Cosi Announces New Financing and Management Changes.

Business Editors

NEW YORK--(BUSINESS WIRE)--April 1, 2003

The Board of Directors of New York-based restaurant company Cosi, Inc. (NASDAQ: COSI) announced today initiatives designed to improve the Company's financial performance, enhance liquidity and strengthen management.

Cosi announced that it intends to initiate a $12 million rights offering and has obtained a $3 million interim secured loan from First Republic Bank, guaranteed by several of the Company's major shareholders. Cosi also announced management changes including William D. Forrest's election as Chairman of the Company and the departure of COO Nick Marsh. Mr. Forrest replaces Eric Gleacher, Chairman and CEO of investment bank Gleacher Partners, who will remain a Director. Jay Wainwright will remain as interim CEO until a permanent CEO is hired. Commenting on the changes, Mr. Forrest said, "I'd like to recognize Jay and Nick for their accomplishment in creating what I believe is an enduring and distinctive brand. I look forward to their involvement as we transition the leadership of Cosi."

Cosi announced previously that it was closely monitoring the performance of its stores and pursuing a franchise and area developer program designed to maximize the market potential of the Cosi brand. Subsequently, the Board of Directors has concluded that the Company's financial performance would be strengthened by closing in an orderly fashion as many as 13 of the Company's restaurants, three of which have already been closed. "We are making these changes as our business is gaining momentum, with comparable store sales increasing approximately 5% in the first quarter and approximately double that in March now that we have lapped last year's price decrease," commented Mr. Forrest.

Cosi anticipates that the proceeds from the rights offering, less the $3 million required to repay the interim bank loan, will provide the resources required to fund the franchising and area development program, terminate leases and strengthen working capital. In addition, it is anticipated the rights offering will provide sufficient funds to open Company-owned restaurants in the future as opportunities are developed.

Cosi intends to commence the rights offering later this spring. The Company anticipates that the $12 million rights offering will give all shareholders the non-transferable right to purchase shares of common stock at a purchase price per share equal to the lesser of $1.50 or 85% of the weighted average price per share of Cosi common stock for the fifteen trading day period ending three trading days before the expiration date of the rights offering. Several of the Company's shareholders, including Mr. Gleacher, Mr. Charles G. Phillips, and ZAM Holdings, L.P., have indicated that they will commit, subject to certain conditions, to purchase shares in the offering, or provide other funding support, in the amount of $8.5 million of the $12 million offering. Mr. Gleacher, Mr. Phillips and an entity related to ZAM Holdings, L.P. are the guarantors of the loan.

The guarantors under the $3 million loan have the right to require the bank to assign the loan to the guarantors and the loan is required to be assigned to the guarantors under certain circumstances. Following an assignment of the loan to the guarantors, the Company has agreed, subject to shareholder approval, to allow the guarantors to convert the loan into Cosi common stock at the same price described above for the rights offering. The Company will submit this conversion feature to shareholder approval at the next annual meeting of shareholders. The guarantors' commitment to purchase shares in the rights offering will be subject to shareholder approval of the conversion feature under the loan.

The terms of the loan and the proposed rights offering were reviewed and approved by a special committee of Cosi's Board of Directors comprised of disinterested directors.

The Board of Directors also announced that Cosi intends to allocate up to 10% of the Company's fully-diluted equity for awards to additional new management personnel including Mr. Forrest.

Cosi previously announced that the Company has reduced its general and administrative staff by approximately 30% (24 positions were eliminated), and announced an expected one-time charge of approximately $1.7 million in the first quarter of 2003 to provide for severance costs related to the executive and general and administrative staff reductions. Subsequent to making that announcement on February 3, 2003, the Company has determined that additional executive management changes are appropriate, and now expects that the charge in the first quarter of 2003 to provide for severance costs related to the executive and general and administrative staff reductions will be approximately $3.7 million.

Cosi also expects to record additional charges of $2.1 million during the first quarter of 2003 to write down assets at three restaurant locations that were closed during the first quarter of 2003, and on 25 locations which were in the Company's development pipeline, but which have been cancelled.

Cosi intends to file a registration statement with the Securities and Exchange Commission relating to the rights offering. The timing and completion of the rights offering is subject to market conditions and other contingencies. There can be no assurance that Cosi will be able to complete the rights offering on terms acceptable to the Company or at all. The rights offering will only be made pursuant to a prospectus filed with the Securities and Exchange Commission. This press release does not constitute an offer to sell, or the solicitation of an offer to buy, any securities nor shall there be any sale of securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities law of any such state or jurisdiction.

About William Forrest

Mr. Forrest, 42, is a Managing Director and the senior member of Gleacher Partners' Restructuring Group. Mr. Forrest joined Gleacher Partners in 2001. From 1997-1999 Mr. Forrest was crisis manager/interim CEO of Fine Host Corporation, a $330 million publicly traded food-service company, where he completed a successful turnaround by negotiating a comprehensive balance sheet restructuring and implementing a strategic integration plan for this 23 subsidiary operating company. Mr. Forrest received a BA from the Cornell University School of Hotel Management.

About Cosi

Cosi restaurants are all-day cafes that feature signature bread and coffee products in a unique environment that changes throughout the day. Cosi offers breakfast, lunch, afternoon coffee, dinner and dessert menus full of creative, cravable foods and beverages. Cosi has developed featured foods that are built around a secret, generations-old recipe for crackly crust flatbread. These products are freshly baked in front of customers throughout the day in open flame stone hearth ovens prominently located in each of the restaurants. There are 94 Cosi locations in eleven states and the District of Columbia.

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This press release contains statements that constitute forward-looking statements under the federal securities laws. Forward-looking statements are statements about future events and expectations and not statements of historical fact. The words "believe," "may," "will," "should," "anticipate," "estimate," "expect," "intend," "objective," "seek," "plan," "strive," or similar words, or negatives of these words, identify forward-looking statements. We qualify any forward-looking statements entirely by these cautionary factors. Forward-looking statements are based on management's beliefs, assumptions and expectations of our future economic performance, taking into account the information currently available to management. Forward-looking statements involve risks and uncertainties that may cause our actual results, performance or financial condition to differ materially from the expectations of future results, performance or financial condition we express or imply in any forward-looking statements. Factors that could contribute to these differences include, but are not limited to: the cost of our principal food products; fluctuations in our quarterly results; labor shortages or increased labor costs; increased government regulation; changes in consumer preferences and demographic trends; supply and delivery shortages or interruptions; increasing competition in the fast casual dining segment of the restaurant industry; market saturation due to new restaurant openings; expansion into new markets; inadequate protection of our intellectual property; our ability to effectively manage our business with a reduced general and administrative staff; our ability to incorporate a franchising and area development model into our strategy; the availability and cost of additional financing; adverse weather conditions which impact customer traffic at our restaurants; and adverse economic conditions. Further information regarding factors that could affect our results and the statements made herein are included in our filings with the Securities and Exchange Commission.