EXHIBIT 4.9
INVESTMENT AGREEMENT
This Investment Agreement (this "Agreement") is made and entered into
as of August 5, 2003, among ZAM Holdings, L.P., a Delaware limited
partnership ("ZAM Holdings"), Eric J. Gleacher, an individual ("Gleacher"),
Charles G. Phillips, an individual ("Phillips"), LJCB Nominees Pty. Ltd., a
limited company ("LJCB" and, collectively with ZAM Holdings, Gleacher and
Phillips, the "Funding Parties") and Cosi, Inc., a Delaware corporation (the
"Company").
WITNESSETH
WHEREAS, the Funding Parties delivered funding letters, dated as of March
31, 2003 (the "Funding Letters"), to the Company pursuant to which they
individually agreed, subject to certain conditions, to provide funding to the
Company;
WHEREAS, ZAM Holdings, Gleacher and Phillips (i) delivered a letter, dated
August 5, 2003, pursuant to which such parties individually agreed, subject to
certain conditions, to provide funding to the Company if the Funding Parties do
not provide the funding contemplated by this Agreement ("Alternative Funding
Letters") and (ii) have provided or will provide the Company with an aggregate
of $1.5 million in funding pursuant to senior secured convertible notes (the
"Bridge Notes");
WHEREAS, the Funding Parties and the Company now desire to specify further
the terms, conditions, rights and obligations of the Funding Parties and the
Company with respect to any funding to be provided to the Company by the Funding
Parties;
WHEREAS, the Company intends to commence a rights offering ("Rights
Offering") pursuant to which the Company would distribute, on a pro rata basis
and at no charge, to the record holders of its common stock, par value $.01 per
share ("Common Stock"), as of a date (the "Rights Offering Record Date") to be
established by the Board of Directors of the Company (the "Board of Directors"),
non-transferable subscription rights ("Subscription Rights") to subscribe for
and purchase shares ("Rights Shares") of Common Stock;
WHEREAS, each stockholder of record would receive one Subscription Right
for each share of Common Stock held by such holder, and each Subscription Right
would entitle the holder to purchase Rights Shares at a price per Rights Share
equal to the lesser of (i) $1.50 per share and (ii) 85% of the weighted average
price per share of the Company's Common Stock as reported on the Nasdaq National
Market for the 15-trading-day period ending three business days prior to the
expiration date of the Rights Offering (either (i) or (ii), as appropriately
adjusted for any stock split, reverse stock split, combination, reorganization,
recapitalization, stock dividend, stock distribution or similar event, the
"Subscription Price") and on the other terms described in the draft registration
statement on Form S-1 provided to the Funding Parties on August 4, 2003
(including, without limitation, such terms concerning the basic subscription
privilege (the "Basic Subscription Privilege"), over-subscription privilege (the
"Over-subscription Privilege") and aggregate offering cap (the "Aggregate
Offering Cap") described therein;
WHEREAS, the Board of Directors has determined that the Transaction
Agreements (as defined in Section 4.1 below), each of the Rights Offering,
Common Stock Investment and Debt
Investment (each, as defined herein), and the transactions contemplated hereby
and thereby, individually or aggregately in any combination, are advisable and
in the best interests of the Company and its stockholders;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained in this Agreement, the parties hereto hereby agree as
follows:
Article I. Funding.
Section 1.1 Form of Funding. Subject to the terms and conditions stated
herein, each Funding Party agrees severally (and not jointly) to provide funding
to the Company following consummation of the Rights Offering by, at the Funding
Party's option, purchasing from the Company:
(a) shares of Common Stock in a private placement at the
Subscription Price (a "Common Stock Investment"); or
(b) a senior secured convertible note of the Company substantially
in the form of the senior secured convertible note attached as Exhibit A
hereto (the "New Company Notes" and such a purchase, a "Debt Investment");
provided, that, subject to the terms and conditions stated herein, each Funding
Party agrees that if the stockholders of the Company (not including the Funding
Parties) collectively subscribe for a number of Rights Shares that, when
multiplied by the Subscription Price, equals at least $2.0 million, then (i)
each such Funding Party shall elect to provide all of its funding pursuant to
Section 1.1 in the form of a Common Stock Investment, and (ii) each such Funding
Party (not including LJCB) or its affiliates shall elect to convert the entire
amount of the outstanding principal of (A) the Prior Note (as hereinafter
defined) plus any accrued and unpaid interest thereunder into shares of Common
Stock of the Company pursuant to the terms of the letter agreement, dated as of
March 31, 2003, by and among the Company, Gleacher, Phillips and Ziff Investors
Partnership, L.P. II, provided, that, the Prior Note has been assigned to the
Guarantors (as such term is defined in the Loan Agreement, dated as of March 31,
2003, by and between the Company, as Borrower, and First Republic Bank, as
Lender) by First Republic Bank, and (B) the Bridge Notes plus any accrued and
unpaid interest thereunder into shares of Common Stock of the Company.
Section 1.2 Amount of Funding. The amount of funding to be provided to the
Company by a Funding Party ("Funding") shall be (i) pursuant to Section 1.1, its
Additional Funding Amount (as defined below) and (ii) at the Funding Party's
option, any amounts funded pursuant to Section 1.2(b) below.
