BIG CITY BAGELS INC, SC 14F1, 1999-06-18

BIG CITY BAGELS INC
SC 14F1, 1999-06-18
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BIG CITY BAGELS, INC.
99 WOODBURY ROAD
HICKSVILLE, NEW YORK 11801

----------------------------

INFORMATION STATEMENT PURSUANT TO SECTION 14(F) OF
THE SECURITIES EXCHANGE ACT OF 1934 AND SEC RULE 14F-1

NOTICE OF CHANGE IN THE MAJORITY
OF THE BOARD OF DIRECTORS

JUNE 18, 1999

----------------------------

This Information Statement is being furnished to all holders of record
at the close of business on June 10, 1999 of the common stock, par value $.001
per share ("Common Stock"), of Big City Bagels, Inc., New York corporation
("Company") in accordance with the requirements of Section 14(f) of the
Securities Exchange Act of 1934 ("Exchange Act") and SEC Rule 14f-1.

No vote or other action by the Company's shareholders is required in
response to this Information Statement. Proxies are not being solicited.

INTRODUCTION

The Company anticipates that on or about June 30, 1999, the
transactions contemplated by the Merger Agreement discussed below under "Merger
Agreement" will be completed and the Board of Directors of the Company ("Board")
will be reconstituted and fixed at four directors. Effective as of the closing
of the transactions, it is anticipated that Mark Weinreb, Stanley Weinreb,
Stanley Raphael and Alan Pearlstein will resign as directors of the Company, and
that Eli Levi, Hector M. Gavilla and Peter J. Keenan will be appointed as new
directors to fill the vacancies created by the resignations. Nelson Braff, a
current director of the Company, will remain a director after the closing. This
closing will not occur, and the new directors will not begin their term, until
after the expiration of the ten-day period beginning on the later of the date of
the filing of this Information Statement with the Securities and Exchange
Commission ("SEC") pursuant to Rule 14f-1 or the date of mailing of this
Information Statement to the Company's shareholders.

Because of the change in the composition of the Board and the merger of
subsidiaries of the Company into Intelligent Computer Solutions, Inc. ("ICS")
and VillageNet, Inc. ("VillageNet") pursuant to the Merger Agreement described
below, there will be a change in control of the Company on the date the new
directors referred to above take office.

As of June 10, 1999, the Company had issued and outstanding 7,899,225
shares of Common Stock, the Company's only class of voting securities that would
be entitled to vote for directors at a shareholders meeting if one were to be
held, each share being entitled to one vote.

Please read this Information Statement carefully. It describes the
terms of the Merger Agreement and contains certain biographical and other
information concerning the executive officers and directors after the merger.
Additional information about the Merger Agreement and the business of the
Company is contained in the Company's Current Report on Form 8-K ("Form 8-K")
dated May 21, 1999, which was filed with the SEC on June 1, 1999. The Form 8-K

<PAGE>

and the accompanying exhibits may be inspected without charge at the public
reference section of the SEC at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, DC 20549. Copies of this material also may be obtained from the SEC
at prescribed rates. The SEC also maintains a website that contains reports,
proxy and information statements and other information regarding public
companies that file reports with the SEC. Copies of the Form 8-K may be obtained
from the SEC's website at http://www.sec.gov.

MERGER AGREEMENT

On May 21, 1999, the Company, BCB Acquisition Corp. I ("BCB I") and BCB
Acquisition Corp. II ("BCB II" and, together with BCB I, the "Merger
Subsidiaries"), ICS, VillageNet and each of the shareholders of ICS and
VillageNet entered into an agreement ("Merger Agreement") pursuant to which each
of the Merger Subsidiaries will merge with and into each of ICS and VillageNet,
with ICS and VillageNet continuing as the surviving corporations of the merger.

Upon the effectiveness of the merger, all of the outstanding shares of
common stock and preferred stock of ICS will be converted into 4,309,733 shares
of the Company's Common Stock and 250,000 shares of the Company's Class B
Preferred Stock, $.001 par value ("Preferred Stock"), and all of the outstanding
shares of common stock of VillageNet will be converted into 4,309,733 shares of
the Company's Common Stock and 250,000 shares of Preferred Stock.

