Document:

EXHIBIT 4.4.2

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                   SUPPLEMENTAL REGISTRATION RIGHTS AGREEMENT

                                  by and among

                                   COSI, INC.

                                       and

                      ZAM HOLDINGS, L.P., ERIC J. GLEACHER,
                  CHARLES G. PHILLIPS, LJCB NOMINEES PTY. LTD.,

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                           Dated as of August 5, 2003

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                                TABLE OF CONTENTS

1.   Certain Definitions.......................................................1

2.   Demand Registrations......................................................3
     (a) Right to Request Registration.........................................3
     (b) Number of Demand Registrations........................................3
     (c) Priority on Demand Registrations......................................3
     (d) Restrictions on Demand Registrations..................................4
     (e) Selection of Underwriters.............................................4
     (f) Other Registration Rights.............................................5
     (g) Effective Period of Demand Registrations..............................5

3.   Piggyback Registrations...................................................5
     (a) Right to Piggyback....................................................5
     (b) Priority on Primary Registrations.....................................6
     (c) Priority on Secondary Registrations...................................6
     (d) Selection of Underwriters.............................................6
     (e) Other Registrations...................................................7

4.   S-3 Registrations.........................................................7

5.   Holdback Agreement........................................................8

6.   Registration Procedures...................................................8

7.   Registration Expenses....................................................10

8.   Indemnification..........................................................10

9.   Participation in Underwritten Registrations..............................10

10.  Rule 144.................................................................10

11.  Miscellaneous............................................................10
     (a) Notices..............................................................10
     (b) No Waivers...........................................................10
     (c) Successors and Assigns...............................................10
     (d) Governing Law........................................................10
     (e) Jurisdiction.........................................................10
     (f) Waiver of Jury Trial.................................................10

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     (g) Counterparts; Effectiveness..........................................10
     (h) Entire Agreement.....................................................10
     (i) Captions.............................................................10
     (j) Severability.........................................................10
     (k) Amendments...........................................................10
     (l) Aggregation of Stock.................................................10
     (m) Equitable Relief.....................................................10
     (n) No Inconsistent Agreements...........................................10

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      SUPPLEMENTAL REGISTRATION RIGHTS AGREEMENT, dated as of August 5, 2003,
among Cosi, Inc. (the "Company"), ZAM Holdings, L.P. ("ZAM Holdings"), Eric J.
Gleacher ("Gleacher"), Charles G. Phillips ("Phillips"), LJCB Nominees Pty. Ltd.
("LJCB", and collectively with ZAM Holdings, Gleacher and Phillips, the
"Stockholders").

      In consideration of the mutual covenants and agreements herein contained
and other good and valid consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties to this Agreement hereby agree as follows:

      1. Certain Definitions.

      In addition to the terms defined elsewhere in this Agreement, the
following terms shall have the following meanings:

      "Affiliate" of any Person means any other Person which directly, or
indirectly through one or more intermediaries, controls, or is controlled by, or
is under common control with, such Person. The term "control" (including the
terms "controlled by" and "under common control with") as used with respect to
any Person means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise. For
purposes of the definition of Holder, Affiliate shall also include any Person
owning an interest in a holder of record of securities that are convertible into
or exchangeable or exercisable for Company Securities.

      "Agreement" means this Supplemental Registration Rights Agreement,
including all amendments, modifications and supplements and any exhibits or
schedules to any of the foregoing, and shall refer to this Supplemental
Registration Rights Agreement as the same may be in effect at the time such
reference becomes operative.

      "Business Day" means any day on which commercial banks are open for
business in New York, New York.

      "Common Stock" means common stock, par value $.01 per share, of the
Company.

      "Company Securities" means the Common Stock beneficially owned directly or
indirectly by any Stockholder as of the date hereof or at any time in the future
and any other capital stock of any class or series of the Company, and any and
all shares of capital stock or other securities of the Company or of any
successor or assign of the Company or of any other entity (whether by merger,
consolidation, sale of assets or otherwise), which may be issued or issuable in
respect of, in exchange for, or in substitution for any Common Stock or such
other capital stock by reason of any stock dividend, stock split, reverse split,
subdivision or combination of shares, distribution, recapitalization,
reclassification, reorganization, merger, consolidation, sale of assets or
otherwise.

      "Exchange Act" means the Securities Exchange Act of 1934, as amended.

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      "Holder" means any holder of record of Registrable Common Stock (as
defined below) and any Affiliates thereof (or in the case of a Holder of
securities that are convertible into or exchangeable or exercisable for Company
Securities, the Affiliates of such Holder).

      "NASD" means the National Association of Securities Dealers, Inc.

      "Person" means any individual, sole proprietorship, partnership, limited
liability company, joint venture, trust, incorporated organization, association,
corporation, institution, public benefit corporation, government (whether
federal, state, county, city, municipal or otherwise, including, without
limitation, any instrumentality, division, agency, body or department thereof)
or any other entity.

      "Prospectus" means the prospectus or prospectuses included in any
Registration Statement, as amended or supplemented by any prospectus supplement
with respect to the terms of the offering of any portion of the Registrable
Common Stock covered by such Registration Statement and by all other amendments
and supplements to the prospectus, including post-effective amendments and all
material incorporated by reference in such prospectus or prospectuses.

      "Registrable Common Stock" means the Company Securities. All references
herein to a "Holder" or "Holder of Registrable Common Stock" shall include the
holder or holders of any securities that are convertible into or exchangeable or
exercisable for Company Securities to the extent of the Company Securities then
underlying such convertible, exchangeable or exercisable securities. For
purposes of determining the number of shares of Registrable Common Stock held by
a Holder and the number of shares of Registrable Common Stock outstanding, for
purposes of this Agreement (including the definition of "Holder") but not for
any other purpose, any holder of record of convertible, exchangeable or
exercisable securities shall be deemed to be a Holder of the number of Company
Securities issuable upon conversion, exchange or exercise of such convertible,
exchangeable or exercisable securities, and all such Company Securities shall be
deemed to be outstanding shares of Registrable Common Stock. Company Securities
shall cease to be Registrable Common Stock with respect to a particular Holder
thereof when such Company Securities can be sold by such Holder (a) pursuant to
a registration statement or (b) in a transaction pursuant to Rule 144 under the
Securities Act, provided that such transaction is not subject to the limitations
of Rule 144(e) under the Securities Act.

      "Registration Statement" means any registration statement of the Company
which covers any of the Registrable Common Stock pursuant to the provisions of
this Agreement, including the Prospectus, amendments and supplements to such
Registration Statement, including post-effective amendments, all exhibits and
all materials incorporated by reference in such Registration Statement.

      "SEC" means the Securities and Exchange Commission.

      "Securities Act" means the Securities Act of 1933, as amended.

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      "underwritten registration" or "underwritten offering" or similar phrases
mean a registration in which securities of the Company are sold to underwriters
for reoffering to the public.

      2. Demand Registrations.

      (a) Right to Request Registration. Any time after the date hereof, any
Holder or Holders who together hold a majority of the then outstanding
Registrable Common Stock ("Initiating Holders") may request registration under
the Securities Act of all or part of the Registrable Common Stock ("Demand
Registration"). Within 10 days after receipt of any such request for Demand
Registration, the Company shall give written notice of such request to all other
Holders of Registrable Common Stock and shall, subject to the provisions of
Section 2(d) hereof, include in such registration all such Registrable Common
Stock with respect to which the Company has received written requests for
inclusion therein within 15 days after the receipt of the Company's notice.

      (b) Number of Demand Registrations. Subject to the provisions of Section
2(a), the Initiating Holders of Registrable Common Stock shall be entitled to
request an aggregate of two (2) Demand Registrations. A registration shall not
count as one of the permitted Demand Registrations (i) until it has become
effective, (ii) if the Initiating Holders requesting such registration are not
able to register and sell at least 90% of the Registrable Common Stock requested
by such Initiating Holders to be included in such registration or (iii) in the
case of a Demand Registration that would be the last permitted Demand
Registration requested hereunder, if the Initiating Holders requesting such
registration are not able to register and sell all of the Registrable Common
Stock requested to be included by such Initiating Holders in such registration.

      (c) Priority on Demand Registrations. The Company shall not include in any
Demand Registration any securities which are not Registrable Common Stock
without the written consent of the Holders of a majority of the shares of
Registrable Common Stock to be included in such registration. If the managing
underwriters of the requested Demand Registration advise the Company in writing
that in their opinion the number of shares of Registrable Common Stock proposed
to be included in any such registration exceeds the number of securities which
can be sold in such offering and/or that the number of shares of Registrable
Common Stock proposed to be included in any such registration would adversely
affect the price per share of the Company's equity securities to be sold in such
offering, the Company shall include in such registration only the number of
shares of Registrable Common Stock which in the opinion of such managing
underwriters can be sold. If the number of shares which can be sold is less than
the number of shares of Registrable Common Stock proposed to be registered, the
amount of Registrable Common Stock to be so sold shall be allocated first, to
the shares of Registrable Common Stock requested to be registered by the
Initiating Holders pro rata on the basis of the number of shares initially
proposed to be registered by such Initiating Holders, and then pro rata among
the other Holders of Registrable Common Stock desiring to participate in such
registration on the basis of the amount of such Registrable Common Stock
initially proposed to be registered by such other Holders. If the number of
shares which can be sold exceeds the number of shares of Registrable Common
Stock

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proposed to be sold, such excess shall be allocated pro rata among the other
holders of securities, if any, desiring to participate in such registration
based on the amount of such securities initially requested to be registered by
such holders or as such holders may otherwise agree.

      (d) Restrictions on Demand Registrations. The Company may (i) postpone for
up to ninety (90) days the filing or the effectiveness of a Registration
Statement for a Demand Registration or Shelf Registration (as hereinafter
defined) if, based on the reasonable good faith judgment of the Company's board
of directors, effecting the registration would have a material adverse effect on
a material financing, acquisition of assets (other than in the ordinary course
of business), disposition of assets or stock, merger or other comparable
transaction or would require the Company to make public disclosure of material
nonpublic information the public disclosure of which the Company's board of
directors has reasonably determined would not be in the best interests of the
Company and the Company shall provide the Initiating Holders with prompt notice
of such postponement or (ii) postpone the filing of a Demand Registration in the
event the Company shall be required to prepare audited financial statements as
of a date other than its fiscal year end (unless the stockholders requesting
such registration agree to pay the expenses of such an audit); provided,
however, that in no event shall the Company withdraw a Registration Statement
under clause (i) after such Registration Statement has been declared effective;
and provided, further, however, that in any of the events described in clause
(i) or (ii) above, the Initiating Holders requesting such a Demand Registration
shall be entitled to withdraw such request and, if such request is withdrawn,
such registration shall not count as one of the permitted Demand Registrations
and, in any event, no such postponed or withdrawn registration shall count as
the Shelf Registration. The Company shall provide written notice to the
Initiating Holders requesting such registration of (x) any postponement or
withdrawal of the filing or effectiveness of a Registration Statement pursuant
to this Section 2(d), (y) the Company's decision to file or seek effectiveness
of such Registration Statement following such withdrawal or postponement and (z)
the effectiveness of such Registration Statement. The Company may defer the
filing of a particular Registration Statement pursuant to this Section 2(d) only
once in any twelve-month period.

      (e) Selection of Underwriters. If any of the Registrable Common Stock
covered by a Demand Registration, or an S-3 Registration or a Shelf Registration
pursuant to Section 4 hereof, is to be sold in an underwritten offering, the
Holders of a majority of the shares of Registrable Common Stock included in such
registration shall have the right to select the managing underwriter(s) to
administer the offering subject to the approval of the Company, which will not
be unreasonably withheld or delayed. The Holders of shares of Registrable Common
Stock included in such Registration shall enter into a customary underwriting
agreement with respect to such shares.

      (f) Other Registration Rights. The Company shall not grant to any Person
the right, other than as set forth herein and except to employees of the Company
with respect to registrations on Form S-8 (or any successor form thereto), to
request the Company to register any securities of the Company which would
adversely affect the ability of the Holders of a majority of the then
outstanding Registrable Common Stock to dispose of

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any shares of Registrable Common Stock held by such Holders without the prior
written consent of the Holders of a majority of the then outstanding Registrable
Common Stock.

