SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) May 21, 1999
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Big City Bagels, Inc.
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(Exact Name of Registrant as Specified in Charter)
New York 0-28058 11-3137508
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(State or Other Jurisdiction (Commission File (IRS Employer
of Incorporation) Number) Identification No.)
99 Woodbury Road, Hicksville, New York 11801
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (516) 932-5050
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N/A
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(Former Name or Former Address, if Changed Since Last Report)
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Item 2. Acquisition or Disposition of Assets
On May 21, 1999, Big City Bagels, Inc. ("Company"), BCB Acquisition
Corp. I ("BCB I") and BCB Acquisition Corp. II ("BCB II"and, together with the
Company and BCB I, the "Big City Parties") entered into an Agreement and Plan of
Reorganization and Merger (the "Merger Agreement") with Intelligent Computer
Solutions, Inc. ("ICS"), VillageNet, Inc. ("VillageNet") and each of the
shareholders of ICS and VillageNet (collectively, the "Shareholders"and,
together with ICS and VillageNet, the "Target Corporation Parties"). The Merger
Agreement provides for the merger (the "Merger") of BCB I and BCB II with and
into ICS and VillageNet, respectively, for the separate corporate existence of
BCB I and BCB II to cease and for ICS and VillageNet to be the surviving
corporations of the Merger, continuing after the Merger as wholly-owned
subsidiaries of the Company. The Merger is expected to be consummated in the
second quarter of 1999.
The following summary of the terms of the Merger Agreement and certain
related agreements is qualified in its entirety by the actual agreements, copies
of which are filed as exhibits to this report.
Merger Consideration
Under the terms of the Merger Agreement, upon consummation of the
Merger, all 100 shares of common stock of each of BCB I and BCB II outstanding
immediately prior to the time that the Merger becomes effective ("Effective
Time") will be converted into and exchanged for 100 shares of common stock of
each of ICS and VillageNet, respectively, which will represent all of the issued
and outstanding shares of capital stock of each of ICS and VillageNet
immediately after the Effective Time.
At the Effective Time, (i) the 1,000 shares of the common stock and 40
shares of the preferred stock of ICS, representing all the outstanding capital
stock of ICS, will be converted into the right to receive 4,309,733 shares of
the Company's common stock ("Big City Common Stock") and 250,000 shares of Class
B Preferred Stock ("Big City Preferred Stock"and, together with the Big City
Common Stock, the "ICS Merger Consideration") and (ii) the 1,000 shares of
common stock of VillageNet, representing all the outstanding capital stock of
VillageNet, will be converted into the right to receive 4,309,733 shares of Big
City Common Stock and 250,000 shares of Big City Preferred Stock ("VillageNet
Merger Consideration"). After the Effective Date, the holders of Big City
Preferred Stock will have the right to convert all 500,000 shares into an
aggregate of 69,000,000 shares of Big City Common Stock at a conversion rate of
138 shares of Big City Common Stock for each share of Big City Preferred Stock.
The holders may convert the Big City Preferred Stock, in whole or in part, at
any time after the Effective Date, provided that the Company is then authorized
to issue a sufficient number of shares of Big City Common Stock. The Certificate
of Incorporation of the Company currently authorizes the Company to issue
25,000,000 shares of Big City Common Stock. As of May 21, 1999, the Company had
outstanding 7,899,225 shares of Big City Common Stock (excluding 65,279 shares
of treasury stock) and had reserved for issuance upon the exercise of
outstanding options and warrants or pursuant to the Company's outstanding stock
plans, 1,537,262 shares of Big City Common Stock. Accordingly, at May 21, 1999,
the Big City Preferred Stock could only be converted into a maximum of
15,563,513 shares of Big City Common Stock. The Certificate of Incorporation is
anticipated to be amended to increase the number of shares of Big City Common
Stock that the Company is authorized to issue at some time subsequent to the
closing of the Merger. The Big City Preferred Stock will be transferrable,
subject to compliance with applicable securities laws. The holders of Big City
Preferred Stock also will have voting rights equal to the number of shares of
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Big City Common Stock into which each share of Big City Preferred Stock is then
convertible. Assuming the conversion of all of the shares of Big City Preferred
Stock, the ICS Merger Consideration and VillageNet Merger Consideration together
would represent 90% of the Big City Common Stock outstanding after the Effective
Time, calculated on a fully diluted basis assuming the exercise of the Company's
outstanding options and warrants that have an exercise price of $1.00 or less.
Management
The following persons will be the executive officers of the Company
after the Merger:
Name Title
---- -----
Peter J. Keenan President
Edilberto R. Enriquez Treasurer and Chief Financial Officer
David A. Levi Secretary
Mark Weinreb, Stanley Weinreb, Stanley Raphael, Howard J. Fein, Alan Pearlstein
and Nelson Braff are currently executive officers and/or directors of the
Company. Immediately prior to the Effective Date, each of these persons, other
than Nelson Braff, will resign from their positions and Eli Levi, Hector M.
Gavilla and Peter J. Keenan will be appointed as directors by Nelson Braff, the
sole existing member of the board to remain in such position, to fill the
vacancies created by the resignations of the other existing directors. The
foregoing directors are expected to serve as directors until the next annual
meeting of the Company's shareholders.
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 (i) pay Mr. Weinreb $65,000 plus all unpaid salary accrued through
the closing date and (ii) 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. 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 Securities Exchange Act of 1934, as
amended ("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 Big City 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
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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.
Covenants
The Merger Agreement contains usual and customary covenants with
respect to the operation of the business of the Big City Parties and the Target
Corporation Parties until the closing, including the requirements that the Big
City Parties and the Target Corporation Parties conduct their operations in the
normal course; use their best efforts to keep available the services of the
current employees and preserve the current relationships with their customers
and other persons with which they have significant business relations; permit
reasonable access to the other party for due diligence purposes; and hold in
confidence all information received from the other party, subject to customary
exceptions.
Other specific covenants include, but are not limited to, the
following: (i) within 45 days after the date of the Merger Agreement, each of
ICS and VillageNet are required to deliver to the Company audited financial
statements for the year ended December 31, 1998 and (ii) the Company may not
effect a reverse split of Big City Common Stock prior to the first anniversary
of the Effective Time, except in certain limited circumstances.
Conditions to Merger
The Merger is subject to a number of conditions including the
requirement that an information statement be prepared by the Company and
distributed to the shareholders of the Company not less than ten days prior to
the closing in compliance with the requirements of Section 14(f) of the Exchange
Act and that the Company receive an opinion of Heritage Capital Corp. that the
transaction is fair to the shareholders of the Company from a financial point of
view. In addition, a Certificate of Amendment to the Certificate of
Incorporation establishing the Big City Preferred Stock must be filed with the
Secretary of State of New York.
At the closing, the Company intends to enter into a Registration Rights
Agreement with each Shareholder, which will provide for certain demand and
piggyback registration of (i) shares of Big City Common Stock then outstanding
and held by a Shareholder and (ii) any shares of Big City Common Stock then
issuable upon conversion of the Big City Preferred Stock held by a Shareholder.
The Merger Agreement also provides, as a condition to closing, that (i)
the Shareholders shall have received from tax counsel to ICS and VillageNet an
opinion in customary form stating that the Merger should qualify as a
reorganization under Section 368(a) of the Internal Revenue Code of 1986, as
amended.
There are a number of other usual and customary conditions that must be
satisfied before the Merger can occur.
Exclusivity
Under the terms of the Merger Agreement, the Company cannot, except in
the limited circumstances described below, (i) solicit or encourage, directly or
indirectly, any inquiries, discussions or proposals for, (ii) continue, propose
or enter into any negotiations or discussions looking toward, or (iii) enter
into any agreement or understanding providing for, any acquisition of any of its
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capital stock or assets ("Other Transaction"). The Merger Agreement also
provides that the Company will not provide any information to any person for the
purpose of evaluating or determining whether to make or pursue any such
inquiries or proposals with respect to any such Other Transaction.
Notwithstanding the foregoing, in the event that the Company receives
an unsolicited proposal for entering into an Other Transaction, the Company may
furnish to such party public and nonpublic information requested by such party
and the Company may negotiate with such party if (i) the board of directors of
the Company determines, in good faith, that the Other Transaction proposal
would, if consummated, result in a transaction that is more favorable to the
Company shareholders and (ii) prior to furnishing such information to or
entering into negotiations with such third party, the Company (a) provides
prompt notice within 24 hours of receipt of the Other Transaction proposal to
ICS and VillageNet and (b) receives an executed confidentiality agreement from
the third party on terms at least as stringent as those contained in any
confidentiality agreement among the Company, ICS and VillageNet.
Under the terms of the Merger Agreement, none of the Target Corporation
Parties shall (i) solicit, encourage, directly or indirectly, any inquiries,
discussions or proposals for, (ii) continue, propose or enter into any
negotiations or discussions looking toward, or (iii) enter into any agreement or
understanding providing for, any acquisition of any capital stock of either ICS
or VillageNet or of any part of either of their assets, nor shall any of the
Target Corporation Parties provide any information to any person for the purpose
of evaluating or determining whether to make or pursue any such inquiries or
proposals with respect to any such acquisition.
Indemnity
Pursuant to the terms of the Merger Agreement, all of the Shareholders
of ICS and VillageNet (severally, in proportion to their ownership of shares of
each of ICS and VillageNet), on the one hand, and the Company, on the other hand
(each of the Company and the Shareholders of ICS and VillageNet (as a group)
being referred to herein as an "Indemnitor"), have agreed to indemnify the other
for breach of the representations, warranties and covenants under the Merger
Agreement. Any claim for indemnity must be made prior to the forty-fifth day
after a committee of independent directors of the Company has received the
audited, consolidated financial statements of the Company for the year ended
December 31, 1999. No indemnity payment shall be made unless, after the
resolution of all claims for indemnity (the date on which the last claim is
resolved being referred to herein as "Judgment Date"), the aggregate of all
amounts for which indemnity would otherwise be owed by such Indemnitor exceeds
$200,000, and then, only for amounts in excess of $200,000. An Indemnitor is
required to pay its indemnity obligations in shares of Big City Common and/or
Preferred Stock, valued for this purpose at the last sale price of the Holding
Stock on the last business day prior to the Judgment Date. The maximum amount
that any Indemnitor shall pay the other is 7,797,942 shares of Big City Common
and/or equivalent Preferred Stock and if it is a claim against a Shareholder
individually only up to a maximum of 10% of the Big City Common and/or Preferred
Stock received in the Merger.
Termination
The transactions contemplated by the Merger may be terminated under the
following limited circumstances:
1. By mutual written consent of the Big City Parties and all the
Shareholders;
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2. By either the Big City Parties or the Target Corporation Parties if,
without fault of such terminating party, the Merger is not consummated on or
prior to November 21, 1999;
3. By either the Big City Parties or the Target Corporation Parties (if
the terminating party is not then in material breach of its obligations under
the Merger Agreement) if (i) a material default or breach is made by the other
party with respect to the due and timely performance of any of its obligations
contained under the Merger Agreement and such default cannot be cured within 30
days, or (ii) if any of the other party's representations and warranties (a)
made without any materiality standard, are not true and correct in all material
respects as of the date the Merger Agreement was executed and as of the closing
date or (b) made with any materiality standard, are not true and correct in all
respects as of the date the Merger Agreement was executed and as of the closing
date, provided that if the representation or warranty is breached by the Big
City Parties, the effect must result in a net worth of less than zero, excluding
certain expenses but including liabilities reasonably expected to mature, before
the Target Corporation Parties may terminate the Merger Agreement; or
4. By either the Big City Parties or the Target Corporation Parties if
the Company is unable to obtain a fairness opinion in customary form from
Heritage Capital Corp. stating that, in substance, the terms of the Merger are
fair to the shareholders of the Company from a financial point of view.
If the Merger Agreement is terminated because there has been a material
default or breach by one of the parties with respect to the due and timely
performance of any of its obligations which cannot be cured within 30 days, or
there has been any breach of any representation or warranty in a material
respect, then the non-terminating party shall, within five days of termination,
pay or reimburse the terminating party for all the documented out-of-pocket
reasonable fees and expenses incurred by the terminating party (including the
reasonable fees and expenses of its counsel, accountants, consultants and
advisors) in connection with the Merger Agreement and the transactions
contemplated by the Merger Agreement. Unless such termination is with respect to
a breach of a representation or warranty deemed to be made at the closing (as
opposed to upon execution of the Merger Agreement) and such breach was caused by
factors within the control of the non-terminating party, then the terminating
party's right to pursue all legal remedies for breach of contract or otherwise,
including damages, will survive such termination unimpaired.
PHD Warrants
Concurrently with the execution of the Merger Agreement, Perrin, Holden
& Davenport Capital Corp. ("PHD") received warrants to purchase an aggregate of
500,000 shares of Big City Common Stock in consideration for introducing the
Company to ICS and VillageNet. The warrants 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 date 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 underlying Common Stock.
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Item 7. Financial Statements, Pro Forma Financial Statements and Exhibits
(a) Financial Statements
The Company will file the required financial statements within
60 days of the last date on which its report on Form 8-K is required to
be filed.
(b) Pro Forma Financial Statements
The Company will file the required pro forma financial
statements within 60 days of the last date on which its report on Form
8-K is required to be filed.
(c) Exhibits
Exhibit Number Description
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2.1 Agreement and Plan of Reorganization and
Merger, dated as of May 21, 1999, among
the Company, BCB I, BCB II, ICS,
VillageNet and the Shareholders (without
schedules and exhibits)
3.1 Form of Certificate of Amendment of the
Company's Certificate of Incorporation
4.1 Form of warrant to purchase an aggregate
of 500,000 shares of Common Stock to be
issued to Perrin, Holden & Davenport
Capital Corp.
10.1 Severance and Consulting Agreement, dated
as of May 21, 1999, between the Company
and Mark Weinreb
10.2 Stock Option Agreement, dated as of May
21, 1999, between the Company and Mark
Weinreb
10.3 Form of Registration Rights Agreement by
and among the Company and the
Shareholders
99.1 Press release of the Company dated May
24, 1999
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Dated: May 28, 1999 BIG CITY BAGELS, INC.
----------------------
(Registrant)
/s/ Mark Weinreb
----------------------
Mark Weinreb
Chairman of the Board and
Chief Executive Officer
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EXHIBIT INDEX
Exhibit Number Description
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2.1 Agreement and Plan of Reorganization and
Merger, dated as of May 21, 1999, among
the Company, BCB I, BCB II, ICS,
VillageNet and the Shareholders (without
schedules and exhibits)
3.1 Form of Certificate of Amendment of the
Company's Certificate of Incorporation
4.1 Form of warrant to purchase an aggregate
of 500,000 shares of Common Stock to be
issued to Perrin, Holden & Davenport
Capital Corp.
10.1 Severance and Consulting Agreement, dated
as of May 21, 1999, between the Company
and Mark Weinreb
10.2 Stock Option Agreement, dated as of May
21, 1999, between the Company and Mark
Weinreb
10.3 Form of Registration Rights Agreement by
and among the Company and the
Shareholders
99.1 Press release of the Company dated May
24, 1999
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EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
among
BIG CITY BAGELS, INC.,
BCB ACQUISITION CORP. I,
BCB ACQUISITION CORP. II,
INTELLIGENT COMPUTER SOLUTIONS, INC.,
VILLAGENET, INC.
and
EACH STOCKHOLDER OF INTELLIGENT COMPUTER SOLUTIONS, INC. and
VILLAGENET, INC.
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TABLE OF CONTENTS
Page
ARTICLE I
THE MERGER........................................................... 1
SECTION 1.1 Definitions................... 1
SECTION 1.2 The Merger.................... 1
SECTION 1.3 Effective Time................ 2
SECTION 1.4 Effects of the Merger......... 2
SECTION 1.5 Certificate of Incorporation
and By-Laws................ 2
SECTION 1.6 The Closing................... 2
ARTICLE II
CONVERSION OF SHARES................................................. 2
SECTION 2.1 Conversion of the Stock of
the Target Corporations..... 2
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
TARGET CORPORATION AND THE STOCKHOLDERS............................ 3
SECTION 3.1 Organization.................. 3
SECTION 3.2 Authority; Corporate Action... 4
SECTION 3.3 No Conflict; Required Filings
and Consents................ 4
SECTION 3.4 Capitalization: Ownership of
Target Corporation Stock.... 5
SECTION 3.5 Licenses and Permits;
Compliance with Laws........ 6
SECTION 3.6 Financial Statements.......... 6
SECTION 3.7 Real Property................. 7
SECTION 3.8 Material Contracts............ 8
SECTION 3.9 Litigation.................... 9
SECTION 3.10 Taxes, Tax Returns and Audits. 9
SECTION 3.11 Absence of Certain Changes.... 10
SECTION 3.12 Employee Benefit Plans........ 12
SECTION 3.13 Labor Relations............... 12
SECTION 3.14 Insurance Policies; Claims.... 12
SECTION 3.15 Intellectual Property......... 13
SECTION 3.16 Personal Properties; Assets... 14
SECTION 3.17 Brokers....................... 15
SECTION 3.18 Records....................... 15
SECTION 3.19 No Illegal or Improper
Transactions................ 15
SECTION 3.20 Related Transactions.......... 15
SECTION 3.21 Disclosure.................... 15
SECTION 3.22 Environmental, Health and
Safety Matters.............. 16
SECTION 3.23 Year 2000 Compliance.......... 16
SECTION 3.24 Domain Names.................. 17
SECTION 3.25 Investment Representations.... 17
SECTION 3.26 Material Customers and
Suppliers................... 18
SECTION 3.27 Nasdaq Listing................ 18
SECTION 3.28 Information Statement......... 18
SECTION 3.29 Tax Opinion................... 18
SECTION 3.30 Schedules..................... 18
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BIG CITY
AND THE MERGER SUBSIDIARY.......................................... 19
SECTION 4.1 Organization.................. 19
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SECTION 4.2 Authority; Corporate Action... 19
SECTION 4.3 No Conflict; Required
Filings and Consents........ 20
SECTION 4.4 Capitalization................ 20
SECTION 4.5 Licenses and Permits;
Compliance with Laws........ 21
SECTION 4.6 Real Property................. 22
SECTION 4.7 Material Contracts............ 22
SECTION 4.8 Litigation.................... 22
SECTION 4.9 Taxes, Tax Returns and Audits. 23
SECTION 4.10 Absence of Certain Changes.... 24
SECTION 4.11 Employee Benefit Plans........ 25
SECTION 4.12 Labor Relations............... 25
SECTION 4.13 Insurance Policies; Claims.... 26
SECTION 4.14 Intellectual Property......... 26
SECTION 4.15 Personal Properties; Assets... 26
SECTION 4.16 Bank Accounts................. 27
SECTION 4.17 Records....................... 27
SECTION 4.18 Environmental, Health and
Safety Matters.............. 27
SECTION 4.19 Securities and Exchange
Commission Reports.......... 27
SECTION 4.20 Information Statement......... 28
SECTION 4.21 Disclosure.................... 28
SECTION 4.22 Brokers....................... 28
SECTION 4.23 Big City Stock................ 29
SECTION 4.24 Collateral Agreements......... 29
SECTION 4.25 Schedules..................... 29
ARTICLE V
NATURE AND SURVIVAL OF REPRESENTATIONS
AND WARRANTIES OF THE PARTIES...................................... 29
SECTION 5.1 Survival...................... 29
SECTION 5.2 Nonwaiver of Rights........... 29
ARTICLE VI
COVENANTS OF TARGET CORPORATIONS
AND THE STOCKHOLDERS............................................... 30
SECTION 6.1 Conduct of Business........... 30
SECTION 6.2 Access to Information;
Confidentiality............. 32
SECTION 6.3 Maintenance of Assets;
Insurance................... 33
SECTION 6.4 No Other Negotiations......... 33
SECTION 6.5 No Securities Transactions.... 33
SECTION 6.6 Fulfillment of Conditions..... 33
SECTION 6.7 Disclosure of Certain Matters. 34
SECTION 6.8 Certain Consents.............. 34
SECTION 6.9 Non-use of Name............... 34
SECTION 6.10 Information for Information
Statement................... 34
SECTION 6.11 Lien Search................... 34
SECTION 6.12 Post Merger Tax Status........ 35
SECTION 6.13 Financial Statements of
Target Corporations........... 35
ARTICLE VII
COVENANTS OF THE BIG CITY PARTIES.................................... 35
SECTION 7.1 Conduct of Business........... 35
SECTION 7.2 Access to Information;
Confidentiality............. 37
SECTION 7.3 Maintenance of Assets;
Insurance................... 38
SECTION 7.4 No Other Negotiations......... 38
SECTION 7.5 Fulfillment of Conditions..... 39
SECTION 7.6 Disclosure of Certain Matters. 39
SECTION 7.7 Certain Consents.............. 39
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SECTION 7.8 Maintenance of Big City
Employee Medical Benefits... 40
SECTION 7.9 Filing of Current Report
on Form 8-K................. 40
SECTION 7.10 Composition of Big City and
Surviving Corporation
Board and Officers at
Effective Time.............. 40
SECTION 7.11 Blue Sky Compliance........... 40
SECTION 7.12 Taxes......................... 40
SECTION 7.13 Sale or Closing of Retail
Stores...................... 40
SECTION 7.14 Opinion of Financial Advisor.. 40
SECTION 7.15 Information Statement......... 41
SECTION 7.16 Amendment to Certificate
of Incorporation............ 41
SECTION 7.17 Representations to Tax
Counsel..................... 41
ARTICLE VIII
JOINT COVENANTS OF THE PARTIE........................................ 41
SECTION 8.1 Further Action................ 41
SECTION 8.2 Schedules..................... 41
SECTION 8.3 Regulatory and Other
Authorizations.............. 42
SECTION 8.4 Indemnification and Director
and Officer Liability
Insurance................... 42
SECTION 8.5 Reverse Stock Split........... 42
SECTION 8.6 Independent Committee......... 43
ARTICLE IX
CONDITIONS TO CLOSING................................................ 43
SECTION 9.1 Conditions to Each Party's
Obligations................. 43
SECTION 9.2 Conditions to the Obligations
of Target Corporations and
the Stockholders............ 43
SECTION 9.3 Conditions to the Obligations
of the Big City Parties..... 45
ARTICLE X
INDEMNIFICATION...................................................... 46
SECTION 10.1 Indemnification by the
Stockholders................ 46
SECTION 10.2 Indemnification by Big City... 47
SECTION 10.3 Procedure..................... 47
SECTION 10.4 Adjustment to Merger
Consideration............... 48
SECTION 10.5 Independent Committee
Determination............... 48
SECTION 10.6 Limitations................... 49
SECTION 10.7 Representations and
Warranties.................. 49
SECTION 10.8 Indemnity as Sole Recourse.... 49
ARTICLE XI
TERMINATION.......................................................... 50
SECTION 11.1 Methods of Termination........ 50
SECTION 11.2 Effect of Termination......... 51
ARTICLE XII
DEFINITIONS.......................................................... 51
SECTION 12.1 Certain Defined Terms......... 51
ARTICLE XIII
GENERAL PROVISIONS................................................... 53
SECTION 13.1 Expenses...................... 53
SECTION 13.2 Notices....................... 53
SECTION 13.3 Press Release; Public
Announcements............... 54
SECTION 13.4 Amendment..................... 55
SECTION 13.5 Waiver........................ 55
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SECTION 13.6 Headings...................... 55
SECTION 13.7 Severability.................. 55
SECTION 13.8 Entire Agreement.............. 55
SECTION 13.9 Benefit; Assignment........... 55
SECTION 13.10 Governing Law; Consent to
Jurisdiction................ 55
SECTION 13.11 Counterparts.................. 56
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EXHIBIT INDEX
Exhibit A-1 Certificate of Merger I
Exhibit A-2 Certificate of Merger II
Exhibit B Tax opinion
Exhibit C-1 Severance Agreement and Consulting
Agreement - Mark Weinreb
Exhibit C-2 Option Agreement - Mark Weinreb
Exhibit D GMM Opinion
Exhibit E GCD Opinion
Exhibit F Perrin Holden & Davenport
Capital Corp. - Warrant
Exhibit G Registration Rights Agreement
Exhibit H Charter Amendment
Exhibit I Big City Representation Letter
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AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
AGREEMENT AND PLAN OF REORGANIZATION AND MERGER, dated as of May 21,
1999, among BIG CITY BAGELS, INC., a New York corporation ("Big City"), BCB
ACQUISITION CORP. I ("BCB I") and BCB ACQUISITION CORP. II ("BCB II") (each
sometimes also referred to as a "Merger Subsidiary" or together as "Merger
Subsidiaries"), each Merger Subsidiary a New York corporation and wholly-owned
subsidiary of Big City, INTELLIGENT COMPUTER SOLUTIONS, INC. ("ICS") and
VILLAGENET, INC., ("VillageNet") (each sometimes also referred to as a "Target
Corporation" or together as the "Target Corporations"), each a New York
corporation, and each of the stockholders of each Target Corporation, all of
whom are listed in Schedule 2.1 hereto (such stockholders being referred to
collectively herein as the "Stockholders").
WHEREAS, the Stockholders are the owners of all of the outstanding
capital stock of the Target Corporations in the respective amounts as set forth
in Schedule 2.1;
WHEREAS, subject to the terms and conditions of this Agreement and Plan
of Merger ("Agreement"), the Parties desire to consummate a merger, as
contemplated herein, pursuant to which each of the Target Corporations shall be
merged with a Merger Subsidiary so that the Target Corporations become
wholly-owned subsidiaries of Big City, with each of the Target Corporations
surviving the Merger; and
WHEREAS, for Federal income tax purposes, the parties intend that such
merger qualify as a reorganization under the provisions of Section 368(a) of the
United States Internal Revenue Code of 1986, as amended (the "Code").
IT IS AGREED:
ARTICLE I
THE MERGER
SECTION 1.1 Definitions. Certain capitalized terms used in this Agreement shall
have the meanings specified in Article XII.
SECTION 1.2 The Merger. Upon the terms and subject to the conditions hereof, and
in accordance with the relevant provisions of the Business Corporation Law of
the State of New York (the "BCL"), BCB I and BCB II shall consummate a merger
(the "Merger") with and into ICS and VillageNet, respectively, at the Effective
Time (as defined). Following the Merger, each of the Target Corporations shall
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continue as the surviving corporations of the Merger and shall continue their
existence under the laws of the State of New York.
SECTION 1.3 Effective Time. As soon as practicable on or after the Closing Date,
after the satisfaction or waiver of all conditions to the Merger, the Target
Corporations and the Merger Subsidiaries shall file with the Secretary of State
of the State of New York ("Secretary of State"), in accordance with the BCL, an
executed copy of the Certificates of Merger in the form of Exhibit A-1 and
Exhibit A-2 hereto (the "Articles of Merger") reflecting the Merger. The Merger
shall become effective at such time as the Certificates of Merger are filed with
the Secretary of State (the "Effective Time"). The Stockholders hereby agree to
the adoption of this Agreement and Plan of Merger if and to the extent required
under the BCL, and acknowledge and agree that their respective signatures hereto
shall constitute their written consent for purposes of authorizing the Merger by
unanimous written consent of stockholders as provided under the BCL.
SECTION 1.4 Effects of the Merger. The Merger shall have the effects set forth
in Section 906 of the BCL.
SECTION 1.5 Certificate of Incorporation and By-Laws. The Articles of
Incorporation and By-Laws of each of ICS and VillageNet will be the Articles of
Incorporation and By-Laws of ICS and VillageNet, respectively, as the surviving
corporations of the Merger at the Effective Time.
SECTION 1.6 The Closing. Subject to the terms and conditions of this Agreement,
the consummation of the Merger and the other transactions contemplated by this
Agreement shall take place at a closing (the "Closing") to be held at 10:00
a.m., local time, on the third Business Day after the date on which the last of
the conditions to Closing set forth in Article IX hereof (other than conditions
to be satisfied at the Closing) are fulfilled or waived by the appropriate
Party, as the case may be, at the offices of Graubard Mollen & Miller, 600 Third
Avenue, New York, New York 10016, or at such other time, date or place as the
Parties may agree upon in writing. The date on which the Closing occurs is
referred to herein as the "Closing Date."
ARTICLE II
CONVERSION OF SHARES
SECTION 2.1 Conversion of the Stock of the Target Corporations. At the Effective
Time, (i) the 1,000 shares of the common stock, no par value and the 40 shares
of the preferred stock, no par value of ICS ("ICS Stock"), representing all the
outstanding capital stock of ICS, shall be converted into the right to receive,
at the Closing in accordance with the BCL, 4,309,733 shares of the common stock,
$.001 par value of Big City ("Big City Common Stock") and 250,000 shares of the
Class B Preferred Stock, $.001 par value ("Big City Preferred Stock") ("ICS
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Merger Consideration") and (ii) the 1,000 shares of the common stock, no par
value, of VillageNet ("VillageNet Stock"), representing all the outstanding
capital stock of VillageNet, shall be converted into the right to receive, at
the Closing in accordance with the BCL, 4,309,733 shares of Big City Common
Stock and 250,000 shares of Big City Preferred Stock ("VillageNet Merger
Consideration"). The ICS Merger Consideration and VillageNet Merger
Consideration will collectively be referred to herein as "Merger Consideration".
At the Closing, the ICS Merger Consideration and the VillageNet Merger
Consideration, respectively, will be issued to the Stockholders listed on
Schedule 2.1 hereto, in the amounts to be provided to Big City prior to Closing
upon delivery by the Stockholders to Big City of the certificates representing
the ICS Stock and VillageNet Stock together with executed stock powers. At the
Effective Time, all of the 100 shares of common stock, no par value, of each of
BCB I and BCB II outstanding immediately prior to the Effective Time shall be
converted into and exchanged for 100 shares of the common stock, no par value,
of ICS and VillageNet, respectively, as the surviving corporations of the
Merger, which shall represent all of the issued and outstanding shares of
capital stock of each of ICS and VillageNet, respectively, as the surviving
corporations of the Merger. At the Closing, each of ICS and VillageNet, as the
surviving corporations of the Merger, shall issue to Big City a stock
certificate representing such 100 shares in exchange for the certificate which
formerly represented the 100 shares of common stock, no par value, of each of
BCB I and BCB II.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF TARGET CORPORATION AND THE STOCKHOLDERS
Each of the Target Corporations and each of the Stockholders, jointly
and severally, (except as otherwise provided in the representations and
warranties set forth below), represent and warrant to the Big City Parties as
follows:
SECTION 3.1 Organization. Each of the Target Corporations is a corporation duly
organized, validly existing and in good standing under the laws of its
respective state of incorporation. Except as described on Schedule 3.1(a),
neither of the Target Corporations owns, directly or indirectly, any capital
stock or other securities of any issuer or any equity interest in any other
entity, including any partnership, limited partnership, limited liability
company, business trust, joint venture or any other business entity, or is a
party to any agreement to acquire any such securities or interest. Neither of
the Target Corporations conducts any business through any entity other than
itself. Each of the Target Corporations is qualified to do business in each
state where the nature of the business it conducts or the properties it owns,
leases or operates requires it to so qualify (which states are listed in
Schedule 3.1(b)), except where the failure to so qualify would not reasonably be
expected to have, either singly or in the aggregate, a Target Corporation
Material Adverse Effect. Each Target Corporation has all requisite corporate
power to own, lease and operate its properties and to carry on its business as
now being conducted.