The Preferred Stock will be convertible into an aggregate of 69,000,000
shares of Common Stock at the rate of 138 shares of Common Stock for each share
of Preferred Stock. Once issued, the Preferred Stock may be converted at any
time, in whole or part, at the election of the holder, provided that the Company
is then authorized to issue a sufficient number of shares of Common Stock. The
Certificate of Incorporation of the Company currently authorizes the Company to
issue 25,000,000 shares of Common Stock. As of June 10, 1999, the Company had
outstanding 7,899,225 shares of Common Stock (excluding 65,279 shares of
treasury stock) and had reserved for issuance upon exercise of outstanding
options and warrants pursuant to the Company's outstanding stock plans 1,537,262
shares of Common Stock. Accordingly, at June 10, 1999, the Common Stock could
only be converted into a maximum of 15,563,513 shares of Common Stock. The
Certificate of Incorporation is anticipated to be amended to increase the number
of shares of Common Stock that the Company is authorized to issue at some time
subsequent to the closing of the merger. The Preferred Stock will be
transferable, subject to compliance with applicable securities laws. The holders
of the Common Stock and Preferred Stock to be issued in the merger will have
certain rights requiring the Company to register the Common Stock issued and
underlying the Preferred Stock.

The Merger Agreement contemplates that a majority of the current
directors of the Company will resign and that new directors, designated by ICS
and VillageNet, will be appointed by the existing director of the Company to
take office upon the effective date of such resignations to serve until their
respective successors are elected and qualify.

CHANGE OF CONTROL

As a result of the actions described above under the captions
"Introduction" and "Merger Agreement," designees of ICS and VillageNet will
constitute a majority of the Board and the shareholders of ICS and VillageNet
will control the Company. Pursuant to the transactions contemplated by the
Merger Agreement, the shareholders of ICS and VillageNet may be deemed to
beneficially own 77,479,466 shares of Common Stock, or 90.7% of the outstanding
shares of the Common Stock of the Company following the closing of the merger.

2
<PAGE>

SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth the number of shares of Common Stock
beneficially owned (a) as of the date of this Information Statement and (b)
after the closing of the merger by (1) those persons or groups known to the
Company who will beneficially own more than 5% of the Company's Common Stock,
(2) each director and director nominee, (3) each executive officer whose
compensation exceeded $100,000 in the year ended December 31, 1998, (4) each
executive officer of the Company to assume office after the closing of the
merger and (5) all directors and executive officers as a group. The information
is determined in accordance with Rule 13d-3 promulgated under the Exchange Act
based upon information furnished by the persons listed or contained in filings
made by them with the Securities and Exchange Commission. Except as indicated
below, the shareholders listed possess sole voting and investment power with
respect to their shares. Except as otherwise indicated in the table below, the
business address of each of the persons listed is c/o Big City Bagels, Inc., 99
Woodbury Road, Hicksville, New York 11801.

Current Holdings(1) After Merger Closing(2)
--------------------------- -------------------------
Name of Beneficial Owner Amount and Amount and
Nature of Nature of
Beneficial Percent Beneficial Percent
Ownership of Class Ownership of Class
----------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Management Group (3) 681,090 7.9% 681,090 *
Mark Weinreb 361,251(4)(5) 4.6% 361,251 *
Stanley Weinreb 160,513(4)(6) 2.0% 160,513 *
Stanley Raphael 159,326(4)(7) 2.0% 159,326 *
Nelson Braff 286,000(8) * 286,000 *
c/o Perrin, Holden & Davenport Capital Corp.
5 Hanover Square
Mezzanine Level
New York, New York 10004
Alan Pearlstein 20,575(9) * 20,575 *
c/o Long Island Auto Parts
190-10 Northern Boulevard
Flushing, New York 11358
Orlac Finance, Ltd. 780,580 9.9% 780,580 *
c/o Gerald Selbst
2 Kaplan Street
Tel Aviv, Israel 64734
Edilberto R. Enriquez 0 0% 0 *
c/o Intelligent Computer Solutions, Inc.
620 Johnson Avenue, Suite 1B
Bohemia, New York 11716
Hector M. Gavilla 0 0% 15,454,591(10) 18.1%
c/o Advanced Testing Technologies, Inc.
110 Ricefield Lane
Hauppauge, New York 11788
Hector P. Gavilla 0 0% 13,098,285 15.3%
c/o Advanced Testing Technologies, Inc.
110 Ricefield Lane
Hauppauge, New York 11788
Peter J. Keenan 0 0% 19,682,075 23.1%
c/o Intelligent Computer Solutions, Inc.
620 Johnson Avenue, Suite 1B
Bohemia, New York 11716
</TABLE>

<PAGE>

- ---------------------

* Less than 1%.

