exv10w6



 






EXHIBIT 10.6




COSI, INC.




AREA DEVELOPMENT AGREEMENT




	 	 	 	 	 
	 

	 	 

Area Developer Name
	 	 
	 
	 	 	 	 
	 

	 	 

Development Area
	 	 
	 
	 	 	 	 
	 

	 	 

Date
	 	 






 









 






TABLE OF CONTENTS




	 	 	 	 	 	 	 
	Section	 	 	 	Page
	 1.
	 	GRANT

	 	 	1	 
	 	 	 
	 	 	 	 
	 2.
	 	TERM

	 	 	2	 
	 	 	 
	 	 	 	 
	 3.
	 	DEVELOPMENT OBLIGATIONS

	 	 	3	 
	 	 	 
	 	 	 	 
	 4.
	 	AREA DEVELOPMENT FEE, INITIAL FRANCHISE FEES, AND ROYALTIES

	 	 	4	 
	 	 	 
	 	 	 	 
	 5.
	 	DUTIES OF THE PARTIES

	 	 	4	 
	 	 	 
	 	 	 	 
	 6.
	 	DEFAULT AND TERMINATION

	 	 	5	 
	 	 	 
	 	 	 	 
	 7.
	 	TRANSFER OF INTEREST

	 	 	6	 
	 	 	 
	 	 	 	 
	 8.
	 	COVENANTS

	 	 	6	 
	 	 	 
	 	 	 	 
	 9.
	 	CORPORATE, LIMITED LIABILITY COMPANY, OR PARTNERSHIP AREA DEVELOPER

	 	 	14	 
	 	 	 
	 	 	 	 
	 10.
	 	NOTICES

	 	 	8	 
	 	 	 
	 	 	 	 
	 11.
	 	PERMITS AND COMPLIANCE WITH THE LAWS

	 	 	8	 
	 	 	 
	 	 	 	 
	 12.
	 	INDEPENDENT CONTRACTOR AND INDEMNIFICATION

	 	 	8	 
	 	 	 
	 	 	 	 
	 13.
	 	APPROVALS AND WAIVERS

	 	 	9	 
	 	 	 
	 	 	 	 
	 14.
	 	SEVERABILITY AND CONSTRUCTION

	 	 	9	 
	 	 	 
	 	 	 	 
	 15.
	 	ENTIRE AGREEMENT

	 	 	10	 
	 	 	 
	 	 	 	 
	 16.
	 	APPLICABLE LAW AND DISPUTE RESOLUTION

	 	 	10	 
	 	 	 
	 	 	 	 
	 17.
	 	ACKNOWLEDGMENTS

	 	 	10	 






 









 






EXHIBIT A — DEVELOPMENT SCHEDULE, AREA AND FEE

EXHIBIT B — DEVELOPER’S PRINCIPALS LIST AND DESIGNATED PRINCIPAL

EXHIBIT C — FRANCHISE AGREEMENT

EXHIBIT D — GUARANTEE, INDEMNIFICATION, AND ACKNOWLEDGEMENT

EXHIBIT E — LEASE TERMS



 









 





AREA DEVELOPMENT AGREEMENT




     THIS AREA DEVELOPMENT AGREEMENT
(the “Agreement”) is made and entered into on this         
            day
of __________, 200          
                    
           (the “Effective Date”), by and between:




			
	 ̈	 	Cosi, Inc, a
Delaware
corporation whose
principal place of
business is 1751
Lake Cook Road,
6th
Floor, Deerfield,
Illinois 60015
(“Franchisor”); and







			
	 ̈	 	                                                                                            a
[resident of]
[corporation
organized in]
[limited liability
company organized
in] [select on], having offices at                                                                                                                                                                                                                                                                                                                                                                                            
(“Area Developer”).






BACKGROUND




     A. Franchisor owns a format and system (the “System”) relating to the establishment and
operation of fast casual restaurants, which operate at retail locations that display Franchisor’s
interior and exterior trade dress and feature and operate under the Proprietary Marks (as defined
below) (each a “Cosi Restaurant”). Cosi Restaurants offer menus specializing in Franchisor’s
signature flatbread, sandwiches, soups, salads, gourmet coffee and specialty beverages and food
items using Franchisor’s proprietary recipes, formulae and techniques, as well as other
non-proprietary food, beverage, and other compatible items designated by Franchisor from time to
time (collectively, “Products”).



     B. The distinguishing characteristics of the System include distinctive exterior and interior
design, decor, color schemes, fixtures, and furnishings; recipes, standards and specifications for
products, equipment, materials, and supplies; uniform standards, specifications, and procedures for
operations; purchasing and sourcing procedures; procedures for inventory and management control;
training and assistance; and marketing and promotional programs; all of which may be changed,
improved, and further developed by Franchisor from time to time.



     C. The System is identified by means of certain trade names, service marks, trademarks, logos,
emblems, and indicia of origin as are now designated and may hereafter be designated by Franchisor
in writing for use in connection with the System including the mark “Cosi” and other marks (the
“Proprietary Marks”).


     D. Area Developer desires to obtain certain development rights to open and operate Cosi Restaurants
under the System and the Proprietary Marks, as well as to receive other assistance provided by
Franchisor in connection therewith.




     NOW THEREFORE, the parties agree as follows:



GRANT




     Grant and Acceptance. Franchisor grants development rights to Area Developer, and
Area Developer undertakes the obligation, pursuant to the terms and conditions of this Agreement,
to develop no less than the number of Cosi Restaurants (the “Franchised Restaurants”) as set forth
in Exhibit A to this Agreement. In this regard, the parties further agree that:



          Each Franchised Restaurant developed hereunder shall be operated pursuant to a separate
Cosi, Inc. Franchise Agreement (a “Franchise Agreement”) that shall be executed as provided in
Section 3.4 below.



          For each Franchised Restaurant to be developed under this Agreement, Area Developer shall
execute the Franchise Agreement for such Franchised Restaurant in accordance with the deadlines set
forth in the development schedule specified in Paragraph 1 of Exhibit A to this Agreement (the
“Development Schedule”).



          Each Franchised Restaurant developed hereunder shall be at a specific location, which shall be
designated in the Franchise Agreement, that is within in the area described in Paragraph 2 of
Exhibit A to this Agreement (the “Development Area”).



     Section 1.01. Development Area. Except as otherwise set forth herein
(including, without limitation, the rights retained by Franchisor as described in Section 1.3),
during the term of this Agreement, and so long as Area Developer is in compliance with its
obligations under this Agreement and all of the Franchise Agreements between Area Developer
(including any affiliate of Area Developer), Franchisor shall not establish or operate, or license
anyone other than Area Developer to establish or operate, a Cosi Restaurant under the Proprietary
Marks and System at any location that is within the Development Area.



     Section 1.02. Franchisor’s Reserved Rights. Notwithstanding anything to the
contrary, Franchisor retains the rights, among others, on any terms and conditions Franchisor deems
advisable, and without granting Area Developer any rights therein:



          To own, acquire, establish, and/or operate and license others to establish and operate,
Cosi Restaurants under the System at any location outside the Development Area notwithstanding
their proximity to the Development Area or their actual or threatened impact on sales or
development of any of the Franchised Restaurants;



          To own, acquire, establish and/or operate and license others to establish and operate,
non-restaurant businesses under the Proprietary Marks, at any location within or outside the
Development Area.



 









 





          To own, acquire, establish and/or operate, and license others to establish and operate,
businesses under proprietary marks other than the Proprietary Marks, whether such businesses are
similar or different from Cosi Restaurants, at any location within or outside the Development Area
notwithstanding their proximity to the Development Area or their actual or threatened impact on
sales or development of any of the Franchised Restaurants;



          To own, acquire, establish, and/or operate and license others to establish and operate, Cosi
Restaurants under the Proprietary Marks at Institutional Accounts (as defined below) at any
location within or outside the Development Area. As used in this Agreement, “Institutional
Accounts” shall mean outlets that serve primarily the customers located within the facility, such
as captive audience facilities (examples include, but are not limited to, parks charging admission,
stadiums, amusement parks and centers, theaters and art centers), limited purpose facilities
(examples include, but are not limited to, airports, transportation centers, department stores,
in-door shopping centers, business and industrial complexes, museums, educational facilities,
hospitals, art centers, and recreational parks), limited access facilities (examples include, but
are not limited to, military complexes, buyer club businesses, educational facilities, business and
industrial complexes), and other types of institutional accounts.



