EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as of
July 16, 2001 by and between NEW WORLD COFFEE - MANHATTAN BAGEL, INC., a
Delaware corporation ("Corporation") and XXXXXXX XXXX ("Executive").
RECITALS
Corporation desires to employ Executive and Executive is willing to accept
such employment by Corporation, on the terms and subject to the conditions set
forth in this Agreement.
AGREEMENT
1. Duties. During the term of this Agreement, Executive agrees to be
employed by Corporation as its Chief Executive Officer, and Corporation agrees
to employ Executive in such capacity. Executive shall devote substantially all
of his business time, energy, and skill to the affairs of Corporation.
Executive's position shall include responsibility for all business matters,
other than (a) acquisitions, which duties shall be shared by Executive with the
Chairman of the Board and (b) external finance and financings, which duties
shall be the responsibility of the Chairman of the Board. Executive shall report
to the Board of Directors. In addition, Executive shall serve as a member of the
Board of Directors for so long as he holds the position of Chief Executive
Officer. Executive shall be based in Golden, Colorado and shall engage in all
business travel related to his duties as required by the Board of Directors,
including travel to Golden Colorado. The Corporation shall pay all reasonable
business expenses incurred by Executive including, without limitation, all
travel, lodging and automobile expenses in connection with duties performed by
Executive in Golden, Colorado. Executive shall relocate himself and his family
to in or near the location of the Corporation's headquarters by July 31, 2002
provided the Term (as defined below) has been extended for one year, which
extension is effective by July 1, 2002. Corporation shall provide a customary
relocation package which is reasonably acceptable to Executive, which shall
include real estate commissions of up to $50,000 and related taxes.
2. Term of Employment.
2.1 Definitions. For purposes of this Agreement the following terms shall
have the following meanings:
(a) "Change in Control" shall mean any of the following events:
(i) Any person or group (as such terms are defined in Section
13(d)(3) of the Exchange Act) has become the holder of more than 40
percent of the outstanding shares of Corporation entitled to vote for
the election of directors (calculated on a fully-diluted basis,
including, without limitation, all options, warrants and convertible
securities), other than persons ("Excluded Persons") excluded by the
Board of Directors from the provisions of Corporation's Rights
Agreement, such as the holders of Corporation's Series F Preferred
Stock and related warrants;
(ii) as a result of or in connection with any cash tender offer,
merger, or other business combination, sale of assets or contested
election, restructuring, or combination of the foregoing, the persons
who are directors of Corporation as of the date of this Agreement
shall cease to constitute a majority of the Board;
(iii) the stockholders of Corporation approve a definitive
agreement (i) to merge or consolidate Corporation with or into another
corporation in which the holders of Corporation's Common Stock and
warrants to purchase Common Stock immediately before such merger or
reorganization will not, immediately following such merger or
reorganization, hold as a group on a fully-diluted basis both the
ability to elect at least a majority of the board of directors of the
surviving corporation and at least a majority in value of the
surviving corporation's outstanding equity securities, or (ii) to sell
or otherwise dispose of all or substantially all of the assets of
Corporation;
(iv) the closing of a transaction or series of transactions in
which more than 50% of the voting power of Corporation, including for
such purpose warrants to purchase Common Stock, is transferred to
persons other than Excluded Persons; or
(v) an Offer is made
(vi) a resolution of the Board is passed authorizing the filing
or acquiescence to the filing of a petition for or against the Company
under Title 11 of the United States Code.
(vii) the stockholders of the Company approve a plan of
liquidation or dissolution of the Company.
(b) "Offer" shall mean a tender offer or exchange offer for shares of
Corporation's Common Stock where the offeror acquires more than 40 percent of
the outstanding shares of Corporation's Common Stock and warrants to purchase
Common Stock of Corporation.
(c) "Termination For Cause" shall mean termination by Corporation of
Executive's employment by Corporation by reason of Executive's willful
dishonesty towards or fraud upon the Corporation or by reason of Executive's
willful material breach of this Agreement.
(d) "Termination Other Than for Cause" shall mean termination by
Corporation of Executive's employment by Corporation (other than a Termination
For Cause) and shall include constructive termination of Executive's employment
by reason of (i) material breach of this Agreement by Corporation or (ii)
material diminution of the Executive's duties, authority or responsibilities as
Chief Executive Officer or (iii) Executive's resignation within 30 days
following a Change in Control or (iv) notice by Corporation of non-renewal under
Section 2.2.