(1) Based on 7,899,225 shares of Common Stock actually outstanding as of
the date of this Information Statement.

(2) Based on 85,378,691 shares of Common Stock potentially outstanding
after the closing of the merger, which includes 69,000,000 shares of
Common Stock issuable upon conversion of the Preferred Stock once an
appropriate amendment to the Company's Certificate of Incorporation to
increase the number of shares of Common Stock that the Company is
authorized to issue has been approved by the Board of Directors and
shareholders of the Company and filed with the State of New York.

(3) The Management Group consists of Mark Weinreb, Stanley Weinreb and
Stanley Raphael, each of whom is a party to, and has agreed to vote
their shares in accordance with, the Founders' Shareholder Agreement
described below. Each of the members of this group shares voting power
with respect to the shares of Common Stock held by each of the members.
The number of shares set forth in the table includes the shares held by
each member, including an aggregate of 168,000 shares of Common Stock
issuable upon exercise of currently exercisable options.

(4) Does not include shares held by other members of the Management Group
(see Note 3) with respect to which each member shares voting power with
the other members of such group.

(5) Includes 106,000 shares of Common Stock issuable upon exercise of
currently exercisable options. Also includes 50,000 shares of Common
Stock issuable upon exercise of options granted to Mr. Weinreb in May
1999 that will become exercisable upon the closing of the merger.

(6) Includes 6,000 shares of Common Stock issuable upon exercise of
currently exercisable options.

4
<PAGE>

(7) Includes 6,000 shares of Common Stock issuable upon exercise of
currently exercisable options. Also includes 1,595 shares of Common
Stock owned by Trade Consultants, Inc. Pension Fund, of which Mr.
Raphael is the trustee.

(8) Includes 34,000 shares of Common Stock issuable upon exercise of
currently exercisable warrants owned by Perrin, Holden & Davenport
Capital Corp. ("PHD"), a New York corporation of which Mr. Braff is an
officer, director and shareholder. Also includes 250,000 shares of
Common Stock issuable upon exercise of warrants granted to PHD in May
1999 that will become exercisable upon the closing of the merger.
Excludes 250,000 shares issuable upon exercise of warrants granted to
PHD, 125,000 of which become exercisable on each of the six-month and
one-year anniversary of the closing. Mr. Braff disclaims beneficial
ownership of the securities owned by PHD, except to the extent of his
equity interest therein. Also includes 2,000 shares of Common Stock
issuable upon exercise of currently exercisable options. See "Certain
Relationships and Related Transactions."

(9) Includes 18,575 shares of Common Stock owned by Brass Capital, L.L.C.
("Brass Capital"), a New York limited liability company of which Mr.
Pearlstein is a member. Mr. Pearlstein disclaims beneficial ownership
of the securities owned by Brass Capital, except to the extent of his
equity interest therein. Also includes 2,000 shares of Common Stock
issuable upon exercise of currently exercisable options.

(10) Includes 6,549,143 shares of Common Stock held by Hector M. Gavilla, as
custodian for Alexander F. Gavilla, Mr. Gavilla's minor son.

(11) Includes 5,456,464 shares of Common Stock owned by Roberta Levi, Mr.
Levi's spouse, and 4,409,987 shares of Common Stock held by Roberta
Levi, as custodian for Shari Levi, Mr. Levi's minor daughter.

(12) Includes those shares of Common Stock deemed to be included in the
respective beneficial ownership of Mark Weinreb, Stanley Weinreb,
Stanley Raphael, Nelson Braff and Alan Pearlstein as set forth in the
table above. Also includes 1,500 shares of Common Stock issuable to
Howard J. Fein, Chief Financial Officer, upon exercise of currently
exercisable options.

(13) Includes those shares of Common Stock deemed to be included in the
respective beneficial ownership of Eli Levi, Hector M. Gavilla, Peter
J. Keenan, Edilberto R. Enriquez, Nelson Braff and David A. Levi as set
forth in the table above.

Founders' Shareholder Agreement

Mark Weinreb, Stanley Weinreb and Stanley Raphael are parties to the
Founders' Shareholder Agreement and the shares of Common Stock beneficially
owned by them are subject to the terms of the Founders' Shareholder Agreement.
Pursuant to the Founders' Shareholder Agreement, each of these members has
agreed to vote his shares for the election of each of the other members of the
group as a director of the Company as long as each such other member owns at
least 20,000 shares of Common Stock. In addition, the members have granted a
right of first refusal to the others with respect to any sales of Common Stock
held by them other than pursuant to a registration statement under the Exchange
Act or pursuant to Rule 144 promulgated thereunder. The parties intend to
terminate the Founders' Shareholder Agreement prior to the closing of the
merger.