      (g) Effective Period of Demand Registrations. After any Demand
Registration filed pursuant to this Agreement has become effective, the Company
shall use its best efforts to keep such Demand Registration effective for a
period equal to 180 days from the date on which the SEC declares such Demand
Registration effective (or if such Demand Registration is not effective during
any period within such 180 days, such 180-day period shall be extended by the
number of days during such period when such Demand Registration is not
effective), or such shorter period which shall terminate when all of the
Registrable Common Stock covered by such Demand Registration has been sold
pursuant to such Demand Registration. If the Company shall withdraw any Demand
Registration pursuant to subsection (d) of this Section 2 (a "Withdrawn Demand
Registration"), the Initiating Holders of the Registrable Common Stock remaining
unsold and originally covered by such Withdrawn Demand Registration shall be
entitled to a replacement Demand Registration which (subject to the provisions
of this Section 2) the Company shall use its best efforts to keep effective for
a period commencing on the effective date of such Demand Registration and ending
on the earlier to occur of the date (i) which is 180 days from the effective
date of such Demand Registration and (ii) on which all of the Registrable Common
Stock covered by such Demand Registration has been sold. Such additional Demand
Registration otherwise shall be subject to all of the provisions of this
Agreement.

      (h) Other Restrictions on Demand Registrations. The Company shall not be
required to effect a registration pursuant to this Section 2 if within thirty
(30) days of receipt of a written request from Initiating Holders pursuant to
Section 2(a) above, the Company gives notice to the Holders of the Company's
intention to make a public offering within ninety (90) days, provided, that, in
any such public offering, the Holders shall be entitled to dispose of any shares
of Common Stock subject to such written request prior to any other shares of
Common Stock disposed of pursuant to such public offering.

      3. Piggyback Registrations.

      (a) Right to Piggyback. In addition to the other rights of the Holders
described herein, whenever the Company proposes to register any of its
securities under the Securities Act (other than a registration statement on Form
S-8 or on Form S-4 or any similar successor forms thereto), whether for its own
account or for the account of one or more stockholders of the Company, and the
registration form to be used may be used for any registration of Registrable
Common Stock (a "Piggyback Registration"), the Company shall give prompt written
notice (in any event within 10 business days after its receipt of notice of any
exercise of other demand registration rights) to all Holders of its intention to
effect such a registration and, subject to Sections 3(b) and 3(c), shall include
in such registration all Registrable Common Stock with respect to which the
Company has received written requests for inclusion therein within 15 days after
the receipt of the Company's notice.

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      (b) Priority on Primary Registrations. If a Piggyback Registration is an
underwritten primary registration on behalf of the Company, and the managing
underwriters advise the Company in writing that in their opinion the number of
securities requested to be included in such registration exceeds the number
which can be sold in such offering and/or that the number of shares of
Registrable Common Stock proposed to be included in any such registration would
adversely affect the price per share of the Company's equity securities to be
sold in such offering, the Company shall include in such registration (i) first,
the securities the Company proposes to sell, (ii) second, the Registrable Common
Stock requested to be included therein by the Holders, pro rata among the
Holders of such Registrable Common Stock on the basis of the number of shares
requested to be registered by such Holders, and (iii) third, other securities
requested to be included in such registration pro rata among the holders of such
securities on the basis of the number of shares requested to be registered by
such holders or as such holders may otherwise agree.

      (c) Priority on Secondary Registrations. If a Piggyback Registration is an
underwritten secondary registration on behalf of a holder of the Company's
securities other than Registrable Common Stock, and the managing underwriters
advise the Company in writing that in their opinion the number of securities
requested to be included in such registration exceeds the number which can be
sold in such offering and/or that the number of shares of Registrable Common
Stock proposed to be included in any such registration would adversely affect
the price per share of the Company's equity securities to be sold in such
offering, the Company shall include in such registration (i) first, the
securities requested to be included therein by the holders requesting such
registration, (ii) second, the Registrable Common Stock requested to be included
in such registration, pro rata among the holders of such securities on the basis
of the number of shares requested to be registered by such holders, and (iii)
third, other securities requested to be included in such registration pro rata
among the holders of such securities on the basis of the number of shares
requested to be registered by such holders or as such holders may otherwise
agree.

      (d) Selection of Underwriters. If any Piggyback Registration is an
underwritten offering, the Company shall have the right to select the managing
underwriter or underwriters to administer any such offering; provided, that such
selection must be approved by the Holders of a majority of the Registrable
Common Stock included in such Piggyback Registration (which such approval may
not be unreasonably withheld or delayed).

      The Company shall have the right to terminate or withdraw any registration
initiated by it under this Section 3 prior to the effectiveness of such
registration whether or not any Holder has elected to include securities in such
registration.

      (e) Other Registrations. If the Company has previously filed a
Registration Statement with respect to Registrable Common Stock pursuant to
Sections 2 or 4(a) hereof or pursuant to this Section 3, and if such previous
registration has not been withdrawn or abandoned, the Company shall not be
obligated to cause to become effective any other registration of any of its
securities under the Securities Act, whether

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on its own behalf or at the request of any holder or holders of such securities,
until a period of at least three months has elapsed from the effective date of
such previous registration.

      4. S-3 Registrations.

      (a) In addition to the other rights of the Holders described herein, if at
any time that the Company is eligible to use Form S-3 or any successor thereto,
any Holder or Holders requests that the Company file a Registration Statement on
Form S-3 or any successor thereto for a public offering of all or any portion of
the Registrable Common Stock held by such Holders, then the Company shall use
its best efforts to register under the Securities Act on Form S-3 (an "S-3
Registration") or any successor thereto, for public sale in accordance with the
method of disposition specified in such notice from the Holder or Holders, the
number of shares of Registrable Common Stock specified in such notice; provided,
however, that the Company shall have no obligation to register such shares of
Registrable Common Stock pursuant to this Section if (based on the current
market prices) the number of shares of Registrable Common Stock specified in
such notice would not yield gross proceeds to the selling stockholders of at
least $500,000. Whenever the Company is required by this Section 4(a) to use its
best efforts to effect the registration of Registrable Common Stock, each of the
procedures and requirements of Section 2 (including but not limited to the
requirement that the Company notify all Holders from whom notice has not been
received and provide them with the opportunity to participate in the offering,
but excluding the first sentence of Sections 2(a) and 2(b)) shall be deemed to
apply to such registration. There is no limitation on the number of
registrations pursuant to this Section 4(a) that the Company is obligated to
effect.

      (b) In addition to the other rights of the Holders described herein, once
the Company becomes eligible to use Form S-3 or any successor thereto, the
Company shall (i) provide written notice to all Holders of Registrable Common
Stock within 10 Business Days of such event and (ii) within 30 days of such
event, prepare and file with the SEC a Registration Statement covering an
offering of the Registrable Common Stock to be made on a continuous basis
pursuant to Rule 415 under the Securities Act (or any similar rule that may be
adopted by the SEC). The registration of the Registrable Common Stock pursuant
to this Section 4(b) is referred to herein as a "Shelf Registration." The
Company shall keep the registration statement relating to the Shelf Registration
continuously effective pursuant to Rule 415 under the Securities Act (or any
similar rule that may be adopted by the SEC) until such date as is the earlier
of (A) the date on which all of the Registrable Common Stock covered thereby
have been sold and (B) the date that is two years after the effective date of
such Registration Statement. The Company is obligated to effect only one Shelf
Registration; provided, that the Company's obligations hereunder shall not be
deemed satisfied, and the Shelf Registration shall not be deemed to have been
effected, unless the applicable Registration Statement has been continuously
effective for the requisite time period. A Shelf Registration does not count as
one of the Demand Registrations.

      (c) During such time as a Shelf Registration is effective with respect to
the shares of Registrable Common Stock of a Holder, such Holder's rights
pursuant to

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Section 2 (Demand Registrations) and Section 3 (Piggyback Registrations) hereof
shall not be effective.

      5. Holdback Agreement.

      The Company agrees not to effect any sale or distribution of any of its
equity securities, or any securities convertible into or exercisable or
exchangeable for such securities, during the 10 days prior to and during the 90
days beginning on the effective date of any underwritten Demand Registration or
any underwritten Piggyback Registration or any underwritten S-3 Registration or
any underwritten Shelf Registration (except as part of such underwritten
registration or pursuant to registrations on Form S-8 or any successor forms
thereto or pursuant to any acquisition or business combination transaction)
unless the underwriters managing the offering otherwise agree to a shorter
period.

      6. Registration Procedures.

      Whenever the Holders request that any Registrable Common Stock be
registered pursuant to this Agreement or the Company is obligated to effect a
Shelf Registration, the Company shall use its best efforts to effect the
registration and the sale of such Registrable Common Stock in accordance with
the intended methods of disposition thereof, and pursuant thereto the Company
shall as expeditiously as possible:

      (a) prepare and file with the SEC a Registration Statement with respect to
such Registrable Common Stock and use its best efforts to cause such
Registration Statement to become effective as soon as practicable thereafter;
and before filing a Registration Statement or Prospectus or any amendments or
supplements thereto, furnish to the Holders of Registrable Common Stock covered
by such Registration Statement and the underwriter or underwriters, if any,
copies of all such documents proposed to be filed, including documents
incorporated by reference in the Prospectus and, if requested by such Holders,
the exhibits incorporated by reference, and such Holders shall have the
opportunity to object to any information pertaining to such Holders that is
contained therein and the Company will make the corrections reasonably requested
by such Holders with respect to such information prior to filing any
Registration Statement or amendment thereto or any Prospectus or any supplement
thereto;

      (b) prepare and file with the SEC such amendments and supplements to such
Registration Statement and the Prospectus used in connection therewith as may be
necessary to keep such Registration Statement effective for a period of not less
than 180 days, in the case of a Demand Registration, Piggyback Registration or
an S-3 Registration; two years, in the case of a Shelf Registration; or such
shorter period as is necessary to complete the distribution of the securities
covered by such Registration Statement, or until any remaining shares of
Registrable Common Stock cease to be Registrable Common Stock, and comply with
the provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement during such period in
accordance with the intended methods of disposition by the sellers thereof set
forth in such Registration Statement;

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      (c) furnish to each seller of Registrable Common Stock such number of
copies of such Registration Statement, each amendment and supplement thereto,
the Prospectus included in such Registration Statement (including each
preliminary Prospectus) and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Common Stock
owned by such seller;

      (d) use its best efforts to register or qualify such Registrable Common
Stock under such other securities or blue sky laws of such jurisdictions as any
seller reasonably requests and do any and all other acts and things which may be
reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Common Stock owned by such
seller (provided, that the Company will not be required to (i) qualify generally
to do business in any jurisdiction where it would not otherwise be required to
qualify but for this subparagraph (d), (ii) subject itself to taxation in any
such jurisdiction or (iii) consent to general service of process in any such
jurisdiction);

      (e) notify each seller of such Registrable Common Stock, at any time when
a Prospectus relating thereto is required to be delivered under the Securities
Act, of the occurrence of any event as a result of which the Prospectus included
in such Registration Statement contains an untrue statement of a material fact
or omits any fact necessary to make the statements therein not misleading, and,
at the request of any such seller, the Company shall prepare a supplement or
amendment to such Prospectus so that, as thereafter delivered to the purchasers
of such Registrable Common Stock, such Prospectus shall not contain an untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein not misleading;

      (f) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the Holders of
a majority of number of shares of the Registrable Common Stock being sold or the
underwriters, if any, reasonably request in order to expedite or facilitate the
disposition of such Registrable Common Stock;

      (g) make available, for inspection by any seller of Registrable Common
Stock, any underwriter participating in any disposition pursuant to such
Registration Statement, and any attorney, accountant or other agent retained by
any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such Registration Statement;

      (h) use its best efforts to cause all such Registrable Common Stock to be
listed on each securities exchange on which securities of the same class issued
by the Company are then listed or, if no such similar securities are then
listed, use its best efforts to secure the designation of all such Registrable
Common Stock as a "national market system security" on The Nasdaq

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Stock Market within the meaning of Rule 11Aa2-1 of the SEC or, failing that, use
its best efforts to secure authorization from The Nasdaq Stock Market for such
Registrable Common Stock, and, without limiting the generality of the foregoing,
use its best efforts to arrange for at least two market makers to register as
such with respect to such Registrable Common Stock with the NASD;

