**EXHIBIT 10.3**SEPARATION AGREEMENT AND GENERAL RELEASE     THIS SEPARATION AGREEMENT AND GENERAL RELEASE (“**Agreement**”) is entered into as of**October 17, 2007**, by and between COSÌ, INC., a Delaware corporation, its subsidiaries, andsuccessors and assigns (collectively, the “**Company**”), and GILBERT MELOTT, a resident of theState of Illinois (“**Employee**”).     Employee and the Company agree as follows:     1. Resignation and Separation. By mutual agreement of Employee and the Company,the employment relationship between Employee and the Company shall terminate on **October 17,2007**(the “**Separation Date**”). In addition to Employee’s *pro rata*bi-weekly salary, lessapplicable withholding taxes and deductions, to be paid to Employee through the SeparationDate, payment for *pro rata*vacation earned through the Separation Date, less applicablewithholding taxes and deductions, and reimbursement for any expenses incurred in the ordinarycourse of business and in accordance with the Company’s business expense reimbursementpolicy, the Company agrees to pay to Employee severance as set forth in Section 2below. Employee’s medical and health benefits have been paid and shall continue through**October 31, 2007**.     On a pro rata basis, as of October 17, 2007:     Total Gross Accrued Vacation Days: 16 daysVacation Days Paid in 2007: 5 daysNet Vacation Due at Separation: 11 days     2. Severance Compensation. Subject to the terms of this Agreement, andproviding Employee signs and does not revoke this Agreement, the Company agrees to pay toEmployee the additional compensation and other benefits as set forth below:          A. Stock Options and Restricted Stock.     Accelerated Vesting. Except for the Forfeited Stock Options (as definedbelow) to which Employee is voluntarily waiving his rights, all unvested stock optionsand all unvested restricted stock held by Employee, as set forth on Schedule Aattached hereto (the “**Restricted Stock and Stock Option Summary**”), shall be 100% vestedimmediately prior to Employee’s termination on the Separation Date. All stock optionsshall be exercisable in accordance with the respective stock option plans pursuant towhich such stock options were granted, and all restricted stock shall continue to besubject to the terms and conditions of the COSÌ, Inc. 2005 Omnibus Long-Term IncentivePlan pursuant to which such restricted stock was granted. Immediately prior toEmployee’s termination on the Separation Date and following accelerated vesting of thestock options and restricted stock in accordance herewith, the total number of vestedoptions and shares of the Company’s stock held by Employee shall be the amounts setforth in the table below in the column entitled “Net Shares Available at Separation(4-5)”:                             **Voluntarily** **Vested due**        **Vested as** **Waived Rights to** **to** **Gross Total** **Shares** **Net Shares****Original** **Regularly** **Accelerate** **Accelerated** **Vested at** **Previously** **Available at****Grant** **Scheduled** **Vesting** **Vesting** **Separation** **Sold** **Separation****(1)** **(2)** **(3)** **(4)** **(2 +4)** **(5)** **(4-5)** 182,826 Stock Options  123,507  11,234 (Grant 3523)  20,000   143,507   -0-  **143,507 Stock Options**      11,234 (Grant 3550)                      14,783 (Grant 3636)                      2,068 (Grant 3636A)                      Total = 39,319                                     143,750 Restricted Stock  62,500   -0-   81,250   143,750   15,671  **128,079 Restricted Stock**                      ** **                      ** **
51

 
     Waiver of Rights to Forfeited Stock Options. Employee hereby voluntarilywaives any and all rights to any unvested stock options having a grant price greaterthan the trading price on the date of this Agreement (as reflected in the RestrictedStock and Stock Option Summary). Accordingly, such waiver shall apply to the grantsidentified in the Restricted Stock and Stock Option Summary as Grant #s, 3523, 3550,3636, and 3636A, as indicated in the foregoing table in the column entitled“Voluntarily Waived Rights to Accelerate Vesting (3)” (collectively, “**Forfeited StockOptions**”).     Selling the Shares of Stock. As requested by Employee, Generalinformation applicable to selling the shares after the Separation Date is outlined inExhibit A attached hereto.     B. Medical and Health Benefits. For up to a period up to but not toexceed eighteen (18) months, commencing as of **November 1, 2007**and continuing through**April 30, 2009**, unless earlier terminated in accordance herewith, the Company shall payfor the cost to continue Employee’s benefits coverage under the Consolidated OmnibusBudget Reconciliation Act (“**COBRA**”). Such COBRA payments shall terminate on theearlier to occur of (i) the 18th consecutive month, or (ii) the dateimmediately prior to the date on which Employee becomes eligible for healthcarebenefits under a healthcare plan offered by another employer or otherwise.All payments and benefits under this Agreement shall be subject to applicable tax andemployment withholdings. Employee acknowledges and agrees that, other than as specificallyset forth in Section 1 above for services rendered and vacation earned as of theSeparation Date and in this Section 2 above, Employee is not due any other compensation orbenefits, including, without limitation, compensation for unpaid salary, unpaid bonus,severance or accrued or unused vacation time or vacation pay, arising from or relating toEmployee’s employment with the Company or the termination of Employee’s employment. Employeefurther acknowledges and agrees that the foregoing payments and benefits set forth in thisSection 2 are compensation which the Company would not be required to pay toEmployee.     