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Cosi DEF 14A 2006 Table of Contents
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION Proxy Statement Pursuant To Section 14(A) Of The Securities Exchange Act Of 1934
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
o Preliminary Proxy Statement
o Confidential, for Use of the Commission Only as permitted by Rule 14a-6(e)(2))
þ Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Under Rule 14a-12)
Così, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
(Payment of Filing Fee (Check the appropriate box):
þ No fee required.
o Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule
0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
o Fee paid previously with preliminary materials.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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COSÌ,
INC.
1751 LAKE COOK ROAD, 6th FLOOR DEERFIELD, ILLINOIS 60015
April 18,
2006
Dear Fellow Stockholder:
You are cordially invited to attend the 2006 Annual Meeting of
Stockholders of Così, Inc. (“Così” or the
“Company”), which will be held on May 15, 2006,
commencing at 2:00 p.m. local time, at the Hyatt Deerfield
Hotel, 1750 Lake Cook Road, Deerfield, Illinois 60015.
At the annual meeting, you will be asked to consider and vote
upon the election of one director, and to ratify the appointment
of BDO Seidman, LLP as our independent registered public
accounting firm.
Each of these proposals is more fully described in the notice of
meeting and Proxy Statement that follows.
We hope that you will find it convenient to attend in person.
Whether or not you expect to attend, please promptly date, sign
and mail the enclosed proxy in the return envelope provided to
ensure your representation at the Annual Meeting and the
presence of a quorum. If you do attend the Annual Meeting, you
may withdraw your proxy should you wish to vote in person.
A copy of the Company’s Annual Report to Stockholders,
which includes a copy of the Company’s
Form 10-K
for the fiscal year ended January 2, 2006, is being
provided to each of the Company’s stockholders with this
Proxy Statement. Additional copies may be obtained by writing to
Così, Inc., 1751 Lake Cook Road, 6th Floor, Deerfield,
Illinois 60015, Attention: Investor Relations.
On behalf of the officers, directors and employees of Così,
I would like to express the Company’s appreciation for your
continued support.
Sincerely,
William Forrest
Executive Chairman
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COSÌ,
INC.
1751 LAKE COOK ROAD, 6THFLOOR DEERFIELD, ILLINOIS 60015
To the Stockholders of Così, Inc.:
Notice is hereby given that the Annual Meeting of Stockholders
of Così, Inc., a Delaware corporation
(“Così” or the “Company”), will be held
on May 15, 2006, commencing at 2:00 p.m. local time,
at the Hyatt Deerfield Hotel, 1750 Lake Cook Road, Deerfield,
Illinois 60015, for the following purposes:
1. To elect one director to serve for a three-year term
expiring at the 2009 Annual Meeting of Stockholders.
2. To consider and ratify BDO Seidman, LLP as the
Company’s independent registered public accounting firm for
the fiscal year ending January 1, 2007.
3. To consider and act upon such other business as may
properly come before the Annual Meeting.
The Board of Directors has fixed the close of business on
April 7, 2006, as the record date for the determination of
stockholders entitled to notice of and to vote on any matters
that may properly come before the Annual Meeting and at any
adjournments or postponements thereof.
By order of the Board of Directors,
William Koziel
Secretary
Dated: April 18, 2006
Deerfield, Illinois
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL
MEETING. WHETHER OR NOT YOU PLAN TO ATTEND, PLEASE MARK, SIGN
AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED ENVELOPE TO ENSURE THAT YOUR SHARES WILL BE
REPRESENTED. YOU MAY NEVERTHELESS VOTE IN PERSON IF YOU ATTEND
THE MEETING.
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COSÌ,
INC.
1751 LAKE COOK ROAD, 6TH FLOOR DEERFIELD, ILLINOIS 60015
PROXY
STATEMENT
This Proxy Statement is furnished by the Board of Directors of
Così, Inc., a Delaware corporation (“Così”
or the “Company”), in connection with the solicitation
of proxies for use at the 2006 Annual Meeting of Stockholders of
Così (the “Annual Meeting”), which will be held
on May 15, 2006, commencing at 2:00 p.m. local time,
at the Hyatt Deerfield Hotel, 1750 Lake Cook Road, Deerfield,
Illinois 60015, and at any adjournments or postponements
thereof, for the purposes set forth in the accompanying Notice
of Annual Meeting of Stockholders. All stockholders are entitled
and encouraged to attend the Annual Meeting in person. This
Proxy Statement and the accompanying Proxy Card are being mailed
to stockholders of Così on or about April 18, 2006.
In voting by proxy with regard to the election of directors,
stockholders may vote in favor of each nominee or withhold their
votes as to each nominee. In voting by proxy with regard to the
ratification of the appointment of our independent registered
public accounting firm, stockholders may vote in favor of the
proposal or against, or may abstain from voting. All properly
executed proxies delivered pursuant to this solicitation and not
revoked will be voted in accordance with the directions given
and, in connection with any other business that may properly
come before the Annual Meeting, in the discretion of the persons
named in the proxy.
If no direction is given on a proxy with respect to a proposal,
the proxy will be voted FOR the slate of directors described
herein and FOR the ratification of BDO Seidman, LLP. As to any
other matter of business that may be brought before the Annual
Meeting, such proxy will be voted in accordance with the
judgment of the persons named in the proxy.
A stockholder who has given a proxy may revoke it at any time
before it is exercised by giving notice of revocation to the
Secretary of Così, by submitting a proxy bearing a later
date, or by attending the Annual Meeting and voting in person.
Attendance at the Annual Meeting will not, in itself, constitute
revocation of a proxy.
The Board of Directors has fixed the close of business on
April 7, 2006, as the record date for determination of
stockholders entitled to notice of, and to vote at, the Annual
Meeting. Holders of record of the Company’s common stock as
of April 7, 2006 will be entitled to one vote for each
share held. On April 7, 2006, there were
39,313,247 shares of common stock outstanding and entitled
to vote.
A majority of the outstanding shares of common stock,
represented in person or by proxy, constitutes a quorum for the
transaction of business at the Annual Meeting. Assuming the
presence of a quorum at the Annual Meeting, the affirmative vote
of a plurality of the votes cast by holders of shares of common
stock represented at the meeting and entitled to vote is
required for the election of directors. The affirmative vote of
a majority of the shares of common stock represented at the
meeting and entitled to vote is required for the ratification of
BDO Seidman, LLP, as the Company’s independent registered
public accounting firm.
An abstention with respect to any proposal other than the
election of directors will be counted as present for purposes of
determining the presence of a quorum but will have the practical
effect of a negative vote as to that proposal. Brokers who do
not receive stockholder voting instructions are entitled to vote
on the election of directors and the ratification of the
independent registered public accounting firm. In the event of a
broker non-vote with respect to any proposal coming before the
meeting caused by the beneficial owner’s failure to
authorize a vote on such proposal, the proxy will be counted as
present for the purpose of determining a quorum but will not be
deemed to be present and entitled to vote on that proposal for
the purpose of determining the total number of shares of which a
majority is required for adoption, having the practical effect
of reducing the number of affirmative votes required
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to achieve a majority vote for such matter by reducing the total
number of shares from which a majority is calculated.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of April 7, 2006, the following are the only entities
(other than the Company’s employees as a group) known to
the Company to be the beneficial owners of more than 5% of the
Company’s outstanding shares of common stock.
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The determination that there were no other persons, entities, or
groups known to the Company to beneficially own more than 5% of
the Company’s common stock was based on a review of the
Company’s internal records and of all statements filed with
respect to the Company since the beginning of the past fiscal
year with the Securities and Exchange Commission (the
“SEC”) pursuant to Section 13(d) or 13(g) of the
Securities Exchange Act of 1934, as amended (the “Exchange
Act”).
The following table sets forth certain information regarding
ownership of common stock as of April 7, 2006, by
(i) each of the members of the Company’s Board of
Directors, (ii) each of the Company’s executive
officers named in the “Summary Compensation Table”
under “Executive Compensation” below, and
(iii) all directors and executive officers of the Company
as a group. All shares were owned directly with sole voting and
investment power unless otherwise indicated.
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CORPORATE
GOVERNANCE
Our business is managed under the direction of our Board of
Directors (the “Board”) pursuant to the Delaware
General Corporation Law and our Bylaws. Our Board has
responsibility for establishing broad corporate policies and for
the overall performance of our Company. It is not, however,
involved in the operating details on a
day-to-day
basis. Our Board is kept advised of the Company’s business
through discussions with the Chief Executive Officer and other
officers of the Company, by reviewing reports, analyses and
materials provided to them, and by participating in Board and
Board Committee meetings.
Our Board meets on a regularly scheduled basis during the year
to review significant developments affecting the Company and to
act on matters requiring Board approval. It also holds special
meetings when an important matter requires Board action between
scheduled meetings.
The Board of Directors is divided into three classes serving
staggered three-year terms.
The Board held four regularly scheduled board meetings in 2005.