      (i) provide a transfer agent and registrar for all such Registrable Common
Stock not later than the effective date of such Registration Statement;

      (j) if requested, cause to be delivered, immediately prior to the
effectiveness of the Registration Statement (and, in the case of an underwritten
offering, at the time of delivery of any Registrable Common Stock sold pursuant
thereto), letters from the Company's independent certified public accountants
addressed to each selling Holder (unless such selling Holder does not provide to
such accountants the appropriate representation letter required by rules
governing the accounting profession) and each underwriter, if any, stating that
such accountants are independent public accountants within the meaning of the
Securities Act and the applicable rules and regulations adopted by the SEC
thereunder, and otherwise in customary form and covering such financial and
accounting matters as are customarily covered by letters of the independent
certified public accountants delivered in connection with primary or secondary
underwritten public offerings, as the case may be;

      (k) otherwise comply with all applicable rules and regulations of the SEC,
and make generally available to its stockholders a consolidated earnings
statement (which need not be audited) for the 12 months beginning after the
effective date of a Registration Statement as soon as reasonably practicable
after the end of such period, which earnings statement shall satisfy the
requirements of an earning statement under Section 11(a) of the Securities Act;

      (l) promptly notify each seller of Registrable Common Stock and the
underwriter or underwriters, if any:

            (i) when the Registration Statement, any pre-effective amendment,
      the Prospectus or any Prospectus supplement or post-effective amendment to
      the Registration Statement has been filed and, with respect to the
      Registration Statement or any post-effective amendment, when the same has
      become effective;

            (ii) of any written request by the SEC for amendments or supplements
      to the Registration Statement or Prospectus;

            (iii) of the notification to the Company by the SEC of its
      initiation of any proceeding with respect to the issuance by the SEC of
      any stop order suspending the effectiveness of the Registration Statement;
      and

            (iv) of the receipt by the Company of any notification with respect
      to the suspension of the qualification of any Registrable Common Stock for
      sale under the applicable securities or blue sky laws of any jurisdiction;

                                       10
<PAGE>

      (m) permit any Holder of Registrable Common Stock, which Holder, in its
sole and exclusive judgment, might be deemed to be an underwriter or a
controlling person of the Company, to participate in the preparation of such
Registration Statement or comparable statement and to require the insertion
therein of material, furnished to the Company in writing, which in the
reasonable judgment of such Holder and its counsel should be included; and

      (n) in the event of the issuance of any stop order suspending the
effectiveness of a Registration Statement, or of any order suspending or
preventing the use of any Prospectus or suspending the qualification of any
Registrable Common Stock included in such Registration Statement for sale in any
jurisdiction, the Company shall use its best efforts promptly to obtain the
withdrawal of such order.

      At all times after the Company has filed a registration statement with the
SEC pursuant to the requirements of either the Securities Act or the Exchange
Act, the Company shall file all reports required to be filed by it under the
Securities Act and the Exchange Act and the rules and regulations adopted by the
SEC thereunder, and take such further action as any Holders may reasonably
request, all to the extent required to enable such Holders to be eligible to
sell Registrable Common Stock pursuant to Rule 144 (or any similar rule then in
effect).

      Each seller of Registrable Common Stock agrees by having its stock treated
as Registrable Common Stock hereunder that, upon notice of the happening of any
event as a result of which the Prospectus included in such Registration
Statement contains an untrue statement of a material fact or omits any material
fact necessary to make the statements therein not misleading (a "Suspension
Notice"), such seller will forthwith discontinue disposition of Registrable
Common Stock until such seller is advised in writing by the Company that the use
of the Prospectus may be resumed and is furnished with a supplemented or amended
Prospectus as contemplated by Section 6(e) hereof, and, if so directed by the
Company, such seller will deliver to the Company (at the Company's expense) all
copies, other than permanent file copies then in such seller's possession, of
the Prospectus covering such Registrable Common Stock current at the time of
receipt of such notice; provided, however, that such postponement of sales of
Registrable Common Stock by the Holders shall not exceed ninety (90) days in the
aggregate in any one year. If the Company shall give any notice to suspend the
disposition of Registrable Common Stock pursuant to a Prospectus, the Company
shall extend the period of time during which the Company is required to maintain
the Registration Statement effective pursuant to this Agreement by the number of
days during the period from and including the date of the giving of such notice
to and including the date such seller either is advised by the Company that the
use of the Prospectus may be resumed or receives the copies of the supplemented
or amended Prospectus contemplated by Section 6(e). In any event, the Company
shall not be entitled to deliver more than three (3) Suspension Notices in any
one year.

                                       11
<PAGE>

      7. Registration Expenses.

      (a) All expenses incident to the Company's performance of or compliance
with this Agreement, including, without limitation, all registration and filing
fees, fees and expenses of compliance with securities or blue sky laws, listing
application fees, printing expenses, transfer agent's and registrar's fees, cost
of distributing Prospectuses in preliminary and final form as well as any
supplements thereto, and fees and disbursements of counsel for the Company and
all independent certified public accountants and other Persons retained by the
Company (all such expenses being herein called "Registration Expenses") (but not
including any underwriting discounts or commissions attributable to the sale of
Registrable Common Stock), shall be borne by the Company. In addition, the
Company shall pay its internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit or quarterly review, the
expense of any liability insurance and the expenses and fees for listing the
securities to be registered on each securities exchange on which they are to be
listed.

      (b) The obligation of the Company to bear the expenses described in
Section 7(a) shall apply irrespective of whether a registration, once properly
demanded, if applicable, becomes effective, is withdrawn or suspended, is
converted to another form of registration and irrespective of when any of the
foregoing shall occur; provided, however, that Registration Expenses for any
Registration Statement withdrawn solely at the request of a Holder of
Registrable Common Stock (unless withdrawn following postponement of filing by
the Company in accordance with Section 2(d)(i) or (ii)) or any supplements or
amendments to a Registration Statement or Prospectus resulting from a
misstatement furnished in writing to the Company by a Holder shall be borne by
such Holder.

      8. Indemnification.

      (a) The Company shall indemnify, to the fullest extent permitted by law,
each Holder, its officers, directors and Affiliates and each Person who controls
such Holder (within the meaning of the Securities Act) against all losses,
claims, damages, liabilities and expenses arising out of or based upon any
untrue or alleged untrue statement of material fact contained in any
Registration Statement, Prospectus or preliminary Prospectus or any amendment
thereof or supplement thereto or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
not misleading or any violation or alleged violation by the Company of the
Securities Act, the Exchange Act or applicable "blue sky" laws, except insofar
as the same are made in reliance and in conformity with information relating to
such Holder furnished in writing to the Company by such Holder expressly for use
therein or caused by such Holder's failure to deliver to such Holder's immediate
purchaser a copy of the Registration Statement or Prospectus or any amendments
or supplements thereto (if the same was required by applicable law to be so
delivered) after the Company has furnished such Holder with a sufficient number
of copies of the same.

      (b) In connection with any Registration Statement in which a Holder of
Registrable Common Stock is participating, each such Holder shall furnish to the

                                       12
<PAGE>

Company in writing such information and affidavits as the Company reasonably
requests for use in connection with any such Registration Statement or
Prospectus and, shall indemnify, to the fullest extent permitted by law, the
Company, its officers and directors, and each Person who controls the Company
(within the meaning of the Securities Act) against all losses, claims, damages,
liabilities and expenses arising out of or based upon any untrue or alleged
untrue statement of material fact contained in the Registration Statement,
Prospectus or preliminary Prospectus or any amendment thereof or supplement
thereto or any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
any violation or alleged violation by the Company of the Securities Act, the
Exchange Act or applicable "blue sky laws," but only to the extent that the same
are made in reliance and in conformity with information relating to such Holder
furnished in writing to the Company by such Holder expressly for use therein;
provided, however, that the obligation to indemnify shall be several, not joint
and several, among such Holders and the liability of each such Holder shall be
in proportion to and limited to the net amount received by such Holder from the
sale of Registrable Common Stock pursuant to such Registration Statement.

      (c) Any Person entitled to indemnification hereunder shall (i) give prompt
written notice to the indemnifying party of any claim with respect to which it
seeks indemnification and (ii) unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties may exist with respect to such claim, permit such indemnifying party to
assume the defense of such claim with counsel reasonably satisfactory to the
indemnified party. If such defense is assumed, the indemnifying party shall not
be subject to any liability for any settlement made by the indemnified party
without its consent (but such consent will not be unreasonably withheld or
delayed). An indemnifying party who is not entitled to, or elects not to, assume
the defense of a claim shall not be obligated to pay the fees and expenses of
more than one counsel (in addition to any reasonably required local counsel) for
all parties indemnified by such indemnifying party with respect to such claim,
unless in the reasonable judgment of any indemnified party there may be one or
more legal or equitable defenses available to such indemnified party which are
in addition to or may conflict with those available to another indemnified party
with respect to such claim. Failure to give prompt written notice shall not
release the indemnifying party from its obligations hereunder.

      (d) The indemnification provided for under this Agreement shall remain in
full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling Person of such
indemnified party and shall survive the transfer of securities.

      (e) If the indemnification provided for in or pursuant to this Section 8
is due in accordance with the terms hereof, but is held by a court to be
unavailable or unenforceable in respect of any losses, claims, damages,
liabilities or expenses referred to herein, then each applicable indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified Person as a result of such losses,
claims, damages, liabilities or expenses in such

                                       13
<PAGE>

proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other in connection
with the statements or omissions which result in such losses, claims, damages,
liabilities or expenses as well as any other relevant equitable considerations.
The relative fault of the indemnifying party on the one hand and of the
indemnified Person on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the indemnifying party or by the indemnified party, and by such
party's relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. In no event shall the liability
of any selling Holder be greater in amount than the lesser of the amount of net
proceeds received by such Holder upon such sale and the amount for which such
indemnifying party would have been obligated to pay by way of indemnification if
the indemnification provided for under Section 8(b) hereof had been available
under the circumstances.

      9. Participation in Underwritten Registrations.

      No Person may participate in any registration hereunder which is
underwritten unless such Person (a) agrees to sell such Person's securities on
the basis provided in any underwriting arrangements approved by the Person or
Persons entitled hereunder to approve such arrangements and (b) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such underwriting
arrangements; provided that no Holder of Registrable Common Stock included in
any underwritten registration shall be required to make any representations or
warranties to the Company or the underwriters (other than representations and
warranties regarding such Holder and such Holder's intended method of
distribution) or to undertake any indemnification obligations to the Company or
the underwriters with respect thereto, except as otherwise provided in Section 8
hereof.

      10. Rule 144.

      The Company covenants that it will file the reports required to be filed
by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the SEC thereunder, and it will take such further action
as any Holder may reasonably request to make available adequate current public
information with respect to the Company meeting the current public information
requirements of Rule 144(c) under the Securities Act, to the extent required to
enable such Holder to sell Registrable Common Stock without registration under
the Securities Act within the limitation of the exemptions provided by (i) Rule
144 under the Securities Act, as such Rule may be amended from time to time, or
(ii) any similar rule or regulation hereafter adopted by the SEC. Upon the
request of any Holder, the Company will deliver to such Holder a written
statement as to whether it has complied with such information and requirements.

