Exhibit 10.1
Cosi, Inc.
Employment Agreement
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into effective as of
the 15th of September, 2007, by and between Cosi, Inc., a Delaware corporation
("Cosi"), and Xxxxx X. Xxxxx ("Xx. Xxxxx").
Cosi and Xx. Xxxxx wish to confirm the terms and conditions upon which Xx.
Xxxxx agrees to provide services to Cosi as its Chief Executive Officer and
President.
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. Xxxxx hereby agree as follows:
1. Term. Cosi hereby agrees to employ Xx. Xxxxx as its Chief Executive
Officer ("CEO") and President, and Xx. Xxxxx hereby accepts such employment, for
a term of five (5) years (the "Initial Term"), commencing on September 15, 2007
(the "Effective Date") and ending on the fifth (5th) annual anniversary of the
Effective Date, subject to earlier termination pursuant to Section 13 below.
Effective upon the expiration of the Initial Term and each Additional Term (as
defined below), unless otherwise terminated in accordance with Section 13 below,
Xx. Xxxxx'x employment shall be deemed to be automatically extended, upon the
same terms and conditions, for an additional period of three (3) years
("Additional Term") in each such case, commencing upon the expiration of the
Initial Term or the then-current Additional Term, as the case may be, unless
Cosi shall have given written notice to Xx. Xxxxx at least thirty (30) days
prior to the expiration of the Initial Term or such Additional Term of its
intention not to extend the employment period, provided that any such notice of
non-extension shall be deemed to constitute a termination of Xx. Xxxxx'x
employment by Cosi other than for Cause (as defined below in Section 13(a).
References in this Agreement to "Term" shall mean the period of time during
which this Agreement continues in full force and effect, including the Initial
Term and any Additional Term or Additional Terms.
2. Duties.
(a) CEO and President. Xx. Xxxxx agrees to carry out such duties as
shall be reasonably requested of him from time to time as CEO and
President by the Chairman and the Board of Directors of Cosi (the
"Board"). Xx. Xxxxx'x office will be located at the Cosi Support Center,
currently located in Deerfield, Illinois.
(b) Board of Directors. Xx. Xxxxx will be appointed to the Cosi
Board at the first meeting of the Board immediately following the
Effective Date. During the Term, Cosi shall nominate Xx. Xxxxx for
election to the Board.
3. Commitment. During the Term, Xx. Xxxxx shall devote his full business
time to his duties as CEO and President and the affairs of Cosi.
4. Compensation. In consideration of the performance by Xx. Xxxxx of his
duties hereunder, Cosi shall pay or provide to Xx. Xxxxx the following
compensation (along with the benefits set forth in Section 5 below), which Xx.
Xxxxx agrees to accept in full satisfaction for his services.
(a) Annual Base Salary. Cosi shall pay to Xx. Xxxxx, effective as of
the Effective Date, an annual base salary in the gross amount of Six
Hundred Thousand Dollars ($600,000), payable in bi-weekly installments of
Twenty-Three Thousand Seventy Six Dollars and 92/100 ($23,076.92) and net
of applicable payroll and withholding taxes, in accordance with Cosi's
regular payroll practices. Xx. Xxxxx'x annual base salary shall be subject
to periodic review by the Board or the Compensation Committee of the Board
("Compensation Committee"), as applicable, and may increase (but not
decrease) such base salary from time to time based on business performance
and industry practices.
(b) Annual Bonus. Cosi shall pay to Xx. Xxxxx an annual bonus,
payable upon achievement of goals established by the Compensation
Committee of the Board in consultation with Xx. Xxxxx, and targeted at
100% of Xx. Xxxxx'x annual base salary, as from time to time in effect.
Annual bonuses, if any, are payable by the fifteenth (15th) day of the
third (3rd) month after Cosi's fiscal year-end to which the bonus relates.
