EXHIBIT 10.4.3
EXECUTION COPY
Cosi, Inc.
Employment Agreement
Agreement dated and effective June 26, 2003, 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 on which Xx.
Xxxxxxx has agreed to provide services to Cosi, as its Executive Chairman.
Accordingly, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Cosi and Xx. Xxxxxxx hereby agree as follows:
1. Duties. Cosi hereby agrees to employ Xx. Xxxxxxx as its Executive
Chairman, and Xx. Xxxxxxx hereby accepts such employment and agrees to carry out
such duties as shall be reasonably requested of him from time to time by the
Board of Directors of Cosi (the "Board"), for a term (the "Term") commencing on
the date hereof and continuing until terminated pursuant to Section 6. Xx.
Xxxxxxx shall have day to day general management responsibility for the
company's affairs and will be responsible for, among other things, for (i) brand
and concept development, (ii) stabilization of the Cosi management team and
store operations, (iii) acting in concert with Cosi's Chief Executive Officer,
approving all major Cosi business decisions and (iv) identifying, recruiting and
recommending to the Board an experienced restaurant industry executive to
succeed Cosi's current interim Chief Executive Officer and work in concert with
the Chairman.
2. Commitment. During the Term, Xx. Xxxxxxx shall devote such time and
efforts to the affairs of Cosi, as may be reasonably necessary to carry out the
duties required of him under this Agreement.
3. Compensation. In consideration for 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) Upon the execution of this Agreement, Cosi shall pay to Xx.
Xxxxxxx a fee of 1,156,407 shares of Cosi's authorized but unissued common
stock, $.01 par value, ("Common Stock"), subject to the terms and
conditions of Section 8 of this Agreement;
(b) Upon the completion by Cosi of its pending rights offering (the
"Rights Offering"), pursuant to which Cosi is seeking to raise up to $12
million through the sale and issuance of shares of Common Stock to its
existing shareholders, Xx. Xxxxxxx shall, subject to the terms and
conditions of Section 8 of this Agreement, be issued such number of
additional shares of Cosi's authorized but unissued Common Stock, as shall
be necessary to maintain Xx. Xxxxxxx'x percentage ownership interest in
Cosi at five percent (5%) on a fully diluted basis, provided, however,
that, if the effective per share price realized by Cosi in the Rights
Offering is less that $1.25, the number of additional shares issuable to
Xx. Xxxxxxx pursuant to this paragraph (b) shall be calculated based
on the number of shares that Cosi would have issued in the Rights Offering
for the same aggregate proceeds at an effective per share price of $1.25;
(c) 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 he properly documents
all such expenses in accordance with policies adopted from time to time by
Cosi; and
(d) Cosi shall pay to Xx. Xxxxxxx such other compensation as may be
approved from time to time by the Board.
4. Proprietary Information. Xx. Xxxxxxx acknowledges and agrees that in
the course of rendering services to Cosi he will have access to and will become
acquainted with confidential information about the business and financial
affairs of Cosi and may have contributed to or may in the future contribute to
such information. Such information is referred to in this Section 4 as
"Proprietary Information" and is more fully defined below. Xx. Xxxxxxx
recognizes that in order to guard the legitimate interests of Cosi, it is
necessary for Cosi to protect all such confidential information. Accordingly,
Xx. Xxxxxxx shall not at any time disclose, directly or indirectly (except as
required by law), any Proprietary Information to any person other than (a) Cosi,
(b) persons who are authorized employees of Cosi at the time of such disclosure,
or (c) such other persons to whom Xx. Xxxxxxx has been instructed to make
disclosure by the Board, and in all such cases only to the extent required in
the course of Xx. Xxxxxxx'x service to Cosi. At the expiration of the Term Xx.
Xxxxxxx shall deliver to Cosi all notes, letters, documents and records which
may contain Proprietary Information which are then in his possession or control
and shall not retain or use any copies or summaries thereof. For purposes
hereof, "Proprietary Information" shall include all confidential know-how,
strategic data, research and development data, business and financial planning
documents or information, marketing data and trade secrets, which are
confidential and proprietary to Cosi. Such information is hereinafter called
"Proprietary Information" and shall include any and all items enumerated in the
preceding sentence which come within the scope of the business activities of
Cosi as to which Xx. Xxxxxxx has had or may have access, whether previously
existing, now existing or arising hereafter, whether conceived or developed by
others or by Xx. Xxxxxxx alone or with others during the period of his service
to Cosi, and whether or not conceived or developed during regular working hours.
"Proprietary Information" shall not include any information which is in the
public domain, provided such information is not in the public domain as a
consequence of disclosure by Xx. Xxxxxxx in violation of this Agreement.
5. Restrictive Covenants. Xx. Xxxxxxx covenants and agrees that for so
long as this Agreement is in effect and for a period of twelve (12) months
thereafter, he shall not, directly or indirectly, whether for his own account or
for any other person or organization:
(a) provide management or other consulting services to owners or
operators of restaurants in any market in which Cosi owns or operates a
restaurant; or
(b) solicit the employment or engagement of, or hire, any employee
of Cosi, including any employee who was such at any time during the last
six (6) months of his engagement with Cosi.
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6. Specific Enforcement/Survival. Xx. Xxxxxxx expressly recognizes that
any breach of Section 4 or Section 5 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 in 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 4, 5 and 6 hereof shall survive the termination of this Agreement.
7. Investment Representations. Xx. Xxxxxxx hereby acknowledges and agrees
with Cosi as follows:
(a) The shares of Common Stock issuable to him under Section 3
(collectively, the "Shares") have not been registered under the Securities
Act of 1933 (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 from such registration requirements.