(a) Pursuant to Section 1.1, the amount of funding to be provided by a
Funding Party to the Company through a Common Stock Investment or Debt
Investment shall be such that (i) in the event of a Common Stock Investment, the
Funding Party purchases at the Subscription Price the number of shares of Common
Stock such that the aggregate purchase price equals such Funding Party's
Additional Funding Amount and (ii) in the event of a Debt Investment, the
Funding Party purchases, for such Additional Funding Amount, a New Company Note
with a principal amount equal to such Additional Funding Amount. A Funding
Party's "Additional
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Funding Amount" shall equal the lesser of (A) and (B) below:
(A) the product of (aa) a fraction, the numerator of which shall be
(i) for ZAM Holdings, $5.0 million, (ii) for Gleacher, $2.0 million, (iii)
for Phillips, $750,000 and (iv) for LJCB, $750,000, and the denominator of
which shall be $8.5 million and (bb) the Dollar amount by which (if any)
$7.5 million exceeds the amount subscribed for pursuant to the Rights
Offering pursuant to Basic Subscription Privileges and Over-subscription
Privileges and
(B) an amount equal to:
(1) for ZAM Holdings, $5.0 million, for Gleacher, $2.0 million, for
Phillips, $750,000 and for LJCB, $750,000; reduced by
(2) for each of ZAM Holdings, Gleacher and Phillips, the original
principal amount of any Bridge Note issued by the Company for its or his
benefit, whether the Bridge Note is outstanding or not, and all unpaid
interest thereunder accrued to the date that is the earlier of (A)
conversion in full of the Bridge Note and (B) the applicable closing of
Funding, reduced by the amount of repayments of principal, if any, made by
the Company under such Bridge Note, and further reduced by
(3) the product of (A) whether the Prior Note is outstanding or not,
the original principal of the Company's senior secured promissory note,
dated as of March 31, 2003, for the benefit of First Republic Bank (such
note for the benefit of First Republic Bank or any assignee in whole or in
part thereof, a "Prior Note") and all unpaid interest thereunder accrued
to the date that is the earlier of (x) conversion in full of the Prior
Note and (y) the applicable closing of Funding, reduced by the amount of
repayments of principal, if any, made by the Company under such Prior
Note, and increased by the aggregate amount (other than payments of
principal or interest on the Prior Note), if any, paid (or if not yet
paid, payable) by the Funding Parties or their associated entities under a
Continuing Guaranty of Payment and Performance ("Guaranty") entered into
by a Funding Party or its associated entity for the benefit of First
Republic Bank in connection with the Prior Note and (B) the quotient equal
to (aa) for Gleacher, 757,604 divided by 3,000,000, (bb) for Phillips,
303,915 divided by 3,000,000 and (cc) for ZAM Holdings, 1,938,481 divided
by 3,000,000; provided, that LJCB shall not be entitled to any reduction
provided by this clause (3); and provided further, that adjustments shall
be made in the event that the Prior Note is subdivided to equitably
apportion the amounts referred to in this clause (3) among the other three
Funding Parties. Notwithstanding the foregoing, there shall be no
reduction pursuant to this clause (3) to the extent that (I) the Prior
Note is held by First Republic Bank through the date of the closing of the
applicable Funding, (II) no Funding Party has exercised its rights to
cause the assignment of such Prior Note, (III) the mandatory assignment
provision applicable with respect to such Prior Note has not become
effective, (IV) neither First Republic Bank nor any direct or indirect
assignee of any of its rights under the Prior Note or with respect to the
indebtedness reflected in connection therewith has demanded payment
pursuant to the Guaranty and (V) there has not occurred any event of
default or breach by the Company under the agreements or instruments
entered into in connection with such indebtedness (including, without
limitation, the Prior Note).
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(b) Notwithstanding anything to the contrary contained herein, the
Company shall provide each Funding Party with the option to maintain, at
such Funding Party's option, such Funding Party's ownership in the Company
(including, for purposes of determining the Funding Party's existing
ownership, the outstanding warrants held by the Funding Parties) relative
to that of each other stockholder of the Company, including, without
limitation, by reducing, at such Funding Party's option, the
Over-subscription Privilege that may be exercised by any such other
stockholder and the Aggregate Offering Cap.
Section 1.3 Effect of Prior Agreements. The provisions of this Agreement
supersede any rights and obligations of the Funding Parties described in the
Funding Letters or the Rights Offering Term Sheet attached to the Funding
Letters (the "Rights Offering Term Sheet"), and such rights and obligations
shall be deemed terminated and of no further force or effect.
Section 1.4 Notification of Funding; Further Assurances. Subject to the
proviso of Section 1.1, a Funding Party shall make an election as to the form of
Funding by providing written notice to the Company within five (5) business days
following written notice from the Company of the expiration or abandonment of
the Rights Offering indicating (i) its elected form of Funding and (ii) the date
on which such Funding is to be made, such date to be no more than five (5)
business days following the date on which such written notice was provided by
the Funding Party. Subject to the terms and conditions of this Agreement, the
Company and such Funding Party shall use commercially reasonable efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary under applicable Laws (as defined in Section 4.5) or as the
other party may reasonably request to effect the consummation of any Funding,
including, without limitation, the execution, acknowledgment and delivery of a
purchase agreement, security agreement, note and other appropriate instruments,
documents, agreements and certificates to give effect to a Funding, in each
case, including representations and warranties, covenants, conditions,
termination provisions and indemnification provisions as are reasonable and
customary.
Article II. The Rights Offering.
Section 2.1 Rights Offering Procedures.
(a) The registration statement covering the issuance of the
Subscription Rights, Rights Shares and rights underlying the Rights Shares
pursuant to the Company's rights plan (including each amendment and supplement
thereto, the "Registration Statement"), and each request for acceleration of
effectiveness thereof, will be provided to each Funding Party and its counsel
prior to its filing with or other submission to the United States Securities and
Exchange Commission ("SEC"). Each Funding Party and its counsel will be given a
reasonable opportunity to review and comment upon the Registration Statement in
each instance before it is filed with the SEC. In addition, the Company will
provide each Funding Party and its counsel with any written comments or other
written communications that the Company or its counsel receives from time to
time from the SEC or its staff with respect to the Registration Statement
promptly after the receipt of such comments or other communications.
(b) In the Rights Offering, the Company will distribute, on a pro
rata basis and at no charge, Subscription Rights to each holder of record of
Common Stock as of the Rights
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Offering Record Date. Each stockholder of record will receive one Subscription
Right for each share of Common Stock held by such holder as of the Rights
Offering Record Date. Each Subscription Right will entitle the holder to
purchase, at the election of the holder thereof, Rights Shares, on or prior to
the Expiration Date, at the Subscription Price, subject to the Aggregate
Offering Cap.
Section 2.2 No Exercise of Subscription Privileges. Each Funding Party
agrees not to exercise its Basic Subscription Privilege or Over-subscription
Privilege in the Rights Offering.
Article III. The Debt Investment.
Section 3.1 Form of Note. In exchange for any Funding received pursuant to
a Debt Investment, the Company shall issue to the appropriate Funding Party a
New Company Note substantially in the form as attached hereto as Exhibit A. The
New Company Notes issued in connection with such a Funding shall be exempt from
Section 4(xi)(6) of the Bridge Notes.
Section 3.2 Security Agreement. The Company's obligations under a New
Company Note shall be secured pursuant to the terms of the New Company Note
(including, without limitation, pursuant to Section 1(b) of such New Company
Note) and pursuant to a security agreement ("Security Agreement") to be entered
into, prior to the consummation of the Debt Investment, between the Company and
the relevant Funding Party substantially in the form as attached hereto as
Exhibit B.
