Document:

Amend to Lease Agmt with Gemini Technology Svcs

 EXHIBIT 10.89 
  
 AMENDMENT TO LEASE AGREEMENT WITH GEMINI TECHNOLOGY SERVICES 
 FOR A PORTION OF THE KEYBANK PARSIPPANY BUILDING

  
 FIRST AMENDMENT TO LEASE AGREEMENT 
  
 THIS FIRST AMENDMENT TO LEASE AGREEMENT (this “Amendment”) made as of the 17 day of January, 2002, by and between TWO GATEHALL
ASSOCIATES, L.L.C. (the “LESSOR”), a Delaware limited liability company, having an address c/o Gale & Wentworth, LLC, 200 Campus Drive, Florham Park, New Jersey 07932, GEMINI TECHNOLOGY SERVICES, INC. (the
“LESSEE”), a Delaware corporation, having an address at c/o Deutsche Bank AG, 1251 Avenue of the Americas, Mail Stop NYC 07-2804, New York, New York 10020, and EXODUS COMMUNICATIONS, INC. (“Exodus”), a Delaware
corporation, having an address at 2831 Mission College Boulevard, Santa Clara, California, 95054-1838. 
  
  
 W I T N E S S E T H 
  
 WHEREAS, pursuant to a certain Lease Agreement dated July 6,
2000 (the “Lease”), LESSOR leased to Exodus, and Exodus hired from LESSOR, approximately 204,515 rentable square feet of space (the “Demised Premises”) in the building commonly known as Two Gatehall
Drive, Parsippany, New Jersey; and 
  
 WHEREAS, pursuant to an Asset Purchase Agreement dated as of the date hereof
between Deutsche Bank, AG, New York Branch (“Deutsche New York”) (an affiliate of LESSEE) and Exodus (the “Asset Purchase Agreement”), Exodus has agreed to assign all of its right, title and interest as
“tenant” under the Lease to LESSEE and Deutsche New York has agreed to cause LESSEE to assume all of the obligations and liabilities of the “tenant” under the Lease, subject however to the terms of the Asset Purchase Agreement;
and 
  
 WHEREAS, LESSEE and LESSOR desire to modify the Lease in certain respects, all subject to and in accordance
with the terms and conditions contained herein. 
  
 NOW, THEREFORE, in consideration of the mutual convenants
contained herein and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, LESSOR and LESSEE hereby agree as follows: 
  
 1.  Capitalized terms used herein but not defined herein shall have the meanings given in the Lease. 
  
 2.  As of the Contingency Satisfaction Date (as that term is defined in Paragraph 10(a) of this Amendment), the Lease shall 

 be deemed amended as follows: 
  
 (a)  The first sentence of Section 2.3(b) of the Lease shall be deleted in its entirety and the following sentence is inserted in lieu thereof: 
  
 Provided no Event of Default is occurring as of the exercise of LESSEE’S extension right or as of the day preceding the commencement
of the Option Period in question, then LESSEE shall have the right to extend the Term for the Option Period in question by notice given to LESSOR not less than twelve (12) months, nor more than fifteen (15) months, prior to the commencement of the
Option Period in question. 
  
 (b)  Section 2.3(g) of the Lease shall be deleted in its
entirety. 
  
 (c)  Section 8.1 of the Lease shall be amended by inserting the phrase
“, including a data center,” immediately following the word “facilities” in the fifth (5th) line thereof. 
  
 (d)  Subsection 16.7(b)(ii) of the Lease shall be amended by deleting the last sentence of said Subsection. 
  
 (e)  Section 16.16 of the Lease shall be deleted in its entirety, it being understood that LESSEE shall not have the right to mortgage its
interest in the Lease. 
  
 (f)  Clause (b) of Section 19.1 of the Lease shall be deleted in
its entirety. 
  
 (g)  Article 26 of the Lease shall be amended by deleting the notice
addresses for LESSEE and inserting the following addresses in lieu thereof: 
  
 Gemini Technology
Services, Inc. 
 c/o Deutsche Bank AG 
 1251 Avenue of the Americas 
 Mail Stop NYC 07-2804 
 New York, New York 10020 
 Attn. Corporate Real Estate Services, Bruce Bloch 

Fax No. (212) 469-3415 

 
 2 

 With a copy of any default notice to: 
  
 Moses & Singer LLP 
 1301 Avenue of the
Americas 
 New York, New York 10019 
 Attn. Richard Strauss, Esq. 
 Fax No. (212) 554-7700 
  
 (h)  Article 28 of the Lease shall be deleted in its entirety, and the following Article 28 shall be inserted in lieu thereof: 

 
  
 ARTICLE 28 
 SECURITY 
  
 28.1  (a)  On or before the Contingency
Satisfaction Date, LESSEE shall deliver to LESSOR a one (1) year, irrevocable, unconditional letter of credit for the benefit of LESSOR in the amount of THIRTY FIVE MILLION DOLLARS ($35,000,000.00 USD), issued by an Acceptable Issuer (as hereinafter
defined) and containing, among other provisions, (i) an “evergreen clause” providing that it shall automatically renew as of its initial and each subsequent expiry date unless the issuing bank gives LESSOR written notice of the non-renewal
at least sixty (60) days prior to the then applicable expiry date, and (ii) a provision obligating the issuing bank to issue a new letter of credit, without charge, to any assignee of LESSOR’S interest under the Lease, and (iii) a provision
stating that the letter of credit shall not in any way be modified or amended without LESSOR’S prior written consent, and (iv) such other commercially reasonable provisions as LESSOR may require from time to time during the Term. Such letter of
credit to be delivered by LESSEE on or before the Contingency Satisfaction Date shall be substantially in the form annexed hereto as Exhibit K, with any deviations from such form subject to LESSOR’s prior written approval, which approval
shall not be unreasonably withheld. The term “Acceptable Issuer”, as used herein, shall mean a commercial bank having (x) an office within the New York City/New Jersey Metropolitan Area, (y) a rating of A or better by
Standard & Poor’s or any successor thereto, and (z) a combined capital, surplus and undivided profits of not 

 
 3 

 less than $1,000,000,000.00. LESSOR hereby acknowledges that, as of the date hereof, based on the representation of
LESSEE set forth in Section 28.7 hereof, Deutsche New York, as a New York branch of Deutsche Bank, AG, satisfies said criteria for an Acceptable Issuer. 
  
 (b)  The letter of credit and any proceeds thereof shall be held by LESSOR as security for the full and faithful performance by LESSEE of the
terms and conditions by it to be observed and performed under the Lease. The letter of credit or any proceeds thereof shall not be considered an advanced payment of rent or a measure of LESSOR’S damages in case of a default by LESSEE. If any
Basic Rent, Additional Rent or other sum payable by LESSEE to LESSOR becomes overdue and remains unpaid after the giving of any applicable notice of default required herein and the expiration of any applicable cure period provided for herein, or
should LESSEE fail to perform any of the terms and conditions of this Lease after the giving of any applicable notice required hereunder and the expiration of any applicable cure period provided for herein, then LESSOR, at its option, and without
prejudice to any other remedy which LESSOR may have on account thereof, shall have the right to draw on the letter of credit and apply the proceeds thereof in the amount required to compensate or reimburse LESSOR, as the case may be, toward the
payment of Basic Rent, Additional Rent or other such sum payable hereunder, or loss or damage actually sustained by LESSOR due to the breach or failure to perform on the part of LESSEE, or any other amounts to which LESSOR is entitled under the
Lease on account of LESSEE’S breach or failure to perform. 
  
 (c)  (i)  Subject to the provisions hereof, LESSOR agrees that the amount of the letter of credit required as security under the Lease (initially $35,000,000.00 USD) shall be reduced by TWO MILLION DOLLARS
($2,000,000.00 USD) on the first anniversary of the Contingency Satisfaction Date and shall be further reduced by TWO MILLION DOLLARS ($2,000,000.00 USD) on each subsequent anniversary of the Contingency Satisfaction Date, unless an “Event of
Default” is occurring as of the anniversary date in question, in which case there shall be no reduction in the letter of credit for such year but subsequent annual reductions 

 
 4 

 shall continue in accordance with and subject to the provisions hereof provided no Event of Default is occurring as of
the applicable subsequent anniversary of the Contingency Satisfaction Date. Notwithstanding anything to the contrary contained in this Article, in no event shall the amount of the letter of credit be reduced below FIFTEEN MILLION DOLLARS
($15,000,000.00 USD). 
  
 (ii)  Subject to the provisions hereof, if LESSEE receives a
Standard & Poor’s (or any successor thereto) “long-term issuer credit rating” of A or better and LESSEE gives LESSOR notice thereof, then, for as long as such credit rating remains at A or better, the amount of the letter of
credit required as security hereunder shall be reduced to FIFTEEN MILLION DOLLARS ($15,000,000.00 USD) unless the letter of credit has already been reduced to said amount pursuant to subsection (i) above. 
  
 (iii)  On or after the effective date of any such reduction of the letter of credit pursuant to this Section
28.1(c), LESSEE shall have the right to replace the letter of credit then held by LESSOR in accordance with the provisions of Section 28.5(d) hereof. From and after the effective date of any such reduction of the letter of credit and
prior to the replacement thereof by LESSEE pursuant to Section 28.5(d), LESSOR shall not draw on the letter of credit in an amount in excess of the then applicable reduced amount for the letter of credit. 
  
