Amendment

 

 

                                                                    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 James F. Hyatt ("Mr. Hyatt").

 

      Cosi and Mr. Hyatt wish to confirm the terms and conditions upon which Mr.

Hyatt 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 Mr. Hyatt hereby agree as follows:

 

      1. Term. Cosi hereby agrees to employ Mr. Hyatt as its Chief Executive

Officer ("CEO") and President, and Mr. Hyatt 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,

Mr. Hyatt's 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 Mr. Hyatt 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 Mr. Hyatt's

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. Mr. Hyatt 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"). Mr. Hyatt's office will be located at the Cosi Support Center,

      currently located in Deerfield, Illinois.

 

            (b) Board of Directors. Mr. Hyatt 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 Mr. Hyatt for

      election to the Board.

 

      3. Commitment. During the Term, Mr. Hyatt 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 Mr. Hyatt of his

duties hereunder, Cosi shall pay or provide to Mr. Hyatt the following

compensation (along with the benefits set forth in Section 5 below), which Mr.

Hyatt agrees to accept in full satisfaction for his services.

 

            (a) Annual Base Salary. Cosi shall pay to Mr. Hyatt, 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. Mr. Hyatt's 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 Mr. Hyatt an annual bonus,

      payable upon achievement of goals established by the Compensation

      Committee of the Board in consultation with Mr. Hyatt, and targeted at

      100% of Mr. Hyatt's 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 Mr. Hyatt 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 Mr. Hyatt 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), Mr. Hyatt 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 Mr. Hyatt

      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, Mr. Hyatt 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 Mr. Hyatt 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

      Mr. Hyatt for all reasonable out-of-pocket business expenses incurred by

      Mr. Hyatt 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 Mr. Hyatt later than the last day of Mr. Hyatt's

      taxable year next following the taxable year in which Mr. Hyatt incurs the

      expense.

 

            (g) Relocation Expenses. All reasonable relocation expenses incurred

      or payable for relocation from Miami, Florida will be reimbursed to Mr.

      Hyatt, or paid directly by Cosi, in accordance with the Cosi Standard

      Executive Relocation Plan ("Relocation Policy"), a copy of which Mr. Hyatt

      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 Mr. Hyatt later than the last day of Mr. Hyatt's

      taxable year in which Mr. Hyatt incurs the expense.

 

            (h) Other Compensation. Cosi shall pay to Mr. Hyatt 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, Mr. Hyatt shall be entitled to the

following benefits:

 

            (a) Healthcare and Insurance. Mr. Hyatt 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 Mr. Hyatt's 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 Mr. Hyatt 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. Mr. Hyatt 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

      Mr. Hyatt's contributions at 50% up to 4% of Mr. Hyatt's annual base

      salary (or at such other rate generally applicable to other participants

      in the plan from time to time).

 

            (c) Vacation. Mr. Hyatt 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 Mr. Hyatt 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 Mr. Hyatt on the Effective Date have been registered pursuant to a

registration statement filed in March 2006. However, Mr. Hyatt 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, Mr.

      Hyatt's 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 Mr. Hyatt 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 Mr. Hyatt 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 Mr. Hyatt 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 Mr. Hyatt

                  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 Mr.

            Hyatt's employment hereunder by Cosi other than for Cause (as

            defined in Section 13(a) below), (B) Mr. Hyatt's death or Total

            Disability (as defined in Section 13(b) below), (C) Mr. Hyatt's

            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 Mr. Hyatt's 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 Mr.

      Hyatt's employment hereunder is terminated by reason of Mr. Hyatt's 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. Mr. Hyatt 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, Mr. Hyatt 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, Mr. Hyatt 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 Mr. Hyatt 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. Mr. Hyatt 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 Mr. Hyatt's 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. Mr. Hyatt 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 Mr. Hyatt 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. Mr. Hyatt 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. Mr. Hyatt

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 Mr. Hyatt; and, to enjoin Mr. Hyatt 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, Mr. Hyatt's

employment hereunder may be terminated by either party upon thirty (30) days'

written notice, except that (i) Cosi may terminate Mr. Hyatt's employment

effective immediately upon written notice to Mr. Hyatt for Cause (as hereinafter

defined) following the expiration of any applicable cure period specified in

Section 13(a) below, and (ii) Mr. Hyatt 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. Mr. Hyatt's employment hereunder shall also terminate effective

immediately upon the occurrence of Mr. Hyatt's 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) Mr. Hyatt shall be convicted of, or plead guilty or nolo

            contendere to, a felony;

 

                  (ii) Mr. Hyatt 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 Mr. Hyatt and such neglect or

            failure to perform shall continue beyond such specified cure period;

 

                  (iii) Mr. Hyatt 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 Mr. Hyatt has an undisclosed interest adverse to Cosi; and/or

 

                  (iv) any other material breach by Mr. Hyatt 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 Mr. Hyatt and such breach shall

            continue beyond such specified cure period.

 

            (b) Definition of Total Disability. The term "Total Disability"

      shall mean Mr. Hyatt's physical or mental disability such that Mr. Hyatt

      is and has been continuously for at least six (6) months unable to perform

      the services required to be provided under this Agreement, and Mr. Hyatt

      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 Mr. Hyatt has consented thereto:

 

                  (i) a material diminution in Mr. Hyatt's duties or

            responsibilities or the failure by Cosi to permit Mr. Hyatt to

            exercise such responsibilities as are consistent with the position

            of CEO and President;

 

                  (ii) a reduction of the amount of Mr. Hyatt's 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 Mr. Hyatt is participating unless

            Cosi has increased Mr. Hyatt's salary to offset and compensate Mr.