          To sell and to distribute, directly or indirectly, or to license others to sell and to
distribute, directly or indirectly, any products (including the Products) through grocery or
convenience stores or through outlets that are primarily retail in nature, or through mail order,
toll free numbers, or the Internet, including those products bearing Franchisor’s Proprietary
Marks, provided that distribution within the Development Area shall not be from a Cosi Restaurant
established under the System that is operated from within the Development Area (except from a Cosi
Restaurant at an Institutional Account);



          To (i) acquire one or more retail businesses that are the same as, or similar to, Cosi
Restaurants then operating under the System (each an “Acquired Business”), which may be at any
location within or outside the Development Area notwithstanding their proximity to the Development
Area or their actual or threatened impact on sales or development of any of the Franchised
Restaurants, and to (ii) operate and/or license others to operate any Acquired Business under its
existing name or as a Cosi Restaurant under the System, subject to the following conditions that
apply to each Acquired Business located within the Development Area:



               Except as provided in Section 1.3.6.2 below, and provided that Area Developer is in
compliance with this Agreement and any other agreement with Franchisor, Franchisor shall offer to
Area Developer the option to purchase and operate, as a Cosi Restaurant, an Acquired Business that
is purchased by Franchisor for operation by Franchisor or its affiliates. In such event,
Franchisor shall provide Area Developer with written notice of Franchisor’s purchase of the
Acquired Business(es), the terms and conditions applicable to the Area Developer’s option to
purchase such Acquired Business(es), and such other information that Franchisor deems necessary to
include in the notice. The terms and conditions offered to Area Developer shall include, without
limitation, the following: (a) the purchase price will be based on Franchisor’s purchase price for
such Acquired Business, and if the Acquired Business was part of an Acquired System (as defined
below in Section 1.3.6.2), then Area Developer’s purchase price for such Acquired Business shall be
determined using a ratio equal to the sales during the prior year of such Acquired Business as
compared to the total sales in such prior year of all Acquired Businesses purchased by Franchisor
in the same transaction; and (b) the requirement that Area Developer enter into Franchisor’s
then-current form of System franchise agreement for the Acquired Business, provided. that Area
Developer shall not be required to pay an initial franchise fee for an Acquired Business. If Area
Developer does not elect to purchase, or fails to complete the purchase of, an Acquired Business,
Franchisor shall have the right to operate itself, or through its affiliates or third party
licensees or franchisees, the Acquired Business under any trade name or trademarks including the
Proprietary Marks.



               If an Acquired Business is part of a system of retail businesses that Franchisor acquires (an
“Acquired System”), Area Developer shall have no right to purchase, and Franchisor shall not be
obligated to offer Area Developer any option to purchase, any Acquired Business that is operated by
a licensee or franchisee under the Acquired System. Franchisor may license such unit to be
operated under any trade name or trademarks including the Proprietary Marks, and may also license
to the licensee or franchisee additional units of the Acquired System that the licensee or
franchisee has the right to develop and operate within the Development Area.



     No Rights to Use the System. This Agreement is not a Franchise Agreement, and does
not grant to Area Developer any right to use the Proprietary Marks or the System or to sell or
distribute any Products. Area Developer’s rights to use the Proprietary Marks and System will be
granted solely under the terms of the Franchise Agreement.



TERM




2









 








     Unless sooner terminated in accordance with the provisions of this Agreement, this
Agreement shall commence on the date hereof and shall expire on the last date set forth in the
Development Schedule, as shown in Paragraph 1 of Exhibit A (the “Expiration Date”).



DEVELOPMENT OBLIGATIONS




     Time is of the Essence. Recognizing that time is of the essence, Area Developer shall
comply strictly with the Development Schedule. Area Developer acknowledges and agrees that the
Development Schedule requires that Area Developer have executed and delivered to Franchisor
Franchise Agreements for a cumulative number of Franchised Restaurants by the end of the time
periods specified in Exhibit A.



     Identifying and Securing Sites. Area Developer shall be solely responsible for
identifying, submitting for Franchisor’s approval, and securing specific sites for each Franchised
Restaurant. The following terms and conditions shall apply to each Franchised Restaurant to be
developed hereunder:



          Area Developer shall submit to Franchisor, in a form specified by Franchisor, a completed
site approval package, which shall include a site approval form prescribed by Franchisor, an option
contract, letter of intent, or other evidence satisfactory to Franchisor which describes Area
Developer’s favorable prospects for obtaining such site, photographs of the site, demographic
statistics, and such other information or materials as Franchisor may reasonably require
(collectively, the “SAP”). Franchisor shall have twenty (20) business days after receipt of the
SAP from Area Developer to approve or disapprove, in its sole discretion, the proposed site for the
Franchised Restaurant. In the event Franchisor does not approve a proposed site by written notice
to Area Developer within said twenty (20) business days, such site shall be deemed disapproved by
Franchisor. No site shall be deemed approved unless it has been expressly approved in writing by
Franchisor.



          Following Franchisor’s approval of a proposed site, Area Developer shall use its best efforts
to secure such site, either through a lease/sublease that is acceptable to Franchisor, as provided
in Section 3.3 below, or a binding purchase agreement, and shall do so within forty (40) business
days of approval of the site by Franchisor. Area Developer shall immediately notify Franchisor of
the execution of the approved lease or binding purchase agreement. The site approved and secured
pursuant to this Agreement shall be specified as the “Approved Location” under the Franchise
Agreement executed pursuant Section 3.4 below.



          Area Developer hereby acknowledges and agrees that approval by Franchisor of a site does not
constitute an assurance, representation, or warranty of any kind, express or implied, as to the
suitability of the site for the Franchised Restaurant or for any other purpose. Approval by
Franchisor of the site indicates only that Franchisor believes the site complies with acceptable
minimum criteria established by Franchisor solely for its purposes as of the time of the
evaluation. Both Area Developer and Franchisor acknowledge that application of criteria that have
been effective with respect to other sites and premises may not be predictive of potential for all
sites and that, subsequent to approval by Franchisor of a site, demographic and/or economic
factors, such as competition from other similar businesses, included in or excluded from criteria
used by Franchisor could change, thereby altering the potential of a site. Such factors are
unpredictable and are beyond the control of Franchisor. Franchisor shall not be responsible for
the failure of a site approved by Franchisor to meet Area Developer’s expectations as to revenue or
operational criteria.



     Lease Terms. For each Franchised Restaurant to be developed hereunder, if Area
Developer will occupy the premises from which the Franchised Restaurant will be operated under a
lease or sublease, Area Developer shall, prior to execution of such lease, submit the lease to
Franchisor for its review and approval; provided, however, if pre-submission to Franchisor is not
possible, then Area Developer may sign the lease only on the condition, agreed to in writing by the
lessor, that the lease shall become null and void if Franchisor does not approve such lease.
Franchisor’s approval of the lease or sublease may be conditioned upon the inclusion of such
provisions as Franchisor may reasonably require, including, without limitation, the terms and
conditions set forth by Franchisor in the Manuals or otherwise in writing from time to time, a
current list of which is included in Exhibit E to this Agreement.



     Franchise Agreements. With respect to the Franchise Agreements to be executed for the
Franchised Restaurants to be developed pursuant to this Agreement, the following terms and
conditions shall apply:



          The Franchise Agreement for the first Franchised Restaurant to be developed under this
Agreement shall be the form of Franchise Agreement attached hereto in Exhibit C.



          The Franchise Agreement for each subsequent Franchised Restaurant to be developed under this
Agreement shall be Franchisor’s then-current form of Franchise Agreement, the terms of which may
differ from the terms of the Franchise Agreement attached hereto including, without limitation, a
higher and/or additional fees; provided, however, so long as Area Developer is in compliance with
this Agreement, then initial franchise fee shall be as set forth in Section 4.3 below, and if the
royalty fee rate is higher for the then-current form of franchise agreement, the royalty fee rate
under the Franchise Agreement that Area Developer executes shall be the same as the royalty fee
rate set forth in the form of Franchise Agreement attached hereto in Exhibit C.



          Franchisor shall permit one or more Franchise Agreements to be executed by entities other than
Area Developer; provided that (a) each such franchisee entity is controlled by, or under common
control with, Area Developer, and (b) the Area Developer and all Principals (as



3









 




defined in Section
9.1 below) of Area Developer requested by Franchisor execute guarantees, guarantying to Franchisor
the timely payment and performance of the franchisee’s obligations under the Franchise Agreement.