5
<PAGE>

DIRECTORS AND EXECUTIVE OFFICERS

The Company anticipates that effective as of the closing of the merger
the Board will be reconstituted and fixed at four directors. Effective as of the
closing, it is anticipated that Mark Weinreb, Stanley Weinreb, Stanley Raphael
and Alan Pearlstein will resign as directors of the Company, and that Eli Levi,
Hector M. Gavilla and Peter J. Keenan will be appointed as new directors to fill
the vacancies created by the resignations. Nelson Braff, a current director of
the Company, will remain a director after the closing. In addition, Howard J.
Fein will resign as Chief Financial Officer of the Company. The following table
sets forth information regarding the Company's current executive officers and
directors and the proposed executive officers and directors of the Company after
the merger. If any proposed director listed in the table below should become
unavailable for any reason, which ICS and VillageNet do not anticipate, the
directors of the Board will vote for any substitute nominee or nominees who may
be selected by ICS and VillageNet prior to the closing.

Current Executive Officers and Directors

Name Age Positions
- --------------- ----- --------------------------
Mark Weinreb 46 Chairman of the
Board, Chief Executive Officer and
Secretary

Stanley Weinreb(1) 70 Director

Stanley Raphael(1) 63 Director

Nelson Braff(2) 40 Director

Alan Pearlstein 45 Director

Howard J. Fein 57 Chief Financial Officer

- ----------------------

(1) Member of Audit Committee.

(2) Mr. Braff will continue to serve as a director after the merger.

Proposed Executive Officers and Directors After the Merger

Name Age Positions
- --------------- ----- --------------------------
Eli Levi 57 Director

Hector M. Gavilla 56 Director

Peter J. Keenan 29 President and Director

Edilberto R. Enriquez 39 Treasurer and Chief Financial Officer

David A. Levi 23 Secretary

6
<PAGE>

Mark Weinreb has been the Chairman of the Board and Chief Executive
Officer of the Company since its inception in December 1992 and Secretary of the
Company since January 1998. From 1975 to 1989, Mr. Weinreb was employed by Bio
Health Laboratories, Inc. ("Bio Health"), a medical testing laboratory, and from
1985 to 1989, he was an owner and vice president of Bio Health, which was sold
in 1989. During his tenure at Bio Health, Mr. Weinreb was responsible for
day-to-day operations, including overseeing the technical aspects of the
laboratory, negotiating property and equipment leases and handling financing
proposals, mergers and acquisitions. From 1989 to 1992, Mr. Weinreb managed his
private investments. Mark Weinreb is the son of Stanley Weinreb.

Stanley Weinreb has been a director of the Company since inception and
served as Vice President of the Company from inception to January 1998. From
1952 to 1989, he was President and owner of Bio Health, a company which he
founded. During his tenure at Bio Health, Mr. Weinreb was the medical director
of the laboratory and was responsible for quality control, obtaining state and
federal licenses and regulatory compliance. Stanley Weinreb is the father of
Mark Weinreb.

Stanley Raphael has been a director of the Company since inception and
served as Secretary of the Company from inception to January 1998. Since 1984,
he has served as President and a director of Trade Consultants, Inc., a
management consulting company. Prior to 1984, Mr. Raphael was an international
trader of oils, chemicals and petrochemicals. He currently is a director of Edge
Petroleum Corp.

Nelson Braff has been a director of the Company since January 1999.
Since July 1996, Mr. Braff has served as a vice president of Perrin, Holden &
Davenport Capital Corp. ("PHD"), an investment banking firm that he co-founded.
From February 1990 to June 1996, Mr. Braff was a partner in the law firm of
Jacobs, Zimms & Braff.

Alan Pearlstein has been a director of the Company since January 1999.
Mr. Pearlstein has been president of Long Island Auto Parts, a company that
retails and wholesales auto parts and accessories, since February 1993, and
served as its treasurer and corporate secretary from January 1980 to January
1993.

Howard J. Fein has been Chief Financial Officer and an Assistant
Secretary of the Company since February 1998. Mr. Fein is a certified public
accountant. He has been a principal of Fein & Fein, P.C., a certified public
accounting firm located in Hicksville, New York since 1972.

