EXHIBIT 10.12
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
AGREEMENT dated as of August 21, 1998 between BIG CITY BAGELS, INC., a New
York corporation with offices at 00 Xxxxxxxx Xxxx, Xxxxxxxxxx, Xxx Xxxx 00000
("Employer"), and XXXX XXXXXXX, 000 Xxxxxxx Xxxxx, Xxxxxxxx, Xxx Xxxx 00000
("Executive").
WHEREAS, Employer and Executive entered into a three-year employment
agreement on January 1, 1996, which will terminate on December 31, 1998 (the
"1996 Agreement"); and
WHEREAS, Employer believes that Executive provides unique management
services for Employer and wishes to retain the continued services of Executive
as its Chairman of the Board and Chief Executive Officer; and
WHEREAS, Employer and Executive have reached an understanding with respect
to the extension of Executive's employment with the Company for an additional
one-year period from the present December 31, 1998 date of termination of the
1996 Agreement; and
WHEREAS, Employer and Executive desire to evidence their agreement in
writing and to provide for the continued employment of Executive by Employer on
the terms set forth herein.
IT IS AGREED:
1. The 1996 Agreement is hereby amended and restated as set forth herein
effective as of August 1, 1998 ("Effective Date").
2. Employment and Duties. Employer hereby agrees to the continued
employment of Executive in an executive capacity as Chairman of the Board and
Chief Executive Officer of Employer and its subsidiaries, with such duties and
authority as appertain to such office and such additional duties and authority
as may be reasonably be assigned to Executive by the Board of Directors of
Employer from time to time, provided that the nature of such duties and
authority shall be consistent with the duties, authority and executive position
of Executive hereunder. Executive hereby accepts such employment and shall use
Executive's best efforts to promote the interests of Employer and devote
Executive's full business time to the performance of Executive's duties
hereunder during the Term set forth in paragraph 3 of this Agreement.
3. Term of Employment. The term of this Agreement ("Term") commenced as of
the Effective Date and shall continue until December 31, 1999 unless terminated
earlier as provided in paragraph 6 of this Agreement.
4. Compensation and Benefits.
(a) Salary. As compensation for Executive's services hereunder
and subject to the power of the Board of Directors to increase Executive's
compensation and award Executive bonuses in its absolute discretion, during the
Term, Employer shall pay Executive a salary at the rate of $200,000 per annum.
All salary to Executive shall be paid in appropriate installments to conform
with the regular payroll dates for salaried personnel of Employer, but not less
than monthly.
(b) Expenses. Employer shall reimburse Executive for all
reasonable expenses incurred by Executive in the performance of Executive's
duties hereunder and necessary business expenses incurred by Executive including
Executive's use of a cellular phone, upon Executive's submission to Employer of
appropriate receipts and reports evidencing such expenses in accordance with
Employer's normal practice and policy.
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(c) Vacation. Executive shall be entitled to three weeks of
paid vacation during the period commencing on the Effective Date and ending
December 31, 1998, and six weeks of paid vacation during the following calendar
year.
(d) Insurance. Executive shall be entitled to such medical,
dental, pension and other benefits and perquisites no less favorable than such
as are afforded to any other senior executive of Employer, subject to applicable
waiting periods and other conditions. Employer also shall reimburse Executive,
or pay directly upon presentation of bills for same by Executive (i) long-term
disability insurance and (ii) life insurance insuring the life of Executive in
the amount of $1,000,000; provided, however, that the premiums paid by Employer
for the insurance policies set forth in (i) and (ii), above, shall not exceed
$7,000 per annum (prorated for the partial year August 1, 1998 through December
31, 1998). These policies shall be owned by Executive and the beneficiary(ies)
of these insurance policies shall be designated by Executive.
(e) Car Allowance. Employer also shall provide Executive with
a suitable automobile for the exclusive use of Executive and shall pay the
insurance, maintenance and other costs associated with the use and operation of
such automobile.
(f) Stock Options. On August 13, 1998, the Board of Directors
granted to Executive options ("Options") to purchase 100,000 shares of Common
Stock under Employer's 1998 Performance Equity Plan at a price equal to the last
sale price of the Common Stock on the trading date immediately preceding the
date of grant. These Options shall be evidenced by a Stock Option Agreement of
even date herewith between Employer and Executive.
5. Place of Employment. The duties of Executive provided for herein shall
require performance primarily at the principal executive office of Employer in
Hicksville, New York, or such other location in the counties of Nassau and
Suffolk to which the principal executive offices of Employer may be relocated
from time to time, although Executive shall undertake such occasional travel,
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within or without the United States, as is or may be reasonably necessary in the
interests of Employer.