(c) Sign-on Restricted Stock. On the Effective Date, Cosi shall
grant to Xx. Xxxxx 200,000 restricted shares (the "Sign-on Restricted
Stock") of Cosi's common stock, $0.01 par value, (the "Common Stock"),
pursuant to the Cosi, Inc. 2005 Omnibus Long-Term Incentive Plan ("LTIP"),
subject to the terms and conditions set forth in Section 8 below and any
additional terms and conditions prescribed by the Compensation Committee
in the Sign-on Restricted Stock Award Agreement.
(d) Initial Restricted Stock. On the Effective Date, Cosi shall
grant to Xx. Xxxxx 275,000 restricted shares of Common Stock, (the
"Initial Restricted Stock"), pursuant to the LTIP, subject to the terms
and conditions set forth in Section 8 below and any additional terms and
conditions prescribed by the Compensation Committee in the Initial
Restricted Stock Award Agreement.
(e) Additional Restricted Stock. Subject to attainment of
Performance Goals in accordance with the second paragraph set forth below
in this Section 4(e), Xx. Xxxxx shall receive annual grants of 100,000
restricted shares of Common Stock for each of fiscal year 2008, 2009,
2010, and 2011, ("Additional Restricted Stock"), to be granted within
seventy five (75) days after the end of each respective fiscal year,
pursuant to the LTIP (or any successor thereto), provided that Xx. Xxxxx
remains continuously employed by Cosi through each such date. The number
of restricted shares of Common Stock granted for each such fiscal year
shall be determined by the Compensation Committee in its sole discretion
based upon attainment of specified performance goals ("Performance Goals")
established annually by the Compensation Committee in consultation with
the CEO. After the Additional Restricted Stock is granted for any
particular fiscal year, the shares granted for such fiscal year will vest
automatically in each succeeding year according to Section 8(a)(iii)(B)
without being subject to further attainment of Performance Goals in
succeeding fiscal years.
If the Performance Goals are attained 100% for such fiscal year, the
Additional Restricted Stock granted for such fiscal year will be 100,000
shares. If the Performance Goals are attained at less than 100% for such
fiscal year, Xx. Xxxxx would not be eligible to receive the Additional
Restricted Stock for such fiscal year. However, the Compensation
Committee, in its sole discretion, may grant to Xx. Xxxxx Additional
Restricted Stock in an amount up to 100,000 shares for such fiscal year,
based upon overall performance for such fiscal year.
The performance metrics may, by way of example only, incorporate the
following key areas: Growth In Cash Flow From Operations - which shall
encompass all enterprise drivers and will be compared to end of year
statements of cash flow; Return On Invested Capital (Heritage Restaurants)
- which shall encompass budgeted restaurant cash flow (RCF) divided by
remodel and other capital expenditures compared to actual end of year
performance; New Company Restaurant Performance - which metric will be
viewed two ways: (1) overall performance against operating budgets, and
(2) actual investment expense against approved restaurant capital budget
request (CBR); and Franchise Performance - which metric will be compared
to annual performance against approved franchise unit average unit volumes
(AUV's) and annual projected franchise operating weeks. The Additional
Restricted Stock shall be subject to the terms and conditions of Section 8
below and any additional terms and conditions prescribed by the
Compensation Committee in the respective Additional Restricted Stock Award
Agreements.
(f) Business Expenses. Cosi shall promptly pay directly or reimburse
Xx. Xxxxx for all reasonable out-of-pocket business expenses incurred by
Xx. Xxxxx 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. Provided that the
reimbursement request and required documentation have been submitted to
Cosi to allow for timely processing, in no event will such payments or
reimbursements be made to Xx. Xxxxx later than the last day of Xx. Xxxxx'x
taxable year next following the taxable year in which Xx. Xxxxx incurs the
expense.
(g) Relocation Expenses. All reasonable relocation expenses incurred
or payable for relocation from Miami, Florida will be reimbursed to Xx.
Xxxxx, or paid directly by Cosi, in accordance with the Cosi Standard
Executive Relocation Plan ("Relocation Policy"), a copy of which Xx. Xxxxx
hereby acknowledges has been delivered to him prior to the date hereof,
all of which relocation expenses shall be paid or reimbursed by Cosi as
required by no later than December 31, 2008. Provided that the
reimbursement request and required documentation have been submitted to
Cosi to allow timely processing, in no event will such payments or
reimbursements be made to Xx. Xxxxx later than the last day of Xx. Xxxxx'x
taxable year in which Xx. Xxxxx incurs the expense.