Article IV. Representations of the Company. The Company represents, warrants and
covenants to each of the Funding Parties as follows:
Section 4.1 Organization. Each of the Company and its subsidiaries (a) is
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, (b) has all corporate power and authority to
own, lease and operate its property and to carry on its business as now being
conducted or as its business is contemplated to be conducted and to consummate
the transactions contemplated by this Agreement and the Supplemental
Registration Rights Agreement attached as Exhibit C hereto (the "Supplemental
Registration Rights Agreement" and, collectively with this Agreement, the New
Company Notes and the Security Agreement, the "Transaction Agreements") and (c)
is duly qualified or licensed to do business and is in good standing as a
foreign corporation under the laws of each jurisdiction where the nature of the
property owned or leased by it or the nature of the business conducted by it
makes such qualification or license necessary, except where the failure to be so
qualified or licensed (i) would not reasonably be expected to either prevent or
delay its ability to perform its obligations under the Transaction Agreements
and (ii) could not reasonably be expected, individually or in the aggregate, to
result in a Material Adverse Effect (as defined in Section 4.8(b)).
Section 4.2 Due Authorization. The Company has all requisite corporate
power and authority to enter into, execute and deliver the Transaction
Agreements and to perform its respective obligations hereunder and thereunder,
and, except for receipt of the Stockholder Approval (as defined in Section 7.4),
has taken all necessary corporate action required for the due authorization,
execution, delivery and performance by it of the Transaction Agreements.
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Section 4.3 Due Execution; Enforceability. This Agreement has been and the
other Transaction Agreements when executed by the Company will be duly and
validly executed and delivered by the Company and constitute valid and binding
obligations of the Company enforceable against it in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally and subject, as to enforceability, to general
principles of equity, including principles of commercial reasonableness, good
faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity).
Section 4.4 Consents. Other than (i) the Stockholder Approval, (ii)
pursuant to the Company's Amended and Restated Registration Agreement, dated as
of March 30, 1999 (the "Registration Agreement"), (iii) compliance with any
applicable requirements of the Securities Exchange Act of 1934, as amended,
including the rules and regulations promulgated thereunder (the "Exchange Act")
and (iv) compliance with the Securities Act of 1933, as amended, including the
rules and regulations promulgated thereunder (the "Securities Act"), neither the
execution, delivery or performance of the Transaction Agreements by the Company,
nor the consummation by the Company of its respective obligations and the
transactions contemplated by the Transaction Agreements, requires any consent or
approval of, authorization by, exemption from, filing or registration with, or
notice to any Governmental Entity (as defined in Section 9.5) or other person
except where the failure to obtain such consent, approval, authorization or
exemption or to make such filing or registration or to provide such notice (a)
would not reasonably be expected to either prevent or delay the Company's
ability to perform its obligations under the Transaction Agreements and (b)
could not reasonably be expected, individually or in the aggregate, to result in
a Material Adverse Effect.
Section 4.5 No Conflicts. The execution, delivery and performance of the
Transaction Agreements does not, and the consummation of the transactions
contemplated hereby and thereby will not, (a) conflict with, or result in any
violation or breach of any provision of the certificate of incorporation or
bylaws of the Company or any of its subsidiaries, (b) except for the
Registration Agreement, conflict with, result in any violation or breach of, or
constitute (with or without notice or lapse of time, or both) a default under or
conflict with (or give rise to any right of termination, amendment, cancellation
or acceleration of any right or obligation or loss of any benefit under) any of
the terms, conditions or provisions of any note, bond, mortgage, license,
indenture, lease, contract or other agreement, instrument or obligation to which
the Company or any of its subsidiaries is a party or by which any of them or any
of their properties or assets may be bound or affected, (c) conflict with or
violate any permit, concession, franchise, license, judgment, injunction, order,
decree, statute, law, ruling, ordinance, rule or regulation (including, without
limitation, federal and state securities laws and regulations) (collectively,
"Laws") applicable to the Company or any of its subsidiaries or by which any of
their properties or assets are bound or affected or (d) except as contemplated
by the Security Agreement, result in the creation or imposition of any
Encumbrance (as defined in Section 9.5) against any of the properties or assets
of the Company or any of its subsidiaries, except in the case of clauses (b) or
(c) above, where such conflicts or violations could neither prevent or delay the
Company's ability to consummate the transactions contemplated by the Transaction
Agreements nor reasonably be expected, individually or in the aggregate, to
result in a Material Adverse Effect.
Section 4.6 SEC Filings. Except as disclosed in the Company SEC Reports
(as
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defined below) and in the registration statements filed by the Company with the
SEC, the Company has filed all reports and registration statements required to
be filed by it with the SEC. As of its filing date, and giving effect to any
amendments thereof, each report filed by the Company with the SEC (collectively,
the "Company SEC Reports") and each registration statement filed by the Company
with the SEC complied as to form in all material respects with the applicable
requirements of the Securities Act and the Exchange Act, as the case may be. As
of its filing date, and giving effect to any amendments thereof, each Company
SEC Report filed pursuant to the Exchange Act did not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. The Company's draft registration
statement on Form S-1 provided to the Funding Parties on August 4, 2003, and
the Company's registration statement on Form S-1 filed with the SEC in
connection with the Rights Offering, as amended or supplemented, if applicable
(as of the date of such registration statement and when any amendment becomes
effective) complies and will comply as to form in all material respects with the
applicable requirements of the Securities Act and does not and will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading.
Section 4.7 Financial Statements. Each of the consolidated financial
statements (including, in each case, any related notes thereto) contained in the
Company SEC Reports and each of the consolidated financial statements
(including, in each case, any related notes thereto) contained in the
registration statements filed by the Company with the SEC (collectively,
"Financial Statements") complied as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, had been prepared in accordance with generally
accepted accounting principles ("GAAP") applied on a consistent basis throughout
the periods involved (except as may be indicated in the notes thereto or, in the
case of the unaudited financial statements contained therein (the "Interim
Financial Statements"), as permitted by Form 10-Q or the Exchange Act
regulations promulgated by the SEC), and each fairly presented the consolidated
financial position of the Company and its consolidated subsidiaries in all
material respects as at the respective dates thereof and the consolidated
results of its operations and cash flows for the periods indicated in accordance
with GAAP (subject, in the case of the Interim Financial Statements, to normal
audit adjustments which were not and are not expected, individually or in the
aggregate, to be material in amount).