(e) "Voluntary Termination" shall mean termination by Executive of
Executive's employment by Corporation other than (i) a constructive termination
described in subsection 2.1(d), and (ii) termination by reason of Executive's
death or disability as described in Sections 2.5 and 2.6.
(f) "Voluntary Termination With Notice" shall mean a Voluntary Termination
that has been preceded by written notice delivered by Executive to Corporation
no later than 60 days (or such shorter period as the parties may agree) prior to
such Voluntary Termination.
2.2 Term. The term of employment of Executive by Corporation shall be from
July 16, 2001 through July 31, 2003 (the "Term"), unless terminated earlier
pursuant to this Section 2. Thereafter, the Term shall automatically renew for
successive one-year periods, unless terminated earlier pursuant to this Section
2, commencing each July 31, unless Corporation or Executive, as the case may be,
gives written notice to the other of its or his desire not to renew such term,
which notice must be given no later than 90 days prior to the end of the initial
Term or any such renewal.
2.3 Termination For Cause. Termination For Cause may be effected by
Corporation at any time during the time of this Agreement and shall be effected
by written notification to Executive. Upon Termination For Cause, Executive
immediately shall be paid all accrued salary, bonus compensation to the extent
earned, vested deferred compensation (other than pension plan or profit sharing
plan benefits which will be paid in accordance with the applicable plan), any
benefits under any plans of Corporation in which Executive is a participant to
the full extent of Executive's rights under such plans, accrued vacation pay and
any appropriate business expenses incurred by Executive in connection with his
duties hereunder, all to the date of termination, but Executive shall not be
paid any other compensation or reimbursement of any kind, including without
limitation, severance compensation.
2.4 Termination Other Than For Cause. Notwithstanding anything else in this
Agreement, Corporation may effect a Termination Other Than For Cause at any time
upon giving notice to Executive of such termination. Upon any Termination Other
Than For Cause, Executive shall immediately be paid all accrued salary, bonus
compensation to the extent earned (and for the purpose of this Section 2.4, a
bonus equal to $187,500 shall be deemed earned for the first 12 months of the
Term), vested deferred compensation (other than pension plan or profit sharing
plan benefits which will be paid in accordance with the applicable plan), any
benefits under any plans of Corporation in which Executive is a participant to
the full extent of Executive's rights under such plans, accrued vacation pay and
any appropriate business expenses incurred by Executive in connection with his
duties hereunder, all to the date of termination, and the severance compensation
provided in Section 4.1, but no other compensation or reimbursement of any kind.
In addition, vesting of the Initial Option (as defined in Section 3.4 below)
will be recomputed based on 25% vesting after each six (6) months of the Term
("Accelerated Vesting").
2.5 Termination by Reason of Disability. If, during the Term of this
Agreement, Executive, in the reasonable judgment of the Board of Directors of
Corporation, has failed to perform his duties under this Agreement on account of
illness or physical or mental incapacity, and such illness or incapacity
continues for a period of more than four (4) months, Corporation shall have the
right to terminate Executive's employment hereunder by written notification to
Executive and payment to Executive of all accrued salary, bonus compensation to
the extent earned, vested deferred compensation (other than pension plan or
profit sharing plan benefits which will be paid in accordance with the
applicable plan), any benefits under any plans of Corporation in which Executive
is a participant to the full extent of Executive's rights under such plans,
accrued vacation pay and any appropriate business expenses incurred by Executive
in connection with his duties hereunder, all to the date of termination. In such
event, Corporation shall pay Executive fifty (50%) percent of his Base Salary
for the first six months after such termination (less any amounts received by
Executive under insurance policies carried by Corporation). Executive shall be
entitled to continued participation in all of Corporation's benefit plans (to
the extent permitted by law or under the terms of such plans) during such six
month period. In addition, Executive's stock options will be entitled to
Accelerated Vesting.
2.6 Death. In the event of Executive's death during the Term of this
Agreement, Executive's employment shall be deemed to have terminated as of the
last day of the month during which his death occurs and Corporation shall pay to
his estate all accrued salary, bonus compensation to the extent earned (but not
less than the pro rata minimum amount), vested deferred compensation (other than
pension plan or profit sharing plan benefits which will be paid in accordance
with the applicable plan), any benefits under any plans of Corporation in which
Executive is a participant to the full extent of Executive's rights under such
plans, accrued vacation pay and any appropriate business expenses incurred by
Executive in connection with his duties hereunder, all to the date of
termination. In addition, Executive's stock options will be entitled to
Accelerated Vesting.