(h) Other Compensation. Cosi shall pay to Xx. Xxxxx such other
compensation as may be approved from time to time by the Board and/or the
Compensation Committee, as applicable.
As referenced in this Section 4 (and elsewhere in this Agreement), Cosi's
"fiscal year" currently consists of twelve (12) fiscal periods commencing on or
around January 1st and ending on or around December 31st each year, comprised of
four (4) fiscal quarters, with each fiscal quarter including three (3) fiscal
periods each. Should Cosi, in its business judgment and in accordance with
applicable laws, rules and regulations, generally accepted accounting
principles, and its corporate governance principles, at any time elect to change
its "fiscal year", references to and time periods in this Agreement based upon
"fiscal year" shall be automatically amended and modified to be consistent with
the time periods in this Agreement but conformed to Cosi's then-current fiscal
year.
5. Employee Benefits. During the Term, Xx. Xxxxx shall be entitled to the
following benefits:
(a) Healthcare and Insurance. Xx. Xxxxx shall be entitled to
participate in any employee welfare benefit plan, program or arrangement
of Cosi generally made available to executives of Cosi, in accordance with
its terms in effect from time to time, including medical, dental, vision,
life, accidental death and dismemberment, and long-term disability
insurance, on the same basis as other Cosi executive employees are
entitled to participate. Cosi shall pay no less frequently than monthly
100% of the single and Child/Spouse/Family healthcare costs. Participation
in, and the terms of, Cosi's healthcare plan are subject to change without
notice.
If at any time during Xx. Xxxxx'x employment or during any period of
time in which he is receiving benefits under any such policy, Cosi's
long-term disability insurance shall terminate for any reason whatsoever,
prior to any such termination Cosi shall obtain and thereafter maintain a
long-term disability insurance policy providing at least the same or
substantially the same benefits to Xx. Xxxxx during the remaining Term or
during any period of time in which he is eligible to continue receiving
such benefits, as the case may be.
(b) 401(k) Retirement Plan. Xx. Xxxxx shall be entitled to
participate in Cosi's 401(k) retirement plan in accordance with its terms
in effect from time to time. Subject to applicable law, Cosi will match
Xx. Xxxxx'x contributions at 50% up to 4% of Xx. Xxxxx'x annual base
salary (or at such other rate generally applicable to other participants
in the plan from time to time).
(c) Vacation. Xx. Xxxxx shall be entitled to up to four (4) weeks
paid vacation per annum, in accordance with Cosi's vacation policy
applicable to Cosi executives.
6. Equipment. Cosi shall provide to Xx. Xxxxx a cell phone, a laptop
computer and a blackberry, at Cosi's cost and expense during the Term.
7. Acknowledgment. The restricted shares of Common Stock issued under the
LTIP to Xx. Xxxxx on the Effective Date have been registered pursuant to a
registration statement filed in March 2006. However, Xx. Xxxxx hereby
acknowledges that the shares of Sign-on Restricted Stock, Initial Restricted
Stock, and Additional Restricted Stock (collectively, the "Shares") granted to
him in connection with his employment are subject to certain restrictions, as
set forth in this Agreement, the LTIP, and the respective Restricted Stock Award
Agreements.
8. Vesting; Repurchase; Repayment; Voting; and Legends.
(a) Vesting of Shares. After such restricted shares are granted, Xx.
Xxxxx'x rights to the Sign-on Restricted Stock, Initial Restricted Stock
and Additional Restricted Stock shall vest in accordance with the
following provisions of this Section 8:
(i) Sign-on Restricted Stock. Subject to the terms and
conditions set forth in this Agreement, the LTIP, and the Sign-on
Restricted Stock Award Agreement:
(A) 100,000 shares of the Sign-on Restricted Stock grant
shall become fully vested on the first anniversary of the
Effective Date, provided that Xx. Xxxxx remains in continuous
employ of Cosi from and after the Effective Date and through
such anniversary date.