Section 4.8 Absence of Certain Changes. Since December 30, 2002, except as
disclosed in the Company SEC Reports prior to the date of this Agreement and the
draft Preliminary Proxy Statement provided to the Funding Parties on August 4,
2003, the Company and its subsidiaries have conducted their businesses in the
ordinary course, in a manner consistent with past practice, and there has not
been any event, occurrence or development of a state of circumstances or facts
which, individually or in the aggregate, has had or could reasonably be expected
to have a Material Adverse Effect or could prevent or delay the Company's
ability to consummate the transactions contemplated by the Transaction
Agreements. For purposes of this Agreement, a "Material Adverse Effect" means
any fact, event, change, circumstance, condition or effect which is or could
reasonably be expected to be materially adverse to the business, condition
(financial or otherwise), results of operations, prospects, properties, assets
or liabilities of the Company and its subsidiaries, taken as a whole.
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Section 4.9 Litigation. Except as set forth in the Company's Annual Report
on Form 10-K/A filed on April 1, 2003 or the Company's Quarterly Report on Form
10-Q filed on May 9, 2003, there is no judgment, ruling, decree, injunction,
rule or order of any Governmental Entity, arbitrator or other person outstanding
against the Company or any of its subsidiaries. Since December 30, 2002, except
as set forth in the Company's Annual Report on Form 10-K/A filed on April 1,
2003 or the Company's Quarterly Report on Form 10-Q filed on May 9, 2003, and
the draft Preliminary Proxy Statement provided to the Funding Parties on August
4, 2003, there have been no claims, actions, suits, proceedings or
investigations, or any amendment of any prior claim, action, suit, proceeding or
investigation, initiated against or, to the knowledge of the Company, threatened
against or affecting the Company or any of its subsidiaries (or any of their
respective properties or assets) at law or in equity or before or by any
Governmental Entity, arbitrator or other person which (a) in any manner
challenges or seeks to prevent, enjoin, alter or materially delay the
transactions contemplated by the Transaction Agreements or (b) if resolved
adversely to the Company or a subsidiary could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
Section 4.10 No Preemptive Rights. No preemptive rights, participation
rights, rights of first offer or first refusal, tag-along or drag-along rights
or similar rights (collectively, "Preemptive Rights") will apply or become
applicable in connection with or as a result of the transactions contemplated by
the Transaction Agreements.
Section 4.11 Due Issuance and Authorization of Securities. All of the
outstanding shares of capital stock of the Company have been, or upon issuance
will be, validly issued, fully paid and non-assessable. No securities of the
Company are subject to Preemptive Rights or other similar rights of any or all
of the stockholders of the Company. Subject to the Stockholder Approval (but
only with respect to the issuance of any shares of Common Stock), the securities
issued and delivered to the Funding Party pursuant to any Funding ("Issued
Securities") and any shares of Common Stock issuable upon conversion, exchange
or exercise of any Issued Securities will be, upon issuance, duly authorized,
validly issued, fully paid and non-assessable, and will vest in the Funding
Party legal and valid title to such securities, free and clear of all
Encumbrances and will not be subject to Preemptive Rights or other similar
rights of any or all of the stockholders of the Company. The New Company Notes
will contain substantially the terms set forth in the form of senior secured
convertible note attached hereto as Exhibit A.
Article V. Representations of the Funding Parties. Each of the Funding
Parties, as to itself, severally and not jointly, represents to the Company
as follows:
Section 5.1 Organization. The Funding Party (a) if not an individual, is
duly formed, validly existing and in good standing under the laws of its
jurisdiction of formation and (b) has all corporate, partnership or other
similar power and authority to consummate the transactions contemplated by the
Transaction Agreements.
Section 5.2 Due Authorization. The Funding Party has all requisite
corporate, partnership or other similar power (if not an individual) and
authority to enter into, execute and deliver the Transaction Agreements and to
perform its obligations hereunder and thereunder and has taken all necessary
corporate, partnership or other similar action required for the due
authorization, execution, delivery and performance by it of the Transaction
Agreements.
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Section 5.3 Due Execution; Enforceability. This Agreement has been duly
and validly executed and delivered by the Funding Party and constitutes its
valid and binding obligation, enforceable against it in accordance with its
terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity).
Section 5.4 Accredited Investor. The Funding Party is an "accredited
investor" within the meaning of Rule 501(a) promulgated under the Securities
Act.
Section 5.5 Consents. Other than compliance with any applicable
requirements of the Exchange Act and compliance with the Securities Act, neither
the execution, delivery or performance of the Transaction Agreements by the
Funding Party, nor the consummation by the Funding Party of its respective
obligations and the transactions contemplated by the Transaction Agreements,
requires any material consent or approval of, authorization by, exemption from,
filing or registration with, or notice to any Governmental Entity or other
person except where the failure to obtain such consent, approval, authorization
or exemption or to make such filing or registration or to provide such notice
would not reasonably be expected to prevent or delay the Funding Party's ability
to perform its obligations under the Transaction Agreements.
Section 5.6 No Conflicts. The execution, delivery and performance of the
Transaction Agreements does not, and the consummation of the transactions
contemplated hereby and thereby will not, (a) if such Funding Party is not an
individual, conflict with, or result in any violation or breach of any provision
of the organizational documents of such Funding Party, (b) conflict with, result
in any violation or breach of, or constitute (with or without notice or lapse of
time, or both) a default under or conflict with (or give rise to any right of
termination, amendment, cancellation or acceleration of any right or obligation
or loss of any benefit under) any of the terms, conditions or provisions of any
material note, bond, mortgage, license, indenture, lease, contract or other
agreement, instrument or obligation to which the Funding Party is a party or by
which it or any of its properties or assets may be bound or affected or (c)
conflict with or violate any material Laws applicable to the Funding Party or by
which any of its properties or assets are bound or affected, except in the case
of clauses (b) or (c) above, where such conflicts or violations could not
prevent or delay the Funding Party's ability to consummate the transactions
contemplated by the Transaction Agreements.
Article VI. Additional Covenants. Each of the Funding Parties, severally and
not jointly, and the Company agree that:
Section 6.1 Stockholders Meeting. The Company shall, as promptly as
practicable, duly call, give notice of, convene and hold a meeting of its
stockholders in accordance with applicable Law and its organizational documents
for the purpose of obtaining the Stockholder Approval.
Section 6.2 The Rights Offering. The Company, consistent with the Board of
Directors' fiduciary duties, shall use its reasonable best efforts to obtain the
Stockholder
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Approval and consummate the Rights Offering in accordance with applicable Law.
