Developer License Agreement

EXHIBIT 10.6

COSI, INC.

AREA DEVELOPMENT AGREEMENT

TABLE OF CONTENTS

EXHIBIT A — DEVELOPMENT SCHEDULE, AREA AND FEE
EXHIBIT B — DEVELOPER’S PRINCIPALS LIST AND DESIGNATED PRINCIPAL
EXHIBIT C — FRANCHISE AGREEMENT
EXHIBIT D — GUARANTEE, INDEMNIFICATION, AND ACKNOWLEDGEMENT
EXHIBIT E — LEASE TERMS

AREA DEVELOPMENT AGREEMENT

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

BACKGROUND

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

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

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

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

      NOW THEREFORE , the parties agree as follows:

GRANT

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

TERM

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

DEVELOPMENT OBLIGATIONS

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

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

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

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

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

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

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

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

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

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

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

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

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

DEVELOPMENT FEE, INITIAL FRANCHISE FEES, AND ROYALTIES

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

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

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

DUTIES OF THE PARTIES

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

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

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

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

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

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

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

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

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

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

DEFAULT AND TERMINATION

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

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

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

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

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

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

      Notice and Opportunity to Cure Other Defaults . Except as otherwise provided in Sections 6.1, 6.2 , and 6.3 above, if Area Developer fails to comply with any material term and condition of this Agreement, such action shall constitute a default under this Agreement and, upon the occurrence of any such default, Franchisor may terminate this Agreement by giving written notice of termination stating the nature of such default to Area Developer at least thirty (30) days prior to the effective date of termination; provided, however, that Area Developer may avoid termination by curing the default to Franchi