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SECTION 3.2 Authority; Corporate Action. Each Target Corporation and each
Stockholder has all necessary power and authority to enter into this Agreement
and to consummate the Merger and other transactions contemplated hereby. All
corporate action necessary to be taken by each Target Corporation and each
Stockholder to authorize the execution, delivery and performance of this
Agreement and all other agreements and instruments to be delivered by each
Target Corporation and each of the Stockholders pursuant hereto has, or at the
Closing, will have been, duly and validly taken, and this Agreement and such
other agreements and instruments have been duly executed and delivered by each
Target Corporation and each Stockholder which is a party thereto. Subject to the
terms and conditions hereof, this Agreement constitutes the valid, binding and
enforceable obligation of each of the Target Corporations and each of the
Stockholders, enforceable against all such parties in accordance with their
respective terms, except as enforceability may be limited or barred by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or similar laws of general application now or hereafter in effect
affecting the rights and remedies of creditors and by general principles of
equity (regardless of whether enforcement is sought in a proceeding at law or in
equity). The representations and warranties made with respect to any Stockholder
in this Section 3.2 are made only by the Stockholder solely with respect to
itself.
SECTION 3.3 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement (and the other agreements and
instruments contemplated hereby) by each Target Corporation and each Stockholder
does not, and the performance by each Target Corporation and each Stockholder of
their respective obligations under this Agreement (and any other agreement and
instrument contemplated hereby) will not, as the case may be, (i) conflict with
or violate the Certificate of Incorporation or By-laws of each of the Target
Corporations, (ii) conflict with or violate any law, statute, ordinance, rule,
regulation, order, judgment or decree applicable to each Target Corporation or
each Stockholder or by which any of the properties or assets of a Target
Corporation is bound or affected, or (iii) except as set forth in Schedule
3.3(a), result in any breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, or result
in the creation of a Lien on any of the properties or assets of any Target
Corporation pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which any Target Corporation is a party or by which any Target Corporation or
any of its respective properties or assets is bound or affected, except, in the
case of clauses (ii) and (iii), above, for any such conflicts, violations,
breaches, defaults or other alterations or occurrences that would not reasonably
be expected to have, either singly or in the aggregate, a Target Corporation
Material Adverse Effect. The representations and warranties made with respect to
any Stockholder in this Section 3.3(a) are made only by the Stockholder solely
with respect to itself.
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(b) The execution and delivery of this Agreement (and the other agreements and
instruments contemplated hereby) by each Target Corporation and each Stockholder
does not, and the performance of this Agreement (and the other agreements and
instruments contemplated hereby) by each Target Corporation and each Stockholder
will not, require any consent, approval, authorization or permit of, or filing
with or notification to, any governmental or regulatory authority or other third
party, except for (i) compliance with the applicable requirements, if any, of
the Exchange Act (as defined) or the Securities Act (as defined), (ii) filing
and recordation of appropriate merger documents as required by the laws of the
State of New York, (iii) as set forth on Schedule 3.3(b), and (iv) where failure
to obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications would not reasonably be expected to have, either singly
or in the aggregate, a Target Corporation Material Adverse Effect. The
representations and warranties made with respect to any Stockholder in this
Section 3.3(b) are made only by the Stockholder solely with respect to itself.
SECTION 3.4 Capitalization: Ownership of Target Corporation Stock. The
authorized capital stock of each Target Corporation and the number of issued
shares of each class of capital stock is set forth in Schedule 3.4. The
Stockholders and their respective residential addresses and their respective
holdings of each Target Corporation's capital stock are set forth on Schedule
2.1 and, the Stockholders are the record and beneficial owners of all of the
outstanding capital stock of each Target Corporation, as so listed, free and
clear of all Liens. Except as set forth on Schedule 3.4, there are no options,
warrants, subscriptions, conversion rights or securities exchange rights or
other securities or other contractual rights outstanding which require, or give
any person the right to require, the issuance, delivery or sale (including a
right of conversion or exchange) of any capital stock of the Target
Corporations, whether or not such rights are presently exercisable. There are no
pre-emptive rights, rights of first refusal or other similar agreements
obligating a Target Corporation to offer any shares of its capital stock to any
person and none of the shares of capital stock of a Target Corporation were
issued in violation of any such rights. No holder of any securities of a Target
Corporation (or securities issuable in exchange therefor) has the right to
require any party to register such securities under the Securities Act (as
defined), either on a "demand" or a "piggyback" basis. All shares, options and
warrants and other securities of each Target Corporation issued since its date
of incorporation were issued in compliance with the registration provisions of
the Securities Act and applicable state securities laws or pursuant to an
exemption therefrom. Neither of the Target Corporations has outstanding any
bonds, debentures, notes or other obligations under the terms of which the
holders of which have any rights to vote with the Stockholders of either Target
Corporation. The representations and warranties made in the second sentence of
this Section 3.4 with respect to any Stockholder are made only by the
Stockholder solely with respect to itself.
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SECTION 3.5 Licenses and Permits; Compliance with Laws. Each Target Corporation
holds all permits, licenses and approvals (collectively, the "Permits") from all
Federal, state and local governmental authorities necessary for it to own, lease
and operate its properties and to carry on its businesses as now being
conducted, and no such Permit has been rescinded and all such Permits are in
full force and effect and are listed on Schedule 3.5, except for such Permits
the failure of which to hold would not reasonably be expected to have, either
singly or in the aggregate, a Target Corporation Material Adverse Effect. The
business of each Target Corporation is being and has been conducted in
compliance with the Permits and all applicable laws, statutes, ordinances,
regulations, judgments, orders, decrees, concessions, grants and other
authorizations of any governmental authority, except for such failures that
would not reasonably be expected to have, either singly or in the aggregate, a
Target Corporation Material Adverse Effect. Neither Target Corporation is in
default in any material respect under any of such Permits and no event has
occurred and no condition exists which, with the giving of notice, the passage
of time, or both, would constitute a default thereunder, except where such
default would not reasonably be expected to have, either singly or in the
aggregate, a Target Corporation Material Adverse Effect. Neither the execution
and delivery of this Agreement nor any of the other documents contemplated
hereby nor the consummation of the transactions contemplated hereby or thereby
nor compliance by each Stockholder and each Target Corporation with any of the
provisions hereof or thereof will result in any suspension, revocation,
impairment, forfeiture or nonrenewal of any Permit, except for such Permits the
loss or impairment of which would not reasonably be expected to have, either
singly or in the aggregate, a Target Corporation Material Adverse Effect.
Neither Target Corporation presently provides any services that would require
that Target Corporation to obtain any authorization or make any registration in
any foreign country.
SECTION 3.6 Financial Statements.
(a) Each Target Corporation has delivered to the Big City Parties audited
financial statements of that Target Corporation for the year ended December 31,
1997 (collectively, the "Target Corporation Audited Financial Statements"). The
Target Corporation Audited Financial Statements, including all related notes and
schedules thereto, have been prepared in accordance with generally accepted
accounting principles applied in the United States ("GAAP") and fairly present
in all material respects the financial position of each Target Corporation as at
the respective dates thereof and the results of operations of each Target
Corporation for the periods indicated on a consistent basis throughout the
periods involved (except as may be noted therein).
(b) Each Target Corporation has delivered to the Big City Parties unaudited
financial statements of that Target Corporation for the year ended December 31,
1998, which are identified as Schedule 3.6(b) (collectively, the "Target
Corporation Unaudited Financial Statements"). The Target Corporation Unaudited
Financial Statements have been prepared in accordance with GAAP and fairly
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present in all material respects the financial position of each Target
Corporation as at the respective dates thereof and the results of operations of
each Target Corporation for the periods indicated on a consistent basis
throughout the periods involved (except as may be noted therein). The Target
Corporation Unaudited Financial Statements were compiled from the books and
records of each Target Corporation regularly maintained by management and used
to prepare the financial statements of that Target Corporation in accordance
with GAAP and such books and records of account of each Target Corporation
reflect all items of income and expense and all assets and liabilities and
accruals required to be reflected therein in accordance with GAAP so as to
permit the independent accountants of each Target Corporation, without unusual
expense, to audit such Target Corporation's financial statements and issue a
report thereon in accordance with generally accepted auditing standards. There
will be no material discrepancies between the audited financial statements of
each of the Target Corporation at and for the year ended December 31, 1998
required to be delivered to the Big City Parties pursuant to Section 6.13 hereof
and the Target Corporation Unaudited Financial Statements.
(c) The accounts receivable of each Target Corporation reflected on the balance
sheet as at December 31, 1998 ("Balance Sheet") included in the Target
Corporation Unaudited Financial Statements have arisen from bona fide
transactions and are reflected on the books and records of each Target
Corporation. Adequate reserves for the uncollectability of such accounts
receivable have been established on the books and records of each Target
Corporation and are reflected on the Balance Sheet and will be reflected on the
audited financial statements of each Target Corporation.
(d) Neither Target Corporation has any debts, liabilities, commitments or
obligations (including, without limitation, any unasserted claims for which
there are circumstances known to or which should reasonably be known to exist by
the Target Corporation or any Stockholder that could serve as a basis therefor),
whether absolute or contingent, liquidated or unliquidated, matured or
unmatured, or due or to become due or otherwise, except for liabilities and
obligations (a) reflected as liabilities on the Balance Sheet, or (b) that have
arisen since December 31, 1998 in the ordinary course of business of each Target
Corporation, consistent with prior periods.
SECTION 3.7 Real Property. Schedule 3.7 contains a true, correct and complete
list and brief description of all real property leased or subleased by each
Target Corporation, all of which properties are hereinafter referred to as the
"Target Leased Real Property." Each Target Corporation has provided to the Big
City Parties true, correct and complete copies of the leases for or other
agreements or arrangements under which each Target Corporation has the right to
use the Target Leased Real Property (the "Leases") and any sublease to or other
similar agreement or arrangement with any third party with respect to such
premises ("Subleases"). Except as set forth in Schedule 3.7, each Target
Corporation has not subleased any Target Leased Real Property to others. Each
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Target Corporation is in compliance with all of the provisions of its Leases and
Subleases and is not in default thereunder, except where the failure to be in
compliance would not be reasonably likely to have a Target Corporation Material
Adverse Effect. Each leasehold interest (i) is valid, subsisting and in full
force and effect; and (ii) is not subject to any Liens (other than collateral
assignments of the leases granted by the landlords thereunder to the extent
permitted by the terms of the Leases and which do not interfere with or detract
from each Target Corporation's use of the property subject to the Leases). The
rental set forth in each of the Leases listed in Schedule 3.7 is the actual
rental currently being paid by each Target Corporation and there are no separate
agreements or understandings with respect to same and each Target Corporation is
current on its rental obligations. The payment obligations of any sublessee
under any Sublease are equal to or greater than the payments required to be made
for the subleased space to the landlord. The Leased Real Property is occupied
under a valid and current occupancy permit or the like to the extent required by
law. Except as set forth in Schedule 3.7, there are no facts known to any of the
Target Corporations or Stockholders which would prevent any Target Leased Real
Property from being occupied by each Target Corporation after the Closing in
substantially the same manner as before. The execution and delivery of this
Agreement, and the performance of the obligations hereunder and thereunder, will
not constitute a default under any Lease.
SECTION 3.8 Material Contracts.
(a) Schedule 3.8(a) sets forth a complete and correct list of all agreements of
the following types to which each Target Corporation is a party and all or any
portion of which are currently in effect (collectively, the "Material
Contracts"): (i) agreements that would be required to be filed as exhibits to
any filings or reports (collectively, the "Required Reports") made by Big City
under the Securities Act or Exchange Act following the Merger; (ii) agreements
for the purchase, sale or distribution of products, materials, commodities,
supplies or other personal property, or for the furnishing or receipt of
services, the performance of which will extend over a period of more than one
year or involve consideration payable by any party in excess of $10,000 in any
one year; (iii) loan agreements, indentures, letters of credit, mortgages, notes
and other debt instruments; (iv) agreements containing any "change of control"
provisions; (v) agreements, arrangements or understandings with any employee,
director or officer of each Target Corporation or with each Stockholder or with
any affiliate of any thereof; (vi) agreements prohibiting each Target
Corporation from engaging or competing in any line of business or limiting such
competition; (vii) joint venture, partnership and similar agreements; (viii)
acquisition or divestiture agreements relating to the (A) sale or purchase of
assets or stock of each Target Corporation (other than sales of inventory in the
ordinary course of business) or (B) the purchase of assets or stock of any other
person (other than the purchase of inventory, supplies or equipment in the
ordinary course of business); (ix) brokerage, finder's or financial advisory
agreements; (x) guarantees of indebtedness for borrowed money of any person;
(xi) reseller, agent and dealer agreements; (xii) licensing and rights
arrangements for any Intellectual Property (as defined, including all licenses
of Intellectual Property and any related rights to or by each Target Corporation
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(or each Stockholder); (xiii) indefeasible rights of use, leases or other
agreements for the acquisition, sale, transfer, assignment or use of or access
to, bandwidth, capacity or any other telecommunications network, facilities or
product; and (xiv) agreements that, individually or together with one or more
related agreements, are material to the assets, financial condition, business or
operations of each Target Corporation. True and complete copies of all Material
Contracts have been delivered to the Big City Parties or made available for
inspection. Except as set forth on Schedule 3.8(a), Each Target Corporation is
not currently, nor has it been during the past five years, a party to any prime
contract, subcontract, basic ordering agreement, letter contract, arrangement,
purchase order, or delivery order of any kind, including all amendments,
modifications, and options thereunder or relating thereto, given by a party
holding itself out as a federal or state government or agency, division,
subdivision or procuring office thereof.
(b) Except as set forth in Schedule 3.8(b) and except for violations,
commissions or failures as would not be reasonably likely to have a Target
Corporation Material Adverse Effect, all Material Contracts are valid and in
full force and effect, and each Target Corporation has not (nor does it or each
Stockholder have any knowledge that any other party thereto has) violated any
provision of, or committed or failed to perform any act which with or without
notice, lapse of time or both would constitute a default under the provisions
of, any Material Contract. The representation and warranty made with respect to
any Stockholder in the parenthetical text in the first sentence in this Section
3.8(b) is made only by the Stockholder solely with respect to itself.
SECTION 3.9 Litigation. Other than as set forth on Schedule 3.9, there are no
actions, suits, arbitrations, mediations or other proceedings pending or, to the
knowledge of each Target Corporation or each Stockholder, threatened against
each Target Corporation at law or in equity before any court, Federal, state,
municipal or other governmental department or agency or other tribunal and there
are no written customer complaints which could reasonably serve as a basis for
same. Neither Target Corporation nor its respective property is subject to any
order, judgment, injunction or decree. No claim, action, proceeding or
investigation is pending or, to the best knowledge of any of the Stockholders,
threatened against each Target Corporation or against any Stockholder which
would reasonably be expected to have a Target Corporation Material Adverse
Effect. The representations and warranties made in this Section 3.9 with respect
to any Stockholder as to the knowledge of such Stockholder of a threatened
claim, action, proceeding or investigation are made only by the Stockholder
solely with respect to itself.
SECTION 3.10 Taxes, Tax Returns and Audits. Each Target Corporation has (or, in
the case of returns becoming due after the date hereof and on or before the
Effective Time, will have prior to the Effective Time) prepared and filed on a
timely basis with all appropriate Federal, state, local and foreign governmental
authorities all returns in respect of Taxes it is required to file on or prior
to the Effective Time or by such date will have obtained the appropriate
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extensions to file, and all such returns completely and accurately (or, in the
case of returns becoming due after the date hereof and on or before the
Effective Time, will completely and accurately) set forth the amount due of any
Taxes relating to the applicable period. Each Target Corporation has paid (or,
in the case of Taxes becoming due after the date hereof and on or before the
Effective Time, will have paid) in full all Taxes due on or before the Effective
Time and, in the case of Taxes accruing on or before the Effective Time that are
not due on or before the Effective Time, each Target Corporation has or will
have established adequate reserves on its books and records and financial
statements (including the Balance Sheet) for such payment in accordance with
GAAP. Each Target Corporation has withheld from each payment made to any of its
present or former employees, officers, directors or other party all amounts
required by law to be withheld and has, where required, remitted such amounts
within the applicable periods to the appropriate governmental authorities. In
addition, other than as set forth on Schedule 3.10, (i) there are no assessments
against any Target Corporation with respect to Taxes that have been issued and
are outstanding; (ii) no governmental authorities have audited or, to the
knowledge of each of the Stockholders, examined any Target Corporation in
respect of Taxes; (iii) neither Target Corporation has executed or filed any
agreement extending the period of assessment or collection of any Taxes which
has not yet expired by its terms; (iv) neither Target Corporation has received
written notification from any governmental authority of its intention to
commence any audit or investigation; (v) neither Target Corporation is a party
to or bound by nor has any obligation under any tax sharing or tax
indemnification agreement, provision or arrangement, whether formal or informal,
and no power of attorney, which is currently in effect, has been granted with
respect to any matter relating to Taxes of each Target Corporation; and (vi)
neither Target Corporation is presently required nor will it be required to
include any adjustment in taxable income under Section 481 of the Code (or any
similar provision of the Tax laws of any jurisdiction) as a result of any change
in method of accounting or otherwise.
SECTION 3.11 Absence of Certain Changes. Other than as set forth on Schedule
3.11, neither Target Corporation has, since December 31, 1998:
(a) issued, delivered or agreed to issue any stock, bonds or other corporate
securities (whether authorized and unissued or held in the treasury), or granted
or agreed to grant any options (including employee stock options), warrants or
other rights for the issue thereof;
(b) borrowed or agreed to borrow any funds;
(c) incurred any obligation or liability, absolute, accrued, contingent or
otherwise, whether due or to become due, except current liabilities incurred in
the ordinary course of business and consistent with prior practice;
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(d) other than pursuant to this Agreement, discharged or satisfied any
obligation or encumbrance other than ordinary operating expenses and trade
payables reflected on the Balance Sheet, and trade payables and other operating
expenses incurred after December 31, 1998 in the ordinary course of business and
consistent with prior practice, all of which payments have been made in a manner
consistent with prior practice;
(e) failed to pay any payables when due, consistent with prior practice;
(f) sold, transferred, leased to others or otherwise disposed of any assets
outside of the ordinary course of business or canceled or compromised any debt
or claim, or waived or released any right of substantial value;
(g) received any notice of termination or other threatened termination of any
Material Contract, Lease, Permit or other agreement, or suffered any damage,
destruction or loss (whether or not covered by insurance) the effect of which
would reasonably be expected to have, either singly or in the aggregate, a
Target Corporation Material Adverse Effect;
(h) encountered any labor union organizing activity labor disputes or had any
material change in its relations with its employees or agents, clients or
insurance carriers;
(i) made any accrual or arrangement for any bonus, or any increase in
compensation or any severance or termination payment to (i) any present or
former officer or employee of each Target Corporation; or (ii) to any affiliate
of any Target Corporation or any officer, director or significant shareholder of
any Target Corporation;
(j) transferred or granted any rights under, or entered into any settlement
regarding the breach or infringement of, any license or any of the Intellectual
Property used in the businesses or operations of each Target Corporation, or
licensed or otherwise transferred or disposed of any of its material
Intellectual Property;
(k) declared or made, or agreed to declare or make, any payment of dividends or
distributions of any assets of any kind whatsoever to any of its stockholders or
any affiliate of any of its stockholders, or purchased or redeemed, or agreed to
purchase or redeem, any of its capital stock, or made or agreed to make any
payment to any of its stockholders or any affiliate of any of its stockholders,
whether on account of debt, management fees or otherwise;
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(l) suffered any material adverse change, in any case or in the aggregate, in
its assets, liabilities, financial condition, results of operations or business;
or
(m) entered into any agreement or made any commitment to take any of the types
of action described in any of the foregoing clauses (other than clauses (g), (h)
or (i)).
SECTION 3.12 Employee Benefit Plans. Schedule 3.12 sets forth a list of all the
"employee benefit plans" (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), programs and arrangements
maintained for the benefit of any current or former employee, officer or
director of each Target Corporation (collectively, the "Target Corporation
Benefit Plans"). Each Target Corporation Benefit Plan has been operated in all
material respects in accordance with the terms and requirements of applicable
law and all required returns and filings for each Target Corporation Benefit
Plan have been timely made. Neither Target Corporation has incurred any direct
or indirect liability under, arising out of or by operation of ERISA or the Code
in connection with any Target Corporation Benefit Plan or any other employee
benefit plan maintained by any other entity under common control with each
Target Corporation and no fact or event exists that could reasonably be expected
to give rise to any such liability. All contributions due and payable on or
before the date hereof in respect of each Target Corporation Benefit Plan have
been made in full and in proper form.
SECTION 3.13 Labor Relations. No Target Corporation is a party to any collective
bargaining agreement or other contract or agreement with any labor organization
or other representative of any of the employees of any Target Corporation. To
the knowledge of each Target Corporation and each Stockholder, there have been
no labor organization activities involving any of the employees of each Target
Corporation during the last five years. Schedule 3.13 hereto contains a complete
list of all of the employees of each Target Corporation, including salary and
bonus paid for 1997 and 1998 and for 1999 through January 31 and material
perquisites and benefits, and of those persons currently intended to become
employees after the dates hereof, including their starting dates and agreed
compensation arrangements. Except as indicated in Schedule 3.13, none of such
employees is subject to an employment agreement or employment restriction with
each Target Corporation or with any prior employer and all employees of each
Target Corporation are terminable at will. Except as listed on Schedule 3.13 or
Schedule 2.1, no employee of a Target Corporation has any right or claim (legal,
equitable or otherwise) to receive any Merger Consideration. The representation
and warranty made in the second sentence of this Section 3.13 with respect to
any Stockholder are made only by the Stockholder solely with respect to itself.
SECTION 3.14 Insurance Policies; Claims. Schedule 3.14 sets forth all insurance
policies and bonds maintained by or on behalf of each Target Corporation. Except
as disclosed in Schedule 3.14, the insurance policies and bonds set forth in
Schedule 3.14 are provided by reputable insurers or issuers, and provide
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adequate coverage for all normal risks incident to the businesses of each Target
Corporation and its assets. No claims have been made against a Target
Corporation as a result of allegedly defective products or any alleged libelous,
slanderous or defamatory statements or activities and none of the Stockholders
or Target Corporations knows of any basis for the assertion of any such claim.
No insurance policy issued to or on behalf of a Target Corporation has ever been
canceled by the policy issuer. No issuer of any policy covering a Target
Corporation or any of its assets, operations or employees has refused to review
a claim during the past five years. The representations and warranties made in
the third sentence of this Section 3.14 with respect to any Stockholder are made
only by the Stockholder solely with respect to itself.
SECTION 3.15 Intellectual Property.
(a) Each Target Corporation owns or possesses all right, title and interest in
and to, or a valid and enforceable license or other right to use all of the
Intellectual Property that is used in the conduct of the business of each Target
Corporation. All Intellectual Property that is used in the conduct of the
business of each Target Corporation (including all applications and
registrations therefor) is listed on Schedule 3.15(a), and no other Intellectual
Property is used or necessary in the conduct of such business. Except as
disclosed in Schedule 3.15(a), (i) each Target Corporation has the right to use
the Intellectual Property it owns or licenses; (ii) all registrations with
respect thereto are in full force and effect; (iii) there are no transfer
restrictions, direct or indirect, relating thereto affected by the Merger as
provided herein; (iv) all relevant documentation and explanatory materials
relating thereto in reasonable detail have been provided to Big City; and (v)
each Target Corporation has taken appropriate and reasonable security measures
to protect the secrecy, confidentiality, and value of each Target Corporation's
trade secrets and related Intellectual Property. All Intellectual Property
licensed to third parties is listed on Schedule 3.15(a). To the knowledge of the
Stockholders, there has been no disclosure of any trade secrets or other
proprietary information of each Target Corporation that has had, or could be
reasonably expected to have, a Target Corporation Material Adverse Effect. Each
Target Corporation has taken customary steps to backup all of its Intellectual
Property and all material Web-based, Internet and computer applications and
projects for customers and clients of the business. Neither Target Corporation
has infringed, misappropriated or otherwise violated any Intellectual Property
of any other person. To the knowledge of each of the Stockholders, no person is
infringing upon any Intellectual Property right of each of the Target
Corporations. Each Target Corporation maintains "Web wrap" agreements as
necessary to alert users and subscribers to the potential civil and criminal
liability to which they may be subject for intellectual property infringement.
The representations and warranties made in the fourth and seventh sentences of
this Section 3.15 with respect to any Stockholder are made only by the
Stockholder solely with respect to itself.
(b) "Intellectual Property" means all patents, patent applications and patent
disclosures; all inventions (whether or not patentable and whether or not
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reduced to practice); all registered and unregistered, statutory and common law
trademarks, service marks and service mark rights, trade dress, trade names and
trade name rights corporate names and domain names and URLs and all the goodwill
associated therewith; all registered and unregistered statutory and common law
copyrights; all registrations, applications and renewals for any of the
foregoing; all protocols, codes and operating systems; and all trade secrets,
confidential information, ideas, formulae, compositions, know-how, manufacturing
and production processes and techniques, research information, drawings,
specifications, design plans, improvements, proposals, technical and computer
data, documentation and software, brand names, inventions, processes, trade
dress, business and product names, industrial models, designs, methodologies,
computer programs (including all source codes), databases, HTML, Java and
related codes, technical information, engineering and technical drawings,
financial business and marketing plans, customer and supplier lists and related
proprietary information, marketing materials and all other proprietary rights.
Intellectual Property does not include software licensed under a shrinkwrap
agreement.
(c) Other than as set forth on Schedule 3.15(c), each Target Corporation has
caused each of its current employees, consultants and independent contractors,
as applicable, that have worked on or contributed to the development or
improvement of any of its software or other Intellectual Property, to execute
applicable "work for hire" (as such term is used in the federal copyright
statute) and/or assignments required to vest in each Target Corporation full,
effective, exclusive and original ownership of all such Intellectual Property.
SECTION 3.16 Personal Properties; Assets. Schedule 3.16 sets forth the personal
properties and assets owned or leased by each Target Corporation as of December
31, 1998 as identified to the independent certified public accountants of each
Target Corporation for the purposes of their review of the Target Corporation
Audited Financial Statements. Each Target Corporation (a) has good and
marketable title to all personal properties and assets owned by it (except
personal properties sold or otherwise disposed of since the date thereof in the
ordinary course of business), and those personal properties acquired after the
date thereof and not thereafter disposed of, free and clear of all Liens, except
(i) statutory liens securing payments not yet due, and (ii) such imperfections
or irregularities of title, claims, liens, charges, security interests or
encumbrances which do not secure monetary obligations and which do not
materially affect the use or marketability of the personal properties or assets
subject thereto or affected thereby or otherwise materially impair each Target
Corporation's business operations or use of such assets, and (b) is the lessee
of all other personal property reflected on Schedule 3.16, which lease is for an
annual amount in excess of $20,000. Each lease for personal property that is
material to the businesses of each Target Corporation is valid without default
thereunder by the lessee or, to the knowledge of each Target Corporation and
each Stockholder, lessor, and each Target Corporation is in possession of the
personal property purported to be leased thereunder. The personal properties and
assets of each Target Corporation are in good operating condition and repair
(ordinary wear and tear excepted).
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SECTION 3.17 Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of each Target Corporation or each Stockholder. The representation and
warranty made in this Section 3.17 with respect to any Stockholder are made only
by the Stockholder solely with respect to itself.
SECTION 3.18 Records. The books of account, minute books, stock certificate
books and stock transfer ledgers of each Target Corporation are complete and
correct in all material respects, and there have been no material transactions
involving a Target Corporation of the type typically recorded in such records
that have not been recorded.
SECTION 3.19 No Illegal or Improper Transactions. Neither Target Corporation
nor, to the best knowledge of the respective Target Corporation, any officer,
director, employee, agent or affiliate of a Target Corporation has offered, paid
or agreed to pay to any person or entity (including any governmental official)
or solicited, received or agreed to receive from any such person or entity,
directly or indirectly, any money or anything of value for the purpose or with
the intent of (i) illegally or improperly facilitating the purchase or sale of
any product or service, or (ii) avoiding the imposition of any fine or penalty,
in any manner which is in violation of any applicable ordinance, regulation or
law.
SECTION 3.20 Related Transactions. Except as disclosed in Schedule 3.20, and for
compensation and related arrangements with employees for services rendered
consistent with past practices, no current or former director, officer, employee
or Stockholder of a Target Corporation, nor any immediate family member of any
of the foregoing, is presently, or since January 1, 1996, has been, (a) a party
to any transaction with a Target Corporation (including, but not limited to, any
contract, agreement or other arrangements providing for the furnishing of
services by, or rental of real or personal property from, or otherwise requiring
payments to, any such director, officer, employee or shareholder or affiliated
entities), or (b) the direct or indirect owner of an interest in any
corporation, firm, association or business organization which is a present
competitor, supplier or customer of a Target Corporation, nor does any such
person receive income from any source other than a Target Corporation which
relates to the business of, or should properly accrue to, a Target Corporation.
All related party transactions have been at arms length and all revenues and
expenses of the Target Corporation that have been collected or paid by any
affiliated entities are properly reported in the Target Corporation Unaudited
Financial Statements and will be properly reported in the audited financial
statements of the Target Corporations.
