EXHIBIT 10.1
SEVERANCE AND CONSULTING AGREEMENT
AGREEMENT dated as of May 21, 1999 between BIG CITY BAGELS, INC., a New
York corporation with offices at 00 Xxxxxxxx Xxxx, Xxxxxxxxxx, Xxx Xxxx 00000
("Company"), and XXXX XXXXXXX, ("Xxxxxxx").
WHEREAS, Company is entering into an Agreement and Plan of
Reorganization and Merger, dated as of May 21, 1999, among the Company, BCB
Acquisition Corp. I, and BCB Acquisition Corp. II, and Intelligent Computer
Solutions, Inc. ("ICS"), VillageNet, Inc. ("VillageNet") and the shareholders
set forth in Schedule 2.1 thereto ("Merger Agreement");
WHEREAS, Company and Xxxxxxx have previously entered into an Amended
and Restated Employment Agreement, dated August 21, 1998, which provides for
Xxxxxxx'x employment with Company through December 31, 1999 (the "Employment
Agreement");
WHEREAS, Company and Xxxxxxx hereby mutually desire to terminate the
Employment Agreement as provided herein simultaneously with the closing
("Closing") of the transactions contemplated by the Merger Agreement; and
WHEREAS, Company desires that Xxxxxxx continue to render certain
consulting services to Company after the date of the Closing as provided herein.
IT IS AGREED:
1. Termination of Employment.
(a) The Employment Agreement and Xxxxxxx'x employment by the
Company thereunder shall be terminated effective as of the Closing and, at such
time, the Employment Agreement shall no longer be of any further force or
effect. In consideration for Xxxxxxx relinquishing his rights and benefits under
the Employment Agreement, the Company shall provide to Xxxxxxx the benefits set
forth in this Section 1.
(b) Simultaneously with the execution of this Agreement, the
Company has entered into and delivered to Xxxxxxx an Option Agreement of even
date herewith entitling Xxxxxxx to purchase up to 50,000 shares of Common Stock
of the Company conditioned upon the occurrence of the Closing. The Company
agrees that the issuance of the shares of Common Stock issuable upon exercise of
such options shall be registered under the Securities Act of 1933, as amended,
on or prior to the date of Closing.
(c) At the Closing, the Company shall
(i) pay Xxxxxxx the sum of $65,000, net of applicable
withholding taxes;
(ii) pay Xxxxxxx all unpaid salary accrued through the
date of Closing, net of applicable withholding taxes;
(iii) reimburse Xxxxxxx for all expenses incurred
through the date of Closing and reimbursable as provided in Section
4(b) of the Employment Agreement;
(iv) assign to Xxxxxxx the lease for the automobile
presently leased by the Company for the exclusive use of Xxxxxxx;
(v) at Xxxxxxx'x option, transfer to Xxxxxxx
ownership of all key-person life insurance policies maintained by the
Company insuring the life of Xxxxxxx, provided that Xxxxxxx shall pay
to the Company any accumulated cash value of such policies and a pro
rata portion of any prepaid premiums; and
(vi) deliver to Xxxxxxx a Promissory Note in the
principal amount of $85,000 in the form of Exhibit A hereto.
(d) At the Closing, Xxxxxxx may assume the automobile lease
presently held by the Company for an automobile for the exclusive use of
Xxxxxxx. Notwithstanding such assumption, the Company shall continue to make all
lease payments required thereunder until the expiration of the four-month period
following the Closing (see Section 1(e) of this Agreement). After expiration of
the four month period after Closing, Xxxxxxx shall be solely responsible for all
further lease payments thereunder and for all insurance, maintenance and other
costs associated with the use and operation of such automobile.
(e) Other Perquisites. For a period of four months from the
date of Closing (the "Continued Perquisite Period"), (i) Xxxxxxx shall continue
to be provided with the medical and dental insurance presently being provided to
him by the Company pursuant to Section 4(d) of the Employment Agreement and (ii)
the Company shall continue to make all lease payments under the automobile lease
presently held by the Company for an automobile for the exclusive use of Xxxxxxx
and pay for all insurance associated with the use and operation of such
automobile, subject to limits and deductibles acceptable to the Company.
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2. Consulting Duties; Term and Consulting Fees.
(a) Commencing after the Closing, Xxxxxxx hereby agrees to
provide the following services ("Services") as a consultant and independent
contractor to assist Company in connection with: (i) transition activities
arising from the change in control of the Company following the Closing; (ii)
overseeing the Company's franchise and commissary operations and the sale of
same; (iii) completing the sales or closing, if any, of any remaining
Company-owned stores; and (iv) the reporting obligations of the Company under
the Securities Exchange Act of 1934. Xxxxxxx shall provide the Services for up
to sixteen consecutive (except for two weeks unpaid vacation under Section 2(c))
seven-day periods, commencing on the date of the Closing (each, a "Service
Period"); provided, however, Xxxxxxx shall not be required to devote more than
25 hours during any Service Period to the provision of such services.