 (iv)  If, after the reduction of the letter of credit pursuant to Subsection 28.1(c)(ii), Standard &
Poor’s (or any successor thereto) lowers LESSEE’S long-term issuer credit rating to below A, LESSEE shall provide LESSOR with notice thereof, and, provided the amount of the letter of credit then required under Subsection 28.1(c)(i)
is greater than $15,000,000.00, LESSEE shall, within five (5) business days after any such lowering of LESSEE’S credit rating, deliver to LESSOR either (a) a replacement letter of credit in the face amount of the letter of credit then required
pursuant to Subsection 28.1(c)(i) and otherwise satisfying the requirements of this Article 28, or (b) an amendment to the letter of credit then held by LESSOR increasing the face amount 

 
 5 

 of the letter of credit to the amount then required pursuant to Subsection 28.1(c)(i) and otherwise satisfying
all of the requirements of this Article 28. 
  
 28.2  Conditioned upon the full
compliance by LESSEE of all of the terms of this Lease as of the date of LESSOR’S return of the letter of credit pursuant to this Section, and the receipt by LESSOR of all sums due hereunder as of such date, said letter of credit then held by
LESSOR, and any proceeds of any draw of the letter of credit by LESSOR which have not been applied by LESSOR in accordance with the provisions hereof, shall be returned to LESSEE within thirty (30) days after the end of the Term, unless there is a
continuing Event of Default. 
  
 28.3  In the event of bankruptcy or other debtor-creditor
proceeding against LESSEE, any proceeds of the letter of credit shall be deemed to be applied first to the payment of rent and other charges due LESSOR for all periods prior to filing of such proceedings. 
  
 28.4  In the event of any transfer of title to the Premises, or any assignment of LESSOR’S interest under
this Lease, LESSOR shall transfer the letter of credit and any proceeds thereof that have not previously been applied by LESSOR in accordance with the provisions hereof to said transferee or assignee and LESSOR shall thereupon be released by LESSEE
from all liability for the return of such letter of credit and/or proceeds, as the case may be; provided, however, LESSOR shall not be obligated to transfer the letter of credit or proceeds in the event of (i) a collateral assignment of its interest
under the Lease, or (ii) any transfer of fee title to the Premises where LESSOR retains a leasehold interest in the Premises and retains the lessor’s interest under the Lease. In the event of such transfer of the letter of credit and any such
proceeds thereof, LESSEE agrees to look to the new lessor for the return of the letter of credit and any proceeds thereof. It is hereby agreed that the provisions of this Section shall apply to every transfer or assignment made of the letter of
credit and/or the proceeds thereof to a new lessor. Nothing contained in this Section 28.4 shall be deemed or construed to relieve or limit LESSEE’S obligations 

 
 6 

 under Section 28.5(d) or under any other provision hereof. 
  

28.5  (a)  LESSOR shall have the right to draw down the letter of credit pursuant to Section 28.1 or Section 28.5(b)
and to apply the proceeds thereof in accordance with the provisions of Section 28.1. To exercise its right to draw on the letter of credit, (i) LESSOR shall present the letter of credit to the issuing bank at the office in New York City/New
Jersey set forth on the letter of credit and (ii) LESSOR shall deliver to the issuing bank a statement from LESSOR setting forth the amount of the draw and stating that LESSOR is entitled to draw down the letter of credit pursuant to the provisions
of Section 28.1 or Section 28.5(b) of this Lease, as the case may be. If LESSOR exercises its right to draw on the letter of credit, then, within ten (10) business days after demand, LESSEE shall deliver to LESSOR either (x) a
replacement letter of credit issued by an Acceptable Issuer in the full amount of the letter of credit then required pursuant to Section 28.1 and satisfying all of the other requirements of said Section 28.1, or (y), provided the
issuer of the letter of credit then held by LESSOR continues to be an Acceptable Issuer, an amendment to such letter of credit which restores the face amount thereof to the full amount then required pursuant to Section 28.1 and which
amendment shall otherwise satisfy all of the requirements of Section 28.1. Upon receipt of any such replacement letter of credit, LESSOR shall return to LESSEE (1) the replaced letter of credit then held by LESSOR, and (2) any of the proceeds
of the draw of such replaced letter of credit which have not been applied by LESSOR in accordance with Section 28.1. Upon receipt of any such amendment to the letter of credit then held by LESSOR, LESSOR shall return to LESSEE any of the
proceeds of the draw of such letter of credit which have not been applied by LESSOR in accordance with Section 28.1. 
  
 (b)  (i)  If any letter credit held by LESSOR is not renewed by the issuer thereof, then, at least forty five (45) days prior to the expiration of the letter of credit, LESSEE shall
deliver to LESSOR a replacement letter of credit issued by an Acceptable Issuer, containing the same terms and for the face 

 
 7 

 amount then required under Section 28.1. From time to time throughout the Term (but not more frequently than one
(1) time per annum) LESSOR may request that LESSEE deliver to LESSOR a letter from the issuing bank of the letter of credit confirming that the letter of credit remains in full force and effect. Within ten (10) business days after receiving any such
request, LESSEE shall deliver to LESSOR a statement (the “Confirming Statement”) executed by the issuing bank, in form reasonably satisfactory to LESSOR, confirming that the letter of credit remains in full force and effect
and stating the then applicable expiration date (subject to automatic extension) of the letter of credit. In addition, if at any time during the Term the issuing bank of the letter of credit then being held by LESSOR (including, without limitation,
Deutsche New York) no longer satisfies all of the criteria for an Acceptable Issuer, because (x) Standard & Poor’s (or any successor) lowers the rating of said issuing bank (or, in the case of Deutsche New York, Standard & Poor’s
lowers the rating of Deutsche Bank, AG) below A, or (y) said issuing bank (or Deutsche Bank, AG, if the issuer is Deutsche New York) no longer has combined capital, surplus and undivided profits of not less than $1,000,000,000.00 USD, or (z) said
issuing bank no longer has an office within the New York City/ New Jersey Metropolitan Area, then LESSEE shall deliver to LESSOR, within thirty (30) days after the lowering of the rating, the reduction in combined capital, surplus and undivided
profits below said level, or the closing by the issuing bank of its last office in the New York City/ New Jersey Metropolitan Area, as the case may be, a replacement letter of credit issued by an Acceptable Issuer containing substantially the same
terms and for the face amount then required under Section 28.1. 
  
 (ii)  In the
event LESSEE fails to deliver any replacement letter of credit or Confirming Statement, as the case may be, on or before the date set forth in Subsection 28.5(b)(i), LESSOR shall have the right to draw down the entire amount of the letter of
credit; provided, however, (1) in the event that LESSEE’S obligation to deliver a replacement letter of credit arises as a result of the issuing bank of the letter of credit no longer satisfying all of the criteria of an Acceptable Issuer,
then, unless the 

 
 8 

 issuing bank is Deutsche New York or any of its affiliates, LESSOR shall not draw on the letter of credit pursuant to
this Subsection 28.5(b)(ii) unless LESSEE has failed to deliver to LESSOR a replacement letter of credit satisfying the requirements hereof on or before the later to occur of (x) the tenth (10th) day after LESSOR gives LESSEE notice that the
issuing bank is no longer an Acceptable Issuer, or (y) the thirtieth (30th) day after the date on which
the issuing bank no longer satisfies all of the criteria of an Acceptable Issuer, and (2) in the event LESSEE fails to deliver any Confirming Statement, LESSOR shall not draw on the letter of credit on account of such failure prior to the forty
fifth (45th) day before the expiration of the then current term of the letter of credit. Any proceeds of the draw of the letter of credit made pursuant to this Subsection 28.5(b)(ii) shall be held by LESSOR in a trust account or accounts with
a commercial bank or banks selected by LESSOR in its sole discretion; such proceeds, unless applied by LESSOR in accordance with the provisions hereof, shall not be commingled with other funds of LESSOR or any other party. Any such proceeds may be
applied by LESSOR at any time in accordance with the provisions of Section 28.1(b). Notwithstanding that such funds are held in a trust account, any interest which accrues thereon shall be the property of LESSOR and shall not be paid to
LESSEE. 
  
 (c)  Notwithstanding anything to the contrary contained herein, LESSEE hereby
expressly acknowledges that the drawing down of said letter of credit shall not operate as a waiver of or preclude LESSOR from exercising any of LESSOR’S other rights and remedies under this Lease. In addition, LESSEE hereby agrees that LESSOR
shall not be required to give LESSEE any prior notice of the drawing down of the letter of credit, and LESSEE hereby waives any such notice to which it may be entitled. The provisions of this Section shall not be deemed or construed as a waiver of
any of LESSEE’S rights under Article 19 of the Lease. 
  
 (d)  (i)  In the event of an assignment of this Lease by LESSOR, LESSEE shall obtain, at its sole cost and expense, either (x) a new letter of credit from the issuing bank containing the same terms and

 
 9 

 for the same face amount as the letter of credit then held by LESSOR which names the new lessor as the beneficiary or (y)
the written consent of the issuing bank to the assignment of the then existing letter of credit from the existing LESSOR to the new lessor in form and substance reasonably satisfactory to the new lessor. 
  
 (ii)  LESSEE shall have the right from time to time throughout the Term to deliver to LESSOR a replacement
letter of credit issued by an Acceptable Issuer in the full amount then required under Section 28.1 and satisfying all of the other requirements for the letter of credit under said Section 28.1. 
  
 (iii)  If LESSEE obtains such a new letter of credit or replacement letter of credit, LESSOR shall surrender
the existing letter of credit to LESSEE simultaneously with LESSOR’S receipt of the new or replacement letter of credit. The parties agree to coordinate the delivery of a new letter of credit and surrender of the existing letter of credit so
that it is done on the effective date of the assignment of this Lease by LESSOR. In the event that the written consent of the issuing bank to the assignment of the then existing letter of credit is to be delivered pursuant to Subsection
28.5(d)(i), LESSEE and LESSOR shall coordinate such delivery such that it is done on or prior to the effective date of the assignment of the Lease by LESSOR. 
  