6. Protection of Confidential Information and Non-Competition.
(a) Executive agrees that Executive's services hereunder are
of a special, unique and extraordinary character, and that Executive's position
with Employer places him in a position of confidence and trust with franchisees,
investors in franchisees and employees of Employer. Executive acknowledges that
the business of Employer is carried on throughout several states of the United
States and that it is the intention of Employer to continue to expand the
geographic area in which Employer engages in its business and marketing efforts.
Executive further acknowledges that in the course of rendering services to
Employer, Executive has obtained and will obtain knowledge of confidential
information and trade secrets of Employer (such as, without limitation,
business, marketing and advertising plans and strategies for Employer and its
franchisees, budgets, information regarding recipes, menus, proprietary
products, vendors, wholesale accounts and potential investors in Employer and
franchises).
(b) Executive agrees that during the Term and at any other
time thereafter, Executive shall not divulge to anyone (other than Employer or
any persons designated by Employer) any knowledge or information of any type
whatsoever of a confidential nature relating to the business of Employer,
including, without limitation, all types of financial and tax information, trade
secrets, business strategies or marketing, advertising and promotional plans,
information regarding recipes, menus and potential investors. Executive further
agrees that during the Term and at any other time thereafter, Executive shall
not make use of, nor permit to be used, any notes, memoranda, specifications,
programs, data, information or other materials of any nature whether oral or
written relating to any matter within the scope of the business of Employer or
concerning any of its dealings or affairs otherwise than for the benefit of
Employer, it being agreed that any of the foregoing shall be and remain the sole
and exclusive property of Employer.
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(c) Executive agrees that while Executive is employed by
Employer and for a two-year period after the termination of Executive's
employment with Employer for any reason other than a breach of Employer's
obligations hereunder, Executive shall not, directly or indirectly, (i) employ
or seek to employ any persons employed by Employer or by any franchisee, or
otherwise directly or indirectly induce or seek to induce such person to leave
his or her employment thereat, or (ii) 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
Employer or franchisees of Employer 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 Employer 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 this
paragraph.
(d) If Executive commits or is about to commit a breach of any
of the provisions of paragraphs 6(b) or (c) above, Employer 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 Employer.
7. Termination.
(a) The duties, obligations, limitations and restrictions
imposed upon Executive or assumed by him hereunder are subject to the
performance by Employer of all its material obligations hereunder.
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(b) Employer agrees that Executive shall not be in default
with respect to the performance of Executive's obligations hereunder and
Employer may not terminate this Agreement as a result of such default unless:
(i) there has been a material breach thereof (defined as "cause" for purposes of
the Stock Option Agreement referred to in paragraph 4(f)), (ii) Employer shall
have given written notice thereof to Executive specifying such material breach
with reasonable particularity, and (iii) within thirty days after Executive
shall have received such notice, Executive shall not have cured such material
breach or, within such time, shall not have taken reasonable steps to cure such
breach and shall not have diligently proceeded thereafter to eliminate it.
The following matters, and only the following matters, shall be deemed a
material breach for purposes of this paragraph 7(b):
(i) The conviction of Executive, by a court of
competent jurisdiction and after all appeal procedures have been
exhausted or have expired, or entry of a guilty or nolo contendere plea
of a crime which constitutes a felony in the jurisdiction involved;
(ii) Executive's willful failure or refusal to
perform Executive's duties and responsibilities hereunder in accordance
with the reasonable directions of the Board of Directors of Employer;
(iii) Executive's commission of an act of
embezzlement, fraud or dishonesty which results in a loss, damage or
injury to Employer or which adversely affects the business of Employer;
or
(iv) Executive's willful failure to comply with
Executive's obligations under paragraphs 6(a) or (b) of this Agreement.
(c) In the event that the Board of Directors of Employer, in
good faith, determines that Executive is totally incapacitated from performing
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his duties, by reason of illness, accident or any physical or mental incapacity,
and such total incapacity continues for a period of one hundred eighty (180)
consecutive days, Employer may terminate Executive's employment upon giving
Executive thirty days notice thereof. Employer shall continue to pay Executive
or his guardian or conservator, as the case may be, the full amount of the
annual salary that Executive was then receiving pursuant to paragraph 4 hereof
through the end of the sixth complete calendar month following the month in
which employment is terminated pursuant to this paragraph 7(c), and shall
continue to cover Executive, his spouse and dependents during such period under
all medical and other benefit plans (including the insurance specified in
paragraph 4(d)) which were in effect at the time of Executive's death. The
aggregate of any and all salary payable pursuant to this paragraph shall be
reduced by an amount equal to the aggregate of payments received by Executive by
reason of any (i) compulsory disability law; (ii) worker's compensation law;
(iii) any disability income insurance policy, the premiums for which have been
paid by Employer; or (iv) any disability plan maintained by Employer for its
employees, the premiums for which have been paid (in whole or in part) by
Employer.