(b) Xxxxxxx shall be authorized to perform, and shall perform,
only those Services approved by the Company pursuant to a plan for a given
Service Period (a "Service Period Plan"), approved by Xxx Xxxx or another
designee of the Company, or otherwise directed by such designee. Xxxxxxx shall
propose a Service Period Plan to such designee at least three (3) business days
prior to the commencement of a Service Period except the first Service Period
when the Service Period Plan will be proposed at the time of Closing. Each
Service Period Plan will be deemed accepted by the Company unless the designee
objects to or changes the Service Period Plan prior to commencement of the
Service Period.
(c) Notwithstanding the foregoing, Company shall be entitled
at any time to terminate the services of Xxxxxxx for any then remaining Service
Periods by providing written notice to Xxxxxxx of such termination at least 7
days prior to the commencement of the next Service Period. During any Service
Period when a notice of termination is so delivered, Xxxxxxx shall continue to
provide services during such period and to be compensated by Company for such
services as provided in this Section 2. Xxxxxxx shall be permitted to take two
weeks of unpaid vacation during the Service Periods. Xxxxxxx'x services as a
consultant shall be performed primarily in the Counties of Nassau and Suffolk,
New York, but Xxxxxxx shall undertake such travel (including multiple-day stays)
as is reasonably required and approved for the performance of a Service Period
Plan. In consideration for his services as a consultant, the Company shall pay
to Xxxxxxx (without withholding) $1,250 for each of the first twelve Service
Periods and $1,875 for the last four Service Periods. Each such payment shall be
paid on the last business day of each Service Period.
3. Expenses. Company shall reimburse Xxxxxxx for all reasonable
expenses specified in, and incurred by Xxxxxxx in the performance of, an
approved Service Period Plan upon Xxxxxxx'x submission to Company of appropriate
receipts and reports evidencing such expenses.
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4. Protection of Confidential Information and Non-Competition.
(a) Xxxxxxx agrees that his services hereunder are, and the
services under his Employment Agreement were of a special, unique and
extraordinary character, and that he will be, and was under his Employment
Agreement in a position of confidence and trust with franchisees, investors in
franchisees and employees of Company and its subsidiaries. Xxxxxxx further
acknowledges that in the course of rendering services to Company, Xxxxxxx has
obtained and will obtain knowledge of confidential information and trade secrets
of Company (such as, without limitation, business, marketing and advertising
plans and strategies for Company and its franchisees, budgets, information
regarding recipes, menus, proprietary products, vendors, wholesale accounts and
potential investors in Company and franchises, as well as in connection with
Company's new line of business provided by ICS and VillageNet) (collectively,
"Confidential Information"). Xxxxxxx agrees not to divulge, furnish or make
accessible any Confidential Information to any person other than is required in
the ordinary course of business by his consulting duties hereunder.
(b) Xxxxxxx agrees that for a two-year period after the date
of Closing, he shall not, directly or indirectly, employ or seek to employ any
persons employed by Company or by any franchisee, or otherwise directly or
indirectly induce or seek to induce such person to leave his or her employment
thereat. In addition, while Xxxxxxx is engaged by Company as a consultant
hereunder, Xxxxxxx shall not, directly or indirectly, establish, engage in or
become economically interested in, as an employee, consultant, agent, owner,
partner, co-venturer, principal, stockholder or otherwise (hereinafter referred
to as "Involvement"), any business specializing, in whole or in part, in
operating any food service business, store or facility which is principally
engaged in the sale of the same or similar food and/or similar proprietary
products sold by Company or franchisees of Company unless such Involvement is
limited to a business which operates not more than three retail stores, none of
which are located within fifteen miles of a retail store operated by Company or
its franchisees. Mere passive ownership of stock representing 5% or less of the
capital stock of a publicly-held company shall not be deemed a violation of the
second sentence of this paragraph.
(c) If Xxxxxxx commits or is about to commit a breach of any
of the provisions of paragraph 4(a) or 4(b) above, Company shall have the right
to have the provisions of this Agreement specifically enforced by any court
having equity jurisdiction without being required to post bond or other security
and without having to prove the inadequacy of the available remedies at law, it
being acknowledged and agreed that any such breach will cause irreparable injury
to Company.
5. Indemnification. Company agrees to indemnify Xxxxxxx and hold him
harmless for the consequences of all Services that he reasonably believes, in
good faith, are in furtherance of a Service Period Plan. The Company agrees to
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defend Xxxxxxx at Company's expense in connection with the defense of any
action, suit or proceeding against Xxxxxxx in connection with the performance of
such Services, unless caused in whole or in part by his intentional misconduct,
gross negligence, or unauthorized acts.
6. Reimbursement of Expenses. In the event of any claims, litigation or
other legal proceedings that Xxxxxxx institutes to enforce his rights under or
to recover damages for breach of the Promissory Note referenced by Section
1(c)(vi), the Stock Option Agreement dated as of August 21, 1998 between the
Company and Xxxxxxx or the Stock Option Agreement referred to in Section 1(b),
Xxxxxxx shall be reimbursed by Company for the costs incurred by Xxxxxxx in
connection with the analysis, defense and prosecution thereof, including
reasonable attorney's fees and expenses, if a non-appealable final decision of a
court of law holds in favor of Xxxxxxx.