          Provided that Area Developer is in compliance with this Agreement, after Area Developer
locates and secures a site pursuant to Sections 3.2 and 3.3 above, Area Developer (or an affiliate
of Area Developer pursuant to Section 3.4.3 above) shall execute the Franchise Agreement for such
Franchised Restaurant, as provided in this Section 3.4. Area Developer shall thereafter comply
with all pre-opening and opening requirements set forth in the Franchise Agreement relating to the
Franchised Restaurant.



     Force Majeure Events. Area Developer shall not be responsible for non-performance
or delay in performance occasioned by a “force majeure,” which means an act of God, war, civil
disturbance, act of terrorism, government action, fire, flood, accident, hurricane, earthquake, or
other calamity, strike or other labor dispute, or any other cause beyond the reasonable control of
Area Developer; provided, however, force majeure shall not include Area Developer’s lack of
adequate financing. If any delay occurs, any applicable time period hereunder shall be
automatically extended for a period equal to the time lost; provided, however, that Area Developer
shall make reasonable efforts to correct the reason for such delay and give Franchisor prompt
written notice of any such delay.



DEVELOPMENT FEE, INITIAL FRANCHISE FEES, AND ROYALTIES




     Area Development Fee. In consideration of the development rights granted herein, upon
execution of this Agreement, Area Developer shall pay an area development fee (“Area Development
Fee”) that is equal to the Franchise Fee (as defined 4.3) for the first Franchised Restaurant and
Seventeen Thousand Five Hundred Dollars ($17,500) for each additional Franchised Restaurant that
Area Developer must develop in order to comply with the Development Schedule, the aggregate amount
of which is specified in Paragraph 3 of Exhibit A to this Agreement. Receipt of the Area
Development Fee is hereby acknowledged. The Area Developer acknowledges and agrees that the Area
Development Fee is fully earned and nonrefundable in consideration of administrative and other
expenses incurred by Franchisor and for the development opportunities lost or deferred as a result
of the rights granted herein to Area Developer, even if Area Developer does not enter into any
Franchise Agreements pursuant to this Agreement.



     Credit Towards Franchise Fee. If Area Developer is in compliance with its obligations
under this Agreement and any other agreement with Franchisor, then upon execution of each Franchise
Agreement, Franchisor will credit towards the Franchise Fee (which amounts are set forth in Section
4.3 below) for said Franchise Agreement, the portion of the Area Development Fee that was
attributable to such Franchised Restaurant. In no circumstances will Franchisor grant credits in
excess of the total Area Development Fee paid by Area Developer.



     Franchise Fees. Notwithstanding anything to the contrary in any of the Franchise
Agreements, the initial franchise fee (the “Franchise Fee”) that shall be paid by Area Developer
for each Franchised Restaurant to be developed pursuant to the Development Schedule shall be the
following amounts, which shall be paid in full upon execution of each such Franchise Agreement,
less any credit that may be applied pursuant to Section 4.2 above:



	 	 	 	 	 
	First Franchised Restaurant
	 	$	40,000	 
	Second and each subsequent Restaurant
	 	$	35,000	 






DUTIES OF THE PARTIES




     Franchisor’s Assistance. Franchisor shall furnish to Area Developer the following:




          Site selection guidelines, including Franchisor’s minimum standards for Cosi Restaurant
sites and sources regarding demographic information, and such site selection counseling and
assistance as Franchisor may deem advisable.



          Such on-site evaluation as Franchisor deems advisable in response to Area Developer’s request
for site approval for each Franchised Restaurant; provided, however, that Franchisor shall not
provide on-site evaluation for any proposed site prior to the receipt of a SAP for such site
prepared by Area Developer pursuant to Section 3.2.




     Designated Principal. If Area Developer is other than an individual, Area
Developer shall designate, subject to Franchisor’s reasonable approval, one Principal (as defined
in Section 9.1) who is both an individual person and owns at least a ten percent (10%), of Area
Developer, and who shall be responsible for general oversight and management of the development of
the Franchised Restaurants under this Agreement and the operations of all such Franchised
Restaurants open and in operation on behalf of Area Developer (the “Designated Principal”). Area
Developer acknowledges and agrees that Franchisor shall have the right to rely upon the Designated
Principal to have been given, by Area Developer, the responsibility and decision-making authority
regarding the Area Developer’s business and operation. In the event the person designated as the
Designated Principal, becomes incapacitated, leaves the employ of Area Developer, transfers his/her
interest in Area Developer, or otherwise ceases to supervise the development of the Franchised
Restaurants, Area Developer shall promptly designate a new Designated Principal, subject to
Franchisor’s reasonable approval.



     Records and Reports to Franchisor. Area Developer shall, at Area Developer’s expense,
comply with the following requirements to prepare, and submit to Franchisor’s the following
reports, financial statements, and other data, which shall be prepared in the form and using the
standard statements and chart of accounts as Franchisor may prescribe from time to time:



4









 





          No later than the twenty first (21st) day following the end of each quarter
year (with the quarter periods concluding at the end of March, June, September and December), Area
Developer shall have prepared a profit and loss statement reflecting all Area Developer’s
operations during the preceding quarter period. Area Developer shall prepare profit and loss
statements on an accrual basis and in accordance with generally accepted accounting principles.
Area Developer shall submit such statements to Franchisor at such times as Franchisor may designate
or as Franchisor may otherwise request.



          No later than ninety (90) days following the end of Area Developer’s fiscal year, a complete
annual financial statement (prepared according to generally accepted accounting principles), on a
compilation basis, and if required by Franchisor, such statements shall be prepared by an
independent certified public accountant.



          Such other forms, reports, records, information, and data as Franchisor may reasonably
designate.



     Maintaining Records. Area Developer shall maintain during the term of this
Agreement, and shall preserve for at least seven (7) years from the dates of their preparation, and
shall make available to Franchisor at Franchisor’s request and at Area Developer’s expense, full,
complete, and accurate books, records, and accounts in accordance with generally accepted
accounting principles.



     Area Developer to Provide Training. Area Developer agrees that, notwithstanding any
thing to the contrary in any Franchise Agreement, Area Developer shall be responsible for
conducting the initial training of all required trainees (including without limitation the owners
and management personnel) for the third (3rd) and any subsequent Franchised Restaurants
developed under this Agreement, in accordance with the requirements and conditions as Franchisor
may from time to time establish for the initial training. By no later than the time Area Developer
is seeking Franchisor’s approval to develop the third (3rd) Franchised Restaurant under
this Agreement, Area Developer shall be have completed to Franchisor’s satisfaction all
requirements and conditions necessary to obtain Franchisor’s approval for Area Developer to conduct
such training.



DEFAULT AND TERMINATION




     Automatic Termination. Area Developer shall be deemed to be in default under this
Agreement, and all rights granted herein shall automatically terminate without notice to Area
Developer, if Area Developer becomes insolvent or makes a general assignment for the benefit of
creditors; if a petition in bankruptcy is filed by Area Developer or such a
petition is filed against and not opposed by Area Developer; if Area Developer is adjudicated
a bankrupt or insolvent; if a bill in equity or other proceeding for the appointment of a receiver
of Area Developer or other custodian for Area Developer’s business or assets is filed and consented
to by Area Developer; if a receiver or other custodian (permanent or temporary) of Area Developer’s
assets or property, or any part thereof, is appointed by any court of competent jurisdiction; if
proceedings for a composition with creditors under any state or federal law should be instituted by
or against Area Developer; if final judgment remains unsatisfied or of record for thirty (30) days
or longer (unless supersedeas bond is filed); if Area Developer is dissolved; if execution is
levied against any asset of Area Developer or Area Developer’s Franchised Restaurants; if suit to
foreclose any lien or mortgage against any asset of Area Developer or Area Developer’s Franchised
Restaurants is instituted against Area Developer and not dismissed within sixty (60) days; or if
any asset of Area Developer’s or any Franchised Restaurant of Area Developer’s shall be sold after
levy thereupon by any sheriff, marshal, or constable.



     Termination Upon Notice. Area Developer shall be deemed to be in default and
Franchisor may, at its option, terminate this Agreement and all rights granted hereunder or take
any of the actions described in Section 6.5 below, without affording Area Developer any opportunity
to cure the default, effective immediately upon the provision of notice to Area Developer (in the
manner provided under Section 10 hereof), upon the occurrence of any of the following events of
default:



          If the Franchise Agreement for any Franchised Restaurant operated by Area Developer (or an
entity affiliated with Area Developer) is terminated.