SECTION 3.21 Disclosure. No representation or warranty by any of the Target
Corporations or Stockholders contained in this Agreement or any Schedule hereto
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contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary in order to make the statements
contained herein or therein not misleading. Any representation and warranty made
in this Section 3.21 with respect to any Stockholder are made only by the
Stockholder solely with respect to itself.
SECTION 3.22 Environmental, Health and Safety Matters.
(a) Each Target Corporation, to the best of its knowledge, is in compliance with
Environmental, Health and Safety Requirements, except for such noncompliance as
would not reasonably be expected to have, either singly or in the aggregate, a
Target Corporation Material Adverse Effect.
(b) Each Target Corporation, to the best of its knowledge, has not received any
written notice, report or other information regarding any actual or alleged
material violation of Environmental, Health, and Safety Requirements, or any
material liabilities or potential material liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise), including any investigatory,
remedial or corrective obligations, relating to each Target Corporation or its
property arising under Environmental, Health, and Safety Requirements, the
subject of which would reasonably be expected to have, either singly or in the
aggregate, a Target Corporation Material Adverse Effect.
SECTION 3.23 Year 2000 Compliance.
(a) Each Target Corporation has conducted a full assessment of its Information
Technology. Except as set forth on Schedule 3.23, to the best knowledge of each
Target Corporation, all Information Technology created by each Target
Corporation or used in or relied on by each Target Corporation in the conduct of
its business is designed to record, store, process and present date/time data
(including without limitation, calculating, comparing and sequencing) from, into
and between the twentieth and twenty-first centuries, including the years 1999
and 2000 and leap year calculations, and all such Information Technology will
not malfunction, cease to function or provide invalid or incorrect results or
degrade in performance as a result of date/time data, including to the extent
that other Information Technology, when used in combination with Information
Technology of Target Corporation, properly exchanges date/time data with it
("Year 2000 Compliant").
(b) To the best of the knowledge of each Target Corporation, all Information
Technology of third parties used in combination with Information Technology used
in or relied on by each Target Corporation in the conduct of its business is
Year 2000 Compliant.
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(c) "Information Technology" means electronic data, communications and other
systems utilizing computer hardware, computer software, computer firmware and
other similar or related items including source codes, operating codes,
programs, utilities and other software.
(d) To the best knowledge of each Target Corporation, the cost of remedying any
and all Information Technology to ensure that it is Year 2000 compliant as
necessary to continue its operations after December 31, 1999 as currently
operated is not reasonably likely to exceed $50,000.
SECTION 3.24 Domain Names. To the best knowledge of each Target Corporation,
Schedule 3.24 sets forth all domain names assigned to or reserved by each Target
Corporation. To the best knowledge of each Target Corporation, its domain names
have been validly obtained by each Target Corporation and are exclusive to each
Target Corporation. All filings, payments and actions have been made or taken
and the domain names used in such manner as may be necessary to maintain the
right to such names. None of such domain names are a federally registered
trademark of any third party. The validity of such domain names have not been
challenged by any party and to the knowledge of each Target Corporation and each
Stockholder, no circumstances exist which would reasonably form the basis for
any such challenge. The representation and warranty made in the immediately
preceding sentence of this Section 3.24 with respect to any Stockholder are made
only by the Stockholder solely with respect to itself.
SECTION 3.25 Investment Representations. Each Stockholder represents as to
itself only that (i) all Big City Stock to be acquired by such Stockholder
pursuant to this Agreement will be acquired for its account and not with a view
towards distribution thereof; (ii) it understands that it must bear the economic
risk of the investment in the Big City Stock, which cannot be sold by it unless
it is registered under the Securities Act, or an exemption therefrom is
available thereunder; (iii) it has had both the opportunity to ask questions and
receive answers from the officers and directors of Big City and all persons
acting on Big City's behalf concerning the business and operations of Big City
and to obtain any additional information to the extent Big City possesses or may
possess such information or can acquire it without unreasonable effort or
expense necessary to verify the accuracy of such information; and (iv) it has
received copies of the Big City Reports described in Section 4.19. Each
Stockholder acknowledges, as to itself only, that (a) it is either (i) an
"accredited investor" as such term is defined in Rule 501(a) promulgated under
the Securities Act or (ii) a person possessing sufficient knowledge and
experience in financial and business matters to enable it to evaluate the merits
and risks of an investment in Big City; and (b) it understands that the
certificates representing the Big City Stock shall bear legends to the effect
that the Big City Stock may not be transferred except upon compliance with (i)
the registration requirements of the Securities Act (or an exemption therefrom)
and (ii) the provisions of this Agreement.
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SECTION 3.26 Material Customers and Suppliers. Schedule 3.26 lists the ten
largest customers (measured by revenue) and suppliers (measured by cost of goods
or services) over the prior 12-month period in each of the businesses of the
Target Corporations. To the best knowledge of each Target Corporation and,
except as scheduled, no customer or supplier has ceased or materially reduced
its business with the Target Corporation during such period, has notified the
Target Corporation of any potential bankruptcy or insolvency, or accounts for
more than 10% of the annual revenues or costs of goods or services, as the case
may be, of the Target Corporation.
SECTION 3.27 Nasdaq Listing. Big City has disclosed to the Target Corporation
Parties that the Common Stock of Big City has been delisted from the Nasdaq
SmallCap Market. Big City has made no representation or warranty to the Target
Corporation Parties with respect to the ability of Big City to have any of its
securities listed on the Nasdaq SmallCap Market.
SECTION 3.28 Information Statement. The information supplied or to be supplied
by or on behalf of the Target Corporations and Stockholders for inclusion or
incorporated by reference in the Big City information statement pursuant to
Section 14(f) of the Exchange Act of 1934, as amended ("Exchange Act"), in
definitive form (the "Information Statement"), will not, at the date mailed to
the Big City stockholders, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. The Information Statement, insofar as it relates
to the Target Corporations and Stockholders, will comply as to form in all
material respects with the applicable provisions of the Exchange Act and rules
and regulations thereunder. The representation and warranty made in this Section
3.28 with respect to any Stockholder are made only by the Stockholder solely
with respect to itself.
SECTION 3.29 Tax Opinion. The Target Corporation Parties have received an
opinion of Gardner Carton & Douglas in the form of Exhibit B annexed hereto.
SECTION 3.30 Schedules. The Target Corporation Parties have made a good faith
effort to provide information on each Schedule to this Agreement, where
necessary, pertinent to the related representation and warranty; however, to the
extent information is provided on one schedule which should also have been
presented on another schedule, disclosure on the one schedule will be deemed
disclosure on the other schedules where appropriate.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BIG CITY
AND THE MERGER SUBSIDIARY
Each of the Big City Parties, jointly and severally, represents and
warrants to the Stockholders as follows:
SECTION 4.1 Organization. Each of the Big City Parties and Big City
Subsidiaries is a corporation or limited partnership, as the case may be, duly
organized, validly existing and in good standing under the laws of its
respective state of incorporation. Except as described on Schedule 4.1(a), none
of the Big City Parties owns, directly or indirectly, any capital stock or other
securities of any issuer or any equity interest in any other entity, including
any partnership, limited partnership, limited liability company, business trust,
joint venture or any other business entity, or is a party to any agreement to
acquire any such securities or interest. None of the Big City Parties conducts
any business through any entity other than itself except for the limited
purposes for which the Big City Subsidiaries are maintained as corporate or
partnership entities. Each of the Big City Parties and Big City Subsidiaries is
qualified to do business in each state where the nature of the business it
conducts or the properties it owns, leases or operates requires it to so qualify
(which states are listed in Schedule 4.1(b)), except where the failure to so
qualify would not reasonably be expected to have, either singly or in the
aggregate, a Big City Material Adverse Effect. Each of the Big City Parties and
Big City Subsidiaries has all requisite corporate power to own, lease and
operate its properties and to carry on its business as now being conducted.
SECTION 4.2 Authority; Corporate Action. Each of the Big City Parties has all
necessary corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated by the respective agreements to which
it is a party. All corporate action necessary to be taken by the Big City
Parties to authorize the execution, delivery and performance of this Agreement
and all other agreements and instruments to be delivered by the Big City Parties
in connection with the transactions contemplated hereby or thereby will have
been, duly and validly taken, and this Agreement and such other agreements and
instruments have been duly executed and delivered by each of the Big City
Parties that are party thereto. Subject to the terms and conditions hereof, this
Agreement constitutes valid, binding and enforceable obligations of each of the
Big City Parties that are party thereto, enforceable in accordance with their
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or similar laws of
general application now or hereafter in effect affecting the rights and remedies
of creditors and by general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).
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SECTION 4.3 No Conflict; Required Filings and Consents.
(a) Provided that the actions described in Section 9.1(c) and (d) are completed
by the Closing, the execution and delivery of this Agreement (and each of the
other agreements contemplated hereby) by each of the Big City Parties do not,
and the performance by each of the Big City Parties of its respective
obligations under this Agreement (and each of the other agreements or
instruments contemplated hereby) will not, as the case may be, (i) conflict with
or violate the Certificate of Incorporation or By-laws of each of the Big City
Companies, (ii) conflict with or violate any law, statute, ordinance, rule,
regulation, order, judgment or decree applicable to each of the Big City
Companies or by which any of their respective properties or assets is bound or
affected, or (iii) result in any breach of or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a Lien on any of the properties or
assets of any of the Big City Companies pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which any of the Big City Companies is a party or by
which any of the Big City Companies or any of their respective properties or
assets is bound or affected, except, in the case of clauses (ii) and (iii),
above, for any such conflicts, violations, breaches, defaults or other
alterations or occurrences that would not reasonably be expected to have, either
singly or in the aggregate, a Big City Material Adverse Effect.
(b) The execution and delivery of this Agreement (and each of the other
agreements and instruments contemplated hereby) by each of the Big City Parties
do not, and the performance of this Agreement (and each of the other agreements
and instruments contemplated hereby) by each of the Big City Parties will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental entity, except (i) for (A) compliance with the
applicable requirements, if any, of the Exchange Act, Securities Act, state
securities laws or state takeover laws and (B) filing and recordation of
appropriate merger documents and the Certificate of Amendment to the Certificate
of Incorporation of Big City to establish the Big City Preferred Stock as
described in Section 9.1(c) as required by the laws of the State of New York,
and (ii) where failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not reasonably be
expected to have, either singly or in the aggregate, a Big City Material Adverse
Effect.
SECTION 4.4 Capitalization. The authorized capital stock of Big City and the
number of issued shares of each class of capital stock is set forth in Schedule
4.4. Except as set forth on Schedule 4.4, there are no options, warrants,
subscriptions, conversion rights or securities exchange rights or other
securities or other contractual rights outstanding which require, or give any
person the right to require, the issuance, delivery or sale (including right of
conversion or exchange) of any capital stock of Big City, the Merger
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Subsidiaries and the Big City Subsidiaries, whether or not such rights are
presently exercisable. There are no pre-emptive rights, rights of first refusal
or other similar agreements obligating Big City, the Merger Subsidiaries and the
Big City Subsidiaries to offer any shares of its capital stock to any person.
Except as set forth on Schedule 4.4 no holder of any securities of Big City, the
Merger Subsidiaries and the Big City Subsidiaries (or securities issuable in
exchange therefor) has the right to require any party to register such
securities under the Securities Act (as defined), either on a "demand" or a
"piggyback" basis. All shares, options and warrants and other securities of Big
City issued since its date of incorporation were issued in compliance with the
registration provisions of the Securities Act and applicable state securities
laws or pursuant to an exemption therefrom. Big City does not have outstanding
any bonds, debentures, notes or other obligations under the terms of which the
holders of which have any rights to vote with the stockholders of Big City. Big
City has reserved 400,000 shares of Big City Stock for issues pursuant to
stock-based awards (including employee stock options) that may be made under the
Big City 1998 Performance Equity Plan ("1998 Option Plan"). As of the date of
this Agreement, the only awards made under the 1998 Plan is an option to
purchase 100,000 shares of Big City Stock and the option to Mark Weinreb
referred to in Section 4.24.
SECTION 4.5 Licenses and Permits; Compliance with Laws. Big City and the Big
City Subsidiaries hold all permits, licenses and approvals (collectively, the
"Big City Permits") from all Federal, state and local governmental authorities
necessary for it to own, lease and operate its properties and to carry on its
businesses as now being conducted, and no Big City Permit has been rescinded and
all Big City Permits are in full force and effect and are listed on Schedule
4.5, except for Big City Permits which the failure to hold would not reasonably
be expected to have, either singly or in the aggregate, a Big City Material
Adverse Effect. The business of Big City is being and has been conducted in
compliance with the Big City Permits and all applicable laws, statutes,
ordinances, regulations, judgments, orders, decrees, concessions, grants and
other authorizations of any governmental authority, except for such failures
that would not reasonably be expected to have, either singly or in the
aggregate, a Big City Material Adverse Effect. Big City and the Big City
Subsidiaries are not in default in any material respect under any Big City
Permits and no event has occurred and no condition exists which, with the giving
of notice, the passage of time, or both, would constitute a default thereunder,
except where such default would not reasonably be expected to have, either
singly or in the aggregate, a Big City Material Adverse Effect. Neither the
execution and delivery of this Agreement nor any of the other documents
contemplated hereby nor the consummation of the transactions contemplated hereby
or thereby nor compliance by Big City with any of the provisions hereof or
thereof will result in any suspension, revocation, impairment, forfeiture or
nonrenewal of any Big City Permit, except for Big City Permits the loss or
impairment of which would not reasonably be expected to have, either singly or
in the aggregate, a Big City Material Adverse Effect. The Big City Parties and
the Big City Subsidiaries do not provide any service that would require that Big
City obtain any authorization or make any registration in any foreign country.
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SECTION 4.6 Real Property. Schedule 4.6 contains a true, correct and complete
list and brief description of all real property (i) leased or subleased by Big
City and the Big City Subsidiaries or (ii) utilized or accessed by Big City and
the Big City Subsidiaries in the operation of its business, including all
rights-of-way and easement agreements. The space occupied by Big City is
adequate for its current and planned operations through December 31, 2000.
Except as set forth on Schedule 4.6, Big City has not subleased any of its real
property to others. Except as set forth on Schedule 4.6, Big City and the Big
City Subsidiaries are in compliance with all of the provisions of its leases and
subleases and are not in default thereunder. Each leasehold interest (i) is
valid, subsisting and in full force and effect; and (ii) is not subject to any
Liens (other than collateral assignments of the leases granted by the landlords
thereunder to the extent permitted by the terms of the leases and which do not
interfere with or detract from the use by Big City and the Big City Subsidiaries
of the property subject to the leases). The payment obligations of any sublessee
under any sublease are equal to or greater than the payments required to be made
for the subleased space to the landlord. Except as set forth in Schedule 4.6
there are no facts known to Big City and the Big City Subsidiaries which would
prevent Big City from occupying any of the property it leases after the Closing
in substantially the same manner as before. The execution and delivery of this
Agreement, and the performance of the obligations hereunder and thereunder, will
not constitute a default under any Lease.
SECTION 4.7 Material Contracts.
(a) There are no contracts, agreements or other documents required to be filed
with the Big City Reports (as hereinafter defined) that have not been filed as
exhibits thereto under the Exchange Act ("Big City Material Contracts"). Except
as set forth on Schedule 4.7(a), Big City and the Big City Subsidiaries are not
currently and have not been during the past five years, a party to any prime
contract, subcontract, basic ordering agreement, letter contract, arrangement,
purchase order, or delivery order of any kind, including all amendments,
modifications, and options thereunder or relating thereto, given by a party
holding itself out as a federal or state government or agency, division,
subdivision or procuring office thereof.
(b) Except as set forth in Schedule 4.7(b), all Big City Material Contracts and
material agreements of the Big City Subsidiaries are valid and in full force and
effect and Big City and the Big City Subsidiaries have not violated any
provision of, or committed or failed to perform any act which with or without
notice, lapse of time or both would constitute a default under the provisions
of, any Big City Material Contract or any material agreements of the Big City
Subsidiaries, respectively.
SECTION 4.8 Litigation. Except as set forth on Schedule 4.8, there are no
actions, suits, arbitrations, mediations or other proceedings pending or, to the
knowledge of Big City, threatened against Big City or the Big City Subsidiaries
at law or in equity before any court, Federal, state, municipal or other
governmental department or agency or other tribunal nor are there any customer
complaints or other circumstances which could reasonably serve as a basis for
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same. Except as set forth on Schedule 4.8, neither Big City nor the Big City
Subsidiaries nor their respective property is subject to any order, judgment,
injunction or decree. Except as set forth on Schedule 4.8, no claim, action,
proceeding or investigation is pending or, to the best knowledge of Big City,
threatened against Big City or the Big City Subsidiaries which would reasonably
be expected to have a Big City Material Adverse Effect.
SECTION 4.9 Taxes, Tax Returns and Audits. Big City has (or, in the case of
returns becoming due after the date hereof and on or before the Effective Time,
will have prior to the Effective Time) prepared and filed on a timely basis with
all appropriate Federal, state, local and foreign governmental authorities all
returns in respect of Taxes it is required to file on or prior to the Effective
Time or by such date will have obtained the appropriate extensions to file, and
all such returns completely and accurately (or, in the case of returns becoming
due after the date hereof and on or before the Effective Time, will completely
and accurately) set forth the amount due of any Taxes relating to the applicable
period. Big City has paid (or, in the case of Taxes becoming due after the date
hereof and on or before the Effective Time, will have paid) in full all Taxes
due on or before the Effective Time and, in the case of Taxes accruing on or
before the Effective Time that are not due on or before the Effective Time, Big
City has or will have established adequate reserves on its books and records and
financial statements (including the Balance Sheet) for such payment in
accordance with GAAP. Big City has withheld from each payment made to any of its
present or former employees, officers, directors or other party all amounts
required by law to be withheld and has, where required, remitted such amounts
within the applicable periods to the appropriate governmental authorities. In
addition, except as set forth on Schedule 4.9, (i) there are no assessments
against Big City with respect to Taxes that have been issued and are outstanding
and Big City is not aware of a basis for the assessment of additional Taxes for
any period for which tax returns have been filed; (ii) no governmental
authorities have audited or, to the knowledge of Big City, examined Big City in
respect of Taxes; (iii) Big City has not executed or filed any agreement
extending the period of assessment or collection of any Taxes which has not yet
expired by its terms; (iv) Big City has not received written notification from
any governmental authority of its intention to commence any audit or
investigation; (v) Big City is not liable for Taxes of any other person or
entity and is not a party to or bound by or nor does it have any obligation
under any tax sharing or tax indemnification agreement, provision or
arrangement, whether formal or informal, and no power of attorney, which is
currently in effect, has been granted with respect to any matter relating to
Taxes of Big City; (vi) Big City is not presently required nor will it be
required to include any adjustment in taxable income under Section 481 of the
Code (or any similar provision of the Tax laws of any jurisdiction) as a result
of any change in method of accounting or otherwise; (vii) Big City has not filed
a consent under Section 341(f) of the Code; and (viii) Big City has not and will
not make any payment that will not be deductible under Section 280G of the Code.
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SECTION 4.10 Absence of Certain Changes. Other than as set forth on Schedule
4.10, or as required or provided by this Agreement or as a result of the sale or
closing of retail stores owned by Big City since December 31, 1998 pursuant to
arrangements or agreements concluded or executed prior to the date of this
Agreement, Big City has not, since December 31, 1998:
(a) issued, delivered or agreed to issue any stock, bonds or other corporate
securities (whether authorized and unissued or held in the treasury), or granted
or agreed to grant any options (including employee stock options), warrants or
other rights for the issue thereof;
(b) borrowed or agreed to borrow any funds;
(c) incurred any obligation or liability, absolute, accrued, contingent or
otherwise, whether due or to become due, except current liabilities incurred in
the ordinary course of business and consistent with prior practice;
(d) discharged or satisfied any obligation or encumbrance other than ordinary
operating expenses and trade payables reflected on the balance sheet dated
December 31, 1998 included in the Big City Reports, and trade payables and other
operating expenses incurred after December 31, 1998 in the ordinary course of
business and consistent with prior practice, all of which payments have been
made in a manner consistent with prior practice;
(e) failed to pay any payables when due, consistent with prior practice;
(f) sold, transferred, leased to others or otherwise disposed of any assets
outside of the ordinary course of business or canceled or compromised any debt
or claim, or waived or released any right of substantial value;
(g) received any notice of termination or other threatened termination of any
Big City Material Contract, lease, Big City Permit or other agreement, or
suffered any damage, destruction or loss (whether or not covered by insurance)
the effect of which would reasonably be expected to have, either singly or in
the aggregate, a Big City Material Adverse Effect;
(h) encountered any labor union organizing activity labor disputes or had any
material change in its relations with its employees or agents, clients or
insurance carriers;
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(i) made any accrual or arrangement for or any bonus, or any increase in
compensation or any severance or termination payment to any present or former
officer or employee of Big City;
(j) transferred or granted any rights under, or entered into any settlement
regarding the breach or infringement of, any license or any of the Intellectual
Property used in the businesses or operations of Big City, or licensed or
otherwise transferred or disposed of any of its material Intellectual Property;
(k) declared or made, or agreed to declare or make, any payment of dividends or
distributions of any assets of any kind whatsoever to any of its stockholders or
any affiliate of any of its stockholders, or purchased or redeemed, or agreed to
purchase or redeem, any of its capital stock, or made or agreed to make any
payment to any of its stockholders or any affiliate of any of its stockholders,
whether on account of debt, management fees or otherwise;
(l) suffered any material adverse change, in any case or in the aggregate, in
its assets, liabilities, financial condition, results of operations or business;
or
(m) entered into any agreement or made any commitment to take any of the types
of action described in any of the foregoing clauses (other than clauses (g), (h)
or (i)).
SECTION 4.11 Employee Benefit Plans. Schedule 4.11 sets forth a list of all the
"employee benefit plans" (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), programs and arrangements
maintained for the benefit of any current or former employee, officer or
director of Big City (collectively, the "Big City Benefit Plans"). Each Big City
Benefit Plan has been operated in all material respects in accordance with the
terms and requirements of applicable law and all required returns and filings
for each Big City Benefit Plan have been timely made. Big City has not incurred
any direct or indirect liability under, arising out of or by operation of ERISA
or the Code in connection with any Big City Benefit Plan or any other employee
benefit plan maintained by any other entity under common control with Big City,
and no fact or event exists that could reasonably be expected to give rise to
any such liability. All contributions due and payable on or before the date
hereof in respect of each Big City Benefit Plan have been made in full and in
proper form.
SECTION 4.12 Labor Relations. Big City is not a party to any collective
bargaining agreement or other contract or agreement with any labor organization
or other representative of any of the employees of Big City. To the knowledge of
Big City, there have been no labor organization activities involving any of the
employees of Big City during the last five years. Schedule 4.12 sets forth those
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persons with whom Big City has entered into an employment agreement or
employment restriction and except for those persons listed on Schedule 4.12 all
employees of Big City are terminable at will.
SECTION 4.13 Insurance Policies; Claims. Schedule 4.13 sets forth all insurance
policies and bonds maintained by or on behalf of Big City. Except as disclosed
in Schedule 4.13, the insurance policies and bonds set forth in Schedule 4.13
are provided by reputable insurers or issuers, and provide adequate coverage for
all normal risks incident to the businesses of Big City and its assets. No
claims have been made against Big City as a result of allegedly defective
products or any alleged libelous, slanderous or defamatory statements or
activities and Big City does not know of any basis for the assertion of any such
claim. No insurance policy issued to or on behalf of Big City has ever been
canceled by the policy issuer. No issuer of any policy covering Big City or any
of its assets, operations or employees has refused to review a claim during the
past five years.
SECTION 4.14 Intellectual Property. Big City owns or possesses all right, title
and interest in and to, or a valid and enforceable license or other right to use
all of the Intellectual Property that is used in or necessary to the conduct of
the business of Big City. All Intellectual Property that is used or necessary in
the conduct of the business of Big City (including all applications and
registrations therefor) is listed on Schedule 4.14, and no other Intellectual
Property is used or necessary in the conduct of such business. Except as
disclosed in Schedule 4.14, (i) Big City has the exclusive right to use its
Intellectual Property; (ii) all registrations with respect thereto are in full
force and effect; (iii) there are no transfer restrictions, direct or indirect,
relating thereto that would prevent or impair any transfer thereof to the
Surviving Corporation as provided herein; and (iv) Big City has taken
appropriate and reasonable security measures to protect the secrecy,
confidentiality, and value of Big City's trade secrets and related Intellectual
Property. All Intellectual Property licensed to third parties is listed on
Schedule 4.14. To the knowledge of Big City, there has been no disclosure of any
trade secrets or other proprietary information of Big City that has had, or
could be reasonably expected to have, a Big City Material Adverse Effect. Big
City has taken customary steps to backup all of its Intellectual Property. Big
City has not infringed, misappropriated or otherwise violated any Intellectual
Property of any other person. To the knowledge of Big City, no person is
infringing upon any Intellectual Property right of Big City.
SECTION 4.15 Personal Properties; Assets. Big City (a) has good and marketable
title to all personal property and assets owned by it (except personal property
sold or otherwise disposed of since the date thereof in the ordinary course of
business and the sale of franchise assets), and that personal property acquired
after the date thereof and not thereafter disposed of, free and clear of all
Liens, except (i) statutory liens securing payments not yet due, and (ii) such
imperfections or irregularities of title, claims, liens, charges, security
interests or encumbrances which do not secure monetary obligations and which do
not materially affect the use or marketability of the personal properties or
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assets subject thereto or affected thereby or otherwise materially impair Big
City's business operations or use of such assets. Each lease for personal
property that is material to the businesses of Big City is valid without default
thereunder by the lessee or, to the knowledge of Big City, lessor, and Big City
are in possession of the personal property purported to be leased thereunder.
The personal properties and assets of Big City are in good operating condition
and repair (ordinary wear and tear excepted), and constitute all of the personal
properties, assets and rights which are necessary for the businesses and
operations of Big City as currently conducted and planned through December 31,
1999.
SECTION 4.16 Bank Accounts. Schedule 4.16 sets forth the name of each bank in
which Big City has an account or safe deposit box, vault, lock-box or other
arrangement, the account number and description of each account at each bank and
the names of all persons authorized to draw thereon or to have access thereto;
and the names of all persons, if any, holding tax or other powers of attorney
from Big City.
SECTION 4.17 Records. The books of account, minute books, stock certificate
books and stock transfer ledgers of Big City are complete and correct in all
material respects, and there have been no material transactions involving Big
City of the type typically recorded in such records that have not been recorded.
SECTION 4.18 Environmental, Health and Safety Matters.
(a) To the best of its knowledge, Big City is in compliance with Environmental,
Health and Safety Requirements, except for such noncompliance as would not
reasonably be expected to have, either singly or in the aggregate, a Big City
Material Adverse Effect.
(b) To the best of its knowledge, Big City has not received any written notice,
report or other information regarding any actual or alleged material violation
of Environmental, Health, and Safety Requirements, or any material liabilities
or potential material liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise), including any investigatory, remedial or corrective
obligations, relating to Big City or its property arising under Environmental,
Health, and Safety Requirements, the subject of which would reasonably be
expected to have, either singly or in the aggregate, a Big City Material Adverse
Effect.
SECTION 4.19 Securities and Exchange Commission Reports.
(a) Big City has filed all forms, reports, statements and other documents
required to be filed with the Commission and has heretofore made available to
the Target Corporation Parties, in the same form filed with the Commission,
together with any amendments thereto, copies of its (i) Annual Report on Form
10-K for the year ended December 31, 1998 and all Quarterly Reports on Form 10-Q
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filed since January 1, 1999 and (ii) all proxy statements relating to meetings
of stockholders (whether annual or special) since January 1, 1999 (collectively,
the "Big City Reports"). As of their respective filing dates, the Big City
Reports complied as to form in all material respects with the requirements of
the Securities Act and Exchange Act and did not contain any untrue statement of
material fact or omit to state a material fact required to be stated therein or
necessary to make the statement therein, in light of the circumstances under
which they were made, not misleading.
(b) The financial statements of the Big City Companies for the year ended
December 31, 1998 audited and reported on by Richard A. Eisner & Company, LLP
(collectively, the "Big City Financial Statements") are contained in the Annual
Report on Form 10-K for the year ended December 31, 1998 which has been
delivered to the Target Corporation Parties as part of the Big City Reports. The
Big City Financial Statements, including all related notes and schedules
thereto, fairly present in all material respects the consolidated financial
position of the Big City Companies as at the respective dates thereof and the
consolidated results of operations and cash flows of the Big City Companies for
the periods indicated in accordance with GAAP applied on a consistent basis
throughout the periods involved (except as may be noted therein) and subject, in
the case of interim financial statements, to normal year-end adjustments.
SECTION 4.20 Information Statement. The information supplied or to be supplied
by or on behalf of Big City for inclusion or incorporation by reference in the
Information Statement will not, at the date mailed to the Big City stockholders,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Information Statement, insofar as it relates to Big City, will
comply as to form in all material respects with the applicable provisions of the
Exchange Act and rules and regulations thereunder.
SECTION 4.21 Disclosure. No representation or warranty by either of the Big City
Parties contained in this Agreement or any Schedule hereto, when taken together
with the Big City Reports, contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary in order
to make the statements contained herein or therein not misleading.
SECTION 4.22 Brokers. Except for a finder's fee payable at the Closing to
Perrin, Holden & Davenport Capital Corp. by issuance of the Warrant referred to
in Section 4.24, no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transaction contemplated by this Agreement based upon arrangements made by or on
behalf of the Big City Parties.
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SECTION 4.23 Big City Stock. The shares of Big City Stock and shares of Big City
Preferred Stock to be issued to the Stockholders pursuant to this Agreement
will, when issued as provided in this Agreement, be validly issued, fully paid
and non-assessable.
SECTION 4.24 Collateral Agreements. (a) Big City has executed the Severance
Agreement and Option Agreement for Mark Weinreb in the form of Exhibit C-1 and
C-2 and (b) Big City has executed the Warrants granting to Perrin, Holden &
Davenport Capital Corp. the right to purchase up to 500,000 shares of the Common
Stock of Big City in the form of Exhibit F annexed hereto.
SECTION 4.25 Schedules. The Big City Parties have made a good faith effort to
provide information on each Schedule to this Agreement, where necessary,
pertinent to the related representation and warranty; however, to the extent
information is provided on one schedule which should also have been presented on
another schedule, disclosure on the one schedule will be deemed disclosure on
the other schedules where appropriate.