All directors attended 75% or more of the board meetings during
the time period in which they were directors. Each director
attended 75% or more of the regularly scheduled board committee
meetings on which such director served during 2005. In addition,
the Board encourages all of its directors to attend the
Company’s Annual Meetings. Seven directors attended the
2005 Annual Meeting.
The Board has affirmatively determined that five of its seven
directors, including all members of the Audit, Compensation and
Nominating/Corporate Governance Committees, are
“independent” as defined by the listing standards of
The Nasdaq Stock Market (“Nasdaq”) and all applicable
rules and regulations of the SEC. The five independent directors
are Eli Cohen, Mark Demilio, Creed L. Ford, III, Robert
Merritt, and Michael O’Donnell.
The independent directors meet without any management directors
or employees present at least twice each year in executive
sessions. Robert Merritt serves as the presiding director to
chair and facilitate all executive sessions.
The Board adopted Corporate Governance Principles that, along
with the charters of the Board committees, provide the framework
for the governance of the Company. The Board’s
Nominating/Corporate Governance Committee is responsible for
overseeing and reviewing the Corporate Governance Principles
from time to time, and for recommending any proposed changes to
the Board for approval. The Corporate Governance Principles are
available on the Company’s website at www.getcosi.com.
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The Board has three committees: Audit, Compensation and
Nominating/Corporate Governance. The membership of each
committee as of April 2006 and the function of each committee
are described below.
Audit Committee. The purpose of the Audit
Committee is to oversee the accounting and financial reporting
processes of the Company and the audits of the Company’s
financial statements. The functions of the Audit Committee
include, without limitation, (i) responsibility for the
appointment, compensation, retention and oversight of the
Company’s internal auditor and independent registered
public accounting firm, (ii) review and pre-approval of all
auditing, non-audit, and internal control-related services
provided to the Company by the independent registered public
accounting firm, other than as may be allowed by applicable law,
and (iii) review of the annual audited and quarterly
consolidated financial statements. The Company’s Amended
and Restated Audit Committee Charter, which describes all of the
committee’s responsibilities, is posted on the
Company’s website at www.getcosi.com.
The Audit Committee has procedures in place to receive, retain,
and treat complaints received regarding accounting, internal
accounting controls, or auditing matters and to allow for the
confidential and anonymous submission by anyone of concerns
regarding questionable accounting or auditing matters.
The current members of the Audit Committee are
Messrs. Demilio, Ford, and Merritt. The Board has
determined that each member meets the independence requirements
set forth by Nasdaq and
Rule 10A-3(b)(1)
of the Exchange Act and is able to read and understand
fundamental financial statements. In addition, Mr. Demilio
qualifies as an “audit committee financial expert”
within the meaning of the SEC regulations and has therefore been
named Chairman of the Audit Committee.
The Audit Committee met seven times in 2005. The Audit Committee
Report appears on page 12.
Compensation Committee. The principal
functions of the Compensation Committee include, without
limitation, (i) annually evaluating the performance of the
Executive Chairman and the Chief Executive Officer,
(ii) reviewing and approving the compensation of the
Executive Chairman and the Chief Executive Officer,
(iii) reviewing and approving the compensation of all other
senior executives, and (iv) implementing incentive
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programs, including the Company’s stock incentive plans.
The Company’s Compensation Committee Charter, which
describes all of the committee’s responsibilities, is
posted on the Company’s website at www.getcosi.com.
The current members of the Compensation Committee are
Messrs. Merritt and O’Donnell, and Mr. Cohen is
the Chair. The Board has determined that each member meets the
independence requirements set forth by Nasdaq and
Section 162(m) of the Internal Revenue Code. The
Compensation Committee met 16 times in fiscal 2005. The Report
of the Compensation Committee on Executive Compensation appears
on page 18.
Nominating/Corporate Governance Committee. The
principal functions of the Nominating/Corporate Governance
Committee include, without limitation, (i) establishing the
Board of Director Candidate Guidelines and the Corporate
Governance Principles, (ii) identifying and nominating
individuals qualified to become directors,
(iii) considering all recommendations of director
candidates made by eligible stockholders, and
(iv) monitoring and recommending the functions of the Board
committees. The Company’s Nominating/Corporate Governance
Committee Charter, which describes all of the committee’s
responsibilities, is posted on the Company’s website at
www.getcosi.com.
The current members of the Nominating/Corporate Governance
Committee are Messrs. Cohen and Demilio, and
Mr. Merritt is the Chair. The Nominating/Corporate
Governance Committee formally met one time in fiscal 2005 and
conducted a number of teleconferences.
The Board approved a new compensation program for non-employee
directors, which went into effect in April 2004, in order to
attract and retain qualified director candidates. For their
services, non-employee directors receive:
Directors are also reimbursed for
out-of-pocket
expenses incurred in connection with their service as directors.
Directors who serve either as the Company’s officers or
employees or as officers or employees of any of its subsidiaries
do not receive any additional compensation for their services as
directors.
Stockholders and other parties interested in communicating
directly with the Board may do so by writing to a specific
director, including the Presiding Director, or to the whole
Board, care of the Secretary. The Company’s Secretary will
distribute any security holder communications received, as
defined by the rules and regulations of the SEC, to the
director(s) to whom the letter is addressed or to all of the
directors if addressed to the entire Board. The following is the
address to which stockholders should send such communications:
Così, Inc., c/o Secretary, 1751 Lake Cook Road,
6th Floor,
Deerfield, Illinois 60015.
All directors, officers, and employees must act ethically at all
times and in accordance with the Company’s Code of Conduct
and Ethics. This code satisfies the definition of “code of
ethics” under the rules and regulations of the SEC and is
available on the Company’s website at www.getcosi.com.
NOMINATION
PROCESS
The Nominating/Corporate Governance Committee (the
“Committee”) identifies individuals that the Committee
believes are qualified to become directors in accordance with
the Board of Director Candidate Guidelines,
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attached hereto as Exhibit A. Candidates are reviewed in
the context of the current composition of the Board, the
operating requirements of the Company, and the long-term
interests of the Company’s stockholders, and are evaluated
for their character, judgment, and business experience and
acumen. Pursuant to the Board of Director Candidate Guidelines,
the Committee will consider and evaluate director candidates
based upon certain minimum qualifications as set forth in
Exhibit A hereto.
After identifying the qualified individuals and conducting
interviews, as appropriate, the Committee will recommend the
selected individuals to the Board. In the event there is a
vacancy on the Board between such stockholders’ meetings,
the Committee will recommend one or more of the qualified
individuals for appointment to the Board.
The Committee may retain a director search firm to help the
Committee identify qualified director nominees.
The Committee has a policy to consider recommendations for
director candidates submitted by stockholders. A stockholder
recommending an individual for consideration by the Committee
must provide (i) evidence in accordance with
Rule 14a-8
of compliance with the stockholder eligibility requirements,
(ii) the written consent of the candidate(s) for nomination
as a director, (iii) a resume or other written statement of
the qualifications of the candidate(s) for nomination as a
director, and (iv) all information regarding the
candidate(s) and the security holder that would be required to
be disclosed in a proxy statement filed with the SEC if the
candidate(s) were nominated for election to the Board,
including, without limitation, name, age, business and residence
address, and principal occupation or employment during the past
five years. Stockholders should send the required information
to: Così, Inc., c/o Secretary, 1751 Lake Cook
Road,
6th Floor,
Deerfield, Illinois 60015.
In order for a recommendation to be considered by the Committee
for the 2007 Annual Meeting of Stockholders, the Secretary must
receive the recommendation no later than 5 p.m. local time
on December 19, 2006. Such recommendations must be sent via
registered, certified, or express mail, or by any other means
that allows the stockholder to determine when the recommendation
was received by the Company. The Secretary will send properly
submitted stockholder recommendations to the Committee for
consideration at a future Committee meeting. Individuals
recommended by stockholders in accordance with these procedures
will receive the same consideration as other individuals
evaluated by the Committee.
In addition, the Company’s Amended and Restated By-laws
(the “By-laws) permit stockholders to nominate directors at
an annual meeting of stockholders or at a special meeting of
stockholders at which directors are to be elected in accordance
with the notice of meeting. Stockholders intending to nominate a
person for election as a director must comply with the
requirements set forth in the Company’s By-laws, which were
filed as Exhibit 3.2 to the Company’s Annual Report on
Form 10-K
for the period ended December 30, 2002, and can also be
obtained, without charge, upon written request to the
Company’s Secretary, whose address is: Così, Inc.,
c/o Secretary, 1751 Lake Cook Road,
6th Floor,
Deerfield, Illinois 60015. The By-laws require, without
limitation, that the Company receive written notification from
the record stockholder containing the information described in
the section above and any other information required by the
By-laws no earlier than December 16, 2006, nor later than
January 15, 2007.
The Company’s By-laws provide that the Company’s Board
of Directors will consist of not less than three members, the
exact number to be determined from time to time by resolution
adopted by the affirmative vote of a majority of all directors
of the Company, with the members to be divided into three
classes. The number of directors of the Company is presently
fixed at eight. Directors in each class are elected for
three-year terms in staggered years.