Eli Levi has served as Executive Vice President of Advanced Testing
Technologies, Inc. ("ATTI") since 1990. ATTI is a full service engineering
company specializing in the manufacture of automatic test equipment and
customized software used in the testing of electronic avionic systems. Since
1994, Mr. Levi has been the Treasurer of ICS and the President and Treasurer of
VillageNet. Mr. Levi also has served as a director of ICS and VillageNet. Mr.
Levi also currently serves as an executive officer of the following companies:
European Testing Technologies, LTD, ATTI Europe, b.v. ("ATTI Europe"), ATTI
International Development, Inc. and Automated Computer Systems, Inc. Of these
companies, only ATTI Europe is actively operating. ATTI Europe is a
Netherlands-based company that provides engineering services and electronic
systems support for automatic test equipment. Eli Levi is the father of David
Levi.

Hector M. Gavilla has served as President of ATTI since its inception
in 1988. Since 1994, Mr. Gavilla has been Vice President and Secretary of each
of ICS and VillageNet and has served as an executive officer of the following
companies: European Testing Technologies, LTD, ATTI Europe, ATTI International
Development, Inc., Automated Computer Systems, Inc., and ICS Systems, Inc. ("ICS
Systems"). Of these companies, only ATTI Europe and ICS Systems are actively
operating. ICS Systems is a computer software company specializing in operating
systems and electronic drivers for automatic test equipment.

7
<PAGE>

Peter J. Keenan has served as President of ICS since June 1996. From
October 1994 to June 1996, Mr. Keenan was technical director of ICS. Since 1995,
Mr. Keenan has served as technical director of VillageNet. From September 1991
to October 1994, Mr. Keenan was employed by ATTI as a purchasing agent.

Edilberto R. Enriquez has been employed as Controller of ICS since
March 1999. From December 1997 to March 1999, Mr. Enriquez was employed as an
accounting manager for IHC Services Inc., an exporting company. From 1991 to
October 1997, Mr. Enriquez was a senior accountant at Linotype-Hell Company, a
manufacturing company.

David A. Levi has been employed as a purchasing agent for ATTI since
January 1997. Since May 1998, Mr. Levi has served as President of ICS Systems.
From 1994 to 1997, Mr. Levi attended the University of Michigan and received a
degree in history. David Levi is the son of Eli Levi.

During the year ended December 31, 1998, the Board held eight meetings.
The Board has a standing audit committee, but does not have a compensation or
nominating committee. The audit committee presently consists of Messrs. Stanley
Weinreb and Stanley Raphael. The audit committee did not meet during the year
ended December 31, 1998. The functions of the audit committee are: (1) to
recommend annually to the Board the appointment of the independent accountants
of the Company, (2) to review with the independent accountants the accounting
practices and policies of the Company, (3) to review with the internal and
independent accountants the overall accounting and financial controls of the
Company, (4) to be available to independent accountants during the year for
consultation, and (5) to review related party transactions by the Company on an
ongoing basis and review potential conflict of interest situations where
appropriate. All of the directors attended at least 75% of the meetings of the
Board and meetings of the committees of the Board on which they served.

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Exchange Act, as amended, requires the Company's
officers, directors and persons who beneficially own more than ten percent of
the Company's Common Stock to file reports of ownership and changes in ownership
with the Securities and Exchange Commission. These reporting persons also are
required to furnish the Company with copies of all Section 16(a) forms they
file. To the Company's knowledge, based solely on its review of the copies of
such forms furnished to it and representations that no other reports were
required, the Company believes that all Section 16(a) reporting requirements
were complied with by the Company's officers and directors during the year ended
December 31, 1998.

8
<PAGE>

EXECUTIVE COMPENSATION

The following table sets forth information concerning compensation for
services in all capacities awarded to, earned by or paid to the Company's Chief
Executive Officer in the year ended December 31, 1998. There were no executive
officers other than the Chief Executive Officer whose compensation exceeded
$100,000 in the year ended December 31, 1998:

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- --------------------------------------------------- ---------- -----------------------------------------------------
Name and Principal Position Year Annual Compensation
---------------- ---------------- -------------------
Salary Bonus Other Annual
($) ($) Compensation
($)
- --------------------------------------------------- ---------- ---------------- ---------------- -------------------
<S> <C> <C> <C> <C>
Mark Weinreb 1998 192,550 -- --
Chairman of the Board, Chief Executive Officer 1997 185,696 -- --
and Secretary 1996 149,000 -- --
- --------------------------------------------------- ---------- ---------------- ---------------- -------------------
</TABLE>

The Chief Executive Officer named above routinely receives other
benefits from the Company, the amounts of which are customary in the industry.
The Company has concluded, after reasonable inquiry, that the aggregate amounts
of such benefits during the year ended December 31, 1998 did not exceed the
lesser of $50,000 or 10% of the compensation set forth above as to the named
individual.