(B) 100,000 shares of the Sign-on Restricted Stock grant
shall become fully vested on the second anniversary of the
Effective Date, provided that Xx. Xxxxx remains in the
continuous employ of Cosi from and after the Effective Date
and through such anniversary date.
(ii) Initial Restricted Stock. Subject to the terms and
conditions set forth in this Agreement, the LTIP, and the Initial
Restricted Stock Award Agreement:
(A) Twenty percent (20%) of the Initial Restricted Stock
grant shall be fully vested on the Effective Date.
(B) On each anniversary of the Effective Date in 2008,
2009, 2010, and 2011, an additional twenty percent (20%) of
the Initial Restricted Stock grant shall become fully vested
on each such date, provided that Xx. Xxxxx remains in the
continuous employ of Cosi from and after the Effective Date
and through each such anniversary date.
(iii) Additional Restricted Stock. Subject to the terms and
conditions set forth in this Agreement, the LTIP, and the respective
Additional Restricted Stock Award Agreements:
(A) Twenty percent (20%) of each Additional Restricted
Stock grant shall be fully vested on the grant date.
(B) For each Additional Restricted Stock grant, twenty
percent (20%) shall become fully vested on each of the first
anniversary of the grant date, the second anniversary of the
grant date, the third anniversary of the grant date, and the
fourth anniversary of the grant date, provided that Xx. Xxxxx
remains in the continuous employ of Cosi from and after such
grant date and through each such anniversary date.
(iv) All Shares granted but not yet vested shall become fully
vested upon the earlier to occur of: (A) the termination of Xx.
Xxxxx'x employment hereunder by Cosi other than for Cause (as
defined in Section 13(a) below), (B) Xx. Xxxxx'x death or Total
Disability (as defined in Section 13(b) below), (C) Xx. Xxxxx'x
voluntary termination for Good Reason (as defined in Section 13(c)
below), or (D) a Change in Control (as defined in Section 14 below).
(v) In the event Xx. Xxxxx'x employment hereunder is (A)
voluntarily terminated by him other than for Good Reason, or (B) is
involuntarily terminated by Cosi for Cause, all granted but unvested
Shares shall be forfeited.
(b) Repurchase of Shares on Death or Disability. In the event Xx.
Xxxxx'x employment hereunder is terminated by reason of Xx. Xxxxx'x death
or Total Disability, Cosi shall have the right, but not the obligation, to
repurchase at any time within ninety (90) days after the effective date of
such termination (or, if later, until the 181st day following the
acquisition of such Shares), all of the Shares excluding any forfeited
Shares. The purchase price shall be the then-current fair market value of
such Shares being repurchased.
(c) Non-Transferability. Xx. Xxxxx 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 sale, transfer, assignment, pledge or other encumbrance
will be void and of no force or effect.
(d) Dividend and Voting Rights. Subject to the restrictions
contained in this Agreement, Xx. Xxxxx shall have the rights of a
stockholder: (i) with respect to the Sign-on Restricted Stock, including
the right to vote with respect to all the Sign-on Restricted Stock, and to
receive all dividends, cash or stock, paid or delivered thereon, from and
after the Effective Date; (ii) 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 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 respective dates
of grant of such Additional Restricted Stock. In the event of forfeiture
of the Shares, Xx. Xxxxx 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. Xxxxx with respect to
the Shares prior to forfeiture.
(e) Legend. All certificates representing the Shares shall have
endorsed thereon the legends set forth in the respective Restricted Stock
Agreements and the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
AN EMPLOYMENT AGREEMENT DATED AS OF [_____________], 2007, BY
AND BETWEEN COSI, INC., AND REGISTERED HOLDER OF THESE
SECURITIES.
9. Confidential Information. Xx. Xxxxx 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. Xxxxx'x in
breach of this Section 9. 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 persons who can obtain economic value from its disclosure or use;
and
(b) is the subject of reasonable efforts by Cosi to maintain its
secrecy.