ARTICLE V
NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF THE PARTIES
SECTION 5.1 Survival. Each statement, representation, warranty, covenant and
agreement made or deemed made by any Party to another under this Agreement shall
remain in effect continuously to and following the Closing, and shall terminate
at such time as the obligation to indemnify for breaches of such statement,
representation, warranty, covenant or agreement under Article X, terminates.
Notwithstanding the above, there shall be no duty to update such statements,
representations or warranties after the Closing.
SECTION 5.2 Nonwaiver of Rights. The representations, warranties, covenants and
agreements made or deemed made by any Party to another shall not be affected or
deemed waived by reason of the fact that another Party or its representatives
knew or should have known that any such representations, warranties, covenants
or agreements is or might be inaccurate in any respect. Any furnishing of
information by any Party to another pursuant to, or otherwise in connection
with, this Agreement, including, without limitation, any information contained
in any document, contract, book or record of the delivering Party to which
another Party shall have access or any information obtained by, or made
available to, any Party as a result of any investigation made by or on behalf of
such Party prior to or after the date of this Agreement, shall not affect such
Party's right to rely on any representation, warranty, covenant or agreement
made or deemed made by another Party in this Agreement and shall not be deemed a
waiver thereof. Notwithstanding the foregoing, in the event a Party learns prior
to Closing that a representation, warranty or covenant of the other Party is
materially inaccurate, that Party shall have the obligation to notify the other
Party of such inaccuracy.
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ARTICLE VI
COVENANTS OF TARGET CORPORATIONS AND THE STOCKHOLDERS
SECTION 6.1 Conduct of Business. Each Target Corporation and each Stockholder
covenants and agrees that each Target Corporation will conduct its business and
operations in the ordinary course consistent with previous practice. Each Target
Corporation and each Stockholder covenants and agrees that, from the date hereof
through the Closing Date, except as otherwise set forth in this Agreement or
agreed to by Big City in writing, they shall cause each Target Corporation to:
(a) conduct its business only in the ordinary course and in a manner consistent
with the current practice of such business, preserve substantially intact the
business organization of each Target Corporation, use commercially reasonable
efforts to keep available the services of the current employees of each Target
Corporation and preserve the current relationships of each Target Corporation
with customers and other persons with which Target Corporation has significant
business relations, and comply with all requirements of law, the violation of
which would reasonably be expected to have, either singly or in the aggregate, a
Target Corporation Material Adverse Effect;
(b) not pledge, sell, transfer, dispose of, or otherwise encumber or grant any
rights or interests to others of any kind with respect to, all or any part of
its capital stock or enter into any discussions or negotiations with any other
party to do so;
(c) not pledge, sell, lease, transfer, dispose of or otherwise encumber any of
its property or assets other than consistent with past practices and in the
ordinary course of business or enter into any discussions or negotiations with
any other party to do so;
(d) not (i) issue any shares of its capital stock nor any options, obligations,
rights, warrants or other securities convertible into or exchangeable for its
capital stock, or any other class of securities, whether debt or equity, of each
Target Corporation; or (ii) amend or otherwise modify the terms of any such
securities, options, obligations, rights or warrants in a manner inconsistent
with the provisions of this Agreement or the effect of which shall be to make
such terms more favorable to the holders thereof;
(e) not declare any dividend or make any distribution in cash, securities or
otherwise on the outstanding shares of its capital stock, or directly or
indirectly redeem or purchase any such capital stock;
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(f) not, in any manner whatsoever, advance, transfer (other than in payment for
goods received or services rendered in the ordinary course of business) or
distribute to any of the Stockholders or any of their affiliates, or otherwise
withdraw, cash or cash equivalents in any manner inconsistent with established
cash management practices, except to pay existing obligations of each Target
Corporation in accordance with their terms;
(g) not make, agree to make or announce any general wage or salary increase or
enter into or amend any employment contract or, unless provided for by contract
executed on or before the date of this Agreement and provided to the Big City
Parties, increase the compensation payable or to become payable to any of its
officers or employees or adopt or increase the benefits of any bonus, insurance,
pension or other employee benefit plan, payment or arrangement, except for those
increases, consistent with past practices, normally occurring as the result of
regularly scheduled salary reviews and increases, and except for increases
directly or indirectly required as a result of changes in applicable law or
regulations;
(h) not make any capital expenditures, except in the ordinary course of business
and consistent with past practices;
(i) not propose or adopt any amendments to its Certificate of Incorporation or
By-laws, except as contemplated hereby;
(j) not merge or consolidate with, or acquire all or substantially all of the
assets of, or otherwise acquire any business operations of, any person or entity
or enter into any agreement for any of the foregoing;
(k) not (i) change any of its methods of accounting in effect at December 31,
1998, or (ii) make or rescind any material, express or deemed election relating
to taxes, settle or compromise any material claim, action, suit, litigation,
proceeding, arbitration, investigation, audit or controversy relating to taxes,
or change any of its methods of reporting income or deductions for Federal
income tax purposes from those employed in the preparation of the Federal income
tax returns for the taxable year ending December 31, 1998;
(l) not deviate from past practices or schedules with respect to the payment of
accounts payable or collection of accounts receivable;
(m) except pursuant to this Agreement, not prepay, before the scheduled
maturity thereof, any of its long-term debt, or incur any obligation for
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borrowed money, whether or not evidenced by a note, bond, debenture or similar
instrument, other than indebtedness incurred in the ordinary course of business
consistent with past practices;
(n) not enter into or modify in any material respect any Material Contract,
Lease or Permit other than in the ordinary course of business;
(o) not take any action that will, or could reasonably be expected to, result
in any of its representations and warranties set forth in this Agreement being
inaccurate or in any of the conditions to the Merger not being satisfied; or
(p) forebear from agreeing in writing or otherwise to do any of the foregoing.
SECTION 6.2 Access to Information; Confidentiality.
(a) Between the date of this Agreement and the Closing Date, the Target
Corporation Parties will (i) permit the Big City Parties and their
Representatives reasonable access to all of the books, records, reports and
other related materials, offices and other facilities and properties of each
Target Corporation; (ii) permit the Big City Parties and their Representatives
to make such inspections thereof as they may reasonably request; and (iii)
furnish the Big City Parties and their Representatives with such financial and
operating data (including without limitation the work papers of each Target
Corporation's accountants) and other information with respect to each Target
Corporation as the Big City Parties may from time to time reasonably request.
(b) Between the date of this Agreement and the Closing Date, employees or
Representatives of Big City may meet with and interview all employees of each
Target Corporation at reasonable times during business hours as may be arranged
by Big City and each Target Corporation.
(c) Each of the Target Corporation Parties shall hold and shall cause their
Representatives to hold in strict confidence, unless compelled to disclose by
judicial or administrative process or by other requirements of law, all terms of
this Agreement and related agreements and all documents and information
concerning any of the Big City Companies furnished to them by the Big City
Parties or their Representatives in connection with the transactions
contemplated by this Agreement (except to the extent that such information can
be shown to have been (i) previously known by any of the Target Corporation
Parties, (ii) in the public domain through no fault of any of the Target
Corporation Parties or (iii) later lawfully acquired by any of the Target
Corporation Parties from another source, which source shall not be the agent of
any of the Big City Companies or person under confidentiality obligation to any
of the Big City Companies) and, except as otherwise required by applicable law,
rule or regulation, none of the Target Corporation Parties shall release or
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disclose such information to any other person, except its auditors, actuaries,
attorneys, financial advisors, bankers and other consultants and advisors who
need to know same in connection with this Agreement.
SECTION 6.3 Maintenance of Assets; Insurance. Between the date of this
Agreement and the Closing Date, the Stockholders shall cause each Target
Corporation to continue to maintain and service the assets of each Target
Corporation consistent with past practice. Through the Closing Date, each Target
Corporation shall maintain insurance policies providing insurance coverage for
its business and the assets of each Target Corporation of the kinds, in the
amounts and against the risks as are commercially reasonable for the businesses
and risks covered.
SECTION 6.4 No Other Negotiations. Unless and until this Agreement shall have
been terminated pursuant to its terms, none of the Target Corporation Parties
nor any of their Representatives shall, directly or indirectly, solicit,
institute, initiate, pursue or enter into any inquiries, discussions, proposals
or negotiations with any person concerning any merger, sale of substantial
assets, tender offer, sale of shares of stock or similar transaction involving a
Target Corporation or disclose, directly or indirectly, any information not
customarily disclosed to the public concerning a Target Corporation, afford to
any other person access to the properties, books or records of a Target
Corporation, or otherwise assist any person preparing to make or who has made
such an offer, or enter into any agreement with any third party providing for a
business combination transaction, equity investment or sale of significant
amount of assets of a Target Corporation.
SECTION 6.5 No Securities Transactions. None of the Target Corporation Parties
shall engage in any transactions involving the securities of Big City prior to
the Closing Date, and, thereafter, any of the Stockholders that is an employee
of the Surviving Corporation or any of the other Big City Companies shall not
engage in any such transaction except as allowed under Big City's policies. In
addition, each Stockholder covenants that it will not sell or otherwise transfer
any Big City Stock acquired in this transaction unless such stock is registered
under the Securities Act or an exemption therefrom is available.
SECTION 6.6 Fulfillment of Conditions. The Stockholders shall use their
commercially reasonable efforts to fulfill, or cause to be fulfilled, the
conditions specified in Article IX to the extent that the fulfillment of such
conditions is within their control. The foregoing obligation includes taking or
refraining from such actions as may be necessary to fulfill such conditions
(including causing each Target Corporation to conduct its businesses in such
manner that on the Closing Date the representations and warranties of the
Stockholders contained herein shall be accurate as though then made, except as
contemplated by the terms hereof).
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SECTION 6.7 Disclosure of Certain Matters. During the period from the date
hereof through the Closing Date, the Target Corporation Parties shall give the
Big City Parties prompt written notice of any event or development that occurs
that (a) had it existed or been known on the date hereof would have been
required to be disclosed under this Agreement or (b) would cause any of the
representations and warranties of any of the Target Corporation Parties
contained herein to be inaccurate or otherwise misleading, (c) gives a Target
Corporation any reason to believe that any of the conditions set forth in
Article IX will not be satisfied, or (d) is of a nature that is or may be
materially adverse to the operations, prospects or condition (financial or
otherwise) of a Target Corporation.
SECTION 6.8 Certain Consents. The Target Corporation Parties, in consultation
with the Big City Parties and their Representatives, shall use their
commercially reasonable efforts to obtain consents under all Material Contracts,
Leases and Permits and all other instruments to which each Target Corporation is
a party or by which it is bound which require the consent of any other party or
person either by the terms thereof or as a matter of law in connection with the
Merger.
SECTION 6.9 Non-use of Name. From and after the date hereof, no Stockholder
shall establish or otherwise be associated with, as an owner, partner,
shareholder, employee or otherwise, any firm which utilizes the name
"Intelligent Computer Solutions" or "VillageNet" or any variant thereof as part
of its business name other than in connection with their employment by Big City
or the Surviving Corporation and their affiliates after the Closing Date or
grant to any person or entity the right to use the name "Intelligent Computer
Solutions" or "VillageNet" or any variant thereof, or grant any material rights
to any Intellectual Property to any third party other than in the ordinary
course of business of Big City or the Surviving Corporation and their
affiliates.
SECTION 6.10 Information for Information Statement. The Target Corporation
Parties will cooperate with Big City in the preparation of the Information
Statement and furnish to Big City all information concerning each of the Target
Corporation Parties that is required or customary for inclusion in an
Information Statement.
SECTION 6.11 Lien Search. The Target Corporations will order and provide to Big
City a lien search ("Lien Search") by a mutually acceptable company of each of
the Target Corporations in respect of UCC filings, federal and state tax lien
and judgments, and federal and state courts (including bankruptcy court) in each
jurisdiction in which the Target Corporations are incorporated and conduct a
substantive portion of their business operations, as listed in Schedule 3.1(b)
which Lien Search will be paid by the Target Corporations.
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SECTION 6.12 Post Merger Tax Status. The Target Corporation Parties will not
undertake any actions prior to the Closing that would adversely affect the
qualification of the Merger as a reorganization within the meaning of Section
368(a) of the Code.
SECTION 6.13 Financial Statements of Target Corporations. Each Target
Corporation will provide to Big City within forty-five days after the date of
this Agreement audited financial statements for the fiscal year ended December
31, 1998, together with all related notes and schedules, which have been
prepared in accordance with GAAP and Regulation S-X (and where applicable
Regulation S-B), together with an executed independent accountant's report
thereon.
ARTICLE VII
COVENANTS OF THE BIG CITY PARTIES
SECTION 7.1 Conduct of Business. Each of the Big City Parties covenants and
agrees that from the date hereof through the Closing Date, except as otherwise
set forth in this Agreement, including Section 7.13, or agreed to by the
Stockholders in writing, each Big City Party will conduct its business and
operations in the ordinary course consistent with previous practice, and each
will:
(a) conduct its business only in the ordinary course and in a manner consistent
with the current practice of such business, preserve substantially intact the
business organization of each Big City Party, use commercially reasonable
efforts to keep available the services of the current employees of each Big City
Party and preserve the current relationships of each Big City Party with
customers and other persons with which the Big City Party has significant
business relations, and comply with all requirements of law, the violation of
which would reasonably be expected to have, either singly or in the aggregate, a
Big City Corporation Material Adverse Effect; provided, however, the foregoing
will not limit the ability of the Big City Parties to offer, negotiate or sell
their respective assets or to otherwise curtail any of their respective business
activities and take other steps to reduce their respective expenses or suffer
concomitant changes in relationships with customers or other persons having
business relations with the Big City Parties and cause changes in the
application of applicable law and regulation, with the written consent of the
Target Corporation Parties, which will not be unreasonably withheld;
(b) not pledge, sell, transfer, dispose of, or otherwise encumber or grant any
rights or interests to others of any kind with respect to, all or any part of
its capital stock, except pursuant to outstanding instruments defining the
rights of securities holders;
(c) unless pursuant to a written agreement disclosed on Schedule 7.1(c) binding
on any Big City Party as of the date of this Agreement, not pledge, sell,
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transfer, dispose of, or otherwise encumber or grant any of its property or
assets other than consistent with past practices and in the ordinary course of
business or enter into any discussions or negotiations with any other party to
do so;
(d) not (i) issue any options, obligations, rights, warrants or other securities
convertible into or exchangeable for its capital stock, or any other class of
securities, whether debt or equity, of each Big City Party other than options
automatically granted to directors of Big City on March 1 of each year pursuant
to its 1996 Performance Equity Plan; or (ii) amend or otherwise modify the terms
of any outstanding options, obligations, rights or warrants in a manner
inconsistent with the provisions of this Agreement or the effect of which shall
be to make such terms more favorable to the holders thereof;
(e) not declare any dividend or make any distribution in cash, securities or
otherwise on the outstanding shares of its capital stock other than as required
by the Certificate of Incorporation, or directly or indirectly redeem or
purchase any such capital stock;
(f) not, in any manner whatsoever, advance, transfer (other than in payment for
goods received or services rendered in the ordinary course of business) or
distribute to any of the stockholders of the Big City Parties or any of their
affiliates, or otherwise withdraw, cash or cash equivalents in any manner
inconsistent with established cash management practices, except to pay existing
obligations of each of the Big City Parties in accordance with their terms;
(g) not make, agree to make or announce any general wage or salary increase or
enter into or amend any employment contract or, unless provided for by contract
executed on or before the date of this Agreement and provided to the Target
Corporation Parties, increase the compensation payable or to become payable to
any of its officers or employees or adopt or increase the benefits of employee
bonus, insurance, pension or other employee benefit plan, payment or
arrangement, except for those increases, consistent with past practices,
normally occurring as the result of regularly scheduled salary reviews and
increases, and except for increases directly or indirectly required as a result
of changes in applicable law or regulations;
(h) not make any capital expenditures, except in the ordinary course of business
and consistent with past practices;
(i) not propose or adopt any amendments to its Certificate of Incorporation or
By-laws;
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(j) not merge or consolidate with, or acquire all or substantially all of the
assets of, or otherwise acquire any business operations of, any person or entity
or enter into any agreement for any of the foregoing;
(k) not (i) change any of its methods of accounting in effect at December 31,
1998, or (ii) make or rescind any material, express or deemed election relating
to taxes, settle or compromise any material claim, action, suit, litigation,
proceeding, arbitration, investigation, audit or controversy relating to taxes,
or change any of its methods of reporting income or deductions for Federal
income tax purposes from those employed in the preparation of the Federal income
tax returns for the taxable year ending December 31, 1998;
(l) not deviate from past practices or schedules with respect to the payment of
accounts payable or collection of accounts receivable;
(m) not prepay, before the scheduled maturity thereof, any of its long-term
debt, or incur any obligation for borrowed money, whether or not evidenced by a
note, bond, debenture or similar instrument, other than indebtedness incurred in
the ordinary course of business consistent with past practices;
(n) not enter into or modify in any material respect any Big City Material
Contract, lease or Big City Permit other than in the ordinary course of
business, provided Big City may enter into and modify its officer and director
liability insurance, including its renewal and/or extension through tail and
similar arrangements;
(o) not take any action that will, or could reasonably be expected to, result
in any of its representations and warranties set forth in this Agreement being
inaccurate in a manner that would result in a Big City Material Adverse Effect
or in any of the conditions to the Merger not being satisfied; or
(p) forebear from agreeing in writing or otherwise to do any of the foregoing.
SECTION 7.2 Access to Information; Confidentiality.
(a) Between the date of this Agreement and the Closing Date, the Big City
Parties will (i) permit the Target Corporation Parties and their Representatives
reasonable opportunity to meet with and ask questions of the appropriate
officers of Big City and shall furnish the Target Corporation Parties and their
Representatives with such appropriate financial and operating data and other
information with respect to Big City as the Target Corporation Parties may from
time to time reasonably request.
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(b) Each of the Big City Parties shall hold and shall cause their
Representatives to hold in strict confidence, unless compelled to disclose by
judicial or administrative process or by other requirements of law, all
documents and information concerning any of the Target Corporation Parties
furnished to them by the Target Corporation Parties or their Representatives in
connection with the transactions contemplated by this Agreement (except to the
extent that such information can be shown to have been (i) previously known by
any of the Big City Parties, (ii) in the public domain through no fault of any
of the Big City Parties or (iii) later lawfully acquired by any of the Big City
Parties from another source, which source shall not be the agent of any of the
Target Corporation Parties or person under confidentiality obligation to any of
the Target Corporation Parties and, except as otherwise required by applicable
law, rule or regulation, none of the Big City Parties shall release or disclose
such information to any other person, except its auditors, actuaries, attorneys,
financial advisors, bankers and other consultants and advisors who need to know
same in connection with this Agreement.
SECTION 7.3 Maintenance of Assets; Insurance. Between the date of this
Agreement and the Closing Date, the Big City Parties will continue to maintain
and service the assets of each of the Big City Parties consistent with past
practice. Through the Closing Date, each of the Big City Parties shall maintain
insurance policies providing insurance coverage for its business and the assets
of each of the Big City Parties of the kinds, in the amounts and against the
risks as are commercially reasonable for the businesses and risks covered.
SECTION 7.4 No Other Negotiations.
(a) Unless and until this Agreement shall have been terminated pursuant to its
terms, none of the Big City Parties nor any of their Representatives shall,
directly or indirectly, solicit, institute, initiate, pursue or enter into any
inquiries, discussions, proposals or negotiations with any person concerning any
merger, sale of all the assets, tender offer, sale of shares of stock or similar
transaction involving a Big City Party or disclose, directly or indirectly, any
information not customarily disclosed to the public concerning a Big City Party,
afford to any other person access to the properties, books or records of a Big
City Party, or otherwise assist any person preparing to make or who has made
such an offer, or enter into any agreement with any third party providing for a
business combination transaction, or sale of all assets of a Big City Party.
(b) Notwithstanding anything to the contrary in this Agreement, (A) in the event
that there is an unsolicited proposal to enter into a merger, business
combination, purchase of substantially all the assets or similar transaction of
or with one or more of the Big City Parties, Big City at its discretion, may
furnish to and communicate with the party or parties public and non-public
information requested by them and Big City may negotiate with these parties, if
(i) the board of directors of Big City determines in good faith, based upon the
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advice of its financial advisors, that such business combination proposal would,
if consummated, result in a transaction that is more favorable to the Big City
stockholders from a financial point of view, than the transaction contemplated
by this Agreement, and based on the advice of its outside counsel, that, as a
result, such action is necessary for Big City's board of directors to act in a
manner consistent with its fiduciary duties under applicable law, and (ii) prior
to furnishing such information to or entering into negotiations with such third
party, Big City, (x) provides prompt notice to the Target Corporations to the
effect that it is furnishing information to or entering into discussions or
negotiations with such third party and (y) receives from such third party an
executed confidentiality agreement on terms at least as stringent as those
contained in any confidentiality agreement among the Target Corporations and Big
City, and (B) Big City may comply with Rule 14e-2 promulgated under the Exchange
Act with regard to a tender or exchange offer. Big City shall notify the Target
Corporations orally and in writing of any such inquiries, offers or proposals
(including the terms and conditions of any such proposal and the identity of the
person making it) within 24 hours of the receipt thereof, shall keep the Target
Corporations informed of the status and details of any such inquiry, offer or
proposal, and shall give the Target Corporations five days' advance notice of
any agreement to be entered into with or any information to be supplied to any
person making such inquiry, offer or proposal.
SECTION 7.5 Fulfillment of Conditions. From the date hereof to the Closing, the
Big City Parties shall use their commercially reasonable efforts to fulfill or
cause to be fulfilled the conditions specified in Article IX to the extent that
the fulfillment of such conditions is within their control. The foregoing
obligation includes taking or refraining from such actions as may be necessary
to fulfill such conditions (including conducting the business of each of the Big
City Parties in such manner that on the Closing Date the representations and
warranties of the Big City Parties contained herein shall be accurate as though
then made).
SECTION 7.6 Disclosure of Certain Matters. During the period from the date
hereof through the Closing Date, the Big City Parties shall give the Target
Corporation Parties prompt written notice of any event or development that
occurs that (a) had it existed or been known on the date hereof would have been
required to be disclosed under this Agreement, (b) would cause any of the
representations and warranties of any of the Big City Parties contained herein
to be inaccurate or otherwise misleading, (c) gives the Big City Parties any
reason to believe that any of the conditions set forth in Article IX will not be
satisfied, or (d) is of a nature that would result in a Big City Material
Adverse Effect.
SECTION 7.7 Certain Consents. The Big City Parties, in consultation with the
Target Corporation Parties, shall use their commercially reasonable efforts to
obtain consents under all Big City Material Contracts, leases and Big City
Permits and all other instruments to which each Big City Party is a party or by
which it is bound which require the consent of any other party or person either
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by the terms thereof or as a matter of law in connection with the Merger, except
that Big City will not obtain consent from Mercado del Lago Group, L.L.C. in
connection with any of the transactions contemplated by this Agreement.
SECTION 7.8 Maintenance of Big City Employee Medical Benefits. From the date
hereof, through the last day of the month in which the Closing takes place, Big
City shall continue to afford coverage under its existing health and medical
plans to those employees of Big City that are covered under such plans as of the
date hereof.
SECTION 7.9 Filing of Current Report on Form 8-K. Promptly after execution of
this Agreement, Big City shall file if required or permitted under the Exchange
Act a Current Report on Form 8-K ("8-K") with the Securities and Exchange
Commission ("SEC") to report the proposed Merger and the terms thereof.
SECTION 7.10 Composition of Big City and Surviving Corporation Board and
Officers at Effective Time. Big City will take all necessary actions to ensure
that, at the Effective Time, the Board of Directors of Big City and the
Surviving Corporations are comprised of, and the officer positions of Big City
and the Surviving Corporations are filled with, the persons set forth on
Schedule 7.10, each to serve until his or her successor is elected and qualified
or until the earlier termination, resignation or removal.
SECTION 7.11 Blue Sky Compliance. Big City will make such filings in each United
States jurisdiction wherein resides a shareholder of the Target Corporations as
may be necessary under the laws of such jurisdiction to permit the issuance of
the Big City stock hereunder, to the extent the laws of such jurisdiction permit
such issuance.
SECTION 7.12 Taxes. The Big City Parties will not undertake any actions prior to
the Closing that would adversely affect the qualification of the Merger as a
reorganization within the meaning of Section 368(a) of the Code.
SECTION 7.13 Sale or Closing of Retail Stores. Notwithstanding anything to the
contrary contained in this Article VII or elsewhere in this Agreement, after the
date of this Agreement, Big City shall not be permitted to enter into an
arrangement or agreement to sell or close any or all of the retail stores owned
by Big City or its subsidiaries prior to the Closing without the written consent
of the Target Corporation Parties, which consent will not be unreasonably
withheld. The limitations of this Section 7.13 do not apply to a written
agreement disclosed on Schedule 7.1(c) binding on any Big City Party as of the
date of this Agreement.
SECTION 7.14 Opinion of Financial Advisor. Big City will use commercially
reasonable efforts to obtain from Heritage Capital Corp, an opinion that the
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consideration to be paid by Big City for each of the Target Corporations is fair
to the Big City stockholders from a financial point of view, within the later of
(i) 45 days after the receipt by Big City of the audited financial statements of
each of the Target Corporations for the year ended December 31, 1998 or (ii) 30
days after the date of this Agreement.
SECTION 7.15 Information Statement. Prior to the Closing Date, Big City will
prepare and distribute to the holders of Common Stock of Big City the
Information Statement pursuant to the applicable rules and regulations under the
Exchange Act.
SECTION 7.16 Amendment to Certificate of Incorporation. Prior to the Closing
Date, the board of directors of Big City will approve the Amendment to the
Certificate of Incorporation to fix the terms of the Big City Preferred Stock,
as set forth in Exhibit H hereto, and file the amendment with the Secretary of
State of the State of New York.
SECTION 7.17 Representations to Tax Counsel. Big City agrees to deliver at the
request of the Target Corporation Parties the representations to tax counsel for
the Target Corporations in the form and in the substance of Exhibit I hereto,
provided, however, Big City shall not be required to deliver such
representations if such representations are not true and correct as of the time
of such delivery.
ARTICLE VIII
JOINT COVENANTS OF THE PARTIES
SECTION 8.1 Further Action. Each of the Parties shall execute all documents and
other instruments and take all further actions as may be reasonably required or
desirable to carry out the provisions hereof and the transactions contemplated
hereby. Upon the terms and subject to the conditions hereof, each of the Parties
shall use commercially reasonable efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all other things necessary, proper or
advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement.
SECTION 8.2 Schedules. The Parties shall have the obligation to supplement or
amend the Schedules being delivered concurrently with the execution of this
Agreement and annexed hereto with respect to any matter hereafter arising or
discovered which, if existing or known at the date of this Agreement, would have
been required to be set forth or described in the Schedules. The obligations of
the Parties to amend or supplement the Schedules being delivered herewith shall
terminate on the Closing Date. Notwithstanding any such amendment or
supplementation, except as otherwise provided herein, the representations and
warranties of the Parties shall be made with reference to the Schedules as they
exist at the time of execution of this Agreement.
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SECTION 8.3 Regulatory and Other Authorizations. The Parties will promptly make
all necessary filings, if any, and use their commercially reasonable efforts to
obtain all authorizations, consents, orders and approvals of all Federal, state
and other regulatory bodies and officials that are required for the consummation
of the transactions contemplated by this Agreement and will cooperate fully with
each other in connection therewith.
SECTION 8.4 Indemnification and Director and Officer Liability Insurance.
(a) Big City and the Target Corporation Parties agree that all rights to
indemnification for acts or omissions occurring prior to the Effective Time now
existing in favor of the current directors and officers of Big City as provided
in the certificate of incorporation or bylaws of the Big City or in any
indemnification agreements shall survive the Merger and shall continue in full
force and effect in accordance with their terms.
(b) If after the Effective Time, Big City and/or the Surviving Corporations
shall cause to be maintained in effect the policies of directors' and officers'
liability insurance, the policies will cover former officers and directors of
the Big City Parties for a period of three years.
(c) In the event Big City or any of its successors or assigns (i) consolidates
with or merges into any other person and shall not be the continuing or
surviving corporation or entity of such consolidation or merger, or (ii)
transfers or conveys all or substantially all of its properties and assets to
any person, then, and in each such case, to the extent necessary, proper
provision shall be made so that the successors and assigns assume the
obligations set forth in this Section 8.4.
(d) The provisions of this Section 8.4 are intended to be for the benefit of,
and shall be enforceable by, each indemnified party and his or her heirs and
representatives and shall survive the Merger and the Closing.
SECTION 8.5 Reverse Stock Split. Big City agrees that it shall not, and the
Stockholders agree that they shall not cause Big City to, effect a reverse split
of Big City Stock prior to the first anniversary of the Effective Time unless
Big City at the time of such reverse split shall meet all requirements for
listing of its Common Stock on the Nasdaq SmallCap Market or the Nasdaq National
Market except for the minimum bid price requirement and the reverse stock split
is being effected to enable Big City to obtain or maintain listing on either of
such trading markets.
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SECTION 8.6 Independent Committee. Until such time as the period for
presenting a claim for indemnification has expired under Sections 10.1 or 10.2,
the Board of Directors of Big City shall include at least one person who
qualifies as an "independent director" as described in Section 10.5.
ARTICLE IX
CONDITIONS TO CLOSING
SECTION 9.1 Conditions to Each Party's Obligations. The respective obligations
of each Party to consummate the Merger and the other transactions contemplated
by this Agreement shall be subject to the fulfillment at or prior to the Closing
Date of the following conditions:
(a) Directors and Officers of Big City and Surviving Corporation. The persons
listed in Section 7.10 shall have been elected directors of Big City (unless
this condition is waived by the Stockholders);
(b) No Governmental Order or Regulation. There shall not be in effect any order,
decree or injunction (whether preliminary, final or appealable) of a United
States Federal or state court of competent jurisdiction, and no regulation shall
have been enacted or promulgated by any governmental authority or agency, that
prohibits consummation of the Merger, and no litigation pending or threatened
regarding same; and
(c) Amendment to Big City Certificate of Incorporation. The board of directors
will have approved the Certificate of Amendment to the Certificate of
Incorporation establishing the Big City Preferred Stock in the form of Exhibit H
annexed hereto, and the certificate will have been filed with the Secretary of
State of the State of New York.