2.7 Voluntary Termination. In the event of a Voluntary Termination,
Corporation shall immediately pay all accrued salary, bonus compensation to the
extent earned, vested deferred compensation (other than pension plan or profit
sharing plan benefits which will be paid in accordance with the applicable
plan), any benefits under any plans of Corporation in which Executive is a
participant to the full extent of Executive's rights under such plans, accrued
vacation pay and any appropriate business expenses incurred by Executive in
connection with his duties hereunder, all to the date of termination, but no
other compensation or reimbursement of any kind, including without limitation,
no severance pay.
2.8 Voluntary Termination With Notice. In the event of a Voluntary
Termination With Notice, Corporation shall pay to Executive all amounts to which
Executive is entitled under Section 2.7, and shall continue to pay Executive his
Base Salary until the earlier of (i) 60 days following such Voluntary
Termination With Notice or (ii) the end of the Term.
2.9 Resignation. Upon a termination of Executive's employment hereunder for
any reason, Executive, with no further action on his part, shall be deemed to
have resigned from all of his offices with Corporation, his seat on the Board of
Directors, and any such positions with any subsidiaries of Corporation, and he
shall return all property of Corporation in his possession.
3. Salary, Benefits and Bonus Compensation.
3.1 Base Salary. As payment for the services to be rendered by Executive as
provided in Section 1 and subject to the terms and conditions of Section 2,
Corporation agrees to pay to Executive a Base Salary payable in equal bi-weekly
installments at the rate of Four Hundred Twenty Five Thousand ($425,000) Dollars
per annum. The Base Salary shall be subject to annual review by the Compensation
Committee of the Board of Directors but shall in no event shall be less than a
rate of $425,000 per annum.
3.2 Bonuses. Executive shall receive a bonus (a "Bonus") of up to Eighty
Eight and one quarter (88.25%) percent of the Base Salary for each calendar year
(or portion thereof) during the Term of this Agreement, pro-rated for the
fraction of such calendar year which includes a portion of the Term. The amount
of the Bonus shall be determined by the Board of Directors after review by the
Compensation Committee based on the achievement of pre-determined goals for
Corporation during such period. Notwithstanding the foregoing, Executive shall
receive a guaranteed bonus of $187,500 for the period July 16, 2001 to July 31,
2002, payable $46,875 on October 31, 2001, January 31, 2002, April 30, 2002 and
July 31, 2002, which shall be deemed a prepayment of the Bonus described in the
preceding portion of this Section 3.2.
3.3 Benefits. During the term of this Agreement, Executive shall be
eligible to participate in such of Corporation's benefit and deferred
compensation plans as are now generally available or later made generally
available to executives of Corporation, including, without limitation, profit
sharing, medical, dental, health, annual physical examination, life, disability
insurance, financial planning plans, supplemental retirement programs and
vacation (but excluding stock options, except as set forth in Section 3.4). In
addition, Executive shall be entitled to receive an automobile allowance of
$18,000 per year payable in equal monthly installments (but no mileage
reimbursement), for a leased automobile which is maintained in or near Golden,
Colorado during the time period in which Executive performed his duties in
Golden, Colorado, and reimbursement for business and travel expenses upon
reasonable accounting therefor. Without limiting the foregoing, Executive shall
be entitled to four (4) weeks paid vacation per year (Executive may elect to
receive payment for up to two (2) weeks per year not taken). In addition,
Executive shall be entitled to term life insurance equal to two (2) times his
Base Salary, a payment of $15,000 on signing to reimburse him for his expenses
and the Corporation shall maintain the existing directors and officers liability
insurance policy during the Term. Corporation will pay for (a) an apartment for
Executive in Golden, Colorado, and (b) reasonable travel expenses to Golden,
Colorado, until July 31, 2002 or the date of the relocation of his family,
whichever is earlier.