10. Non-Competition. Xx. Xxxxx covenants and agrees that during his
employment with Cosi and for twelve (12) months following the termination of his
employment for any reason, he shall not, directly or indirectly, personally or
with other employees, agents or otherwise, or on behalf of any other person,
firm or corporation, engage in any business relationship specifically with
direct concept competitors in the fast casual (or premium convenience) segment
within the continental United States, including, but not limited to, Panera
Bread, Atlanta Bread Company, Chipotle Restaurants, and Starbucks, and any
successors in interest thereto. The parties acknowledge and agree that the
foregoing restrictions in this Section 10 shall not apply to concepts in the
quick service (QSR) or casual dining segments. Notwithstanding the foregoing in
this Section 10, ownership by Xx. Xxxxx of an interest in Cosi or any licensed
franchisee of Cosi shall not be deemed to be a violation of this Section 10.
11. Non-Solicitation of Employees. Xx. Xxxxx covenants and agrees that
during his employment with Cosi and for twelve (12) months following the
termination of his employment for any reason, 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.
12. Specific Enforcement; Survival; Remedies Cumulative. Xx. Xxxxx
expressly recognizes that any breach of Sections 9, 10 or 11 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. Xxxxx; and, to enjoin Xx. Xxxxx from activities in
violation of this Agreement. Notwithstanding any provisions of this Agreement to
the contrary, the provisions of Sections 9, 10, 11, and 12 hereof shall survive
the termination of this Agreement. All rights and remedies are cumulative, and
Cosi's rights under this Section 12 shall be in addition to, and not in lieu of,
any other rights and remedies Cosi may have at law or in equity.
13. Termination. Except as otherwise expressly set forth in this
Agreement, subject to the terms and conditions of this Agreement, Xx. Xxxxx'x
employment hereunder may be terminated by either party upon thirty (30) days'
written notice, except that (i) Cosi may terminate Xx. Xxxxx'x employment
effective immediately upon written notice to Xx. Xxxxx for Cause (as hereinafter
defined) following the expiration of any applicable cure period specified in
Section 13(a) below, and (ii) Xx. Xxxxx may terminate his employment effective
immediately upon written notice to Cosi for Good Reason (as hereinafter defined)
following expiration of any applicable cure period specified in Section 13(c)
below. Xx. Xxxxx'x employment hereunder shall also terminate effective
immediately upon the occurrence of Xx. Xxxxx'x death or Total Disability (as
hereinafter defined). Any such termination shall be 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. Xxxxx shall be convicted of, or plead guilty or nolo
contendere to, a felony;
(ii) Xx. Xxxxx shall willfully neglect or fail to perform the
services required to be provided under this Agreement, provided that
written notice from the Board specifying such neglect or failure and
a reasonable opportunity to cure, up to but not to exceed thirty
(30) days, has been delivered to Xx. Xxxxx and such neglect or
failure to perform shall continue beyond such specified cure period;
(iii) Xx. Xxxxx shall commit any fraud, embezzlement or other
act of intentional dishonesty against Cosi, or shall attempt to
profit from any transaction in which Cosi is a participant and in
which Xx. Xxxxx has an undisclosed interest adverse to Cosi; and/or
(iv) any other material breach by Xx. Xxxxx of a material
provision of this Agreement, provided that written notice from the
Board specifying such material breach and the provision so breached
and a reasonable opportunity to cure, up to but not to exceed thirty
(30) days, has been delivered to Xx. Xxxxx and such breach shall
continue beyond such specified cure period.
(b) Definition of Total Disability. The term "Total Disability"
shall mean Xx. Xxxxx'x physical or mental disability such that Xx. Xxxxx
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. Xxxxx
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) Definition of Good Reason. The term "Good Reason" shall mean
only one or more of the following, unless Xx. Xxxxx has consented thereto:
(i) a material diminution in Xx. Xxxxx'x duties or
responsibilities or the failure by Cosi to permit Xx. Xxxxx to
exercise such responsibilities as are consistent with the position
of CEO and President;
(ii) a reduction of the amount of Xx. Xxxxx'x annual base
salary (as in effect on the date hereof and as the same may be
increased from time to time) or potential annual bonus (at the rate
in effect on the date hereof and as the same may be increased from
time to time) or the discontinuation by Cosi of all healthcare and
medical benefits plans in which Xx. Xxxxx is participating unless
Cosi has increased Xx. Xxxxx'x salary to offset and compensate Xx.
