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SEC Filings

COSI INC filed this Form 8-K on 02/13/2017
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D.           Background Regarding Disputes Among Cosi and the Franchisee Parties.

15.          During these cases, certain disputes have existed among Cosi and the Franchisee Parties related primarily to: (i) the Debtors’ attempts to collect fees from Fast Casual which the Debtors’ believe to be due and owing under the FC MFA and (ii) the Franchisee Parties’ asserted “cure claims” in connection with the Debtors’ proposed assumption and assignment of the MFAs to LIMAB under the APA or the reorganized Debtors under the Plan Option.3

16.          Specifically, on or about November 10, 2016, Fast Casual sent Cosi, through counsel, a document entitled “Fast Casual Costa Rica Cure Claim” (the “Cure Claim”).  In the Cure Claim, Fast Casual alleged that Cosi had breached certain alleged obligations under the Fast Casual MFA, which resulted in damages, including the alleged failure to provide training programs, prototype plans, pre-opening supervision and assistance, consulting assistance, and marketing materials.  In addition, in the Cure Claim, Fast Casual alleged certain incurable non-monetary defaults.

As reflected in Amendment No. 4 to the APA, the Debtors and LIMAB negotiated holdbacks of $975,000.00 and $100,000.00 from the cash component of the Purchase Price under the APA (defined in Amendment No. 4 to the APA and referred to therein as the “FC Franchise Reserve” and the “FC Costs”) to be withheld by LIMAB as a result of the disputes existing among Cosi and the Franchisee Parties.  See Dkt. No. 608.  The Debtors and LIMAB negotiated the conditions pursuant to which the FC Franchise Reserve (or a portion thereof) and the FC Costs would be released to the Debtors.  Of significance to this Motion, Amendment No. 4 to the APA includes the following amendment in Section 9.01A(f):

If, prior to the Closing Date, Seller resolves the disputes related to the assignment of the FC Franchise Agreement on terms acceptable to Seller and Purchaser, then Purchaser shall direct and facilitate the immediate release of the FC Franchise Reserve to Seller, inclusive of a release of the remaining security for the FC Costs indemnity.

The Debtors’ position is that Settlement Agreement described herein satisfies the conditions set forth in Section 9.01A(f) of the APA such that, upon this Court’s approval of the Settlement Agreement, LIMAB will authorize the release of the FC Franchise Reserve and FC Costs (less any approved reduction regarding the FC Costs) to take place no later than the effective date of the Debtors’ Chapter 11 plan.


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