(d) In the event of the death of Executive, Executive's
employment shall terminate and thereupon Employer shall be obligated to pay to
Executive's surviving spouse Executive's annual salary through the end of the
sixth complete calendar month following the month in which said death occurred
and shall continue to cover Executive's surviving spouse and dependents during
such period under all medical and other benefit plans which were in effect at
the time of Executive's death. Such payment shall be made monthly to Executive's
surviving spouse at any address designated by such surviving spouse. If
Executive has no surviving spouse, then such installments shall be paid to any
other person theretofore designated by Executive in writing to Employer or,
failing such designation, to Executive's estate.
(e) If (i) Employer shall (A) terminate Executive's employment
hereunder in any manner or for any reason other than as provided in paragraphs
7(b), (c) or (d) or (B) fail to renew Executive's employment for at least one
successive year upon scheduled expiration of this Agreement upon the same terms
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and conditions with the exception of clause (i)(B) of this sentence, or (ii)
Executive shall elect to terminate his employment with Employer for "Good
Reason" (defined below), then Executive shall be paid upon such termination or
scheduled expiration, as the case may be, a lump sum cash payment of $200,000
("Cash Payment"). In addition, if Employer has terminated Executive's employment
hereunder in any manner or for any reason other than as provided in paragraphs
7(b), (c) or (d), Employer shall maintain, at its cost, through the end of the
Term, medical and dental benefits comparable to that which Executive was
receiving prior to termination and all additional insurance provided to
Executive in paragraph 4(d) plus the car allowance provided to Executive in
paragraph 4(e) ("Non-Cash Payment" and, together with Cash Payment, the
"Termination Payment"). Executive shall be under no duty to mitigate damages. As
used herein, "Good Reason" shall mean: (i) Executive's authority, duties, job
title or position of responsibility, or the nature of Executive's duties or the
scope of his responsibilities, is materially diminished, and that diminution is
not corrected by the Company within 15 days after written notice from Executive
describing the diminution alleged to constitute Good Reason; (ii) the nature and
conditions of Executive's employment are materially changed so as not to be
those normally associated with an officer holding the title of Chairman and
Chief Executive Officer of a company, and that change is not corrected by
Employer within 15 days after written notice from Executive describing the
change alleged to constitute Good Reason; (iii) the material breach by Employer
of any other provision of this Agreement, including but not limited to, the
taking of any action by Employer which would deprive Executive of any benefit
set forth in paragraph 4, if Employer fails to remedy that breach within 15 days
after written notice from the Employee describing the acts alleged to constitute
that breach; (iv) failure of Executive to be nominated for election to the Board
at any time when his term of office as a director expires during the Term of the
Agreement; or (v) relocation of Executive's place of employment to a location
outside of the County of Nassau or Suffolk. Notwithstanding the foregoing, it
shall not be considered Good Reason if Executive himself causes any of the
situations described in clauses (i) through (v) to occur.
(f) In the event that Executive becomes entitled to the
Termination Payment, if any portion of the Termination Payment will be subject
to the tax ("Excise Tax") imposed by Section 4999 of the Internal Revenue Code
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of 1986, as amended ("Code"), Employer shall pay Executive at the time specified
in paragraph 7(e), an additional amount ("Gross-Up Payment") such that the net
amount retained by Executive, after deduction of any Excise Tax on the
Termination Payment and any federal, state and local income tax and Excise Tax
upon the payment provided for by this paragraph, shall be equal to the
Termination Payment. For purposes of determining whether the Termination Payment
will be subject to the Excise Tax and the amount of such Excise Tax, (i) any
other payments or benefits received or to be received by Executive in connection
with Executive's termination of employment (whether pursuant to the terms of
this Agreement, the Stock Option Agreement or any other plan, arrangement or
agreement with Employer, any person whose actions result in a change in control
or any person affiliated with Employer or such person) shall be treated as
"parachute payments" within the meaning of Section 280G(b)(2) of the Code, and
all "excess parachute payments" within the meaning of Section 280G(b)(1) shall
be treated as subject to the Excise Tax, unless in the opinion of tax counsel
selected by Employer's independent auditors and acceptable to Executive such
other payments or benefits (in whole or in part) do not constitute parachute
payments, or such excess parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered within the meaning of
Section 280G(b)(4) of the Code, (ii) the amount of the Termination Payment which
shall be treated as subject to the Excise Tax shall be equal to the lesser of
(A) the total amount of the Termination Payment or (B) the amount of excess
parachute payments within the meaning of Sections 280G(b)(1) and (4) (after
applying clause (i), above, and after deducting any excess parachute payments in
respect of which payments have been made under paragraph 7(e)), and (iii) the
value of any non-cash benefits or any deferred payment or benefit shall be
determined by Employer's independent auditors in accordance with the principles
of Sections 280G(d)(3) and (4) of the Code. For purposes of determining the
amount of the Gross-Up Payment, Executive shall be deemed to pay federal income
taxes at the highest marginal rate of federal income taxation in the calendar
year in which the Gross-Up Payment is to be made and state and local income
taxes at the highest marginal rates of taxation in the state and locality of
Executive's residence on the date of termination, net of the maximum reduction
in federal income taxes which could be obtained from deduction of such state and
local taxes. In the event that the Excise Tax is subsequently determined to be
less than the amount taken into account hereunder at the time of termination of
Executive's employment, Executive shall repay to Employer at the time that the
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amount of such reduction in Excise Tax is finally determined the portion of the
Gross-Up Payment attributable to such reduction plus interest on the amount of
such repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the
event that the Excise Tax is determined to exceed the amount taken into account
hereunder at the time of the termination of Executive's employment (including by
reason of any payment, the existence or amount of which cannot be determined at
the time of the Gross-Up Payment), Employer shall make an additional gross-up
payment in respect of such excess (plus any interest payable with respect to
such excess) at the time that the amount of such excess is finally determined.