(d) Information Statement. The Information Statement will have been prepared by
Big City and distributed to the stockholders of Big City not less than ten days
prior to the Closing in compliance with the requirements of Section 14(f) of the
Exchange Act.
SECTION 9.2 Conditions to the Obligations of Target Corporations and the
Stockholders. The obligations of each Target Corporation and each Stockholder to
consummate the Merger and the other transactions contemplated by this Agreement
shall be subject to the fulfillment, at or prior to the Closing, of each of the
following conditions:
(a) Representations and Warranties; Covenants. Without supplementation after the
date hereof, the representations and warranties of the Big City Parties
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contained in this Agreement shall be, with respect to those representations and
warranties qualified by any materiality standard, true and correct in all
respects, as of the Closing, and with respect to all other representations and
warranties, true and correct in all material respects, as of the Closing, with
the same force and effect as if made as of the Closing, and all the covenants
contained in this Agreement to be complied with by the Big City Parties on or
before the Closing Date shall have been complied with, and the Stockholders
shall have received certificates of officers of the Big City Parties to such
effect provided, however, that this condition shall be fulfilled and the Target
Corporation and its Stockholders shall have no right to terminate this Agreement
under Section 11.1(b) if, in the aggregate and taken as a whole, the breach of
any of such representation and warranties or covenants would not result in a Big
City Material Adverse Effect;
(b) Certain Employment and Option Matters. Big City shall have entered into the
Severance Agreement and the Option Agreement with Mark Weinreb, each in the form
of Exhibits C-1 and C-2 annexed hereto, respectively;
(c) Legal Opinion. The Stockholders shall have received from Graubard Mollen &
Miller, counsel to the Big City Parties, a legal opinion addressed to the
Stockholders, dated the Closing Date, opining in all material respects to the
matters set forth on Exhibit D annexed hereto;
(d) Consents. The Big City Parties shall have obtained and delivered to the
Target Corporation Parties all government and private third party consents to
the Merger (as described in Sections 7.7) except that Big City will not have to
obtain consent from Mercado del Lago Group, L.L.C. in connection with any of the
transactions contemplated by this Agreement;
(e) No Material Adverse Effect. At the Closing, there shall have been no event
that would have a Big City Material Adverse Effect. Between the date of this
Agreement and the Closing Date, there shall not have occurred an event which
would reasonably be expected to result in a Big City Material Adverse Effect;
(f) Necessary Proceedings. All proceedings, corporate or otherwise, to be taken
by the Big City Parties in connection with the consummation of the transactions
contemplated by this Agreement shall have been duly and validly taken, and
copies of all documents, resolutions and certificates incident thereto, duly
certified by officers of the Big City Parties as of the Closing, shall have been
delivered to the Stockholders; and
(g) Registration Rights. Big City shall have executed and delivered to the
Stockholders a Registration Rights Agreement substantially in the form of
Exhibit G annexed hereto.
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SECTION 9.3 Conditions to the Obligations of the Big City Parties. The
obligations of the Big City Parties to consummate the Merger and the other
transactions contemplated by this Agreement shall be subject to the fulfillment,
at or prior to the Closing, of each of the following conditions:
(a) Representations and Warranties; Covenants. Without supplementation after the
date hereof, the representations and warranties of Target Corporations and the
Stockholders contained in this Agreement shall be, with respect to those
representations and warranties qualified by any materiality standard, true and
correct in all respects, as of the Closing, and with respect to all other
representations and warranties, true and correct in all material respects, as of
the Closing Date, with the same force and effect as if made as of the Closing,
and all the covenants and agreements contained in this Agreement to be complied
with by any of the Target Corporation Parties on or before the Closing Date
shall have been complied with, and the Big City Parties shall have received a
certificate of an officer of each Target Corporation and a certificate of the
Stockholders to such effect;
(b) Legal Opinion. The Big City Parties shall have received from Gardner, Carton
& Douglas, counsel to each of the Target Corporation Parties, a legal opinion
addressed to the Big City Parties, dated the Closing Date, opining in all
material respects to the matters set forth on Exhibit E hereto.
(c) Consents. The Target Corporation Parties shall have obtained and delivered
to the Big City Parties all governmental and private third party consents to the
Merger as described in Sections 6.8;
(d) No Material Adverse Change. At the Closing, there shall have been no
material adverse change in the assets, liabilities, financial condition or
business of Target Corporations as of December 31, 1998 ("Target Corporation
Material Adverse Change"). Between the date of this Agreement and the Closing
Date, there shall not have occurred an event which would reasonably be expected
to constitute a Target Corporation Material Adverse Effect;
(e) Necessary Proceedings. All proceedings, corporate or otherwise, to be taken
by the Target Corporation Parties in connection with the consummation of the
transactions contemplated by this Agreement shall have been duly and validly
taken, and copies of all documents, resolutions and certificates incident
thereto, duly certified by the officers of each Target Corporation as of the
Closing, shall have been delivered to the Big City Parties;
(f) Release by Stockholders. Each Stockholder shall execute and deliver to the
Big City Parties a certificate acknowledging and agreeing that, except as set
forth in this Agreement, each Target Corporation has no obligation or duty to
their respective Stockholders (or any of its affiliates) now owing or to become
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due and that each such Stockholder has no rights with respect to any assets or
securities of the Target Corporation;
(g) Insurance. Big City shall have obtained a binder (or similar type
commitment) from its insurance carrier presently providing Big City with
directors and officers liability insurance with respect to a three-year "tail"
policy relating to Big City's existing directors and officers commencing upon
the Closing, which policy shall be non-cancelable by Big City and fully paid.
(h) Tax Opinion. The Stockholders shall have received from tax counsel to the
Target Corporations an opinion that the Merger should qualify as a
reorganization under section 368(a) of the Code, provided, however, that the
condition set forth in this Section 9.2(h) shall be deemed satisfied unless
there shall have occurred (a) a change in law (which includes a change in or
issuance of relevant statutes, regulations, published rulings or positions of
the Internal Revenue Service or court decisions) since the date hereof, (b) a
failure by the Big City Parties to deliver representations to tax counsel for
the Target Corporations, (c) notification to tax counsel for the Target
Corporation Parties, or independent knowledge by such tax counsel, that any of
the Big City representations relied upon by such tax counsel are no longer true
in any material respect, or (d) a change in facts or circumstances with respect
to the Big City Parties or the Target Corporation Parties that have been
addressed by their respective representations and relied upon by such tax
counsel, which change was not within the control of the Target Corporation
Parties, in each case such that such tax counsel determines that a tax opinion
substantially in the same form as the form tax opinion attached as Exhibit B
hereto cannot be delivered or, if delivered, may no longer be relied upon.
ARTICLE X
INDEMNIFICATION
SECTION 10.1 Indemnification by the Stockholders. Subject to the limitations
set forth in Section 10.6, the Stockholders shall severally (in proportion of
their ownership of each of the shares of common stock of the Target
Corporations) indemnify and hold harmless Big City and, assuming the Merger is
consummated, the Surviving Corporations, from and against, and shall reimburse
Big City and the Surviving Corporations for, any Damages which may be sustained,
suffered or incurred by them, whether as a result of any Third Party Claim or
otherwise, and which arise or result from the breach of any Target Corporations'
or Stockholders' covenants, representations, warranties, agreements, obligations
or undertakings contained in this Agreement. This indemnity will survive the
Closing. Claims made for indemnity hereunder must be made prior to the
forty-fifth day after the committee of independent directors (referred to in
Section 10.5) of Big City has received the audited, consolidated financial
statements for the fiscal year ending December 31, 1999, of Big City. Any claim
for indemnity asserted within the relevant period under this section shall
survive until resolved.
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SECTION 10.2 Indemnification by Big City. Subject to the limitations set forth
in Section 10.6, Big City will indemnify and hold harmless the Stockholders,
from and against, and shall reimburse the Stockholders for, any Damages which
may be sustained, suffered or incurred by them, whether as a result of any Third
Party Claim or otherwise, and which arise or result from the breach of any of
the Big City Parties covenants, representations, warranties, agreements,
obligations or undertakings contained in this Agreement. This indemnity will
survive the Closing. Claims made for indemnity hereunder must be made prior to
the forty-fifth day after the committee of independent directors of Big City has
received the audited consolidated financial statements for the fiscal year
ending December 31, 1999, of Big City. Any claim for indemnity asserted within
the relevant period under this section shall survive until resolved.
SECTION 10.3 Procedure.
(a) Third-Party Claims. In the event that an Indemnified Party becomes aware of
a Third Party Claim for which an Indemnifying Party would be liable to an
Indemnified Party hereunder, the Indemnified Party shall give reasonably prompt
notice in writing to the Indemnifying Party of such claim, identifying the basis
for such claim or demand, and the amount or the estimated amount thereof to the
extent then determinable (which estimate shall not be conclusive of the final
amount of such claim whether or not the claim is a Third Party Claim ("Claim
Notice"); provided, however, that any delay in giving the Claim Notice will not
be deemed a waiver of nor result in any discontinuation of any rights of the
Indemnified Party, except to the extent the rights of the Indemnifying Party are
actually prejudiced by such failure. The Indemnifying Party, upon request of the
Indemnified Party, shall retain counsel (who shall be reasonably acceptable to
the Indemnified Party) to represent the Indemnified Party and shall pay the
reasonable fees and disbursements of such counsel with regard thereto; provided,
however, that the Indemnified Party is hereby authorized, prior to the date on
which it receives written notice from the Indemnifying Party designating such
counsel, to retain counsel, whose fees and expenses shall be at the expense of
the Indemnifying Party, to file any motion, answer or other pleading and take
such other action which it reasonably shall deem necessary to protect its
interests or those of the Indemnifying Party until the date on which the
Indemnified Party receives such notice from the Indemnifying Party. After the
Indemnifying Party shall retain such counsel, the Indemnified Party shall have
the right to retain its own counsel, but the fees and expenses of such counsel
shall be at the expense of the Indemnified Party unless (x) the Indemnifying
Party and the Indemnified Party shall have mutually agreed to the retention of
such counsel or (y) the named parties of any such proceeding (including any
impleaded parties) include both the Indemnifying Party and the Indemnified Party
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them. The Indemnifying
Party shall not, in connection with any proceedings or related proceedings in
the same jurisdiction, be liable for the fees and expenses of more than one such
firm for the Indemnified Party (except to the extent the Indemnified Party
retained counsel to protect its (or the Indemnifying Party's) rights prior to
the selection of counsel by the Indemnifying Party). If requested by the
Indemnifying Party, the Indemnified Party agrees to cooperate with the
Indemnifying Party and its counsel in contesting any Third Party Claim which the
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Indemnifying Party defends. A Third Party Claim may not be settled by the
Indemnifying Party without the prior written consent of the Indemnified Party
(which consent will not be unreasonably withheld) unless, as part of such
settlement, the Indemnified Party shall receive a full and unconditional
release; provided, however, that the Indemnifying Party shall not settle any
claim without the prior written consent of the Indemnified Party (which consent
shall not be unreasonably withheld) if such Claim is not exclusively for
monetary Damages.
(b) Direct Claims. In the event any Indemnified Party has a direct claim against
any Indemnifying Party, the Indemnified Party shall send a Claim Notice with
respect to the claim to the Indemnifying Party.
(c) Books and Records. After delivery of a Claim Notice, so long as any right to
indemnification exists pursuant to this Article X, the affected Parties each
agree to retain all books and records related to such Claim Notice. In each
instance, the Indemnified Party shall have the right to be kept fully informed
by the Indemnifying Party and its legal counsel with respect to any legal
proceedings. Any information or documents made available to any Party hereunder
and designated as confidential by the Party providing such information or
documents and which is not otherwise generally available to the public and not
already within the knowledge of the Party to whom the information is provided
(unless otherwise covered by the confidentiality provisions of any other
agreement among the Parties hereto, or any of them), and except as may be
required by applicable law, shall not be disclosed to any third party (except
for the representatives of the Party being provided with the information, in
which event the Party being provided with the information shall request its
representatives not to disclose any such information which it otherwise required
hereunder to be kept confidential).
SECTION 10.4 Adjustment to Merger Consideration. Any indemnification payment
made pursuant to this Article X will be deemed to be an adjustment to the Merger
Consideration.
SECTION 10.5 Independent Committee Determination. Whether any claim for
indemnification is sought pursuant to Sections 10.1, or any decision is required
to be made on behalf of Big City or the Surviving Corporations in connection
with a claim or action for indemnification under those sections, shall be
determined by a committee of the Board of Directors of Big City comprised solely
of the independent directors of Big City. For the purposes of this Agreement, an
independent director shall be a person who is not a Stockholder and who is not
and has not been during the ten years prior to the Effective Time employed by or
otherwise affiliated with either of the Target Corporations or of any of the
Stockholders.
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SECTION 10.6 Limitations.
(a) Basket. Big City on the one hand and the Stockholders collectively on the
other hand shall not be required to indemnify the other under Sections 10.01 or
10.02 unless the aggregate of all amounts for which indemnity would otherwise be
due against it or them exceeds $200,000 and then, only for amounts in excess of
$200,000.
(b) Payment and Ceiling. The amount due upon payment of an indemnified claim
will be made solely by the delivery of shares of Big City Common Stock and/or
Big City Preferred Stock, free and clear of all Liens, valued for this purpose
at the last sale price of the Big City Common Stock on the last trading day
prior to the date the Claim Notice is given ("Sale Price"). The payment of
Damages by Big City will be made solely by Class B Preferred Stock that is
convertible into 7,797,942 shares of Big City Common Stock. The payment of
Damages will be up to a maximum of 7,797,942 shares of Big City Common Stock (or
their equivalent of Big City Preferred Stock) issued as the Merger Consideration
deliverable pro rata from among all the Stockholders in respect of Damages
resulting from an act or actions by the Target Corporations and up to the
maximum amount of ten percent of the shares of Big City Common Stock and Big
City Preferred Stock (calculated by reference to the underlying Common Stock)
issued to a Stockholder as Merger Consideration in respect of Damages resulting
from an act or actions solely of that Stockholder. The number of shares of Big
City Common Stock and Big City Preferred Stock deliverable as payment of Damages
will be proportionately increased or decreased to account for any stock
dividend, subdivision, reclassification, stock split or combination of Big City
Common Stock.
SECTION 10.7 Representations and Warranties. For purposes of indemnity under
this Article X for breach of a representation or warranty of a Party under this
Agreement, the representations and warranties shall be the representations and
warranties of a Party made herein, as supplemented, modified or amended by any
schedule thereto as of the Closing Date in accordance with Section 8.02 (except
where such supplementation, modification or amendment is made to cure a
misrepresentation or omission existing as of the date hereof), without regard to
any materiality qualifications or standards otherwise contained therein.
SECTION 10.8 Indemnity as Sole Recourse. After the Closing Date, a Party may
seek remedy against any other Party for breach of a representation, warranty or
covenant hereunder only under and in accordance with the terms of this Article
X.
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ARTICLE XI
TERMINATION
SECTION 11.1 Methods of Termination. The transactions contemplated herein may
be terminated and/or abandoned at any time but not later than the Closing:
(a) By mutual written consent of the Big City Parties and all the Stockholders;
(b) By the Big City Parties (if they are not then in material breach of their
obligations hereunder) if (i) a material default or breach shall be made by the
Target Corporation Party with respect to the due and timely performance of any
of their covenants and agreements contained herein and such default is not cured
within thirty days, or (ii) if any of the Target Corporation Party's
representations and warranties, (x) made without any materiality standard, are
not true and correct in all material respects as of the date hereof and as of
the Closing Date or (y) made with any materiality standard, are not true and
correct in all respects as of the date hereof and as of the Closing Date;
(c) By the Target Corporation Parties (if they are not then in material breach
of their obligations hereunder) if (i) a material default or breach shall be
made by the Big City Parties with respect to the due and timely performance of
any of their covenants and agreements contained herein and such default or
breach results or would result in a Big City Material Adverse Effect and such
default or breach is not cured within thirty days, or (ii) if any of the Big
City Parties representations and warranties, (x) made without any materiality
standard, are not true and correct in all material respects as of the date
hereof and as of the Closing Date or (y) made with any materiality standard, are
not true and correct in all respects as of the date hereof and as of the Closing
Date, provided, however, that the inaccuracies of any such representations or
warranties shall not give rise to the right to terminate under this clause (ii)
of this Section 11.1(c)(ii) unless the inaccuracies, in the aggregate and taken
as a whole, reflect and would result in a Big City Material Adverse Effect;
(d) By either the Target Corporation Parties or the Big City Parties if,
pursuant to Section 7.14, Big City is unable to obtain an opinion from Heritage
Capital Corp. that the consideration to be paid by Big City for each of the
Target Corporations is fair to the Big City stockholders from a financial point
of view.
(e) By either the Target Corporation Parties or the Big City Parties (if the
terminating Party is not then in material breach of its obligations hereunder)
if the Effective Time has not occurred by six months from the date of this
Agreement for any reason unless the Parties agree to an extension in writing.
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SECTION 11.2 Effect of Termination. In the event of termination by a Party, or
both Parties, pursuant to Section 11.1 hereof, written notice thereof shall
forthwith be given to the other Party and all obligations (except as set forth
in this Section 11.2) of the Parties shall terminate and no Party shall have any
right against the other Party hereto. Notwithstanding the foregoing, if this
Agreement is so terminated by one Party under Section 11.1(b) or (c) above, it
is expressly agreed and understood that the non-terminating party shall, within
five days of termination, pay or reimburse the terminating party for all the
documented out-of-pocket reasonable fees and expenses incurred by the
terminating party (including the reasonable fees and expenses of its counsel,
accountants, consultants and advisors) in connection with this Agreement and the
transactions contemplated hereby, and if such termination is with respect to a
representation or warranty made upon execution of this Agreement or a breach of
a representation or warranty deemed to be made at the Closing and such breach
was caused by factors within the control of the non-terminating party, then the
terminating Party's right to pursue all legal remedies for breach of contract or
otherwise, including, without limitation, Damages relating thereto shall survive
such termination unimpaired. If the transactions contemplated by this Agreement
are terminated and/or abandoned as provided herein:
(a) Each Party hereto will return all documents, work papers and other material
(and all copies thereof) of the other Party, relating to the transactions
contemplated hereby, whether so obtained before or after the execution hereof,
to the Party furnishing the same; and
(b) All confidential information received by either Party hereto with respect to
the business of the other Party shall be treated in accordance with Sections 6.2
and 7.2 hereof, which shall survive such termination or abandonment.
ARTICLE XII
DEFINITIONS
SECTION 12.1 Certain Defined Terms. As used in this Agreement, the following
terms shall have the following meanings:
"Big City Material Adverse Effect" means a material adverse effect on
the results of operations, financial condition, business or assets of Big City
and its subsidiaries, taken as a whole and considered as one enterprise such
that Big City would have a negative net worth (less all non-cash accounting
charges required to be stated in the financial statements of Big City that are
associated with the merger transaction between the Big City Parties and the
Target Corporation Parties or are contemplated by this Agreement and assuming
all contingent liabilities of the Big City Parties and Big City Subsidiaries
reasonably expected to mature, are for this purpose deemed actual liabilities of
Big City ) as of the Closing Date or an event that would materially impair any
51
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of the Big City Parties ability to consummate the transactions contemplated by
this Agreement.
"Big City Parties" means Big City and the Merger Subsidiaries.
"Big City Subsidiaries" means Big City NY, Inc., a New York
corporation, Bagel Partners, Inc., a New York corporation, and Pumpernickel
Partners, L.P., a Delaware limited partnership.
"Business Day" means a day of the year on which banks are not required
or authorized to be closed in the City of New York.
"Damages" means the dollar amount of any loss, damage, cost, expense or
liability, including, without limitation, reasonable attorneys' fees and
disbursements incurred by an Indemnified Party in any action or proceeding
between the Indemnified Party and the Indemnifying Party or between the
Indemnified Party and a third party, which is determined (as provided in Article
X) to have been sustained, suffered or incurred by a Party and to have arisen
from or in connection with an event or state of facts which is subject to
indemnification under this Agreement; the amount of Damages shall be the amount
finally determined by a court of competent jurisdiction or appropriate
governmental administrative agency (after the exhaustion of all appeals) or the
amount agreed to upon settlement in accordance with the terms of this Agreement.
"Environmental, Health, and Safety Requirements" means all federal,
state, local and foreign statutes, regulations, and ordinances concerning public
health and safety, worker health and safety, and pollution or protection of the
environment, including without limitation all those relating to the presence,
use, production, generation, handling, transportation, treatment, storage,
disposal, distribution, labeling, testing, processing, discharge, release,
threatened release, control, or cleanup of any hazardous materials, substances
or wastes, as such requirements are enacted and in effect on or prior to the
Closing Date.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Lien" means any lien, claim, charge, option, security interest,
restriction or encumbrance.
"Party" means Big City and/or the Merger Subsidiaries, on the one hand,
and the Stockholders and/or the Target Corporations, on the other hand
(collectively, the "Parties").
"Representatives" of either Party means such Party's employees,
accountants, auditors, actuaries, counsel, financial advisors, bankers,
investment bankers and consultants.
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"Securities Act" means the Securities Act of 1933, as amended.
"Target Corporation Material Adverse Effect" means a material adverse
effect on the results of operations, financial conditions, business or assets of
a Target Corporation, or an event that would materially impair the ability of
any Target Corporation or Stockholder to consummate the transactions
contemplated by this Agreement.
"Target Corporation Parties" means, collectively, each of the
Stockholders and each of the Target Corporations.
"Tax" or "Taxes" means all income, gross receipts, sales, stock
transfer, excise, bulk transfer, use, employment, franchise, profits, property
or other taxes, fees, stamp taxes and duties, assessments, levies or charges of
any kind whatsoever, together with any interest and any penalties, additions to
tax or additional amounts imposed by any taxing authority with respect thereto.
"Third Party Claim" means a claim, demand, suit, proceeding or action
by a person, firm, corporation or government entity other than a party hereto or
any affiliate of such party.
ARTICLE XIII
GENERAL PROVISIONS
SECTION 13.1 Expenses. Except as otherwise provided herein, all costs and
expenses, including, without limitation, fees and disbursements of
Representatives, incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the Party incurring such costs and
expenses, whether or not the Closing shall have occurred. The Stockholders shall
pay all such expenses incurred by the Target Corporations.
SECTION 13.2 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered personally or by facsimile or one day after
delivery to a nationally recognized courier, in each case, to the Parties at the
following addresses or facsimile numbers (or at such other address or facsimile
numbers for a Party as shall be specified by like notice, except that notices of
changes of address shall be effective upon receipt):
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(a) If to the Stockholders, as set forth in Schedule 2.1,
If to ICS,
Advanced Testing Technologies, Inc.
110 Ricefield Lane
Hauppage, NY 11788
Attention: Mr. Eli Levi
Facsimile No. 516-231-8517
If to VillageNet,
620 Johnson Avenue
Suite 1B
Bohemia, NY 11716
Attention: Mr. Peter Keenan
Facsimile No.: 516-218-0769
with a copy to:
Gardner, Carton & Douglas
Suite 3400 Quaker Tower
321 North Clark Street
Chicago, Illinois 60610-4795
Attention: Joseph Greenberg, Esq.
Facsimile No.: 312-644-3381
(b) If to Big City or the Merger Subsidiary:
Big City Bagels, Inc.
99 Woodbury Road
Hicksville, New York 11801
Attention: Mark Weinreb, Chairman
Facsimile No.: (516) 932-5056
with a copy to:
Graubard Mollen & Miller
600 Third Avenue
New York, New York 10016
Attention: Peter M. Ziemba, Esq.
Facsimile No.: 212-818-8881
SECTION 13.3 Press Release; Public Announcements. The Parties shall not make
any other public announcements in respect of this Agreement or the transactions
contemplated herein without prior consultation and approval by the other party
as to the form and content thereof, which approval shall not be unreasonably
withheld. Notwithstanding the foregoing, Big City may make any disclosure which
its counsel advises is required by applicable law or regulation, in which case,
Big City shall use commercially reasonably efforts to give the Stockholders
reasonable advance notice and opportunity to comment.
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SECTION 13.4 Amendment. This Agreement may not be amended or modified except by
an instrument in writing signed by the Parties.
SECTION 13.5 Waiver. At any time prior to the Closing, either Party may (a)
extend the time for the performance of any of the obligations or other acts of
the other Party, (b) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and (c)
waive compliance with any of the agreements or conditions contained herein. Any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed by the Party to be bound thereby.
SECTION 13.6 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 13.7 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any Party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the Parties shall negotiate in good
faith to modify this Agreement so as to effect the original intent of the
Parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.
SECTION 13.8 Entire Agreement. This Agreement and the Schedules and Exhibits
hereto constitute the entire agreement and supersede all prior agreements and
undertakings, both written and oral, between the Target Corporations, the
Stockholders and Big City with respect to the subject matter hereof.
SECTION 13.9 Benefit; Assignment. This Agreement shall inure to the benefit of
and be binding upon the Parties and the successors and permitted assigns of the
Parties and, except as otherwise expressly provided herein, are not intended to
confer upon any other person any rights or remedies hereunder. This Agreement is
not assignable by any Party without the express written consent of the other
Parties.
SECTION 13.10 Governing Law; Consent to Jurisdiction. Except as to matters
governed by the BCL, this Agreement shall be governed by, and construed in
accordance with, the law of the State of New York, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law. Each
Party hereby submits to the exclusive jurisdiction of the courts (city, state
and federal) located in the County of New York, State of New York, for any
action, proceeding or claim brought by any other Party pursuant to this
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Agreement or any other agreement, instrument or other document executed and
delivered in connection with this Agreement or pursuant hereto and waives any
objection to the venue of any such suit, action or proceeding and the right to
assert that such forum is not a convenient forum. Service of process in any such
action or proceeding brought against a Party may be made by registered mail
addressed to such Party at the address set forth in Section 13.2 or to such
other address as such Party shall notify the other Party in writing is to be
used for such purpose pursuant to Section 13.2.
SECTION 13.11 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different Parties in separate counterparts, each of
which when executed shall be deemed to be an original but all of which when
taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed as of the date first written above.
BCB ACQUISITION CORP. I INTELLIGENT COMPUTER SOLUTIONS, INC.
/s/ Mark Weinreb /s/ Peter Keenan
By:________________________ By:_______________________________
BCB ACQUISITION CORP. II
/s/ Mark Weinreb
By:___________________________
BIG CITY BAGELS, INC. VILLAGENET, INC.
/s/ Mark Weinreb /s/ Eli Levi
By:___________________________ By:_______________________________
/s/ Peter Keenan /s/ Steven Levi
______________________________ ______________________________
Peter Keenan, Stockholder Steven Levi, Stockholder
/s/ David Levi /s/ Susan Levi
______________________________ ______________________________
David Levi, Stockholder Susan Levi, Stockholder
Eli Levi Living Trust, Stockholder
/s/ Roberta Levi /s/ Eli Levi
_______________________________________ By:_______________________________
Roberta Levi, custodian for Eli Levi, Trustee
Shari Levi, Stockholder
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Roberta Levi Living Trust, Stockholder
/s/ Roberta Levi /s/ Hector P. Gavilla
By:_________________________________ ______________________________
Roberta Levi, Trustee Hector P. Gavilla, Stockholder
/s/ Hector M. Gavilla /s/ Hector M. Gavilla
______________________________ ______________________________
Hector M. Gavilla, Stockholder Hector M. Gavilla, custodian for
Alexander F. Gavilla, Stockholder
/s/ Vincent Pasceri, Jr.
______________________________
Vincent Pasceri, Jr., Stockholder
57
EXHIBIT 3.1
CERTIFICATE OF AMENDMENT OF THE
CERTIFICATE OF INCORPORATION
OF
BIG CITY BAGELS, INC.
Pursuant to Section 805 of the
New York Business Corporation Law
We, the undersigned, being, respectively, the Chairman of the Board and
Assistant Secretary of Big City Bagels, Inc. ("Corporation"), a corporation
organized and existing under the Business Corporation Law of the State of New
York hereby certify:
1. The name of the Corporation is Big City Bagels, Inc.
2. The Certificate of Incorporation of the Corporation was filed with
the Department of State of the State of New York on December 14, 1992.
3. Article FOURTH is hereby amended by the addition of a new
subsection, subsection (d), to read as follows:
(d) Class B Preferred Stock
(i) Designations and Amount. 556,510 shares of the Preferred Stock of
the Corporation, par value $ .001 per share, shall constitute a class of
Preferred Stock designated as "Class B Preferred Stock" ("Class B Preferred
Stock").
(ii) Liquidation Rights. If the Corporation shall be voluntarily or
involuntarily liquidated, dissolved or wound up at any time when any of the
Class B Preferred Stock shall be outstanding, the assets of the Corporation
legally available for distribution shall be distributed ratably to the holders
of Class B Preferred Stock (on the basis of the number of full shares of Common
Stock into which such shares are then convertible pursuant to Section (d)(v)(B)
hereof) and the holders of Common Stock.
(iii) Dividends. No dividend or distribution in cash or other property
on the Corporation's Common Stock shall be declared or paid or set apart for
payment, unless, at the same time, an equivalent dividend or distribution is
declared or paid or set apart, as the case may be, on the Class B Preferred
Stock and payable on the same date, at the rate per share of Class B Preferred
Stock based upon the shares of Common Stock that a holder of such Class B
Preferred Stock would be entitled to receive if such holder had converted such
<PAGE>
Class B Preferred Stock into Common Stock as provided in Section (d)(v) hereof
immediately prior to the record date for such dividend or distribution on the
Common Stock.
(iv) Voting Rights. Except as otherwise provided herein or by law, the
holders of Class B Preferred Stock shall, by virtue of their ownership thereof,
be entitled to cast the number of votes per share thereof on each matter
submitted to the Corporation's shareholders for voting as is equal to the number
of full shares of Common Stock into which such share is then convertible
pursuant to Section (d)(v)(B) hereof assuming for this purpose that the
Corporation is then authorized to issue a sufficient number of shares of Common
Stock to effect a conversion of all outstanding Class B Preferred Stock. Such
votes shall be cast together with those cast by the holders of Common Stock as
one class except as otherwise provided herein or by law. The Class B Preferred
Stock shall not have cumulative voting rights
(v) Conversion of Class B Preferred Stock.