          If Area Developer (or an officer or director of, or a shareholder in, Area Developer (or an
entity affiliated with Area Developer) if Area Developer is a corporation, or a general or limited
partner of Area Developer, if Area Developer is a partnership) is convicted of a felony, a crime
involving moral turpitude, or any other crime or action that Franchisor believes is reasonably
likely to have an adverse effect on the System, the Proprietary Marks, the goodwill associated
therewith, or Franchisor’s interest therein.



          If Area Developer or any Principal purports to transfer any rights or obligations under this
Agreement or any the assets of Area Developer in a manner that is contrary to the terms of Section
7 of this Agreement.



     Notice and Opportunity to Cure – For a Missed Deadline. Failure by Area Developer
to meet a deadline under the Development Schedule (a “Missed Deadline”) shall constitute a default
under this Agreement. Franchisor shall, for one (1) Missed Deadline, provide Area Developer with a
reasonable opportunity to cure such default by Franchisor notifying Area Developer in writing of a
new date for the Missed Deadline (without change to any other deadline in the Development
Schedule). If Area Developer fails to come into compliance with the Development Schedule by such
new deadline, and/or upon the occurrence of another Missed Deadline, Franchisor, in its discretion,
may terminate this Agreement and all rights granted hereunder without affording Area Developer any
further opportunity to cure the default, effective immediately upon the delivery of written notice
to Area Developer (in the manner set forth in Section 10 of this Agreement); or Franchisor, in its
discretion, may elect, in lieu of terminating this Agreement, to take any of the actions described
in Section 6.5 below.



5









 





     Notice and Opportunity to Cure Other Defaults. Except as otherwise provided in
Sections 6.1, 6.2 , and 6.3 above, if Area Developer fails to comply with any material term and
condition of this Agreement, such action shall constitute a default under this Agreement and, upon
the occurrence of any such default, Franchisor may terminate this Agreement by giving written
notice of termination stating the nature of such default to Area Developer at least thirty (30)
days prior to the effective date of termination; provided, however, that Area Developer may avoid
termination by curing the default to Franchisor’s satisfaction, and by promptly providing proof
thereof to Franchisor within the 30-day period. If any such default is not cured within the
specified time, or such longer period as applicable law may require, this Agreement and all rights
granted hereunder (including but not limited to, the right to develop new Franchised Restaurants)
will terminate without further notice to Area Developer effective immediately upon the expiration
of the thirty (30) day period or such longer period as applicable law may require.



     Franchisor’s Other Options Upon Default. Franchisor, in its discretion, may elect, in
lieu of terminating this Agreement, to use other remedial measures for Area Developer’s breach of
this Agreement, which include, but are not limited to: (i) termination of the credit towards
Franchise Fees granted in Section 4.2 hereof; (ii) loss of the limited exclusivity, or reduction
in the scope of protections, granted to Area Developer under Section 1.2 herein for the Development
Area; (iii) reduction in the scope of the Development Area; (iv) reduction in the number of
Franchised Restaurants to be developed by Area Developer; and/or (v) Franchisor’s retention of all
area development fees paid, or owed, by Area Developer. If Franchisor exercises said right,
Franchisor shall not have waived its right to, in the case of future defaults, exercise all other
rights, and invoke all other provisions, that are provided in law and/or set out under this
Agreement.



     No Further Rights. Upon termination or expiration of this Agreement, Area Developer
shall have no right to establish or operate any Cosi Restaurant for which a Franchise Agreement has
not been executed by Franchisor at the time of termination or expiration. Franchisor’s remedies
for Area Developer’s breach of this Agreement shall include,
without limitation, Area Developer’s loss of its right to develop additional Franchised
Restaurants under this Agreement, and Franchisor’s retention of all area development fees paid, or
owed, by Area Developer. Upon termination or expiration, Franchisor shall be entitled to
establish, and to franchise others to establish, Cosi Restaurants in the Development Area, except
as may be otherwise provided under any Franchise Agreement which has been executed between
Franchisor and Area Developer or, as permitted under Section 3.4.3 of this Agreement, Area
Developer’s affiliates.



TRANSFER OF INTEREST




     Franchisor’s Rights to Transfer. Franchisor shall have the right to transfer or
assign this Agreement and all or any part of its rights or obligations herein to any person or
legal entity, and any designated assignee of Franchisor shall become solely responsible for all
obligations of Franchisor under this Agreement from the date of assignment. In addition, and
without limitation to the foregoing, Area Developer expressly affirms and agrees that Franchisor
may sell its assets, its Proprietary Marks, or its System; may sell its securities in a public
offering or in a private placement; may merge, acquire other corporations, or be acquired by
another corporation; and may undertake a refinancing, recapitalization, leveraged buy-out, or other
economic or financial restructuring.



     No Transfers Without Franchisor’s Approval. Area Developer understands and
acknowledges that Franchisor has granted the rights hereunder in reliance on the business skill,
financial capacity, and personal character of Area Developer or the Principals of Area Developer if
Area Developer is not an individual. Accordingly, neither Area Developer nor any Principal shall
sell, assign, transfer, pledge or otherwise encumber any direct or indirect interest in the Area
Developer (including any direct or indirect interest in a corporate or partnership Area Developer),
the rights or obligations Area Developer under this Agreement, or any material asset of the Area
Developer’s business, without the prior written consent of Franchisor, which shall be subject to
Sections 7.3 and 7.4 below and to all of the conditions and requirements for transfers set forth in
the Franchise Agreement attached to this Agreement as Exhibit C that Franchisor deems applicable to
a proposed transfer under this Agreement.



     Simultaneous Transfers. Area Developer understands and acknowledges that any consent
to a transfer of this Agreement shall, unless waived, be conditioned on, among other factors, the
requirement that the proposed transfer of this Agreement is to be made in conjunction with a
simultaneous transfer of all Franchise Agreements executed pursuant to this Agreement to the same
approved transferee.



     Transfer Fee. At the request of Franchisor, Area Developer shall pay a transfer fee
of an amount equal to Ten Thousand Dollars ($10,000) for each Franchised Restaurant that remains to
be developed and opened in order to satisfy the Development Schedule. Additionally, for any
Franchise Agreements executed pursuant to this Agreement that are transferred, the transfer fee due
under such Franchise Agreement(s) shall be paid to Franchisor pursuant to the terms of such
Franchise Agreement(s).



     Transfer to Entity Formed for by Area Developer. Notwithstanding anything to the
contrary in this Section 7, if Area Developer is an individual and seeks to transfer this Agreement
to a corporation, partnership, or limited liability company formed for the convenience of
ownership, the conditions of Sections 7.4 shall not apply, and Area Developer may undertake such
transfer, provided that Area Developer owns one hundred percent (100%) of the equity interest in
the transferee entity, and the Area Developer personally guarantees, in a written guaranty
satisfactory to Franchisor, the performance of the obligations of the Area Developer under this
Agreement.



COVENANTS




     Confidential Information. Area Developer shall at all times preserve in confidence
any and all materials and information furnished or disclosed to Area Developer by Franchisor, and
shall disclose such information or materials only to such of Area Developer’s employees or agents
who must have access to it in connection with their employment. Area Developer shall not at any
time, during the term of this Agreement or thereafter, without Franchisor’s prior written consent,
copy, duplicate, record, or otherwise reproduce such materials or information, in whole or in part,
nor otherwise make the same available to any unauthorized person.



6









 





     During the Term. Area Developer specifically acknowledges that, pursuant to this
Agreement, Area Developer will receive valuable specialized training and confidential information,
which may include, without limitation, information regarding the operational, sales, advertising
and promotional methods and techniques of Franchisor and the System. Area Developer covenants that
during the term of this Agreement, except as otherwise approved in writing by Franchisor, Area
Developer shall not, either directly or indirectly, for itself, or through, on behalf of, or in
conjunction with any person, persons, partnership, or corporation:



          Divert or attempt to divert any business or customer of any Cosi Restaurant or of any unit
under the System to any competitor, by direct or indirect inducement or otherwise, or do or
perform, directly or indirectly, any other act injurious or prejudicial to the goodwill associated
with the Proprietary Marks or the System.



          Unless released in writing by the employer, employ or seek to employ any person who is at that
time employed by Franchisor or by any other franchisee or area developer of Franchisor, or
otherwise directly or indirectly induce such person to leave his or her employment.