Following this Annual Meeting of Stockholders, there will be
only seven directors. Two of our directors recently resigned,
and we have successfully filled one of the resulting vacancies
with a new highly qualified director, Michael O’Donnell.
Our Nominating/Corporate Governance Committee is currently
reviewing other
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candidates to fill the remaining vacancy. The Board therefore
recommends that stockholders elect one director to the class
whose term expires in 2009.
When the Board appointed Mr. O’Donnell to the Board in
March 2006, he was assigned to the class of directors whose term
expires in 2006. The Board nominates him for a term of three
years, expiring at the 2009 Annual Meeting of Stockholders or
until his successor has been duly elected and qualified. Mr.
O’Donnell has consented to being named as a nominee and to
serving as a director if elected. Should the nominee be unable
or unwilling to serve as a director, the enclosed proxy will be
voted for such other person or persons as the Board may
recommend. Management does not anticipate that such an event
will occur.
The Board of Directors recommends a vote “FOR” the
election of the nominee named above.
Information
about the Nominee, the Continuing Directors and Executive
Officers
The table below sets forth the names and ages of the directors,
including the nominee, and the current executive officers of the
Company, as well as the positions and offices held by such
persons. A summary of the background and experience of each of
these individuals is set forth below the table.
William D. Forrest, Executive Chairman and
Director. Mr. Forrest joined the
Company’s Board of Directors and was elected Chairman of
the Board on March 31, 2003. On June 26, 2003, he was
appointed Executive Chairman, an officer’s position with
day to day general management responsibility for the affairs of
the Company. On February 9, 2004, Mr. Forrest became a
full-time member of the Company’s executive team to
continue focusing on leveraging the Company’s growth and
business development potential. From March 2001 to February
2004, Mr. Forrest headed the Restructuring Group at
Gleacher & Co. Mr. Forrest served as a corporate
restructuring professional from 1988 to March 2001 and, in 1997,
he attained the designation Certified Turnaround Professional
(“CTP”). The CTP designation establishes stringent
criteria for practical experience, knowledge, and ethical
integrity for the Corporate Renewal Industry. Prior to joining
Gleacher & Co., Mr. Forrest was a Managing
Director of Catterton-Forrest LLC (a division of Catterton
Partners) from October 1999 to February 2001, where he was
responsible for the acquisition and management of portfolio
companies, focused exclusively on the troubled
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business space. From December 1997 to August 1999,
Mr. Forrest was crisis manager/interim Chief Executive
Officer for Fine Host Corporation, a $330 million
publicly-traded food service company, where he completed the
successful turnaround by negotiating a comprehensive balance
sheet restructuring utilizing a pre-negotiated Chapter 11
bankruptcy proceeding and by implementing a strategic
integration plan of acquired companies for this 23-subsidiary
operating company. Mr. Forrest received a Bachelor of Arts
degree from Cornell University. His work has been published in
the American Bankruptcy Journal, and he has been a featured
speaker for organizations, including the Turnaround Management
Association.
Kevin Armstrong, President, Chief Executive Officer and
Director. Mr. Armstrong was appointed President
and Chief Executive Officer of the Company and elected to the
Board of Directors on July 7, 2003. Mr. Armstrong has
over 20 years of experience in the restaurant industry.
From November 2000 to July 2002, Mr. Armstrong was
President and Chief Operating Officer of Long John Silvers
Restaurants, Inc., where he developed successful brand
strategies that reversed two years of sales decline and resulted
in three years of same store sales growth and profitability.
Mr. Armstrong was pivotal in bringing the company out of
bankruptcy, ultimately leading to its sale to YUM Brands. From
August 1999 to November 2000, he was Senior Vice President and
Chief Marketing Officer of Long John Silvers Restaurants, Inc.
Prior to his tenure at Long John Silver’s, from September
1996 to August 1999, Mr. Armstrong served as Chief
Marketing Officer for Subway Franchisee Advertising Trust, an
independent arm of the $3.2 billion Subway brand. There he
reengineered marketing processes and reversed an
18-month
negative sales and profit performance period, increasing store
profitability. Mr. Armstrong also served as a consultant to
PepsiCo’s restaurant services division from May 1991 to
September 1996, developing brand-positioning strategies for over
forty diverse companies. From June 1989 to February 1991,
Mr. Armstrong was responsible for both domestic and
international marketing strategies at Burger King.
William Koziel, Chief Financial
Officer. William Koziel was appointed Chief
Financial Officer and Treasurer and Secretary of the Company in
August 2005 and was Controller from August 2004 until August
2005. He has over 10 years of executive finance and
accounting experience in the retail industry, more than nine of
which have been with publicly-traded companies. From January
2002 to July 2004, Mr. Koziel served as Vice President
Controller of Galyan’s Sporting Goods, Inc., a
$700 million publicly-traded sporting goods retailer. Prior
to joining Galyan’s, Mr. Koziel served as Vice
President Controller of Homelife Corporation, a
$600 million furniture retailer, from July 1999 to January
2002. From 1998 to June 1999, he served as Vice President
Finance for Futorian Furnishings, a $200 million furniture
manufacturer. From 1995 to December 1998, Mr. Koziel served
as Chief Financial Officer of Evans, Inc., a $150 million
publicly-traded specialty retailer. He received a Masters of
Business Administration from De Paul University in 1992 and a
Bachelor of Science in Accounting from De Paul University in
1980. Mr. Koziel successfully achieved accreditation as a
certified public accountant in 1981.
Gilbert Melott, Executive Vice President of Operations and
People. Mr. Melott was appointed as the
Company’s Vice President of Operations and People in
February 2004 and was Vice President of People from December
2001 to February 2004. From December 1995 to November 2001,
Mr. Melott was Executive Director of Training and Vice
President of People, Process and Education at Bennigan’s.
Prior to joining Bennigan’s, Mr. Melott was a
Division Director of Human Resources at Sheraton Holding
Corporation in Boston, Massachusetts, and spent four years as
Divisional Training and Development Manager at TGI
Friday’s. Mr. Melott is a nationally recognized expert
in generational workplace studies and recipient of Industry of
Choice awards for achievement in training and education.
Mr. Melott received a Bachelor of Science degree in
Marketing and Organizational Communication from Fordham
University in 1985.
Patrick Donnellan, Vice President of Business
Development. Mr. Donnellan was appointed
Vice President of Business Development in November 2004 and was
Vice President of Development Strategy from July 2004 to
November 2004. Prior to joining the Company, Mr. Donnellan
was a principal with the New York office of Booz Allen Hamilton,
Inc., where he worked from 1998 to 2004. While with Booz Allen
Hamilton, Mr. Donnellan assisted a number of Fortune 500
clients in developing and implementing business strategies,
including a fundamental transformation of a consumer products
company, a corporate strategy and market strategy for a major
aerospace manufacturer, innovation effectiveness and efficiency
for consumer goods’ companies, and a sales force
restructuring for an electronics manufacturer. He received a
MSIA (MBA) from Carnegie Mellon University in 1998 and Bachelor
of Science degree in Economics from Bates College in 1994.
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Paul Seidman, Vice President of Food and
Beverage. Mr. Seidman was appointed the
Company’s Vice President of Food and Beverage on
September 16, 2003. Mr. Seidman has over twenty years
of experience in the food service industry. From April 2001 to
August 2003, he served as the Senior Vice President of Marketing
and Product Development for Bertucci’s Corporation, where
he was responsible for the menu engineering efforts that
broadened menu appeal and aided in reducing Bertucci’s food
cost and garnered awards for best children’s menu and best
wine list. Prior to joining Bertucci’s, Mr. Seidman
served as the Senior Vice President of Food & Beverage
and Procurement at Brinker International’s largest
franchisee, The New England Restaurant Company, from 1996 to
April 2001. From 1982 to 1996, Mr. Seidman held similar
positions at the Bayport Restaurant Group, La Madeleine,
and the Club Corporation of America. Mr. Seidman is a
graduate of the Culinary Institute of America and received a
Bachelor of Science degree in Hotel and Restaurant Management
from Florida International University. He is also a member of
the Research Chefs Association.
Maggie Martensen, Controller. Maggie Martensen
was appointed Controller of the Company in September 2005, and
was Assistant Controller from November 2004 to September 2005.
Prior to joining the Company, Ms. Martensen was at Near
North National Group, an insurance brokerage firm, where she
served as the Director of Finance for a wholly-owned subsidiary
from January 2000 to July 2002 and as Director of Financial
Reporting for Near North National Group from July 2002 to
November 2004. While at Near North, Ms. Martensen assisted
with the sale and divestiture of various subsidiaries as well as
the transfer of a significant segment of the Chicago brokerage
business. Prior to joining Near North, Ms. Martensen was
Controller for La Strada, Inc., a restaurant company
operating several restaurant concepts in the Chicago, Illinois,
area, including fine dining, casual dining, and banquet
facilities. Ms. Martensen received a Bachelor of Science
degree in Business Administration from Olivet Nazarene
University in 1997 and received accreditation as a certified
public accountant in 1999.