 28.6.  If Standard & Poor’s, or any successor thereto, shall change its rating system, then the “A or better” rating required
under this Article shall be automatically adjusted to the comparable rating under the new system. If Standard & Poor’s, or its successor, shall cease to maintain or publish a rating, then a comparable rating shall be utilized from a
recognized authority (comparable to Standard & Poor’s) in lieu of the rating required hereunder. 
  
 28.7  LESSEE hereby represents and warrants to LESSOR that (i) Deutsche New York is an unincorporated branch bank of Deutsche Bank, AG, a banking corporation organized under the laws of the Federal Republic of Germany, and,
(ii) Deutsche Bank, AG will be bound by, and will have liability to LESSOR for, 

 
 10 

 
all of the obligations of Deutsche New York under any letter of credit issued to LESSOR by Deutsche New York pursuant to the terms hereof. 
  

(i)  Section 31.9 of the Lease shall be deleted in its entirety. 
  
 (j)  Exhibit C-1 to the Lease shall be deleted in its entirety, and Exhibit C-1 to this Amendment shall be inserted in lieu thereof.

  
 (k)  Exhibit K to this Amendment shall be inserted into the Lease as Exhibit
K thereto. 
  
 3.  (a)  LESSEE hereby acknowledges that LESSOR and Exodus entered into
certain agreements, pursuant to Section 2.2(b) of the Lease, memorializing the Effective Date with respect to Stage 1 of the Demised Premises, Stage 2 of the Demised Premises, Stage 3 of the Demised Premises, and Stage 4 of the Demised
Premises, dated, respectively, July 25, 2000, August 14, 2000, October 23, 2000, and December 11, 2000 (collectively, the “Effective Date Agreements”). Copies of the Effective Date Agreements have been delivered to LESSEE. LESSEE
hereby confirms the respective Effective Dates for Stage 1 of the Demised Premises, Stage 2 of the Demised Premises, Stage 3 of the Demised Premises, and Stage 4 of the Demised Premises, as set forth in the Effective Date Agreements. 

 
 (b)  Exodus hereby acknowledges that Exodus failed to execute and deliver to LESSOR such an agreement
memorializing the Effective Date with respect to Stage 5 of the Demised Premises, as required by Section 2.2(b) of the Lease. Exodus hereby agrees, and LESSEE hereby acknowledges, that (i) LESSOR has delivered Stage 5 of the Demised Premises
in accordance with the Lease; (ii) the Effective Date for Stage 5 of the Demised Premises is April 13, 2001; (iii) Basic Rent with respect to Stage 5 of the Demised Premises is payable in accordance with Exhibit B to the Lease; and (iv)
LESSEE is not entitled to any credit against Basic Rent under Section 2.1(c) of the Lease. 
  
 4.  LESSEE shall accept the Demised Premises in its “AS IS” physical condition and state of repair as of the Contingency Satisfaction Date. In this regard, LESSOR shall have no obligation to do any work or perform
any services to the Demised Premises or the Premises in connection with this Amendment; provided however, this Paragraph 4 shall not be deemed or
 

 
 11 

 
construed to relieve LESSOR of any of its maintenance or repair obligations expressly set forth in the Lease or relieve Exodus of its obligations under the Lease or the Asset Purchase Agreement.

  
 5.  (a)  LESSEE hereby certifies to LESSOR that, as of the date hereof, LESSEE has no
knowledge of any default, or any event or condition which, with the passage of time or the giving of notice, or both, would constitute a default, by LESSOR under the Lease. 
  
 (b)  LESSEE acknowledges and agrees that neither LESSOR, nor any agent or representative of LESSOR has made, and LESSOR is not liable or
responsible for or bound in any manner by, any express or implied representations, warranties, covenants, agreements, obligations, guarantees, statements, information or inducements pertaining to the Building, the Demised Premises, the Lease, this
Amendment, or any other matter or thing with respect thereto, except as expressly set forth in the Lease and except as expressly set forth in Paragraph 5(c) hereof. 
  
 (c)  LESSOR hereby certifies to LESSEE that, as of the date hereof, (i) Exodus has paid LESSOR all rental and other amounts currently due and
owing to LESSOR under the Lease, except for the amounts specified in Section I of Schedule 1 annexed hereto and made a part hereof and except for late charges and interest payable under the Lease relating to such amounts (the late charges and
interest payable with respect to the amounts specified in Section I of Schedule 1 are hereinafter called the “Current Late Charges”), (ii) LESSOR has no knowledge of any default, or any event or condition which, with the
passage of time or the giving of notice, or both, would constitute a default, by Exodus under the Lease, except as listed on Schedule 1, (iii) LESSOR has received no written notice from Exodus that Exodus has assigned its interest in the
Lease or sublet all or any portion of the Demised Premises, and (iv) the Lease has not been amended. Within five (5) business days after receiving a written request therefor from LESSEE made prior to the Contingency Satisfaction Date, LESSOR shall
execute and deliver to LESSEE a supplemental statement certifying that, as of the date of the supplemental statement, (i) LESSOR has no knowledge of any default, or any event or condition which, with the passage of time or the giving of notice, or
both, would constitute a default, by Exodus under the Lease, except as listed in such supplemental statement, (ii) LESSOR has received no written notice from Exodus that Exodus has assigned its interest under the Lease or sublet all or any portion
of the
 

 
 12 

 
Demised Premises, except as listed in such supplemental amendment, and (iii) the Lease has not been amended, except as specified in such supplemental statement. Provided LESSEE gives LESSOR the
advanced notice specified above, which notice indicates the closing date under the Asset Purchase Agreement, and requests the delivery of such supplemental statement on such date, LESSOR shall send the notice for receipt by LESSEE on such closing
date in accordance with the Provisions of Paragraph 11 hereof; provided, however, LESSOR shall have no liability to LESSEE in the event LESSEE does not receive such statement on the closing date. LESSOR hereby agrees that, unless this
Amendment is cancelled pursuant to Paragraph 10(c) hereof, LESSOR waives the payment of the Current Late Charges or any other late charges or interest which may hereafter accrue under the Lease related to the amounts reflected in Section I of
Schedule 1; provided, however, except as expressly set forth in this sentence, nothing contained herein shall be deemed or construed as a waiver by LESSOR of any future late charges or interest payments due under the Lease. 

 
 (d)  LESSOR hereby agrees that it shall not enter into any amendment to the Lease with Exodus without
the prior written consent of LESSEE. 
  
 6.  LESSEE hereby acknowledges that simultaneously with the
execution of this Amendment, LESSEE has entered into a nondisturbance agreement satisfying the requirements of Section 23.1(b) of the Lease with the holder of the mortgage affecting the Premises as of the date hereof. 
  
 7.  On or before the Contingency Satisfaction Date, LESSEE shall deliver to LESSOR the letter of credit required under
Article 28 of the Lease. 
  
 8.  Except as expressly provided in this Amendment, all of the terms
and conditions of the Lease shall remain unmodified and shall continue in full force and effect, and are hereby ratified and confirmed. 
  
 9.  (a)  LESSEE represents and warrants to LESSOR that LESSEE has not dealt with any real estate broker or sales representative in connection with the Asset Purchase Agreement or this Amendment, other
than Insignia/ESG, Inc. (“LESSEE’S Broker”) and CB Richard Ellis, Inc. and CSFB Realty, Inc. (collectively, the “Exodus Brokers”). LESSEE shall pay, or cause to be paid, prior to or simultaneously with
the occurrence of the Contingency Satisfaction Date, any and all sums due LESSEE’S Broker in connection with the Asset Purchase Agreement
 

 
 13 

 
and the transactions contemplated thereby and/or this Amendment, and, after the Contingency Satisfaction Date, shall provide LESSOR with evidence of the payment thereof within five (5) business
days after receiving any request therefor from LESSOR. LESSEE hereby agrees to indemnify, defend and hold harmless LESSOR, LESSOR’S managing agent, and the respective members, partners, directors, officers and employees of the foregoing
entities from and against any threatened or asserted claims, liabilities, losses or judgements (including reasonable attorneys’ fees and disbursements) by any broker or sales representative, including LESSEE’S Broker, but excluding the
Exodus Brokers, claiming or alleging to have dealt with LESSEE in connection with the Asset Purchase Agreement or this Amendment. This indemnification shall survive the expiration or earlier termination of the Lease or the cancellation of this
Amendment. 
  
 (b)  Exodus represents and warrants to LESSOR that Exodus has not dealt with
any real estate broker or sales representative in connection with the Asset Purchase Agreement or this Amendment, other than LESSEE’S Broker and the Exodus Brokers. Exodus shall pay, or cause to be paid, prior to or simultaneously with the
occurrence of the Contingency Satisfaction Date, any and all sums due the Exodus Brokers in connection with the Asset Purchase Agreement and the transactions contemplated thereby and/or this Amendment, and shall provide LESSOR with evidence of the
payment thereof within five (5) days after receiving a request therefor from LESSOR. Exodus hereby agrees to indemnify, defend and hold harmless LESSOR, LESSOR’S managing agent, and the respective members, partners, directors, officers and
employees of the foregoing entities from and against any threatened or asserted claims, liabilities, losses or judgements (including reasonable attorneys’ fees and disbursements) by any broker or sales representative, including the Exodus
Brokers but excluding LESSEE’S Broker, claiming or alleging to have dealt with Exodus in connection with the Asset Purchase Agreement or this Amendment. This indemnification shall survive the expiration or earlier termination of the Lease or
the cancellation of this Amendment. 
  