(b) He is an "accredited investor" as defined in Regulation D under
the Securities Act of 1933 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.
8. Vesting of Shares; Repurchase of Unvested Shares; Voting and Legends.
(a) Xx. Xxxxxxx'x rights to the Shares shall vest in accordance with
the following provisions of this Section 8:
(i) Twenty-five Percent (25%) of the Shares shall be fully
vested on issuance.
(ii) So long as this Agreement then remains in effect, on
April 1, 2004, an additional Twenty-five Percent (25%) of the Shares
shall become fully vested on such date.
(iii) So long as this Agreement then remains in effect, on the
last day of each month, commencing with April, 2004 and ending with
March, 2006, Two and Eight One Hundredths of a Percent (2.08%) of
the Shares shall become fully vested on each such date; provided
that on March 31, 2006, an additional Eight One Hundredths of a
Percent (0.08%) of the Shares shall become fully vested.
(iv) All Shares not yet vested shall become fully vested on
the earlier to occur of (1) the termination of this Agreement by
Cosi without Cause (as defined in Section 9) and (2) upon a Change
in Control as defined in Appendix 1 hereto.
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(v) In the event that this Agreement is terminated, except for
a termination by Cosi without Cause, all unvested Shares shall be
forfeited.
(b) Repurchase of Unvested Shares on Termination. In the event of
the termination of this Agreement by reason of Xx. Xxxxxxx'x death or
Total Disability (as defined in Section 9), Cosi shall have the right, but
not the obligation to repurchase at any time within ninety (90) days after
such termination, all of the then unvested Shares. The purchase price for
such unvested Shares shall be the after-tax costs, if any, to Xx. Xxxxxxx
of such unvested Shares.
(c) 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 shall be void and of no force or effect.
(d) Dividend and Voting Rights. Subject to the restrictions
contained in this Agreement, Xx. Xxxxxxx shall have the rights of a
stockholder with respect to the Shares, including the right to vote with
respect to all the Shares, and to receive all dividends, cash or stock,
paid or delivered thereon, from and after the date hereof. In the event of
forfeiture of the Shares, Xx. Xxxxxxx shall have no further rights with
respect to the 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.
(e) 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 DATED
AS OF JUNE 24, 2003 BY AND BETWEEN COSI, INC. AND XXXXXXX X.
XXXXXXX.
9. Termination. This Agreement shall be for term of three (3) years,
commencing on April 1, 2003 and ending on March 31, 2006, provided that (i) Cosi
may terminate this Agreement immediately (i) on notice to Xx. Xxxxxxx for
"Cause" (as hereinafter defined) and (ii) this Agreement shall also terminate
upon Xx. Xxxxxxx'x death or Total Disability (also as hereinafter defined). 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;
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(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 of 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.
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, which disability is expected to extend beyond the terms of this
Agreement, as determined by any independent qualified physician mutually
acceptable to Cosi and Xx. Xxxxxxx (or his personal representative) or, if Cosi
and Xx. Xxxxxxx are unable to agree on an independent qualified physician, as
determined by a panel of three physicians, one designated by Cosi, one
designated by Xx. Xxxxxxx and one designated by the two physicians so
designated.
10. No Employee Benefits. Xx. Xxxxxxx shall not be entitled to participate
in any employee benefit plan program or arrangement of Cosi unless specifically
approved by the Board in writing.
11. No Assignment. Neither party may assign or delegate any of its rights
or 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.
12. 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. This Agreement may be altered, amended or superseded only by
an agreement in writing, signed by both parties or the party against whom
enforcement of any waiver, change, modification, extension or discharge is
sought. No action of 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.
13 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.
14 Binding Effect; Benefit. This Agreement shall be binding upon and inure
to the benefit of Xx. Xxxxxxx and his administrators, executors, heirs, and
permitted assigns, and Cosi and its successors and permitted assigns.
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15 Notices. Any notice required or permitted to be given hereunder 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: Xx. Xxxxxxx X. Xxxxxxx
c/o Gleacher Partners, LLC
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
To Cosi: Cosi, Inc.
Attention: Board of Directors
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
or to such other address as each of the above may designate to the other in
writing. Notices are effective upon actual receipt.
16 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 such compensation;
provided that, other than with respect to the Shares to be issued to Xx. Xxxxxxx
under Section 8(a)(i), 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 Internal Revenue Code of 1986,
as amended.
17 Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall be considered and have the force and effect of an original.
18 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 New York.
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In Witness Whereof, Cosi has caused this Agreement to be duly executed on
its behalf and Xx. Xxxxxxx has hereunto set his hand and seal, all as of the
date first above written.
Cosi, Inc. Xx. Xxxxxxx
By: /s/ Xxx Xxxxxxxxxx /s/ Xxxxxxx X. Xxxxxxx
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APPENDIX 1
CHANGE IN CONTROL. For purposes of this Agreement, a "Change in Control" means
the date on which the earlier of the following events occur: (a) the acquisition
by any entity, person or group (other than ZAM Holdings, L.P., LJCB Nominees Pty
Ltd, Xxxx X. Xxxxxxxx, 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, of more than 50% of the outstanding capital
stock of Cosi entitled to vote for the election of directors ("Voting Stock");
(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; (c) the sale
or transfer of all or substantially all of the property of Cosi other than to an
entity of which Cosi owns at least 80% of the Voting Stock; or (d) during any
period of twenty-four (24) consecutive months, 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 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. A Change in Control shall not include any acquisition
in which Xx. Xxxxxxx is a member of the acquiring group or an officer or owner
of the acquiring entity.