Section 6.3 Listing Obligation. As long as the Company has securities
listed on Nasdaq or any other stock exchange, the Company will take all
reasonable steps necessary, and pay all reasonable fees required, to list all of
the shares of Common Stock issued (or issuable upon conversion, exchange or
exercise of other Issued Securities issued) in connection with the Funding and
the Rights Shares on Nasdaq or such other stock exchanges in the United States
of America on which the Common Stock then is listed. Following the initial
listing of such shares, the Company, consistent with the Board of Directors'
fiduciary duties, will use its commercially reasonable best efforts to maintain
the listing of such shares whenever the Common Stock is listed on any such
exchange.
Section 6.4 Reservation of Common Shares. The Board of Directors shall
reserve for issuance 17,000,000 shares of Common Stock for the purpose of
issuing the shares of Common Stock upon conversion, exchange or exercise of any
Issued Securities issued in connection with the Funding and on the conversion of
the Prior Note and the Bridge Notes and shall not engage in any recapitalization
or other restructuring that shall increase the number of shares so issuable
pursuant to the terms of the Issued Securities and on the conversion of the
Prior Note and the Bridge Notes. The Company shall use its best efforts to
obtain stockholder approval and all other necessary approvals for the
authorization of additional shares of Common Stock in the event that shares of
Common Stock in excess of the number of shares reserved pursuant to the
preceding sentence are issuable upon conversion, exchange or exercise of any
Issued Securities issued in connection with the Funding and on the conversion of
the Prior Note and the Bridge Notes.
Section 6.5 Commercially Reasonable Efforts; Further Assurances. Subject
to the terms and conditions of this Agreement, the Funding Parties and the
Company will use commercially reasonable efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary under
applicable Laws or as the other parties may reasonably request for the
implementation of the Transaction Agreements and the consummation of the
transactions contemplated hereby and thereby. From time to time after the date
of this Agreement, the parties hereto shall execute, acknowledge and deliver to
the other parties such other instruments, documents, and certificates and will
take such other actions as the other parties may reasonably request in order to
consummate the transactions contemplated by this Agreement.
Section 6.6 Public Announcements. The parties shall consult with each
other before issuing any press release or otherwise making any public statements
with respect to the Transaction Agreements or the transactions contemplated
hereby or thereby and shall not issue any such press release or make any such
public statement without the prior consent of the other parties (which consent
shall not be unreasonably withheld or delayed), except as may be required by Law
or any listing rules of, or listing agreement or arrangement with, a national
securities exchange to which the Company is a party.
Section 6.7 Notification of Certain Matters. The Company shall give notice
to each Funding Party promptly after becoming aware of the occurrence or
non-occurrence of any event the occurrence or non-occurrence of which has caused
or would be reasonably likely to cause (a) any representation or warranty of the
Company contained in this Agreement to be untrue or inaccurate, (b) any
covenant, condition or agreement contained in this Agreement not to be
10
complied with or satisfied, (c) any condition set forth in Article VII to be
unsatisfied or (d) a Funding Party to have the right to terminate this Agreement
under Article VIII hereof; provided, however, that the delivery of any notice
pursuant to this Section 6.7 shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
ARTICLE VII. Conditions to the Obligations of a Funding Party. The obligations
of each Funding Party are subject to the fulfillment to its satisfaction, prior
to the closing of any Funding (a "Closing"), of the following conditions:
Section 7.1 Compliance. The representations and warranties of the Company
in this Agreement shall be true and correct as of the date of this Agreement and
at and as of the date of the applicable Closing (with the same effect as though
made as of such Closing), and the Company shall have performed and complied with
all agreements, obligations and conditions contained in this Agreement required
to be performed or complied with by it prior to the applicable Closing. The
Company shall have delivered to the Funding Party:
(a) an Officer's Certificate, dated the date of the Closing,
certifying that the conditions specified in Sections 7.1, 7.4, 7.5 and 7.6
have been fulfilled;
(b) certified copies of resolutions and other corporate proceedings,
in form and substance reasonably satisfactory to such Funding Party,
authorizing the execution, delivery and performance of the Transaction
Agreements and the transactions contemplated hereby and thereby,
including, without limitation, the issuance and delivery of any Issued
Securities, and certifying any director and/or stockholder resolutions or
approval to have been obtained; and
(c) a certified schedule of all material agreements, arrangements,
contracts, understandings and commitments to which the Company is a party
or by or to which it or its assets or properties are bound or subject
("Material Contracts").
Section 7.2 Funding Permitted by Applicable Law, Etc. On the date of the
Closing, the Funding and the issuance of any securities pursuant thereto shall
be permitted by the Laws of each jurisdiction to which the Company and the
Funding Party are subject and no action, suit, proceeding, statute, rule,
regulation, order, decree, judgment, injunction, restraining order or
investigation by or before any Governmental Entity or other person shall have
been enacted, issued, enforced, commenced or threatened which has the effect of
restraining, prohibiting or invalidating or otherwise interfering with the
transactions contemplated by the Transaction Agreements.
Section 7.3 Proceedings and Documents. All corporate and other proceedings
in connection with the transactions contemplated by the Transaction Agreements
and all documents, agreements, instruments and certificates (including, without
limitation, those described in the second sentence of Section 1.4) incident to
such transactions shall be reasonably satisfactory to such Funding Party and its
counsel, and such Funding Party and its counsel shall have received all such
counterpart originals or certified or other copies of such documents,
agreements, instruments and certificates as it or they may reasonably request.
Section 7.4 Required Consents. The Company shall have obtained all
consents,
11
authorizations and approvals necessary or reasonably requested by the
Funding Party in connection with the transactions contemplated by the
Transaction Agreements, including, without limitation, (i) the Stockholder
Approval, (ii) the consent of the Initiating Holders (as such term is defined in
the Registration Agreement) pursuant to the Registration Agreement, and (iii)
the approval of the Board of Directors pursuant to applicable Laws, the
Company's organizational documents or otherwise (including, where appropriate,
the approval of disinterested directors or a special committee thereof) and
including resolutions exempting the applicability of Section 203 of the Delaware
General Corporation Law, none of which have been revoked, and in each case, the
Company shall have provided evidence of the foregoing in form and substance
reasonably satisfactory to the Funding Party. For purposes of this Agreement,
the "Stockholder Approval" means the approval of the stockholders of the Company
with respect to (and, in each case, including the direct or indirect potential
issuance of shares of Common Stock pursuant to) (i) the conversion feature of
the Prior Note; (ii) the conversion feature of the Bridge Notes; (iii) the
consummation and terms of the Rights Offering and (iv) the rights and
obligations of the Company and the Funding Parties pursuant to this Agreement
(including, without limitation, with respect to the potential Debt Funding).