      11. Miscellaneous.

      (a) Notices. All notices, requests and other communications to any party
hereunder shall be in writing (including facsimile or similar writing) and shall
be given,

                                       14
<PAGE>

            If to the Company, to:

                  Cosi, Inc.
                  Attn: William D. Forrest
                  242 West 36th Street, 11th Floor
                  New York, NY 10018
                  Facsimile No.: (212) 739-7334

            with a copy (which shall not constitute notice), to:

                  William P. Mills, III, Esq.
                  Cadwalader, Wickersham & Taft LLP
                  100 Maiden Lane
                  New York, New York 10038
                  Facsimile No.: (212) 504-6666

            If to ZAM Holdings, to:

                  ZAM Holdings, L.P.
                  c/o Ziff Brothers Investments, L.L.C.
                  153 E. 53rd Street
                  New York, New York 10022
                  Attention: Frederick H. Fogel, Esq.
                  Facsimile No.: (212) 292-6538

            with a copy (which shall not constitute notice), to:

                  Skadden, Arps, Slate, Meagher & Flom LLP
                  Four Times Square
                  New York, NY 10036
                  Attention:  Diana M. Lopo, Esq.
                  Facsimile No.: (212) 735-2000

            If to Gleacher, to:

                  William McNichols
                  Gleacher Partners LLC
                  660 Madison Avenue
                  New York, NY  10021
                  Facsimile No.:  (212) 843-4910

                                       15
<PAGE>

            If to Phillips, to:

                  Charles G. Phillips
                  775 Park Avenue
                  New York, NY  10021
                  Facsimile No.:  (212) 249-7855

            If to LJCB, to:

                  Greg Woolley
                  Facsimile No.:  (011-61-2-9255-4170)

      If to a transferee Holder, to the address of such Holder set forth in the
transfer documentation provided to the Company;

            in each case with copies to:

                  Skadden, Arps, Slate, Meagher & Flom LLP
                  Four Times Square
                  New York, NY 10036
                  Attention:  Diana M. Lopo, Esq.
                  Facsimile No.: (212) 735-2000

or such other address or facsimile number as such party (or transferee) may
hereafter specify for the purpose by notice to the other parties. Each such
notice, request or other communication shall be effective (a) if given by
facsimile, when such facsimile is transmitted to the facsimile number specified
in this Section and the appropriate facsimile

                                       16
<PAGE>

confirmation is received or (b) if given by any other means, when delivered at
the address specified in this Section.

      (b) No Waivers. No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.

      (c) Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, it being understood that subsequent Holders of the
Registrable Common Stock are intended third party beneficiaries hereof.

      (d) Governing Law. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of New York.

      (e) Jurisdiction. Any suit, action or proceeding seeking to enforce any
provision of, or based on any matter arising out of or in connection with, this
Agreement or the transactions contemplated hereby may be brought in any federal
or state court located in the County and State of New York, and each of the
parties hereby consents to the jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding
and irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing, each party agrees that
service of process on such party as provided in Section 11(a) shall be deemed
effective service of process on such party.

      (f) Waiver of Jury Trial.

      EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

      (g) Counterparts; Effectiveness. This Agreement may be signed in any
number of counterparts (any number of which may be by facsimile), each of which
shall be an original, with the same effect as if the signatures thereto and
hereto were upon the same instrument.

      (h) Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter of this Agreement and
supersedes all prior agreements and understandings, both oral and written,
between the parties with respect to the transactions contemplated herein. Except
as provided to the contrary

                                       17
<PAGE>

herein, no provision of this Agreement or any other agreement contemplated
hereby is intended to confer on any Person other than the parties hereto any
rights or remedies.

      (i) Captions. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof.

      (j) Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or other authority to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party. Upon such a
determination, the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions contemplated
hereby be consummated as originally contemplated to the fullest extent possible.

      (k) Amendments. The provisions of this Agreement, including the provisions
of this sentence, may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given without the
prior written consent of the holders of a majority of the Company Securities (as
constituted on the date hereof); provided, however, that without a Stockholder's
written consent no such amendment, modification, supplement or waiver shall
affect adversely such Stockholder's rights hereunder in a discriminatory manner
inconsistent with its adverse effects on rights of other Stockholders hereunder
(other than as reflected by the different number of shares held by such
Stockholder); provided, further, that the consent or agreement of the Company
shall be required with regard to any termination, amendment, modification or
supplement of, or waivers or consents to departures from, the terms hereof,
which affect the Company's obligations hereunder.

      (l) Aggregation of Stock. All Registrable Common Stock held by or acquired
by any Affiliated Persons will be aggregated together for the purpose of
determining the availability of any rights under this Agreement.

      (m) Equitable Relief. The parties hereto agree that legal remedies may be
inadequate to enforce the provisions of this Agreement and that equitable
relief, including specific performance and injunctive relief, may be used to
enforce the provisions of this Agreement.

      (n) No Inconsistent Agreements. The Company shall not enter into any
agreement, or any amendment to any agreement, which is inconsistent with or
violates the rights granted to the Holders of Registrable Common Stock in this
Agreement.

                                       18
<PAGE>

      IN WITNESS WHEREOF, this Supplemental Registration Rights Agreement has
been duly executed by each of the parties hereto as of the date first written
above.

                                        ZAM Holdings, L.P.,
                                        by its General Partner,
                                        PBK HOLDINGS, INC.

                                        By: /s/ Fred Fogel
                                            ------------------------------------
                                        Name:  Fred Fogel
                                        Title: VP

                                        ERIC J. GLEACHER

                                        /s/ Eric. J. Gleacher
                                        ----------------------------------------

                                        CHARLES G. PHILLIPS

                                        /s/ Charles G. Phillips
                                        ----------------------------------------

                                        LJCB NOMINEES PTY. LTD.
                                        by its Director,
                                        Greg Woolley

                                        By: /s/ Greg Woolley
                                            ------------------------------------
                                        Name:  Greg Woolley
                                        Title: Director

                                        COSI, INC.

                                        By: /s/ William D. Forrest
                                            -----------------------------
                                        Name:  William D. Forrest
                                        Title: Executive Chairman

                                       19EXHIBIT 4.8.1

                         Senior Secured Convertible Note

          THIS NOTE AND ANY SECURITIES INTO WHICH THIS NOTE MAY BE
          CONVERTED (COLLECTIVELY, THE "SECURITIES") HAVE BEEN
          ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER
          THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE
          SECURITIES LAWS OF ANY OTHER JURISDICTION. THE SECURITIES
          MAY NOT BE OFFERED, SOLD OR TRANSFERRED IN THE ABSENCE OF
          SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER THE
          SECURITIES ACT AND OTHER APPLICABLE SECURITIES LAWS.

                                   COSI, INC.

                         SENIOR SECURED CONVERTIBLE NOTE
                         -------------------------------

$969,240.50               Due December 31, 2004               New York, New York
                                                                  August 5, 2003

            Unless converted pursuant to Section 5 hereof, Cosi, Inc., a
Delaware corporation (the "Borrower"), hereby unconditionally promises to pay to
the order of ZAM Holdings, L.P., a Delaware limited partnership ("Lender"),
(Lender, its successors or assigns, as applicable, "Holder"), in lawful money of
the United States of America and in immediately available funds, the principal
amount of Nine Hundred Sixty Nine Thousand Two Hundred Forty Dollars and 50
Cents ($969,240.50) (the "Loan") on December 31, 2004 (the "Maturity Date"); and
to pay interest at the time, in the form and at the rate set forth herein on the
unpaid principal amount hereof, for the period commencing August 5, 2003 until
such principal amount shall be paid in full. This Senior Secured Convertible
Note (as amended, supplemented, extended, restated, renewed, refunded, replaced,
refinanced, increased in amount or otherwise modified, in each case from time to
time and whether in whole or in part, this "Note") evidences the unpaid
principal amount of the Loan together with all accrued and unpaid interest
thereon (collectively, and together with all other amounts payable under this
Note, the "Obligations").

            This Note is issued to Holder in accordance with and subject to the
following terms and conditions:

      1.    Interest.

            (a) The outstanding principal amount of the Loan shall accrue
interest from the date hereof until all payments hereunder have been irrevocably
paid in full or this Note has been converted as provided in Section 5 hereof at
a per annum rate equal at all times to the lesser of (i) the maximum lawful rate
of interest in effect at such time under "applicable law" (as defined below),
and (ii) the rate of interest publicly announced from time to time by Bank of
America or any successor thereto, as its prime rate or reference rate (provided,
that if such financial institution publicly announces more than one prime rate
or reference rate, then the higher or highest of such rates) (such rate, the
"Index") plus three-quarters (0.75) percentage points per annum (provided, that
such rate shall be adjusted concurrently with, and such adjustments shall be
effective on the same date as, adjustments announced in such prime rate),
compounded monthly; provided, however, that from and after either (i) the
occurrence of an Event of Default (as defined below) (whether or not the Holder
has elected to accelerate unpaid principal and interest under this Note as a
result of such Event of Default); or (ii) the maturity of this Note (whether the
stated maturity date of this Note or the maturity date resulting from the
Holder's acceleration of unpaid principal and interest), then in

<PAGE>

either of such circumstances, interest on the unpaid principal balance of this
Note shall accrue at a rate equal to eight percent (8%) per annum above the
otherwise applicable rate stated above. Interest shall be calculated on the
basis of a year of 360 days and shall accrue on the outstanding principal amount
of this Note and, to the extent permitted by law, on any accrued but unpaid
interest thereon that has been compounded until all payments hereunder have been
irrevocably paid in full or the Note has been converted as provided in Section
5. Borrower acknowledges and agrees that the calculation of interest on the
basis described in the immediately preceding sentence may result in the accrual
and payment of interest in amounts greater than those which would be payable if
interest were calculated on the basis of a three hundred sixty-five (365) day
year. Except as otherwise provided herein, accrued and unpaid interest hereunder
shall be due and payable monthly on the seventh (7th) day of the month, with the
first such payment being payable on September 7, 2003.

            (b) If the Index ceases to be made available, the Holder shall
select an alternate index as a substitute for the Index (the "Substituted
Index") which, in the Holder's good faith judgment, is comparable to the Index
and which is not likely to result in the interest rate being substantially
different than if such prior Index had continued to be made available. In such
event, the Holder shall adjust the percentage point spread set forth above (the
"Spread") based on the value of the Substituted Index as of the last preceding
date on which the interest rate was adjusted or, if no such adjustment has yet
occurred, as of the date of this Note, such that the sum of the Substituted
Index and the adjusted Spread equals the sum of the prior Index plus the prior
Spread. Borrower acknowledges and agrees that the Index represents an index
which is quoted, published or announced from time to time by the financial
institution identified above as an index for variable interest rates. If either
(i) First Republic Bank holds the note, in the amount of $3,000,000, dated March
31, 2003, of the Company (the "First Republic Note") and consents if and to the
extent required or (ii) the First Republic Note has been retired or has been
transferred pursuant to the put and call arrangements to which the First
Republic Note is subject, this Note is secured by a security agreement
substantially in the form as attached as Exhibit A executed in favor of the
Holder, as secured party ("Security Agreement"), provided, however, that the
Company agrees that it shall not grant any other Person security in any of the
property of the Company (other than with respect to equipment pledged to secure
the Company's equipment loan credit facility) and that it shall execute the
Security Agreement as soon as the conditions in either (i) or (ii) are
satisfied.

            (c) It is expressly stipulated and agreed to be the intent of the
Holder and the Borrower to, at all times, conform to and contract in strict
compliance with applicable usury laws from time to time in effect. All
agreements between the Holder and the Borrower, including, without limitation,
this Note, are hereby limited by the provisions of this Section 1(c) which shall
override and control all such agreements, whether now existing or hereafter
arising and whether written or oral. In no way, nor in any event or contingency
(including, but not limited to, prepayment, default, demand for payment or
acceleration of maturity), shall the interest taken, reserved, contracted for,
charged, chargeable, received or collected under this Note exceed the maximum
nonusurious amount permitted by applicable law (the "Maximum Amount"). If, from
any possible construction of any agreement, document or instrument (including,
without limitation, this Note), interest would otherwise be payable in excess
of, or is adjudicated to be payable in excess of, the Maximum Amount, any such
construction shall be subject to the provisions of this Section 1(c), and, ipso
facto, such agreement, document or instrument shall be reformed and the interest
payable shall be reduced to the Maximum Amount, without the necessity of
execution of any amendment or new document. If the Holder shall ever receive
anything of value that is characterized as interest under applicable law and
that would apart from this provision be in excess of the Maximum Amount, an
amount equal to the amount that would have been excessive interest shall,
without penalty, be applied first to the reduction of the outstanding principal
amount of this Note, and second to the reduction of any other amounts due and
payable under this Note, and not to the payment of interest, or promptly
refunded to the Borrower or the other payor thereof if and to the extent such
amount that would have been excessive exceeds such unpaid principal amount and
such other amounts. The right to accelerate maturity of this Note or any other
indebtedness does not include the right to accelerate any interest that has not
otherwise accrued on the date of such acceleration, and the Holder does not
intend to take, reserve, contract for, charge, receive or collect any unearned
interest in the event of acceleration. All interest paid or agreed to be paid to
the Holder shall, to the extent permitted by applicable law, be amortized,
prorated, allocated and spread throughout the full stated term (including any
renewal or extension) of the indebtedness to

                                       2
<PAGE>

which it relates so that the amount of interest thereon does not exceed the
Maximum Amount. As used in this Section 1(c), the term "applicable law" shall
mean the laws of the State of New York or the federal laws of the United States,
whichever laws allow the greater interest, applicable to commercial loans as
such laws now exist or may be changed or amended or come into effect in the
future.