The following table summarizes the number of shares and the terms of
stock options granted to the Company's Chief Executive Officer in the year ended
December 31, 1998:

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
OPTION/SHARE GRANTS DURING YEAR ENDED DECEMBER 31, 1998
- ------------------------------------- --------------------------------- ------------ --------------- ---------------
Individual Grants
- ------------------------------------- ------------ -------------------- ------------ --------------- ---------------
% of Total
Options/Shares
Name and Position Options/ Granted to Exercise Market Price Expiration
During Period Shares Employees in Price on Date of Date
Granted Fiscal Year ($/Share) Grant ($)
- ------------------------------------- ------------ -------------------- ------------ --------------- ---------------
<S> <C> <C> <C> <C> <C>
Mark Weinreb 2,000(1) 1.9% 4.6875 4.6875 3/30/2008
Chairman of the Board, Chief 100,000(2) 92.6% 1.00 1.00 8/20/2008
Executive Officer and Secretary
- ------------------------------------- ------------ -------------------- ------------ --------------- ---------------
</TABLE>

(1) Represents immediately exercisable options to purchase 2,000 shares of
Common Stock granted pursuant to the terms of the Company's 1996
Performance Equity Plan ("1996 Plan"), which provides for stock option
grants of 2,000 shares to be made to each director of the Company on
March 31st of each year. See "--1996 Performance Equity Plan."

(2) Represents immediately exercisable options under the Company's 1998
Performance Equity Plan ("1998 Plan") to purchase 100,000 shares of
Common Stock.

Employment Agreements

In August 1998, the Company entered into an Amended and Restated
Employment Agreement with Mark Weinreb, the Company's Chairman and Chief
Executive Officer. The amendment extended Mr. Weinreb's employment term for one
year until December 31, 1999 and provides for a salary at the rate of $200,000

<PAGE>

per annum. The amendment also provides that if (1) the Company terminates Mr.
Weinreb's employment without cause, (2) the Company fails to renew his
employment agreement for one additional year or (3) Mr. Weinreb elects to
terminate his employment for "good reason" (as defined in the agreement), then
Mr. Weinreb will receive a lump sum cash payment of $200,000. In addition, the
Company granted to Mr. Weinreb an option under the 1998 Plan to purchase 100,000
shares of Common Stock at an exercise price of $1.00 per share. The option is
immediately exercisable and will remain exercisable until August 2008.

Concurrently with the execution of the Merger Agreement, the Company
entered into a Severance and Consulting Agreement with Mark Weinreb that, upon
the closing of the merger, will terminate Mr. Weinreb's employment with the
Company and retain him as a consultant for up to 16 weeks. At the closing, the
Company will (1) pay Mr. Weinreb $65,000 plus all unpaid salary accrued through
the closing date and (2) deliver to Mr. Weinreb a promissory note in the
principal amount of $85,000. The note will be paid in 12 equal monthly
installments, without interest, commencing on the four-month anniversary of the
closing date or earlier if his consultancy is terminated. If the note is not
paid at maturity, interest will accrue from the date of maturity until paid in
full at a rate of 18% per annum. The Company and Mark Weinreb currently are
negotiating a modification to the Severance and Consulting Agreement that would
eliminate or reduce the $65,000 payable upon the closing and the $85,000 payable
after the closing. In consideration for eliminating this cash component of his
severance, it is contemplated that the Company will issue shares of common stock
(approximately 125,000) that will be subject to certain restrictions on resale.
As of the date of this Information Statement, no definitive modification has
been executed by the parties and such modification would be subject to approval
by the parties to the Merger Agreement. For a period of four months after the
closing, the Company will continue to provide certain perquisites provided under
his former employment agreement. After the closing, Mr. Weinreb will provide
consulting services to the Company relating to transition activities and the
Company's reporting obligations under the Exchange Act. Mr. Weinreb will provide
these services for up to 16 consecutive seven-day periods, but for not more than
25 hours per period. The Company will pay Mr. Weinreb $1,250 for each of the
first 12 periods and $1,875 for the last four periods.