            Hyatt for the cost of such discontinued healthcare and medical

            benefits or has otherwise provided substantially similar healthcare

            and medical benefits to Mr. Hyatt;

 

                  (iii) the failure by Cosi to grant to Mr. Hyatt 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 Mr. Hyatt;

 

                  (v) the relocation of the Cosi Support Center and Mr. Hyatt's

            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 Mr. Hyatt 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, Mr. Hyatt 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 Mr. Hyatt's 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 Mr. Hyatt for Good Reason; Death or Total

            Disability. In the event Mr. Hyatt's employment hereunder is

            involuntarily terminated by Cosi other than for Cause or voluntarily

            terminated by Mr. Hyatt for Good Reason or Mr. Hyatt's 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 Mr. Hyatt's employment hereunder is involuntarily terminated

            by Cosi other than for Cause or voluntarily terminated by Mr. Hyatt

            for Good Reason, in lieu of any amounts or benefits Mr. Hyatt may be

            entitled to receive under the Cosi severance policy, Cosi shall

            continue to pay Mr. Hyatt 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 Mr. Hyatt's employment hereunder is involuntarily terminated

            by Cosi other than for Cause or voluntarily terminated by Mr. Hyatt

            for Good Reason or Mr. Hyatt's 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 Mr. Hyatt without Good Reason or

            Termination by Cosi for Cause. In the event Mr. Hyatt's employment

            hereunder is voluntarily terminated by Mr. Hyatt 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., Charles G. Phillips, 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 Mr. Hyatt 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 Mr. Hyatt 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. Mr. Hyatt 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 Mr. Hyatt 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 Mr. Hyatt:                              To Cosi :

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

 

 James F. Hyatt                              Cosi, Inc.

 3888 Commander Drive                        1751 Lake Cook Road, 6th Floor

 Chamblee, Georgia 30341                     Deerfield, Illinois  60015

                                             Attn: General Counsel

 Phone: (404) 414-7365

                                             Phone: (847) 597-8818

 

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 Mr. Hyatt 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 Mr. Hyatt 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 Mr.

Hyatt 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

Mr. Hyatt's taxable year next following his taxable year in which the related

taxes, interest or penalties are remitted. For purposes of this Agreement, Mr.

Hyatt 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 Mr. Hyatt has hereunder set his hand, all as of the date first

above written.

 

                                      COSI, INC.

 

By:   /s/ James F. Hyatt              By:   /s/ William D. Forrest

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

   JAMES F. HYATT                        Name:  William D. Forrest

                                         Title: Chairman

 

 

 

 

 

 

 

FIRST AMENDMENT TO EMPLOYMENT AGREEMENT

                                                                    EXHIBIT 10.6

 

                                                              EXECUTION DOCUMENT

 

                                   COSI, INC.

                                 FIRST AMENDMENT

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

                    (To Employment Agreement of James Hyatt)

 

      THIS FIRST AMENDMENT ("Amendment") is made and entered into as of the 18

day of December, 2008, by and between Cosi, Inc., a Delaware corporation

("Cosi"), and James Hyatt ("Mr. Hyatt").

 

      WHEREAS, Cosi and Mr. Hyatt are parties to that certain Employment

Agreement dated as of September 15, 2007 (as amended, the "Employment

Agreement"). Defined terms used in this Amendment that are not otherwise defined

herein shall have the meanings ascribed to them in the Employment Agreement, as

amended hereby; and

 

      WHEREAS, Cosi and Mr. Hyatt desire to amend the Employment Agreement.

 

      NOW, THEREFORE, in consideration of the premises set forth herein and for

other good and valuable consideration, the receipt and sufficiency of which is

hereby acknowledged and agreed, Cosi and Mr. Hyatt hereby agree as follows:

 

      1. Medical and Health Benefits. Section 13(d)(i) of the Employment

Agreement is hereby amended and modified by inserting the following paragraph at

the end of said Section 13(d)(i):

 

                  "Additionally, in the event Mr. Hyatt's employment hereunder

            is involuntarily terminated by Cosi other than for Cause or

            voluntarily terminated by Mr. Hyatt for Good Reason, and provided

            that Mr. Hyatt timely elects to continue medical and health benefits

            pursuant to the Consolidated Omnibus Reconciliation Act of 1985, as

            amended ("COBRA"), Cosi shall reimburse Mr. Hyatt for, or otherwise

            shall pay, the COBRA premiums from the Date of Termination until the

            earlier of (x) the twelve (12) month anniversary of the Date of

            Termination or (2) the date on which Mr. Hyatt becomes eligible for

            healthcare benefits under a health and welfare plans offered by

            another employer. After expiration of such twelve (12) month period,

            in accordance with COBRA rules, Mr. Hyatt may, at Mr. Hyatt's

            option, continue such coverage at Mr. Hyatt's expense without

            reimbursement by Cosi."

 

      2. Effective Date of Amendment. Upon execution of this Amendment by Cosi

and Mr. Hyatt, this Amendment shall be effective as of the date first above

written.

 

      3. Acknowledgment. Except for the express provisions of this Amendment,

all of the terms, covenants and conditions of the Employment Agreement, and all

of the respective rights and obligations of Cosi and Mr. Hyatt hereunder and

thereunder, shall remain in full force and effect during the term of the

Employment Agreement, and are not otherwise modified, altered, amended, revised

or changed.

 

      IN WITNESS WHEREOF, Cosi and Mr. Hyatt have duly executed this Amendment

as of the date first above written.

 

                                      COSI, INC., a Delaware corporation

 

 

By: /s/ James Hyatt                   By: /s/ Robert Merritt

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

    JAMES HYATT                           Robert Merritt, Chairman of the Board

 

Date: December 18, 2008.              Date: December 18, 2008.