3. Return of Company Materials. Employee agrees to and shall promptly return tothe Company at the Cosi Support Center, or such other location as may be agreed to byEmployee and the Company, all property of the Company in Employee’s control or possession,including, without limitation, confidential and proprietary information of the Company, keys,and key cards, security codes, laptop computer, training materials, files, customer lists,franchisee lists, and any other equipment, materials, or information of the Company.     4. General Release of All Claims. For and in consideration of the paymentsand/or other benefits to be provided to and/or on behalf of Employee pursuant to thisAgreement, and the agreements set forth herein, and other good and valuable consideration,the receipt and sufficiency of which Employee hereby acknowledges and agrees, Employee, onbehalf of Employee and Employee’s successors, heirs, beneficiaries, agents, executors andassigns, hereby voluntarily, knowingly, and willingly releases and forever discharges theCompany and its stockholders, parents, affiliates, subsidiaries, divisions, any and allcurrent and former directors, officers, executives and agents thereof, and their heirs andassigns, and any and all pension benefit or welfare benefit plans of the Company, includingcurrent and former trustees and administrators of such pension benefit and welfare benefitplans (collectively, the “**Releasees**”), from any and all claims, complaints, causes of action,charges, demands or rights, of any kind or nature whatsoever, in law or in equity, whetherknown or unknown, which may have existed or which may now exist from the beginning of time tothe date of this Agreement, including, without limitation, any claims Employee may havearising from or relating to Employee’s employment or termination from employment with theCompany, and further including a release of any rights or claims Employee may have under theAge Discrimination in
52

 
Employment Act, as amended by the Older Worker Benefits Protection Act,the Equal Pay Act, Title VII of the Civil Rights Act of 1964, as amended, the Civil RightsAct of 1991, the Americans with Disabilities Act, the Family andMedical Leave Act of 1993; Section 1981 of the Civil Rights Act of 1866; Section 1985(3) ofthe Civil Rights Act of 1871; the Employee Retirement Income Security Act of 1974, asamended; any other federal, state or local laws against discrimination; or any other federal,state, or local statute, or common law relating to employment, wages, hours, or any otherterms and conditions of employment, including, but not limited to, the Illinois Human RightsAct, and the Illinois Wage Payment and Collection Act and any other laws regarding thepayment of wages, to the maximum extent permitted by law. This release further includes arelease by Employee of any claims for wrongful discharge, breach of contract, torts or anyother claims in any way related to Employee’s employment with or resignation or terminationfrom the Company.     This Section 4 shall operate as a general release and a covenant not to sue tothe extent permitted by law. It is the intention of the parties in executing this Agreementthat it shall be an effective bar to each and every claim, demand, and cause of actiondescribed in this paragraph, including known and unknown claims. This release is notintended as a bar to any claim that, by law, may not be waived, or a claim to challenge thevalidity of this Agreement. Employee waives any right to any monetary recovery should anyfederal, state or local administrative agency pursue any claims on Employee’s behalf arisingout of or related to Employee’s employment with and/or termination from Employee’s employmentwith the Company. Employee acknowledges that Employee has not suffered any on-the-job injuryor condition for which Employee has not already filed a claim. Employee further acknowledgesthat Employee has no pending claims against the Company.     5. No Admission. This Agreement is not an admission by either Employee or theCompany of any wrongdoing or liability.     6. Waiver of Reinstatement. Employee waives any right to reinstatement orfuture employment with the Company following Employee’s separation from the Company on theSeparation Date.     7. No Disparagement. Employee agrees not to engage in any act after executionof this Agreement that is intended, or may reasonably be expected to harm the reputation,business, prospects or operations of the Company, its officers, directors, stockholders orexecutives. Employee will take no action which would reasonably be expected to lead tounwanted or unfavorable publicity to the Company.     8. Indemnification. The Company shall indemnify Employee to the fullest extentpermissible under the Company’s By-laws as in effect on the date hereof, including, withoutlimitation, with respect to the suit pending in the Stamford Superior Court in the matter of*Charles Gray v. Cosi, Inc.*(Docket No. FST-CV-05-4002871S).     9. Cooperation. Employee agrees to cooperate reasonably with the Company andits counsel in regard to any litigation, investigation, or similar action presently pendingor subsequently initiated involving matters of which Employee has knowledge as a result ofEmployee’s employment with the Company. Such reasonable cooperation shall consist ofEmployee making himself available at reasonable times for consultation with officers of theCompany and its counsel and for depositions or other similar activity. Employee shall notreceive any additional compensation for rendering such assistance. The Company shall pay orreimburse Employee, as determined by the Company, for reasonable costs of travel andtravel-related expenses incurred by Employee in connection with any such cooperation andassistance *provided that*Employee shall contact the Company promptly upon notice tocoordinate travel arrangements prior to incurring any such costs and expenses and shallpromptly submit to the Company receipts and documentation for such costs and expenses.     