      2.    Payments.

            (a) All payments of principal and interest with respect to this Note
shall be made on the due date thereof no later than 3:00 p.m., New York, New
York time, in immediately available funds in lawful money of the United States
of America (without any counterclaim, offset or deduction whatsoever and free
and clear of, and without withholding or deduction for or on account of, any
present or future taxes, levies, imposts, duties, charges or fees of any
nature), to the Holder by wire transfer (and pursuant to specific instructions
to be supplied by the Holder prior to the date of the first such payment). All
payments (including all prepayments) hereunder received by the Holder shall be
applied first to the payment of accrued and unpaid interest hereunder and only
thereafter to the outstanding principal balance of this Note. Any payment
received by the Holder after 3:00 p.m., New York, New York time, on any day,
will be deemed to have been received on the next following "Business Day."
"Business Day" means any day on which banks are not authorized to be closed for
business in New York, New York.

            (b) The Holder and any person (including any natural person,
partnership, joint venture, corporation, limited liability company, association,
company, trust, any other entity, unincorporated organization and government and
any department, political subdivision or agency thereof, "Person") to which the
Holder sells, assigns, grants a participation in, or otherwise transfers, part
or all of its interest in this Note agree that on the date the Holder or Person
becomes a party to this Note, and from time to time thereafter if requested by
the Borrower or required because, as a result of a change in law or a change in
circumstances or otherwise, a previously delivered form or statement becomes
incomplete or incorrect in any material respect, it will deliver complete,
accurate and duly executed forms or other statements prescribed by the Internal
Revenue Service of the United States certifying the Holder's or such Person's
exemption from United States withholding taxes (including backup withholding
taxes) with respect to all payments to be made to such Holder or Person under
this Note, provided that any such Holder or Person shall not be required to
deliver such forms or statements because such exemption is not available to such
Holder or Person as the result of a change in law or interpretation taking
effect after the later of the date hereof, or the date on which such Person
acquired an interest in the Note.

            (c) Voluntary prepayment of the entire amount of the outstanding
principal (but not a portion that is less than the entire amount) of this Note
and any accrued and unpaid interest hereunder (the "Voluntary Prepayment") shall
be permitted prior to the Maturity Date, at the option of the Borrower, without
premium or penalty, provided, however, that the Borrower shall not be permitted
to make any Voluntary Prepayment if, within five (5) Business Days of receiving
notice from the Borrower of its intention to make the Voluntary Prepayment, the
Holder provides notice to the Borrower of its intention to exercise any or all
of the Holder's rights pursuant to Section 5 hereof. (d) The Borrower agrees
that to the extent the Borrower makes a payment or payments hereunder which
payment or payments, or any part thereof, are subsequently invalidated, declared
to be fraudulent or preferential, set aside and/or required to be repaid to the
Borrower, its successors or assigns under any bankruptcy law, state or federal
law, common law or equitable cause, then, to the extent of such payment or
repayment, the obligations, or part thereof, under this Note that have been
paid, reduced or satisfied by such amount shall be reinstated and continued in
full force and effect as of the time immediately preceding such initial payment,
reduction or satisfaction.

      3. Representations and Warranties. Borrower hereby represents, warrants
and covenants to the Holder that (i) all of the following provisions of this
Section 3 are true and correct at and as of the date of this Note and (ii) all
of the following provisions of this Section 3 are, and shall be, true and
correct at and as of each such date during which this Note is outstanding (with
the same effect as though made at and as of each such date during which this
Note is outstanding). Borrower's representations and warranties

                                       3
<PAGE>

shall survive the execution of this Note, notwithstanding any investigation at
any time made by or on behalf of any party.

            (a) Organization. Each of the Borrower and its Subsidiaries (as
defined below) (i) is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation, (ii) has all corporate
power and authority to own, lease and operate its property and to carry on its
business as now being conducted or as its business is contemplated to be
conducted and to consummate the transactions contemplated by this Note and (iii)
is duly qualified or licensed to do business and is in good standing as a
foreign corporation under the laws of each jurisdiction where the nature of the
property owned or leased by it or the nature of the business conducted by it
makes such qualification or license necessary, except where the failure to be so
qualified or licensed (1) would not reasonably be expected to either prevent or
delay its ability to perform its obligations under this Note and (2) could not
reasonably be expected, individually or in the aggregate, to result in a
Material Adverse Effect (as defined below). For purposes of this Agreement, a
"Subsidiary" of any Person shall mean any corporation, partnership, joint
venture or other legal entity of which such Person (either alone or through or
together with any other Subsidiary), owns, directly or indirectly, more than 50%
of the stock or other equity interests, the holders of which are generally
entitled to vote for the election of the board of directors or other governing
body of such corporation, partnership, joint venture or other legal entity.

            (b) Due Authorization. The Borrower has all requisite corporate
power and authority to enter into, execute and deliver this Note and to perform
its respective obligations hereunder, and has taken all necessary corporate
action required for the due authorization, execution, delivery and performance
by it of this Note.

            (c) Due Execution; Enforceability. This Note has been duly and
validly executed and delivered by the Borrower and constitutes the valid and
binding obligation of the Borrower enforceable against it in accordance with its
terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity).

            (d) Consents. Neither the execution, delivery or performance of this
Note by the Borrower, nor the consummation by the Borrower of its respective
obligations and the transactions contemplated by this Note, requires any consent
or approval of, authorization by, exemption from, filing or registration with,
or notice to any United States (Federal, state or local) or foreign government,
or governmental, regulatory, judicial or administrative authority, agency or
commission ("Governmental Entity") or other Person except (i) with regard to the
Stockholder Approval (as defined in Section 5 hereof), and (ii) where the
failure to obtain such consent, approval, authorization or exemption or to make
such filing or registration or to provide such notice (1) would not reasonably
be expected to either prevent or delay the Borrower's ability to perform its
obligations under this Note and (2) could not reasonably be expected,
individually or in the aggregate, to result in a Material Adverse Effect.

            (e) No Conflicts. The execution, delivery and performance of this
Note does not, and the consummation of the transactions contemplated hereby will
not, (i) conflict with, or result in any violation or breach of any provision of
the certificate of incorporation or bylaws of the Borrower or any of its
Subsidiaries, (ii) conflict with, result in any violation or breach of, or
constitute (with or without notice or lapse of time, or both) a default under or
conflict with (or give rise to any right of termination, amendment, cancellation
or acceleration of any right or obligation or loss of any benefit under) any of
the terms, conditions or provisions of any note, bond, mortgage, license,
indenture, lease, contract or other agreement, instrument or obligation to which
the Borrower or any of its Subsidiaries is a party or by which any of them or
any of their properties or assets may be bound or affected, (iii) conflict with
or violate any permit, concession, franchise, license, judgment, injunction,
order, decree, statute, law, ruling, ordinance, rule or regulation (including,
without limitation, federal and state securities laws and regulations)
(collectively, "Laws") applicable to the Borrower or any of its Subsidiaries or
by which any of their properties or assets are bound or affected or (iv) result
in the creation or imposition of any pledge, claim,

                                       4
<PAGE>

lien, charge, encumbrance or security interest of any kind or nature whatsoever
(any of the foregoing, an "Encumbrance") against any of the properties or assets
of the Borrower or any of its Subsidiaries, except for the Security Agreement,
and except in the case of clauses (ii) or (iii) above, where such conflicts or
violations could neither prevent or delay the Borrower's ability to consummate
the transactions contemplated by this Note nor reasonably be expected,
individually or in the aggregate, to result in a Material Adverse Effect.

            (f) SEC Filings. Except as disclosed in the Company SEC Reports (as
defined below) and in the registration statements filed by the Borrower with the
United States Securities and Exchange Commission ("SEC"), the Borrower has filed
all reports and registration statements required to be filed by it with the SEC.
As of its filing date, and giving effect to any amendments thereof, each report
filed by the Borrower with the SEC (collectively, the "Company SEC Reports") and
each registration statement filed by the Borrower with the SEC complied as to
form in all material respects with the applicable requirements of the Securities
Act of 1933, as amended, including the rules and regulations promulgated
thereunder (the "Securities Act") and the Securities Exchange Act of 1934, as
amended, including the rules and regulations promulgated thereunder (the
"Exchange Act"), as the case may be. As of its filing date, and giving effect to
any amendments thereof, each Company SEC Report filed pursuant to the Exchange
Act did not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. The
Borrower's draft registration statement on Form S-1 dated August 4, 2003
provided to the Lender prior to the date hereof, and any such amended or
supplemented version of such registration statement filed with the SEC, if
applicable, and each other registration statement filed by the Borrower with the
SEC after the date hereof pursuant to the Securities Act , as amended or
supplemented, if applicable (as of the date of any such registration statement
and when any amendment becomes effective) complies and will comply as to form in
all material respects with the applicable requirements of the Securities Act and
does not and will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading.

            (g) Financial Statements. Each of the consolidated financial
statements (including, in each case, any related notes thereto) contained in the
Company SEC Reports and each of the consolidated financial statements
(including, in each case, any related notes thereto) contained in the
registration statements filed by the Borrower with the SEC (collectively, the
"Financial Statements") complied as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, had been prepared in accordance with generally
accepted accounting principles ("GAAP") applied on a consistent basis throughout
the periods involved (except as may be indicated in the notes thereto or, in the
case of the unaudited financial statements contained therein (the "Interim
Financial Statements"), as permitted by Form 10-Q or the Exchange Act
regulations promulgated by the SEC), and each fairly presented the consolidated
financial position of the Borrower and its consolidated Subsidiaries in all
material respects as at the respective dates thereof and the consolidated
results of its operations and cash flows for the periods indicated in accordance
with GAAP (subject, in the case of the Interim Financial Statements, to normal
audit adjustments which were not and are not expected, individually or in the
aggregate, to be material in amount).

            (h) Absence of Certain Changes. Since December 30, 2002, except as
disclosed in the Company SEC Reports prior to the date of this Note, the
Borrower and its Subsidiaries have conducted their businesses in the ordinary
course, in a manner consistent with past practice, and there has not been any
event, occurrence or development of a state of circumstances or facts which,
individually or in the aggregate, has had or could reasonably be expected to
have a Material Adverse Effect or could prevent or delay the Borrower's ability
to consummate the transactions contemplated by this Note. For purposes of this
Note, a "Material Adverse Effect" means any fact, event, change, circumstance,
condition or effect which is or could reasonably be expected to be materially
adverse to the business, condition (financial or otherwise), results of
operations, prospects, properties, assets or liabilities of the Borrower and its
Subsidiaries, taken as a whole.

            (i) Litigation. Except as set forth in the Borrower's Annual Report
on Form 10-K/A filed on April 1, 2003 or the Borrower's Quarterly Report on Form
10-Q filed on May 9, 2003, there is no

                                       5
<PAGE>

judgment, ruling, decree, injunction, rule or order of any Governmental Entity,
arbitrator or other Person outstanding against the Borrower or any of its
Subsidiaries. Since December 30, 2002, except as set forth in the Borrower's
Annual Report on Form 10-K/A filed on April 1, 2003 or the Borrower's Quarterly
Report on Form 10-Q filed on May 9, 2003, there have been no claims, actions,
suits, proceedings or investigations, or any amendment of any prior claim,
action, suit, proceeding or investigation, initiated against or, to the
knowledge of the Borrower, threatened against or affecting the Borrower or any
of its Subsidiaries (or any of their respective properties or assets) at law or
in equity or before or by any Governmental Entity, arbitrator or other Person
which (i) in any manner challenges or seeks to prevent, enjoin, alter or
materially delay the transactions contemplated by this Note or (ii) if resolved
adversely to the Borrower or a Subsidiary could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.

