for the entire remaining term hereof, together with all other amounts
previously due, at once; provided, however, that such payment shall not be
deemed a penalty or liquidated damages but shall merely constitute payment in
advance of rent for the remainder of said term; upon making such payment, Tenant
shall be entitled to receive from Landlord all rents received by Landlord from
other assignees, tenants and subtenants on account of the Premises during the
term of this lease, provided that the monies to which Tenant shall so become
entitled shall in no event exceed the entire amount actually paid by Tenant to
Landlord pursuant to this clause (C) less all costs, expenses and attorneys'
fees of Landlord incurred in connection with the reletting of the Premises; or
(D) Landlord may, from time to time without terminating this Lease, and
without releasing Tenant in whole or in part from Tenant's obligation to pay
monthly rental and additional rent and perform all of the covenants, conditions
and agreement to be performed by tenant as provided in this Lease, make such
alterations and repairs as may be necessary in order to relet the Premises, and,
after making such alterations and repairs, Landlord may, but shall not be
obligated to, relet the Premises or any part thereof for such term or terms
(which may be for a term extending beyond the term of this Lease) at such rental
or rentals and upon such other terms and conditions as Landlord in its sole
discretion may deem advisable or acceptable; upon each reletting, all rentals
received by Landlord from such reletting shall be applied first, to the payment
of any indebtedness other than rent due hereunder from Tenant to Landlord,
second, to the payment of any costs and expenses of such reletting, including
brokerage fees and attorneys' fees, and of costs of such alterations and
repairs, third, to the payment of the monthly rental and additional rent due and
unpaid hereunder, and the residue, if any, shall be held by Landlord and applied
against payments of future monthly rental and additional rent as the same may
become due and payable hereunder; in no event shall Tenant be entitled to any
excess rental received by Landlord over and above charges that Tenant is
obligated to pay hereunder, including monthly rental and
6
<PAGE>
additional rent; if such rental received from such reletting during any month
are less than those to be paid during the month by Tenant hereunder, including
monthly rental and additional rent, Tenant shall pay any such deficiency to
Landlord; which deficiency shall be calculated and paid monthly; Tenant shall
also pay Landlord as soon as ascertained and upon demand all costs and expenses
incurred by Landlord in connection with such reletting and in making any
alterations and repairs which are not covered by the rentals received from such
reletting; notwithstanding any such reletting without termination, Landlord may
at any time thereafter elect to terminate this Lease for such previous breach.
Tenant acknowledges that the Premises are to be used for commercial purposes,
and Tenant expressly waives the protections and rights set forth in Official
Code of Georgia Annotated Section 44-7-52.
EXTERIOR SIGNS
22. Tenant shall place no signs upon the outside walls or roof of the
Premises except with the written consent of the Landlord. Any and all signs
placed on the Premises by Tenant shall be maintained in compliance with
governmental rules and regulations governing such signs, and Tenant shall be
responsible to Landlord for any damage caused by installation, use or
maintenance of said signs, and all damage incident to such removal.
LANDLORD'S ENTRY OF PREMISES
23. Landlord may card the Premises "For Rent" or "For Sale" ninety (90)
days before the termination of this Lease. Landlord may enter the Premises at
reasonable hours to exhibit the Premises to prospective purchasers or tenants,
to inspect the Premises to see that Tenant is complying with all of its
obligations hereunder, and to make repairs required of Landlord under the terms
hereof or to make repairs to Landlord's adjoining property, if any.
EFFECT OF TERMINATION OF LEASE
24. No termination of this Lease prior to the normal ending thereof, by
lapse of time or otherwise, shall affect Landlord's right to collect rent for
the period prior to termination thereof.
SUBORDINATION
25. At the option of Landlord, Tenant agrees that this Lease shall remain
subject and subordinate to all present and future mortgages, deeds to secure
debt or other security instruments (the "Security Deeds") affecting the Building
or the Premises, and Tenant shall promptly execute and deliver to Landlord such
certificate or certificates in writing as Landlord may request, showing the
subordination of the Lease to such Security Deeds, and in default of tenant so
doing, Landlord shall be and is hereby authorized and empowered to execute such
certificate in the name of and as the act and deed of Tenant, this authority
being hereby declared to be coupled with an interest and to be irrevocable.
Tenant shall upon request from Landlord at any time and from time to time
execute, acknowledge and deliver to Landlord a written statement certifying as
follows: (A) that this Lease is unmodified and in full force and effect (or if
there has been modification thereof, that the same is in full force and effect
as modified and stating the
7
<PAGE>
nature thereof); (B) that to the best of its knowledge there are no uncured
defaults on the part of Landlord (or if any such default exists, the specific
nature and extent thereof); (C) the date to which any rent and other charges
have been paid in advance, if any; and (D)such other matters as Landlord may
reasonably request. Tenant irrevocably appoints Landlord as its attorney-in-
fact, coupled with an interest, to execute and deliver, for an in the name of
Tenant, any document or instrument provided for in this paragraph.
