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Cosi Objections Filed

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The U.S. Trustee (UST) assigned to the Cosi case filed with the U.S. Bankruptcy Court an objection to the Debtors’ motion for an order establishing bidding procedures and granting related relief and order approving the sale of substantially all assets free and clear of all liens, claims and encumbrances.

The objection asserts, “The terms and conditions of the Motion are onerous and should be modified. First, the Debtors have not demonstrated that the $465,000 in Bid Protections (7% of the originally proposed purchase price) represent the actual, reasonable, and necessary costs of preserving the estate under 11 U.S.C. 503(b). The UST submits that no Bid Protections are necessary here where the Senior Secured Creditors/DIP Lenders/Stalking Horse Bidders enjoy a longstanding and close connection to the Debtors’ (and have further demanded extremely generous DIP Obligations and already collected $250,000 from the Debtors on September 26, 2016). In addition, the elimination or reduction (to an amount equal to demonstrated actual, reasonable, and, necessary costs) of the Bid Protections would decrease the Lenders’ ability to credit bid so as to entice (potential and then Qualified) Bidders to participate in a more competitive bidding process. Second, the proposed Minimum Overbid of $7,369,000 (9.2% of the originally proposed purchase price) does not represent sound business judgment by the Debtors.”

The objection continues, “The Motion provides no information on how the above figures were calculated where the Debtors propose to pay the Bidders a Break-up Fee of $315,000 and an Expense Reimbursement Fee of up to $150,000, without final Court approval upon the filing of an application by the Bidders, and further propose to bundle an extra $100,000 into the Minimum Overbid. The Bid Protections and the Minimum Overbid chill potential higher and better offers by unnecessarily increasing the amount of an opening counterbid.” The UST also filed a separate objection to the Company’s post-petition financing motion.

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