            (j) No Preemptive Rights. No preemptive rights, participation
rights, rights of first offer or first refusal, tag-along or drag-along rights
or other approval rights (collectively, "Preemptive Rights") will apply or
become applicable in connection with or as a result of the transactions
contemplated by this Note.

            (k) Due Issuance and Authorization of Securities. All of the
outstanding shares of capital stock of the Borrower have been, or upon issuance
will be, validly issued, fully paid and non-assessable. No securities of the
Borrower are subject to Preemptive Rights or other similar rights of any or all
of the stockholders of the Borrower. This Note is, and any securities issuable
to the Holder upon conversion, exchange or exercise of this Note will be, upon
issuance, duly authorized, validly issued, fully paid and non-assessable, each
vesting in the Holder legal and valid title to such securities, free and clear
of all Encumbrances and are and will not be subject to Preemptive Rights or
other similar rights of any or all of the stockholders of the Borrower.

      4.    Events of Default.

            If any of the following events shall occur and be continuing (each
such event, an "Event of Default"):

            (i) the Borrower fails to repay the principal amount of this Note
when due, or fails to pay any interest thereon when due and such failure to pay
interest continues for five (5) days;

            (ii) any representation or warranty made by the Borrower in this
Note shall be false in any material respect;

            (iii) the Borrower fails to convert the outstanding principal amount
of this Note and any accrued and unpaid interest hereunder into shares of common
stock in accordance with the terms of Section 5 and such failure continues for
five (5) days;

            (iv) the Borrower violates any material covenant, agreement or
condition contained in this Note, which violation shall not have been cured for
a period of forty-five (45) days following notice to the Borrower from the
Holder;

            (v) this Note, or any part thereof, shall (other than resulting from
payment or by consent of the applicable parties thereto), at any time after its
execution and delivery and for any reason, cease to be in full force and effect
or shall be declared to be null and void or the validity or enforceability
thereof shall be contested by the Borrower or the Borrower shall deny that the
Borrower has any or further liability or obligation thereunder;

            (vi) any default or breach occurs under any other agreement,
document or instrument to which Borrower or any of its Subsidiaries is a party
that is not cured within any applicable grace period therefor, and such default
or breach involves the failure to make any payment when due in respect of any
principal of or interest on indebtedness or guaranteed indebtedness for borrowed
money (other than the

                                       6
<PAGE>

Obligations) of Borrower or any of its Subsidiaries in excess of $250,000 in the
aggregate (including amounts owing to all creditors under any combined or
syndicated credit arrangements) and such failure causes, or permits any holder
of such indebtedness or guaranteed indebtedness or a trustee to cause, such
indebtedness or guaranteed indebtedness or a portion thereof in excess of
$250,000 in the aggregate to become due prior to its stated maturity or prior to
its regularly scheduled dates of payment, in each case, regardless of whether
such right is exercised, by such holder or trustee;

            (vii) Borrower fails to pay any of its indebtedness or to perform
any of its obligations when due under any document between Borrower and any
other Person who holds a lien on the collateral securing all or any part of the
Obligations ("Collateral") that is senior to the lien held by the Holder in the
Collateral and fails to cure such breach within any applicable cure period under
such document (provided, that nothing contained in this Section constitutes or
shall be construed as the Holder's consent to any lien being placed on the
Collateral, other than liens on equipment pledged to secure the Company's
equipment loan credit facility);

            (viii) the Borrower shall be liquidated, dissolved, adjudicated
insolvent, or shall fail to pay, or shall admit in writing its inability to pay
its debts as they mature, or shall make a general assignment for the benefit of
creditors; or the Borrower shall apply for or consent to the appointment of any
receiver, custodian, trustee or similar officer for it or for all or any
substantial part of its property, or such receiver, custodian, trustee or
similar officer shall be appointed without the application or consent of the
Borrower; or the Borrower shall institute (by petition, application, answer,
consent or otherwise), or take any action to authorize the institution of, any
bankruptcy, insolvency, reorganization, dissolution, liquidation or similar
proceeding relating to the Borrower under the Laws of any jurisdiction; or any
such proceeding shall be instituted (by petition, application or otherwise)
against the Borrower and such proceeding shall not be dismissed within thirty
(30) days after being instituted;

            (ix) any final, non-appealable money judgment, writ or warrant of
attachment, or similar process involving in any individual case or in the
aggregate at any time an amount in excess of $250,000 shall be entered into or
filed against the Borrower or any of its Subsidiaries or any of their respective
properties or assets;

            (x) a court order is entered against Borrower enjoining the conduct
of all or a material part of its business, and Borrower fails to cause such
injunction to be fully stayed, dissolved or removed within sixty (60) days after
such order is entered;

            (xi) the Borrower has, without the Holder's prior written consent,
(1) changed its jurisdiction of incorporation; (2) succeeded to all or any
substantial part of the liabilities of any other Person; (3) directly or
indirectly, consolidated with or merged into any other Person or permitted any
other Person to consolidate with or merge into it or engaged in any other
corporate reorganization; (4) sold, leased, conveyed, abandoned or otherwise
disposed of all or substantially all or any substantial part of its assets in
one transaction or a series of transactions; (5) engaged in a transaction or
series of transactions in which more than twenty percent (20%) of the voting
power of the Borrower directly or indirectly may be issued, transferred or
disposed of (including by exercise, exchange or conversion of derivative
securities) to a Person other than ZAM Holdings, L.P.; (6) incurred, assumed or
guaranteed any indebtedness for borrowed money or incurred Encumbrances (other
than pursuant to (A) Borrower's senior secured promissory note, dated as of
March 31, 2003, for the benefit of First Republic Bank (the "Prior Note"), (B)
an Investment Agreement among Borrower, ZAM Holdings, L.P., Eric J. Gleacher
("Gleacher"), Charles G. Phillips ("Phillips") and LJCB Nominees Pty. Ltd.
pursuant to which Borrower issues to such other parties senior secured
convertible notes of Borrower (such agreement, the "Investment Agreement");
provided, that such Investment Agreement expressly provides that such senior
secured convertible notes are exempt pursuant to this Section 4(xi)(6) and (C)
senior secured convertible notes, issued as of the date hereof, or to be issued,
by Borrower to Gleacher and Phillips in the principal amounts of $378,802 and
$151,957.50, respectively) in excess of $3 million; or (7) agreed or committed
to do any of the foregoing;

                                       7
<PAGE>

            (xii) (1) the validity or priority of the Holder's security interest
in the Collateral is impaired in any material respect for any reason; or (2) the
value of the Collateral has deteriorated, declined or depreciated as a result of
any intentional act or omission by Borrower; or

            (xiii) an "Event of Default" shall occur under the Security
Agreement;

then, (A) upon the occurrence of any Event of Default described in clause (viii)
of this Section 4, the Obligations shall automatically become immediately due
and payable without presentment, demand, protest, notice of intent to
accelerate, notice of acceleration or further notice of any kind, all of which
are hereby expressly waived by the Borrower, and (B) upon the occurrence of any
other Event of Default, the Holder may, at its option, by written notice to the
Borrower declare the Obligations to be forthwith due and payable, whereupon such
Obligations shall become and be forthwith due and payable, without presentment,
demand, protest, notice of intent to accelerate, notice of acceleration or
further notice of any kind, all of which are hereby expressly waived by the
Borrower.

            Other than as provided in this Section 4, the Note shall be
satisfied only by Conversion pursuant to Section 5 or by payment in full of all
amounts due hereunder.

      5.    Conversion.

            (a) Conversion Right. Subject to and upon compliance with the
provisions hereof, and subject to the approval of the stockholders of Borrower
with respect to the conversion feature of this Note, but (provided that Borrower
shall not have presented at a meeting of its stockholders the conversion feature
of this Note for approval by such stockholders) only if required under
applicable Law, (the "Stockholder Approval"), the Holder shall have the right,
at any time or from time to time, to convert all or any portion of the Total
Convertible Amount into as many shares of common stock, par value $.01 per
share, of Borrower ("Common Stock") as the portion of the Total Convertible
Amount so converted is a multiple of the Initial Conversion Price or, in case an
adjustment of such price has taken place pursuant to the provisions of this
Section 5, then at the price as last adjusted and in effect at the date this
Note or portion thereof is surrendered for conversion (such price or such price
as last adjusted, as the case may be, the "Conversion Price"). Notwithstanding
the preceding sentence, if, pursuant to Article I, Section 1.1(b) of the
Investment Agreement, the stockholders of the Borrower collectively subscribe
for a number of Rights Shares that equals at least $2,000,000, then the Holder
shall elect to convert the Total Convertible Amount in its entirety into shares
of Common Stock of the Borrower pursuant to this Section 5. For the purposes of
this Note, the term "Total Convertible Amount" shall mean, on any date, the sum
of the unpaid principal amount of this Note and the accrued and unpaid interest
thereon on such date. For the purposes of this Note, the term "Initial
Conversion Price" shall mean the lesser of (i) $1.50 and (ii) 85% of the
weighted average price per share of Borrower's Common Stock as reported on the
Nasdaq National Market for the fifteen trading day period ending three trading
days before the conversion date (provided, that (1) if the shares of such Common
Stock then are not traded on the Nasdaq National Market, the average of the
highest reported bid and lowest reported asked price for each of such fifteen
days as reported by NASDAQ shall be used; (2) if the shares of such Common Stock
then are not listed and traded on the NASDAQ, the average closing prices for
such fifteen days as reported by the principal national securities exchange on
which the shares are listed and traded shall be used; or (3) if the shares of
such Common Stock are not then listed or traded on NASDAQ or a national
securities exchange, the fair market value as determined jointly in good faith
by the Holder and the Borrower shall be used).

            (b) Manner of Conversion. This Note may be converted on any Business
Day prior to the Maturity Date (any such date of conversion, a "Conversion
Date"). In order to exercise such conversion privilege, the Holder shall
surrender this Note to the Borrower accompanied by a written statement (the
"Conversion Notice") designating the portion of the Total Convertible Amount to
be converted. If the Holder elects to convert this Note, or a portion thereof,
such conversion (a "Conversion") shall be deemed to have taken place immediately
prior to the close of business on the Conversion Date, and at such time the
rights of the Holder as Holder of this Note shall cease to the extent of the
portion of the Total Convertible Amount so converted and the Holder shall be
treated for all purposes (with respect to such portion) as the record holder of
the Common Stock issuable upon Conversion at such time.

                                       8
<PAGE>

            (c) Delivery of Stock Certificates, Etc. The Borrower, at its
expense (including the payment by it of any documentary stamp or similar issue
or transfer taxes, other than any taxes which may then be payable in respect of
the transfer of any such shares of Common Stock in a name other than that of the
Holder), will issue and deliver to the Holder as promptly as practicable on or
after a Conversion Date a certificate or certificates for the number of shares
of Common Stock of the Borrower issuable upon the Conversion. If this Note shall
be converted only in part, the Borrower shall, upon such Conversion, execute and
deliver to the Holder, at the expense of the Borrower, a new Note in principal
amount equal to the unconverted portion of the Total Convertible Amount (dated
as of the Conversion Date).

            (d) Adjustments on Conversion. The Borrower shall pay all interest
on the portion of this Note surrendered for conversion accrued through the last
full business day immediately preceding the date that the Conversion Notice
shall have been received by the Borrower, provided that no such payment shall be
made if the interest so accrued is converted pursuant to this Section 5. No
fractional shares of common stock shall be issued upon conversion of this Note,
but, if the conversion results in a fraction, an amount equal to such fraction
multiplied by the Per Share Market Price of the Common Stock on the last
Business Day prior to the Conversion Date shall be paid in cash to the Holder.
"Per Share Market Price" means, for any date of determination thereof, the
average daily Market Price per share for the 15 trading days immediately
preceding such date. The term "Market Price" shall mean the last reported sale
price per share regular way of Borrower's Common Stock as reported on the Nasdaq
National Market (provided, that (1) if the shares of such Common Stock then are
not traded on the Nasdaq National Market, the average of the highest reported
bid and lowest reported asked price for such day as reported by NASDAQ shall be
used; (2) if the shares of such Common Stock then are not listed and traded on
the NASDAQ, the closing price for such day as reported by the principal national
securities exchange on which the shares are listed and traded shall be used; or
(3) if the shares of such Common Stock are not then listed or traded on NASDAQ
or a national securities exchange, the fair market value as determined jointly
in good faith by the Holder and the Borrower shall be used).