          Own, maintain, operate, engage in, be employed by, provide any assistance to, or have any more
than a one percent (1%) interest in (as owner or otherwise) any Competitive Business (as defined
below). A “Competitive Business” shall be consider to be retail food businesses with menu
offerings consisting predominantly of salads, sandwiches, or coffee offered in a fast casual
environment. Furthermore, Area Developer acknowledges and agrees that Area Developer shall be
considered in default under this Agreement and that this Agreement will be subject to immediate
termination as provided in Section 6.2 herein, in the event that a person in the immediate family
(including spouse, domestic partner, parent or child) of Area Developer (or, if Area Developer is
other than an individual, each Principal that is subject to these covenants) engages in a
Competitive Business that would violate this Section 8.2.3 if such person was subject to the
covenants of this Section 8.2.3.



     After the Agreement and After a Transfer. Area Developer covenants that, except
as otherwise approved in writing by Franchisor, for a continuous uninterrupted period of two (2)
years from the date of (a) a transfer permitted under Section 7 above, or (b) expiration of this
Agreement ; (c) termination of this Agreement (regardless of the cause for termination); (d) a
final order of a duly authorized arbitrator, panel of arbitrators, or a court of competent
jurisdiction (after all appeals have been taken) with respect to any of the foregoing or with
respect to enforcement of this Section 8.3; or (e) any or all of the foregoing, Area Developer
shall not either directly or indirectly, for itself, or through, on behalf of, or in conjunction
with any person, partnership, corporation, or other entity, own, maintain, operate, engage in, or
have any interest in any Competitive Business, which is, or is intended to be (i) located within
the Development Area (other than those Franchised Restaurants provided for in the Development
Schedule), or makes offers and sales into the Development Area; or (ii) located within a radius of
seven hundred fifty (750) feet any other Cosi Restaurant located in an urban area, or within a
radius of one (1) mile of any other Cosi Restaurant located in an suburban area. Provided,
however, that this provision shall not apply to the operation by Area Developer of any business
under the System under a franchise agreement with Franchisor.



     Exception for Ownership in Public Entities. Sections 8.2 and 8.3 hereof shall not
apply to ownership by Area Developer of less than a five percent (5%) beneficial interest in the
outstanding equity securities of any publicly-held corporation. As used in this Agreement, the
term “publicly-held corporation” refers to a corporation which has outstanding securities that have
been registered under the federal Securities Exchange Act of 1934.



     Personal Covenants. At the request of Franchisor, Area Developer shall obtain and
furnish to Franchisor executed covenants similar in substance to those set forth in this Section 8
(including covenants applicable upon the termination of a person’s relationship with Area
Developer) and the provisions of Sections 6 and 7 of this Agreement (as modified to apply to an
individual) from any or all of the following persons: (a) the Designated Principal, (b) all
managers and other personnel employed by Area Developer who have received or will receive training
and/or other confidential information; (c) all officers, directors, and Principals who have or will
receive training or access to confidential information, or who are or may be involved in the
operation or development of the Franchised Restaurants. Every covenant required by this Section
8.5 shall be in a form approved by Franchisor, including specific identification of Franchisor as a
third-party beneficiary of such covenants with the independent right to enforce them.



     Covenants as Independent Clauses. The parties agree that each of the foregoing
covenants shall be construed as independent of any other covenant or provision of this Agreement.
If all or any portion of a covenant in this Section 8 is held unreasonable or unenforceable by a
court or agency having valid jurisdiction in an unappealed final decision to which Franchisor is a
party, Area Developer expressly agrees to be bound by any lesser covenant subsumed within the terms
of such covenant that imposes the maximum duty permitted by law, as if the resulting covenant were
separately stated in and made a part of this Section 8.



     Franchisor’s Right to Reduce Scope of the Covenants. Area Developer understands and
acknowledges that Franchisor shall have the right, in its sole discretion, to reduce the scope of
any covenant set forth in Sections 8.2 and 8.3 in this Agreement, or any portion thereof, without
Area Developer’s consent, effective immediately upon receipt by Area Developer of written notice
thereof; and Area Developer agrees that it shall comply forthwith with any covenant as so modified,
which shall be fully enforceable notwithstanding the provisions of Section 15 hereof.



     Covenants Survive Claims. Area Developer expressly agrees that the existence of any
claims it may have against Franchisor, whether or not arising from this Agreement, shall not
constitute a defense to the enforcement by Franchisor of the covenants in this Section 8. Area
Developer agrees to pay all costs and expenses (including reasonable attorneys’ fees) incurred by
Franchisor in connection with the enforcement of this Section 8.



7









 





     Compliance with Laws. Area Developer represents and warrants to Franchisor that
neither Area Developer (including, without limitation, any and all of its employees, directors,
officers and other representatives), nor any of its affiliates or the funding sources for either is
a person or entity designated with whom Franchisor, or any of its affiliates, are prohibited by law
from transacting business.



ARTICLE II. CORPORATE, LIMITED LIABILITY COMPANY, OR PARTNERSHIP Area Developer




     List of Principals. If Area Developer is a corporation, limited liability company, or
partnership, each owner of beneficial interest in Area Developer (each a “Principal”), and the
interest of each Principal in Area Developer, shall be identified in Exhibit B to the Agreement.
Area Developer shall maintain a list of all Principals and immediately furnish Franchisor with an
update to the information contained in Exhibit B upon any change, which shall be made only in
compliance with Section 7 above.



     Guaranties. Such Principals as Franchisor may request shall execute a guarantee,
indemnification, and acknowledgment of Area Developer’s obligations under this Agreement in the
form attached hereto as Exhibit D. As set forth in Section 5.2 above, the Designated Principal
shall at all times have at least a ten percent (10%) interest in Area Developer.



     Corporations and Limited Liability Companies. If Area Developer is a corporation or
limited liability company, Area Developer shall comply with the following requirements:



          Area Developer shall be newly organized and its governing documents shall at all times
provide that its activities are confined exclusively to developing and operating the Franchised
Restaurants.



          Area Developer shall, upon request of Franchisor, promptly furnished to Franchisor copies of
Area Developer’s articles of incorporation, bylaws, articles of organization, operating agreement
and/or other governing documents, and any amendments thereto, including the resolution of the Board
of Directors or members authorizing entry into this Agreement.



          Area Developer shall maintain stop-transfer instructions against the transfer on its records
of any equity securities; and each stock certificate or issued securities of Area Developer shall
conspicuously endorse upon its face a statement, in a form satisfactory to Franchisor, which
references the transfer restrictions imposed by this Agreement; provided, however, that the
requirements of this Section 9.3.3 shall not apply to a publicly-held corporation.



     Partnerships and Limited Liability Partnerships. If Area Developer or any
successor to or assignee of Area Developer is a partnership or limited liability partnership, Area
Developer shall comply with the following requirements:



          Area Developer shall be newly organized and its partnership agreement shall at all times
provide that its activities are confined exclusively to developing and operating the Franchised
Restaurants.



          Area Developer shall furnish Franchisor with a copy of its partnership agreement as well as
such other documents as Franchisor may reasonably request, and any amendments thereto.



          The partners of the partnership shall not, without the prior written consent of Franchisor,
admit additional general partners, remove a general partner, or otherwise materially alter the
powers of any general partner.



NOTICES




     Any and all notices required or permitted under this Agreement shall be in writing and
shall be personally delivered, sent by registered mail, or by other means which affords the sender
evidence of delivery, or of rejected delivery, to the respective parties at the addresses shown on
the signature page of this Agreement, unless and until a different address has been designated by
written notice to the other party. Any notice by a means which affords the sender evidence of
delivery, or rejected delivery, shall be deemed to have been given at the date and time of receipt
or rejected delivery.



PERMITS AND COMPLIANCE WITH THE LAWS




     Compliance with Laws. Area Developer shall comply with all federal, state, and local
laws, rules and regulations, and shall timely obtain any and all permits, certificates, or licenses
necessary for the full and proper conduct of the business contemplated under this Agreement.



     Notice of Actions. Area Developer shall notify Franchisor in writing within five (5)
days of the commencement of any action, suit, or proceeding, and of the issuance of any order,
writ, injunction, award, or decree of any court, agency or other governmental instrumentality,
which may adversely affect the operation or financial condition of Area Developer and/or any
Franchised Restaurant established under this Agreement.



INDEPENDENT CONTRACTOR AND INDEMNIFICATION



8









 





     No Fiduciary Relationship. Area Developer is an independent contractor. Franchisor
and Area Developer are completely separate entities and are not fiduciaries, partners, joint
venturers, or agents of the other in any sense and neither shall have the power to bind the other.
No act or assistance given by either party to the other pursuant to this Agreement shall be
construed to alter the relationship.



