Exhibit 10.1
EXECUTION COPY
Cosi, Inc.
Employment Agreement
This Employment Agreement ("Agreement") is entered into effective as of
December 12, 2005 (the "Effective Date"), by and between Cosi, Inc., a Delaware
corporation ("Cosi"), and Xxxxxxx X. Xxxxxxx ("Xx. Xxxxxxx").
Cosi and Xx. Xxxxxxx wish to confirm the terms and conditions upon which
Xx. Xxxxxxx agrees to continue to provide services to Cosi as its Chairman.
Accordingly, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged and agreed, Cosi and Xx. Xxxxxxx hereby agrees as follows:
1. Duties, Commitment and Term.
(a) Executive Chairman. Xx. Xxxxxxx shall continue to serve as
Cosi's Executive Chairman through December 31, 2006. While serving as
such, Xx. Xxxxxxx shall carry out such duties as shall be reasonably
requested of him from time to time by the Board of Directors of Cosi (the
"Board").
(b) Non-Executive Chairman. Commencing January 1, 2007 and
continuing until terminated pursuant to Section 10 below, Xx. Xxxxxxx
shall serve as Cosi's Non-Executive Chairman. Xx. Xxxxxxx shall carry out
such duties as Cosi's Non-Executive Chairman, as are customarily
associated with such position.
(c) Commitment. For so long as Xx. Xxxxxxx is serving as Executive
Chairman, he shall devote his full business time and best efforts to the
duties required of him under this Agreement. Xx. Xxxxxxx shall devote such
time to his duties as Non-Executive Chairman as (i) required by the duties
customarily associated with such position; (ii) are otherwise set forth in
this Agreement, or (iii) may be reasonably requested of him by Cosi's
Chief Executive Officer or the Board. For so long as Xx. Xxxxxxx is
serving as Executive Chairman or Non-Executive Chairman (the "Term"), he
shall not undertake any commitments that might interfere with his
commitments to Cosi. During the period from the date hereof through
December 31, 2006, Xx. Xxxxxxx shall not undertake any other business
activities without the prior approval of a majority of the non-employee
members of the Board; provided that such approval will not be unreasonably
withheld in connection with requests that Xx. Xxxxxxx be permitted to
serve on boards of directors of charitable institutions, civic
organizations and other corporations.
2. Compensation. In consideration of the performance by Xx. Xxxxxxx
of his duties hereunder, Cosi shall pay or provide to Xx. Xxxxxxx the following
compensation, which Xx. Xxxxxxx agrees to accept in full satisfaction for his
services:
(a) Annual Base Salary; Director's Fees. Commencing on the Effective
Date and continuing through December 31, 2006, Cosi shall pay to Xx.
Xxxxxxx an annual base salary in the gross amount equal to one hundred
percent (100%) of the gross salary payable by Cosi to its Chief Executive
Officer, payable in bi-weekly installments net of applicable payroll and
withholding taxes in accordance with Cosi's regular payroll practices.
Commencing January 1, 2007 and continuing thereafter through the
termination of Xx. Xxxxxxx'x service as Non-Executive Chairman, Cosi shall
pay to Xx. Xxxxxxx an annual director's fee equal to three times the
normal annual fee paid to other directors, which is currently paid in the
form of Cosi common stock, in addition to customary meeting fees and
reimbursements. While serving as Non-Executive Chairman, Xx. Xxxxxxx shall
make himself available to provide counsel to senior management of the
Company. When the scope of such counsel is beyond that which would
ordinarily be provided by a Chairman in connection with such role and the
duration of such counsel is material, as determined by the Chief Executive
Officer and approved by the Chairperson of the Compensation Committee, Xx.
Xxxxxxx shall be eligible for the payment of an amount equal to a director
meeting fee, either telephonic or in person as appropriate; provided that
in no event shall the total of all payments by Cosi to Xx. Xxxxxxx exceed
$200,000 in any calendar year during which he serves as Non-Executive
Chairman.
(b) Annual Bonus. For fiscal years 2005 and 2006, Cosi shall pay to
Xx. Xxxxxxx an annual bonus equal to the annual bonus payable by Cosi to
its Chief Executive Officer. No bonus shall be payable to Xx. Xxxxxxx for
any period after December 31, 2006.
(c) Initial Restricted Stock. On the Effective Date, subject to the
terms and conditions of Section 5 of this Agreement and the Cosi, Inc.