Vicki J. Baue, General Counsel. Ms. Baue
was appointed General Counsel on September 23, 2004, and
also serves as the Company’s Chief Legal Officer and Chief
Compliance Officer. From August 1998 to April 2004,
Ms. Baue was an associate in the Corporate and Securities
practice group in the Chicago, Illinois, office of DLA Piper
Rudnick Gray Cary US LLP (f/k/a Piper Rudnick, LLP) where her
practice focused on Mergers and Acquisitions and General
Corporate. From 1988 to August 1998, Ms. Baue was employed
by Creative Expressions Group, Inc., an international
manufacturer and distributor of paper party goods, where she was
Director of Process Improvements and responsible for legal
affairs and business results from 1997 to 1998, a member of the
senior leadership team, and Manager of Customer Services, Credit
and Support Services from
1988-1997.
Ms. Baue received a Juris Doctor degree from the University
of Indiana School of Law in 1997 and a Bachelor of Science
Degree in Human Resources Management from the University of
Alabama in 1980. She was admitted to the Indiana Bar in 1997 and
the Illinois Bar in 1998.
Eli Cohen, Director. Mr. Cohen has been a
director of the Company since January 2004. Mr. Cohen has
also been employed by ZBI Equities, LLC, an investment firm
based in New York and an affiliate of ZAM Holdings, L.P., the
Company’s largest stockholder, since April 2002. From May
2000 to April 2002, Mr. Cohen was with Accel Partners, a
venture capital firm based in Palo Alto, California. Prior
thereto, Mr. Cohen was employed at ZBI Equities, LLC
from August 1998 to May 2000 and worked at Bain &
Company, a management consultancy, from July 1994 to September
1995. Mr. Cohen also researched and co-authored The
Leadership Engine, a book published by HarperCollins, and
co-founded and consulted for Tichy Cohen Associates, a
consulting firm focused on leadership development, from
September 1995 to August 1998. Mr. Cohen graduated from The
University of Michigan with a degree in Economics.
Mark Demilio, Director. Mr. Demilio has
been a director of the Company since April 2004. Since October
2001, Mr. Demilio has served as Executive Vice President
and Chief Financial Officer of Magellan Health Services, Inc., a
$1.5 billion publicly-traded managed behavioral healthcare
company that manages the delivery of behavioral healthcare
treatment services that are provided through its contracted
network of third-party treatment providers. He served as
Executive Vice President, General Counsel of that company from
July 1999 to December 2000 and as Executive Vice President,
Finance and Legal from December 2000 to October 2001. Prior to
joining Magellan Health Services, Inc., Mr. Demilio was with
Youth Services International, Inc., a publicly-traded company
that managed residential treatment centers for behaviorally
troubled youth and behavioral treatment programs in juvenile
correction facilities, serving as Executive Vice President,
Business Development and General Counsel from March 1997 to June
1998 and Chief Financial Officer from June 1998 to March 1999.
Prior thereto,
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Mr. Demilio was a partner with Miles &
Stockbridge, a Baltimore, Maryland-based law firm.
Mr. Demilio has also been a financial analyst for BlueCross
BlueShield of Maryland (now, CareFirst) and a certified public
accountant with Arthur Andersen. Mr. Demilio holds a Juris
Doctor degree from the University of Maryland School of Law and
a Bachelor of Science degree in Accounting from Villanova
University.
Creed L. Ford, III,
Director. Mr. Ford has been a director of
the Company since March 1997. Mr. Ford has been Chairman
and Co-Chief Executive Officer of Fired Up, Inc., the parent
company of Johnny Carino’s Country Italian restaurants and
Gumbo’s Louisiana Style I, since 1997, and the
President of Ford Restaurant Group, a Chili’s
Grill & Bar franchisee, since 1997. From 1976 through
1997, Mr. Ford served in various capacities, including
Chief Operating Officer and Director, at Brinker International,
Inc. As Chief Operating Officer and Director, Mr. Ford
oversaw all operations at Brinker for all of its restaurant
concepts. Mr. Ford serves on the boards of Rudy’s BBQ,
Texas Restaurant Association Education Foundation, Texas A&M
Center of Entrepreneurship, and Fired Up, Inc.
Robert S. Merritt, Director. Mr. Merritt
has been a director of the Company since October 2005. In 2005,
Mr. Merritt retired from Outback Steakhouse, Inc., where he
served as Senior Vice President-Finance, Chief Financial
Officer, Treasurer and Secretary since February 1991, and served
as Vice President and Chief Financial Officer from January 1990
to February 1991. From 1988 to 1989, he served as Executive Vice
President of Administration and Chief Financial Officer of
JB’s Restaurants, Inc., a restaurant operator. From 1985 to
1988, he was Vice President of Finance for JB’s
Restaurants. From 1981 to 1985, Mr. Merritt was employed by
Vie de France Corporation, a restaurant and specialty baking
company, as Vice President of Finance and Accounting and Chief
Financial Officer. He received his B.B.A. in Accounting from
George Washington University.
Michael O’Donnell,
Director. Mr. O’Donnell has been a
member of our board of Directors since March 2006. Since March
2005, he has served as Chairman of the Board, President and
Chief Executive Officer of Champps Entertainment, Inc. From
September 2003 until March 2005, he served as Chief Executive
Officer and President of Sbarro, Inc. From 1998 through May
2002, he served in various executive capacities with Outback
Steakhouse, Inc. From 1995 to 1998, O’Donnell was
President, Chief Operating Officer, and a partner of Ale House
Restaurants, Inc.
The members of the Audit Committee have been appointed by the
Board of Directors. The Audit Committee is governed by a charter
that has been approved and adopted by the Board of Directors and
which is reviewed and reassessed annually by the Audit
Committee. The Audit Committee is comprised of three independent
directors.
The following Audit Committee Report does not constitute
soliciting material and shall not be deemed filed or
incorporated by reference into any other Company filing under
the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, except to the extent the
Company specifically incorporates this Audit Committee Report by
reference therein.
The Audit Committee assists the Board of Directors in fulfilling
its oversight responsibilities by reviewing (i) the
financial reports and other financial information provided by
the Company to any governmental body or to the public,
(ii) the Company’s systems of internal controls
regarding finance, accounting, legal compliance, and ethics, and
(iii) the Company’s auditing, accounting and financial
reporting processes generally.
Management is responsible for the preparation and integrity of
the Company’s financial statements and its systems of
internal controls. The independent registered public accounting
firm is responsible for performing an independent audit of the
Company’s consolidated financial statements in accordance
with generally accepted auditing standards and for issuing a
report thereon. The Audit Committee has met and held discussions
with management and BDO Seidman, LLP, the independent registered
public accounting firm.
To fulfill our responsibilities, we did the following:
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Based upon these reviews and discussions, the Audit Committee
recommended to the Board of Directors that the audited financial
statements be included in the Company’s Annual Report on
Form 10-K
for the year ended January 2, 2006.
Respectfully submitted,
The Audit Committee
Mark Demilio
Creed L. Ford, III
Robert Merritt
The following table sets forth certain summary information
concerning compensation paid during 2005 by the Company to or on
behalf of all individuals serving as the Company’s Chief
Executive Officer during 2005 and to each of the Company’s
four most highly compensated executive officers other than the
Chief Executive Officer who were serving as executive officers
as of January 2, 2006.
SUMMARY
COMPENSATION TABLE
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There were no stock options granted to the executive officers
named in the “Summary Compensation Table” during
fiscal year 2005.
The following table sets forth certain summary information as of
January 2, 2006, concerning exercised and unexercised
options to purchase Così’s common stock held by the
executive officers named in the “Summary Compensation
Table”.
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The following table sets forth certain information as of
January 2, 2006, with respect to the Company’s equity
compensation plans under which shares of the Company’s
common stock may be issued.
A total of 3,700,000 shares of common stock have been
reserved for issuance under the Così, Inc. 2005 Omnibus
Long-Term Incentive Plan (the “Omnibus Plan”). As of
April 7, 2006, a total of 1,375,000 restricted shares of
the Company’s common stock have been issued under the
Omnibus Plan. Of those shares that were issued, a total of
30,000 shares were forfeited due to termination of
employment prior to the date the shares were fully vested and
non-forfeitable. If any award under the Omnibus Plan is
forfeited, settled in cash, expires, or is otherwise terminated
without issuance of shares, such shares will again be available
for awards under the plan. Any shares that are tendered by the
participant or retained by the Company as full or partial
payment to the Company for the purchase of an award or to
satisfy tax withholding obligations in connection with an award
will be available for awards under the Omnibus Plan. Upon
payment of shares upon the exercise of a stock appreciation
right, the number of shares available for issuance under the
Omnibus Plan will be reduced by the number of actual shares
issued in such payment. The Omnibus Plan provides for
discretionary awards to the Company’s employees and
directors of restricted stock, restricted stock units,
non-qualified stock options, incentive stock options, stock
appreciation rights, and any other stock award that may be
payable in shares, cash, other securities, or any other form of
property as may be determined by the Compensation Committee or
such other committee comprised of independent directors of the
Company.
