INTERIM OPERATING AGREEMENT
This Interim Operating Agreement (this “Agreement”) is made as of December 20, 2016 (the “Effective Date”) by and between LIMAB LLC, a Delaware limited liability company, or its designee (“LIMAB” or “Operator”), and Cosi, Inc., a Delaware corporation (“Cosi”), Hearthstone Partners, LLC, a Massachusetts limited liability company, Hearthstone Associates, LLC, a Massachusetts limited liability company, Xando Cosi Maryland, Inc., a Maryland corporation, and Cosi Sandwich Bar, Inc., a Delaware corporation (together with Cosi, collectively, the “Owner” or “Debtors”).
WHEREAS, Owner is engaged in the business of operating and franchising the “COSI” chain of international casual dining restaurants (the “Business”);
WHEREAS, on September 28, 2016 (the “Petition Date”), the Debtors commenced a case under chapter 11 of title 11 of the United States Code, 11 U.S.C. §§ 101-1330 (the “Bankruptcy Code”), by filing a voluntary petition for relief in the United States Bankruptcy Court for the District of Massachusetts (the “Bankruptcy Court”), Case No. 16-13704 (MSH);
WHEREAS, Owner and Operator
are parties to an Asset Purchase Agreement, dated as of October 18, 2016 (as amended, from time to time, the “Cosi APA”), which is subject to the approval of the Bankruptcy Court, and Operator was declared the “Winning Bidder” for the Purchased Assets pursuant to that certain Notice of Winning Bidder and Cancellation of Auction dated November 29, 2016 (Docket No. 459);
WHEREAS, pursuant to and in connection with Amendment No. 4 to the Cosi APA, in lieu of the Closing under the Cosi APA, and in order to maximize the value of the assets of these estates (and minimize the administrative burdens on the estates) for the benefit of all parties, Operator has requested that Owner pursue the confirmation and consummation of a plan under chapter 11 of the Bankruptcy Code on terms reasonably acceptable to Operator (the “Plan”), containing (a) terms and provisions that result, on the effective date of the Plan (the “Plan Effective Date”), in substantially the same economic benefits for Debtors and their estates with respect to the cash portion of the Purchase Price as provided under the Cosi APA, by means of the use of a plan administrator or other mechanism to administer claims and the use and distribution of available cash, (b) terms and provisions that result, on the Plan Effective Date, in substantially the same economic benefits and control benefits for Operator with respect to the Purchased Assets and the Business as well as the benefits available by effecting such transactions under a chapter 11 plan, and (c) containing other plan terms and provisions reasonably requested by Operator, including terms and provisions designed to preserve net operating losses and other tax attributes of Cosi (the pursuit of the Plan on such terms, the “Plan Option”);
WHEREAS, on the date hereof, as security for Operator’s obligations to consummate the Transactions under the Cosi APA or the Plan Option, and in addition to Owner’s ability to set off any liability on account of such obligations against Operator’s claims in these cases after entry of an appropriate order, Operator shall deposit in one or more segregated bank accounts maintained by Owner, free and clear of any and all claims and liens, and subject to disbursement or disposition only (other than as set forth below) pursuant to further order of the Bankruptcy Court, the amount of the cash portion of the Purchase Price (including Cure Costs) that would have been paid by Operator on the date hereof had the date hereof been the Closing Date;