QUIET ENJOYMENT
26. So long as Tenant observes and performs the covenants and agreements
contained herein, it shall at all times during the Lease term peacefully and
quietly have and enjoy possession of the Premises, but always subject to the
terms hereof.
NO ESTATE IN LAND
27. This Lease shall create the relationship of Landlord and Tenant
between the parties hereto. No estate shall pass out of Landlord. Tenant has
only a usufruct not subject to levy and sale, and not assignable by Tenant
except by Landlord's consent.
HOLDING OVER
28. If Tenant remains in possession of the Premises expiration of the
term hereof, with Landlord's acquiescence and without any express agreement of
the parties, Tenant shall be a tenant at will at the rental rate which is in
effect at end of this Lease and there shall be no renewal of this Lease by
operation of law. If Tenant remains in possession of the Premises after
expiration of the term hereof without Landlord's acquiescence, Tenant shall be a
tenant at sufferance and commencing on the date following the date of such
expiration, the monthly rental payable under Paragraph 3 above shall for each
month, or fraction thereof during which Tenant so remains in possession of the
Premises, be twice the monthly rental otherwise payable under Paragraph 3 above.
ATTORNEY'S FEES
29. In the event that any action or proceeding is brought to enforce any
term, covenant or condition of this Lease on the part of Landlord or Tenant, the
prevailing party in such litigation shall be entitled to recover reasonable
attorney's fees to be fixed by the court in such action or proceeding, in an
amount at lease equal to fifteen percent or any damages due from the non-
prevailing party. Furthermore, Landlord and Tenant agree to pay the attorney's
fees and expenses of (A) the other party to this Lease (either Landlord or
Tenant) if it is made a party to litigation because of its being a party to this
Lease arid when it has not engaged in any wrongful conduct itself, and (B)
Broker if Broker is made a party to litigation because of its being a party to
this Lease and when Broker has not engaged in any wrongful conduct itself.
8
<PAGE>
RIGHTS CUMULATIVE
30. All rights, powers and privileges conferred hereunder upon parties
hereto shall be cumulative and not restrictive of those given by law.
WAIVER OF RIGHTS
31. No failure of Landlord to exercise any power given Landlord hereunder
or to insist upon strict compliance by Tenant of its obligations hereunder and
no custom or practice of the parties at variance with the terms hereof shall
constitute a waiver of Landlord's right to demand exact compliance with the
terms hereof.
AGENCY DISCLOSURE
32. Landlord and Tenant hereby acknowledge that Broker has acted as an
agent for Landlord in this transaction and will be paid a real estate commission
by Landlord.
(A) Neither Broker nor any other broker identified in this Lease shall owe
any duty to Landlord or Tenant greater than what is set forth in the Brokerage
Relationships in Real Estate Transactions Act, Official Code of Georgia
Annotated Section 10-6A-1 et seq.
------
BROKER'S COMMISSION
33. Broker has rendered valuable service by assisting in the creation of
the landlord-tenant relationship hereunder. The commission to be paid in
conjunction with the creation of the relationship by this Lease has been
negotiated between Landlord and Broker and Landlord hereby agrees to pay Broker
as compensation for Broker's services in procuring this Lease and creating the
aforesaid landlord-tenant relationship pursuant to the terms of a December 1,
1998 listing agreement (as modified) between Landlord and Broker.