 (c)  LESSOR represents and warrants to LESSEE that
LESSOR has not dealt with any real estate broker or sales representative in connection with this Amendment, other than LESSEE’S Broker and the Exodus Brokers. LESSOR hereby agrees to indemnify, defend and hold harmless LESSEE and LESSEE’S
directors, officers and employees from and against any
 

 
 14 

 
threatened or asserted claims, liabilities, losses or judgements (including reasonable attorneys’ fees and disbursements) arising out of or in connection with a breach of the foregoing
representation by LESSOR. This indemnification shall survive the expiration or earlier termination of the Lease or the cancellation of this Amendment. 
  
 10.  (a)  LESSOR and LESSEE acknowledge and agree that this Amendment is contingent upon the occurrence of each of the following conditions: 
  
 (1)  a final non-appealable order in the form of Schedule 2 annexed hereto (the “Sale
Order”) has been entered by the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) and there shall be no unsatisfied conditions to the Sale Order’s effectiveness; 

 
 (2)  all pre-petition and post-petition defaults under the Lease have been cured in accordance with
the Sale Order as of the date of the execution and delivery of the Assignment and Assumption (as hereinafter defined) by LESSEE and Exodus, including, without limitation, those specified in Schedule 1 annexed hereto; 
  
 (3)  LESSEE and Exodus shall have executed and unconditionally delivered to each other and to LESSOR an
assignment and assumption of the Lease in accordance with the Sale Order in the form annexed hereto as Schedule 3 (the “Assignment and Assumption”); and 
  
 (4)  a letter of credit satisfying all of the requirements of Article 28 of the Lease, as modified by this Amendment, shall have been delivered
to LESSOR and any conditions to the effectiveness of such delivery shall have been satisfied. 
  
 The term
“Contingency Satisfaction Date”, as used herein, means the date on which the last of the conditions set forth in the immediately preceding sentence has been satisfied. Within five (5) business days after the occurrence of the
Contingency Satisfaction Date, LESSOR and LESSEE shall execute and deliver to each other an agreement memorializing the occurrence of the Contingency Satisfaction Date and confirming that the cancellation right set forth in Paragraph 10(c)
hereof is null and void and of no further force or effect, provided, however, the failure to execute and deliver such agreement shall not affect the occurrence of the Contingency Satisfaction Date. 

 
 15 

  
 (b)  LESSEE agrees that it shall not enter into the
Assignment and Assumption until all other conditions of the Contingency Satisfaction Date set forth in Paragraph 10(a) hereof have been satisfied. 
  
 (c)  If the Contingency Satisfaction Date has not occurred on or before the Outside Date (as hereinafter defined), LESSOR and LESSEE shall each
have the right to cancel this Amendment by notice given to the other party at any time thereafter but prior to the occurrence of the Contingency Satisfaction Date whereupon, except as expressly set forth herein, this Amendment shall be null and void
and of no further force and effect. The term “Outside Date”, as used herein, means March 31, 2002; provided, however, LESSEE shall have the right by notice given to LESSOR on or before March 31, 2002 (time being of the essence with
respect to such notice) to extend the Outside Date to a date specified by LESSEE in such notice, which date shall not be later than June 3, 2002, provided that at the time of the giving of such notice the following conditions shall be satisfied: (1)
Exodus shall have paid all rental and other amounts then due and payable under the Lease or provided LESSOR which adequate assurances of the payment of all rental and other amounts which may be due or become due under the Lease prior to the Outside
Date (as extended) in the form of a letter of credit or other security reasonably satisfactory to LESSOR, and (2) the Asset Purchase Agreement remains in full force and effect. If the Asset Purchase Agreement is terminated prior to the Contingency
Satisfaction Date, LESSEE shall give LESSOR notice thereof within five (5) days after the date of such termination, and LESSOR and LESSEE shall each have the right to cancel this Amendment by notice given to the other party at any time after the
termination of the Asset Purchase Agreement but prior to the occurrence of the Contingency Satisfaction Date whereupon, except as expressly set forth herein, this Amendment shall be null and void and of no further force and effect. 

 
 11.  Prior to the Contingency Satisfaction Date, all notices or other communications given by LESSEE or LESSOR to the
other hereunder shall be in writing and shall be given in accordance with Article 26 of the Lease as modified by Paragraph 2 of this Amendment notwithstanding that such modifications do not become effective until the Contingency Satisfaction
Date. 
  
 12.  LESSOR is currently holding a letter of credit as security for Exodus’ performance of
its obligations under the
 

 
 16 

 
Lease pursuant to Article 28 thereof. Nothing contained in this Amendment shall be deemed or construed as a waiver of any of LESSOR’S rights under Article 28, including, without limitation,
its right to draw on said letter of credit and apply the proceeds thereof in accordance with said Article 28. Within fifteen (15) days after the occurrence of the Contingency Satisfaction Date, LESSOR shall deliver to Exodus said letter of credit,
if it has not been delivered to the issuer thereof, together with the proceeds of any draw of said letter of credit which have not been applied by LESSOR in accordance with Article 28 of the Lease. For the purposes of this Paragraph 12,
Article 28 of the Lease shall mean Article 28 in its form prior to amendment pursuant to the terms of this Amendment. 
  
 13.  This Amendment may not be changed orally and shall be binding upon and inure to the benefit of the parties hereto and their respective successors, permitted assigns and legal representatives. This Amendment embodies
and constitutes the entire understanding between the parties with respect to the subject matter hereof and all prior agreements, representations and statements, oral or written, relating to the subject matter hereof, are merged into this Amendment.

  
 14.  If any provision of this Amendment shall be held invalid or unenforceable according to law, the
remaining provisions herein shall not be affected thereby and shall continue in full force and effect. 
  
 15.  This Amendment may be executed and delivered in several counterparts, each of which, when so executed and delivered, shall constitute an original, fully enforceable counterpart for all purposes. 

 
 16.  The mailing or delivery of this document or any draft of this document by LESSOR or its agent to LESSEE, its
agent or attorney, shall not be deemed an offer by LESSOR on the terms set forth in this document or draft, and this document or draft may be withdrawn or modified by LESSOR or its agent at any time and for any reason. The purpose of this paragraph
is to place LESSEE on notice that this document or draft shall not be effective, nor shall LESSEE have any rights with respect hereto, unless and until both LESSOR and LESSEE shall execute this document. 

 
 17 

  
 IN WITNESS WHEREOF, the parties hereto have signed this Amendment as of the date
first above written. 
  
 
	 WITNESS:
 	  	 LESSOR:
 
	 
	  	  	 TWO GATEHALL ASSOCIATES, L.L.C
 
	 
	                                      
                                        
             
 	  	 By:
 	 	   /s/    CHRISTOPHER F.
SAMETH                
 
	 
	  	  	  	 	 Name:    Christopher F. Sameth
 
	  	  	  	 	 Title:    Authorized Representative
 
	 
	 WITNESS:
 	  	 LESSEE:
 
	 
	  	  	 GEMINI TECHNOLOGY SERVICES, INC.
 
	 
	                                      
                                        
             
 	  	 By:
 	 	   /s/    D. L.
WIENER                                      
                
 
	 
	  	  	  	 	 Name:    D. L. Wiener
 
	  	  	  	 	 Title:    Vice President
 
	 
	                                      
                                        
             
 	  	 By:
 	 	   /s/    HOWARD
BECKER                                      
        
 
	 
	  	  	  	 	 Name:    Howard Becker
 
	  	  	  	 	 Title:    Vice President
 

 
  
 Exodus executes this Amendment solely for the purpose of agreeing
to the provisions of Paragraphs 3(b), 9(b) and 12 hereof. 
  
 
	 WITNESS:
 	  	 EXODUS COMMUNICATIONs, INC.
 
	 
	                                      
                                        
             
 	  	 By:
 	 	   /s/    LAURIE D.
PRIDDY                                      
      
 
	 
	  	  	  	 	 Name:    Laurie D. Priddy
 
	  	  	  	 	 Title:    EVP Worldwide Operations
 

 

 
 18<PAGE>
                                                                    Exhibit 10.7

                                     FORM OF
                                   COSI, INC.
                         SENIOR SECURED NOTE AND WARRANT
                               PURCHASE AGREEMENT

         THIS SENIOR SECURED NOTE AND WARRANT PURCHASE AGREEMENT (the
"Agreement") is made as of the 12th day of August, 2002, by and between Cosi,
Inc., a Delaware corporation (the "Company"), and each of the Purchasers named
on Schedule I attached hereto (the "Purchasers").

         WHEREAS, the Company desires to enter into a financing with the
Purchasers in an amount of up to $15,000,000, or such additional amount approved
by the Company's Board of Directors not to exceed $25,000,000.

         WHEREAS, the Company and the Purchasers desire to set forth herein the
terms and conditions of such financing.

         NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound, agree as follows:

                                    AGREEMENT

                                   SECTION 1

                          AMOUNT AND TERMS OF THE LOANS

         1.1 The Loans. Subject to the terms of this Agreement, the Company may
borrow from the Purchasers, and each Purchaser shall lend to the Company, the
maximum principal loan amount set forth on Schedule I following such Purchasers
name (as to each Purchaser, the "Commitment"), pursuant to one or more senior
secured promissory notes in the form attached hereto as Exhibit A (the "Notes").
Each of the Purchasers hereby agrees to purchase a Note, subject to the terms
and conditions hereof, on the Closing Date in an original maximum principal
amount equal to such Purchaser's Commitment.

