EINSTEIN NOAH RESTAURANT GROUP INC

On September 15, 2014, the Company granted performance share units (“PSUs”) with a grant date fair value of $250,000 to Frank C. Paci, its new President and Chief Executive Officer (“CEO”) (See Note 8). The PSUs cliff vest three years from the date of grant. The number of PSUs that actually vest will be determined based on the achievement of certain earnings per share thresholds set forth in the award agreement and may range from 0% to 150% of the target grant. PSUs that do not vest based on failure to satisfy the stated performance criteria are

The Company has been named as a defendant in a lawsuit currently pending in the United States District Court for the District of Delaware entitled The State of Delaware ex rel. William French vs. Card Compliant LLC et al., Case No. 14-CV-00688 (GMS). This case was filed under seal in June 2013 by a former employee (William French) of one of the other defendants, and was unsealed in March 2014. The case includes numerous other defendants, including other well-known restaurant and food retail companies. The complaint in this case alleges that the Company (like the other defendants) knowingly failed to report and deliver funds to the State of Delaware arising from unredeemed balances on gift cards issued for use at the Company’s stores, which the State and Mr. French contend is required under Delaware’s unclaimed property statutes. The complaint alleges that this conduct

constitutes a violation of the Delaware False Claims and Reporting Act. The plaintiffs seek a cease-and-desist order, monetary damages (including treble damages under the Delaware False Claims and Reporting Act), penalties, and attorneys’ fees and costs. On May 30, 2014, all defendants removed the case from Delaware State Court to the U.S. District Court. In June 2014, all defendants filed a motion seeking dismissal of the complaint in its entirety on multiple grounds, including the failure of the plaintiff to state a claim that constitutes a violation of any law or statute. On September 5, 2014, the plaintiffs filed a response brief opposing the defendants’ motion. On October 10, 2014, the defendants filed a reply brief in support of their motion to dismiss. A ruling on the defendants’ motion to dismiss is expected within the coming months. Separately, the plaintiffs have filed a motion seeking to remand the case to the Delaware State Court. The motion to remand is now briefed and the parties have requested oral argument, but no ruling has been issued. This case is still in its early stages and only limited discovery has occurred between the parties. Accordingly, the Company is unable to make a reasonable estimate of the likelihood or possible range of any adverse damages of a judgment against it. However, the Company intends to defend itself vigorously in this case.

Completion of the Offer is subject to a number of conditions, including (i) that a majority of the Shares outstanding (determined on a fully diluted basis) be validly tendered and not validly withdrawn prior to the expiration of the Offer; (ii) the expiration or termination of any applicable waiting period relating to the Offer under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended (the “HSR Act”); and (iii) certain other customary conditions which are outlined in Annex B to the Merger Agreement previously filed with the SEC as Exhibit 2.1 to our current report on Form 8-K on September 29, 2014 and incorporated by reference herein. On October 20, 2014, the parties were informed that the Federal Trade Commission has granted early termination of the waiting period under the HSR Act. Accordingly, the condition to the Offer that the applicable waiting period under the HSR Act shall have expired or been terminated has been satisfied.

Following the completion of the Offer, and subject to the satisfaction or waiver of certain customary conditions set forth in the Merger Agreement, the Purchaser will merge with and into the Company, with the Company surviving as an indirect wholly-owned subsidiary of JAB (the “Merger” and together with the Offer, the “Acquisition”), pursuant to the procedure provided under Section 251(h) of the Delaware General Corporation Law without any additional stockholder approvals. The Merger will be effected as promptly as practicable following the purchase by the Purchaser of Shares validly tendered and not withdrawn in the Offer.

If the transaction with JAB is not consummated, we will be subject to several risks and our business could be adversely affected. The price of our common stock may decline significantly from the current market price, to the extent that the current market price reflects the market’s expectation that the Offer and the Merger will be completed or as a result of the market’s perceptions as to the reasons why the Offer and the Merger were not completed. Further, if the Offer and the Merger are not completed, we may experience negative reactions from the financial markets and our customers, suppliers and employees, which could adversely impact our access to the capital markets and other business relationships in the future.

Prior to any termination of the Merger Agreement, certain aspects of our operations will be restricted by the terms of the merger agreement, which may cause us to forgo otherwise attractive business opportunities. Significant transaction costs associated with the acquisition, including legal fees, financial advisory fees and other expenses, have already been incurred that are payable even if the acquisition is not consummated. Our management will have focused significant attention on negotiating and preparing for the Merger instead of on pursuing other potential strategic opportunities that could have been beneficial to us.

Litigation may be filed against us and the members of our Board of Directors challenging the Offer and the Merger and any adverse outcome in any such litigation may prevent the Offer and the Merger from becoming effective or from becoming effective within the expected timeframe.

Historically, following the announcement of a proposed merger, securities class action litigation is frequently brought against a company and its board of directors. Although no litigation related to the Offer or the Merger has been filed at this time, if any person or entity were to secure injunctive or other relief prohibiting, delaying or otherwise adversely affecting our ability to consummate the Offer or the Merger, then such injunctive or other relief may prevent the Merger from being consummated at all or within the expected time frame. If consummation of the Offer or the Merger is prevented or delayed, it could have negative consequences that materially and adversely affect our business, results of operations, and the price per share for our common stock, as described above.