Broker's commission shall not apply to any "additional rental" as that term
is used in this Lease. Any separate commission agreement is hereby incorporated
as a part of this Lease by reference and any third party assuming the rights and
obligations of Landlord under this Lease shall be obligated to perform all of
Landlord's obligations to Broker under said separate commission agreement. If
the Tenant becomes a tenant at will or at sufferance pursuant to Paragraph 28
above, or if the term of this Lease is extended or if this Lease is renewed or
if a new lease is entered into between Landlord and Tenant covering either the
Premises or any part thereof or covering any other premises as an expansion of,
addition to, or substitution for the Premises, regardless of whether such
premises are located adjacent to or in the vicinity of the Premises, Landlord,
in consideration of Broker's having assisted in the creation of the landlord-
tenant relationship, agrees to pay Broker additional commissions as set forth
below, it being the intention of the parties that Broker shall continue to be
compensated so long as the parties hereto, their successors and/or assigns
continue the relationship of landlord and tenant which initially resulted from
the efforts of Broker, whether relative to the Premises or any expansion
thereof, or relative to any other premises leased by Landlord to Tenant from
time to time, whether the rental therefore is paid under this Lease or
otherwise. Broker agrees that, in the event Landlord sells
9
<PAGE>
the Premises, and upon Landlord's furnishing Broker with an agreement signed by
the purchaser assuming Landlord's obligations to Broker under this Lease, Broker
will release the original Landlord from any further obligations to Broker
hereunder. If the purchaser of the Premises does not agree in writing to assume
Landlord's obligations to Broker under this Lease, Landlord shall remain
obligated to pay Broker the commissions described in this Paragraph 33 even
after the expiration of the original term of this Lease if the purchaser (A)
extends the term of this Lease; (B) renews this Lease; or (C) enters into a new
lease with Tenant covering either the Premises or any part thereof, or covering
any other premises as an expansion of, addition to, or substitution for the
Premises, regardless of whether such premises are located adjacent to or in the
vicinity of the Premises. Voluntary cancellation of this Lease shall not nullify
Broker's right to collect the commission due for the remaining term of this
Lease and the provisions contained hereinabove relative to additional
commissions shall survive any cancellation or termination of this lease. In the
event that the Premises are condemned, or sold under threat of and in lieu of
condemnation, Landlord shall, on the date of receipt by Landlord of the
condemnation award or sale proceeds, pay to Broker the commission, reduced to
its present cash value at the existing legal rate of interest, which would
otherwise be due to the end of the term contracted for under Paragraph 2 above.
LIMITATION OF BROKER'S SERVICES AND DISCLAIMER
34. Broker is a party to this Lease for the purpose of enforcing its
rights under Paragraph 33 above. Tenant must look solely to Landlord as regards
to all covenants, agreements and warranties herein contained, and Broker shall
never be liable to Tenant in regard to any matter which may arise by virtue of
this Lease. It is understood and agreed that the commissions payable to Broker
under Paragraph 33 above are compensation solely for Broker's services in
assisting in the creation of the landlord-tenant relationship hereunder;
accordingly, Broker is not obligated hereunder on account of payment of such
commissions to furnish any management services for the Premises. Landlord and
Tenant acknowledge that the Atlanta Commercial Board of REALTORS, Inc. has
furnished this Commercial Lease Agreement form to its members as a service and
that it makes no representation or warranty as to the enforceability of this
Commercial Lease Agreement form.
PURCHASE OF PROPERTY BY TENANT
35. In the event that Tenant acquires title to the Premises or any part
thereof, or any premises as an expansion of, addition to or substitution for the
Premises at any time during the term of this Lease, or any renewals thereof, or
within six (6) months after the expiration of the term hereof or the extended
term hereof, Landlord shall pay Broker a commission on the sale of the Premises
in lieu of any further commission which otherwise would have been due under this
Lease. Such commission, as negotiated between the parties, shall be six percent
(6%) of the gross sales price, payable in full at closing.
ENVIRONMENTAL LAWS
36. Landlord represents to the best of its knowledge and belief, (A) the
Premises are in compliance with all applicable environmental laws, and (B) there
are not excessive levels (as
10
<PAGE>
defined by the Environmental Protection Agency) of radon, toxic waste or
hazardous substances on the Premises. Tenant represents and warrants that Tenant
shall comply with all applicable environmental laws and that Tenant shall not
permit any of his employees, brokers, contractors or subcontractors, or any
person present on the Premises to generate, manufacture, store, dispose or
release on, about, or under the Premises any toxic waste or hazardous substances
which would result in the Premises not complying with any applicable
environmental laws.
TIME OF ESSENCE
37. Time is of the essence of this Lease.
DEFINITIONS
38. "Landlord" as used in this Lease shall include the undersigned, its
heirs, representatives, assigns and successors in title to the Premises,
"Tenant" shall include the undersigned and its heirs, representatives, assigns
and successors, and if this Lease shall be validly assigned or sublet, shall
include also Tenant's assignees or sublease as to the Premises covered by
assignment or sublease. "Broker" shall include the undersigned, its successors,
assigns, heirs and representatives. "Landlord", "Tenant" and "Broker" include
male and female, singular and plural, corporation, partnership or individual, as
may fit the particular parties.
NOTICES
39. All notices required or permitted under this Lease shall be in
writing, and shall be personally delivered or sent by U.S. Certified Mail,
return receipt requested, postage prepaid. Broker shall be copied with all
required or permitted notices. Notices to Tenant shall be delivered or sent to
the address shown below, except that upon Tenant's taking possession of the
Premises, then the Premises shall be Tenant's address for notice purposes.
Notices to Landlord and Broker shall be delivered or sent to the addresses
hereinafter stated, to wit:
Landlord: The Mulberry Group
1694 Chantilly Drive
Atlanta, Georgia 30324
Tenant: New Millennium Multi Media, Inc. DBA Avana
6131 Oakbrook Parkway
Norcross, Georgia 30093
Broker: Cushman & Wakefield of Georgia, Inc.