7. Binding Effect; Successors. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective heirs,
successors, assigns and representatives.
8. Entire Understanding; Governing Law. This Agreement, the Promissory
Note and the Stock Option Agreement referred to in Section 1(b) and the Stock
Option Agreement dated as of August 21, 1998 herewith represent the entire
agreement and understanding between the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings. This
Agreement shall be governed by, and construed in accordance with, the internal
laws of New York (without regard to principles of conflicts of law).
9. Modification. This Agreement may not be amended, modified, canceled,
discharged, extended or changed except by an agreement in writing signed by the
party against whom enforcement of any such amendment, modification,
cancellation, discharge, extension or change is sought.
10. Headings. Paragraph headings contained in this Agreement are for
convenience of reference only and shall not be considered a part of this
Agreement.
11. Severability. If any provision or if any part of any provision of
this Agreement is found to be unenforceable, illegal or contrary to public
policy by a court of competent jurisdiction, the parties agree that this
Agreement shall remain in full force and effect except for such provision or
part of any such provision held to be unenforceable.
12. Notices. Any notices or other communications required or permitted
hereunder shall be in writing and shall be deemed effective when delivered in
person, by overnight courier (e.g., FedEx), or by registered or certified mail,
return receipt requested, in all cases the notice shall be deemed effective on
the date of receipt, addressed to Xxxxxxx at Xxxxxxx'x then current home address
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and, in the case of Company, addressed to Company at its offices, 00 Xxxxxxxx
Xxxx, Xxxxxxxxxx, Xxx Xxxx 00000 or such other principal executive office it
shall maintain and disclose as such on the cover page of a report filed by the
Company under the Securities Exchange Act of 1934. Either party may change the
address to which notices are to be addressed by notice in writing given to the
other in accordance with the terms hereof.
13. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, and all of which, taken
together, shall constitute one instrument.
IN WITNESS WHEREOF, Company has by its appropriate officer signed this
Agreement and Xxxxxxx has signed this Agreement as of the day and year first
above written.
/s/ Xxxx Xxxxxxx
-----------------------------------------
XXXX XXXXXXX
BIG CITY BAGELS, INC.
By: /s/ Xxxxxx Xxxx
-------------------------------------
Xxxxxx Xxxx, Chief Financial Officer
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Exhibit A
PROMISSORY NOTE
Dated: May 21, 1999
$85,000.00
FOR VALUE RECEIVED, Big City Bagels, Inc., a New York
corporation ("Maker"), hereby promises to pay to the order of Xxxx Xxxxxxx
("Payee"), at the address indicated for payment on the signature page of this
Promissory Note, in lawful money for the United States, the principal sum of
$85,000.00, without interest unless this Promissory Note shall not be paid at
maturity, in which case interest shall accrue on the unpaid principal balance
from the date of maturity until paid in full at the rate of 18% per annum.
Payment of principal hereon shall be made in 12 equal monthly installments of
$7,083.34 on the ____ day of each month commencing on ____________, 1999 [insert
4-month anniversary of Closing]. Notwithstanding the foregoing, if Maker has
elected not to continue the services of Payee as a consultant to the Maker
pursuant to the Severance and Consulting Agreement between Maker and Payee dated
as of May 21, 1999 ("Severance and Consulting Agreement") through ___________,
1999 [insert 4-month anniversary of Closing], then the installments provided in
this Promissory Note shall commence as of the last day of such consultancy.
Payment of interest, if any, accrued under this Promissory Note shall be made
when the principal amount is paid in full. All payments of principal and
interest, if any, shall be made without set-off, withholding, deduction or
counterclaim.
This Promissory Note may be prepaid at any time in whole or
from time to time in part, in each case without premium or penalty.
The entire unpaid principal amount of this Promissory Note
shall become immediately due and payable without demand on the happening of any
one or more of the following events:
(a) failure of the Maker to make any payment of any
installment of principal within 10 days after such payment is due and five days
after notice by Payee to Maker that payment of an installment was not paid
within such 10 day period; or
(b) the filing of a petition by or against the Maker under the
provisions of any state insolvency law or under the provisions of the Federal
Bankruptcy Act or any assignment by the Maker for the benefit of creditors.
Maker and all other parties liable herefor, whether principal,
endorser, or otherwise, hereby jointly and severally (i) waive presentment,
demand for payment, notice of dishonor, notice of protest and protest and all
other notices or demands in connection with the delivery, acceptance,
performance, default, endorsement or guaranty of this Promissory Note, (ii)
waive recourse to suretyship defenses generally, including extensions of time,
releases of security and other indulgences which may be granted from time to
time by holder of this Promissory Note to Maker or any party liable herefor, and
(iii) agree to pay all costs and expenses, including reasonable attorneys' fees,
in connection with the enforcement or collection of this Promissory Note.
Big City Bagels, Inc.
By:___________________________________
Chief Financial Officer
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