     Public Notice. During the term of this Agreement, Area Developer shall hold itself
out to the public as an independent contractor operating the business pursuant to an area
development agreement with Franchisor. Area Developer agrees to take such action as may be
necessary to do so, including, without limitation, exhibiting a notice of the fact in a conspicuous
place in Area Developer’s offices, the content of which Franchisor reserves the right to specify.



     No Assumption of Liability. Nothing in this Agreement authorizes Area Developer to
make any contract, agreement, warranty, or representation on Franchisor’s behalf, or to incur any
debt or other obligation in Franchisor’s name; and that Franchisor shall in no event assume
liability for, or be deemed liable hereunder as a result of, any such action; nor shall Franchisor
be liable by reason of any act or omission of Area Developer in Area Developer’s operations
hereunder, or for any claim or judgment arising therefrom against Area Developer or Franchisor.



     Indemnification. Area Developer shall indemnify and hold Franchisor, Franchisor’s
owners and affiliates, and their respective officers, directors, and employees (the “Indemnitees”)
harmless against any and all causes of action, claims, losses, costs, expenses, liabilities,
litigation, damages or other expenses (including, but not limited to, settlement costs and
attorneys’ fees) arising directly or indirectly from, as a result of, or in connection with Area
Developer’s operation of the business contemplated hereunder (notwithstanding any claims that the
Indemnitees are or were negligent). Area Developer agrees that with respect to any threatened or
actual litigation, proceeding or dispute which could directly or indirectly affect any of the
Indemnitees, the Indemnitees shall have the right, but not the obligation, in their discretion, to:
(i) choose counsel, (ii) direct, manage and/or control the handling of the matter; and (iii) settle
on behalf of the Indemnitees, and/or Area Developer, any claim against the Indemnitees. All
vouchers, canceled checks, receipts, receipted bills or other evidence of payments for any such
losses, liabilities, costs, damages, charges or expenses of whatsoever nature incurred by any
Indemnitee shall be taken as prima facie evidence of Area Developer’s obligation hereunder.



APPROVALS AND WAIVERS




     Approval Requests. Whenever this Agreement requires the prior approval or consent of
Franchisor, Area Developer shall make a timely written request to Franchisor therefor, and such
approval or consent shall be in writing. Franchisor shall respond to Area Developer’s timely
requests in a reasonably timely and prompt manner.



     Non-waiver. No failure of Franchisor to exercise any power reserved to it hereunder,
or to insist upon strict compliance by Area Developer with any obligation or condition hereunder,
and no custom or practice of the parties in variance with the terms hereof, shall constitute a
waiver of Franchisor’s right to demand exact compliance with the terms hereof. Waiver by
Franchisor of any particular default by Area Developer shall not be binding unless in writing and
executed by the party sought to be charged and shall not affect or impair Franchisor’s right with
respect to any subsequent default of the same or of a different nature; nor shall any delay,
waiver, forbearance, or omission of Franchisor to exercise any power or rights arising out of any
breach or default by Area Developer of any of the terms, provisions, or covenants hereof, affect or
impair Franchisor’s rights nor shall such constitute a waiver by Franchisor of any right hereunder
or of the right to declare any subsequent breach or default. Subsequent acceptance by Franchisor
of any payment(s) due to it hereunder shall not be deemed to be a waiver by Franchisor of any
preceding breach by Area Developer of any terms, covenants or conditions of this Agreement.



SEVERABILITY AND CONSTRUCTION




     Severable Parts. Except as expressly provided to the contrary herein, each portion,
section, part, term, and/or provision of this Agreement shall be considered severable; and if, for
any reason, any section, part, term, and/or provision herein is determined to be invalid and
contrary to, or in conflict with, any existing or future law or regulation by a court or agency
having valid jurisdiction, such shall not impair the operation of, or have any other effect upon,
such other portions, sections, parts, terms, and/or provisions of this Agreement as may remain
otherwise intelligible; and the latter shall continue to be given full force and effect and bind
the parties hereto; and said invalid portions, sections, parts, terms, and/or provisions shall be
deemed not to be a part of this Agreement.



     Terms Surviving this Agreement. Any provision or covenant in this Agreement which
expressly or by its nature imposes obligations beyond the expiration, termination or assignment of
this Agreement (regardless of cause for termination), or assignment shall survive such expiration,
termination.



     No Rights on Third Parties. Except as expressly provided to the contrary herein,
nothing in this Agreement is intended, nor shall be deemed, to confer upon any person or legal
entity other than Area Developer, Franchisor, officers, directors, shareholders, agents, and
employees of Franchisor, and such successors and assigns of Franchisor as may be contemplated by
Section 15 hereof, any rights or remedies under or by reason of this Agreement.



     Full Scope of Terms. Area Developer expressly agrees to be bound by any promise or
covenant imposing the maximum duty permitted by law which is subsumed within the terms of any
provision hereof, as though it were separately articulated in and made a part of this Agreement,
that may result from striking from any of the provisions hereof any portion or portions which a
court or agency having valid jurisdiction may hold to be unreasonable and unenforceable in an
unappealed final decision to which Franchisor is a party, or from reducing the scope of any promise
or covenant to the extent required to comply with such a court or agency order.



9









 





     Franchisor’s Application of its Rights. Franchisor shall have the right to operate,
develop and change the System in any manner that is not specifically precluded by this Agreement.
Whenever Franchisor has reserved in this Agreement a right to take or withhold an action, or are
deemed to have a right and/or discretion to take or withhold an action, or to grant or decline to
grant Area Developer a right to take or omit an action, except as otherwise expressly and
specifically provided in this Agreement, Franchisor may make its decision or exercise its rights,
on the basis of the information readily available to Franchisor, and its judgment of what is in its
best interests and/or in the best interests of the Franchisor’s franchise network, at the time its
decision is made, without regard to whether: (i) other reasonable or even arguably preferable
alternative decisions could have been made by Franchisor; (ii) the decision or action of Franchisor
will promote its financial or other individual interest; (iii) Franchisor’s decision or the action
it take applies differently to Area Developer and one or more other franchisees or Franchisor’s
company-owed operations; or (iv) Franchisor’s decision or the exercise of its right or discretion
is adverse to Area Developer’s interests. In the absence of an applicable statute, Franchisor will
have no liability to Area Developer for any such decision or action. Franchisor and Area Developer
intend that the exercise of Franchisor right or discretion will not be subject to limitation or
review. If applicable law implies a covenant of good faith and fair dealing in this Agreement,
Franchisor and Area Developer agree that such covenant shall not imply any rights or obligations
that are inconsistent with a fair construction of the terms of this Agreement and that this
Agreement grants Franchisor the right to make decisions, take actions and/or refrain from taking
actions not inconsistent with Area Developer’s rights and obligations hereunder.



     Captions Only for Convenience. All captions in this Agreement are intended solely for
the convenience of the parties, and none shall be deemed to affect the meaning or construction of
any provision hereof.



ENTIRE AGREEMENT




     This Agreement, the attachments hereto, and the documents referred to herein constitute
the entire Agreement between Franchisor and Area Developer concerning the subject matter hereof,
and supersede any prior agreements, no other representations having induced Area Developer to
execute this Agreement. Except for those permitted to be made unilaterally by Franchisor
hereunder, no amendment, change, or variance from this Agreement shall be binding on either party
unless mutually agreed to by the parties and executed by their authorized officers or agents in
writing.



APPLICABLE LAW AND DISPUTE RESOLUTION




     Governing Law. This Agreement takes effect upon its acceptance and execution by
Franchisor, and shall be interpreted and construed under the laws of the state in which Franchisor
has its headquarters at the time the action is commenced (the “HQ State”); provided, however, that
nothing in this Section 16.1 is intended by the parties to subject this Agreement to any franchise
or similar law, rule, or regulation of the HQ State or of any other state to which it would not
otherwise be subject. In the event of any conflict of law, the laws of the HQ State shall prevail,
without regard to, and without giving effect to, the HQ State’s application of its conflict of law
rules.



     Non-Binding Mediation. Before any party may bring an action in court against the
other, the parties must first meet to mediate the dispute (except as otherwise provided below).
Any such mediation shall be non-binding and shall be conducted by the American Arbitration
Association in accordance with its then-current rules for mediation of commercial disputes.
Notwithstanding anything to the contrary, this Section 16.2 shall not bar either party from
obtaining injunctive relief against threatened conduct that will cause it loss or damages, under
the usual equity rules, including the applicable rules for obtaining restraining orders and
preliminary injunctions, without having to engage in mediation. Mediation hereunder shall be
concluded within forty five (45) days of Area Developer’s receipt of the notice specifying the
designated mediator or such longer period as may be agreed upon by the parties in writing. All
aspects of the mediation process shall be treated as confidential, shall not be disclosed to
others, and shall not be offered or admissible in any other proceeding or legal action whatever.
Franchisor and Area Developer shall each bear its own costs of mediation, and each shall bear
one-half the cost of the mediator or mediation service.