                  (a) The amount of any such borrowing from each Purchaser shall
         be referred to herein as such Purchaser's "Loan" with respect to such
         borrowing, and each event of borrowing shall be referred to herein as a
         "Loan Disbursement" and shall be documented on Schedule A to the Note
         as provided in Section 2 of each Note.

                  (b) The Company may at its sole discretion draw down one or
         more Loan Disbursements on a pro rata basis from the Purchasers from
         time to time during the period commencing on the date hereof and ending
         on the earlier of an initial public offering or August 12, 2003,
         provided that the amount of any Loan requested from any
<PAGE>
         Purchaser may not exceed the excess, if any, of such Purchaser's
         Commitment over the aggregate principal amount of all Loans theretofore
         made by such Purchaser, and the aggregate amount of Loans requested and
         made by all Purchasers in connection with any Loan Disbursement shall
         not exceed the excess of the aggregate Commitments of the Purchasers
         over the principal amount of all Loans theretofore made by the
         Purchasers.

         1.2 Borrowing Mechanics of the Loans.

                  (a) Whenever the Company desires that the Purchasers make a
         Loan Disbursement, the Company shall so notify each Purchaser, in
         writing, no later than 10:00 a.m. (New York City time) at least five
         Business Days in advance of the proposed date of financing (the "Credit
         Date"), the aggregate amount of such Loan Disbursement and the amount
         of each such Purchaser's requested Loan.

                  (b) Each Purchaser shall make the amount of its Loan available
         to the Company not later than 12:00 p.m. (New York City time) on the
         applicable Credit Date by wire transfer of same day funds in dollars.

                                   SECTION 2

                               ISSUANCE OF WARRANT

         2.1 Issuance of Warrants. Subject to the terms and conditions of this
Agreement, the Company shall issue to each Purchaser warrants, as set forth in
Sections 2.2 and 2.3 below, each in the form attached hereto as Exhibit B (the
"Warrant" or "Warrants"). The Warrants shall, (i) unless sooner terminated as
provided therein, not be exercisable until one year and a day from the day that
each such Warrant is issued, (ii) have a term commencing upon issuance and
expiring August 12, 2007, and (iii) be exercisable at an exercise price (subject
to adjustment as set forth in the Warrants) equal to $6.00 per share.

         2.2 Initial Warrants. At the Closing (as defined below) the Company
will issue Warrants pro rata to each Purchaser (the "Initial Warrants") in an
amount representing the right to purchase 60,000 shares of Common Stock, $0.01
par value per share, of the Company, for each $1,000,000 of such Purchaser's
Commitment, or a proportional share thereof. Such amount of Initial Warrants
shall be set forth following such Purchaser's name under the column captioned
"Number of Initial Warrants" on Schedule I hereto.

         2.3 Draw Warrants. At the time of a Loan Disbursement the Company shall
issue to each Purchaser additional Warrants (the "Draw Warrants") in an amount
representing the right to purchase 60,000 shares of Common Stock, $0.01 par
value per share, of the Company, for each $1,000,000 of each Purchaser's Loan
Disbursement, or a proportional share thereof.

                                       2
<PAGE>

                                    SECTION 3

                                   THE CLOSING

         3.1 Closing Date. The closing or the issuance of the Notes and the
Initial Warrants (the "Closing") shall be held as of the date of execution and
delivery of this Agreement by the Company and the Purchasers.

         3.2 Delivery. At the Closing the Company shall deliver to each
Purchaser such Purchaser's Note and Initial Warrants.

                                    SECTION 4

                REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS

         4.1 Purchase for Own Account. By each Purchaser's execution of this
Agreement, each Purchaser hereby confirms that the Notes, the Warrants and the
Common Stock issuable upon exercise of the Warrants (collectively, the
"Securities") to be received by such Purchaser, shall be acquired solely for its
own account and beneficial interest, not as a nominee or agent, for investment
and not for sale or with a view to the resale or distribution of the Securities
or any part thereof, such Purchaser has no present intention of selling (in
connection with a distribution or otherwise), granting any participation in, or
otherwise distributing the same, and does not presently have reason to
anticipate a change in such intention. By executing this Agreement, each
Purchaser further represents that each Purchaser does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participation to such person or to any third person, with respect to any of the
Securities. Each Purchaser represents that it has full power and authority to
enter into this Agreement.

         4.2 Accredited Investor. Each Purchaser is an "accredited investor"
within the meaning of Securities and Exchange Commission Rule 501 of Regulation
D, as now in effect.

The undersigned represents and warrants that the undersigned falls within the
category (or categories) marked. PLEASE INDICATE EACH CATEGORY OF ACCREDITED
INVESTOR THAT YOU, THE UNDERSIGNED, SATISFY, BY PLACING AN "X" ON THE
APPROPRIATE LINE

_______     Category 1.    A bank as defined in Section 3(a)(2) of the Act
                           whether acting in its individual or fiduciary
                           capacity; or

_______     Category 2.    A savings and loan association or other institution
                           as defined in Section 3(a)(5)(A) of the Act whether
                           acting in its individual or fiduciary capacity; or

_______     Category 3.    A broker or dealer registered pursuant to Section 15
                           of the Securities Exchange Act of 1934; or

_______     Category 4.    An insurance company as defined in Section 2(13) of
                           the Act; or

                                       3
<PAGE>

_______     Category 5.    An investment company registered under the Investment
                           Company Act of 1940; or

_______     Category 6.    A business development company as defined in Section
                           2(a)(48) of the Investment Company Act of 1940; or

_______     Category 7.    A small business investment company licensed by the
                           U.S. Small Business Administration under Section
                           301(c) or (d) of the Small Business Investment Act of
                           1958; or

_______     Category 8.    A plan established and maintained by a state, its
                           political subdivision or any agency or
                           instrumentality of a state or its political
                           subdivisions, for the benefit of its associates, with
                           assets in excess of $5,000,000; or

_______     Category 9.    An employee benefit plan within the meaning of the
                           Employee Retirement Income Security Act of 1974 in
                           which the investment decision is made by a plan
                           fiduciary, as defined in Section 3(21) of such Act
                           which is either a bank, savings and loan association,
                           insurance company or registered investment advisor,
                           or an employee benefit plan with total assets in
                           excess of $5,000,000 or, if a self-directed plan, the
                           investment decisions are made solely by persons who
                           are accredited investors; or

_______     Category 10.   A private business development company as defined in
                           Section 202(a)(22) or the Investment Advisers Act of
                           1940; or

_______     Category 11.   An organization described in Section 501(c)(3) of the
                           Internal Revenue Code, a corporation, a Massachusetts
                           or similar business trust, or a partnership, not
                           formed for the specific purpose of acquiring the
                           Notes, with total assets in excess of $5,000,000; or

_______     Category 12.   A director or executive officer of the Company; or

_______     Category 13.   A natural person whose individual net worth, or joint
                           net worth with that person's spouse, at the time of
                           his or her purchase exceeds $1,000,000; or

_______     Category 14.   A natural person who had an individual income in
                           excess of $200,000 in each of the two most recent
                           years or joint income with that person's spouse in
                           excess of $300,000 in each of those years and has a
                           reasonable expectation of reaching the same income
                           level in the current year; or

_______     Category 15.   A trust, with total assets in excess of $5,000,000,
                           not formed for the specific purpose of acquiring the
                           Notes, whose purchase is directed by a sophisticated
                           person as described in SEC Rule 506(b)(2)(ii); or

_______     Category 16.   An entity in which all the equity owners are
                           accredited investors.

                                       4
<PAGE>

         4.3 Information and Sophistication. Each Purchaser acknowledges that it
has received all the information it has requested from the Company (including
the risk factors set forth in Schedule II attached hereto) and that it considers
necessary or appropriate for deciding whether to acquire the Securities.
Purchaser further represents that it has had an opportunity to ask questions and
receive answers from the Company regarding the terms and conditions of the
offering of the Securities and the business, properties, prospects, and
financial condition of the Company, and to obtain any additional information
necessary to verify the accuracy of the information given to such Purchaser.

         4.4 Investment Experience. Each Purchaser represents that it has such
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risk of the investment in the Securities.

         4.5 Ability to Bear Economic Risk. Each Purchaser acknowledges that
investment in the Securities involves a high degree of risk, and represents that
such Purchaser is able, without materially impairing its financial condition, to
hold the Securities for an indefinite period of time and to suffer a complete
loss of its investment.

         4.6 Further Limitations on Disposition. Without in any way limiting the
representations set forth above, each Purchaser further agrees not to make any
disposition of all or any portion of the Securities unless and until:

                  (i) There is then in effect a Registration Statement under the
         Securities Act of 1933 (the "Act"), as amended, covering such proposed
         disposition and such disposition is made in accordance with such
         Registration Statement; or

                  (ii) Such Purchaser shall have notified the Company of the
         proposed disposition and shall have furnished the Company with a
         detailed statement of the circumstances surrounding the proposed
         disposition, and if requested by the Company, such Purchaser shall have
         furnished the Company with an opinion of counsel, satisfactory to the
         Company, that such disposition will not require registration under the
         Act, as amended.

                  (iii) Notwithstanding the provisions of paragraphs (a) and (b)
         above, no such registration statement or opinion of counsel shall be
         necessary for a transfer by Purchaser to a shareholder or partner (or
         retired partner) of such Purchaser, or transfers by gift, will or
         intestate succession to any spouse or lineal descendants or ancestors,
         if all transferees agree in writing to be subject to the terms hereof
         to the same extent as if they were the Purchaser hereunder and, prior
         to any such transfer, such Purchaser delivers such written agreement to
         the Company.