10. Restrictive Covenants. Employee acknowledges and agrees that Employee willcontinue to be bound by the restrictive covenants set forth in and the terms and conditionsof that certain Confidentiality and Non-Compete Agreement dated as of December 17, 2001,(the “**Confidentiality and Non-Compete Agreement**”), as amended by this Section 10 of thisAgreement, entered into between Employee and the Company (a copy of which is attached to andincorporated herein), and that the terms and agreements thereof which are intended to survivetermination of Employee’s employment with the Company shall so survive and continue in fullforce and effect. In consideration of Employee’s waiver of any rights with respect to theForfeited Stock Options and other good and valuable consideration, the receipt andsufficiency of which is hereby acknowledged and agreed by the parties hereto, the
53

 
Companyagrees to reduce the term of the post-termination non-compete and more narrowly define“competitive business” for purposes of Sections 5(ii) and (iii) of the Confidentiality andNon-Compete Agreement. Accordingly,Sections 5(ii), (iii) and (iv) of the Confidentiality and Non-Compete Agreement arehereby deleted in their entirety and replaced with the following provisions:     “5(ii) Non-Compete. During the term of Employee’s employment withCOSÌ (except for the sole and exclusive benefit of COSÌ) and for a period oftwelve (12) consecutive months immediately following the termination ofEmployee’s employment with COSÌ, for any or no reason whatsoever, Employee shallnot, directly or indirectly, without the express prior written consent of COSÌ,(i) enter the employ of, or render services to or on behalf of, any person, firm,corporation, or other entity engaged in a Directly Competitive Business (asdefined below); or (ii) engage in any Directly Competitive Business forEmployee’s own account or as an individual, partner, shareholder, director,officer, principal, agent, employee, member, manager, trustee, consultant,advisor, joint venturer, representative, or in any other relationship orcapacity, whether or not for monetary benefit. Nothing contained in thisparagraph shall be deemed to prohibit Employee from acquiring, solely as aninvestment, less than five percent (5%) of the issued and outstanding securitiesof any public corporation.     5(iii) Directly Competitive Business. In connection with Section5(ii) above, a “**Directly Competitive Business**” is any business providing the sameor similar products as provided by COSÌ in a premium convenience or fast casualrestaurant format, including, without limitation, Potbelly’s, Panera Bread,Atlanta Bakery, Au Bon Pain, Corner Bakery, and other fast causal or premiumconvenience restaurant companies in direct competition with COSÌ that provide thesame or similar products as provided by COSÌ. This prohibition as it pertains torestaurant companies includes only those restaurant companies that (i) are directcompetitors of COSÌ, and/or (ii) are seeking to enter into direct competitionwith COSÌ.     5(iv) Acknowledgements by Employee. Employee acknowledges and agreesthat (a) COSÌ is aggressively developing and growing its business throughout theUnited States and internationally, through company development, franchisedevelopment, licensing agreements, and strategic partnerships, and it’s businessis national in scope, and (b) the periods of time, geographical scope and otherlimitations provided for in this Agreement are the minimum such terms necessary toprotect and maintain the proprietary interests, business, and goodwill of COSÌ andits successors and assigns and are reasonable in all respects. Employee furtheragrees that any breach of the confidentiality and non-disclosure obligations andrestrictive covenants of this Agreement will cause COSÌ irreparable injury anddamage for which COSÌ cannot be adequately compensated in monetary damages. Tothe extent any such provisions of this Agreement, or any portion thereof, isdeemed unenforceable by virtue of its scope, in terms of the period of time,geographical area or otherwise, but may be made enforceable by limitationsthereon, Employee agrees that the same shall be enforceable to the fullest extentpermissible under the laws and public policies of the jurisdictions in whichenforcement is sought. The parties hereby authorize any court of competentjurisdiction to modify or reduce the scope of any such restrictive covenant to theextent necessary to make any such restrictive covenant enforceable to the fullestextent permitted by law.”     11. Governing Law. This Agreement shall be governed by and construed inaccordance with the laws of the State of Illinois, without reference to the principles ofconflict of laws.     12. Entire Agreement; Severability. This Agreement represents the completeagreement between Employee and the Company concerning the subject matter in this Agreementand supersedes all prior agreements (other than the Confidentiality and Non-CompeteAgreement, as amended by Section 10 of this Agreement), or understandings, written ororal. This Agreement may not be amended or modified other than by a written agreementexecuted by the parties hereto or their respective successors and legal representatives. Theprovisions of this Agreement are severable, and if any part of this Agreement is found to beunenforceable, the other provisions of this Agreement shall remain fully valid andenforceable to the fullest extent permitted by law.