1201 W. Peachtree Street
Suite 3300
Atlanta, Georgia 30309
All notices shall be effective upon delivery. Any party may change his notice
address upon written notice to the other parties.
11
<PAGE>
ENTIRE AGREEMENT
40. This Lease contains the entire agreement of the parties hereto, and no
representations, inducements, promises or agreements, oral or otherwise, between
the parties, not embodied herein, shall be of any force or effect. No
subsequent alteration, amendment change or addition to this Lease, except as to
changes or additions to the Rules and Regulations described in paragraph 7,
shall be binding upon Landlord or Tenant unless reduced to writing and signed by
Landlord and Tenant.
SPECIAL STIPULATIONS
41. Any special stipulations are set forth in the attached Exhibit ____.
Insofar as said Special Stipulations conflict with any of the foregoing
provisions, said Special Stipulations shall control.
12
<PAGE>
1. The rent for the first 3 months of this lease is abated.
2. The annual rental will increase by 3% per annum.
3. Tenant has deposited $12,500 with Landlord. Landlord will apply this
amounts towards the $12,500 security deposit that is due at lease
signing.
4. Landlord will provide space in a good clean working condition at
occupancy. This will include but not be limited to elevator,
mechanical systems, lighting, HVAC. Landlord will be responsible for
the upkeep of all roof-top HVAC systems, the roof and ground
maintenance throughout the term of this lease.
5. Tenant will have the full use of the interstate signage that was
formerly advertising Wolf Camera and Kodak. Any costs associated with
this sign is at Tenants expense.
6. Landlord will provide Tenant up to 50 free and unassigned parking
spaces throughout the term of the lease.
7. Landlord will provide Tenant an allowance of $5.00 per square foot
($62,500) to make alterations to Tenants space. Tenant will supply
Landlord with a plan outlining any changes Tenant plans to make in the
space for Landlord's prior approval. Payment of funds shall be made to
Tenant within 48 hours of submission of invoice to Landlord. Tenant
may elect to use any portion of funds toward lease payments at his
discretion.
13
<PAGE>
Tenant acknowledges that Tenant has read and understood the terms of this Lease
and has received a copy of it.
The date of this Agreement is _________________, 19____.
IN WITNESS WHEREOF, Purchaser, Seller and Broker have hereunto set their hands
and seals as of the date indicated below.
LANDLORD: The Mulberry Group
By: /s/ S. Roger Calhoun (SEAL)
-------------------------------------------
By: /s/ S. Roger Calhoun (SEAL)
--------------------------------------------
Date and time executed by Purchaser: 7-14-99
-----------
TENANT: New Millennium Multi Media Inc., DBA Avana
By: /s/ Richard S. Granville III (SEAL)
--------------------------------------------
By: /s/ Richard S. Granville III (SEAL)
--------------------------------------------
Date and time executed by Seller: 7-13-99
--------------
BROKER: Cushman & Wakefield of Georgia, Inc.
By: /s/ Charlene F. Posey, Managing Director (SEAL)
--------------------------------------------
By: /s/ Charlene F. Posey, Managing Director (SEAL)
--------------------------------------------
Date and time executed by Broker: 7-12-99
--------------
14
<PAGE>
Exhibit 21.1
SUBSIDIARY CORPORATIONS OF
GRACE DEVELOPMENT, INC.
December 31, 1999
State or Nation
Name of Incorporation
---- ----------------
New Millennium Multimedia, Inc. Georgia
Avana Communications Corporation Georgia
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Form 10-k of Grace
Development Inc. of our report dated June 24, 1999 relating to the financial
statements of New Millennium Inc., which appeared in the Form 8k/A (No.
00025582).
/s/ Smith & Radigan
Smith & Radigan, Certified Public Accountants, LLC
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
ACCOMPANYING FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000846899
<NAME> GRACE DEVELOPMENT, INC.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 102,481
<SECURITIES> 3,700,000
<RECEIVABLES> 56,458
<ALLOWANCES> 10,500
<INVENTORY> 0
<CURRENT-ASSETS> 4,040,550
<PP&E> 2,661,312
<DEPRECIATION> 263,423
<TOTAL-ASSETS> 7,598,815
<CURRENT-LIABILITIES> 5,206,819
<BONDS> 0
0
0
<COMMON> 4,270,195
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 7,598,815
<SALES> 679,415
<TOTAL-REVENUES> 679,415
<CGS> 668,269
<TOTAL-COSTS> 3,647,336
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 169,360
<INCOME-PRETAX> (3,095,092)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,095,092)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,095,092)
<EPS-BASIC> (.07)
<EPS-DILUTED> (.07)
</TABLE>