Section 7.5 Execution of Supplemental Registration Rights Agreement. The
Company and the requisite stockholders needed to effect the Supplemental
Registration Rights Agreement shall have executed, delivered to the Funding
Party and not withdrawn from the Supplemental Registration Rights Agreement, and
such Supplemental Registration Rights Agreement shall remain in full force and
effect.
Section 7.6 Nasdaq Listing. All shares of Common Stock issued (or issuable
upon conversion, exchange or exercise of other Issued Securities issued) in
connection with the Funding shall have been approved for quotation on NASDAQ,
subject to official notice of issuance.
Section 7.7 Opinion. The Funding Party shall have received a favorable
opinion, in form and substance reasonably acceptable to such Funding Party and
its legal counsel, from Cadwalader, Wickersham & Taft LLP, counsel to the
Company, dated the date of Closing, with respect to: (A) the Company's corporate
existence, power, authority and good standing; (B) the due authorization,
execution and delivery of this Agreement and each of the Transaction Agreements
and the due authorization of the issuance of the securities contemplated hereby;
(C) the validity and enforceability of the Transaction Agreements; (D) the
Transaction Agreements (i) do not violate the charter or bylaws of the Company,
(ii) do not violate or breach any Material Contract, (iii) do not violate any
applicable Laws or any judgment, order or decree known to such counsel which is
applicable to the Company or any subsidiary; (E) the due authorization of the
securities issuable in connection with any Funding and upon conversion of the
New Company Note, and upon issuance thereof that such securities will be validly
issued, fully paid and nonassessable; (F) to such counsel's knowledge, no
threatened or pending legal or governmental investigations, actions, suits or
proceedings against or affecting the Company or any subsidiary relating to this
Agreement or the Transaction Agreements or which would adversely affect the
ability of the Company to perform its obligations hereunder or thereunder; and
(G) no licenses, permits, certificates, consents, orders, approvals or other
authorizations from governmental authorities (collectively, "Governmental
Approvals") required to be obtained by the Company for the execution and
delivery of, or the consummation of the transactions
12
contemplated by, the Transaction Agreements.
Article VIII. Termination.
Section 8.1 Termination Events. This Agreement may be terminated, before
or after the Closing of any Funding, by a Funding Party (provided, that such
termination will be effective with respect to the Company and such terminating
Funding Party, but not with respect to the Company and any other Funding Party
that has not terminated this Agreement):
(a) at any time after December 1, 2003 (the "Termination Date");
provided, that such Termination Date shall be extended to December 31,
2003 if (i) the Company has obtained the Stockholder Approval prior to
December 1, 2003 and (ii) the Company has waived its rights under the
Alternative Funding Letters;
(b) if a court of competent jurisdiction or other Governmental
Entity shall have issued an order, decree or ruling (which order, decree
or ruling the parties shall use their reasonable best efforts to have
lifted) or taken other action permanently restraining or enjoining or
otherwise prohibiting any of the transactions contemplated by the
Transaction Agreements, and such order, decree, ruling or other action
shall have become final and non-appealable;
(c) upon breach of any representation, warranty, covenant or
agreement on the part of the Company set forth in this Agreement, or if
any representation or warranty of the Company shall have become untrue, in
either case such that any condition set forth in Section 7.1 can not be
satisfied on or before the Termination Date;
(d) if there shall have been a (i) Material Adverse Effect or (ii)
failure by the Company to obtain the Stockholder Approval at the first
meeting of stockholders held after the date of this Agreement;
(e) if the Company shall have (i) changed its jurisdiction of
incorporation; (ii) succeeded to all or any substantial part of the
liabilities of any other entity; (iii) directly or indirectly,
consolidated with or merged into any other person or permitted any other
person to consolidate with or merge into it or engaged in any other
corporate reorganization; (iv) sold, leased, conveyed, abandoned or
otherwise disposed of all or substantially all or any substantial part of
its assets in one transaction or a series of transactions; (v) engaged in
a transaction or series of transactions (other than the Rights Offering, a
Common Stock Investment or a Debt Investment) in which more than twenty
percent (20%) of the voting power of the Company directly or indirectly
may be issued, transferred or disposed of (including by exercise, exchange
or conversion of derivative securities) to a person other than a Funding
Party; (vi) incurred, assumed or guaranteed any indebtedness for borrowed
money or incurred Encumbrances (other than pursuant to the Prior Note,
Bridge Notes or any New Company Notes) in excess of $3 million; (vii)
taken any action to effect or allow the dissolution, winding up or
liquidation of the Company or the insolvency of, or the appointment of an
assignee for the benefit of creditors of, or of a receiver for, the
Company; (viii) filed a petition in bankruptcy or allowed such a petition
to be filed against the Company or (ix) agreed or committed to do any of
the foregoing; or
13
(f) if First Republic Bank or any direct or indirect assignee of any
of its rights under the Prior Note or with respect to the indebtedness
reflected in connection therewith has demanded payment pursuant to the
Guaranty or if there has occurred any event of default or breach by the
Company under the agreements or instruments entered into in connection
with such indebtedness (including, without limitation, the Prior Note) or
if there has occurred any event of default or breach by the Company under
the agreements or instruments entered into in connection with the Bridge
Notes.
Section 8.2 Result of Termination. In the event of termination of this
Agreement and abandonment of the transactions contemplated hereby by any or all
of the parties pursuant to Section 8.1, written notice thereof shall forthwith
be given to the other party or parties hereto and, with respect to the
terminating Funding Party and the Company, this Agreement shall terminate and
the transactions contemplated hereby shall be abandoned, without further action
by any of the parties hereto. If this Agreement is terminated as provided
herein, this Agreement, the applicable Funding Letter and the Rights Offering
Term Sheet shall become void and of no effect with respect to the terminating
Funding Party and the Company with no liability on the part of either such party
hereto or thereto, provided, that the covenants and agreements set forth in this
Section 8.2 and in Article IX shall survive the termination hereof and that no
such termination shall relieve any party from any liability or damages resulting
from any willful breach by that party of this Agreement and the obligations of
the Funding Parties to First Republic Bank with respect to the Prior Note shall
continue.
Article IX. Miscellaneous.