2005 Omnibus Long-Term Incentive Plan ("LTIP"), Cosi shall grant to Xx.
Xxxxxxx pursuant to the LTIP 200,000 shares of Cosi's authorized but
unissued common stock, $0.01 par value (the "Initial Restricted Stock").
The Initial Restricted Stock grant shall be set forth in a Restricted
Stock Award Agreement in the form attached hereto as Exhibit A.
(d) Additional Restricted Stock. During the Term, subject to Xx.
Xxxxxxx'x then still serving as Cosi's Executive Chairman or Non-Executive
Chairman and the attainment of applicable performance goals, Cosi shall
make additional grants to Xx. Xxxxxxx of up to 50,000 restricted shares of
Cosi's authorized but unissued common stock, $0.01 par value (the
"Additional Restricted Stock"), pursuant to the LTIP, in each of 2006 and
2007 at such times as grants are made to senior executives of the Cosi
generally. The exact number of shares of Additional Restricted Stock
granted pursuant to this Section 2(d) will be determined by the
Compensation Committee based on the attainment of performance criteria
established by the Committee in consultation with Cosi management.
Each Additional Restricted Stock grant shall be set forth in a Restricted
Stock Award Agreement in the form attached hereto as Exhibit A.
(e) Expenses. Cosi shall pay directly or reimburse Xx. Xxxxxxx for
all reasonable out-of-pocket expenses incurred by Xx. Xxxxxxx in
connection with his performance of services hereunder, provided that all
such expenses are properly documented in accordance with policies adopted
from time to time by Cosi.
(f) Other Compensation. Cosi shall pay to Xx. Xxxxxxx such other
compensation as may be approved from time to time by the Board.
3. Treatment of Stock Options or Stock Awards. Any options and
awards denominated in Cosi common stock granted to Xx. Xxxxxxx in connection
with his employment with Cosi prior to the Effective Date shall remain in full
force and effect pursuant to their terms; provided that the definition of
"Change in Control" (or any similar definition) that applies to any such grant
shall be replaced with the definition of Change in Control set forth in Section
11 hereof. Such options and awards, and any other options and awards granted to
Xx. Xxxxxxx, shall vest and become immediately exercisable in full upon a Change
in Control (as defined in Section 11 below).
4. Investment Representations. Xx. Xxxxxxx hereby acknowledges and
agrees with Cosi as follows:
(a) The Initial Restricted Stock and the Additional Restricted Stock
(collectively, the "Shares") have not been registered under the Securities
Act of 1933, as amended from time to time (the "Act") or any state
securities laws, in reliance on his representation, hereby confirmed by
him, that he is acquiring the Shares for investment and not with any view
towards the distribution thereof. He further acknowledges that any resale
of the Shares is subject to compliance with the registration requirements
of the Act or with an applicable exemption with the ownership of Shares.
(b) Xx. Xxxxxxx is an "accredited investor" as defined in Regulation
D under the Act and is personally experienced and sophisticated in
financial and investment matters and is able to assess the risks and
rewards associated with the ownership of Shares.
5. Vesting; Repurchase; Repayment; Voting; and Legends.
(a) Vesting of Shares. Xx. Xxxxxxx'x rights to the Shares shall vest
in accordance with the following provisions of this Section 5:
i. Twenty percent (20%) of the Initial Restricted Stock and
the Additional Restricted Stock shall be fully vested upon grant.
ii. Solely on the condition that Xx. Xxxxxxx is then still
serving as Cosi's Executive Chairman or Non-Executive Chairman, an
additional twenty percent (20%) of the Initial Restricted Stock and
the Additional Restricted Stock shall become fully vested on each of
the first four annual anniversaries of the applicable grant date.
iii. All Shares previously granted, but not yet vested shall
become fully vested upon the earliest to occur of: (A) the
termination of this Agreement by Cosi without Cause (as defined in
Section 10(a) below), (B) Xx. Xxxxxxx'x death or Total Disability,
(C) the Board's failure to nominate Xx. Xxxxxxx for election to the
Board in the year in which his then current term as a director is
due to expire and (D) the occurrence of a Change in Control.
iv. In the event Xx. Xxxxxxx'x employment or service and this
Agreement are terminated by Xx. Xxxxxxx voluntarily or are
terminated by Cosi for Cause, all granted but unvested Shares shall
be forfeited.
(b) Non-Transferability. Xx. Xxxxxxx shall not sell, transfer,
assign, pledge or otherwise encumber or dispose of, by operation of law or
otherwise, Shares which have not vested pursuant to this Agreement. Any
such purported transfer will be void and of no force or effect.