All awards under the Omnibus Plan intended to constitute
performance-based compensation shall comply with the
requirements of Section 162(m) of the Internal Revenue Code
and shall be made in accordance with Section 7 of the
Omnibus Plan. The exercise price per share for a non-qualified
stock option may not be less than 100% of the fair market value
of a share of common stock on the grant date. The exercise price
per share for an incentive stock option may not be less than
100% of the fair market value of a share of common stock on the
grant date. The exercise price per share for an incentive stock
option granted to a person owning stock possessing more than 10%
of the total combined voting power of all classes of the
Company’s stock may not be less than 110% of the fair
market value of a share of common stock on the grant date.
Subject to the express provisions of the Omnibus Plan, the
Compensation Committee of the Board of Directors has full
discretion to administer and interpret the plan, including to
determine the eligible persons to whom, and the time or times at
which, awards will be granted; the types of awards to be
granted; and, the number of shares to be covered by or used for
reference purposes for each award.
As of April 7, 2006, options to purchase approximately
3,703,206 shares of common stock are outstanding under the
Amended and Restated Così, Inc. Stock Incentive Plan (the
“CSI Plan”). The Omnibus Plan was adopted
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in May 2005 to replace the CSI Plan. Accordingly, no additional
stock options may be granted under the CSI Plan. The exercise
price per share for an incentive stock option could not be less
than 100% of the fair market value of a share of common stock on
the grant date. The exercise price per share for a non-qualified
stock option could not be less than 85% of the fair market value
of a share of common stock on the grant date. The exercise price
per share for an incentive stock option granted to a person
owning stock possessing more than 10% of the total combined
voting power of all classes of the Company’s stock could
not be less than 110% of the fair market value of a share of
common stock on the grant date.
The Company may elect at any time to cancel any option granted
under the CSI Plan and pay the holder of such option the excess
of the fair market value of the shares subject to the option as
of the date of such election to cancel over the exercise price
set forth in the particular grant agreement.
In the event that an optionee’s employment is terminated by
the Company, other than for cause, such optionee may exercise
any exercisable options under the CSI Plan for a period of
90 days. In the event that an optionee’s employment is
terminated by reason of death, such optionee’s exercisable
options may be exercised under the CSI Plan for a period of
six months.
As of April 7, 2006, options to purchase approximately
253,510 shares of common stock are outstanding under the
Così Sandwich Bar, Inc. Incentive Stock Option Plan (the
“CSB Plan”). No stock options may be granted under the
CSB Plan after October 1, 2001. The CSB Plan provided for
discretionary grants of incentive stock options to certain key
employees. The exercise price per share for an option could not
be less than 100% of the fair market value of a share of common
stock on the grant date. The exercise price per share for an
incentive stock option granted to a person owning stock
possessing more than 10% of the total combined voting power of
all classes of the Company’s stock could not be less than
110% of the fair market value of a share of common stock on the
grant date. To the extent that the aggregate fair market value
of stock with respect to which incentive stock options are
exercisable for the first time by an optionee during any
calendar year (under this CSB Plan and all of the Company’s
other incentive stock option plans or those of its subsidiaries)
exceeds $100,000, such incentive stock option shall be treated
as options that are not incentive stock options. In the event
that an optionee’s employment is terminated by the Company,
other than for cause, such optionee may exercise any exercisable
options under the plan for a period of 30 days. In the
event that an optionee’s employment is terminated by reason
of death, such optionee may exercise any exercisable options
under the CSB Plan for a period of six months. In the event that
an optionee’s employment is terminated by the Company for
cause, all options held by such optionee are immediately
cancelled and the Company may require such optionee to sell to
it, at a sales price equal to the lesser of the exercise price
and the fair market value of the underlying shares, all shares
owned by the optionee that were acquired pursuant to this CSB
Plan. The CSB Plan is administered and interpreted by the Board
of Directors.
A total of 250,000 shares of common stock have been
reserved for issuance under the Amended and Restated Così,
Inc. Non-Employee Director Stock Option Plan. Shares subject to
unexercised options granted under the plan that have expired or
terminated become available for issuance again under the plan.
The Amended and Restated Così, Inc. Non-Employee Director
Stock Option Plan, as approved at the 2004 Annual Meeting of
Stockholders, provides for (i) automatic and
non-discretionary grants of shares of common stock to
non-employee directors, (ii) grants of non-qualified stock
options to non-employee directors, and (iii) grants of
stock appreciation rights (“SARs”) to non-employee
directors. On the date of each annual meeting of the
Company’s stockholders, each non-employee director shall
receive a number of shares of common stock equal to
(x) $25,000 divided by (y) the market price of the
Company’s common stock as of the date of grant. The Board
of Directors has the discretionary authority to determine the
eligibility of non-employee directors to receive stock options
and SARs, the time or times at which the options or SARs may be
exercised, and whether all of the options or SARs may be
exercised at one time or in increments; provided, however, that
the purchase price of shares subject to a non-qualified stock
option shall not be less than 85% of the fair market value of a
share of common stock on the grant date. The Board of Directors
does not have the authority, discretion, or power to select the
directors who will receive shares of common stock or determine
the terms of the awards of shares of common stock to be granted
pursuant to the plan, the number of shares of
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common stock to be issued under the plan, or the time at which
such awards of shares of common stock are to be granted. Each
optionee under the plan may exercise any unexpired options or
SARs following a change in control of Così, a sale of
substantially all of the assets of Così, or shareholder
approval of the dissolution of Così. As of April 7,
2006, a total of 47,850 shares of common stock have been
granted to non-employee directors pursuant to the
Amended & Restated Così, Inc. Non-Employee
Director Stock Option Plan.
The purpose of the Employee Stock Purchase Plan is to provide
employees with an opportunity to purchase the Company’s
shares through accumulated payroll deductions. The plan provides
for the grant of stock options to eligible employees. If the
plan is activated by the Compensation Committee, and subject to
the terms and conditions of the plan, each employee will be
eligible to participate in the plan commencing on the first day
of the offering period (as described below) occurring on or
after the date on which the employee has been employed by the
Company for six months. The plan is administered by the
Compensation Committee.
A total of 500,000 shares of common stock are authorized
for issuance under the plan. If the plan is activated by the
Compensation Committee, any eligible employee could elect to
participate in the plan by authorizing the Compensation
Committee to make payroll deductions to pay the exercise price
of an option at the time and in the manner prescribed by the
Compensation Committee. The employee could designate the amount
of the payroll deduction in whole percentages, up to 10% of the
employee’s compensation for each payroll period in an
offering period. In no event would an employee be granted an
option under the plan that would permit an employee to purchase
shares of common stock under the plan, to the extent that,
immediately after the grant, such employee (i) would own
common stock
and/or hold
options to purchase common stock possessing 5% or more of the
total combined voting power or value of all classes of the
Company’s stock, or (ii) has the right to purchase
common stock during any calendar year having a fair market value
in excess of $25,000. Options would be granted at two six-month
offering periods in each calendar year. The date of grant and
the date of exercise for the first option period under the plan
in a given calendar year would be January 1 and June 30,
respectively, and the date of grant and date of exercise for the
second option period would be July 1 and December 31,
respectively. As of April 7, 2006, the plan has not been
activated and no options have been granted under this plan. The
price of stock purchased under the plan would be an amount equal
to the lesser of 85% of the fair market value of the stock on
the date of purchase or on the date of commencement of the
applicable offering period.
Employment Agreement with William D.
Forrest. On December 12, 2005, we entered
into a new employment agreement with William D. Forrest.
Pursuant to this employment agreement, Mr. Forrest will
continue to serve as Executive Chairman of the Company through
December 31, 2006. After that date, Mr. Forrest will serve
as Non-Executive Chairman. Through December 31, 2006, the
Company will pay Mr. Forrest an annual base salary of
$350,000. For fiscal 2005 and 2006, he will have the ability to
earn an annual bonus of up to 100% of his annual base salary.
Beginning in 2007, while serving as Non-Executive Chairman,
Mr. Forrest will be paid an annual director’s fee
equal to three times the normal annual fee paid to other
directors, in addition to customary meeting fees. Pursuant to
the terms of his employment agreement, we granted to
Mr. Forrest 200,000 shares of our authorized but
unissued common stock on December 12, 2005, and an
additional 40,000 shares on March 30, 2006, all under
the Così, Inc. 2005 Omnibus Long-Term Incentive Plan. Mr.
Forrest’s rights in the shares vested 20% on the grant date
and an additional 20% vests annually for a period of four years
on the anniversary of the grant date, provided that at each such
date Mr. Forrest is still serving as Executive or
Non-Executive Chairman. Mr. Forrest may also receive
additional grants up to 50,000 shares of our authorized but
unissued common stock in fiscal 2007, pursuant to the Così,
Inc. 2005 Omnibus Long-Term Incentive Plan and in accordance
with terms and conditions prescribed by the Compensation
Committee of our Board of Directors, including, without
limitation, the timing, vesting, and performance measures
applicable to each such grant. All shares issued pursuant to the
employment agreement that are not then vested will fully vest
upon the termination of his employment by Così without
cause (as defined in the employment agreement), or upon a change
of control (as defined in the employment agreement). If
Mr. Forrest voluntarily terminates his employment or is
terminated by Così for cause (as defined in the employment
agreement), all unvested shares at the time of termination will
be forfeited. Mr. Forrest’s employment agreement
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also provides for customary confidentiality, non-competition and
non-solicitation agreements. The Company will also pay
Mr. Forrest 12 months severance if the Company
terminates his employment without cause prior to January 1,
2007.