Section 9.1 Notices. Any notices and other communications given pursuant
to this Agreement shall be in writing and shall be effective upon delivery by
hand or upon receipt if sent by certified or registered mail (postage prepaid)
or by a nationally recognized overnight courier service (appropriately marked
for overnight delivery) or upon transmission if sent by facsimile (with physical
delivery of the communication being made by one of the other means specified in
this Section 9.1 as promptly as practicable thereafter). Notices are to be
addressed as follows:
(a) If to ZAM Holdings, to:
ZAM Holdings, L.P.
c/o Ziff Brothers Investments, L.L.C.
153 E. 53rd Street
New York, New York 10022
Attention: Frederick H. Fogel, Esq.
Telecopy No.: (212) 292-6538
with a copy (which shall not constitute notice) to:
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, NY 10036
Attention: Diana M. Lopo, Esq.
Telecopy No.: (212) 735-2000
14
(b) If to Gleacher, to:
Eric Gleacher
Gleacher Partners LLC
660 Madison Avenue
19th Floor
New York, NY 10021
Telecopy No.: (212) 843-3828
(c) If to Phillips, to:
Charles G. Phillips
775 Park Avenue
New York, NY 10021
Telecopy No.: (212) 249-7855
(d) If to LJCB, to:
LJCB Nominees Pty Ltd.
161 Collins Street
Melbourne, Australia 3000
Attention: President
Telecopy No.: +61 414-814524
(e) If to the Company, to:
Cosi, Inc.
Attn: William D. Forrest
242 West 36th Street, 11th Floor
New York, NY 10018
Telecopy No.: (212) 739-7334
with a copy (which shall not constitute notice) to:
William P. Mills, III, Esq.
Cadwalader, Wickersham & Taft LLP
100 Maiden Lane
New York, New York 10038
Telecopy No.: (212) 504-6666
or to such other respective addresses as any of the parties hereto shall
designate to the other by like notice, provided that notice of a change of
address shall be effective only upon receipt thereof. All such notices and other
communications shall be deemed received on the date of receipt by the recipient
thereof if received prior to 5 p.m. in the place of receipt and such day is a
business day in the place of receipt. Otherwise, any such notice, request or
communication shall be deemed not to have been received until the next
succeeding business day in the place of
15
receipt.
Section 9.2 Entire Agreement; Waivers and Amendments. This Agreement
contains the entire agreement and understanding between the Company, on the one
hand, and each Funding Party, on the other hand, with respect to the funding and
related transactions contemplated herein and supersede all prior written or oral
agreements, statements, representations, and understandings with respect
thereto. With respect to the Company and any Funding Party, this Agreement may
only be amended or modified, and the terms hereof may only be waived, by a
writing signed by both such parties or, in the case of a waiver, by the party
entitled to the benefit of the terms being waived. No failure or delay by any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. No waiver on the part of any party of, or failure to insist upon,
strict compliance with any obligation, covenant, agreement or condition shall
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure to comply with any obligation, covenant, agreement or condition. The
rights and remedies provided pursuant to this Agreement are cumulative and are
not exclusive of any rights or remedies which any party otherwise may have at
law or in equity.
Section 9.3 Assignments; Binding Effect.
(a) Neither this Agreement nor any rights, interests or obligations
hereunder may be assigned, delegated or otherwise transferred by the Company, in
whole or in part, without the prior written consent of the other parties hereto,
and any attempted assignment, delegation or transfer without such consent shall
be void and of no effect. Neither this Agreement nor any rights, interests or
obligations hereunder may be assigned, delegated or otherwise transferred by any
Funding Party, in whole or in part, without the prior written consent of the
Company, and any attempted assignment, delegation or transfer without such
consent shall be void and of no effect.
(b) This Agreement shall be binding upon and inure to the benefit of the
Funding Parties and their respective heirs, legal representatives, successors
and permitted assigns. This Agreement shall be binding upon and inure to the
benefit of the Company. With respect to any Funding Party, this Agreement shall
not inure to the benefit of the heirs, legal representatives, successors or
assigns of the Company without the prior written consent of such Funding Party.
Section 9.4 No Third Party Beneficiaries. This Agreement is for the
benefit of the parties hereto and is not intended to confer upon any other
person any rights or remedies hereunder, except as otherwise provided in Section
9.10.
Section 9.5 Interpretation. This Agreement shall be construed as if
drafted jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any provisions
of this Agreement. The definitions contained in this Agreement are applicable to
the singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such term. The words "hereof,"
"herein" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement. Any statute defined or referred to herein or in any agreement or
instrument that is referred to herein means
16
such statute as from time to time amended, modified or supplemented, including
(in the case of statutes) by succession of comparable successor statutes. As
used in this Agreement, the term:
(a) "person" shall mean and include a natural person, a partnership,
a joint venture, a corporation, a limited liability company, an
association, a company, a trust, any other entity, an unincorporated
organization and a government or any department, political subdivision or
agency thereof;
(b) "business day" shall mean a day which in the State of New York
is neither a legal holiday nor a day on which banking institutions are
required or authorized by Law or regulation to close;
(c) "subsidiary" of any person shall mean any corporation,
partnership, joint venture or other legal entity of which such person
(either alone or through or together with any other subsidiary), owns,
directly or indirectly, more than 50% of the stock or other equity
interests, the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of such
corporation, partnership, joint venture or other legal entity;
(d) "affiliate" shall have the meaning set forth in Rule 12b-2
promulgated under the Exchange Act;
(e) "Governmental Entity" means any United States (Federal, state or
local) or foreign government, or governmental, regulatory, judicial or
administrative authority, agency or commission;
(f) "Encumbrance" means any pledge, claim, lien, charge, encumbrance
or security interest of any kind or nature whatsoever; and
(g) "Dollars" and "$" mean dollars in lawful currency of the United
States of America.
Section 9.6 Governing Law; Jurisdiction; Specific Performance.
(a) This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York.
(b) Each of the parties hereto hereby irrevocably submits to the exclusive
jurisdiction of (i) the United States District Court for the Southern District
of New York and, if such court lacks jurisdiction, (ii) the Supreme Court of the
State of New York, New York County, for the purposes of any suit, action or
other proceeding arising out of this Agreement or any transaction contemplated
hereby. Each of the parties hereto hereby agrees (A) to commence any action,
suit or proceeding relating hereto either in the United States District Court
for the Southern District of New York or if such suit, action or other
proceeding may not be brought in such court for jurisdictional reasons, in the
Supreme Court of the State of New York, New York County, and (B) that service of
any process, summons, notice or document by U.S. registered mail to such party's
respective address set forth above shall be effective service of process for any
action, suit or proceeding in New York with respect to any matters to which it
has submitted to jurisdiction
17
in this Section. The parties hereto hereby irrevocably and unconditionally waive
any objection to the laying of venue of any action, suit or proceeding arising
out of this Agreement or the transactions contemplated hereby in (1) the Supreme
Court of the State of New York, New York County, or (2) the United States
Distinct Court for the Southern District of New York, and hereby further
irrevocably and unconditionally waive and agree not to plead or claim in any
such court that any such action, suit or proceeding brought in any such court
has been brought in an inconvenient forum.