Concurrently with the execution of the Merger Agreement, the Company
entered into a Stock Option Agreement with Mark Weinreb, pursuant to which the
Company granted Mr. Weinreb an option to purchase an aggregate of 50,000 shares
of Common Stock conditioned upon the closing of the merger. The option will
become exercisable on the closing date and will remain exercisable for five
years. The exercise prices are as follows: $0.48 per share for 25,000 shares;
$0.75 per share for 12,500 shares; and $1.00 per share for 12,500 shares. The
Company will register the shares issuable upon exercise of the option on or
prior to the closing date. Termination of Mr. Weinreb's consultancy for any
reason will not cause the option to terminate. The option will remain
exercisable until the expiration of the exercise period.

In August 1996, ICS entered into an employment agreement with Peter J.
Keenan that provides for the employment of Mr. Keenan as President of ICS and
his purchase of 51% of ICS. This agreement will remain in effect after the
closing of the merger. The agreement provides for a salary at the rate of
$50,000 per annum as long as there is any promissory note outstanding from ICS
to Advanced Testing Technologies, Inc., or from Mr. Keenan to any other person
for the purchase of ICS stock. Mr. Keenan's salary may be increased annually by
the Board up to a maximum salary of $125,000, provided that there is an
additional employee, designated by Hector M. Gavilla and Eli Levi, added to the
ICS payroll who will be paid an annual salary equal to any excess amount over
$50,000 per annum paid to Mr. Keenan. The agreement also provides that Mr.
Keenan may sell his shares under certain circumstances and, if he dies, becomes
disabled for more than one year or his employment is terminated for any reason,
he must sell his shares back to ICS. The agreement also prohibits Mr. Keenan
from competing with ICS for 18 months from the date of his termination.

10
<PAGE>

In connection with Mr. Keenan's employment agreement, Mr. Keenan
purchased a 51% interest in ICS from the existing shareholders of ICS by giving
such shareholders a promissory note in the principal amount of $100,000. The
promissory note is guaranteed by ICS and is subject to a security agreement
among Mr. Keenan, ICS and certain ICS shareholders dated November 3, 1996, as
amended on May 21, 1999. The security agreement provides that certain shares of
Common Stock of the Company that will be held by Mr. Keenan following the merger
will be subject to a security interest.

1996 Performance Equity Plan

In March 1996, the Company adopted the 1996 Plan. The 1996 Plan
authorizes the granting of awards of up to 70,000 shares of Common Stock to the
Company's key employees, officers, directors and consultants. Awards consist of
stock options (both nonqualified options and options intended to qualify as
"Incentive" stock options under Section 422 of the Internal Revenue Code of
1986, as amended), restricted stock awards, deferred stock awards, stock
appreciation rights and other stock-based awards, as described in the 1996 Plan.
As of June 10, 1999, 7,988 shares of Common Stock and options to purchase 33,780
shares of Common Stock were outstanding under the 1996 Plan, with 28,232 shares
available for future grant.

On March 31st of each calendar year during the term of the 1996 Plan,
assuming there are enough shares then available for grant under the 1996 Plan,
each person who is then a director of the Company will be awarded stock options
to purchase 2,000 shares of Common Stock at the fair market value thereof (as
determined in accordance with the 1996 Plan), all of which options are
immediately exercisable as of the date of grant and have a term of ten years.
These are the only awards which may be granted to a director of the Company
under the 1996 Plan. The 1996 Plan is administered by the Board which determines
the persons (other than directors) to whom awards will be granted, the number of
awards to be granted and the specific terms of each grant, including the
exercisability thereof, subject to the provisions of the 1996 Plan.

In connection with qualified stock options, the exercise price of each
option may not be less than 100% of the fair market value of the Common Stock on
the date of grant (or 110% of the fair market value in the case of a grantee
holding more than 10% of the outstanding stock of the Company). The aggregate
fair market value of shares for which qualified stock options are exercisable
for the first time by such employee during any calendar year may not exceed
$100,000. Nonqualified stock options granted under the 1996 Plan are also
required to have exercise prices not less than the fair market value of the
Common Stock on the date of grant.

The 1996 Plan also contains change in control provisions which could
cause options and other awards to become immediately exercisable and
restrictions and deferral limitations applicable to other awards to lapse in the
event any "person," as such term is used in Sections 13(d) and 14(d) of the
Exchange Act, including a "group" as defined in Section 13(d), but excluding
certain shareholders of the Company, acquires beneficial ownership of more than
25% of the Company's outstanding shares of Common Stock.