            (e) Adjustments to Conversion Price.

                  (i) Adjustments for Recapitalization. In case the Borrower at
      any time on or after the date hereof shall:

                  (A)   pay a dividend or make a distribution in shares of
                        Common Stock to holders of its capital stock of any
                        class,

                  (B)   subdivide its outstanding shares of Common Stock into a
                        larger number of shares,

                  (C)   combine its outstanding shares of Common Stock into a
                        smaller number of shares,

                  (D)   pay a dividend or make a distribution to holders of its
                        Common Stock in (1) shares of its capital stock other
                        than Common Stock, (2) assets (including, without
                        limitation, securities of other Persons), evidences of
                        indebtedness or rights, or (3) options or warrants to
                        subscribe for or purchase any of its securities
                        (collectively, "Other Securities or Assets"),

      then the Conversion Price shall be adjusted to that price determined by
      multiplying the Conversion Price in effect immediately prior to such event
      by a fraction (x) the numerator of which shall be the total number of
      outstanding shares of Common Stock of the Borrower immediately prior to
      such event, and (y) the denominator of which shall be the total number of
      outstanding shares of Common Stock of the Borrower immediately after such
      event; provided that if the Borrower shall pay a dividend or make a
      distribution on its Common Stock in Other Securities or Assets, the
      Conversion Price shall be adjusted to the price obtained by multiplying
      the price then subject to adjustment by a fraction (x) the numerator of
      which shall be the Per Share Market Price of the Common Stock on the
      record date for such dividend or distribution, less the fair market value
      (on a per share of Common

                                       9
<PAGE>

      Stock basis) as determined jointly in good faith by the Holder and the
      Borrower of the Other Securities or Assets so distributed, and (y) the
      denominator of which shall be the Per Share Market Price of the Common
      Stock on the record date for such dividend or distribution. Any adjustment
      made pursuant to this paragraph shall become effective immediately after
      the record date in the case of a dividend or distribution and shall become
      effective immediately after the effective date in the case of subdivision
      or combination. The provisions of this Section 5(e) shall apply to the
      Conversion Price determined (directly or indirectly) by reference to the
      Initial Conversion Price of $1.50 and to any transactions described in (A)
      through (D) above occurring during or after a fifteen trading day period
      referred to in Section 5(a) but ending on the Conversion Date; provided,
      that if any such transaction described in (A) through (D) above occurs
      during a fifteen trading day period referred to in Section 5(a), the
      calculation of the Conversion Price shall be equitably adjusted to provide
      for a consistent basis of calculation during such period.

                  (ii) De Minimis Adjustments. Except as hereinafter provided,
      no adjustment of the Conversion Price hereunder shall be made if such
      adjustment results in a change of less than 1% in the Conversion Price
      then in effect. Any adjustment of less than 1% in the Conversion Price
      then in effect shall be carried forward and shall be made at the time of
      and together with any subsequent adjustment which, together with
      adjustment or adjustments so carried forward, amounts to 1% or more of the
      Conversion Price then in existence.

            (f) Adjustments for Reorganization. If the Borrower shall be
reorganized or shall be merged into or consolidate with any another Person or
shall sell all or substantially all of its assets or another Person shall be
merged into Borrower and in connection therewith Common Stock of the Borrower
shall be changed or converted into Successor Assets (as hereinafter defined), or
if the Borrower shall issue by reclassification of its shares of Common Stock
any shares of capital stock of the Borrower (each such event, an "Organic
Change"), then, as a condition of such Organic Change, lawful and adequate
provision shall be made whereby the Holder shall thereafter have the right to
receive upon the basis and upon the terms and conditions specified herein and in
lieu of the shares of Common Stock immediately theretofore receivable upon
conversion of this Note, such shares of stock, securities, assets or cash
(collectively, the "Successor Assets") as may (by virtue of such Organic Change)
be issued or payable with respect to or in exchange for a number of outstanding
shares of Common Stock equal to the number of shares of Common Stock immediately
theretofore so receivable by the Holder hereunder had such Organic Change not
taken place. In any such case, appropriate provisions shall be made with respect
to the rights and interests of the Holder to the end that the provisions of this
Section 5 (including, without limitation, provisions for adjustment of the
Conversion Price) shall thereafter be applicable as nearly as may be, in
relation to any Successor Assets thereafter deliverable upon conversion of this
Note.

            (g) Dissolution or Liquidation. In the event of any proposed
distribution of the assets of the Borrower in dissolution or liquidation (except
under circumstances when Section 5(f) shall be applicable), the Borrower shall
mail notice thereof to the Holder of this Note and shall make no distribution to
stockholders until the expiration of 30 days from the date of mailing of such
notice and, in any such case, the Holder may exercise the conversion rights with
respect to this Note within 30 days from the date of mailing such notice and all
rights herein granted not so exercised within such 30-day period shall
thereafter become null and void.

            (h) Certain Events. If any event occurs of the type contemplated by
Sections 5(e), 5(f), or 5(g) but not expressly provided for by such provisions
which adversely affect the rights of the Holder in a manner different than the
holders of Common Stock, then the Borrower's board of directors shall make an
appropriate adjustment in the number of shares of Common Stock obtainable upon
conversion of this Note pursuant to Section 5(a) so as to protect the rights of
the Holder.

            (i) Notices. The Borrower shall provide notice to the Holder, in
accordance with Section 11 of this Note, at least ten (10) Business Days prior
to the record date (or, if there is no record date, the date of such dividend,
distribution or event) for (i) any dividend, distribution or event that would
trigger adjustment hereunder and (ii) any dividend or distribution to all
holders of Common Stock outside the ordinary course of business, describing the
material terms thereof. Upon any adjustment or other

                                       10
<PAGE>

change relating to the shares of Common Stock or other property issuable upon
the Conversion pursuant to Section 5(a), then and in each such case the Borrower
shall give written notice thereof to Holder, in accordance with Section 11 of
this Note, which notice shall state the increase or decrease, if any, in the
number or other denomination of the shares of Common Stock issuable upon the
Conversion pursuant to Section 5(a), and the amount of other property receivable
upon the Conversion, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.

            (j) Adequate Shares. The Borrower will at all times reserve and keep
available out of its authorized but unissued capital stock 1,938,481 shares of
Common Stock for the purpose of effecting the Conversion pursuant to Section
5(a). All shares of stock which may be issuable upon the Conversion pursuant to
Section 5(a) will, upon issuance, be validly issued, fully paid and
non-assessable and free from all taxes (other than any taxes which may then be
payable in respect of the transfer of any such shares), liens and charges with
respect to the issuance thereof. The shares of stock issuable upon the
Conversion pursuant to Section 5(a) shall be issued without charge to the Holder
thereof for any issuance tax in respect thereof or other cost incurred by the
Borrower in connection with the Conversion and the related issuance of such
shares. The Borrower shall not close its books against the transfer of shares of
stock issued or issuable upon the Conversion pursuant to Section 5(a) in any
manner which interferes with the timely conversion of this Note. The Borrower
shall provide reasonable assistance and cooperate with any Holder of this Note
as required to make any governmental filings or obtain any licenses, permits,
certificates, consents, orders, approvals or other authorizations from
governmental authorities (collectively, "Governmental Approvals") prior to or in
connection with the conversion of this Note (including, without limitation,
making any filings required to be made by the Borrower). The Borrower shall take
all such reasonable actions as may be necessary to assure that all stock which
may be issuable upon the Conversion pursuant to this Section 5 may be issued
without violation of any applicable Law or governmental regulation. The Borrower
shall, as promptly as practicable, duly call, give notice of, convene and hold a
meeting of its stockholders in accordance with applicable Law and its
organizational documents for the purpose of obtaining the Stockholder Approval
and the approval of the stockholders of Borrower with respect to the conversion
feature of the Prior Note ("Prior Note Approval"). The Borrower, consistent with
the board of directors' fiduciary duties, shall use its best efforts to obtain
the Stockholder Approval and Prior Note Approval in accordance with applicable
Law.

            (k) Listing Obligation. As long as Borrower has securities listed on
NASDAQ or any other stock exchange, Borrower will take all reasonable steps
necessary, and pay all reasonable fees required, to list all of the shares of
Common Stock issued or issuable upon conversion, exchange or exercise of, or
otherwise in connection with, this Note on NASDAQ or such other stock exchanges
in the United States of America on which the Common Stock then is listed.
Following the initial listing of such shares, the Borrower, consistent with the
board of directors' fiduciary duties, will use its commercially reasonable best
efforts to maintain the listing of such shares whenever the Common Stock is
listed on any such exchange.

      6. Covenants of Borrower While Note Is Outstanding. The Borrower agrees
that, so long as there is any unpaid principal or interest outstanding or other
amount due to the Holder under this Note:

          (i)     Payment of Obligations. The Borrower will pay and discharge,
                  and will cause each Subsidiary to pay and discharge, at or
                  before maturity, all their respective obligations and
                  liabilities, including, without limitation, tax liabilities,
                  except where such tax liabilities may be contested in good
                  faith by appropriate proceedings, and will maintain, and will
                  cause each Subsidiary to maintain, in accordance with
                  generally accepted accounting principles, appropriate reserves
                  for the accrual of any of the same, and except where such
                  failures to pay and discharge, individually or in the
                  aggregate, would not reasonably be expected to have a Material
                  Adverse Effect;

          (ii)    Maintenance of Property; Insurance. The Borrower will keep,
                  and will cause each Subsidiary to keep, all material property
                  useful and necessary in its

                                       11
<PAGE>

                  business in good working order and condition; and will
                  maintain, and will cause each Subsidiary to maintain (either
                  in the name of the Borrower or in such Subsidiary's own name)
                  with financially sound and reputable insurance companies,
                  insurance on all their property in at least such amounts and
                  against at least such risks as are usually insured against in
                  the same general area by companies of established repute
                  engaged in the same or a similar business. The Borrower will
                  furnish to the Holder, upon written request, full information
                  as to the insurance carried;

          (iii)   Conduct of Business and Maintenance of Existence. The Borrower
                  will continue, and will cause each Subsidiary to continue, to
                  engage in business of the same general type as now conducted
                  by the Borrower and its Subsidiaries, and will preserve, renew
                  and keep in full force and effect, and will cause each
                  Subsidiary to preserve, renew and keep in full force and
                  effect their respective corporate existence and their
                  respective rights, privileges and franchises necessary or
                  desirable in the normal conduct of business, except for such
                  failures to continue and failures to preserve, renew and keep
                  that, individually or in the aggregate, would not reasonably
                  be expected to have a Material Adverse Effect; provided that
                  nothing in this Section shall prohibit the abandonment or
                  termination of the corporate existence, rights, privileges or
                  franchises of any Subsidiary when deemed by the Borrower in
                  good faith to be in the best interest of its overall business;

          (iv)    Compliance with Laws. Each of Borrower and its Subsidiaries
                  shall comply with all federal, state, local and foreign Laws
                  and regulations applicable to it, except to the extent that
                  the failure to comply, individually or in the aggregate, could
                  not reasonably be expected to have a Material Adverse Effect;

          (v)     Books and Records; Inspections by Holder. Borrower shall keep
                  and maintain complete and accurate books and records relating
                  to its business at its principal place of business. The Holder
                  shall have access to such books and records at all reasonable
                  times upon not less than two (2) Business Days prior written
                  notice to Borrower for the purposes of examination,
                  inspection, verification, copying and for any other reasonable
                  purpose. Borrower authorizes the Holder, at its option but
                  without any obligation of any kind to do so, to discuss the
                  affairs, finances and accounts of Borrower with any of
                  Borrower's officers and directors and, at the Holder's
                  expense, with Borrower's independent accountants and auditors,
                  and Borrower irrevocably authorizes all accountants and
                  auditors employed or retained by Borrower to respond to and
                  answer all requests from the Holder for financial and other
                  information regarding Borrower. Borrower waives the benefit of
                  any accountant-client privilege or other evidentiary privilege
                  precluding or limiting the disclosure or delivery of any of
                  its books and records to the Holder (except that Borrower does
                  not waive any attorney-client privilege).