Section 9.7 Captions. The headings in this Agreement are inserted for
convenience of reference only, and shall not affect the interpretation of this
Agreement.
Section 9.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement. All such counterparts
will be deemed an original, will be construed together and will constitute one
and the same instrument.
Section 9.9 Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in force
and effect and shall in no way be affected, impaired or invalidated so long as
the economic and legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party. Upon such determination,
the parties shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner in order that the transactions contemplated hereby be
consummated as originally contemplated to the fullest extent possible.
Section 9.10 Indemnification. (a) The Company will indemnify, save and
hold harmless each Funding Party, and all of its respective directors, officers,
stockholders, employees, partners, members, managers, representatives,
affiliates, attorneys and agents and all of its respective heirs, successors,
legal administrators and permitted assigns (collectively, the "Indemnitees")
from and against any and all liability, loss, cost, damage, reasonable
attorneys' and accountants' fees and expenses, court costs and all other
out-of-pocket expenses incurred by any or all of the Indemnitees in connection
with any investigation, litigation or proceeding relating to or arising from the
execution, delivery and performance by the Company of the Transaction
Agreements, the Rights Offering, any Funding and any other transactions related
hereto or thereto (including, without limitation, the Company's use of the
Collateral, as defined in the New Company Notes), and the consummation of all
such transactions, except to the extent of any willful misconduct or gross
negligence of the Indemnitees. This indemnification provision will be in
addition to the rights of each and all of the Indemnitees to bring an action
against the Company for breach of any term of this Agreement or any other
Transaction Agreement. The Company acknowledges and agrees that each and all of
the Indemnitees shall be treated as third party beneficiaries with rights to
bring an action against the Company under this Section 9.10.
(b) A Funding Party shall give the Company prompt notice of any
third-party claim that may give rise to any indemnification obligation under
this Section 9.10, together with the estimated amount of such claim, and the
Company shall have the right to assume the defense (at the Company's expense) of
any such claim through counsel of the Company's own choosing by
18
so notifying the Funding Party within thirty (30) days of the first receipt by
the Company of such notice from the Funding Party; provided, however, that any
such counsel shall be reasonably satisfactory to the Funding Party. Failure to
give such notice shall not affect the indemnification obligations hereunder in
the absence of actual and material prejudice. From and after the date the
Company notifies the Funding Party of its assumption of the defense of a
third-party claim, the Company will not be liable for any fees or expenses of
separate counsel incurred by a Funding Party; provided that (i) if, under
applicable standards of professional conduct, a conflict with respect to any
significant issue between any Indemnitee and the Company would reasonably be
expected to exist in respect of such third-party claim, the Company shall pay
the reasonable fees and expenses of such additional counsel as may be required
to be retained in order to resolve such conflict and (ii) the Company shall be
liable for the fees and expenses of counsel employed by the Funding Party or an
Indemnitee for any period during which the Company has not assumed the defense
of any such third-party claim (other than during any period in which the Funding
Party will have failed to give notice of the third-party claim as provided
above). If the Company assumes such defense, the Funding Party shall have the
right to participate in the defense thereof and to employ counsel, at its own
expense, separate from the counsel employed by the Company. If two or more of
the Funding Parties or Indemnitees may be entitled to indemnification from the
Company as parties to any proceeding, the Company may require each party to use
the same legal counsel as the other parties; provided, however, that each party
shall be entitled to separate legal counsel if a conflict with respect to any
significant issue between the Indemnitees would reasonably be expected to exist.
If the Company chooses to defend or prosecute any third-party claim, the Funding
Party shall agree to any settlement, compromise or discharge of such third-party
claim that the Company may recommend and that, by its terms, discharges the
Funding Party and the Indemnitees from the full amount of liability in
connection with such third-party claim; provided, however, that, without the
consent of the Funding Party, the Company shall not consent to, and the Funding
Party shall not be required to agree to, the entry of any judgment or enter into
any settlement that (A) provides for injunctive or other non-monetary relief
affecting the Funding Party or any Indemnitee or (B) does not include as an
unconditional term thereof the giving of a release from all liability with
respect to such claim by each claimant or plaintiff to each Indemnitee that is
the subject of such third-party claim. Notwithstanding anything in this
Agreement to the contrary, the Company shall have no obligation to indemnify any
Funding Party or Indemnitee under this Agreement for any amounts paid in
settlement of any proceeding without the Company's prior written consent, which
may not be unreasonably withheld or delayed. The Company may offset (1) any
unpaid amount for which a Funding Party or an Indemnitee is determined to be
liable to the Company pursuant to any proceeding, claim, issue or matter
determined by final judgment or other final adjudication, not subject to further
appeal or review, against (2) any indemnification payment required to be made by
the Company pursuant to this Section 9.10 to such Funding Party or Indemnitee.
Section 9.11 Survival of Representations and Warranties, etc. All
representations and warranties made in, pursuant to or in connection with this
Agreement will survive the execution and delivery of this Agreement
indefinitely, notwithstanding any investigation at any time made by or on behalf
of any party hereto; and all statements contained in any certificate, instrument
or other writing delivered by or on behalf of any party hereto required to be
made pursuant to the terms of this Agreement or required to be made in
connection with or in contemplation of the transactions contemplated by this
Agreement will constitute representations and warranties by such party pursuant
to this Agreement.
19
IN WITNESS WHEREOF, each of the parties has executed this Agreement as of
the date first written above.
ZAM Holdings, L.P.,
by its General Partner,
PBK HOLDINGS, INC.
By: /s/ Fred Fogel
----------------------------
Name: Fred Fogel
Title: VP
ERIC J. GLEACHER
/s/ Eric J. Gleacher
--------------------------------
CHARLES G. PHILLIPS
/s/ Charles G. Phillips
--------------------------------
LJCB NOMINEES PTY. LTD.
by its Director, Greg Woolley
By: /s/ Greg Woolley
----------------------------
Name: Greg Woolley
Title: Director
COSI, INC.
By: /s/ William D. Forrest
----------------------------
Name: William D. Forrest
Title: Executive Chairman
20