Employment Agreement with Kevin Armstrong. On
May 9, 2005, we entered into an employment agreement with
Kevin Armstrong to serve as the Company’s Chief Executive
Officer and President. Pursuant to the terms of this employment
agreement, we will pay Mr. Armstrong an annual base salary
of $350,000. He will also have the ability to earn an annual
bonus of up to 100% of his annual base salary. Pursuant to the
terms of his employment agreement, we granted to
Mr. Armstrong 300,000 shares of our authorized but
unissued common stock on May 9, 2005, and an additional
160,000 shares on March 30, 2006, all under the Cosi
Inc. 2005 Omnibus Long-Term Incentive Plan.
Mr. Armstrong’s rights in the shares vested 20% on the
grant date and an additional 20% vests annually for a period of
four years on the anniversary of the grant date, provided that
at each such date Mr. Armstrong continues to be employed by
us. In addition, Mr. Armstrong may also receive additional
grants up to an aggregate of 640,000 shares of our
authorized but unissued common stock, to be awarded over fiscal
years 2007 through 2009, pursuant to the Così, Inc. 2005
Omnibus Long-Term Incentive Plan and in accordance with terms
and conditions prescribed by the Compensation Committee of our
Board of Directors, including, without limitation, the timing,
vesting, and performance measures applicable to each such grant.
All shares issued pursuant to this employment agreement that are
not then vested will fully vest upon the termination of his
employment by Così without cause (as defined in the
employment agreement), or upon a change of control (as defined
in the employment agreement). If Mr. Armstrong voluntarily
terminates his employment or is terminated by Così for
cause (as defined in the employment agreement), all unvested
shares at the time of termination will be forfeited. Mr.
Armstrong is entitled to health benefits and life and long-term
disability insurance in amounts standard for all of the
Company’s employees. In addition, Mr. Armstrong may
participate in the Company’s 401(k) retirement plan, and
the Company will match his contributions at 25% up to 4% of his
annual base salary. Mr. Armstrong’s employment
agreement also provides for customary confidentiality,
non-competition, and non-solicitation agreements. The Company
will pay Mr. Armstrong 12 months severance if the
Company terminates his employment for any reason other than for
cause.
Employment Agreement with William Koziel. On
August 17, 2005, the Company entered into an oral at-will
employment agreement with Mr. Koziel. Pursuant to the terms
of this agreement, Mr. Koziel will serve as Chief Financial
Officer and will be paid an annual base salary of $250,000, and
he will be eligible to receive a performance bonus of up to 40%
of his annual base salary based upon attaining mutually agreed
upon performance levels. He will also be eligible to receive
restricted stock pursuant to the Così, Inc. 2005 Omnibus
Long-Term Incentive Plan. Mr. Koziel is entitled to health
benefits and life and long-term disability insurance in amounts
standard for all of the Company’s employees. In addition,
Mr. Koziel may participate in the Company’s 401(K)
retirement plan, and the Company will match his contributions at
25% up to 4% of his annual base salary. Mr. Koziel’s
agreement also provides for customary non-competition and
non-solicitation agreements. Mr. Koziel’s employment
may be terminated by either party at any time for any reason.
The Compensation Committee is responsible for making
recommendations to the Board of Directors concerning the
compensation levels of the executive officers of the Company.
The Compensation Committee also administers the Company’s
equity compensation plans (the “Plans”) and determines
awards to be made under the Plans to the Company’s
directors, executive officers, and other eligible employees. The
Compensation Committee relies on information provided by a
retained compensation consultant to determine competitive levels
of compensation in the market and in the industry.
The Compensation Committee held sixteen meetings in fiscal 2005.
The following Compensation Committee Report describes the
considerations that have guided, or will guide, the Compensation
Committee in assessing executive compensation.
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The goal of the Compensation Committee is to provide competitive
levels of compensation that integrate pay with the
Company’s short-term and long-term performance goals,
reward corporate performance, and recognize individual
initiative and achievement. It is anticipated that these
policies will help the Company to continue to attract and retain
quality personnel and thereby enhance the Company’s
long-term profitability and share value.
The Company’s direct compensation program therefore
consists of:
The Company currently pays its executives and targets its
executive compensation relative to restaurant industry levels.
The Compensation Committee believes this provides the executives
with significant incentives to deliver on near term milestones
that are important to the Company, as well as to align interests
of management with interests of stockholders and further
encourage their retention.
The base salaries of the Company’s executive officers are
based in part on comparative industry data and on various
quantitative and qualitative considerations regarding corporate
and individual performance. An executive’s base salary will
be determined after an assessment of his or her sustained
performance, current salary in relation to the executive’s
job responsibilities, and his or her experience and potential
for advancement. In establishing base salaries for the
Company’s executive officers, the Compensation Committee
may consider several additional factors, including:
(i) industry compensation trends, (ii) restaurant
industry and job-specific skills and knowledge,
(iii) historical and expected contributions to the
Company’s performance, and (iv) level, complexity,
breadth, and difficulty of duties.
Eligible executive officers of the Company may also be awarded
bonuses for achieving certain performance levels. These bonuses
are based on various quantitative and qualitative performance
criteria for these executive officers and are designed to
attract and retain qualified individuals and also to encourage
them to meet the Company’s desired performance goals.
The Compensation Committee believes that the grants of stock
option awards and restricted stock awards are an effective means
of advancing the long-term interests of the Company’s
stockholders by integrating executive compensation with the
long-term value of the Company’s common stock. Awards of
restricted stock and stock options to executive officers align
the interests of these officers with those of the stockholders
and will also further encourage their retention.
Under the Così, Inc. 2005 Omnibus Long-Term Incentive Plan
(the “Omnibus Plan”), the Company may provide
long-term executive compensation incentives to more closely
align the interests of management with the Company’s
stockholders. These incentives may be in the form of
non-qualified stock options, incentive stock options, stock
appreciation rights, restricted stock, restricted stock units,
and any other stock award that may be payable in shares, cash,
other securities, or any other form of property as may be
determined by the Compensation Committee.
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The Company’s officers are eligible to participate in the
various qualified and non-qualified employee benefit plans
sponsored by the Company. The Company makes only nominal use of
perquisites in compensating its executive officers.
2005
Compensation Decisions
Messrs. Forrest, Armstrong, and Koziel were employed in
2005 pursuant to the agreements described under “Employment
Agreements” above. Salary changes for these executives were
made pursuant to such agreements. The salaries for the other
named executive officers were based on the criteria stated above
in the “Compensation Policies” section. The following
2005 annual base salaries were approved for the named executive
officers:
The Compensation Committee awarded bonuses in 2005 based on the
strength of the Company’s new management team, the success
of the secondary public offering, the progress made in executing
the Company’s growth strategy, and achieving the
Company’s financial targets. Bonuses for
Messrs. Forrest and Armstrong were each paid at 57.15% of
their annual bonus potential based on achieving the
Company’s financial targets, growth initiatives, and
development goals. Bonuses for Messrs. Koziel, Gilbert, and
Seidman were each paid at 100% of their annual bonus potential
based on achieving the Company’s financial targets,
departmental results, and individual performance objectives.
Pursuant to the Omnibus Plan, the Company granted the following
restricted stock awards to the named executive officers:
These restricted stock awards were granted at the prevailing
market price on the date of grant and typically vest 20% on the
date of grant and 20% annually on each anniversary of the grant
date over the next four years, provided the officer is still
employed on each such date.
The Compensation Committee approved long-term incentive
restricted stock awards in 2005 based on the strength of the
Company’s new management team, the success of the secondary
public offering, and the progress made in executing the
Company’s growth strategy. Long-term incentive restricted
stock awards were granted to
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Messrs. Forrest and Armstrong at 80% of their respective
annual restricted stock award potential based upon achieving the
Company’s financial targets, growth initiatives, and
development goals. Long-term incentive restricted stock awards
were granted to Messrs. Koziel, Gilbert, and Seidman at
100% of their respective annual restricted stock award potential
based upon achieving the Company’s financial targets,
departmental results, and individual performance objectives.
The Compensation Committee annually reviews and approves
corporate goals and objectives relevant to Executive Chairman
and CEO compensation, evaluates the Executive Chairman’s
and CEO’s performance in light of those goals and
objectives, and recommends to the Board the Executive
Chairman’s and CEO’s compensation levels based on this
evaluation. The Executive Chairman and CEO each receive an
annual base cash salary and an annual target bonus. The annual
target bonus is dependent upon (i) the Company meeting its
objectives and (ii) the Executive Chairman and CEO meeting
any specific objectives set out by the Board for such
executives, respectively.