Xxxxx for the cost of such discontinued healthcare and medical
benefits or has otherwise provided substantially similar healthcare
and medical benefits to Xx. Xxxxx;
(iii) the failure by Cosi to grant to Xx. Xxxxx his Sign-on
Restricted Stock or Initial Restricted Stock in accordance with the
terms of this Agreement;
(iv) the failure by Cosi to make a payment due under this
Agreement when due to Xx. Xxxxx;
(v) the relocation of the Cosi Support Center and Xx. Xxxxx'x
office more than fifty (50) miles outside of the City of Chicago and
the Chicagoland area by decision of the Board, or a committee
thereof, where Xx. Xxxxx was not consulted about or given an
opportunity to participate in such decision; and/or
(vi) any other material breach by Cosi of a material provision
of this Agreement.
Provided that, within thirty (30) days following the occurrence of any of
the events set forth in items (i) through (vi) above, Xx. Xxxxx shall have
delivered written notice to Cosi of his intention to terminate his
employment for Good Reason, which notice specifies in reasonable detail
the circumstances claimed to give rise to Xx. Xxxxx'x right to terminate
employment for Good Reason, and Cosi shall not have cured such
circumstances within thirty (30) days following Cosi's receipt of such
notice.
(d) Cosi's Obligations Upon Termination.
(i) Involuntary Termination by Cosi Other than for Cause;
Voluntary Termination by Xx. Xxxxx for Good Reason; Death or Total
Disability. In the event Xx. Xxxxx'x employment hereunder is
involuntarily terminated by Cosi other than for Cause or voluntarily
terminated by Xx. Xxxxx for Good Reason or Xx. Xxxxx'x employment is
terminated due to his death or Total Disability, Cosi shall pay to
him (or his estate) his accrued but unpaid base salary, bonuses and
medical benefits that are payable through the effective date of
termination ("Accrued Benefits") as soon as administratively
practicable following termination of employment. In addition, in the
event Xx. Xxxxx'x employment hereunder is involuntarily terminated
by Cosi other than for Cause or voluntarily terminated by Xx. Xxxxx
for Good Reason, in lieu of any amounts or benefits Xx. Xxxxx may be
entitled to receive under the Cosi severance policy, Cosi shall
continue to pay Xx. Xxxxx his then-current base salary as severance
(the "Severance") during the following period: (A) in the case such
termination occurs prior to the first anniversary of the Effective
Date, twenty-four (24) months, or (B) in the case such termination
occurs on or after the first anniversary of the Effective Date,
twelve (12) months. The Severance shall be payable in accordance
with Cosi's regular payroll practices (not less frequently than
monthly) beginning as soon as administratively practicable following
termination of employment, subject to Section 23 hereof. In the
event Xx. Xxxxx'x employment hereunder is involuntarily terminated
by Cosi other than for Cause or voluntarily terminated by Xx. Xxxxx
for Good Reason or Xx. Xxxxx'x employment is terminated due to his
death or Total Disability, the terms of Sections 8(a)(iv) and 8(b)
above shall apply with respect to the Shares.
(ii) Voluntary Termination by Xx. Xxxxx without Good Reason or
Termination by Cosi for Cause. In the event Xx. Xxxxx'x employment
hereunder is voluntarily terminated by Xx. Xxxxx without Good Reason
or is involuntarily terminated by Cosi for Cause, Cosi shall pay to
him his Accrued Benefits as soon as administratively practicable
following termination of employment. In such event, the terms of
Section 8(a)(v) shall apply with respect to the Shares.
14. Change in Control. For purposes of this Agreement, a "Change in
Control" shall mean 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., 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"); (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. Xxxxx is a member of the acquiring group or
an officer or owner of the acquiring entity.