(g) Upon termination of his employment, Executive shall
promptly return all of Employer's property to Employer.
(h) Notwithstanding any termination of his employment,
Executive's obligations to Employer pursuant to paragraph 6 of this Agreement
shall survive such termination.
8. Life Insurance. Executive agrees that Employer shall have the right to
continue to maintain key-person life insurance on Executive's life, at
Employer's sole expense and with Employer as the sole beneficiary thereof.
Executive shall cooperate fully with Employer in obtaining such life insurance,
sign any necessary consents, applications and other related forms or documents
and take any required medical examinations. Employer agrees that upon
termination of Executive's employment for any reason whatsoever, Employer shall
transfer ownership of any such insurance policies to Executive upon Executive's
payment to Employer of the accumulated cash value of such policies, if any, and
a pro rata portion of any prepaid premiums.
9. Indemnification. Employer agrees to indemnify Executive and hold him
harmless for the consequences of all acts and decisions made by him in good
faith while performing services for Employer. Employer shall use Employer's best
efforts to obtain coverage for Executive under any insurance policy now in force
or hereafter obtained during the Term of this Agreement, covering the officers
and directors of Employer against lawsuits. Employer agrees to pay all expenses,
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including attorneys' fees and disbursements, actually and necessarily incurred
by Executive in connection with the defense of any such action, suit or
proceeding, and in connection with any related appeals, and also shall pay the
cost of any resulting judgments or settlements.
10. Reimbursement of Expenses. In the event of any claims, litigation or
other legal proceedings that Executive institutes to enforce his rights under,
or to recover damages for breach of this Agreement, or Executive is involved in
any litigation or other legal proceeding to defend the validity of this
Agreement, Executive shall be reimbursed by Employer within thirty (30) days
after delivery to Employer of statements for the costs incurred by Executive in
connection with the analysis, defense and prosecution thereof, including
reasonable attorneys' fees and expenses; provided, however, that Executive shall
reimburse Employer for all such costs if it is determined by a non-appealable
final decision of a court of law that Executive shall have acted in bad faith
with the intent to cause material damage to Employer in connection with any such
claim, litigation or proceeding.
11. Assignment. This Agreement is a personal contract and Executive may not
sell, transfer or assign his rights, interests and obligations hereunder. Any
assignment contrary to this paragraph shall be null and void of no force and
effect. The rights and obligations of Employer hereunder shall be binding upon
and run in favor of the successors and assigns of Employer. In the event of any
attempted assignment or transfer of rights hereunder contrary to the provisions
hereof, Employer shall have no further liability for payments hereunder.
12. Entire Understanding; Governing Law. This Agreement and the Stock
Option Agreement executed simultaneously herewith represent the entire agreement
and understanding between the parties with respect to the subject matter hereof
and supersedes 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).
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13. 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.
14. Headings. Paragraph headings contained in this Agreement are for
convenience of reference only and shall not be considered a part of this
Agreement.
15. 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.
16. 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 Executive at Executive's then current home
address and, in the case of Employer, addressed to Employer at its offices, 00
Xxxxxxxx Xxxx, Xxxxxxxxxx, Xxx Xxxx 00000. 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.
17. 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.
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IN WITNESS WHEREOF, Employer has by its appropriate officer signed this
Agreement and Executive has signed this Agreement as of the day and year first
above written.
/s/ Xxxx Xxxxxxx
__________________________________
XXXX XXXXXXX
BIG CITY BAGELS, INC.
/s/ Xxxxxx X. Xxxx
By:_____________________________________
Xxxxxx X. Xxxx
Chief Financial Officer and
Assistant Secretary
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