     Litigation. Any legal action brought by Area Developer against Franchisor in any
forum or court, whether federal or state, shall be brought only within the HQ State. Any legal
action brought by Franchisor against Area Developer in any forum or court, whether federal or
state, may be brought within the HQ State or in the state in which Area Developer is located. Area
Developer hereby waives all questions of personal jurisdiction or venue for the purpose of carrying
out this provision.



     No Rights Exclusive of Other Rights. No right or remedy conferred upon or reserved to
Franchisor or Area Developer by this Agreement is intended to be, nor shall be deemed, exclusive of
any other right or remedy provided herein or permitted by law or equity, but each shall be
cumulative of every other right or remedy.



     Waiver of Jury Trial. Franchisor and Area Developer irrevocably waive trial by jury
in any action, proceeding, or counterclaim, whether at law or in equity, brought by either of them
against the other. Any and all claims and actions arising out of or relating to this Agreement,
the relationship of Area Developer and Franchisor, or Area Developer’s activities under this
Agreement, brought by either party hereto against the other, whether in mediation, or a legal
action, shall be commenced within two (2) years from the occurrence of the facts giving rise to
such claim or action, or such claim or action shall be barred.



     Waiver of Punitive Damages. Franchisor and Area Developer hereby waive to the fullest
extent permitted by law any right to or claim of any punitive or exemplary damages against the
other.



     Injunctive Relief. Nothing herein contained shall bar the right of Franchisor to
obtain injunctive relief against threatened conduct that will cause it loss or damages under the
usual equity rules, including the applicable rules for obtaining restraining orders and preliminary
injunctions.



ACKNOWLEDGMENTS





10









 








     Area Developer’s Investigation of the Business Possibilities. Area Developer
acknowledges that it has conducted an independent investigation of the business of developing and
operating Cosi Restaurants, and recognizes that the business venture contemplated by this Agreement
involves business risks and that its success will be largely dependent upon the ability of Area
Developer (or, if Area Developer is a corporation, partnership or limited liability company, the
ability of its principals) as (an) independent businessperson(s). Franchisor expressly disclaims
the making of, and Area Developer acknowledges that it has not received, any warranty or guarantee,
express or implied, as to the potential volume, profits, or success of the business venture
contemplated by this Agreement.



     Receipt of UFOC and Complete Agreement. Area Developer acknowledges that it received
a complete copy of this Agreement, the attachments hereto, and agreements relating thereto, if any,
at least five (5) business days prior to the date on which this Agreement was executed. Area
Developer further acknowledges that it received the disclosure document required by the Trade
Regulation Rule of the Federal Trade Commission entitled “Disclosure Requirements and Prohibitions
Concerning Franchising and Business Opportunity Ventures” at least ten (10) business days prior to
the date on which this Agreement was executed or any payment by Area Developer for the rights
granted under this Agreement.



     Area Developer Read the Agreement and Consulted. Area Developer acknowledges that it
has read and understood this Agreement, the attachments hereto, and agreements relating thereto, if
any, and that Franchisor has accorded Area Developer ample time and opportunity to consult with
advisors of Area Developer’s own choosing about the potential benefits and risks of entering into
this Agreement.



     No Conflicting Obligations. Each party represents and warrants to the others that
there are no other agreements, court orders, or any other legal obligations that would preclude or
in any manner restrict such party from: (a) negotiating and entering into this Agreement; (b)
exercising its rights under this Agreement; and/or (c) fulfilling its responsibilities under this
Agreement.



[signature page follows]




11









 








     IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Agreement in
duplicate on the day and year first above written.



	 	 	 	 	 	 	 	 	 
	COSI, INC.	 	 	 	 

	Franchisor	 	 	 	Area Developer
	 
	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	By:	 	 
	 

	 	 

	 	 
	 	 	 	 

	Name:

	 	 	 	 	 	Name:	 	 
	 

	 	 

	 	 
	 	 	 	 

	Title:

	 	 	 	 	 	Title:	 	 
	 

	 	 

	 	 
	 	 	 	 

	 
	 	 	 	 	 	 	 	 
	Address for Notices:	 	Address for Notices:
	 
	 	 	 	 	 	 	 	 
	Cosi, Inc.	 	 	 	 	 	 
	1751 Lake Cook Road, 6th Floor	 	 

	Deerfield, IL 60015	 	 	 	 

	Telephone: (847) 597-8800	 	 	 	 

	Fax: (847) 597-8884	 	 	 	Attn:	 	 
	 

	 	 	 	 	 	 	 	 

	Attn: Department of Franchising	 	Telephone	 	:

 

	 

	 	 	 	 	 	Fax:	 	 
	 

	 	 	 	 	 	 	 	 

	With copy to:	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Cosi, Inc.	 	 	 	 	 	 
	1751 Lake Cook Road, 6th Floor	 	 	 	 
	Deerfield, IL 60015	 	 	 	 	 	 
	Telephone: (847) 597-8800	 	 	 	 	 	 
	Fax: (847) 597-8884	 	 	 	 	 	 
	Attn: Legal Department	 	 	 	 	 	 







12









 








COSI, INC.




AREA DEVELOPMENT AGREEMENT

EXHIBIT A

DATA SHEET





			
	1.	 	Development Schedule (see Section 1.1): Area Developer shall execute Franchise
Agreements for the development and operation of                      (___) Franchised Restaurants,
within the Development Area in accordance with the following Development Schedule:






	 	 	 	 	 	 	 
	 	 	Minimum Cumulative Number	 	 
	 	 	of Franchise Agreements for	 	 
	 	 	Franchised Restaurants to be located	 	 
	 	 	Within the Development Area	 	By this Date
	 
	 	 	 	 	 	 
	 	 	 
	 	 

	 	 	 
	 	 

	 	 	 
	 	 

	 	 	 
	 	 

	 	 	 
	 	 

	Total:
	 	 	 	 	 	 
	 

	 	 	 	 	 	 







			
	2.	 	Development Area (see Section 1.1): The Development Area shall be the following,:                                                                                 
                                                                                                    

                                                                                                                                                                

                                                                                                                                                                

                                                                                                                                                                

                                                                                                                                                                

                                                                                                                                                                

                                                                                                                                                                








			
	3.	 	Area Development Fee (see Section 4.1): The Area Development Fee shall be $                                        .







			
		 	Initial:                     Date:                                          Initial:                     Date:                    







			
		 	FRANCHISOR                                         AREA DEVELOPER







A-1









 








COSI, INC.




AREA DEVELOPMENT AGREEMENT

EXHIBIT B

LIST OF PRINCIPALS & DESIGNATED PRINCIPAL



The following identifies all of Area Developer’s Principals (as defined in Section 9.1 of the Area
Development Agreement




	 	 	 	 	 
	Name of Principal	 	Address	 	Interest (%) with description
	 
	 	 	 	 
	 


	 	 

	 	 

	 


	 	 

	 	 

	 


	 	 

	 	 

	 


	 	 

	 	 

	 


	 	 

	 	 

	 


	 	 

	 	 

	 


	 	 

	 	 

	 


	 	 

	 	 

	 

	 	 	 	Total: 100%






AREA DEVELOPER’S DESIGNATED PRINCIPAL



The following identifies Area Developer’s Designated Principal (as defined in Section 5.2 of
the Area Development Agreement




	 	 	 	 	 	 	 	 	 
	 	 	Address, telephone number,	 	 	Interest (%) (with	 
	Name and Title	 	and e-mail address	 	 	description) if any	 
	 
	 	 	 	 	 	 	 	 





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COSI, INC.




AREA DEVELOPMENT AGREEMENT

EXHIBIT C

FORM OF FRANCHISE AGREEMENT





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COSI, INC.




AREA DEVELOPMENT AGREEMENT

EXHIBIT D

GUARANTEE, INDEMNIFICATION, AND ACKNOWLEDGMENT




     As an inducement to Cosi, Inc. (“Franchisor”) to enter the Cosi, Inc. Area Development
Agreement between Franchisor and                                                                                                      (“Area Developer”), dated                                         , 200                     (the “Agreement”), the
undersigned, jointly and severally, hereby unconditionally guarantee to Franchisor and Franchisor’s
successors and assigns that all of Area Developer’s monetary obligations under the Agreement will
be punctually paid and performed and that all monetary obligations will be punctually paid and
performed.