15. No Assignment. Neither party may assign or delegate any of its or his
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;
provided that Cosi may assign this Agreement in connection with a sale or other
disposition of all or substantially all of its assets.
16. Entire Agreement; Modification. This instrument contains the entire
agreement of Cosi and Xx. Xxxxx with respect to its subject matter. 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.
17. Severability. Xx. Xxxxx 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.
18. Binding Effect; Benefit. This Agreement shall be binding upon and
shall inure to the benefit of Xx. Xxxxx and his administrators, executors, heirs
and permitted assigns, and Cosi and its successors and permitted assigns. In the
event of a Change in Control, this Agreement shall be binding upon any successor
or assign of Cosi as fully as if such successor or assign were a signatory
hereto, and references herein to Cosi shall mean and include all such successors
or assigns.
19. 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. Xxxxx: To Cosi :
------------- ---------
Xxxxx X. Xxxxx Cosi, Inc.
0000 Xxxxxxxxx Xxxxx 0000 Xxxx Xxxx Xxxx, 0xx Xxxxx
Xxxxxxxx, Xxxxxxx 00000 Xxxxxxxxx, Xxxxxxxx 00000
Attn: General Counsel
Phone: (000) 000-0000
Phone: (000) 000-0000
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.
20. Withholding. All amounts payable under this Agreement shall be subject
to applicable employee payroll and withholding taxes.
21. Counterparts; Facsimile Signatures. This Agreement may be executed in
counterparts, each of which shall be considered, and shall have the force and
effect of, an original but all of which taken together shall constitute one and
the same instrument. Signatures by facsimile are hereby authorized and shall
have the same force and effect as the original.
22. 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, without regard to its principles of conflicts of law.
23. Effect of Section 409A. It is expressly contemplated by the parties
that this Agreement will conform to, and be interpreted to comply with, Section
409A of the Internal Revenue Code, as amended (the "Code"). Notwithstanding any
other provision of this Agreement, if Xx. Xxxxx is a "specified employee" as
defined in Section 409A(a)(2)(B)(i) of the Code at the time of his separation
from service, then the payment of any amount this Agreement which is considered
deferred compensation subject to Section 409A of the Code shall be deferred for
six (6) months after his "separation from service" or, if earlier, his death as
required by Section 409A(a)(2)(B)(i) of the Code (the "409A Deferral Period").
In the event payments are otherwise due to be made in installments or
periodically during the 409A Deferral Period, the payments which would otherwise
have been made in the 409A Deferral Period shall be accumulated and paid in a
lump sum as soon as the 409A Deferral Period ends, and the balance of the
payments shall be made as otherwise scheduled. If Xx. Xxxxx incurs any interest
or additional tax under Section 409A(a)(1)(B) of the Code with respect to
amounts payable under this Agreement, Cosi promptly at that time will pay Xx.
Xxxxx an additional amount so that, after all taxes on such additional amount,
he has an amount remaining equal to such interest or additional tax. Such
gross-up payment, however, shall be made in any event no later than the end of
Xx. Xxxxx'x taxable year next following his taxable year in which the related
taxes, interest or penalties are remitted. For purposes of this Agreement, Xx.
Xxxxx shall not be deemed to have terminated employment unless he has a
"separation from service" within the meaning of Section 409A of the Code where
it is reasonably anticipated that no further services will be performed after
such date or that the level of bona fide services he will perform after that
date (whether as an employee or independent contractor) will permanently
decrease to no more than 20 percent of the average level of bona fide services
performed by him over the immediately preceding 36-month period. All rights to
payments and benefits under this Agreement shall be treated as rights to receive
a series of separate payments and benefits to the fullest extent allowed by
Section 409A of the Code.
IN WITNESS WHEREOF, Cosi has caused this Agreement to be duly executed on
its behalf and Xx. Xxxxx has hereunder set his hand, all as of the date first
above written.
COSI, INC.
By: /s/ Xxxxx X. Xxxxx By: /s/ Xxxxxxx X. Xxxxxxx
-------------------------------- --------------------------------
XXXXX X. XXXXX Name: Xxxxxxx X. Xxxxxxx
Title: Chairman