         4.7 Company's Reliance. Each Purchaser understands that the Company
will rely upon the accuracy and truth of the foregoing representations, and the
Purchaser hereby consents to such reliance.

                                       5
<PAGE>

         4.8 No Brokers. The Purchasers have not employed any broker or finder
in connection with the transactions contemplated by this Agreement.

         4.9 Lock-Up Agreement. Each Purchaser, if requested of such Purchaser
and all employees of the Company holding equal or larger numbers of shares of
the Company's Common Stock by an underwriter of Common Stock or other securities
of the Company, shall agree not to sell or otherwise transfer or dispose of any
Securities of the Company acquired hereunder (except Securities included in such
registration) during such 180 day period following the effective date of a
registration statement of the Company filed under the Act, as amended, or such
shorter period of time as the underwriter shall require. Such agreement shall be
in writing in the form satisfactory to such underwriter. The Company may impose
stop-transfer instructions with respect to such Securities subject to the
foregoing restriction until the end of said period.

         4.10 Due Authorization. Each Purchaser is duly organized and validly
existing under the laws of the state of its organization and has all power and
authority to enter into and consummate the transactions contemplated by this
Agreement and the agreements contemplated herein. This agreement and each of the
agreements and documents referenced hereto to which such Purchaser is a party
has been duly authorized by all necessary action on the part of such Purchaser.
This Agreement and each of the documents referenced herein to which such
Purchaser is a party constitutes a valid and binding agreement of such Purchaser
enforceable against such Purchaser in accordance with its terms, except to the
extent that enforceability may be limited by bankruptcy, insolvency or other
similar laws affecting creditors' right generally.

         4.11 Legend. Each Purchaser understands that the certificates
evidencing the Securities (other than the Notes) will bear a legend in
substantially the following form:

                  THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
                  REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
                  "ACT") OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED
                  STATES. THE SECURITIES EVIDENCED BY THIS CERTIFICATE MAY NOT
                  BE OFFERED, SOLD OR TRANSFERRED FOR VALUE, DIRECTLY OR
                  INDIRECTLY, IN THE ABSENCE OF SUCH REGISTRATION UNDER THE ACT
                  AND QUALIFICATION UNDER APPLICABLE STATE LAWS, OR PURSUANT TO
                  AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND QUALIFICATION
                  UNDER APPLICABLE STATE LAWS, THE AVAILABILITY OF WHICH IS TO
                  BE ESTABLISHED TO THE REASONABLE SATISFACTION OF COSI, INC.

         4.12 No General Solicitation. Each Purchaser acknowledges that it has
not been offered or sold any Securities pursuant to any advertisement, article,
notice or other communication published in any newspaper, magazine, or similar
media or broadcast over

                                       6
<PAGE>

television or radio, nor any seminar or meeting whose attendees have been
invited by any general solicitation or general advertising.

                                   SECTION 5

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

           The Company hereby represents and warrants to the Purchasers that:

         5.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. The
Company is duly qualified to transact business and is in good standing in each
jurisdiction in which the failure to so qualify would have a material adverse
effect on its business or properties. 5.2 Authorization. All corporate action on
the part of the Company, its officers, directors and stockholders necessary for
the authorization, execution and delivery of this Agreement, the performance of
all obligations of the Company hereunder and the authorization, issuance, sale
and delivery of the Notes and Warrants being sold hereunder has been taken or
will be taken prior to the Closing, and this Agreement and each Note constitutes
a valid and legally binding obligation of the Company, enforceable in accordance
with its terms, except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally.

         5.3 Litigation. There is no action, suit, proceeding or investigation
pending or currently threatened against the Company that questions the validity
of this Agreement, or the right of the Company to enter into this Agreement, or
to consummate the transactions contemplated hereby, or that might result, either
individually or in the aggregate, in any material adverse change in the assets,
condition, affairs or prospects of the Company, financially or otherwise, nor is
the Company aware that there is any basis for the foregoing. The Company is not
a party or subject to the provisions of any order, writ, injunction, judgment or
decree of any court or government agency or instrumentality. There is no action,
suit, proceeding or investigation by the Company currently pending or that the
Company intends to initiate.

         5.4 Absence of Required Consents; No Violations. No consent or approval
of any third party, any court or tribunal, or any administrative, governmental
or regulatory body, agency or authority is required for the execution, delivery
and performance of this Agreement by the Company. Neither the execution,
delivery nor performance of this Agreement by the Company will conflict with or
result in any breach of any provisions of the Certificate of Incorporation, as
amended, (except for any conflict or breach that has been waived) or By-laws of
the Company or violate any order, writ, injunction or decree applicable to the
Company.

                                       7
<PAGE>

                                   SECTION 6
                            COVENANTS OF THE COMPANY

         6.1 Covenants. The Company hereby incorporates by reference the
covenants contained in the Series C Preferred Stock Purchase Agreement dated
March 30, 1999, as amended. The Company shall provide a copy of such covenants
to the Purchasers upon request.

         6.2 Additional Covenant. At the time of each Loan Disbursement the
Company shall certify to the Purchasers, that since the date hereof, no
circumstance or event has occurred which has had a material adverse effect on
the business, assets, results of operations or financial condition of the
Company, taken as a whole.

                                   SECTION 7
                         PRO RATA TREATMENT AND PAYMENTS

         7.1 Pro Rata Treatment and Payments. Each Loan Disbursement from the
Purchasers hereunder shall be made pro rata in accordance with the respective
Commitments of the Purchasers. Each payment by the Company on account of
principal of and interest on the Loans shall be made pro rata in accordance with
the respective outstanding principal amount of the Loans of the Purchasers. All
payments to be made by the Company hereunder, whether on account of principal or
interest, shall be made without set-off or counterclaim and shall be made prior
to 12:00 noon, New York City time, on the due date thereof to the Purchasers, at
the addresses specified on Schedule A hereto, in same day funds. If any payment
hereunder becomes due and payable on a day other than a Business Day, such
payment shall be extended to the next succeeding Business Day and, with respect
to payments of principal, interest thereon shall be payable at the then
applicable rate during such extension.

                                    SECTION 8
                                EVENT OF DEFAULT

         8.1 Event of Default. An Event of Default exists if any of the
following events shall occur and be continuing:

                  (a) The Company shall fail to pay the principal of the Loans
         when due in accordance with the terms hereof; or the Company shall fail
         to pay any interest on the Loans within 10 Business Days of the date
         thereof; or

                  (b) the Company, pursuant to or within the meaning of any
         Bankruptcy Law (defined to include any existing or future law of any
         jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
         reorganization or relief of debtors):

                           (i) commences a voluntary case;

                           (ii) consents to the entry of an order for relief
                  against it in an involuntary case;

                                       8
<PAGE>

                           (iii) consents to the appointment of a Custodian of
                  it or for any substantial part of its property; or

                           (iv) makes a general assignment for the benefit of
                  its creditors or takes any comparable action under any foreign
                  laws relating to insolvency;

                  (c) the Company breaches any provision of the Borrower
         Security Agreement, dated as of August 12, 2002, among the Company and
         the Purchasers hereto (as amended supplemented or otherwise modified
         from time to time, the "Security Agreement") in any material respect,
         and such breach shall continue in effect for 30 days following notice
         to the Company thereof by any Purchaser; or

                  (d) any representation of warranty made by the Company in this
         Agreement or the Security Agreement shall have been incorrect in any
         material respect as of the date made.

         8.2 Acceleration. If an Event of Default occurs and is continuing, (A)
if such event is an Event of Default specified in clause (i) or (ii) of Section
8.1(b), automatically the Loans (with accrued interest thereon) shall
immediately become due and payable and (B) if such event is an Event of Default
the Purchasers may, by notice to the Company, declare the principal of and
accrued but unpaid interest on all the Securities to be due and payable. Upon
such a declaration, such principal and interest shall be due and payable
immediately.

         8.3 Other Remedies. If an Event of Default occurs and is continuing,
the Purchasers may pursue any available remedy to collect the payment of
principal of or interest on the Notes, or to enforce the performance of any
provision of this Agreement. A delay or omission by the Purchasers in exercising
any right or remedy accruing upon an Event of Default shall not impair the right
or remedy or constitute a waiver of or acquiescence in the Event of Default. No
remedy is exclusive of any other remedy. All available remedies are cumulative.

                                   SECTION 9
                                  MISCELLANEOUS

         9.1 Binding Agreement. The terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective successors and
assigns of the parties. Nothing in this Agreement, express or implied, is
intended to confer upon any third party any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.

         9.2 Termination. This Agreement shall terminate at an initial public
offering, provided that the Company has complied in all material respects with
its obligations hereunder.

         9.3 Successors and Assigns. Other than as specifically provided for
herein, this Agreement, and the rights and obligations of each of the parties
hereunder, may not be assigned by any Purchaser without the prior written
consent of the Company. Subject to the foregoing sentence, this Agreement shall
insure to the benefit of, and shall be binding upon, the parties and their
successors and assigns.

                                       9
<PAGE>

         9.4 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of New York as applied to agreements among New York
residents, made and to be performed entirely within the State of New York.

         9.5 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

         9.6 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

         9.7 Notices. Any notice required or permitted under this Agreement
shall be given in writing and shall be deemed effectively given upon receipt or
upon deposit with the United States Post Office, by registered or certified
mail, postage prepaid, addressed to the Company at 242 West 36th Street, 11th
Floor, New York, New York, or to the Purchasers at the address set forth on
Schedule I hereto, or at such other address as such party may designate by ten
days advance written notice to the other party.