Mr. Forrest’s annual base salary was increased 17.6%
over the prior year’s annual base salary, and he received a
cash bonus for 2005 of $200,000. In addition, on
December 12, 2005, Mr. Forrest was issued 200,000
restricted shares of the Company’s common stock.
Mr. Armstrong’s annual base salary was increased 16.7%
over the prior year’s annual base salary, and he received a
cash bonus for 2005 of $200,000. In addition, on May 9,
2005, Mr. Armstrong was issued 300,000 restricted shares of
the Company’s common stock.
In determining the fairness and adequacy of compensation for
Messrs. Armstrong and Forrest, the Compensation Committee
considers the Company’s actual financial performance as
well as Messrs. Armstrong’s and Forrest’s
respective qualifications, background, and prior industry
experience. Other factors that guide the Compensation Committee
are Messrs. Armstrong’s and Forrest’s ability to
lead the Company through its period of management transition,
their expected ability to lead the Company through its next
stage of development, and the level of compensation of senior
executives in similar capacities at other companies within the
restaurant industry.
Section 162(m) of the Code generally limits to
$1 million the federal tax deductibility of compensation
(including stock options and stock incentive units) paid in one
year to the named executive officers. The tax deductibility of
deferred compensation paid to an executive officer when he is no
longer subject to Section 162(m) is not subject to the
limitation. There is an exception to the $1,000,000 limitation
for performance-based compensation (including stock options and
stock incentive units) if certain requirements are satisfied,
including stockholder approval. The Company complies with
Section 162(m) for annual salary, annual cash incentive
awards, and long-term incentives in order to ensure that this
compensation will be deductible. To maintain flexibility in
compensating executive officers in a manner designed to promote
varying corporate goals, the Compensation Committee has not
adopted a policy requiring all compensation to be deductible.
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The Compensation Committee believes that the Company’s
Compensation Policies are strongly linked to the Company’s
performance and the enhancement of stockholder value. The
Compensation Committee intends to continually evaluate the
Company’s Compensation Policies and plans to ensure that
they are appropriately configured to align the interests of
officers and stockholders and that the Company can attract,
motivate and retain talented management personnel.
Respectfully submitted,
The Compensation Committee
Eli Cohen, Chairperson
Robert Merritt
Michael O’Donnell
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Set forth below is a graph comparing the cumulative total
stockholder return on Così’s common stock with the
NASDAQ Composite Index and the Standard &
Poor’s Small Cap Restaurant Index for the period covering
Così’s initial public offering on November 22,
2002, through the end of Così’s 2005 fiscal year on
January 2, 2006. The Company’s common stock trades on
the NASDAQ National Market under the symbol
“COSÌ.” The graph assumes an investment of
$100.00 made at the opening of trading on November 22,
2002, in (i) Così’s common stock, (ii) the
stocks comprising the NASDAQ Composite Index, and
(iii) stocks comprising the Standard & Poor’s
Small Cap Restaurant Index.
Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires Così’s directors, executive
officers, and 10% stockholders to file reports of ownership and
reports of changes in ownership of Così’s common stock
and other equity securities with the SEC and the NASDAQ National
Market. Directors, executive officers, and 10% stockholders are
required to furnish the Company with copies of all
Section 16(a) forms they file. Based on a review of the
copies of such reports furnished to it, Così believes that
during fiscal 2005, Così’s directors, executive
officers, and 10% stockholders complied with all
Section 16(a) filing requirements applicable to them, other
than late filing of Forms 3 and 4 by each of the following
individuals: William D. Forrest (two Form 4s), Kevin
Armstrong (one Form 4), Gilbert Melott (one Form 4),
William Koziel (one Form 4), Paul Seidman (one
Form 4), Peter Lucas (one Form 4), Cynthia Jamison
(one Form 4), Garry Stock (one Form 4), and Robert
Merritt (Form 3).
The Compensation Committee makes all compensation decisions. The
current members of the Compensation Committee are
Messrs. Cohen, Merritt, and O’Donnell. No interlocking
relationship exists between the Company’s Board of
Directors or Compensation Committee and the board of directors
or compensation committee of any other company, nor has any such
interlocking relationship existed in the past.
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The Board of Directors has appointed the firm of BDO Seidman,
LLP to be the Company’s independent registered public
accounting firm for the fiscal year ended January 1, 2007,
and recommends to stockholders that they vote for ratification
of that appointment.
BDO Seidman, LLP has served in this capacity since
August 11, 2004. A representative of BDO Seidman, LLP will
be present at the Annual Meeting, will have an opportunity to
make a statement, and will be available to respond to
appropriate questions.
The appointment of the independent registered public accounting
firm is approved annually by the Audit Committee of the Board of
Directors of Così and subsequently submitted to the
stockholders for ratification. The Audit Committee reviews and
approves in advance the scope of the audit, the types of
non-audit services that Così will need, and the estimated
fees for the coming year. The Audit Committee also reviews and
approves non-audit services to ensure that these services will
not impair the independence of the independent registered public
accounting firm.
Before making its recommendation to the Board of Directors for
appointment of BDO Seidman, LLP, the Audit Committee carefully
considered that firm’s qualifications as independent
registered public accounting firm for the Company, which
included a review of BDO Seidman, LLP’s performance in the
prior year, as well as its reputation for integrity and
competence in the fields of accounting and auditing. The Audit
Committee expressed its satisfaction with BDO Seidman, LLP in
these respects.
The Board of Directors recommends a vote “FOR”
ratification of BDO Seidman, LLP as the Company’s
independent registered public accounting firm for the fiscal
year ending January 1, 2007.
On June 11, 2004, Ernst & Young LLP
(“Ernst & Young”) delivered a letter to the
Company confirming that it would resign as the Company’s
auditor after Ernst & Young’s SAS 100 review of
the Company’s financial statements for the quarter ending
June 28, 2004. On August 11, 2004, Ernst &
Young completed its review of the Company’s
Form 10-Q
for the quarter ended June 28, 2004, and Ernst &
Young’s resignation became effective.
The reports of Ernst & Young on the Company’s
financial statement for the year ended December 29, 2003
did not contain an adverse opinion or a disclaimer of opinion
and were not qualified or modified as to uncertainty, audit
scope, or accounting principles.
In connection with the audits of the Company’s financial
statements for the year ended December 29, 2003 and through
August 11, 2004, there were no disagreements with
Ernst & Young on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or
procedure, which disagreements, if not resolved to the
satisfaction of Ernst & Young, would have caused
Ernst & Young to make reference thereto in its report
on the Company’s financial statements for such years.
No reportable event of the type described in
Item 304(a)(1)(v) of
Regulation S-K
occurred during the fiscal year ended December 29, 2003 and
through August 11, 2004 except that in connection with the
completion of the year-end audit, Ernst & Young advised
the Company and the Audit Committee that they noted certain
matters considered to be significant deficiencies in the design
or operation of the Company’s internal controls that, in
their judgment, could adversely affect the Company’s
ability to record, process, summarize, and report financial data
consistent with the assertions of management in the consolidated
financial statements. Specifically, Ernst & Young
recommended that the Company ensure the timely preparation of
accounting reconciliations and analyses, specifically accruals
and prepaid assets, and related timely review thereof.
Ernst & Young specifically advised the Company and the
Audit Committee that none of these conditions are believed to be
material weaknesses in the design or operation of the
Company’s internal controls.
Ernst & Young’s observations arose from
(1) an error in a formula in a spreadsheet that the Company
used to keep track of prepaid insurance and (2) the fact
that the Company had not yet performed certain year-end account
reconciliations specifically related to accruals and prepaid
assets by the time Ernst & Young first began their work
for the year end audit in January.
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In January 2004, Ernst & Young discovered an error in a
formula in a spreadsheet that the Company used to keep track of
prepaid insurance. This formula was fixed immediately after
Ernst & Young reported the discovery of the error to
the Company. The information that resulted from the corrected
formula increased the Company’s net loss by $170,242.
When Ernst & Young first began their work for the
year-end audit in mid January 2004, they noted that the Company
had not yet performed certain year-end account reconciliations
and analyses specifically related to accruals and prepaid
assets. The Company had completed a rights offering on
December 29, 2003, was in the process of finalizing
its uniform franchising offering circular, and was orienting an
entirely new management team to their first year-end closing of
the Company’s books. As a result of the foregoing, the
Company completed its year-end account reconciliations and
related analyses in February 2004.
Even though the Company completed the fourth quarter account
reconciliations and related analyses in ample time to comply
with the Securities and Exchange Commission’s filing
timelines, Ernst & Young suggested that management
should have completed the account reconciliations and related
analyses earlier. With respect to the Company’s filings for
the first fiscal quarter of 2004, the Company believes that it
has improved the timely preparation and review of account
reconciliations and analyses.
The Company was advised by Ernst & Young that the
formula error described above and their belief that the fourth
quarter account reconciliations and related analyses should have
been completed earlier were the only reportable conditions that
Ernst & Young observed in the design or operation of
the Company’s internal controls.
The Company’s Audit Committee discussed the above subject
matter with Ernst & Young in March 2004 and believes
that it took the necessary steps to correct the deficiencies, as
of the first quarter 2004, by requiring an additional person to
review the type of spreadsheet referred to above and requiring
management to complete account reconciliations and analyses as
soon as possible in advance of the independent registered public
accounting firm’s review thereof.