54

 
     13. Revocation Period. Employee may revoke his release of claims under the ADEA(as defined in Section 14(h) below), within the seven (7) day period following theexecution of this Agreement by Employee. Anysuch revocation must be submitted, in writing, to the Company, and to the person identified,in the Company’s notice address set forth below the Company’s signature block on thesignature page attached hereto, and must state, “I hereby revoke my release of claims underthe ADEA.” If the last day of the revocation period is a Saturday, Sunday or legal holidayrecognized by the State of Illinois, then such revocation period shall not expire until thenext following day which is not a Saturday, Sunday or legal holiday. In the event ofEmployee’s revocation under this provision of the Agreement, only the release of claims underthe ADEA will be affected and the remainder of the Agreement shall remain in full force andeffect and all other claims will remain released.     14. Acknowledgment of Waiver. By executing this Agreement, Employeeacknowledges that:     (a) Employee has entered into this Agreement voluntarily and not as a result ofcoercion, duress, or undue influence;     (b) Employee has read and fully understands the terms of this Agreement;     (c) Employee has been advised to consult with an attorney and/or other advisors ofEmployee’s choice before executing this Agreement;     (d) Employee understands that this Agreement is **LEGALLY BINDING**and by executingit Employee gives up certain rights;     (e) Employee has been afforded the opportunity of at least twenty-one (21) days toconsider this Agreement (although Employee may voluntarily choose to sign thisAgreement earlier) and to consult with an attorney;     (f) Pursuant to Section 4 above, Employee **VOLUNTARILY, KNOWINGLY, ANDWILLINGLY RELEASES**the Releasees from any and all claim Employee may have, known orunknown, in exchange for the benefits provided to and obtained by Employee by executingthis Agreement;     (g) Employee may revoke his release of claims under the ADEA within the seven (7)day period following Employee’s execution of this Agreement, as set forth inSection 13 above;     (h) The General Release in this Agreement includes a **WAIVER OF ALL RIGHTS ANDCLAIMS**Employee may have under the Age Discrimination in Employment Act of 1967 (29U.S.C. §621 et seq.), as amended by the Older Workers’ Benefit Protection Act (the“**ADEA**”); and     (i) Pursuant to Section 2(A) above, Employee **VOLUNTARILY WAIVES**any rightsand all rights with respect to the Forfeited Stock Options, in exchange for the reducedterm of the post-termination non-compete and the more narrow definition of the term“Directly Competing Business”, as set forth in Section 10 above.     15. Notice. Any notice required or permitted to be given hereunder shall be inwriting and shall be delivered by hand, express delivery by a nationally recognized courier(i.e., DHL, Federal Express, UPS, etc.), or mailed by certified mail, return receiptrequested, postage prepaid, addressed to the respective notice addresses set forth below eachparty’s name on the signature page.     16. Counterparts. This Agreement may be executed in counterparts, each of whichshall be deemed an original. This Agreement and any counterpart so executed shall be deemedone and the same instrument.     This Agreement has been executed by the parties as of the respective dates set forthbelow.
55

 
         **EMPLOYEE:**   **COMPANY:**       **COSI, INC.**, a Delaware corporation   /S/ GILBERT MELOTT    By: /S/ WILLIAM E. KOZIEL   Name: **GILBERT MELOTT**   Name: **WILLIAM E. KOZIEL**  Date: 10/17/2007   Title: **CFO**      Date: 10/17/2007           Notice Address:   Notice Address:   Mr. Gilbert Melott   COSÌ, Inc.  3344 N. Racine Ave.   1751 Lake Cook Road, 6th Floor  Chicago, IL 60657   Deerfield, IL 60015      Attention: Vicki J. Baue,  Telephone: (773) 910-0400   V. P. & General Counsel  Facsimile:                                                 Email: gilbertmelott@yahoo.com   Telephone: (847) 597-8800      Facsimile: (847) 580-4964      Email: vbaue@getcosi.com  
56