(A) For the purposes of conversion, the Class B Preferred
Stock shall be valued at $138.00 per share ("Value"), and, if converted, the
Class B Preferred Stock, together with the accrued and unpaid cash dividends
thereon to the date of conversion, shall be converted into Common Stock (the
"Conversion Stock") at the conversion price ("Conversion Price") of $1.00 per
share of Conversion Stock, subject to adjustment pursuant to the provisions of
this Section (d)(v).
(B) The holders of Class B Preferred Stock shall have the
right, at their option, to convert such shares into Conversion Stock at any time
that the Corporation has authorized but unissued a sufficient number of shares
of Common Stock. Each holder of Class B Preferred Stock who desires to convert
its Class B Preferred Stock into shares of Common Stock shall surrender the
certificate or certificates therefor, duly endorsed, at the office of the
Corporation and shall give written notice to the Corporation at such office that
such holder elects to convert the same. Such notice shall state the number of
shares of Class B Preferred Stock being converted. Thereupon, the Corporation
shall promptly issue and deliver at such office to such holder a certificate or
certificates for that number of whole shares of Common Stock as shall be
computed by dividing (1) the product of the aggregate number of Class B
Preferred Stock so surrendered and the sum of the Value and the accrued and
unpaid cash dividends with respect to such Class B Preferred Stock by (2) the
Conversion Price for such shares of Class B Preferred Stock in effect at the
date of such surrender. In the event of any exercise of the conversion right of
the Class B Preferred Stock granted herein (i) stock certificates for the shares
of Common Stock purchased by virtue of such exercise shall be delivered to such
holder forthwith, and unless the Class B Preferred Stock has been fully
converted, a new Class B Preferred Stock certificate, representing the Class B
Preferred Stock not so converted, shall also be delivered to such holder
forthwith, and (ii) stock certificates for the shares of Common Stock so
purchased shall be dated the date of surrender of the Class B Preferred Stock
certificate converted into such shares, and the holder making such surrender
shall be deemed for all purposes to be the holder of the shares of Common Stock
so purchased as of the date of such surrender.
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(C) Subject to the adjustment provided in Section (d)(v)(D)
below, all shares of Common Stock which may be issued upon conversion of Class B
Preferred Stock will, upon issuance, be duly issued, fully paid and
non-assessable and free from all taxes, liens, and charges with respect to the
issue thereof.
(D) In the event the Corporation shall, at any time or from
time to time while any of the shares of Class B Preferred Stock are outstanding,
(i) pay a dividend or make a distribution with respect to Common Stock in shares
of Common Stock, (ii) subdivide or split its outstanding shares of Common Stock
into a larger number of shares, or (iii) combine its outstanding shares of
Common Stock into a smaller number of shares, in each case whether by
reclassification of shares, recapitalization of the corporation or otherwise,
the Conversion Price shall be adjusted by multiplying the Conversion Price by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately before such event, and the denominator of which is the
number of shares of Common Stock outstanding immediately after such event. Such
adjustment shall become effective at the opening of business on the business day
next following the record date for determination of shareholders entitled to
receive such dividend or distribution in the case of a dividend or distribution,
and shall become effective immediately after the effective date in case of a
subdivision, split, combination or reclassification; and any shares of Common
Stock issuable in payment of a dividend shall be deemed to have been issued
immediately prior to the close of business on the record date for such dividend.
(E) Any notice required by the provisions of this Section (v)
shall be in writing and shall be deemed effectively given: (i) upon personal
delivery to the party to be notified, (ii) when sent by confirmed telex or
facsimile, (iii) seven (7) days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or (iv) two (2)
business days after deposit with a nationally recognized overnight courier,
specifying next day delivery, with written verification of receipt. All notices
shall be addressed to the Corporation at its principle office and to each holder
of record at the address of such holder appearing on the books of the
Corporation.
(F) The Corporation shall not be required to issue fractions
of shares of Common Stock upon conversion of the Class B Preferred Stock or
payment of any dividends. If any fractions of a share would, but for this
section (vi)(F), be issuable upon any conversion of Class B Preferred Stock or
payment of the Class B Preferred Stock, in lieu of such fractional share the
Company shall round up or down to the nearest whole number of shares.
(G) In order that the Corporation may issue shares of Common
Stock upon conversion of shares of the Class B Preferred Stock and payment of
any preferred dividends, the Corporation will endeavor to comply with all
applicable Federal and state securities laws and will endeavor to list such
shares of Common Stock to be issued upon conversion on each securities exchange
on which Common Stock is listed at the time of conversion and endeavor to
maintain such listing for such period of time as either the Class B Preferred
Stock or Common Stock underlying such Class B Preferred Stock remains
outstanding.
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(H) If any of the following shall occur: (i) any
reclassification, subdivision combination or change of outstanding shares of
Common Stock issuable upon conversion of shares of the Class B Preferred Stock
(other than a change in par value, or from par value to no par value, or from no
par value to par value, or as a result of a subdivision or combination), or (ii)
any consolidation or merger of the Corporation with or into another corporation
which does not constitute a liquidation under Section (d)(ii), then in addition
to all of the rights granted to the holders of the Class B Preferred Stock as
designated herein, the Corporation, or such successor or purchasing corporation,
as the case may be, shall, as a condition precedent to such reclassification,
change, consolidation or merger ("Corporate Change"), provide in its certificate
of incorporation or other charter document that each share of the Class B
Preferred Stock shall be convertible into the kind and amount of shares of
capital stock and other securities and property (including cash) receivable upon
such Corporate Change by a holder of the number of shares of Common Stock
deliverable upon conversion of such share of the Class B Preferred Stock and the
payment of the Preferred Dividend thereon immediately prior to the Corporate
Change. If, in the case of any such Corporate Change, the stock or other
securities and property (including cash) receivable thereupon by a holder of
Common Stock includes shares of capital stock or other securities and property
of a corporation other than the corporation which is the successor of the
Corporation in such Corporate Change, then the certificate of incorporation or
other charter document of such other corporation shall contain such additional
provisions to protect the interests of the holders of shares of the Class B
Preferred Stock as the Board of Directors shall reasonably consider necessary by
reason of the foregoing. The provision of this section (vi)(H) shall similarly
apply to successive reclassifications, changes, consolidations or mergers.
(I) The Corporation will not, by amendment of its Certificate
of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation, but will at
all times in good faith assist in the carrying out of all the provisions of this
section (v)(I) and in the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights of the holders of the
Class B Preferred Stock against impairment.
4. This Amendment has been adopted by the Board of Directors of the
Corporation pursuant to authority conferred upon the Board of Directors by
Article FOURTH of the Certificate of Incorporation of the Corporation and
Section 502 of the New York Business Corporation Law.
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IN WITNESS WHEREOF, the undersigned have executed this Certificate this
___th day of ___________, 1999, and affirm the statements contained herein are
true under penalties of perjury.
BIG CITY BAGELS, INC.
By: _______________________
Name: Mark Weinreb
Title: Chairman and Chief Executive Officer
By: ______________________
Name:
Title: Secretary
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EXHIBIT 4.1
THE REGISTERED HOLDER OF THIS WARRANT, BY ITS ACCEPTANCE
HEREOF, AGREES THAT IT WILL NOT SELL, TRANSFER OR ASSIGN
THIS WARRANT EXCEPT AS HEREIN PROVIDED.
WARRANT
For the Purchase of
[250,000] [125,000] [125,000] Shares of Common Stock
of
BIG CITY BAGELS, INC.
1. Warrant.
THIS CERTIFIES THAT, in consideration of $10 and other good and
valuable consideration, duly paid by or on behalf of Perrin, Holden & Davenport
Capital Corp. ("Holder"), as registered owner of this Warrant, to Big City
Bagels, Inc. ("Company"), Holder is entitled, at any time or from time to time
on and after [1st tranche will be exercisable immediately after the Closing Date
so the instrument representing the 1st tranche will simply omit the bracketed
text in this sentence] the [six-month anniversary of the] [first anniversary of
the] date ("Closing Date ") on which a closing ("Closing") shall occur of the
transactions contemplated by the Agreement and Plan of Reorganization and
Merger, dated as of May 21, 1999, among the Company, BCB Acquisition
Corp. I, and BCB Acquisition Corp. II, and Intelligent Computer Solutions,
Inc., VillageNet, Inc. and the shareholders set forth on Appendix A thereto
("Merger Agreement") (hereinafter the date upon which this Warrant shall first
become exercisable is referred to as the "Commencement Date"), and at or before
5:00 p.m., Eastern Time on the fifth anniversary of the Closing Date
("Expiration Date"), but not thereafter, to subscribe for, purchase and receive,
in whole or in part, up to [two hundred fifty thousand (250,000)] [one hundred
twenty-five thousand (125,000)] [one hundred twenty-five thousand (125,000)]
shares of Common Stock of the Company, $.001 par value per share ("Warrant
Shares"). If the Expiration Date is a day on which banking institutions are
authorized by law to close, then this Warrant may be exercised on the next
succeeding day which is not such a day in accordance with the terms herein.
During the period ending on the Expiration Date, the Company agrees not to take
any action that would terminate the Warrant. This Warrant is initially
exercisable at [$0.48 ] [$.075] [$1.00] per Warrant Share; provided, however,
that upon the occurrence of any of the events specified in Section 6 hereof, the
rights granted by this Warrant, including the exercise price and the number of
Warrant Shares to be received upon such exercise, shall be adjusted as therein
specified. The term "Exercise Price" shall mean the initial exercise price or
the adjusted exercise price, depending on the context, of a Warrant Share.
Notwithstanding anything to the contrary contained herein, this Warrant
and all rights provided to the Holder hereunder shall become effective if and
only if the Closing shall have occurred on or before November 21, 1999, unless
such date shall have been postponed to a later date by the parties to the Merger
Agreement, in which case such later date shall apply.
This Warrant is one of a series of similar warrants issued by the
Company to the Holder in connection with the transactions contemplated by the
Merger Agreement, which warrants, in the aggregate, entitle the Holder to
purchase up to 500,000 shares of Common Stock, $.001 par value per share, of the
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Company with an exercise price of $0.48 with respect to 250,000 shares, $0.75
with respect to 125,000 shares, and $1.00 with respect to 125,000 shares. These
warrants, collectively, are referred to herein as the "PHD Warrants."
2. Exercise.
2.1 Exercise Form. In order to exercise this Warrant, the exercise form
attached hereto must be duly executed and completed and delivered to the
Company, together with this Warrant and payment of the Exercise Price for the
Warrant Shares being purchased. If the subscription rights represented hereby
shall not be exercised at or before 5:00 p.m., Eastern time, on the Expiration
Date, this Warrant shall become and be void without further force or effect, and
all rights represented hereby shall cease and expire.
2.2 Legend. Each certificate for Warrant Shares purchased under this
Warrant shall bear a legend as follows, unless such Warrant Shares have been
registered under the Securities Act of 1933, as amended ("Act"):
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended ("Act") or applicable
state law. The shares may not be offered for sale, sold or otherwise
transferred except pursuant to an effective registration statement
under the Act, or pursuant to an exemption from registration under the
Act and applicable state law."
2.3 Conversion Right.
2.3.1 Determination of Amount. In lieu of the payment of the
Exercise Price in the manner provided by Section 2.1, the Holder shall have the
right (but not the obligation) to convert this Warrant, in whole or in part,
into Warrant Shares ("Conversion Right"), as follows: upon exercise of the
Conversion Right, the Company shall deliver to the Holder (without payment by
the Holder of any of the Exercise Price) that number of Warrant Shares equal to
the quotient obtained by dividing (x) the "Value" (as defined below) of the
portion of the Warrant being converted at the time the Conversion Right is
exercised by (y) the Market Price. The "Value" of the portion of the Warrant
being converted shall equal the remainder derived from subtracting (a) the
Exercise Price multiplied by the number of Warrant Shares underlying the portion
of the Warrant being converted from (b) the Market Price of the Common Stock
multiplied by the number of Warrant Shares underlying the portion of the Warrant
being converted. As used herein, the term "Market Price" at any date shall be
deemed to be the last reported sale price of the Common Stock on the trading day
immediately preceding such date, or, in case no such reported sale takes place
on the immediately preceding trading day, the average of the last reported sale
prices for the immediately preceding three trading days, in either case as
officially reported by the principal securities exchange on which the Common
Stock is listed or admitted to trading, or, if the Common Stock is not listed or
admitted to trading on any national securities exchange or if any such exchange
on which the Common Stock is listed is not its principal trading market, the
last reported sale price as furnished by the National Association of Securities
Dealers, Inc. ("NASD") through the Nasdaq National Market or SmallCap Market,
or, if applicable, the OTC Bulletin Board, or if the Common Stock is not listed
or admitted to trading on any of the foregoing markets, or similar organization,
as determined in good faith by resolution of the Board of Directors of the
Company, based on the best information available to it.
2.3.2 Exercise of Conversion Right. The Conversion Right may
be exercised by the Holder on any business day on or after the Commencement Date
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and not later than the Expiration Date by delivering the Warrant with a duly
executed exercise form attached hereto with the conversion section completed.
3. Transfer.
3.1 General Restrictions. The registered Holder of this Warrant, by its
acceptance hereof, agrees that it will not sell, transfer or assign or
hypothecate this Warrant to anyone except upon compliance with, or pursuant to
exemptions from, applicable securities laws. In order to make any permitted
assignment, the Holder must deliver to the Company the assignment form attached
hereto duly executed and completed, together with this Warrant and payment of
all transfer taxes, if any, payable in connection therewith. The Company shall
immediately transfer this Warrant on the books of the Company and shall execute
and deliver a new Warrant or Warrants of like tenor to the appropriate
assignee(s) expressly evidencing the right to purchase the aggregate number of
Warrant Shares purchasable hereunder or such portion of such number as shall be
contemplated by any such assignment.
3.2 Restrictions Imposed by the Securities Act. This Warrant and the
Warrant Shares underlying this Warrant shall not be transferred unless and until
(i) the Company has received the opinion of counsel for the Holder that such
securities may be sold pursuant to an exemption from registration under the Act,
and applicable state law, the availability of which is established to the
reasonable satisfaction of the Company, or (ii) a registration statement
relating to such Warrant Shares has been filed by the Company and declared
effective by the Securities and Exchange Commission and compliance with
applicable state law.
4. New Warrants to be Issued.
4.1 Partial Exercise or Transfer. Subject to the restrictions in
Section 3 hereof, this Warrant may be exercised or assigned in whole or in part.
In the event of the exercise or assignment hereof in part only, upon surrender
of this Warrant for cancellation, together with the duly executed exercise or
assignment form and funds (or conversion equivalent) sufficient to pay any
Exercise Price and/or transfer tax, the Company shall cause to be delivered to
the Holder without charge a new Warrant of like tenor to this Warrant in the
name of the Holder evidencing the right of the Holder to purchase the aggregate
number of Warrant Shares hereunder as to which this Warrant has not been
exercised or assigned.
4.2 Lost Certificate. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this Warrant
and of reasonably satisfactory indemnification, the Company shall execute and
deliver a new Warrant of like tenor and date. Any such new Warrant executed and
delivered as a result of such loss, theft, mutilation or destruction shall
constitute a substitute contractual obligation on the part of the Company.
5. Registration Rights.
5.1 Demand Registration.
5.1.1 Grant of Right. The Company, upon written demand
("Initial Demand Notice") of the Holder(s) of at least a majority of the PHD
Warrants and/or the underlying shares of Common Stock considered together agrees
to register on one occasion the resale of all or any portion of this Warrant and
the Warrant Shares requested by such Holder(s) in the Initial Demand Notice (the
"Registrable Securities"). On such occasion, the Company will file a
Registration Statement covering the Registrable Securities within sixty days
after receipt of the Initial Demand Notice and use its best efforts to have such
registration
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statement declared effective promptly thereafter. Should the filing of this
registration or the effectiveness thereof be delayed by the Company, the
exercisability of this Warrant shall be extended for a period of time equal to
such delay. Moreover, if the Company fails to comply with the provisions of this
Section 5.1.1, the Company shall, in addition to any other equitable or other
relief available to the Holder, be liable for any and all incidental, special
and consequential damages sustained by the Holder. The demand for registration
may be made at any time after the nine month anniversary of the Closing Date and
thereafter until the earlier of (i) the seventh anniversary of the Closing Date
or (ii) the date upon which all of the Registrable Securities are eligible for
resale pursuant to Rule 144(k) promulgated under the Act ("Rule 144(k)").
5.1.2 Terms. The Company shall bear all fees and expenses
attendant to registering the Registrable Securities, but the Holder(s) shall pay
any and all underwriting commissions and the expenses of any legal counsel
selected by the Holder(s) to represent it in connection with the sale of the
Registrable Securities. The Company agrees to use its best efforts to cause the
filing required herein to become effective promptly and to qualify or register
the Registrable Securities in such States as are reasonably requested by the
Holder(s); provided, however, that in no event shall the Company be required to
register the Registrable Securities in a State in which such registration would
cause (i) the Company to be obligated to register or license to do business in
such State, or (ii) the principal shareholders of the Company to be obligated to
escrow their shares of capital stock of the Company. The Company shall cause any
registration statement filed pursuant to the demand rights granted under Section
5.1.1 to remain effective and the related prospectus current until all the
Registrable Securities are sold or until all such securities may be sold by the
holders thereof under Rule 144(k). During any consecutive 365-day period, the
Company may suspend the availability of the Registration Statement for no more
than two periods of up to 20 consecutive days and for no more than an aggregate
of 40 days during any 365-day period, if the Company's Board of Directors
determines, based upon the opinion of legal counsel, that there is a valid
purpose for such suspension.
5.2 "Piggy-Back" Registration.
5.2.1 Grant of Right. In addition to the demand right of
registration, the Holder(s) of the PHD Warrants shall have the right, at any
time until the earlier of (i) the seventh anniversary of the Closing Date or
(ii) the date upon which all of the Registrable Securities are eligible for
resale pursuant to Rule 144(k), to include the Registrable Securities as part of
any other registration of securities filed by the Company (other than in
connection with a transaction contemplated by Rule 145(a) promulgated under the
Act or pursuant to Form S-8 or any equivalent form) provided, however, that if,
in the written opinion of the Company's managing underwriter or underwriters, if
any, for such offering, the inclusion of the Registrable Securities, when added
to the securities being registered by the Company or the selling stockholder(s),
will exceed the maximum amount of the Company's securities which can be marketed
(i) at a price reasonably related to their then current market value, or (ii)
without materially and adversely affecting the entire offering, the Company
shall nevertheless register all or any portion of the Registrable Securities
required to be so registered but such Registrable Securities shall not be sold
by the Holder(s) until 180 days after the registration statement for such
offering has become effective and provided further that, if any securities are
registered for sale on behalf of other stockholders in such offering and such
stockholders have not agreed to defer such sale until the expiration of such 180
day period, the number of securities to be sold by all shareholders in such
public offering during such 180 day period shall be apportioned pro rata among
all such selling stockholders, including the Holder(s), according to the total
amount of securities of the Company owned by said selling shareholders,
including all holders of the Registrable Securities.
5.2.2 Terms. The Company shall bear all fees and expenses
attendant to registering the Registrable Securities, but the Holder(s) shall pay
any and all underwriting commissions and the expenses
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<PAGE>
of any legal counsel selected by the Holder(s) to represent them in connection
with the sale of the Registrable Securities. In the event of such a proposed
registration, the Company shall furnish the Holder(s) with not less than thirty
days written notice prior to the proposed date of filing of such registration
statement. Such notice to the Holder(s) shall continue to be given for each
registration statement filed by the Company until such time as all of the
Registrable Securities have been sold by the Holder(s) or are eligible for
resale pursuant to Rule 144(k). The Holder(s) shall exercise the "piggy-back"
rights provided for herein by giving written notice, within twenty days of the
receipt of the Company's notice of its intention to file a registration
statement. The Company shall cause any registration statement filed pursuant to
the demand rights granted under Section 5.1.1 to remain effective and the
related prospectus current until all the Registrable Securities are sold or
until all such securities may be sold by the holders thereof under Rule 144(k).
During any consecutive 365-day period, the Company may suspend the availability
of the Registration Statement for no more than two periods of up to 20
consecutive days and for no more than an aggregate of 40 days during any 365-day
period, if the Company's Board of Directors determines, based upon the opinion
of legal counsel, that there is a valid purpose for such suspension.
5.3 General Terms.
5.3.1 Indemnification.
(1) The Company shall indemnify the Holder(s) of the
Registrable Securities to be sold pursuant to any registration statement
hereunder and any underwriter or person deemed to be an underwriter under the
Act and each person, if any, who controls such Holders or underwriters or
persons deemed to be underwriters within the meaning of Section 15 of the Act or
Section 20(a) of the Securities Exchange Act of 1934, as amended ("Exchange
Act"), against all loss, claim, damage, expense or liability (including all
reasonable attorneys' fees and other expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever) to which any
of them may become subject under the Act, the Exchange Act or otherwise, arising
from such registration statement. The Holder(s) of the Registrable Securities to
be sold pursuant to such registration statement, and their successors and
assigns, shall severally, and not jointly, indemnify the Company, against all
loss, claim, damage, expense or liability (including all reasonable attorneys'
fees and other expenses reasonably incurred in investigating, preparing or
defending against any claim whatsoever) to which they may become subject under
the Act, the Exchange Act or otherwise, arising from information furnished by or
on behalf of such Holders, in writing, for specific inclusion in such
registration statement.
(2) If any action is brought against a party hereto,
("Indemnified Party") in respect of which indemnity may be sought against the
other party ("Indemnifying Party"), such Indemnified Party shall promptly notify
Indemnifying Party in writing of the institution of such action and Indemnifying
Party shall assume the defense of such action, including the employment and fees
of counsel reasonably satisfactory to the Indemnified Party. Such Indemnified
Party shall have the right to employ its or their own counsel in any such case,
but the fees and expenses of such counsel shall be at the expense of such
Indemnified Party unless (i) the employment of such counsel shall have been
authorized in writing by Indemnifying Party in connection with the defense of
such action, or (ii) Indemnifying Party shall not have employed counsel to
defend such action, or (iii) such Indemnified Party shall have been advised by
counsel that there may be one or more legal defenses available to it which may
result in a conflict between the Indemnified Party and Indemnifying Party (in
which case Indemnifying Party shall not have the right to direct the defense of
such action on behalf of the Indemnified Party), in any of which events, the
reasonable fees and expenses of not more than one additional firm of attorneys
designated in writing by the Indemnified Party shall be borne by Indemnifying
Party. Notwithstanding anything to the contrary contained herein, if
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<PAGE>
Indemnified Party shall assume the defense of such action as provided above,
Indemnifying Party shall not be liable for any settlement of any such action
effected without its written consent.
(3) If the indemnification or reimbursement provided
for hereunder is finally judicially determined by a court of competent
jurisdiction to be unavailable to an Indemnified Party (other than as a
consequence of a final judicial determination of willful misconduct, bad faith
or gross negligence of such Indemnified Party), then Indemnifying Party agrees,
in lieu of indemnifying such Indemnified Party, to contribute to the amount paid
or payable by such Indemnified Party (i) in such proportion as is appropriate to
reflect the relative benefits received, or sought to be received, by
Indemnifying Party on the one hand and by such Indemnified Party on the other or
(ii) if (but only if) the allocation provided in clause (i) of this sentence is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in such clause (i) but also the
relative fault of Indemnifying Party and of such Indemnified Party; provided,
however, that in no event shall the aggregate amount contributed by a Holder
exceed the profit, if any, earned by such Holder as a result of the exercise by
him of the Warrants and the sale by him of the underlying shares of Common
Stock.
(4) The rights accorded to Indemnified Parties
hereunder shall be in addition to any rights that any Indemnified Party may have
at common law, by separate agreement or otherwise.
5.3.2 Exercise of Warrants. Nothing contained in this Warrant
shall be construed as requiring the Holder to exercise the Warrant prior to or
after the initial filing of any registration statement or the effectiveness
thereof.
5.3.3 Documents to be Delivered by Holder(s). The Holder shall
furnish to the Company, as requested, a completed and executed questionnaire
provided by the Company requesting information customarily sought of selling
securityholders.
6. Adjustments
6.1 Adjustments to Exercise Price and Number of Securities. The
Exercise Price and the number of Warrant Shares shall be subject to adjustment
from time to time as hereinafter set forth:
6.1.1 Stock Dividends - Recapitalization, Reclassification,
Split-Ups. If, after the date hereof, and subject to the provisions of Section
6.2 below, the number of outstanding shares of Common Stock is increased by a
stock dividend on the Common Stock payable in shares of Common Stock or by a
split-up, recapitalization or reclassification of shares of Common Stock or
other similar event, then, on the effective date thereof, the number of Warrant
Shares issuable on exercise of this Warrant shall be increased in proportion to
such increase in outstanding shares.
6.1.2 Aggregation of Shares. If after the date hereof, and
subject to the provisions of Section 6.3, the number of outstanding shares of
Common Stock is decreased by a consolidation, combination or reclassification of
shares of Common Stock or other similar event, then, upon the effective date
thereof, the number of Warrant Shares issuable on exercise of this Warrant shall
be decreased in proportion to such decrease in outstanding shares.
6.1.3 Adjustments in Exercise Price. Whenever the number of
Warrant Shares purchasable upon the exercise of this Warrant is adjusted, as
provided in this Section 6.1, the Exercise Price
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shall be adjusted (to the nearest cent) by multiplying such Exercise Price
immediately prior to such adjustment by a fraction (x) the numerator of which
shall be the number of Warrant Shares purchasable upon the exercise of this
Warrant immediately prior to such adjustment, and (y) the denominator of which
shall be the number of Warrant Shares so purchasable immediately thereafter.
6.1.4 Replacement of Securities upon Reorganization, etc. In
case of any reclassification or reorganization of the outstanding shares of
Common Stock other than a change covered by Section 6.1.1 or 6.1.2 hereof or
which solely affects the par value of such shares of Common Stock, or in the
case of any merger or consolidation of the Company with or into another
corporation (other than a consolidation or merger in which the Company is the
continuing corporation and which does not result in any reclassification or
reorganization of the outstanding shares of Common Stock), or in the case of any
sale or conveyance to another corporation or entity of the property of the
Company as an entirety or substantially as an entirety in connection with which
the Company is dissolved, the Holder of this Warrant shall have the right
thereafter (until the expiration of the right of exercise of this Warrant) to
receive upon the exercise hereof, for the same aggregate Exercise Price payable
hereunder immediately prior to such event, the kind and amount of shares of
stock or other securities or property (including cash) receivable upon such
reclassification, reorganization, merger or consolidation, or upon a dissolution
following any such sale or other transfer, by a holder of the number of Warrant
Shares obtainable upon exercise of this Warrant immediately prior to such event;
and if any reclassification also results in a change in shares of Common Stock
covered by Sections 6.1.1 or 6.1.2, then such adjustment shall be made pursuant
to Sections 6.1.1, 6.1.2, 6.1.3 and this Section 6.1.4. The provisions of this
Section 6.1.4 shall similarly apply to successive reclassifications,
reorganizations, mergers or consolidations, sales or other transfers.
6.1.5 Changes in Form of Warrant. This form of Warrant need
not be changed because of any change pursuant to this Section, and Warrants
issued after such change may state the same Exercise Price and the same number
of Warrant Shares as are stated in the Warrants initially issued pursuant to
this Agreement. The acceptance by any Holder of the issuance of new Warrants
reflecting a required or permissive change shall not be deemed to waive any
rights to a prior adjustment or the computation thereof.
6.2 Elimination of Fractional Interests. The Company shall not be
required to issue certificates representing fractions of Warrant Shares upon the
exercise of this Warrant, nor shall it be required to issue scrip or pay cash in
lieu of any fractional interests, it being the intent of the parties that all
fractional interests shall be eliminated by rounding any fraction up to the
nearest whole number of Warrant Shares or other securities, properties or
rights.
7. Reservation and Listing. The Company shall at all times reserve and keep
available out of its authorized shares of Common Stock, solely for the purpose
of issuance upon exercise of this Warrant, such number of Warrant Shares or
other securities, properties or rights as shall be issuable upon the exercise
thereof. The Company covenants and agrees that, upon exercise of this Warrant
and payment of the Exercise Price therefor, all Warrant Shares and other
securities issuable upon such exercise shall be duly and validly issued, fully
paid and non-assessable and not subject to preemptive rights of any stockholder.
As long as the Warrants shall be outstanding, the Company shall use its best
efforts to cause all Warrant Shares issuable upon exercise of this Warrant to be
listed (subject to official notice of issuance) on all securities exchanges (or,
if applicable on Nasdaq) on which the Common Stock is then listed and/or quoted.
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8. Certain Notice Requirements.
8.1 Holder's Right to Receive Notice. Nothing herein shall be construed
as conferring upon the Holder the right to vote or consent or to receive notice
as a shareholder for the election of directors or any other matter, or as having
any rights whatsoever as a stockholder of the Company. If, however, at any time
prior to the expiration of this Warrant and its exercise, any of the events
described in Section 8.2 shall occur, then, in one or more of said events, the
Company shall give written notice of such event at least fifteen days prior to
the date fixed as a record date or the date of closing the transfer books for
the determination of the stockholders entitled to such dividend, distribution,
conversion or exchange of securities or subscription rights, or entitled to vote
on such proposed dissolution, liquidation, winding up or sale. Such notice shall
specify such record date or the date of the closing of the transfer books, as
the case may be.
8.2 Events Requiring Notice. The Company shall be required to give the
notice described in this Section 8 upon one or more of the following events: (i)
if the Company shall take a record of the holders of its shares of Common Stock
for the purpose of entitling them to receive a dividend or distribution payable
otherwise than in cash, or a cash dividend or distribution payable otherwise
than out of retained earnings, as indicated by the accounting treatment of such
dividend or distribution on the books of the Company, or (ii) the Company shall
offer to all the holders of its Common Stock any additional shares of capital
stock of the Company or securities convertible into or exchangeable for shares
of capital stock of the Company, or any option, right or warrant to subscribe
therefor, or (iii) a merger or reorganization in which the Company is not the
surviving party, or (iv) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business shall be proposed.
8.3 Notice of Change in Exercise Price. The Company shall, promptly
after an event requiring a change in the Exercise Price pursuant to Section 6
hereof, send notice to the Holder of such event and change ("Price Notice"). The
Price Notice shall describe the event causing the change and the method of
calculating same and shall be certified as being true and accurate by the
Company's President and Chief Financial Officer.