(c) Dividend and Voting Rights. Subject to the restrictions
contained in this Agreement, Xx. Xxxxxxx shall have the rights of a
stockholder: (i) with respect to the Initial Restricted Stock, including
the right to vote with respect to all the Initial Restricted Stock, and to
receive all dividends, cash or stock, paid or delivered thereon, from and
after the Effective Date, and (ii) with respect to the Additional
Restricted Stock, including the right to vote with respect to all the
Additional Restricted Stock, and to receive all dividends, cash or stock,
paid or delivered thereon, from and after the date of grant of such
Additional Restricted Stock. In the event of forfeiture of the Shares, Xx.
Xxxxxxx shall have no further rights with respect to the forfeited Shares.
However, the forfeiture of the Shares shall not create any obligation to
repay dividends received as to the Shares, nor shall such forfeiture
invalidate any votes given by Xx. Xxxxxxx with respect to the Shares prior
to forfeiture.
(d) Legend. All certificates representing the Shares shall have
endorsed thereon the following legends.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER STATE OR U.S. FEDERAL SECURITY LAWS AND MAY NOT BE
OFFERED, SOLD, PLEDGED, HYPOTHECATED, OR OTHERWISE DISTRIBUTED OR
TRANSFERRED, NOR MAY THESE SECURITIES BE TRANSFERRED ON THE BOOKS OF THE
COMPANY, IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
THESE SHARES ARE SUBJECT TO AN EMPLOYMENT AGREEMENT EFFECTIVE AS
OF DECEMBER 12, 2005, BY AND BETWEEN COSI, INC., AND XX. XXXXXXX.
6. Confidential Information. Xx. Xxxxxxx acknowledges and agrees
that during his employment with Cosi and following the termination of his
employment for any reason, he will not at any time divulge any trade secrets or
other confidential information pertaining to the business of Cosi. The term
"confidential information" as used in this Agreement shall mean any trade
secret, confidential or proprietary information of Cosi or its affiliates, other
than that which has become generally known to the public other than through an
act of Xx. Xxxxxxx in breach of this Section 6. The term "trade secrets" as used
in this Agreement shall mean information, including, but not limited to,
technical or non-technical data, a formula, a pattern, a compilation, a program,
a device, a method, a technique, a drawing, a recipe, a process, financial data,
financial plans, product plans, or a list of actual or potential customers or
suppliers that:
(a) derives economic value, actual or potential, from not being
generally known to, and not being readily ascertainable by proper means by
other person who can obtain economic value from its disclosure or use, and
(b) is the subject of reasonable efforts by Cosi to maintain its
secrecy.
7. Non-Competition. Xx. Xxxxxxx covenants and agrees that during the
Term and for twelve (12) months thereafter, he shall not directly or indirectly,
personally or with other employees, agents or otherwise, or on behalf of any
other person, firm or corporation, invest in, or provide management or
consulting services to owners and operators of, any restaurant and similar
establishment which is or intends to become a competitor of Cosi within the
continental United States. Notwithstanding the foregoing in this Section 7,
ownership by Xx. Xxxxxxx of an interest in Cosi or any licensed franchisee of
Cosi shall not be deemed to be a violation of this Section 7.
8. Non-Solicitation of Employees. Xx. Xxxxxxx covenants and agrees
that during the Term and for twelve (12) months thereafter, he shall not on his
own behalf or on behalf of any other person, firm, partnership, association,
corporation or business organization, entity or enterprise call on, solicit or
attempt to induce any other officer or employee of Cosi or its affiliates or
licensed franchisees to terminate his or her employment with Cosi or its
affiliates or licensed franchisees and shall not assist any other person or
entity in such a solicitation unless such employee is first terminated by Cosi.
9. Specific Enforcement; Survival; Remedies Cumulative. Xx. Xxxxxxx
expressly recognizes that any breach of Sections 6, 7, or 8 of this Agreement by
him is likely to result in irreparable injury to Cosi and agrees that Cosi shall
be entitled, if it so elects, to institute and prosecute proceedings in any
court of competent jurisdiction, either at law or in equity, to obtain damages
for any breach of this Agreement; to enforce the specific performance of this
Agreement by Xx. Xxxxxxx; and, to enjoin Xx. Xxxxxxx from activities in
violation of this Agreement. Notwithstanding any provisions of this Agreement to
the contrary, the provisions of Sections 6, 7, 8, and 9 hereof shall survive the
termination of this Agreement. All rights and remedies are cumulative, and
Cosi's rights under this Section 9 shall be in addition to, and not in lieu of,
any other rights and remedies Cosi may have at law or in equity.