          (vi)    Notice of Material Adverse Changes. Borrower shall immediately
                  notify the Holder in writing of (a) any Material Adverse
                  Effect; (b) any material adverse change in the Collateral; (c)
                  any claim, action, suit, proceeding or investigation, or any
                  amendment of any prior claim, action, suit, proceeding or
                  investigation, initiated against or threatened against or
                  affecting the Borrower or any of its Subsidiaries (or any of
                  their respective properties or assets) which, individually or
                  in the aggregate, may cause or result in a Material Adverse
                  Effect or any material impairment in the ability of Borrower
                  to carry on its business in substantially the same manner as
                  it is now being conducted; and (d) any occurrence which could
                  form the basis of an Event of Default.

                                       12
<PAGE>

          (vii)   Licenses. Borrower shall maintain all Governmental Approvals
                  necessary for the ownership of its properties and the conduct
                  of its businesses, except for Governmental Approvals the
                  failure of which to maintain would not reasonably be expected
                  to have a Material Adverse Effect.

          (viii)  Further Assurances. Upon the Holder's request, Borrower shall
                  execute and deliver to the Holder such further documents and
                  agreements, in form and substance satisfactory to the Holder,
                  as the Holder may reasonably require to effectuate the terms
                  of this Agreement and the Security Agreement, including,
                  without limitation, executing, and causing the other necessary
                  parties to execute, a registration rights agreement covering
                  the shares of Common Stock issuable upon conversion of this
                  Note on terms acceptable to Holder.

          (ix)    Negative Covenants. Other than pursuant to the Investment
                  Agreement, the Borrower shall not, nor shall it permit any of
                  its Subsidiaries to, without the prior written consent of the
                  Holder:

                  (i) directly or indirectly, by operation of Law or otherwise,
      merge or consolidate with or into any Person;

                  (ii) (a) create, incur, assume or permit to exist any
      long-term Indebtedness (as defined below); (b) except in the ordinary
      course of business, consistent with past practice and in an aggregate
      amount not to exceed $250,000 for any consecutive twelve (12) month
      period, create, incur, assume or permit to exist short-term Indebtedness;
      (c) pay, repay, discharge, purchase, repurchase or satisfy any
      Indebtedness issued or guaranteed by the Borrower or any Borrower
      Subsidiary, except as required by the terms thereof; (d) modify the terms
      of any Indebtedness or other liability, other than modifications of short
      term debt in the ordinary and usual course of business and consistent with
      past practice or (e) assume, guarantee, endorse or otherwise become liable
      or responsible (whether directly, contingently or otherwise) for the
      obligations of any other Person;

                  (iii) other than liens on equipment pledged to secure the
      Company's equipment loan credit facility, create, incur, assume or permit
      to exist any mortgage or deed of trust, pledge, hypothecation, assignment,
      deposit arrangement, lien, charge, claim, security interest, easement or
      Encumbrance, or preference, priority or other security agreement or
      preferential arrangement of any kind or nature whatsoever (including,
      without limitation, any lease or title retention agreement, any financing
      lease having substantially the same economic effect as any of the
      foregoing, and the filing of, or agreement to give, any financing
      statement perfecting a security interest under the Uniform Commercial Code
      or comparable Law of any jurisdiction); or

                  (iv) enter into any agreement, contract, commitment or
      arrangement to do any of the foregoing, or authorize, recommend, propose
      or announce an intention to do, any of the foregoing.

      For purposes of this Note, "Indebtedness" means (i) all indebtedness
for borrowed money or for the deferred purchase price of property or services
(other than current trade liabilities incurred in the ordinary course of
business and payable in accordance with customary practices), (ii) any other
indebtedness that is evidenced by a note, bond, debenture or similar
instrument, (iii) all obligations under financing leases, (iv) all
obligations in respect of acceptances issued or created, (v) all liabilities
secured by any lien on any property and (vi) all guarantee obligations.

            (x) Stockholders Meeting. The Company shall, as promptly as
practicable, duly call, give notice of, convene and hold a meeting of its
stockholders in accordance with applicable law and its organizational documents
for the purpose of obtaining the Stockholder Approval.

                                       13
<PAGE>

      7. Investment Intent. The Holder hereby represents and warrants to the
Borrower that it is an "accredited investor" within the meaning of Rule 501(a)
promulgated under the Securities Act.

      8. Security. Payment of the Obligations is secured pursuant to the
Security Agreement.

      9. Business Days. If any payment is due, or any time period for giving
notice or taking action expires, on a day which is not a Business Day, the
payment shall be due and payable on, and the time period shall automatically be
extended to, the immediately succeeding Business Day, and interest shall
continue to accrue at the required rate hereunder until any such payment is
made.

      10. Governing Law; Consent to Jurisdiction. THIS NOTE SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF NEW YORK, AND SHALL BIND AND INURE
TO THE BENEFIT OF THE PARTIES HERETO AND THEIR RESPECTIVE SUCCESSORS AND
ASSIGNS.

            THE BORROWER HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF THE
COURTS OF NEW YORK AND THE UNITED STATES OF AMERICA, IN EACH CASE LOCATED IN
NEW YORK COUNTY (THE "SELECTED COURTS") FOR ANY PROCEEDING ARISING OUT OF OR
RELATING TO THIS NOTE (AND AGREES NOT TO COMMENCE ANY PROCEEDING RELATING
THERETO EXCEPT IN SUCH COURTS) AND WAIVES ANY OBJECTION TO VENUE BEING LAID
IN ANY OF THE SELECTED COURTS WHETHER BASED ON THE GROUNDS OF FORUM NON
CONVENIENS OR OTHERWISE.  THE BORROWER HEREBY AGREES THAT SERVICE OF ANY
PROCESS, SUMMONS, NOTICE OR DOCUMENT BY U.S. REGISTERED MAIL TO ITS ADDRESS
SET FORTH ABOVE SHALL BE EFFECTIVE SERVICE OF PROCESS FOR ANY ACTION, SUIT OR
PROCEEDING IN NEW YORK WITH RESPECT TO ANY MATTERS TO WHICH IT HAS SUBMITTED
TO JURISDICTION IN THIS SECTION.

      11. Notices. All notices provided for herein shall be delivered (a) if to
the Borrower, to it at Cosi, Inc., 242 West 36th Street, New York, NY 10018,
Attn: William D. Forrest, and (b) if to the Holder, to it at ZAM Holdings, L.P.,
c/o Ziff Brothers Investments, L.C., 153 E. 53 Street, New York, NY 10022 with a
copy (which shall not constitute notice) to Skadden, Arps, Slate, Meagher & Flom
LLP, Four Times Square, New York, NY 10036, Attention: Diana M. Lopo, Esq.,
Telecopy No.: (212) 735-2000. All notices, requests, consents and other
communications hereunder to any party shall be deemed to be sufficient if
contained in a written instrument delivered in person or sent by telecopy,
nationally recognized overnight courier or first class registered or certified
mail, return receipt requested, postage prepaid, addressed to such party at the
address set forth in this Section 11 or such other address as may hereafter be
designated in writing by such party to the other party.

      12. Miscellaneous.

            (a) Amendment; Waiver. No failure or delay on the part of the Holder
in exercising any power or right hereunder, and no course of dealing between the
Borrower and the Holder of this Note, shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. No modification or waiver of any provision of this Note nor
consent to any departure by the Borrower therefrom shall in any event be
effective unless the same shall be in writing and executed by the Holder, and
then such modification, waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given. No notice to or
demand on the Borrower in any case shall entitle the Borrower to any other or
further notice or demand in similar or other circumstances. No amendment to, or
modification of, any provision of this Note shall in any event be effective
unless the same shall be in writing and executed and delivered by the Borrower
and the Holder. No waiver of, or consent with respect to, any provision of this
Note shall in any event be effective unless the same shall be in writing and
executed and delivered by the party from whom such waiver or consent is sought.

            (b) Successors and Assigns. Subject to the terms and conditions of
this Note, this Note shall inure to the benefit of the Holder of this Note and
the Borrower and their respective successors

                                       14
<PAGE>

and assigns and be binding upon the Holder of this Note and the Borrower and
their respective successors and assigns.

            (c) Entire Agreement. This Note and the Security Agreement, and the
agreements, documents and instruments executed in connection herewith and
therewith, constitute the entire understanding between the Borrower and the
Holder with respect to the subject matter hereof and supersede any prior
agreements, written or oral, with respect thereto. The rights and remedies
provided pursuant to this Note are cumulative and are not exclusive of any
rights or remedies which any party otherwise may have at law or in equity.

            (d) Lost, Stolen, Destroyed or Mutilated Note. If this Note is lost,
stolen or destroyed, upon Borrower's receipt of a reasonably satisfactory
indemnification agreement executed by the Holder, or if this Note is mutilated,
upon the Holder's surrender of the mutilated Note to Borrower, Borrower shall
execute and deliver to the Holder a new promissory note which is identical in
form and content to this Note to replace the lost, stolen, destroyed or
mutilated Note. Such a replacement note shall be deemed a "Note" for all
purposes hereunder.

            (e) Attorneys' Fees and Costs and Other Expenses. Upon the Holder's
demand, Borrower shall reimburse the Holder for all costs and expenses,
including reasonable attorneys' fees and costs, incurred by the Holder in
connection with the exercise of any or all of the Holder 's rights and remedies
under this Note or the Security Agreement, the enforcement of any or all
Obligations, whether or not any legal proceedings are instituted by the Holder,
or the defense of any action or proceeding by Borrower or any other Person
relating to the Loan. Without limiting the generality of the immediately
preceding sentence, such costs and expenses shall include all reasonable
attorneys' fees and costs incurred by the Holder in connection with any federal
or state bankruptcy, insolvency, reorganization, or other similar proceeding by
or against Borrower which in any way affects the Holder's exercise of its rights
and remedies under the Note or the Security Agreement. Borrower's obligation to
reimburse the Holder under this Section shall include payment of interest on all
amounts expended by the Holder from the date of expenditure at the rate of
interest applicable to principal under the Note. Wherever any of the terms of
this Note or the Security Agreement provide for the payment or recovery of
costs, fees, or other expenses (including attorneys' fees and costs), such term
shall be deemed to provide for the payment or recovery of reasonable costs,
fees, expenses, and reasonable attorneys' fees and costs.

            (f) Time of the Essence. Time is of the essence in the performance
by Borrower of each provision of this Note and the Security Agreement.

            (g) Interpretation. This Note shall be construed as if drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any provisions
of this Note. The definitions used in this Note are applicable to the singular
as well as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such term. The words "hereof," "herein" and
"hereunder" and words of similar import when used in this Note shall refer to
this Note as a whole and not to any particular provision of this Note. Any
statute defined or referred to herein or in any agreement or instrument that is
referred to herein means such statute as from time to time amended, modified or
supplemented, including by succession of comparable successor statutes.

      13. Descriptive Headings. The headings appearing in this Note have been
inserted for convenience of reference only and shall be given no substantive
meaning or significance whatsoever in construing the terms and provisions of
this Note.

      14. Severability. Should any provision of this Note be judicially declared
to be invalid, unenforceable or void, such decision will not have the effect of
invalidating or voiding the remainder of this Note, and the parties hereto agree
that the provision of this Note so held to be invalid, unenforceable or void
will be deemed to have been stricken herefrom and the remainder will have the
same force and effectiveness as if such provision had never been included
herein, provided, however the parties hereto shall use their best efforts
replace the provision so deemed to have been stricken herefrom with a provision

                                       15
<PAGE>

that the parties reasonably believe to be valid and enforceable and which has a
substantially identical economic and legal effect as the provision so deemed to
have been stricken herefrom.

      15. Prior Agreements. Borrower and Holder agree that the Loan constitutes
"other funding support" for purposes of the funding letter, dated as of March
31, 2003 from Lender to Borrower.

                                       16
<PAGE>

            IN WITNESS WHEREOF, the Borrower has duly executed and delivered
this Note as of the date first written above.

                                        Cosi, Inc.

                                        By: /s/ William D. Forrest
                                            --------------------------------
                                            Name:  William D. Forrest
                                            Title: Executive Chairman

                                       17

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