8.4 Transmittal of Notices. All notices, requests, consents and other
communications under this Warrant shall be in writing and shall be deemed to
have been duly made on the date of delivery if delivered personally or sent by
overnight courier, with acknowledgment of receipt by the party to which notice
is given, or on the fifth day after mailing if mailed to the party to whom
notice is to be given, by registered or certified mail, return receipt
requested, postage prepaid and properly addressed as follows: (i) if to the
registered Holder of this Warrant, to the address of such Holder as shown on the
books of the Company, or (ii) if to the Company, to its principal executive
office.
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9. Miscellaneous.
9.1 Headings. The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Warrant.
9.2 Entire Agreement. This Warrant (together with any other agreements
and documents being delivered pursuant to or in connection with this Warrant)
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof, and supersedes all prior agreements and understandings of
the parties, oral and written, with respect to the subject matter hereof.
9.3 Binding Effect. This Warrant shall inure solely to the benefit of
and shall be binding upon, the Holder and the Company and their respective
successors, legal representatives and assigns, and no other person shall have or
be construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Warrant or any provisions herein contained.
9.4 Governing Law; Submission to Jurisdiction. This Warrant shall be
governed by and construed and enforced in accordance with the law of the State
of New York, without giving effect to conflict of laws. The Company hereby
agrees that any action, proceeding or claim against it arising out of, or
relating in any way to this Warrant shall be brought and enforced in the courts
of the State of New York or of the United States of America for the Southern
District of New York, and irrevocably submits to such jurisdiction, which
jurisdiction shall be exclusive. The Company hereby waives any objection to such
exclusive jurisdiction and that such courts represent an inconvenient forum. Any
process or summons to be served upon the Company may be served by transmitting a
copy thereof by registered or certified mail, return receipt requested, postage
prepaid, addressed to it at the address set forth in Section 8 hereof. Such
mailing shall be deemed personal service and shall be legal and binding upon the
Company in any action, proceeding or claim. The Company agrees that the
prevailing party(ies) in any such action shall be entitled to recover from the
other party(ies) all of its reasonable attorneys' fees and expenses relating to
such action or proceeding and/or incurred in connection with the preparation
therefor.
9.5 Waiver, Etc. The failure of the Company or the Holder to at any
time enforce any of the provisions of this Warrant shall not be deemed or
construed to be a waiver of any such provision, nor to in any way affect the
validity of this Warrant or any provision hereof or the right of the Company or
any Holder to thereafter enforce each and every provision of this Warrant. No
waiver of any breach, non-compliance or non-fulfillment of any of the provisions
of this Warrant shall be effective unless set forth in a written instrument
executed by the party or parties against whom or which enforcement of such
waiver is sought; and no waiver of any such breach, non-compliance or
non-fulfillment shall be construed or deemed to be a waiver of any other or
subsequent breach, non-compliance or non-fulfillment.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer as of the 21st day of May, 1999.
BIG CITY BAGELS, INC.
/s/ Mark Weinreb
By:_______________________________
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Form to be used to exercise Warrant:
Big City Bagels, Inc.
99 Woodbury Road
Hicksville, New York 11801
Date: _____________________, 19___
The undersigned hereby elects irrevocably to exercise the
within Warrant and to purchase ________ shares of Common Stock of Big City
Bagels, Inc. and hereby makes payment of $____________ (at the rate of
$_________ per share of Common Stock) in payment of the Exercise Price pursuant
thereto. Please issue the Common Stock as to which this Warrant is exercised in
accordance with the instructions given below.
or
The undersigned hereby elects irrevocably to convert its right
to purchase ____________ shares of Common Stock purchasable under the within
Warrant into __________ shares of Common Stock of Big City Bagels, Inc. (based
on a "Market Price" of $________ per share of Common Stock). Please issue the
Common Stock in accordance with the instructions given below.
--------------------------------------
Signature
NOTICE: The signature to this form must correspond with the
name as written upon the face of the within Warrant in every particular without
alteration or enlargement or any change whatsoever.
INSTRUCTIONS FOR REGISTRATION OF SECURITIES
Name ________________________________________________________
(Print in Block Letters)
Address ________________________________________________________
<PAGE>
Form to be used to assign Warrant:
ASSIGNMENT
(To be executed by the registered Holder to
effect a transfer of the within Warrant):
FOR VALUE RECEIVED, ________________________________ does
hereby sell, assign and transfer unto _________________________________ the
right to purchase _____________________ shares of Common Stock of Big City
Bagels, Inc. ("Company") evidenced by the within Warrant and does hereby
authorize the Company to transfer such right on the books of the Company.
Dated:____________________, 19___
--------------------------------------
Signature
- ---------------------------
Signature Guaranteed
NOTICE: The signature to this form must correspond with the
name as written upon the face of the within Warrant in every particular without
alteration or enlargement or any change whatsoever, and must be guaranteed by a
bank, other than a savings bank, or by a trust company or by a firm having
membership on a registered national securities exchange.
EXHIBIT 10.1
SEVERANCE AND CONSULTING AGREEMENT
AGREEMENT dated as of May 21, 1999 between BIG CITY BAGELS, INC., a New
York corporation with offices at 99 Woodbury Road, Hicksville, New York 11801
("Company"), and MARK WEINREB, ("Weinreb").
WHEREAS, Company is entering into an Agreement and Plan of
Reorganization and Merger, dated as of May 21, 1999, among the Company, BCB
Acquisition Corp. I, and BCB Acquisition Corp. II, and Intelligent Computer
Solutions, Inc. ("ICS"), VillageNet, Inc. ("VillageNet") and the shareholders
set forth in Schedule 2.1 thereto ("Merger Agreement");
WHEREAS, Company and Weinreb have previously entered into an Amended
and Restated Employment Agreement, dated August 21, 1998, which provides for
Weinreb's employment with Company through December 31, 1999 (the "Employment
Agreement");
WHEREAS, Company and Weinreb hereby mutually desire to terminate the
Employment Agreement as provided herein simultaneously with the closing
("Closing") of the transactions contemplated by the Merger Agreement; and
WHEREAS, Company desires that Weinreb continue to render certain
consulting services to Company after the date of the Closing as provided herein.
IT IS AGREED:
1. Termination of Employment.
(a) The Employment Agreement and Weinreb's employment by the
Company thereunder shall be terminated effective as of the Closing and, at such
time, the Employment Agreement shall no longer be of any further force or
effect. In consideration for Weinreb relinquishing his rights and benefits under
the Employment Agreement, the Company shall provide to Weinreb the benefits set
forth in this Section 1.
(b) Simultaneously with the execution of this Agreement, the
Company has entered into and delivered to Weinreb an Option Agreement of even
date herewith entitling Weinreb to purchase up to 50,000 shares of Common Stock
of the Company conditioned upon the occurrence of the Closing. The Company
agrees that the issuance of the shares of Common Stock issuable upon exercise of
such options shall be registered under the Securities Act of 1933, as amended,
on or prior to the date of Closing.
<PAGE>
(c) At the Closing, the Company shall
(i) pay Weinreb the sum of $65,000, net of applicable
withholding taxes;
(ii) pay Weinreb all unpaid salary accrued through the
date of Closing, net of applicable withholding taxes;
(iii) reimburse Weinreb for all expenses incurred
through the date of Closing and reimbursable as provided in Section
4(b) of the Employment Agreement;
(iv) assign to Weinreb the lease for the automobile
presently leased by the Company for the exclusive use of Weinreb;
(v) at Weinreb's option, transfer to Weinreb
ownership of all key-person life insurance policies maintained by the
Company insuring the life of Weinreb, provided that Weinreb shall pay
to the Company any accumulated cash value of such policies and a pro
rata portion of any prepaid premiums; and
(vi) deliver to Weinreb a Promissory Note in the
principal amount of $85,000 in the form of Exhibit A hereto.
(d) At the Closing, Weinreb may assume the automobile lease
presently held by the Company for an automobile for the exclusive use of
Weinreb. Notwithstanding such assumption, the Company shall continue to make all
lease payments required thereunder until the expiration of the four-month period
following the Closing (see Section 1(e) of this Agreement). After expiration of
the four month period after Closing, Weinreb shall be solely responsible for all
further lease payments thereunder and for all insurance, maintenance and other
costs associated with the use and operation of such automobile.
(e) Other Perquisites. For a period of four months from the
date of Closing (the "Continued Perquisite Period"), (i) Weinreb shall continue
to be provided with the medical and dental insurance presently being provided to
him by the Company pursuant to Section 4(d) of the Employment Agreement and (ii)
the Company shall continue to make all lease payments under the automobile lease
presently held by the Company for an automobile for the exclusive use of Weinreb
and pay for all insurance associated with the use and operation of such
automobile, subject to limits and deductibles acceptable to the Company.
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2. Consulting Duties; Term and Consulting Fees.
(a) Commencing after the Closing, Weinreb hereby agrees to
provide the following services ("Services") as a consultant and independent
contractor to assist Company in connection with: (i) transition activities
arising from the change in control of the Company following the Closing; (ii)
overseeing the Company's franchise and commissary operations and the sale of
same; (iii) completing the sales or closing, if any, of any remaining
Company-owned stores; and (iv) the reporting obligations of the Company under
the Securities Exchange Act of 1934. Weinreb shall provide the Services for up
to sixteen consecutive (except for two weeks unpaid vacation under Section 2(c))
seven-day periods, commencing on the date of the Closing (each, a "Service
Period"); provided, however, Weinreb shall not be required to devote more than
25 hours during any Service Period to the provision of such services.
(b) Weinreb shall be authorized to perform, and shall perform,
only those Services approved by the Company pursuant to a plan for a given
Service Period (a "Service Period Plan"), approved by Eli Levi or another
designee of the Company, or otherwise directed by such designee. Weinreb shall
propose a Service Period Plan to such designee at least three (3) business days
prior to the commencement of a Service Period except the first Service Period
when the Service Period Plan will be proposed at the time of Closing. Each
Service Period Plan will be deemed accepted by the Company unless the designee
objects to or changes the Service Period Plan prior to commencement of the
Service Period.
(c) Notwithstanding the foregoing, Company shall be entitled
at any time to terminate the services of Weinreb for any then remaining Service
Periods by providing written notice to Weinreb of such termination at least 7
days prior to the commencement of the next Service Period. During any Service
Period when a notice of termination is so delivered, Weinreb shall continue to
provide services during such period and to be compensated by Company for such
services as provided in this Section 2. Weinreb shall be permitted to take two
weeks of unpaid vacation during the Service Periods. Weinreb's services as a
consultant shall be performed primarily in the Counties of Nassau and Suffolk,
New York, but Weinreb shall undertake such travel (including multiple-day stays)
as is reasonably required and approved for the performance of a Service Period
Plan. In consideration for his services as a consultant, the Company shall pay
to Weinreb (without withholding) $1,250 for each of the first twelve Service
Periods and $1,875 for the last four Service Periods. Each such payment shall be
paid on the last business day of each Service Period.
3. Expenses. Company shall reimburse Weinreb for all reasonable
expenses specified in, and incurred by Weinreb in the performance of, an
approved Service Period Plan upon Weinreb's submission to Company of appropriate
receipts and reports evidencing such expenses.
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<PAGE>
4. Protection of Confidential Information and Non-Competition.
(a) Weinreb agrees that his services hereunder are, and the
services under his Employment Agreement were of a special, unique and
extraordinary character, and that he will be, and was under his Employment
Agreement in a position of confidence and trust with franchisees, investors in
franchisees and employees of Company and its subsidiaries. Weinreb further
acknowledges that in the course of rendering services to Company, Weinreb has
obtained and will obtain knowledge of confidential information and trade secrets
of Company (such as, without limitation, business, marketing and advertising
plans and strategies for Company and its franchisees, budgets, information
regarding recipes, menus, proprietary products, vendors, wholesale accounts and
potential investors in Company and franchises, as well as in connection with
Company's new line of business provided by ICS and VillageNet) (collectively,
"Confidential Information"). Weinreb agrees not to divulge, furnish or make
accessible any Confidential Information to any person other than is required in
the ordinary course of business by his consulting duties hereunder.
(b) Weinreb agrees that for a two-year period after the date
of Closing, he shall not, directly or indirectly, employ or seek to employ any
persons employed by Company or by any franchisee, or otherwise directly or
indirectly induce or seek to induce such person to leave his or her employment
thereat. In addition, while Weinreb is engaged by Company as a consultant
hereunder, Weinreb shall not, directly or indirectly, establish, engage in or
become economically interested in, as an employee, consultant, agent, owner,
partner, co-venturer, principal, stockholder or otherwise (hereinafter referred
to as "Involvement"), any business specializing, in whole or in part, in
operating any food service business, store or facility which is principally
engaged in the sale of the same or similar food and/or similar proprietary
products sold by Company or franchisees of Company unless such Involvement is
limited to a business which operates not more than three retail stores, none of
which are located within fifteen miles of a retail store operated by Company or
its franchisees. Mere passive ownership of stock representing 5% or less of the
capital stock of a publicly-held company shall not be deemed a violation of the
second sentence of this paragraph.
(c) If Weinreb commits or is about to commit a breach of any
of the provisions of paragraph 4(a) or 4(b) above, Company shall have the right
to have the provisions of this Agreement specifically enforced by any court
having equity jurisdiction without being required to post bond or other security
and without having to prove the inadequacy of the available remedies at law, it
being acknowledged and agreed that any such breach will cause irreparable injury
to Company.
5. Indemnification. Company agrees to indemnify Weinreb and hold him
harmless for the consequences of all Services that he reasonably believes, in
good faith, are in furtherance of a Service Period Plan. The Company agrees to
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<PAGE>
defend Weinreb at Company's expense in connection with the defense of any
action, suit or proceeding against Weinreb in connection with the performance of
such Services, unless caused in whole or in part by his intentional misconduct,
gross negligence, or unauthorized acts.
6. Reimbursement of Expenses. In the event of any claims, litigation or
other legal proceedings that Weinreb institutes to enforce his rights under or
to recover damages for breach of the Promissory Note referenced by Section
1(c)(vi), the Stock Option Agreement dated as of August 21, 1998 between the
Company and Weinreb or the Stock Option Agreement referred to in Section 1(b),
Weinreb shall be reimbursed by Company for the costs incurred by Weinreb in
connection with the analysis, defense and prosecution thereof, including
reasonable attorney's fees and expenses, if a non-appealable final decision of a
court of law holds in favor of Weinreb.
7. Binding Effect; Successors. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective heirs,
successors, assigns and representatives.
8. Entire Understanding; Governing Law. This Agreement, the Promissory
Note and the Stock Option Agreement referred to in Section 1(b) and the Stock
Option Agreement dated as of August 21, 1998 herewith represent the entire
agreement and understanding between the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings. This
Agreement shall be governed by, and construed in accordance with, the internal
laws of New York (without regard to principles of conflicts of law).
9. Modification. This Agreement may not be amended, modified, canceled,
discharged, extended or changed except by an agreement in writing signed by the
party against whom enforcement of any such amendment, modification,
cancellation, discharge, extension or change is sought.
10. Headings. Paragraph headings contained in this Agreement are for
convenience of reference only and shall not be considered a part of this
Agreement.
11. Severability. If any provision or if any part of any provision of
this Agreement is found to be unenforceable, illegal or contrary to public
policy by a court of competent jurisdiction, the parties agree that this
Agreement shall remain in full force and effect except for such provision or
part of any such provision held to be unenforceable.
12. Notices. Any notices or other communications required or permitted
hereunder shall be in writing and shall be deemed effective when delivered in
person, by overnight courier (e.g., FedEx), or by registered or certified mail,
return receipt requested, in all cases the notice shall be deemed effective on
the date of receipt, addressed to Weinreb at Weinreb's then current home address
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<PAGE>
and, in the case of Company, addressed to Company at its offices, 99 Woodbury
Road, Hicksville, New York 11801 or such other principal executive office it
shall maintain and disclose as such on the cover page of a report filed by the
Company under the Securities Exchange Act of 1934. Either party may change the
address to which notices are to be addressed by notice in writing given to the
other in accordance with the terms hereof.
13. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, and all of which, taken
together, shall constitute one instrument.
IN WITNESS WHEREOF, Company has by its appropriate officer signed this
Agreement and Weinreb has signed this Agreement as of the day and year first
above written.
/s/ Mark Weinreb
-----------------------------------------
MARK WEINREB
BIG CITY BAGELS, INC.
By: /s/ Howard Fein
-------------------------------------
Howard Fein, Chief Financial Officer
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<PAGE>
Exhibit A
PROMISSORY NOTE
Dated: May 21, 1999
$85,000.00
FOR VALUE RECEIVED, Big City Bagels, Inc., a New York
corporation ("Maker"), hereby promises to pay to the order of Mark Weinreb
("Payee"), at the address indicated for payment on the signature page of this
Promissory Note, in lawful money for the United States, the principal sum of
$85,000.00, without interest unless this Promissory Note shall not be paid at
maturity, in which case interest shall accrue on the unpaid principal balance
from the date of maturity until paid in full at the rate of 18% per annum.
Payment of principal hereon shall be made in 12 equal monthly installments of
$7,083.34 on the ____ day of each month commencing on ____________, 1999 [insert
4-month anniversary of Closing]. Notwithstanding the foregoing, if Maker has
elected not to continue the services of Payee as a consultant to the Maker
pursuant to the Severance and Consulting Agreement between Maker and Payee dated
as of May 21, 1999 ("Severance and Consulting Agreement") through ___________,
1999 [insert 4-month anniversary of Closing], then the installments provided in
this Promissory Note shall commence as of the last day of such consultancy.
Payment of interest, if any, accrued under this Promissory Note shall be made
when the principal amount is paid in full. All payments of principal and
interest, if any, shall be made without set-off, withholding, deduction or
counterclaim.
This Promissory Note may be prepaid at any time in whole or
from time to time in part, in each case without premium or penalty.
The entire unpaid principal amount of this Promissory Note
shall become immediately due and payable without demand on the happening of any
one or more of the following events:
(a) failure of the Maker to make any payment of any
installment of principal within 10 days after such payment is due and five days
after notice by Payee to Maker that payment of an installment was not paid
within such 10 day period; or
(b) the filing of a petition by or against the Maker under the
provisions of any state insolvency law or under the provisions of the Federal
Bankruptcy Act or any assignment by the Maker for the benefit of creditors.
Maker and all other parties liable herefor, whether principal,
endorser, or otherwise, hereby jointly and severally (i) waive presentment,
demand for payment, notice of dishonor, notice of protest and protest and all
other notices or demands in connection with the delivery, acceptance,
performance, default, endorsement or guaranty of this Promissory Note, (ii)
waive recourse to suretyship defenses generally, including extensions of time,
<PAGE>
releases of security and other indulgences which may be granted from time to
time by holder of this Promissory Note to Maker or any party liable herefor, and
(iii) agree to pay all costs and expenses, including reasonable attorneys' fees,
in connection with the enforcement or collection of this Promissory Note.
Big City Bagels, Inc.
By:___________________________________
Chief Financial Officer
2
EXHIBIT 10.2
STOCK OPTION AGREEMENT
AGREEMENT, made as of the 21st day of May, 1999 between BIG CITY
BAGELS, INC., a New York corporation ("Company"), and MARK WEINREB ("Holder").
WHEREAS, Holder and Company have entered into a Severance and
Consulting Agreement ("Severance and Consulting Agreement") with respect to the
termination of Holder's employment with Company and his retention by Company as
a consultant thereto, dated as of the date hereof; and
WHEREAS, on May 12, 1999, the Board of Directors authorized the grant
to Holder, outside of any of the Company's Performance Equity Plans, of an
option (the "Option") to purchase an aggregate of 50,000 of the authorized but
unissued or treasury shares of the common stock of Company, $.001 par value
("Common Stock"), on the terms and conditions set forth in this Agreement,
conditioned upon a closing ("Closing") of the transactions contemplated by the
Agreement and Plan of Reorganization and Merger, dated as of May 21, 1999, among
the Company, Big City Acquisition Corp. I, and Big City Acquisition Corp. II,
and Intelligent Computer Solutions, Inc., VillageNet, Inc. and the shareholders
set forth on Schedule 2.1 thereto ("Merger Agreement"); and
WHEREAS, Holder desires to acquire said Option on the terms and
conditions set forth in this Agreement:
IT IS AGREED:
1. Grant of Stock Option. Company hereby grants Holder the Option to
purchase all or any part of an aggregate of 50,000 shares of Common Stock (the
"Option Shares") on the terms and conditions set forth herein, conditioned upon
the Closing. The Option and the rights provided to the Holder hereunder shall
become effective if and only if the Closing shall have occurred (the date of the
Closing being hereinafter referred to as the "Closing Date") on or before
November 21, 1999, unless such date shall have been postponed to a later date by
the parties to the Merger Agreement, in which case such later date shall apply.
2. Non-Qualified Stock Option. The Option represented hereby is not
intended to be an Option which qualifies as an "Incentive Stock Option" under
Section 422 of the Internal Revenue Code of 1986, as amended.
3. Exercise Price. The exercise price of the first 25,000 Option Shares
shall be $0.48, the exercise price of the next 12,500 Option Shares shall be
$0.75 and the exercise price of the remaining 12,500 Option Shares shall be
$1.00, subject to adjustment as hereinafter provided ("Exercise Prices").
<PAGE>
4. Exercisability. This Option is exercisable, subject to the terms and
conditions of this Agreement, at any time from and after the Closing Date, and
it shall remain exercisable until the close of business on the fifth anniversary
of the Closing Date (the "Exercise Period").
5. Effect of Termination of Employment and/or Consultancy. The
termination of the Holder's employment with the Company pursuant to the
Severance and Consulting Agreement and the termination of the Holders'
consultancy with the Company under the Severance and Consulting Agreement for
any reason whatsoever shall not cause a termination of the Option and once it
shall become exercisable, it shall remain exercisable until the expiration of
the Exercise Period.
6. Withholding Tax. Not later than the date as of which an amount first
must be included in the gross income of Holder for federal income tax purposes
with respect to the Option, Holder may be required to pay to Company, or make
arrangements satisfactory to Company regarding the payment of, any federal,
state and local taxes of any kind required by law to be withheld or paid with
respect to such amount. The obligations of Company under the Plan and pursuant
to this Agreement shall be conditional upon such payments or arrangements with
Company, if such payments or arrangements are required, and Company shall, to
the extent permitted by law, have the right to deduct any such taxes from any
payment of any kind otherwise due to Holder from Company.
7. Adjustments.
7.1 In the event of a stock split, stock dividend, combination
of shares, or any other similar change in the Common Stock of Company as a
whole, the Board of Directors of Company shall make equitable, proportionate
adjustments in the number and kind of shares covered by the Option and in the
Exercise Prices hereunder.
7.2 In the event of any reclassification or reorganization of
the outstanding shares of Common Stock other than a change covered by Section
7.1 hereof or which solely affects the par value of such shares of Common Stock,
or in the case of any merger or consolidation of Company with or into another
corporation (other than a consolidation or merger in which Company is the
continuing corporation and which does not result in any reclassification or
reorganization of the outstanding shares of Common Stock), Holder shall have the
right thereafter (until the expiration of the right of exercise of this Option)
to receive upon the exercise hereof after such event, for the same aggregate
Exercise Prices payable hereunder immediately prior to such event, the kind and
amount of shares of stock or other securities or property (including cash)
receivable upon such reclassification, reorganization, merger or consolidation
by a holder of the number of shares of Common Stock of Company obtainable upon
exercise of this Option immediately prior to such event. The provisions of this
Section 7.2 shall similarly apply to successive reclassifications,
reorganizations, mergers or consolidations, sales or other transfers.
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8. Method of Exercise.
8.1 Notice to Company. The Option shall be exercised in whole
or in part by written notice in the form attached hereto as Exhibit A directed
to Company at its principal place of business accompanied by full payment as
hereinafter provided of the Exercise Price for the number of Option Shares
specified in the notice.
8.2 Delivery of Option Shares. Company shall deliver a
certificate for the Option Shares to Holder as soon as practicable after payment
therefor, but in any event not more than ten business days thereafter.
8.3 Payment of Purchase Price.
8.3.1 Cash Payment. Holder shall make cash payments
by wire transfer, certified or bank check or personal check, in each case
payable to the order of Company, Company shall not be required to deliver
certificates for Option Shares until Company has confirmed the receipt of good
and available funds in payment of the purchase price thereof.
8.3.2 Stock Payment. At Holder's election, Holder
shall be permitted to use Common Stock of Company owned by him to pay the
purchase price for the Option Shares (and any required withholding taxes) by
delivery of stock certificates in negotiable form which are effective to
transfer good and valid title thereto to Company, free of any liens or
encumbrances. Shares of Common Stock used for this purpose shall be valued at
the Fair Market Value, as defined below, on the second trading day immediately
preceding the date notice is delivered by Holder pursuant to Section 8.1.
8.3.3 Fair Market Value. "Fair Market Value", unless
otherwise required by any applicable provision of the Internal Revenue Code of
1986, as amended, or any regulations issued thereunder, means, as of any given
date: (i) if the Common Stock is listed on a national securities exchange or
quoted on the Nasdaq National Market or Nasdaq SmallCap Market, the last sale
price of the Common Stock in the principal trading market for the Common Stock
on the last trading day preceding the date of exercise in accordance with
Section 8.3.2, above, as reported by the exchange or Nasdaq, as the case may be;
(ii) if the Common Stock is not listed on a national securities exchange or
quoted on the Nasdaq National Market or Nasdaq SmallCap Market, but is traded in
the over-the-counter market, the closing bid price for the Common Stock on the
last trading day preceding the date of exercise in accordance with Section
8.3.2, above, as reported by the OTC Bulletin Board or the National Quotation
Bureau, Incorporated or similar publisher of such quotations; and (iii) if the
fair market value of the Common Stock cannot be determined pursuant to clause
(i) or (ii) above, such price as Company shall determine, in good faith.
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8.3.4 Cashless Exercise. At Holder's election,
Holder shall be permitted to convert this Option, in whole or part, into Common
Stock ("Conversion Right") as follows: Upon exercise of the Conversion Right,
Company shall deliver to Holder (without payment by Holder of any of the
Exercise Price) that number of shares of Common Stock equal to the quotient
obtained by dividing (i) the "Value" (as defined below) of the portion of the
Option being converted on the second trading day immediately preceding the date
notice is delivered by Holder pursuant to Section 8.1 ("Valuation Date") by (ii)
the "Market Price" (as defined above) on the Valuation Date. The "Value" of the
portion of the Option being converted shall equal the remainder derived from
subtracting (a) the Exercise Price multiplied by the number of shares of Common
Stock underlying the portion of the Option being converted from (b) the Market
Price of the Common Stock multiplied by the number of shares of Common Stock
underlying the portion of the Option being converted.
9. Nonassignability. The Option shall not be assignable or
transferable, without the consent of Company, except by will or by the laws of
descent and distribution in the event of the death of Holder. No transfer of the
Option by Holder by will or by the laws of descent and distribution shall be
effective to bind Company unless Company shall have been furnished with written
notice thereof and a copy of the will and/or such other evidence as Company may
deem necessary to establish the validity of the transfer and the acceptance by
the transferee or transferees of the terms and conditions of the Option.
10. Form S-8 Registration. The Company shall register the Option Shares
on a Registration Statement on Form S-8 filed by it under the Securities Act of
1933, as amended ("Act") not later than the Closing Date and shall take such
action as is necessary to maintain the effectiveness of such registration
statement and a current prospectus relating thereto as long as any portion of
the Option remains exercisable.
11. Company Representations. Company hereby represents and warrants to
Holder that:
(i) Company, by appropriate and all required action,
is duly authorized to enter into this Agreement and consummate all of
the transactions contemplated hereunder; and
(ii) the Option Shares, when issued and delivered by
Company to Holder in accordance with the terms and conditions hereof,
will be duly and validly issued and fully paid and non-assessable.
12. Holder Representations. Holder hereby represents and warrants to
Company that:
(i) he is acquiring the Option and, unless the Option
Shares have been registered under the Act, he shall acquire the Option
Shares, for his own account and not with a view towards the
distribution thereof;
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(ii) he has received a copy of the Plan as in effect
as of the date of this Agreement;
(iii) he has received a copy of all reports and
documents required to be filed by Company with the Commission pursuant
to the Exchange Act within the last 12 months and all reports issued by
Company to its shareholders;
(iv) he understands that he must bear the economic
risk of the investment in the Option Shares, which cannot be sold by
him unless they are registered under the Act or an exemption therefrom
is available thereunder;
(v) in his position with Company, he has had both the
opportunity to ask questions and receive answers from the officers and
directors of Company and all persons acting on its behalf concerning
the terms and conditions of the offer made hereunder and to obtain any
additional information to the extent Company possesses or may possess
such information or can acquire it without unreasonable effort or
expense necessary to verify the accuracy of the information obtained
pursuant to clause (iii) above; and
(vi) he is aware that, in the absence of registration
under the Act or his ability to sell the Option Shares pursuant to Rule
144(k) promulgated under the Act, Company shall place stop transfer
orders with its transfer agent against the transfer of the Option
Shares and the certificates evidencing the Option Shares shall bear the
following legend:
"The shares represented by this certificate have been
acquired for investment and have not been registered
under the Securities Act of 1933. The shares may not
be sold or transferred in the absence of such
registration or an exemption therefrom under said
Act."
13. Restriction on Transfer of Option Shares. Anything in this
Agreement to the contrary notwithstanding, Holder hereby agrees that he shall
not sell, transfer by any means or otherwise dispose of the Option Shares
acquired by him unless (i) they have been registered under the Act or (ii) an
exemption from the registration requirements of the Act is available thereunder
and Holder has furnished Company with notice of such proposed transfer and an
opinion of legal counsel that such proposed transfer is so exempt.
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14. Miscellaneous.
14.1 Notices. All notices, requests, deliveries, payments,
demands and other communications which are required or permitted to be given
under this Agreement shall be in writing and shall be either delivered
personally or sent by registered or certified mail, or by private courier to the
parties at their respective addresses set forth herein, or to such other address
as either shall have specified by notice in writing to the other. Notice shall
be deemed duly given hereunder when delivered or mailed as provided herein.