10. Termination. Subject to the terms and conditions of this
Agreement, this Agreement and Xx. Xxxxxxx'x employment with Cosi may be
terminated by either party upon 30 days' written notice, provided that Cosi may
terminate this Agreement and Xx. Xxxxxxx'x employment immediately upon notice to
Xx. Xxxxxxx for Cause (as hereinafter defined). This Agreement and Xx. Xxxxxxx'x
employment shall also terminate immediately upon Xx. Xxxxxxx'x death or Total
Disability (as hereinafter defined), in any such case on the terms and subject
to the conditions of this Agreement.
(a) Definition of Cause. The term "Cause" shall mean only one or
more of the following:
i. Xx. Xxxxxxx shall be convicted of, or plead guilty or nolo
contendere to, a felony;
ii. Xx. Xxxxxxx shall willfully neglect or fail to perform the
services required to be provided under this Agreement following
written notice from the Board specifying such neglect and a
reasonable opportunity to cure such neglect or failure; and
iii. Xx. Xxxxxxx shall commit any fraud, embezzlement or other
material act or intentional dishonesty against Cosi, or shall
attempt to profit from any transaction in which Cosi is a
participant and in which Xx. Xxxxxxx has an undisclosed interest
adverse to Cosi.
(b) Definition of Total Disability. The term "Total Disability"
shall mean Xx. Xxxxxxx'x physical or mental disability such that Xx.
Xxxxxxx is and has been continuously for at least six (6) months unable to
perform the services required to be provided under this Agreement, and Xx.
Xxxxxxx is determined to be eligible for long-term disability benefits
under the long-term disability benefits plan of Cosi in effect from time
to time.
(c) Cosi's Obligations Upon Termination.
i. Termination Other than by Cosi for Cause or by Xx. Xxxxxxx.
Prior to January 1, 2007, in the event this Agreement and Xx.
Xxxxxxx'x employment with Cosi are terminated for any reason
(including, without limitation, by his death or Total Disability),
other than by (x) Cosi for Cause or (y) by Xx. Xxxxxxx voluntarily,
then Cosi shall pay to Xx. Xxxxxxx his base salary, bonuses and
benefits that are payable through the effective date of termination
("Accrued Benefits") and an amount equal to his then-current annual
base salary. Any Cosi options and awards denominated in Cosi common
stock granted to Xx. Xxxxxxx in connection with his employment with
Cosi, whether granted before or after the Effective Date, shall
become 100% vested and exercisable and shall otherwise remain
subject to the original terms of such awards. In addition, the terms
of Sections 5(a)(iii) shall apply with respect to all Shares.
ii. Termination by Cosi for Cause; Voluntarily Xx. Xxxxxxx;
Non-Reelection. In the event this Agreement and Xx. Xxxxxxx'x
employment or service with Cosi are terminated (A) by Xx. Xxxxxxx
voluntarily, (B) by Cosi for Cause, or (C) due to Xx. Xxxxxxx'x
failure to be reelected to the Board prior to a Change in Control,
Cosi shall pay to Mr. Forest his Accrued Benefits. In such event,
any Cosi options and stock awards denominated in Cosi common stock
granted to Xx. Xxxxxxx in connection with his employment with Cosi,
whether granted before or after the Effective Date, shall expire in
accordance with the terms and conditions of the applicable plan and
agreement pursuant to which such options and awards were granted. In
addition, the terms of Section 5(a)(iv) shall apply with respect to
the Shares.
11. Change in Control. A "Change in Control" shall mean the
date on which the earlier of the following events occur: (i) either
(A) the acquisition by any entity, person or group (other than ZAM
Holdings, L.P., LJCB Nominees Pty Ltd., Xxxxxxx X. Xxxxxxxx, or any
entity related to any such party) of beneficial ownership, as that
term is defined in Rule 13d-3 under the Securities Exchange Act of
1934, as amended, of more than 50% of the outstanding capital stock
of Cosi entitled to vote for the election of directors ("Voting
Stock"); or (B) the merger or consolidation of Cosi with one or more
corporations or other entity as a result of which the holders of
outstanding Voting Stock of Cosi immediately prior to such a merger
or consolidation hold less than 60% of the Voting Stock of the
surviving or resulting corporation or any direct or indirect parent
corporation or entity of such surviving or resulting entity, and in
addition to (A) or (B), (C) as a result of an event described in (A)
or (B), the individuals who, at the beginning of such period,
constitute the Board of Directors (the "Incumbent Directors") cease
for any reason other than death to constitute at least a majority
thereof; provided, however, that "Change in Control" shall not
include any event described in clauses (i) through (iii) above (A)
in which Xx. Xxxxxxx is a member of the acquiring group or an
officer or owner of the acquiring entity or (B) if following such
event, Xx. Xxxxxxx continues employment as a senior executive of
Cosi (including, without limitation, as Non-Executive Chairman).