The Company provided Ernst & Young with a copy of this
disclosure prior to its initial filing with the Securities and
Exchange Commission. The Company received a letter from
Ernst & Young addressed to the Securities and Exchange
Commission stating that it agreed with the above statements.
On August 11, 2004, the Audit Committee engaged BDO
Seidman, LLP as the Company’s independent registered public
accounting firm for the fiscal year ending January 3, 2005.
During the Company’s fiscal year ended December 29,
2003, and the subsequent interim period through and including
August 11, 2004, the Company did not consult with BDO
Seidman, LLP regarding the application of accounting principles
to a specified transaction, either completed or proposed, or the
type of audit opinion that might be rendered on the
Company’s consolidated financial statements, or any matter
that was either the subject of a disagreement (as defined in
Item 304(a)(1)(iv) of
Regulation S-K
and the related instructions) or reportable event (within the
meaning of Item 304(a)(1)(v) of
Regulation S-K).
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INDEPENDENT
AUDITORS
The following table presents the aggregate fees billed for
professional services rendered by BDO Seidman, LLP in fiscal
2005 and fiscal 2004 and by Ernst & Young in fiscal
2004. Other than as set forth below, no professional services
were rendered or fees billed by BDO Seidman, LLP or by
Ernst & Young, LLP during fiscal 2004 or fiscal 2005.
Consistent with SEC policies regarding auditor independence, the
Audit Committee has responsibility for appointing, setting
compensation, and overseeing the work of the independent
registered public accounting firm. In recognition of this
responsibility, the Audit Committee has established a policy to
review and pre-approve all audit, internal-control related, and
permissible non-audit services provided by the independent
registered public accounting firm. These services may include
audit services, audit-related services, internal-control related
services, tax services, and other services.
Prior to engagement of the independent registered public
accounting firm, the Committee shall pre-approve all audit
services and all permitted non-audit services (including the
estimated fees), except those excluded from requiring
pre-approval based upon the de minimus exception set
forth in Section 10A(i)(1)(b) of the Securities Exchange
Act of 1934, as amended. The Audit Committee also specifically
pre-approves any engagement of the independent registered public
accounting firm to provide internal-control related services.
Prior to engaging BDO Seidman, LLP to render the above services,
and pursuant to its charter, the Audit Committee approved the
engagement for each of the services and determined that the
provision of such services by the independent registered public
accounting firm was compatible with the maintenance of BDO
Seidman, LLP’s independence in the conduct of its auditing
services.
The Audit Committee will use the following procedures for the
pre-approval of all audit and permissible non-audit services
provided by the independent registered public accounting firm.
Before engagement of the independent registered public
accounting firm for the next year’s audit, the independent
registered public accounting firm will submit a detailed
description of services expected to be rendered during that year
within each of four categories of services to the Audit
Committee for approval.
1. Audit Services include audit work performed on
the financial statements, as well as work that generally only
the independent registered public accounting firm can reasonably
be expected to provide, including comfort letters, statutory
audits, and discussions surrounding the proper application of
financial accounting
and/or
reporting standards.
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2. Audit-Related Services are for assurance and
related services that are traditionally performed by the
independent registered public accounting firm, including due
diligence related to mergers and acquisitions, employee benefit
plan audits, and, special procedures required to meet certain
regulatory requirements.
3. Tax Services include all services, except those
services specifically related to the audit of the financial
statements, performed by the independent registered public
accounting firm’s tax personnel, including tax analysis;
assisting with coordination of execution of tax related
activities, primarily in the area of corporate development;
supporting other tax related regulatory requirements; and tax
compliance and reporting.
4. Other Services are those associated with services
not captured in the other categories. The Company generally
doesn’t request such services from the independent
registered public accounting firm.
Prior to engagement, the Audit Committee pre-approves
independent registered public accounting firm services within
each category. The fees are budgeted and the Audit Committee
requires the independent registered public accounting firm to
report actual fees versus the budget periodically throughout the
year by category of service. During the year, circumstances may
arise when it may become necessary to engage the independent
registered public accounting firm for additional services not
contemplated in the original pre-approval categories. In those
instances, the Audit Committee requires specific pre-approval
before engaging the independent registered public accounting
firm.
The Audit Committee may delegate pre-approval authority to one
or more of its members. The member to whom such authority is
delegated must report, for informational purposes only, any
pre-approval decisions to the Audit Committee at its next
scheduled meeting.
The Board of Directors does not intend to bring any other
business before the meeting, and as far as is known by the
Board, no matters are to be brought before the meeting except as
disclosed in the Notice of Annual Meeting of Stockholders.
However, as to any other business which may properly come before
the meeting, it is intended that proxies, in the form enclosed,
will be voted in respect thereof in accordance with the judgment
of the persons voting such proxies.
A copy of Così’s Annual Report, which incorporates its
Form 10-K
for the fiscal year ended January 2, 2006, including
audited financial statements set forth therein, was sent to all
stockholders of Così along with this Proxy Statement.
The proxy accompanying this Proxy Statement is solicited by the
Così Board of Directors. Proxies may be solicited by
officers, directors and regular supervisory and executive
employees of Così, none of whom will receive any additional
compensation for their services. Such solicitations may be made
personally, or by mail, facsimile, telephone, telegraph or
messenger. Così may reimburse brokers and other persons
holding shares in their names or in the names of nominees for
expenses in sending proxy materials to beneficial owners and
obtaining proxies from such owners. All of the costs of
solicitation of proxies will be paid by Così.
In accordance with the rules promulgated by the SEC, any
stockholder who wishes to submit a proposal for inclusion in the
proxy material to be distributed by the Company in connection
with the 2007 Annual Meeting of Stockholders must submit such
proposal to Così no later than December 19, 2006.
In addition, Così’s Amended and Restated By-laws have
an advance notice procedure for stockholders to bring business
before an Annual Meeting of Stockholders. The advance notice
procedure requires that a stockholder
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interested in presenting a proposal for action at the 2007
Annual Meeting of Stockholders must deliver a written notice of
the proposal, together with certain specified information
relating to such stockholder’s stock ownership and
identity, to Così’s Secretary not earlier than
December 16, 2006, nor later than January 15, 2007.
However, in the event that the 2007 Annual Meeting is called for
a date that is not within 30 days before or after the
anniversary date of the 2006 Annual Meeting of Stockholders,
notice by the stockholder, in order to be timely, must be so
received not later than the close of business on the tenth day
following the day on which notice of the date of the 2007 Annual
Meeting was mailed or public disclosure of the date of the
Annual Meeting was made, whichever first occurs.
By order of the Board of Directors,
William D. Forrest
Executive Chairman
Dated: April 18, 2006
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EXHIBIT A
COSÌ,
INC.
The Nominating/Corporate Governance Committee of Così, Inc.
(“Corporation”) identifies, evaluates and recommends
candidates to become members of the Board of Directors
(“Board”) with the goal of creating a balance of
knowledge, experience and diversity. Stockholders may also
recommend candidates to the Nominating/Corporate Governance in
accordance with the procedure set forth in the
Nominating/Corporate Governance Committee Charter. Candidates
are reviewed in the context of current composition of the Board,
the operating requirements of the Corporation and the long-term
interests of the Corporation’s stockholders and are
evaluated for their character, judgment, business experience and
acumen. In conducting this assessment, the Committee will
consider and evaluate director-candidates based upon the
following factors:
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ANNUAL MEETING OF STOCKHOLDERS OF
COSI, INC.
May 15, 2006
Please date, sign and mail
your proxy card in the envelope provided as soon as possible. â Please detach along perforated line and mail in the envelope provided. â
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF DIRECTOR AND “FOR” PROPOSAL 2.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x
OTHER MATTERS:
Discretionary authority is hereby granted with respect to such other matters as may properly come before the meeting or any adjournment or postponement thereof.
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COSI, INC.
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 15, 2006 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints William D. Forrest and Kevin Armstrong, and each or either of them,
with full power of substitution, as his or her true and lawful agents and proxies (“Proxies”) to
represent the undersigned at the Annual Meeting of Stockholders of Cosi, Inc. (“Cosi”) to be held
at the Hyatt Deerfield Hotel, 1750 Lake Cook Road, Deerfield, Illinois, on May 15, 2006, at 2:00
p.m. local time, and at any adjournments or postponements thereof, and authorizes said Proxies to
vote all shares of Cosi shown on the other side of this card with all the powers the undersigned
would possess if personally thereat.
THE
PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED ON THE REVERSE SIDE. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED “FOR” THE ELECTION OF THE NAMED NOMINEE, AND “FOR” THE RATIFICATION
OF THE EXTERNAL AUDITORS. THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE PROXY STATEMENT OF
COSI SOLICITING PROXIES FOR THE 2006 ANNUAL MEETING.
All previous proxies given by the undersigned to vote at the Annual Meeting or at any adjournment
or postponement thereof are hereby revoked.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
14475
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