14.2 Holder and Shareholder Rights. Holder shall not have any
of the rights of a shareholder with respect to the Option Shares until such
shares have been issued after the due exercise of the Option. Nothing contained
in this Agreement shall be deemed to confer upon Holder any right to continued
employment with Company or any subsidiary thereof, nor shall it interfere in any
way with the right of Company to terminate such employment in accordance with
the provisions regarding such termination set forth in Holder's written
employment agreement with Company, or if there exists no such agreement, to
terminate Holder at will.
14.3 Waiver. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
other or subsequent breach.
14.4 Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof. This
Agreement may not be amended except by writing executed by Holder and Company.
14.5 Binding Effect; Successors. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and, to the extent not
prohibited herein, their respective heirs, successors, assigns and
representatives. Nothing in this Agreement, expressed or implied, is intended to
confer on any person other than the parties hereto and as provided above, their
respective heirs, successors, assigns and representatives any rights, remedies,
obligations or liabilities.
14.6 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York (without regard
to choice of law provisions).
14.7 Headings. The headings contained herein are for the sole
purpose of convenience of reference, and shall not in any way limit or affect
the meaning or interpretation of any of the terms or provisions of this
Agreement.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of
the day and year first above written.
BIG CITY BAGELS, INC. Address: 99 Woodbury Road
Hicksville, New York 11801
By: /s/ Howard Fein
---------------------------
Name: Howard Fein
Title: Chief Financial Officer
HOLDER
/s/ Mark Weinreb
- ---------------------------
MARK WEINREB
7
<PAGE>
EXHIBIT A
FORM OF NOTICE OF EXERCISE OF OPTION
________________________
DATE
Big City Bagels, Inc.
99 Woodbury Road
Hicksville, New York 11801
Attention: The Board of Directors
Re: Purchase of Option Shares
Gentlemen:
In accordance with my Stock Option Agreement dated as of _____
___, 1999 with Big City Bagels, Inc. ("Company"), I hereby irrevocably elect to
exercise the right to purchase _________ shares of Company's common stock, par
value $.001 per share ("Common Stock").
As payment for my shares, enclosed is (check and complete
applicable box[es]):
|_| a [personal check] [certified check] [bank check]
payable to the order of "Big City Bagels, Inc." in
the sum of $_________;
|_| confirmation of wire transfer in the amount of
$_____________; and/or
|_| a certificate for ___________ shares of Company's
Common Stock, free and clear of any encumbrances,
duly endorsed, having a Fair Market Value (as such
term is defined in Section 8.3.3 of the Stock Option
Agreement) of $_________; and/or
|_| in lieu of payment of the purchase price, I elect to
convert my Option into shares of Common Stock
pursuant to Section 8.3.4 of the above-mentioned
agreement.
I hereby represent and warrant to, and agree with, Company
that:
(i) I have received a copy of all reports and
documents required to be filed by Company with the Commission pursuant
to the Exchange Act within the last 12 months and all reports issued by
Company to its shareholders;
(ii) I understand that I must bear the economic risk
of the investment in the Option Shares, which cannot be sold by me
unless they are registered under the Securities Act of 1933 (the "Act")
or an exemption therefrom is available thereunder;
(iii) in my position with Company, I have had both
the opportunity to ask questions and receive answers from the officers
and directors of Company and all persons acting on its behalf
concerning the terms and conditions of the offer made hereunder and to
obtain any additional information to the extent Company possesses or
may possess such information or can acquire it without unreasonable
effort or expense necessary to verify the accuracy of the information
obtained pursuant to clause (i) above; and
(iv) if the Option Shares have not been registered
under the Act, (a) I am acquiring the Option and shall acquire the
Option Shares for my own account, for investment, and not with a view
towards the distribution thereof, (b) I am aware that Company shall
place stop transfer orders with its transfer agent against the transfer
<PAGE>
of the Option Shares unless they may be transferred pursuant to Rule
144(k) and (c) the certificates evidencing the Option Shares shall bear
the following legend:
"The shares represented by this certificate
have been acquired for investment and have
not been registered under the Securities Act
of 1933. The shares may not be sold or
transferred in the absence of such
registration or an exemption therefrom under
said Act."
Kindly forward to me my certificate at your earliest convenience.
Very truly yours,
_______________________________ _______________________________
(Signature) (Address)
_______________________________ _______________________________
(Print Name)
_______________________________
(Social Security Number)
2
EXHIBIT 10.3
FORM OF
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and
entered into as of ____________ ___, 1999 by and among Big City Bagels, Inc., a
corporation organized under the laws of the State of New York (the "Company"),
and the holders of the Company's (i) Common Stock, par value $.001 per share
("Common Stock") and (ii) Class B Preferred Stock, par value $ $.001 per share
(the "Class B Preferred") which are initially convertible into _____ shares of
Common Stock, listed on Exhibit A hereto, (individually, a "Holder," and
collectively, the "Holders").
WITNESSETH:
WHEREAS, the Company will acquire Intelligent Computer Solutions, Inc.,
a New York corporation ("ICS") and VillageNet, Inc., a New York corporation
("VillageNet") pursuant to an Agreement and Plan of Merger dated as of May 21,
1999, (the "Merger Agreement");
WHEREAS, pursuant to the Merger Agreement, the Holders will receive (i)
shares of Common Stock (the "Merger Common Stock") and (ii) shares of Class B
Preferred (the "Merger Preferred Stock"), in exchange for their stock in ICS and
VillageNet;
WHEREAS, as an inducement to enter into the Merger Agreement, the
Company has agreed to enter into this Agreement with the Holders; and
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth below, the parties hereto agree as follows:
AGREEMENT
Section 1. Definitions.
1.1. As used in this Agreement, the following terms shall have the
following meanings:
"Affiliate" means any entity controlling, controlled by or under common
control with a designated Person. For the purposes of this definition, "control"
shall have the meaning specified as of the date of this Agreement for that word
in Rule 405 promulgated by the Commission under the Securities Act.
"Board" means the Board of Directors of the Company.
<PAGE>
"Commission" means the Securities and Exchange Commission, any and
successor thereto.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Person" means an individual, partnership, corporation, business trust,
limited liability company, joint stock company, trust, unincorporated
association, joint venture, or other entity of whatever nature.
"Registrable Stock" means (i) any shares of Common Stock then
outstanding and held by the Holder and (ii) any shares of Common Stock then
issuable upon conversion of the Class B Preferred held by the Holder; provided,
however, that Registrable Stock shall not include any shares the sale of which
has been (x) effectively registered under the Securities Act and sellable by the
Holder thereof in accordance with such registration, or (y) sellable to the
public pursuant to Rule 144 of the Commission, or any successor rule.
"Rule 144" means Rule 144 promulgated by the Commission under the
Exchange Act, as such rule may be amended from time to time, or any successor
Rule thereto.
"Securities" means any debt or equity securities of the Company,
whether now or hereafter authorized, and any instrument convertible into, or
exercisable or exchangeable for, Securities or a Security.
"Securities Act" means the Securities Act of 1933, as amended prior to
or after the date of this Agreement, or any federal statute or statutes which
shall be enacted to take the place of such Act, together with all rules and
regulations promulgated thereunder.
Section 2. Demand Registrations.
2.1. The Holders of no less than 51% of the Registrable Stock shall be
entitled to four demand registrations commencing immediately upon the
effectiveness of this Agreement, by providing a written notice to the Company
requesting that the Company register the amount of Registrable Stock specified
in the notice, under the Securities Act and under other relevant securities
laws, for disposition in accordance with methods stated in the notice.
2.2. When it receives a registration notice under Section 2.1 above,
the Company shall use commercially reasonable efforts to effect the registration
under the Securities Act of Registrable Stock specified in the registration
notice under Section 2.1 to the extent requisite to permit disposition by the
Holders in accordance with the intended methods of disposition described in the
registration notice.
Section 3. Incidental Registration. Each time the Company proposes to
register any of its Securities under the Securities Act (other than pursuant to
Section 2 of this Agreement), it will give at least 30 days advance written
notice of its intention to do so to the Holders. Each Holder may then specify,
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<PAGE>
by prompt notice to the Company, a number of shares of Registrable Stock held by
it which it wishes to include in the Company's proposed registration. Subject to
the market cutback limitations of Section 8 of this Agreement, the Company will
use commercially reasonable efforts to effect the registration under the
Securities Act of Registrable Stock specified by the Holders under this Section
3.
Section 4. Limitations on Registration Rights. Notwithstanding any
contrary provision of thisAgreement:
(a) the Company shall not be required to effect more than four
registrations pursuant to Section 2 of this Agreement; provided,
however, that a demand for registration shall not count as a
registration required pursuant to Section 2 of this Agreement under
this clause 4(a) if the registration statement filed with respect to
such registration is not declared effective by the Commission; and
(b) Section 3 of this Agreement shall not apply to a
registration effected solely to offer securities for sale pursuant to,
or in connection with, (i) an employee benefit plan or (ii) a
transaction subject to Rule 145 under the Securities Act or in an
exchange offer registered on Form S-4 or any successor form to Form
S-4, or to any registration on a form which does not permit inclusion
of Registrable Stock pursuant to Commission rule or practice.
Section 5. Registration Procedures.
5.1. Whenever the Company is required by the provisions of this
Agreement to use commercially reasonable efforts to effect the registration of
any Registrable Stock under the Securities Act, the Company will, as
expeditiously as possible:
(a) in the case of a registration required under Section 2 of
this Agreement, engage the underwriters as provided in Section 12;
(b) before filing each registration statement or prospectus or
amendment or supplement thereto with the Commission, furnish counsel
for the sellers with copies of all such documents proposed to be filed
which shall be subject to the reasonable approval of such counsel;
(c) prepare and file with the Commission a registration
statement with respect to such Registrable Stock and use commercially
reasonable efforts to cause such registration statement to become and
remain effective for the period provided in Section 5.2 below;
(d) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for a period of 180 days and to comply with the
provisions of the Securities Act with respect to the sale or other
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<PAGE>
disposition of all Registrable Stock covered by such registration
statement in accordance with the intended methods of disposition set
forth in such registration statement;
(e) prepare and promptly file with the Commission, and notify
each seller of such Registrable Stock immediately after the filing of,
such amendment or supplement to such registration statement or
prospectus as may be necessary to correct any statements or omissions
if, during such periods as a prospectus relating to such Securities is
required to be delivered under the Securities Act, any event shall have
occurred as the result of which any such prospectus or any other
prospectus as then in effect would include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances in which they
were made, not misleading, and notify each seller immediately after its
discovery of such event;
(f) furnish to the underwriters and each seller of such
Registrable Stock such numbers of copies of such registration
statement, each amendment and supplement thereto, the prospectus
included in such registration statement (including each preliminary
prospectus) and such other documents as such underwriters or the seller
may reasonably request in order to facilitate the disposition of the
Registrable Stock subject to such registration statement in accordance
with such registration statement;
(g) use commercially reasonable efforts to register or qualify
any Registrable Stock covered by such registration statement under the
securities or blue sky laws of such jurisdictions within the United
States of America as the seller or the underwriters reasonably request,
and to take any other acts which a seller or the underwriters may
reasonably request under such securities or blue sky laws to enable the
consummation of the disposition in such jurisdictions of such
Registrable Stock (provided, however, that the Company may not be
required under this Agreement (i) to qualify generally to do business
as a foreign corporation in any jurisdiction in which it would not
otherwise be required to qualify, or (ii) to subject itself to taxation
in any such jurisdiction, or (iii) to consent to general service of
process in any such jurisdiction);
(h) use commercially reasonable efforts to cause all
Registrable Stock sold under the registration to be listed on each
securities exchange or to be qualified and eligible for trading in any
automated quotation system, if any, on which similar Securities issued
by the Company are then listed or traded or, if no such listing or
qualification has then occurred, to use commercially reasonable efforts
to cause such Securities to be so listed or qualified on an exchange or
in a trading system that is reasonably acceptable to the Company and
the Holders of Registrable Stock;
(i) enter into such customary agreements (including
underwriting agreements in customary form) and take all such other
actions as the underwriters, if any, or the Holders of more than 50% of
the Registrable Stock being sold reasonably request in order to
expedite or facilitate the disposition of such Registrable Stock
(including, without limitation, effecting a stock split or a
combination of shares of the Common Stock, subject to the limitation
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<PAGE>
not to effect a reverse stock split pursuant to Section 8.5 of the
Merger Agreement);
(j) advise each seller of Registrable Stock immediately after
it shall receive notice or obtain knowledge thereof, of the issuance of
any stop order by the Commission suspending the effectiveness of such
registration statement or the initiation or threatening of any
proceeding for such purpose and promptly use reasonable efforts to
prevent the issuance of any stop order or to obtain its withdrawal if
such stop order should be issued; and
(k) make available for inspection by the sellers of
Registrable Stock, any underwriter participating in any disposition
pursuant to such registration statement, and any attorney, accountant
or other agent retained by any seller or such underwriter, all
financial and other records, pertinent corporate documents and
properties of the Company, and cause the Company's officers, directors,
employees and independent accountants to supply all information
reasonably requested by any such seller or such underwriter in
connection with such registration statement, all subject to such
limitations as the Company reasonably deems appropriate in order to
protect the Company's confidential or proprietary information.
5.2. Notwithstanding any contrary provision of this Section 5, the
Company shall not be required to use commercially reasonable efforts to maintain
the effectiveness of any registration statement for a period in excess of 180
days or for a period extending beyond the date the sellers have sold or
otherwise disposed of their Registrable Stock registered under such registration
statement, whichever is earlier.
5.3. It shall be a condition precedent to the inclusion of the
Registrable Stock of any sellers in a registration effected pursuant to this
Agreement that the sellers shall (a) furnish to the Company such information
regarding the sellers, the Registrable Stock of the sellers and the intended
method of disposition of such Registrable Stock, and (b) execute such
indemnities, underwriting agreements and other documents, as the Company or the
managing underwriter shall reasonably request in order to satisfy the
requirements applicable to such registration.
Section 6. Expenses. The Company will pay all Registration Expenses (as
defined below) in connection with each registration of Registrable Stock
requested pursuant to Sections 2 and 3 of this Agreement; provided, however,
that if the Company does not include any shares for its own account in a
registration statement requested pursuant to Section 2, the Company shall not be
required to pay any Registration Expenses. For purposes of this Section 6,
"Registration Expenses" means all expenses incident to the Company's performance
of or compliance with Sections 2 and 3 of this Agreement, including, without
limitation, all registration, filing and National Association of Securities
Dealers, Inc. fees, all fees and expenses of complying with securities or blue
sky laws, all word processing, duplicating and printing expenses, messenger and
delivery expenses, the reasonable fees and disbursements of counsel for the
Company and of its independent public accountants, including the expenses of any
special audits or "cold comfort" letters required by or incident to such
performance and compliance, the reasonable fees and disbursements of one law
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<PAGE>
firm retained by the Holders of more than 50% of the Registrable Stock being
registered, premiums and other costs of policies of insurance obtained by the
Company against liabilities arising out of the public offering of the
Registrable Stock being registered but excluding all agency fees and
commissions, underwriting discounts and commissions and transfer taxes, if any.
Section 7. Indemnification.
7.1. In the event of any registration of any of its Registrable Stock
under the Securities Act pursuant to this Agreement, the Company agrees to
indemnify and hold harmless each seller of Registrable Stock, and each Affiliate
of such seller, against any losses, claims, damages or liabilities, joint or
several, under the Securities Act, the Securities Exchange Act, other federal or
state statutory law or regulation, at common law or otherwise, arising out of or
based upon:
(a) any untrue statement or alleged untrue statement of any
material fact contained, on the effective date thereof, in any
registration statement under which such Securities were registered
under the Securities Act, or contained in any preliminary prospectus or
final prospectus contained therein, or any summary prospectus contained
therein, or any amendment or supplement thereto, or
(b) any omission or alleged omission to state in any such
document (on the effective date thereof in the case of a Registration
Statement) a material fact required to be stated therein or necessary
to make the statements therein not misleading,
except insofar as any such loss, claim, damage or liability is:
(x) caused by, or contained in, any information concerning a
seller furnished in writing to the Company by such seller expressly for
use in connection with such registration, or
(y) caused by such seller's failure to deliver a copy of the
registration statement or prospectus or any amendment or supplement
thereto as required by the Securities Act or the rules or regulations
thereunder, or
(z) caused by the use of a prospectus or preliminary
prospectus or any amendment or supplement thereto after receipt of
notice from the Company that it should no longer be used.
In connection with an underwritten offering, the Company will indemnify such
underwriters, their officers and directors and each Person who controls (within
the meaning of the Securities Act) such underwriters to the same extent as
provided above with respect to the sellers of the Registrable Stock. The Company
shall reimburse each Person indemnified pursuant to this Section 7.1 in
connection with investigating or defending any loss, claim, damage, liability or
action indemnified against. The reimbursements required by this Section 7.1
shall be made by periodic payments during the course of the investigation or
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<PAGE>
defense, as and when bills are received or expenses incurred. The indemnities
provided pursuant to this Section 7.1 shall remain in force and effect
regardless of any investigation made by or on behalf of the indemnified party
and shall survive transfer of Registrable Stock by the Holders.
7.2. In the event of any registration of any Registrable Stock under
the Securities Act pursuant to this Agreement, each Holder agrees to furnish to
the Company in writing such information and affidavits as the Company reasonably
requests for use in connection with any registration statement or prospectus in
connection with the registration or any amendment or supplement thereto.
7.3. Subject to the limitation set forth in the last sentence of this
Section 7.3, each Holder which is a seller of Registrable Stock in a
registration pursuant to this Agreement, agrees severally and not jointly to
indemnify and hold harmless the Company, its directors and officers, and each
Affiliate of the Company, against:
(a) any losses, claims, damages or liabilities, joint or
several, arising out of or based upon:
(i) any untrue statement or alleged untrue statement of
any material fact contained, on the effective date
thereof, in any registration statement under which
such Securities were registered under the Securities
Act, or contained in any preliminary prospectus or
final prospectus contained therein, or any summary
prospectus contained therein, or any amendment or
supplement thereto, or
(ii) any omission or alleged omission to state in any such
document (on the effective date thereof in the case
of a Registration Statement) a material fact required
to be stated therein or necessary to make the
statements therein not misleading,
but only insofar as any such loss, claim, damage or liability is caused by, or
contained in, any information furnished in writing to the Company by the
indemnifying seller expressly for use in connection with such registration; and
(b) any losses, claims, damages or liabilities, joint or
several, arising out of or based upon the improper delivery by such
seller of, or any failure by such seller to deliver, a copy of the
registration statement or prospectus or any amendment or supplement
thereto as required by the Securities Act or the rules or regulations
thereunder. In connection with an underwritten offering, each seller
will indemnify such underwriters, their officers and directors and each
Person who controls (within the meaning of the Securities Act) such
underwriters to the same extent as provided above with respect to the
Company. Each seller shall reimburse each Person indemnified pursuant
to this Section 7.3 in connection with investigating or defending any
loss, claim, damage, liability or action indemnified against. The
reimbursements required by this Section 7.3 shall be made by periodic
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<PAGE>
payments during the course of the investigation or defense, as and when
bills are received or expenses incurred. Notwithstanding any contrary
provision of this Agreement, the liability under this Section 7 of each
Holder which is a seller of Registrable Stock shall be limited to the
amount of proceeds received by the indemnifying seller from the sale of
the Registrable Stock sold by the indemnifying seller.
7.4. Indemnification similar to that specified in Sections 7.1 and 7.3
above (with such modifications as shall be appropriate) shall be given by the
Company and the indemnifying seller covering any registration or other
qualification of Securities under any federal or state securities law or
regulation other than the Securities Act with respect to any such registration
or other qualification effected pursuant to this Agreement.
7.5. Each party entitled to indemnification under this Section 7 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably by withheld) and the Indemnified Party may participate in such
defense at such party's expense (unless the Indemnified Party shall have
reasonably concluded that there may be a conflict of interest between the
Indemnifying Party and the Indemnified Party in such action, in which case the
fees and expenses of one firm of counsel for all Indemnified Parties shall be at
the expense of the Indemnifying Party), and provided further that the failure of
any Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 7 unless the
Indemnifying Party is materially prejudiced thereby. No Indemnifying Party, in
the defense of any such claim or litigation, shall, except with the consent of
each Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect to such claim or litigation. Each Indemnified Party shall
furnish such information regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing and as shall be reasonably
required in connection with the defense of such claim and litigation resulting
therefrom.
7.6. If the indemnification provided for in this Section 7 is held by a
court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any loss, liability, claim, damage or expense referred to herein,
then the Indemnifying Party, in lieu of indemnifying such Indemnified Party
hereunder, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, liability, claim, damage or expense in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and of the Indemnified Party on the other in connection
with the statements or omissions which resulted in such loss, liability, claim,
damage or expense, as well as any other relevant equitable considerations. The
relative fault of the Indemnifying Party and of the Indemnified Party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
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<PAGE>
relates to information supplied by the Indemnifying Party or by the Indemnified
Party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
7.7. Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with any underwritten public offering contemplated by
this Agreement are in conflict with the foregoing provisions, the provisions in
such underwriting agreement shall be controlling.
Section 8. Priority on Registrations.
8.1. If in connection with any offering involving an underwriting of
Registrable Stock pursuant to Section 3 of this Agreement, the managing
underwriters advise the Company in writing that in their opinion the number of
Securities proposed to be included in the offering (including Registrable
Securities requested to be included therein) exceeds the number which can be
sold in such offering, the Company will include in such registration (i) first,
the securities the Company proposes to sell and (ii) second, the Registrable
Securities requested to be included in such registration by the Holders together
with any securities held by all holders of other securities having the right to
include such securities in such registration; provided, however, that such
participation be pro rata in accordance with the number of shares held by each
person requesting such registration.
8.2. In connection with any offering involving an underwriting of
Registrable Stock pursuant to Section 3 of this Agreement, the Company shall not
be required to include any of the Registrable Stock of a Holder in such offering
unless such Holder agrees to the terms of the underwriting agreed to between the
Company and the underwriter or underwriters selected by the Company.
Section 9. Lockup Agreement. In connection with any registration of any
of the Company's Securities, each Holder agrees that, upon the request of the
Company or the underwriters managing any underwritten offering of the Company's
Securities, it will not sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any Securities of the Company (other
than the securities included in the registration) without the prior written
consent of the Company or such underwriters, as the case may be, for such period
of time (not to exceed 90 days) from the effective date of such registration as
the Company or the underwriters may specify.
Section 10. Compliance with Rule 144. With a view to making available
the benefits of certain rules and regulations of the Commission which may permit
the sale of restricted securities to the public without registration, the
Company agrees to:
(a) make and keep public information available as those terms
are understood and defined in Rule 144 at all times and for so long as
the Company is subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act;
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<PAGE>
(b) use commercially reasonable efforts to file with the
Commission in a timely manner all reports and other documents required
of the Company under the Securities Act and the Exchange Act; and
(c) so long as any Holder owns any Securities, and is not
eligible to sell such Securities under paragraph (k) of Rule 144,
furnish to a Holder upon request, a written statement by the Company as
to its compliance with the reporting requirements of Rule 144 and of
the Securities Act and the Exchange Act, a copy of the most recent
annual or quarterly report of the Company, and such other reports and
documents so filed as the Holder may reasonably request in availing
itself of any rule or regulation of the Commission allowing the Holder
to sell any such securities without registration.
Section 11. Assignability of Registration Rights. The rights set forth
in this Agreement shall accrue to each subsequent holder of Registrable Stock
who shall have executed a written consent agreeing to be bound by the terms and
conditions of this Agreement as a party to this Agreement.
Section 12. Designation of Underwriter. In the case of any registration
effected pursuant to Section 2 of this Agreement, the managing underwriter(s)
and any other investment banking advisers to the Company shall be selected by
the Holders of not less than 50% of the Registrable Stock to be registered and
shall be reasonably acceptable to the Company. The Company shall select the
managing underwriter(s) and all other investment banking advisers to the Company
for all other registrations that may be effected from time to time by the
Company.
Section 13. Miscellaneous.
13.1. Amendment. This Agreement may be amended by a written agreement
signed by the Company and the Holders of not less than 70% of the Registrable
Stock.
13.2. Severability. In the event that any court or any governmental
authority or agency declares all or any part of any Section of this Agreement to
be unlawful or invalid, such unlawfulness or invalidity shall not serve to
invalidate any other Section of this Agreement, and in the event that only a
portion of any Section is so declared to be unlawful or invalid, such
unlawfulness or invalidity shall not serve to invalidate the balance of such
Section.
13.3. Successors and Assigns. This Agreement is binding upon and inures
to the benefit of the Company, its successors and assigns, and the Holders,
their successors and assigns, heirs and legal representatives.
13.4. Notices. All communications in connection with this Agreement
shall be in writing and shall be deemed properly given if hand delivered or sent
by telecopier or overnight courier with adequate evidence of delivery or sent by
registered or certified mail, return receipt requested, and if to a Holder,
addressed to the Persons and at such addresses as are set forth below such
Holder's name on Exhibit A hereto, or, if no such Person or address appears, at
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such Holder's address as shown on the books of the Company or its transfer
agent, and if to the Company, at its offices at
Big City Bagels, Inc.
99 Woodbury Road
Hicksville, NY 11801
Attention: Chief Financial Officer
Facsimile: 516-932-5056
or such other addresses or Persons as the recipient shall have designated to the
sender by a written notice given in accordance with this Section. Any notice
called for hereunder shall be deemed given when received.
13.5. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York applicable to agreements
between New York residents entered into and to be performed entirely within New
York.
13.6. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
together constitute one and the same instrument.
13.7. Headings. The headings used herein are solely for the convenience
of the parties and shall not serve to modify or interpret the text of the
Sections at the beginning of which they appear.
13.8. Entire Agreement. This Agreement embodies the entire agreement
and understanding among the Company and the Holders and supersedes all prior
oral and written agreements and understandings relating to the subject matter
hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be executed on the day first above written.
The Company:
Big City Bagels, Inc.
By:
Name:
Title:
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The Holders:
By:___________________________
Peter Keenan
By:___________________________
Steven Levi
By:___________________________
David Levi
By:___________________________
Susan Levi
Eli Levi Living Trust
By:___________________________
Eli Levi, Trustee
Roberta Levi Living Trust
By:___________________________
Roberta Levi, Trustee
By:___________________________
Roberta Levi, Custodian for
Shari Levi
By:___________________________
Hector P. Gavilla
By:___________________________
Hector M. Gavilla
By:___________________________
Vincent Pasceri, Jr.
By:___________________________
Vincent A. Pasceri
By:___________________________
Vincent A. Pasceri,
Custodian for Marisa A. Pasceri
-12-
<PAGE>
By:___________________________
Debi E. Pasceri
By:___________________________
Debi E. Pasceri,
Custodian for Nicole K. Pasceri
By:___________________________
Jennifer N. Pasceri
By:___________________________
Hector M. Gavilla, Custodian for
Alexander F. Gavilla
-13-
<PAGE>
EXHIBIT A
Peter Keenan
Steven Levi
David Levi
Susan Levi
Eli Levi Living Trust (Eli Levi, Trustee)
Roberta Levi Living Trust (Roberta Levi, Trustee)
Roberta Levi, Custodian for Shari Levi
Hector P. Gavilla
Hector M. Gavilla
Vincent Pasceri, Jr.
Vincent A. Pasceri
Vincent A. Pasceri, Custodian for Marisa A. Pasceri
Debi E. Pasceri
Debi E. Pasceri, Custodian for Nicole K. Pasceri
Jennifer N. Pasceri
Hector M. Gavilla, Custodian for Alexander F. Gavilla
-15-
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
BIG CITY BAGELS SIGNS DEFINITIVE MERGER AGREEMENT
HICKSVILLE, New York, May 24, 1999 - - BIG CITY BAGELS, INC. (OTC BB: BIGC)
announced today the signing of the definitive agreement for its acquisition by
merger of VillageNet, Inc. (www.villagenet.com) and Intelligent Computer
Solutions, Inc. (www.icsnet.com). The merger is subject to several conditions,
including receipt of a fairness opinion from Heritage Capital Corp. The merger
is expected to close during the second quarter.
VillageNet, Inc. ("VillageNet") is a community-oriented Internet service
provider specializing in educational and family-based Internet services with a
local emphasis on business advertising and shopping, chat rooms and
parent/student/teacher interaction.
Intelligent Computer Solutions, Inc. ("ICS") is a systems-integration firm
specializing in network design, implementation and maintenance and providing
Internet/intranet messaging and security products. ICS is a value added
government and commercial reseller for Cisco Systems Inc. (Nasdaq: CSCO) and
FORE Systems (Nasdaq: FORE) and is authorized to sell and install their products
to public entities in New York (e.g. school districts) without public bidding
through those companies' New York State contracts.
Following the merger, management of the combined companies will be assumed
by the current officers and directors of VillageNet and ICS. Peter Keenan will
serve as the President, Edilberto Enriquez will serve as the Treasurer and Chief
Financial Officer, and David Levi will serve as the Secretary. The board of
directors will be Messrs. Eli Levi, Peter Keenan, Hector M. Gavilla and one of
the Company's current directors, Nelson Braff.
In exchange for all their stock, the stockholders of VillageNet and ICS
will receive from the Company 8,619,466 shares of Common Stock and 500,000
shares of a new class of Preferred Stock, which will be convertible into
69,000,000 shares of Common Stock. The shares of Common Stock being issued in
the merger and upon conversion of the Preferred Stock will represent 90 percent
of the outstanding shares of Common Stock following the transaction, calculated
on a fully diluted basis assuming the exercise of the Company's outstanding
options and warrants that have an exercise price of $1.00 or less.
The Company, a franchisor and owner of Big City Bagels delis/cafes, has
been orderly disposing of its unprofitable operations since the middle of 1998
while it explored the acquisition or combination with other businesses.
# # #
This press release contains forward-looking statements that involve risks
and uncertainties that could cause actual results to differ materially from
those set forth in the forward-looking statements. These risks and uncertainties
are described in the Company's filings with the SEC, including its Prospectus
dated April 3, 1998.
This release and prior releases are available on the KCSA Public Relations
Worldwide website at www.kcsa.com.
Contact: Big City Bagels, Inc., Hicksville
Mark Weinreb, Chief Executive Officer
516-932-5050
or
KCSA, New York
Jeff Corbin / Joseph A. Mansi
212-682-6300 Ext. 214 / 205
212-697-0910 (fax)
[email protected] / [email protected]
www.kcsa.com