         9.8 Modification; Waiver. No modification or waiver of any provision of
this Agreement or consent to departure therefrom shall be effective unless in
writing and approved by the Company and at least 50% of the Purchasers.

         9.9 Entire Agreement. This Agreement, together with the agreements and
documents referred to herein, constitute the entire agreement among the parties
hereto with respect to the subject matter hereof and supersede all prior and
contemporaneous negotiations, agreements and understandings.

         9.10 Expenses. Upon the Closing, the Company shall reimburse the
Purchasers' out-of-pocket expenses in connection with the transaction
contemplated by this Agreement, including reasonable legal fees of counsel
representing the Purchasers, provided the Loans, for such Purchaser, is at least
$5,000,000 pursuant to this Agreement.

         9.11 No Third Party Beneficiaries. Nothing contained in this Agreement
shall be deemed to confer rights on any person or to indicate that this
Agreement has been entered into for the benefit of any person, other than the
parties hereto.

         9.12 Further Assurances. At any time after the Closing, each party
shall upon request of another party, execute, acknowledge and deliver all such
further and other assurances and documents, and will take such action consistent
with the terms of this Agreement, as may be reasonably requested to carry out
the transactions contemplated herein and to permit each party to enjoy its
rights and benefits hereunder.

         9.13 Nouns and Pronouns. Whenever the context may require, any pronouns
used herein shall include the corresponding masculine, feminine or neuter forms,
and the singular form of names and pronouns shall include the plural and vice
versa.

                                       10
<PAGE>

         IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.

                                                                      SCHEDULE I

<TABLE>
<CAPTION>
                                                                                                               Number of Initial
          Purchaser                                                            Commitment                          Warrants
          ---------                                                            ----------                          --------
<S>                                                                            <C>                             <C>
Diamond Family Foundation                                                        $75,000                             4,500

LJCB Nominees Pty Ltd                                                          $2,500,000                            1,500

Austin Hearst                                                                   $140,000                             8,400

Talon Opportunity Fund, LP                                                      $750,000                            45,000

Northwood Ventures LLC                                                          $240,000                            14,400

Northwood Capital Partners LLC                                                   $60,000                             3,600

Eric Gleacher                                                                  $1,500,000                           90,000

EGI-Fund (02-04) Investors, LLC                                                 $256,000                            15,360

Cosi Partners                                                                   $250,000                            15,000

Charles G. Phillips                                                             $579,570                            34,774
</TABLE>

                                       11
<PAGE>

<TABLE>
<CAPTION>
                                                                                                               Number of Initial
          Purchaser                                                            Commitment                          Warrants
<S>                                                                            <C>                             <C>
Daniel L. Abbott, MD Trustee for Abbott Family Trust                            $250,000                            15,000

Rod Dammeyer                                                                    $100,000                             6,000

John Diamond                                                                     $25,000                             1,500

Marilyn Diamond                                                                 $150,000                             9,000

Jamie Diamond Schwartz                                                           $25,000                             1,500

David Kelson                                                                     $25,000                             1,500

Cosi CH, LLC                                                                   $4,095,314                           245,719

LBJ Capital                                                                     $500,000                            30,000

Gail A. Gilbert 1996 Revocable Trust                                           $1,500,000                           90,000

ZAM Holdings, LP                                                               $3,373,616                           202,417
</TABLE>

                                       12
<PAGE>

                                                                     SCHEDULE II
                                  RISK FACTORS

You should carefully consider the following risks, with regard to the Company
(referred to herein as "we" and "our") before entering into the transactions
contemplated herein. If any of the following risks actually occur, the Company's
business could be harmed. In that case the Company could be unable to meet its
financial obligations and you might lose all or part of your investment.

IF WE ARE UNABLE TO ACHIEVE OUR RAPID GROWTH STRATEGY OUR BUSINESS COULD BE
MATERIALLY ADVERSELY AFFECTED.

We are planning a rapid growth strategy which will depend on our ability to open
new restaurants on a timely and profitable basis. We have experienced delays in
restaurant openings from time to time, we may experience delays in the future
and we cannot assure you that we will be able to achieve our expansion goals.

Any inability to implement our growth strategy could materially adversely affect
our business, financial condition, operating results or cash flows. Our ability
to expand successfully will depend on a number of factors, some of which are
beyond our control, including:

o        identification and availability of suitable restaurant sites;

o        competition for restaurant sites;

o        negotiation of favorable leases;

o        management of construction and development costs of new restaurants;

o        securing required governmental approvals and permits;

o        recruitment of qualified operating personnel;

o        competition in new markets; and

o        general economic conditions.

In addition, we contemplate entering new markets in which we have no operating
experience. These new markets may have different demographic characteristics,
competitive conditions, consumer tastes and discretionary spending patterns than
our existing markets, which may cause our new restaurants to be less successful
in these new markets than in our existing markets.

ANY INABILITY TO MANAGE OUR GROWTH EFFECTIVELY COULD MATERIALLY ADVERSELY AFFECT
OUR OPERATING RESULTS.

Failure to manage our growth effectively could harm our business. We have grown
significantly since our inception and intend to grow substantially in the
future. We have increased the number of our restaurants from 36 restaurants as
of December 31, 1999 to 72 restaurants currently. Our existing restaurant
management systems, financial and management controls and information systems
may not be adequate to support our planned expansion. Our ability to manage our
growth effectively will require us to continue to enhance these systems,
procedures and controls and to locate, hire, train and retain operating
personnel. We cannot assure you that we will be able to respond on a timely
basis to all of the changing demands that our planned expansion will impose on
management and on our existing infrastructure. If we are unable to manage our
growth effectively, our business and operating results could be materially
adversely impacted.

                                       13
<PAGE>

YOU SHOULD NOT RELY ON PAST INCREASES IN OUR AVERAGE UNIT VOLUMES AS AN
INDICATION OF OUR FUTURE RESULTS OF OPERATIONS BECAUSE THEY MAY FLUCTUATE
SIGNIFICANTLY.

A number of factors have historically affected, and will continue to affect, our
average sales, including, among other factors:

o        introduction of new menu items;

o        unusually strong initial sales performance by new restaurants;

o        competition;

o        general regional and national economic conditions;

o        consumer trends; and

o        our ability to execute our business strategy effectively.

It is not reasonable to expect our average unit volumes to increase at rates
achieved over the past several years. Changes in our average sales results could
cause the price of our common stock to fluctuate substantially.

WE HAVE A LIMITED OPERATING HISTORY AND WE MAY BE UNABLE TO ACHIEVE
PROFITABILITY.

The first Xando Coffee and Bar was opened in October 1994 and the first Cosi
Sandwich Bar was opened in February 1996. We are currently operating 72
restaurants, 15 of which have been open for less than one year. Accordingly, you
have limited information with which to evaluate our business and prospects. As a
result, forecasts of our future revenues, expenses and operating results may not
be as accurate as they would be if we had a longer history of operations and of
combined operations. Since we were formed, we have incurred net losses of
approximately $104 million through the end of fiscal 2001, primarily due to new
restaurant opening expenses, impairment charges, the cost of our merger in 1999
and the costs of hiring senior management to develop and implement our expansion
strategy. We intend to continue to expend significant financial and management
resources on the development of additional restaurants. We cannot predict
whether we will be able to achieve or sustain revenue growth, profitability or
positive cash flow in the future.

OUR RESTAURANTS ARE CURRENTLY CONCENTRATED IN THE NORTHEASTERN AND MID-ATLANTIC
REGIONS OF THE UNITED STATES, PARTICULARLY IN THE NEW YORK CITY AREA.
ACCORDINGLY, WE ARE HIGHLY VULNERABLE TO NEGATIVE OCCURRENCES IN THESE REGIONS.

We currently operate 56 restaurants in Northeastern and Mid-Atlantic states, of
which 26 are located in the New York City area, 16 of which are located in New
York Central Business Districts. As a result, we are particularly susceptible to
adverse trends and economic conditions in these areas. In addition, given our
geographic concentration, negative publicity regarding any of our restaurants
could have a material adverse effect on our business and operations, as could
other regional occurrences impacting the local economies in these markets.

OUR OPERATIONS DEPEND ON GOVERNMENTAL LICENSES AND WE MAY FACE LIABILITY UNDER
"DRAM SHOP" STATUTES.

                                       14
<PAGE>

We are subject to extensive federal, state and local government regulations,
including regulations relating to alcoholic beverage control, the preparation
and sale of food, public health and safety sanitation, building, zoning and fire
codes. Our business depends on obtaining and maintaining required food service
and/or liquor licenses for each of our restaurants. If we fail to hold all
necessary licenses, we may be forced to delay or cancel new restaurant openings
and close or reduce operations at existing locations. In addition, our sale of
alcoholic beverages subjects us to "dram shop" statutes in some states. These
statutes allow an injured person to recover damages from an establishment that
served alcoholic beverages to an intoxicated person. Although we take
significant precautions to ensure that all employees are trained in the
responsible service of alcohol and maintain insurance policies in accordance
with all state regulations regarding the sale of alcoholic beverages, the misuse
of alcoholic beverages by customers may create considerable risks for us. If we
are the subject of a judgment substantially in excess of our insurance coverage,
or if we fail to maintain our insurance coverage, our business, financial
condition, operating results or cash flows could be materially and adversely
affected

OUR RESTAURANT EXPANSION STRATEGY FOCUSES PRIMARILY ON FURTHER PENETRATING
EXISTING MARKETS. THIS STRATEGY CAN CAUSE SALES IN SOME OF OUR EXISTING
RESTAURANTS TO DECLINE, WHICH COULD RESULT IN RESTAURANT CLOSURES.

