Item 2.03

Creation of a Direct Financial obligation or an Obligation under an Off-Balance Sheet Arrangement.

On October 3, 2016, Cosi, Inc., a Delaware corporation, Hearthstone Partners LLC, a Massachusetts limited liability company, Hearthstone Associates, LLC, a Massachusetts limited liability company, Xando Cosi Maryland, Inc., a Maryland corporation, and Cosi Sandwich Bar, Inc., a Delaware corporation (collectively, the “Borrowers”) entered into Secured Debtor-In-Possession Promissory Notes with AB Value Partners, L.P., a Delaware limited partnership (“AB Value”), in the principal amount of $273,060.00, with AB Opportunity Fund LLC, a Delaware limited partnership (“AB Opportunity”), in the principal amount of $1,093,470, and Milfam II L.P., a Georgia limited partnership (“Milfam”), in the principal amount of $2,733,470.00 (collectively, the “DIP Notes”, and AB Value, AB Opportunity and Milfam being collectively, the “DIP Lenders”). Interest will accrue daily on the adjusted principal balance at the rate per annum equal to twelve percent (12%) (computed on the basis of the actual number of days elapsed over a year of 365/366 days calculated from and including the date the first loan was made), and to be paid in arrears on the maturity date.

The obligations of the Borrowers under the DIP Notes are secured by all assets of the Borrowers.  The DIP Notes are senior to all other obligations of the Borrowers and subject to customary events of default, including but not limited for the Borrowers’ non-payment of its obligations under the DIP Notes, breach of its representations and warranties under the DIP Notes or any other payment obligations of any nature pursuant to any other documents relating to the DIP Notes, non-compliance with the covenants set forth in the DIP Notes, termination of any lender security interest and excess disbursements over budget by more than 15%, among other events. Upon the occurrence of an event of default, the DIP Lenders may increase the then-applicable interest rate to 15% (or the maximum allowed pursuant to applicable law) or enforce all liens and security interests, among all other remedies that may be available to the DIP Lenders at law.  For so long as the Agreement is outstanding and until all obligations under the DIP Notes are paid in full, the Borrowers are subject to covenants described in the DIP Notes.  Copies of the three DIP Notes are filed hereto as Exhibits 4.1, 4.2 and 4.3 and are incorporated herein by reference.