1998 Performance Equity Plan

In January 1998, the Board adopted, and in June 1998 the stockholders
approved the 1998 Plan. The 1998 Plan authorizes the granting of awards of up to
400,000 shares of Common Stock to the Company's key employees, officers,
directors and consultants. Awards consist of stock options (both nonqualified
options and options intended to qualify as "Incentive" stock options under
Section 422 of the Internal Revenue Code of 1986, as amended), restricted stock
awards, deferred stock awards, stock appreciation rights and other stock-based
awards, as described in the 1998 Plan. As of June 10, 1999, options to purchase
100,000 shares of Common Stock were outstanding under the 1998 Plan, with
300,000 shares available for future grant.

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In connection with qualified stock options, the exercise price of each
option may not be less than 100% of the fair market value of the Common Stock on
the date of grant (or 110% of the fair market value in the case of a grantee
holding more than 10% of the outstanding stock of the Company). The aggregate
fair market value of shares for which qualified stock options are exercisable
for the first time by such employee during any calendar year may not exceed
$100,000. Nonqualified stock options granted under the 1998 Plan are also
required to have exercise prices not less than the fair market value of the
Common Stock on the date of grant.

The 1998 Plan also contains change in control provisions that are
identical to those described above with respect to the 1996 Plan.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In February 1998, the Company appointed Howard J. Fein to serve as
part-time Chief Financial Officer (and principal accounting officer) of the
Company at a salary of $50,000 for 1998. Mr. Fein is a principal of Fein & Fein,
P.C., a certified public accounting firm which has rendered accounting
consulting services to the Company since its inception in 1992. In March 1996,
Mr. Fein was granted options to purchase 1,500 shares of Common Stock pursuant
to the 1996 Plan, at an exercise price of $20.00 per share, in consideration for
rendering consulting services to the Company. During 1997, in consideration for
accounting consulting services rendered by Fein & Fein, P.C. and Howard J. Fein,
the Company paid Fein & Fein, P.C. $100,201 in cash. In 1998, the Company paid
Fein & Fein, P.C. $52,822 in cash and granted an award of Common Stock to Howard
J. Fein with a value of $26,500 pursuant to the 1996 Plan (4,988 shares of
Common Stock based on the last sale price of the Common Stock on the date of
grant) in consideration for accounting consulting services rendered.

Concurrently with the execution of the Merger Agreement, PHD received
warrants to purchase an aggregate of 500,000 shares of Common Stock in
consideration for introducing the Company to VillageNet and ICS. The warrants
are conditioned upon the closing of the merger and will be exercisable as
follows: 250,000 of the warrants will be immediately exercisable upon the
closing of the merger at an exercise price of $0.48 per share; 125,000 of the
warrants will become exercisable on the six-month anniversary of the closing
date at an exercise price of $0.75 per share; and 125,000 warrants will become
exercisable on the one-year anniversary of the closing at an exercise price of
$1.00 per share. The warrants expire on the fifth anniversary of the closing
date of the merger. The Company has granted PHD certain demand and "piggyback"
registration rights for the warrants and the underlying Common Stock. Nelson
Braff, a director of the Company, is a vice president and co-founder of PHD.

ATTI and ICS are affiliated entities as a result of common
stockholders. In recent years, ATTI has provided ICS with working capital. ICS
has an outstanding note payable to ATTI dated August 1, 1996 in the principal
amount of $176,652. The note bears interest at a rate of 5% per annum and
matures on May 1, 2001. To date, ICS has not made any payments on this note. As
of December 31, 1998, interest in the amount of $21,971 has accrued on this
note. ICS also has a non-interest bearing demand loan from ATTI. As of December
31, 1998, the balance of this demand loan was $305,325. The repayment terms of
this loan have not yet been determined.

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VillageNet has a non-interest bearing demand loan from ICS. As of
December 31, 1998, the balance of this demand loan was $277,785. The repayment
terms of this loan have not yet been determined. VillageNet also has a
non-interest bearing demand loan from two of VillageNet's shareholders and
proposed directors of the Company, Eli Levi and Hector M. Gavilla. As of
December 31, 1998, the balance of this demand loan was $28,516.
The repayment terms of this loan have not yet been determined.

BIG CITY BAGELS, INC.

Dated: June 18, 1999