     Upon demand by Franchisor, the undersigned each hereby jointly and severally agree to
immediately make each payment required of Area Developer under the Agreement and waive any right to
require Franchisor to: (a) proceed against Area Developer for any payment required under the
Agreement; (b) proceed against or exhaust any security from Area Developer; (c) pursue or exhaust
any remedy, including any legal or equitable relief, against Area Developer; or (d) give notice of
demand for payment by Area Developer. Without affecting the obligations of the undersigned under
this Guarantee, Franchisor may, without notice to the undersigned, extend, modify, or release any
indebtedness or obligation of Area Developer, or settle, adjust, or compromise any claims against
Area Developer, and the undersigned each hereby jointly and severally waive notice of same and
agree to remain and be bound by any and all such amendments and changes to the Agreement.



     The undersigned each hereby jointly and severally agree to defend, indemnify and hold
Franchisor harmless against any and all losses, damages, liabilities, costs, and expenses
(including, but not limited to, reasonable attorney’s fees, reasonable costs of financial and other
investigation, court costs, and fees and expenses) resulting from, consisting of, or arising out of
or in connection with any failure by Area Developer to perform any obligation of Area Developer
under the Agreement, any amendment thereto, or any other agreement executed by Area Developer
referred to therein.



     The undersigned each hereby jointly and severally acknowledge and expressly agree to be
individually bound by all of the covenants contained in Sections 6, 7, 8, and 16 of the Agreement,
and acknowledge and agree that this Guarantee does not grant the undersigned any right to use the
“Cosi” marks or system.



     This Guarantee shall terminate upon the termination or expiration of the Agreement, except
that all obligations and liabilities of the undersigned which arose from events which occurred on
or before the effective date of such termination shall remain in full force and effect until
satisfied or discharged by the undersigned, and all covenants which by their terms continue in
force after the expiration or termination of the Agreement shall remain in force according to their
terms. Upon the death of an individual guarantor, the estate of such guarantor shall be bound by
this Guarantee, but only for defaults and obligations hereunder existing at the time of death; and
the obligations of the other guarantors will continue in full force and effect.



     Guarantor represents and warrants to Franchisor that neither Guarantor (including, without
limitation, any and all of its employees, directors, officers and other representatives), nor any
of its affiliates or the funding sources for either is a person or entity designated with whom
Franchisor, or any of its affiliates, are prohibited by law from transacting business.



     Any and all notices required or permitted under this guarantee provision shall be in writing
and shall be personally delivered, in the manner provided under Section 10 of this Agreement.



     Unless specifically stated otherwise, the terms used in this Guarantee shall have the same
meaning as in the Agreement, and shall be interpreted and construed in accordance with Section 16
of the Agreement. This Guarantee shall be interpreted and construed under the laws of the State of
Delaware. In the event of any conflict of law, the laws of the State of Delaware shall prevail
(without regard to, and without giving effect to, the application of Delaware conflict of law
rules).



     IN WITNESS WHEREOF, the undersigned has signed this guarantee provision as of the date of this
Agreement.



	 	 	 	 	 
	 	 	GUARANTOR(S)
	 
	 	 	 	 
	 

	 	Printed Name:	 	 
	 

	 	 	 







	 	 	 	 	 
	 

	 	Address:	 	 
	 

	 	 	 	 

	 
	 	 	 	 
	 

	 	 	 	 

	 

	 	Signed:	 	 
	 

	 	 	 	 

	 

	 	 	 	(In his/her individual capacity)






	 	 	 	 	 
	 

	 	Printed Name:	 	 
	 

	 	 	 







	 	 	 	 	 
	 

	 	Address:	 	 
	 

	 	 	 	 

	 
	 	 	 	 
	 

	 	 	 	 







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COSI, INC.




AREA DEVELOPMENT AGREEMENT

EXHIBIT E

LEASE TERMS




     In accordance with Section 3.3 of this Area Development Agreement, Area Developer’s lease or
sublease for the premises of each of the Franchised Restaurants shall contain terms acceptable to
Franchisor, which may include (but are not limited to) the following:


1. The initial term of the lease, or initial term together with renewal terms, will be for not
fewer than ten (10) years.



2. A provision stating that the lessor consents to Area Developer’s use and display of the
Proprietary Marks and signage as Franchisor may prescribe from time to time for the Franchised
Restaurant, subject only to the provisions of applicable law.



3. A provision that Area Developer shall have the right to alter, renovate, add, remodel, modify,
and/or change the premises and/or other improvements upon the premises as Area Developer may deem
desirable, provided that if any such alterations, renovations, additions, modifications, remodeling
and/or changes to the premises and/or improvements upon the premises affect the exterior,
structural elements or foundation of the premises, Area Developer shall first obtain the consent of
the lessor, which consent shall not be unreasonably withheld, conditioned or delayed.



4. A provision that the premises be used solely for the operation of a franchised Cosi Restaurant,
which is currently: a counter service restaurant/café/coffee bar offering for sale various types of
food, beverages and related products for both on and off premises consumption, such products may
include without limitation the following: coffee, tea, espresso, other coffee and tea based drinks,
coffee based drinks including alcohol, salads, pizza, pasta, grilled entree items, sandwiches,
soups, desserts, beverages (which may include the sale of alcoholic beverages, provided that
alcoholic beverages will be for on-premises consumption only) and promotional items such as shirts,
hats and other items displaying the “COSI” logo, all as may be permitted under the relevant
franchise agreement signed for the Franchised Restaurant. Additionally, the lessor consents to the
Area Developer’s use of (i) a gas-fired brick oven, and (ii) café style windows on the premises.



5. A provision that requires the lessor to concurrently provide Franchisor with a copy of any
written notice of deficiency under the lease sent to Area Developer, and that the lessor will
provide Franchisor with written notice specifying deficiencies that Area Developer did not cure.



6. A provision that grants to Franchisor, in its sole discretion, the right (but not obligation) to
cure any deficiency under the lease within thirty (30) days after the expiration of the period in
which Area Developer had to cure any such default should Area Developer fail to do so.



7. A provision acknowledging that, in the event the Franchise Agreement for the Franchised
Restaurant expires or is terminated: (a) Area Developer is obligated under the Franchise Agreement
to take certain steps to de-identify the location as a Cosi Restaurant operated by Area Developer;
and (b) the lessor will cooperate fully with Franchisor in enforcing such provisions of the
Franchise Agreement against the Area Developer, including allowing Franchisor, its employees and
agents to enter and remove signs, decor and materials bearing or displaying any Proprietary Marks,
designs or logos of Franchisor, provided that the lessor shall not be required to bear any expense
thereof.



8. A provision that expressly states that any default under the lease shall constitute a default
under the Franchise Agreement, and that the termination of the Franchise Agreement shall constitute
a default under the lease.



9. A provision reserving to Franchisor the right, at Franchisor’s election, to receive an
assignment of the leasehold interest upon termination or expiration of the franchise grant.



10. A provision that expressly requires that, if requested by Franchisor, the lessor of the
premises will provide Franchisor all sales and other information the lessor may have related to the
operation of the Franchised Restaurant.



11. Area Developer is restricted from accepting any requirement under the lease that seeks to
impose any restrictions (territorial or otherwise) on the development or operation of other Cosi
Restaurants by Area Developer, Franchisor, or any other person or entity.



12. A
provision that the lessor agrees that Area Developer may not assign the lease or sublease all or any part of its occupancy rights thereunder without Franchisor’s prior written consent.



13. A provision that the lessor’s consent to an assignment of the lease or subletting of the
Premises will not be required in connection with an assignment or subletting Franchisor, or any
parent, subsidiary or affiliated corporation of Franchisor or Area Developer, or another operator
that has been approved by Franchisor to be the franchisee for the Franchised Restaurant.




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     14. A provision that prohibits the lessor from selling or leasing, or allowing the sublease of,
space in the building, or on the property, to any person or entity for a retail food business that
will consist predominantly of salads, sandwiches, or coffee offered in a fast casual environment.
Additionally, the lessor shall not sell and shall prohibit any other tenant or subtenant in the
building, or on the property, from engaging in activities predominantly related to the sale of
sandwiches and salads. In the event lessor does not comply with these restrictions, Franchisee
will have the right to seek an injunction prohibiting the occupancy by the new competing business
or against the existing tenant as the case may be.



2