In accordance with our expansion strategy, we intend to open new restaurants
primarily in our existing markets. Since we typically draw customers from a
relatively small radius around each of our restaurants, the sales performance
and customer counts for restaurants near the area in which a new restaurant
opens may decline due to cannibalization, which could result in restaurant
closures.

OUR FAILURE OR INABILITY TO ENFORCE OUR TRADEMARKS OR OTHER PROPRIETARY RIGHTS
COULD ADVERSELY AFFECT OUR COMPETITIVE POSITION OR THE VALUE OF OUR BRAND.

We own certain common law trademark rights and a number of federal and
international trademark and service mark registrations, and proprietary rights
to certain of our core menu offerings. We believe that our trademarks and other
proprietary rights are important to our success and our competitive position.
We, therefore, devote appropriate resources to the protection of our trademarks
and proprietary rights. The protective actions that we take, however, may not be
enough to prevent unauthorized usage or imitation by others, which might cause
us to incur significant litigation costs and could harm our image or our brand
or competitive position. To date, we have not been notified that our trademarks
or menu offerings infringe the proprietary rights of third parties, but we
cannot assure you that third parties will not claim infringement by us. Any such
claim, whether or not it has merit, could be time-consuming, result in costly
litigation, cause product delays or require us to enter into royalty or
licensing agreements. As a result, any such claim could have a material adverse
effect on our business, results of operations and financial condition.

OUR QUARTERLY RESULTS MAY FLUCTUATE AND COULD FALL BELOW EXPECTATIONS OF
SECURITIES ANALYSTS AND INVESTORS DUE TO SEASONALITY AND OTHER FACTORS,
RESULTING IN A DECLINE IN OUR STOCK PRICE.

Our quarterly and yearly results have varied in the past, and we believe that
our quarterly operating results will vary in the future. Factors such as
seasonality, inclement weather, and

                                       15
<PAGE>

unanticipated increases in labor, commodity, energy, insurance or other
operating costs may cause our quarterly results to fluctuate. For this reason,
you should not rely upon our quarterly operating results as indications of
future performance.

WE MAY NEED ADDITIONAL CAPITAL IN THE FUTURE AND IT MAY NOT BE AVAILABLE ON
ACCEPTABLE TERMS.

We do not presently have a credit facility available for general purposes. The
development of our business may require significant additional capital in the
future to, among other things, fund our operations, expand the range of services
we offer and finance future acquisitions and investments. We have historically
relied upon private sales of our equity and debt instruments to fund our
operations. There can be no assurance, however, that these sources of financing,
or alternative sources such as a credit facility, will be available on terms
favorable to us, or at all. Our ability to obtain additional financing will be
subject to a number of factors, including market conditions, our operating
performance and investor sentiment. These factors may make the timing, amount,
terms and conditions or additional financings unattractive to us. If we are
unable to raise additional capital, our growth could be impeded.

OUR BUSINESS IS AFFECTED BY CHANGES IN CONSUMER PREFERENCES AND DISCRETIONARY
SPENDING.

Our success depends, in part, upon the popularity of our food products and our
ability to develop new menu items that appeal to consumers. Shifts in consumer
preferences away from our restaurants or cuisine, our inability to develop new
menu items that appeal to consumers, or changes in our menu that eliminate items
popular with some consumers could harm our business. Also, our success depends
to a significant extent on discretionary consumer spending, which is influenced
by general economic conditions and the availability of discretionary income.
Accordingly, we may experience declines in sales during economic downturns or
during periods of uncertainty like that which followed the terrorist attacks on
the United States and the possibility of further terrorist attacks. Any material
decline in the amount of discretionary pending could have a material adverse
effect on our sales, results of operations, business and financial condition.

OUR SUCCESS DEPENDS ON OUR ABILITY TO COMPETE WITH MANY FOOD SERVICE BUSINESSES.

The restaurant industry is intensely competitive and we compete with many
well-established food service companies on the basis of taste, quality and price
of product offered, customer service, atmosphere, location and overall guest
experience. We compete with other sandwich retailers, specialty coffee
retailers, bagel shops, fast-food restaurants, delicatessens, cafes, bars,
take-out food service companies, supermarkets and convenience stores. Our
competitors change with each of the five dayparts (breakfast, lunch, afternoon
coffee, dinner and dessert), ranging from coffee bars and bakery cafes to casual
dining chains. Aggressive pricing by our competitors or the entrance of new
competitors into our markets could reduce our sales and profit margins. Many of
our competitors or potential competitors have substantially greater financial
and other resources than we do which may allow them to react to changes in
pricing, marketing and the quick service restaurant industry better than we can.
As our competitors expand their operations, we expect competition to intensify.
We also compete with other employers in our markets for hourly workers and may
be subject to higher labor costs.

                                       16
<PAGE>

FLUCTUATIONS IN COFFEE PRICES COULD ADVERSELY AFFECT OUR OPERATING RESULTS.

The price of coffee, one of our main products, can be highly volatile. Although
most coffee trades on the commodity markets, coffee of the quality we seek tends
to trade on a negotiated basis at a substantial premium above commodity coffee
pricing, depending on supply and demand at the time of the purchase. Supplies
and prices of green coffee can be affected by a variety of factors, such as
weather, politics and economics in the producing countries. Two organizations,
the Association of Coffee Producing Countries and the International Coffee
Organization, have sought with mixed success to coordinate production and
pricing of coffee among certain countries and to maintain pricing quotas among
coffee producers. An increase in pricing of specialty coffees could have a
significant adverse effect on our profitability. To mitigate the risks of
increasing coffee prices and to allow greater predictability in coffee pricing,
we typically enter into fixed price purchase commitments for a portion of our
green coffee requirements. We acquire coffee through a single supplier. We
cannot assure you that these activities will be successful or that they will not
result in our paying substantially more for our coffee supply than we would have
been required to pay absent such activities.

CHANGES IN FOOD AND SUPPLY COSTS COULD ADVERSELY AFFECT OUR RESULTS OF
OPERATIONS.

Our profitability depends in part on our ability to anticipate and react to
changes in food and supply costs. We rely on a single primary distributor of our
food and paper goods. Although we believe that alternative distribution sources
are available, any increase in distribution prices or failure by our distributor
to perform could adversely affect our operating results. In addition, we are
susceptible to increases in food costs as a result of factors beyond our
control, such as weather conditions and government regulations. Failure to
anticipate and adjust our purchasing practices to these changes could negatively
impact our business.

THE FOOD SERVICE INDUSTRY IS AFFECTED BY LITIGATION AND PUBLICITY CONCERNING
FOOD QUALITY, HEALTH AND OTHER ISSUES, WHICH CAN CAUSE CUSTOMERS TO AVOID OUR
PRODUCTS AND RESULT IN LIABILITIES.

Food service businesses can be adversely affected by litigation and complaints
from customers or government authorities resulting from food quality, illness,
injury or other health concerns or operating issues stemming from one restaurant
or a limited number of restaurants. Adverse publicity about these allegations
may negatively affect us, regardless of whether the allegations are true, by
discouraging customers from buying our products. We could also incur significant
liabilities if a lawsuit or claim results in a decision against us or litigation
costs regardless of the result.

OUR BUSINESS COULD BE ADVERSELY AFFECTED BY INCREASED LABOR COSTS OR LABOR
SHORTAGES.

Labor is a primary component in the cost of operating our business. We devote
significant resources to recruiting and training our managers and hourly
employees. Increased labor costs, due to competition, increased minimum wage or
employee benefits costs or otherwise, would adversely impact our operating
expenses. In addition, our success depends on our ability to attract, motivate
and retain qualified employees, including restaurant managers and staff, to keep
pace with our growth strategy. If we are unable to do so, our results of
operations may be adversely affected.

                                       17
<PAGE>

PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW MAY DELAY OR PREVENT OUR
ACQUISITION BY A THIRD PARTY.

Our certificate of incorporation, by-laws and shareholder rights agreement
contain several provisions that may make it more difficult for a third party to
acquire control of us without the approval of our board of directors. These
provisions include, among other things, a classified board of directors,
elimination of stockholder action by written consent, advance notice for raising
business or making nominations at meetings and "blank check" preferred stock.
Blank check preferred stock enables our board of directors to, without
shareholder approval, designate and issue additional series of preferred stock
with such dividend, liquidation, conversion, voting or other rights, including
the right to issue convertible securities with no limitations on conversion as
our board of directors may determine. The issuance of blank check preferred
stock may adversely affect the voting and other rights of the holders of our
capital stock as our board of directors may designate and issue preferred stock
with terms that are senior to our common stock. These provisions may make it
more difficult or expensive for a third party to acquire a majority of our
outstanding voting common stock. These provisions also may delay, prevent or
deter a merger, acquisition, tender offer, proxy contest or other transaction
that might otherwise result in our shareholders' receiving a premium over the
market price for their common stock.

WE MAY BE EXPOSED TO POTENTIAL LIABILITY UNDER THE SECURITIES LAWS AS A RESULT
OF HAVING MORE THAN 500 OPTIONHOLDERS.

We have sought to create a culture in which each employee has a shared sense of
ownership in our business. Part of this effort was the establishment of an
extensive employee option plan, in which each employee, including hourly-level
employees, is given the opportunity to participate. As our company has grown, we
have issued stock options to an increasing number of our employees. When the
number of our optionholders exceeded 500, we inadvertently failed to register
our options pursuant to Section 12(g) of the Exchange Act, as required by SEC
regulations. Our failure to so register our options may expose us to potential
liability under the securities laws. However, we believe that any such liability
would not be material to our financial condition or results of operations.

                                       18

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00044-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00044-of-00352.parquet"}]]