3.4 Options. An option shall be granted to Executive as of the first day of
the Term under Corporation's option plan, to be set forth in a separate Option
Agreement, exercisable at the closing price of the common stock on July 13, 2001
($1.15 per share, the "Exercise Price"), for a number of shares of common stock
equal to three (3%) percent (the "Initial Option") of the then outstanding
common stock (including the common stock issuable under outstanding options and
warrants with an exercise price of $3.00 per share or less; "Fully Diluted
Common Stock"), which option will vest as to 50% of the amount thereof at the
end of each 12 month period during the Term, except as otherwise set forth
herein, and an option for one (1%) percent of the Fully Diluted Common Stock at
the Exercise Price which shall vest at the end of the first one year extension
of the Term (provided the Term is thus extended under Section 2.2 hereof).
Executive shall have piggyback registration rights as to the common stock he may
purchase under such options, to be confirmed by a registration rights agreement
having customary terms, which will be entered into by Corporation and Executive.
Executive's options shall be subject to review by the Compensation Committee of
the Board of Directors.
4. Severance Compensation and Death Benefits
4.1 Severance Compensation. In the event Executive's employment is
terminated in a Termination Other Than For Cause, (i) Executive shall be paid as
severance compensation an amount equal to one (1) times his annual Base Salary
(at the rate payable at the time of such termination) on a bi-weekly basis and
(ii) the Company shall continue to provide for a period of twelve months from
the date of termination the benefits then being provided to the Executive at the
time of such termination. The amount of any payment or benefit provided for in
this Section 4.1 shall not be reduced by any compensation earned by the
Executive as the result of employment or engagement by another person, by
retirement benefits, by offset against any amount claimed to be owed by the
Executive to the Company or otherwise.
4.2 No Severance Compensation Upon Other Termination. In the event of a
Voluntary Termination or Termination For Cause, neither Executive nor his estate
shall be paid any severance compensation.
5. Covenant Not to Compete or Solicit
5.1 Non-Competition. From the date hereof and until the first (1st)
anniversary of a Termination for Cause or a Voluntary Termination (including a
Voluntary Termination With Notice), Executive shall not directly or indirectly,
without the prior written consent of the Corporation, engage anywhere in the
United States in (whether as an employee, consultant, proprietor, partner,
director or otherwise), or have any ownership interest in (except for ownership
of ten percent (10%) or less of any outstanding entity whose securities are
listed on a national securities exchange), or participate in the financing,
operation, management or control of, any firm, corporation or business (other
than Corporation) that engages in the marketing or sale of bagels and/or fast
casual sandwiches as one of its principal businesses. The provision of this
Section 5.1 shall not apply to a termination under Sections 2.4, 2.5 or 2.6
hereof.
5.2 Separate Covenants. The covenants contained in Section 5.1 above shall
be construed as a series of separate covenants, one for each county, city and
state of the United States. Except for geographic coverage, each such separate
covenant shall be identical in terms to the covenant contained in Section 5.1.
If, in any judicial proceeding, a court refuses to enforce any of such separate
covenants (or any part thereof), then such unenforceable covenant (or such part)
shall be eliminated from this Agreement to the extent necessary to permit the
remaining separate covenants (or portions thereof) to be enforced. In the event
that the provisions of this Section 5 are deemed to exceed the time, geographic
or scope limitations permitted by applicable law, then such provisions shall be
reformed to the maximum time, geographic or scope limitations, as the case may
be, permitted by applicable laws.
5.3 Non-Disclosure and Non-Solicitation. Executive agrees that all
confidential and proprietary information relating to the business or operations
of Corporation shall be kept and treated as confidential both during and after
the Term of this Agreement, except as may be permitted in writing by
Corporation's Board of Directors or as such information is within the public
domain or comes within the public domain without any breach of this Agreement or
if the disclosure of which is required by court order or applicable law
(provided Executive gives Corporation reasonable notice thereof and a right to
oppose the same at Corporation's expense). In addition, from the date hereof and
for two years after the termination of Executive's employment for any reason,
Executive shall not directly or indirectly, without the prior written consent of
Corporation, solicit the services, or cause to be employed, any person who was
an employee of Corporation at the date of such termination, or within six (6)
months prior to such time.
5.4 Corporation. For the purpose of this Section 5, the term "Corporation"
includes each corporation or other entity of which Corporation owns, directly or
through another entity, at least 50% of the equity, or which is controlled by
Corporation.
6. Miscellaneous.
6.1 Waiver. The waiver of the breach of any provision of this Agreement
shall not operate or be construed as a waiver of any subsequent breach of the
same or other provision hereof.