For purposes of this Section 11, "Incumbent Director" shall mean a director who
was a director at the beginning of a given 24-month period; provided, however,
that a director who was not a director at the beginning of such 24-month period
shall be deemed to have satisfied such 24-month requirement (and be an Incumbent
Director) if such director was elected by, or on the recommendation of or with
the approval of, at least two-thirds of the directors who then qualified as
Incumbent Directors either actually (because they were directors at the
beginning of such 24-month period) or through the operation of this proviso.
12. No Assignment. Neither party may assign or delegate any of its
obligations hereunder, without the prior written consent of the other party,
which consent may be withheld by the other party in its or his sole discretion.
13. Entire Agreement; Modification. This instrument contains the
entire agreement of Cosi and Xx. Xxxxxxx with respect to the subject matter
contained herein, and all promises, representations, understandings,
arrangements and prior agreements with respect to such subject matter are merged
herein and superseded hereby, including, without limitation, the employment
agreement between Cosi and Xx. Xxxxxxx dated as of June 26, 2003, as amended on
February 9, 2004. This Agreement may be altered or amended or superseded only by
an agreement in writing, signed by both parties or by the party against whom
enforcement of any waiver, change, modification, extension or discharge is
sought. No action or course of conduct shall constitute a waiver of any of the
terms and conditions of this Agreement, unless such waiver is specified in
writing, and then only to the extent so specified. A waiver of any of the terms
and conditions of this Agreement on one occasion shall not constitute a waiver
of the other terms and conditions of this Agreement, or of such terms and
conditions on any other occasion.
14. Severability. Xx. Xxxxxxx and Cosi hereby expressly agree that
the provisions of this Agreement are severable and, in the event that any court
of competent jurisdiction shall determine that any provision or covenant herein
contained is invalid, in whole or in part, the remaining provisions shall remain
in full force and effect and any such provision or covenant shall nevertheless
be enforceable as to the balance thereof.
15. Binding Effect; Benefit. This Agreement shall be binding upon
and shall inure to the benefit of Xx. Xxxxxxx and his administrators, executors,
heirs and permitted assigns, and Cosi and its successors and permitted assigns.
16. Notices. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be delivered by hand or mailed by
certified mail, return receipt requested, postage prepaid, addressed as follows:
To Xx. Xxxxxxx: To Cosi:
-------------- -------
Xx. Xxxxxxx X. Xxxxxxx Cosi Inc.
0 Xxxxxx Xxxx 0000 Xxxx Xxxx Xxxx, 0xx Xxxxx
Xxxxxxxxx, XX 00000 Xxxxxxxxx, Xxxxxxxx 00000
Attn: General Counsel
or to such other address as a party hereto may designate to the other in writing
in accordance herewith. Notices are effective upon actual receipt.
17. Withholding. All amounts payable under this Agreement shall be
subject to applicable employee withholding taxes, which shall be paid to Cosi by
Xx. Xxxxxxx immediately prior to the vesting and payment of any non-cash
compensation; provided that other than with respect to the Initial Restricted
Stock to be granted under Section 3(c), no such advance payment of withholding
taxes to Cosi shall be required with respect to compensation for which Xx.
Xxxxxxx has made a valid election pursuant to Section 83(b) of the Code.
18. Counterparts. This Agreement may be executed in counterparts,
each of which shall be considered and have the force and effect of an original,
but all of which taken together shall constitute one and the same instrument.
19. Governing Law. The validity, interpretation and performance of
this Agreement shall be governed by and construed in accordance with the laws of
the State of Illinois.
IN WITNESS WHEREOF, Cosi has caused this Agreement to be duly executed on
its behalf and Xx. Xxxxxxx has hereunder set his hand, all effective as of the
Effective Date.
COSI, INC.
/s/ Xxxxxxx X. Xxxxxxx By: /s/ Xxxxx Xxxxxxxxx
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Xxxxxxx X. Xxxxxxx Name: Xxxxx Xxxxxxxxx
Title: Chief Executive Officer and
President