6.3 Entire Agreement; Modifications. Except as otherwise provided herein,
this Agreement represents the entire understanding among the parties with
respect to the subject matter hereof, and this Agreement supersedes any and all
prior understandings, agreements, plans and negotiations, whether written or
oral, with respect to the subject matter hereof, including without limitation,
any understandings, agreements or obligations respecting any past or future
compensation, bonuses, reimbursements, or other payments to Executive from
Corporation. All modifications to the Agreement must be in writing and signed by
the party against whom enforcement of such modification is sought.
6.4 Notices. All notices and other communications under this Agreement
shall be in writing and shall be given by first-class mail, certified or
registered with return receipt requested, or by recognized overnight courier to
the respective persons named below:
If to Corporation:
New World Coffee - Manhattan Bagel, Inc.
000 Xxxxxxxxxx Xxx Xxxx
Xxxxxxxxx, XX 00000
Attention: Chairman of the Board
With copies to:
New World Coffee - Manhattan Bagel, Inc.
000 Xxxxxxxxxx Xxx Xxxx
Xxxxxxxxx, XX 00000
Attention: General Counsel
Ruskin, Moscou, Xxxxx & Faltischek, P.C.
000 Xxx Xxxxxxx Xxxx
Xxxxxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx
If to Executive:
Xxxxxxx Xxxx
000 Xxxxxxx Xxxxx
Xxxxxx Xxxx, XX 00000
With a copy to:
Xxxxxx & Xxxxx, P.C.
Thirty-Second Floor
One Liberty Place
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxxxxx X. XxXxxxx
Any party may change such party's address for notices by notice duly given
pursuant to this Section 6.4.
6.5 Headings. The Section headings herein are intended for reference and
shall not by themselves determine the construction or interpretation of this
Agreement.
6.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts
entered into and wholly to be performed within the State of New York by New York
residents. All claims, disputes and other matters in question between
Corporation and Executive arising out of, or relating to this Agreement or the
breach thereof, shall be subject to binding arbitration in Denver, Colorado
under the rules of the American Arbitration Association then obtaining.
Notwithstanding the foregoing, Corporation may seek an order of a court of
competent jurisdiction to obtain an injunction for a breach or threatened breach
of Section 5 hereof by Executive.
6.7 Severability. Should a court or other body of competent jurisdiction
determine that any provision of this Agreement is excessive in scope or
otherwise invalid or unenforceable, such provision shall be adjusted rather than
voided, if possible, so that it is enforceable to the maximum extent possible,
and all other provisions of this Agreement shall be deemed valid and enforceable
to the extent possible.
6.8 Survival of Corporation's Obligations. Corporation's obligations
hereunder shall not be terminated by reason of any liquidation, dissolution,
bankruptcy, cessation of business, or similar event relating to Corporation.
This Agreement shall not be terminated by any merger or consolidation or other
reorganization of Corporation. In the event any such merger, consolidation, or
reorganization shall be accomplished by transfer of stock or by transfer of
assets or otherwise, the provisions of this Agreement shall be binding upon the
surviving or resulting corporation or person. This Agreement shall be binding
upon and inure to the benefit of the executors, administrators, heirs,
successors and assigns of the parties; provided, however, that except as herein
expressly provided, this Agreement shall not be assignable either by Corporation
(except to an affiliate of Corporation or upon the sale of all or substantially
all of its assets) or by Executive.
6.9 Counterparts. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one and the same
Agreement.
6.10 Withholdings. All compensation and benefits to Executive hereunder
shall be reduced by all federal, state, local and other withholdings and similar
taxes and payments required by applicable law.
6.11 Indemnification. In addition to any rights to indemnification to which
Executive is entitled to under the corporation's Certificate of Incorporation
and Bylaws, Corporation shall indemnify Executive at all times during and after
the term of this Agreement to the maximum extent permitted under Section 145 of
the Delaware General Corporation Law or any successor provision thereof and any
other applicable state law, and shall pay Executive's expenses in defending any
civil or criminal action, suit or proceeding, to the maximum extent permitted
under such applicable state law. This provision shall survive the termination of
this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
NEW WORLD COFFEE- MANHATTAN BAGEL, INC.
By: /s/ Xxxxx Xxxxxx
----------------
Xxxxx Xxxxxx
Chairman of the Board of Directors
EXECUTIVE
/s/ Xxxxxxx Xxxx
----------------
Xxxxxxx Xxxx, Individually
